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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

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

For the transition period from [ ] to [ ]

Commission file number 000-52506

ESP RESOURCES, INC.(Name
of small business issuer in its charter)

|Nevada                                                               | 98-0440762                          
|-------------------------------------------------------------------- | ------------------------------------
|(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)                             | (Zip Code)                          

Issuers telephone number (337) 706-7056

Indicate by check mark whether the registrant (1) has filed all
  reports required to be filed by Section 13 or 15(d) of the Securities Exchange
  Act during the preceding 12 months (or 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 []

Indicate by check mark if disclosure of delinquent filers pursuant
  to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
  herein, and will not be contained, to the best of registrants knowledge,
  in definitive proxy or information statements incorporated by reference in Part
  III of this Form 10-K or any amendment to this Form 10-K. [ x ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large accelerated filer.                      | [    ] | Accelerated filer.         | [    
    ]
|--------------------------------------------- | ------ | -------------------------- | -----------
|Non-accelerated filer.                        | [    ] | Smaller reporting company. | [ X ]      
|(Do not check if a smaller reporting company) |        |                            |            

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

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrants most recently
completed second fiscal quarter, June 30, 2008: $19,933,045.

Number of the issuers Common Stock outstanding as of April 3,
2009: 22,859,689

Documents incorporated by reference: None

Transitional Small Business Disclosure Format (Check One): Yes
[   ] No [ X ]

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TABLE OF CONTENTS

|              |                                                                                                                     | Page
|------------- | ------------------------------------------------------------------------------------------------------------------- | ----
|Part I        |                                                                                                                     |     
|Item
      1  | Business                                                                                                            | 3   
|Item
      1A | Risk
      Factors                                                                                                  | 10  
|Item
      1B | Unresolved
      Staff Comments                                                                                     | 17  
|Item
      2  | Properties                                                                                                          | 17  
|Item
      3  | Legal
      Proceedings                                                                                             | 19  
|Item
      4  | Submission
      of Matters to a Vote of Security Holders                                                           | 19  
|Part II       |                                                                                                                     |     
|Item
      5  | Market
      for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. | 19  
|Item
      6  | Selected
      Financial Data.                                                                                      | 21  
|Item
      7  | Managements
      Discussion and Analysis of Financial Condition and Results of Operation                          | 21  
|Item
      7A | Quantitative
      and Qualitative Disclosures about Market Risk                                                    | 28  
|Item
      8  | Financial
      Statements and Supplementary Data                                                                   | 28  
|Item
      9  | Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure                    | 49  
|Item
      9A | Controls
      and Procedures                                                                                       | 49  
|Item
      9B | Other
      Information                                                                                             | 50  
|Part III      |                                                                                                                     |     
|Item
      10 | Directors
      and Executive Officers and Corporate Governance.                                                    | 50  
|Item
      11 | Executive
      Compensation                                                                                        | 55  
|Item
      12 | Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                | 56  
|Item
      13 | Certain
      Relationships and Related Transactions, and Director Independence.                                    | 57  
|Item
      14 | Principal
      Accounting Fees and Services                                                                        | 58  
|Part IV       |                                                                                                                     |     
|Item
      15 | Exhibits,
      Financial Statement Schedules                                                                       | 59  
|Signatures    |                                                                                                                     | 61  

2

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PART I

ITEM 1. BUSINESS

This annual report contains forward-looking statements as that
term is defined under applicable securities laws. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as may, should,
expects, plans, anticipates, believes, estimates, predicts,
potential or continue or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled Risk Factors, that may cause our companys or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our financial statements are stated in United States dollars
(US$) and are prepared in accordance with United States generally accepted
accounting principles.

In this annual report, unless otherwise specified, all
references to common shares refer to the common shares of our capital
stock.

As used in this annual report, the terms we, us and our
mean ESP Resources, Inc., unless otherwise indicated.

Corporate History

We were incorporated on October 27, 2004, in the State of
Nevada. Our principal offices are located at 1255 Lions Club Road, Scott, LA
70583.

Effective September 28, 2007, we completed a merger with our
subsidiary, Pantera Petroleum Inc., a Nevada corporation. As a result, we
changed our name from Arthro Pharmaceuticals, Inc. to Pantera Petroleum Inc.
We changed the name of our company to better reflect the direction and business
of our company.

In addition, effective September 28, 2007, we effected a
sixteen (16) for one (1) forward stock split of our authorized, issued and
outstanding common stock. As a result, our authorized capital increased from
75,000,000 common shares to 1,200,000,000 common shares - with the same par
value of $0.001. At that time, our issued and outstanding share capital
increased from 6,970,909 common shares to 111,534,544 common shares. The name
change and forward stock split became effective with the OTC Bulletin Board at
the opening for trading on September 28, 2007 under the new stock symbol
PTPE.

In December 2008, the Company entered into an agreement with
ESP Resources, Inc., a Delaware corporation (ESP Delaware), whereby the Company
acquired 100% ownership of ESP Delaware in exchange for 292,682,297 common
shares. As a result of this acquisition, we changed our name from Pantera
Petroleum, Inc. to ESP Resources, Inc. On January 27, 2009, subsequent to the
date of this report, we effected a one (1) for twenty (20) reverse stock split
of our common stock and received a new ticker symbol. The name change and
reverse stock split became effective with the OTC Bulletin Board at the opening
of trading on January 27, 2009 under the new symbol ESPI. Our new CUSIP number
is 26913L104. We plan to file an 8K/A shortly with a more in-depth description
of our combined company.

3

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Business

We are an exploration stage company engaged in the acquisition
of prospective oil and gas properties, and through our wholly owned subsidiary,
ESP Petrochemicals, Inc. (ESPPI), we are a custom formulator of specialty
chemicals for the energy industry.

ESP Petrochemicals, Inc.

Through our wholly owned subsidiary, ESP Petrochemicals Inc.,
we are a custom formulator of specialty chemicals for the energy industry.
ESPPIs more specific mission is to provide applications of surface chemistry to
service all facets of the fossil energy business via a high level of innovation.
ESPPI is focusing its efforts on solving problems in a highly complex
integration of processes to achieve the highest level of quality petroleum
output. Listening to its customers with their changing demands and applying its
skills as chemical formulators enables ESPPI to measure its success in this
endeavor.

ESPPI acts as manufacturer, distributor and marketer of
specialty chemicals. ESPPI supplies specialty chemicals for a variety of oil
field applications including separating suspended water and other contaminants
from crude oil, pumping enhancement, and cleaning, as well as 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. These include the depth of the producing formation,
the bottom-hole temperature of the producing well, the size of the well head
through which the producing fluids flow, the size and pressure ratings of the
production equipment, including the separators, heater-treaters, compression
equipment, size of production tubulars in the wellbore, size of the storage
tanks on the customers location, and pressure ratings of the sales lines for the
oil and gas products. 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.

ESPPI's goal is first, to solve the customers problem at the
well and optimize drilling or production, and secondly, the sale of product.
Typically, the ESPPI team may gather information at a well site and enter this
data into the analytical system at the companys labs in Lafayette, Louisiana.
The system provides testing parameters and reproduces conditions at the
wellhead. This allows the ESPPI chemist 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.

Oil and Gas Exploration

Chaco Basin Concessions: Share Purchase
Agreement

Following the change in our business in late 2007, we conducted
due diligence on potential acquisitions of suitable oil and gas properties in
Paraguay, South America. On November 21, 2007, we entered into a share purchase
agreement, as amended March 17, 2008 and July 30, 2008 (the Original
Agreement), among our company, Artemis Energy PLC, formerly Pantera Oil and Gas
PLC (Artemis), Aurora Petroleos SA (Aurora) and Boreal Petroleos SA
(Boreal). To more effectively align the interests of our company with Artemis,
Aurora and Boreal, and to provide for a potentially more efficient accounting
and tax treatment for our company, Artemis, Aurora and Boreal under their
respective tax and accounting regimes, the parties entered negotiations and
further revised the Original Agreement. On September 9, 2008, we amended the
agreement (Restated Purchase Agreement) as follows.

| | (a) | Aurora acknowledged and agreed to:
| | --- | ----------------------------------
| |     |                                   
| |     | (i)                               
| |     |                                   
| |     | (ii)                              
| |     |                                   
| |     | (iii)                             
| |     |                                   
| | (b) | Boreal acknowledged and agreed
to:

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| |     | (i)                                                                                                                                                                                                                                                                                          | the prior indebtedness owed to our company is $335,000
      and to issue a five year note bearing 5% simple interest, in a form to be
      mutually agreed upon by Boreal and our company;                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| |     | (ii)                                                                                                                                                                                                                                                                                         | issue a five year note bearing 5% simple interest, in a
      form to be mutually agreed upon by Boreal and our company, to our company
      in an amount equal to any future payments made by our company to Boreal
      pursuant to the amended agreement; and
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| |     | (iii)                                                                                                                                                                                                                                                                                        | the terms of repayment of any outstanding amounts to our
      company;                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| | (c) | Artemis agreed to:                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| |     | (i)                                                                                                                                                                                                                                                                                          | cancel 2,600,000 of our 4,000,000 common shares issued to
      Artemis on November 21, 2007;                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| |     | (ii)                                                                                                                                                                                                                                                                                         | issue warrants to our company to purchase:                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                              | A.                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                              | B.                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                              | C.                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                              | D.                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                   
| | (d) | We agreed to issue a share purchase warrant entitling
      Artemis to purchase up to 2,600,000 shares of our common stock at an
      exercise price of $0.27 per share, with the other terms and conditions of
      the warrants to be mutually agreed upon by Artemis and our
  company.

In addition, each of Aurora and Boreal agreed to use all funds
that they respectively receive from our company in connection with the amended
agreement exclusively towards the exploration and development of the concessions
held by each of Aurora and Boreal. Each of Aurora and Boreal have agreed to (i)
consult and work together with our company to plan and execute any exploration
and development activities either of them conduct; (ii) provide our company with
annualized budgets with monthly cost projections; and (iii) not incur costs in
excess of $5,000 for any transactions without the prior written consent of
either our company or Artemis.

Please review the amended agreement attached as Exhibit 10.9 to
this annual report for a complete description of all of the terms and conditions
of the amended agreement.

Aurora and Boreal Chaco Basin Concessions

Aurora has acquired the rights to concessions in northern
Paraguay consisting of three tracts: Tagua, Toro, and Cerro Cabrera. They are
located in the eastern extensions of the Chaco Basin, where, in Bolivia and
Argentina significant reserves of natural gas, oil and condensate have been
discovered. The Chaco Basin extends across Paraguay, Bolivia and Argentina, and
in Paraguay,the Chaco Basin is composed of two Sub-Basins, the Curupayty
and Carandayty Sub-Basins. The sources for most of the known hydrocarbons in the
Chaco Basin are the Devonian Los Monos and Silurian Kirusillas shales. Both are
mixed oil and gas prone source rocks. The amalgamated fans and channel
sandstones of the Carboniferous Tarija and Tupambi formations are the main
producing reservoirs in the Chaco Basin. The Tagua tract, approximately 116
square miles in area, is located in the Carandayty Sub-Basin on the border with
Bolivia. The Curupayty Sub-Basin is located along the southern margin of the
Chaco Basin. The Toro tract, approximately 927 square miles in area, is located
in the Curupayty Sub-Basin in north central Paraguay. The Cerro Cabrera Block,
approximately 1,996 square miles in area, is located in northern Paraguay on the
Bolivian border. Aurora entered into a Concession Contract with the government
of Paraguay on March 2, 2007. This Concession Contract is assigned Law Number
3,551, dated July 16, 2008, having been duly ratified by the Congress of
Paraguay and signed by President Nicanor Duarte Frutos.

5

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Boreal has acquired the rights to concessions in northern
Paraguay consisting of two tracts: Pantera and Bahia Negra. They are also
located in the eastern extensions of the Chaco Basin. The Pantera tract,
approximately 1,158 square miles in area, is located in the Curupayty Sub-Basin
on the border with Bolivia. The Bahia Negra tract, approximately 1,853 square
miles in area, is located at the southern end of the Curupayty Sub-Basin in
north central Paraguay. Boreal entered into a Concession Contract with the
government of Paraguay on March 2, 2007. This Concession Contract is assigned
Law Number 3,478, dated December 13, 2008, having been duly ratified by the
Congress of Paraguay and signed by President Nicanor Duarte Frutos.

On January 30, 2008, we entered into an agreement with T.B.
Berge, P.G., for the reprocessing of 1993 vintage Phillips Petroleum 2D seismic
data and 1971 vintage Texaco 2D seismic data, located on our Pantera concession,
consisting of approximately 988,000 acres in northern Paraguay. On July 10,
2008, Mr. Berge completed the reprocessing and interpretation of approximately
178 miles of 2-D seismic data and submitted his processing report to our
company. The reprocessed data, along with well, surface, and cultural
information, were loaded and mapped in an SMT project. Mr. Berge submitted
relevant horizons and maps to show hydrocarbon systems and prospects and
determined a probabilistic range for identified prospects, as well as a mean
outcome for economics, using SPE (Society of Petroleum Engineers), WPC (World
Petroleum Council), and AAPG (American Association of Petroleum Geologists)
guidelines. Existing well files from the Pantera #1 well, drilled by Phillips
Petroleum in 1995, were recovered from storage in Paraguay and fully digitized
and incorporated into the report. The Pantera #1 well tops and intervals were
tied to existing seismic lines and correlated around the rest of the reprocessed
data grid.

Possible additional steps could include the processing of a
number of large seismic displays on paper that are from the older Texaco surveys
through a process called seismic vectorization (or SEGY conversion) to recover
and reprocess that data as if we had the tapes. The process should allow us to
do post-stack processing (migration) and then load the data with our existing
data. This may be useful information of a more regional nature that would help
put the regional perspective together. We have accumulated additional well data
to aid in this survey. This survey would be intended to further add to our
evaluation of identified prospects and aid in the formulation of the drilling
plan.

However, commensurate with our acquisition of ESP Resources
(Delaware) and the strategic focus of those assets on specialty chemicals for
the energy industry, we are currently evaluating this project for viability and
strategic fit. Given the global downturn in oil and gas prices and the severe
contraction in the equity and credit markets for financing, we have been
actively seeking a lead joint venture partner or purchaser for the property to
move forward with exploration plans. However, there is no guarantee that a
financial partner or purchaser may be discovered for the property which will
lead to our inability to move forward with the exploration project.

Block 83 84 Joint Venture

In addition, on February 24, 2008, we purchased a 10% interest
in a joint venture formed pursuant to a joint venture agreement, with Trius
Energy, LLC, as the managing venturer, and certain other joint venturers, in
consideration for $800,000. Pursuant to the joint venture agreement, our company
and the other joint venturers agreed, among other things, (a) to form a joint
venture for the limited purpose of (i) securing, re-entering, re-opening,
managing, cultivating, drilling and operating the Gulf-Baker 83 #1 Well, the
Sibley 84 #1 Well and the Sibley 84 #2 Well located in West Gomez oil and gas
fields in Pecos County, Texas, (ii) such other business agreed to by the joint
venturers, and (iii) all such actions incidental to the foregoing as the joint
venturers determine; (b) that the joint venturers shall have equal rights to
manage and control the joint venture and its affairs and business, and that the
joint venturers designate Trius Energy, LLC, as the managing venturer and
delegate to the managing venturer the day-to-day management of the joint
venture; (c) that distributions from and contributions to the joint venture
shall be made in a prescribed manner; and (d) that all property acquired by the
joint venture shall be owned by the joint venture, in the name of the joint
venture, and beneficially owned by the joint venturers in the percentages of
each joint venturer from time to time. On April 1, 2008, the joint venture began
re-entry operations on the Sibley 84 #1 Well.

On August 16, 2008, the Sibley 84 #1 well of Block 83 84
Project JV entered production and began to sell natural gas. While bottom hole
pressure remained strong after an acidization procedure on the perforations, or
holes made in the production formation through which formation gas enters the
wellbore, increasing amounts of formation water from an undetermined zone caused
a significant decrease in the natural gas production rates, and caused the Block
83 84 Project JV to shut in the well for evaluation. While evaluating solutions
from service providers to decrease the water production, on November 12, 2008,
there was a reported well-head blowout. Multiple service companies were
mobilized on location to control the well and place a Blow Out Preventer on the
casing head at the surface of the well. The Block 83 84 Project JV is in the
process of working with the insurance provider to pay for all work done in
controlling the well and also for all repair costs in order to replace all
damaged equipment and to return the well to production. Due to the current
condition of the well and the uncertainty regarding its production levels, its
classification will remain as an unproven property.

6

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*Baker Ranch Block 80*

On October 30, 2008, we entered into and closed the definitive
documents for the transaction with Lakehills and a private equity drilling fund
(the "Investor). Pursuant to the terms of the Agreement, we, along with
Lakehills, entered into drilling arrangements with the Investor whereby we and
Lakehills granted the Investor an exclusive option to fund the drilling,
re-entry and completion of certain wells located in the West Gomez field
(Bakers Ranch) located in Pecos County, Texas. According to the terms of the
Agreement, the Investor acquired a 100% working interest in the wells. Upon
tie-in of each well, the Investor will own a 95% working interest in such well
and the Investor will grant to Lakehills a 5% working interest. The Investors
working interest shall remain 95% until such time as the Investor has achieved a
12% internal rate of return from its investment (IRR) in the well. Thereafter,
the Investor will grant to us a 5% working interest and the Investors working
interest percentage will be reduced to 90% until such time as the Investor has
achieved a 20% IRR from its investment in the Well Program. Thereafter, the
Investor will grant to us an additional 10% working interest such that our
working interest will be 15% and the Investors working interest will be reduced
to 80% until such time as the Investor has achieved a 25% IRR from its
investment in the Well Program. Thereafter, the Investor will grant to us an
additional 6% working interest such that our interest in such Well will be 21%
and the Investors working interest will be reduced to 74% accordingly. In all
cases, Lakehills working interest will remain at 5%.

The Investor shall receive 100% of the cash flows on the
initial well (the Initial Well) until such cash flow received exceeds the
$87,190 plus interest represented by a promissory note that we executed in favor
of the Investor. No cash distributions shall be paid to us or to Lakehills until
the Note has been paid in full. Upon full payment of the Note, we shall receive
100% of the cash flow from the Initial Well until the aggregate amount of such
cash flow received by us totals $350,000. No cash distributions shall be made or
otherwise accrue to the Investor or Lakehills during this period. Thereafter,
the Investor will receive 50% of the Initial Wells operating cash flow and we
will receive 50% of the Initial Wells operating cash flow until each party
receives $175,000 (i.e., an aggregate of $350,000). No cash distributions shall
be made or otherwise accrue to Lakehills during this period. Thereafter, cash
distributions shall be calculated in accordance with the then current working
interest ownership percentages associated with the Initial Well as outlined in
the paragraph above. The distributions that would otherwise be payable to us
pursuant to the immediately preceding sentence shall be paid to the Investor
until the aggregate of such distributions paid to the Investor totals $175,000.
The first $525,000 of cash flow received by us under the transaction documents
shall be used to satisfy its obligations to certain investors under an oil and
gas certificate agreement. Re-entry operations on Block 80 began in November
2008 with the goal of placing the well back into production in the near future.
Due to the current re-entry operations and the uncertainty regarding its
production levels, its classification will remain as an unproven property.

Principal Products

Petrochemicals:Through ESPPI, we are a custom
formulator of specialty chemicals for the energy industry. ESPPIs more specific
mission is to provide applications of surface chemistry to service all facets of
the fossil energy business via a high level of innovation. ESPPI is focusing its
efforts on solving problems in a highly complex integration of processes to
achieve the highest level of quality petroleum output. Listening to its
customers with their changing demands and applying its skills as chemical
formulators enables ESPPI to measure its success in this endeavor.

ESPPI acts as manufacturer, distributor and marketer of
specialty chemicals. ESPPI supplies specialty chemicals for a variety of oil
field applications including separating suspended water and other contaminants
from crude oil, pumping enhancement, and cleaning, as well as a variety of
fluids and additives used in the drilling and production process.

ESPPI currently offers production chemicals, drilling
chemicals, waste remediation chemicals, cleaners and waste treatment chemicals:

- Surfactants that are highly effective in treating production and injection
  problems at the customer well-head.
- Well completion and work-over chemicals that maximize productivity from
  new and existing wells.
- Bactericides that kill water borne bacterial growth, thus preventing
  corrosion and plugging of the customer well-head and flowline.
- 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.
- ESPPI emulsion breakers, which are chemicals specially formulated for
  crude oils containing produced waters.
- Paraffin chemicals that inhibit and/or dissolve paraffin to prevent
  buildup. Their effectiveness is not diminished when used in conjunction with
  other chemicals.

7

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- Water Clarifiers that solve any and all of the problems associated with
  purifying effluent water, improve appearance, efficiency and productivity.

Oil and Gas Exploration:We are also engaged in the
business of exploring and, if warranted, developing commercial reserves of oil
and gas. Since we are currently an exploration stage company, there is no
assurance that commercially viable resources or reserves exist on any of our
properties, and a great deal of further exploration will be required before a
final evaluation as to the economic and legal feasibility for our future
operation is determined. As of the date of this annual report, we have not
discovered any economically viable resource or reserve on the properties owned
by Aurora or Boreal, and there is no assurance that we will discover any. On
August 16, 2008, the Sibley 84 #1 well of Block 83 84 Project JV entered
production and began to sell natural gas. Due to the current condition of the
well and the uncertainty regarding its production levels, its classification
will remain as an unproven property.

Distribution Methods

ESP Petrochemicals, Inc.: ESPPI's goal is first, to
solve the customers problem at the well and optimize drilling or production,
and secondly, the sale of product. Typically, the ESPPI team may gather
information at a well site and enter this data into the analytical system at the
companys labs in Lafayette, Louisiana. The system provides testing parameters
and reproduces conditions at the wellhead. This allows the ESPPI chemist 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.

Once the chemical blend has been formulated and decided, the
chemical is placed in service at the wellhead of the customer by delivering a
storage tank, called a day tank, at the customers well-site location and
filling the tank with the custom blended chemical. The tank is tied to a
pressure pump that provides the pumping capacity to deliver the chemical into
the wellhead for the customer.

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
ESPPI team is able to provide its customers is a differentiating factor within
the industry.

West Gomez Projects: The West Gomez field has all of the
necessary infrastructure to gather and deliver oil and natural gas when and if
any of the projects enter into production.

Chaco Basin Concessions: A new gas field discovery in
Paraguay will require new infrastructure, such as gas processing plants, gas
gathering pipelines, and construction of a connection into the existing pipeline
system in Brazil and Argentina for international export. A new oil discovery
will also require new infrastructure, such as oil tanks and pumps. Crude oil
must be moved from the production site to refineries. These movements can be
made using a number of different modes of transportation, including trucks and
trains, and also via an oil pipeline, which would need to be constructed in
Paraguay. We would not, on our own, be able to distribute any oil and gas we
discover, from our operations in Paraguay. We would need to rely on third party
contractors to distribute any such oil and gas or sell any such oil and gas to
third parties at the point of production.

Competition

ESP Petrochemicals, Inc.: Currently, the market
distribution is shared by very few large participants, namely, Baker Petrolite,
Nalco, and Champion Technologies, Inc. There are several small to 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, ESPPI will continually enhance and update its
technology. ESPPI has allocated funds to research and development of new
technologies to maintain the efficacy of its technology and its ability to
compete so it can continue to grow its business.

ESPPIs strategy for surpassing the competition is to provide
better service and response time combined with superior chemical solutions that
can be translated into savings for its customers. We believe that ESPPI is able
to solve these problems due to the following competitive advantages:

| | * | Personalized service.                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Expedited Field Analysis; and                                                                                                                                                     
| | * | Convenience and access to the best available market rates
      and products that it can produce and identify that are currently offered
      by its suppliers for its customers.

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Additionally, new companies are constantly entering the market.
This growth and fragmentation could also have a negative impact on ESPPIs
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.

Oil and Gas Exploration: The oil and gas industry is
very competitive. We compete with numerous individuals and companies, including
many major oil and gas companies, which have substantially greater technical,
financial and operational resources and staffs. Accordingly, there is a high
degree of competition for desirable oil and gas interests, suitable properties
for drilling operations and necessary drilling equipment, as well as for access
to funds. This competition could adversely impact our ability to finance
property acquisitions and further exploration.

Licenses, concessions, royalty agreements or labor
contracts

Aurora and Boreal have acquired rights to concessions in
Paraguay representing approximately 3,872,000 acres or 6,050 square miles
pursuant to a Concession Contract with the government of Paraguay dated March 2,
2007. For further details of our agreements and concessions, please see our
disclosure under the section entitled Description of Property below.

Government Approval and Regulation

We, together with ESPPI, are 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. We do not anticipate having to expend significant resources to comply
with any governmental regulations applicable to our operations.

We, together with ESPPI, are required to obtain licenses and
permits from various governmental authorities. We anticipate that we will be
able to obtain all necessary licenses and permits to carry on the activities
which we intend to conduct, and that we intend to comply in all material
respects with the terms of such licenses and permits. However, there can be no
guarantee that we will be able to obtain and maintain, at all times, all
necessary licenses and permits required to undertake our proposed exploration
and development or to place our properties into commercial production. In the
event that we proceed with our operation without necessary licenses and permits,
we may be subject to large fines and possibly even court orders and injunctions
to cease operations.

Oil and gas operations in United States and elsewhere are also
subject to federal and state laws and regulations which seek to maintain health
and safety standards by regulating the design and use of drilling methods and
equipment. Furthermore oil and gas operations in the United States are also
subject to federal and state laws and regulations including, but not limited to:
the construction and operation of facilities; the use of water in industrial
processes; the removal of natural resources from the ground; and the
discharge/release of materials into the environment.

We are also subject to the laws and regulations which are
generally applicable to business operations, such as business licensing
requirements, income taxes and payroll taxes

Costs and Effects of Compliance with Environmental
Laws

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 and their officers and employees 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.

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.

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The Company knows of no existing contamination sites where the
company supplies petrochemicals for their current customer locations. The title
for the chemicals that ESP supplies to their customer base passes from ESP to
the customer upon delivery of the chemical to the customer location. We have
insurance that covers accidental spillage and cleanup at our blending location
and for transportation to the customer location; however, the customer is
responsible for the integrity of the chemical once the chemical blend is
delivered to the receiving point of the customer.

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.

In general, our exploration and production activities are
subject to certain federal, state and local laws and regulations relating to
environmental quality and pollution control. Such laws and regulations increase
the costs of these activities and may prevent or delay the commencement or
continuance of a given operation. Compliance with these laws and regulations has
not had a material effect on our operations or financial condition to date.
Specifically, we are subject to legislation regarding emissions into the
environment, water discharges and storage and disposition of hazardous wastes.
In addition, legislation has been enacted which requires well and facility sites
to be abandoned and reclaimed to the satisfaction of state authorities. However,
such laws and regulations are frequently changed and we are unable to predict
the ultimate cost of compliance. Generally, environmental requirements do not
appear to affect us any differently or to any greater or lesser extent than
other companies in the industry.

Number of Employees

We together with ESPPI, currently have seven 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. The management of our company is comprised of a team of highly
skilled and experienced professionals, and we focus on training and professional
development for all levels of employees and on hiring additional experienced
employees. We believe that our relations with our employees are good.

ITEM 1A. RISK FACTORS

The shares of our common stock are highly speculative in
nature, involve a high degree of risk and should be purchased only by persons
who can afford to lose the entire amount invested in the common stock. You
should carefully consider the risks described below and the other information in
this annual report before investing in our common stock. If any of the following
risks actually occurs, our business, financial condition or operating results
could be materially adversely affected. In such case, the trading price of our
common stock could decline due to any of these risks, and you may lose all or
part of your investment.

RISKS RELATED TO OUR BUSINESSWe have had
negative cash flows from operations.

To date we have had negative cash flows from operations and we
have been dependent on sales of our equity securities and debt financing to meet
our cash requirements and have incurred losses totaling $115,283 for the year
ended December 31, 2008. As of December 31, 2008, we had a working capital
deficit of $106,792. We do not expect positive cash flow from operations in the
near term. There is no assurance that actual cash requirements will not exceed
our estimates. In particular, additional capital may be required in the event
that costs increase beyond our expectations, such as drilling and completion
costs, or we encounter greater costs associated with general and administrative
expenses or offering costs.

The occurrence of any of the aforementioned events could
adversely affect our ability to meet our business plans. 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.

We will depend almost exclusively on outside capital to pay for
the continued exploration and development of our properties. Such outside
capital may include the sale of additional stock and/or commercial borrowing.
Capital may not continue to be available if necessary to meet these continuing
development costs or, if the capital is available, that it will be on terms
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. The issuance of additional equity securities by us would
result

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in a significant dilution in the equity interests of our
current stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments. 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.

If we are unable to obtain financing in the amounts and on
terms deemed acceptable to us, we may be unable to continue our business and as
a result may be required to scale back or cease operations of our business, the
result of which would be that our stockholders would lose some or all of their
investment.

A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our operations.

A prolonged decline in the price of our common stock could
result in a reduction in the liquidity of our common stock and a reduction in
our ability to raise capital. Because our operations have been primarily
financed through the sale of equity securities, a decline in the price of our
common stock could be especially detrimental to our liquidity and our continued
operations. Any reduction in our ability to raise equity capital in the future
would force us to reallocate funds from other planned uses and would have a
significant negative effect on our business plans and operations, including our
ability to continue our current operations. If our stock price declines, we may
not be able to raise additional capital or generate funds from operations
sufficient to meet our obligations.

We have a history of losses and fluctuating operating
results.

From inception through to December 31, 2008, we have incurred
aggregate losses of $530,020. Our net loss for the year ended December 31, 2008
was $115,283. There is no assurance that we will operate profitably or will
generate positive cash flow in the future. In addition, our operating results in
the future may be subject to significant fluctuations due to many factors not
within our control, such as the general economic cycle, the market price of oil
and gas and exploration and development costs. If we cannot generate positive
cash flows in the future, or raise sufficient financing to continue our normal
operations, then we may be forced to scale down or even close our operations.

Until such time as we generate revenues, we expect an increase
in development costs and operating costs. Consequently, we expect to incur
operating losses and negative cash flow until our properties enter commercial
production.

We have a limited operating history upon which to base
financial performance, making it difficult for prospective investors to assess
the value of our stock, and if we are not successful in continuing to grow our
business, then we may have to scale back our operations and may not be able to
continue as a going concern.

We have limited history of revenues from operations. Our wholly
owned petrochemicals business, ESP Petrochemicals, Inc., was formed in November
2006 and began operations in February 2007 and has limited operating history.
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. We have yet to
generate positive earnings and there can be no assurance that we will ever
operate profitably.

Our company has a limited operating history and must be
considered in the development stage. The success of our company is significantly
dependent on a successful acquisition, drilling, completion and production
program as well as the successful growth of our recently acquired petrochemicals
business line. Our companys operations will be subject to all the risks
inherent in the establishment of a developing enterprise and the uncertainties
arising from the absence of a significant operating history. We may be unable to
locate recoverable reserves or operate on a profitable basis. We are in the
development stage and potential investors should be aware of the difficulties
normally encountered by enterprises in the development stage. If our business
plan is not successful, and we are not able to operate profitably, we may not be
able to continue as a going concern and investors may lose some or all of their
investment in our company.

Due to the speculative nature of the exploration of oil and
gas properties, there is substantial risk that aspect of our business will
fail.

The business of oil and gas exploration and development is
highly speculative involving substantial risk. There is generally no way to
recover any funds expended on a particular property unless reserves are
established and unless we can exploit such reserves in an economic manner. We
can provide investors with no assurance that any property interest that we may
acquire will provide commercially exploitable reserves. Any expenditure by our
company in connection with locating, acquiring and developing an interest in a
mineral or oil and gas property may not provide or contain commercial quantities
of reserves.

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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.

Because of the early stage of development and the nature of
our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally
because of the nature of our business and the early stage of its development. We
are engaged in the supply of specialty chemicals to the petroleum industry. We
are also engaged in the business of exploring and, if warranted, developing
commercial reserves of oil and gas. Our properties are in the exploration stage
only and are without known reserves of oil and gas. Accordingly, we have not
generated any revenues from our oil and gas exploration properties nor have we
realized a profit from our oil and gas exploration operations to date and there
is little likelihood that we will generate any revenues or realize any profits
from such operations in the short term. Any profitability in the future from our
business will be dependent upon the successful growth of ESPPIs petrochemicals
business as well as locating and developing economic reserves of oil and gas,
which itself is subject to numerous risk factors as set forth herein. Since have
not generated any revenues from our oil and gas explorations and our
petrochemical operations are in an early stage of development, we will have to
raise additional monies through the sale of our equity securities or debt in
order to continue business operations.

The potential profitability of oil and gas ventures depends
upon factors beyond the control of our company.

The oil and gas industry in general is cyclical in nature. It
tends to reflect and be amplified by general economic conditions, both
domestically and abroad. Historically, in periods of recession or periods of
minimal economic growth, the operations of oil and gas companies have been
adversely affected. Certain end-use markets for oil and petroleum products
experience demand cycles that are highly correlated to the general economic
environment which is sensitive to a number of factors outside our control.

A recession or a slowing of the economy could have a material
adverse effect on our financial results and proposed plan of operations. A
recession may lead to significant fluctuations in demand and pricing for oil and
gas. If we elect to proceed with the development of any of our property
interests, our profitability may be significantly affected by decreased demand
and pricing of oil and gas. Reduced demand and pricing pressures will adversely
affect our financial condition and results of operations. We are not able to
predict the timing, extent and duration of the economic cycles in the markets in
which we operate.

The potential profitability of oil and gas properties is
dependent upon many factors beyond our control. For instance, world prices and
markets for oil and gas are unpredictable, highly volatile, potentially subject
to governmental fixing, pegging, controls, or any combination of these and other
factors, and respond to changes in domestic, international, political, social,
and economic environments. Additionally, due to worldwide economic uncertainty,
the availability and cost of funds for production and other expenses have become
increasingly difficult, if not impossible, to project. These changes and events
may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations.
A productive well may become uneconomic in the event water or other deleterious
substances are encountered which impair or prevent the production of oil and/or
gas from the well. In addition, production from any well may be unmarketable if
it is impregnated with water or other deleterious substances. The marketability
of oil and gas which may be acquired or discovered will be affected by numerous
factors beyond our control. These factors include the proximity and capacity of
oil and gas pipelines and processing equipment, market fluctuations of prices,
taxes, royalties, land tenure, allowable production and environmental
protection. These factors cannot be accurately predicted and the combination of
these factors may result in our company not receiving an adequate return on
invested capital.

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Competition in the oil and gas industry is very intense and
there is no assurance that we will be successful in acquiring additional
property interests.

The oil and gas industry is very competitive. We compete with
numerous individuals and companies, including many major oil and gas companies,
which have substantially greater technical, financial and operational resources
and staff. Accordingly, there is a high degree of competition for desirable oil
and gas interests, suitable properties for drilling operations and necessary
drilling equipment, as well as for access to funds. We cannot predict if the
necessary funds can be raised or that any projected work will be completed.

We are required to obtain licenses and permits from various
governmental authorities. We anticipate that we will be able to obtain all
necessary licenses and permits to carry on the activities which we intend to
conduct, and that we intend to comply in all material respects with the terms of
such licenses and permits. However, there can be no guarantee that we will be
able to obtain and maintain, at all times, all necessary licenses and permits
required to undertake our proposed exploration and development or to place our
properties into commercial production. In the event that we proceed with our
operation without necessary licenses and permits, we may be subject to large
fines and possibly even court orders and injunctions to cease operations.

The acquisition of oil and gas interests involve many risks
and disputes as to the title of such interests will result in a material adverse
effect on our company.

The acquisition of interests in mineral properties involves
certain risks. Title to mineral claims and the borders of such claims may be
disputed. The concessions may be subject to prior unregistered agreements or
transfers and title may be affected by undetected defects. If it is determined
that any of our companys concessions are based upon a claim with an invalid
title, a disputed border, or subject to a prior right, the balance sheet of our
company will be adversely affected and we may not be able to recover damages
without incurring expensive litigation costs.

The marketability of natural resources will be affected by
numerous factors beyond our control which may result in us not receiving an
adequate return on invested capital to be profitable or viable.

The marketability of natural resources which may be acquired or
discovered by us will be affected by numerous factors beyond our control. These
factors include market fluctuations in oil and gas pricing and demand, the
proximity and capacity of natural resource markets and processing equipment,
governmental regulations, land tenure, land use, regulation concerning the
importing and exporting of oil and gas and environmental protection regulations.
The exact effect of these factors cannot be accurately predicted, but the
combination of these factors may result in us not receiving an adequate return
on invested capital to be profitable or viable.

The potential costs of environmental compliance in our
petrochemical business 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 and their officers and employees 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.

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. The Company
knows of no existing contamination sites where the company supplies
petrochemicals for their current customer locations. The title for the chemicals
that ESP supplies to their customer base passes from ESP to the customer upon
delivery of the chemical to the customer location. We have insurance that covers
accidental spillage and cleanup at our blending location and for transportation
to the customer location; however, the customer is responsible for the integrity
of the chemical once the chemical blend is delivered to the receiving point of
the customer.

The Company intends to conduct appropriate due diligence with
respect to environmental matters in connection with future

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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 in our petrochemical business 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. The Company
currently has spillage, transportation, and handling insurance. 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.

Oil and gas operations are subject to comprehensive
regulation which may cause substantial delays or require capital outlays in
excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal, state, and local
laws relating to the protection of the environment, including laws regulating
removal of natural resources from the ground and the discharge of materials into
the environment. Oil and gas operations are also subject to federal, state, and
local laws and regulations which seek to maintain health and safety standards by
regulating the design and use of drilling methods and equipment. Various permits
from government bodies are required for drilling operations to be conducted, and
no assurance can be given that such permits will be received. Environmental
standards imposed by federal, provincial, or local authorities may be changed
and any such changes may have material adverse effects on our activities.
Moreover, compliance with such laws may cause substantial delays or require
capital outlays in excess of those anticipated, thus causing an adverse effect
on us. Additionally, we may be subject to liability for pollution or other
environmental damages which we may elect not to insure against due to
prohibitive premium costs and other reasons. To date, we have not been required
to spend any material amount on compliance with environmental regulations.
However, we may be required to do so in the future and this may affect our
ability to expand or maintain our operations.

Exploration and production activities are subject to certain
environmental regulations which may prevent or delay the commencement or
continuance of our operations.

In general, our exploration and production activities are
subject to certain federal, state and local laws and regulations relating to
environmental quality and pollution control. Such laws and regulations increase
the costs of these activities and may prevent or delay the commencement or
continuance of a given operation. Compliance with these laws and regulations has
not had a material effect on our operations or financial condition to date.
Specifically, we are subject to legislation regarding emissions into the
environment, water discharges and storage and disposition of hazardous wastes.
In addition, legislation has been enacted which requires well and facility sites
to be abandoned and reclaimed to the satisfaction of state authorities. However,
such laws and regulations are frequently changed and we are unable to predict
the ultimate cost of compliance. Generally, environmental requirements do not
appear to affect us any differently or to any greater or lesser extent than
other companies in the industry.

We believe that our operations comply, in all material
respects, with all applicable environmental regulations. However, we are not
fully insured against all possible environmental risks.

Any future operations will involve many risks and we may
become liable for pollution or other liabilities which may have an adverse
effect on our financial position.

In the course of the exploration, acquisition and development
of mineral properties, several risks and, in particular, unexpected or unusual
geological or operating conditions may occur. Drilling operations generally
involve a high degree of risk. Hazards such as unusual or unexpected geological
formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire,
inability to obtain suitable or adequate machinery, equipment or labor, and
other risks are involved. We may become subject to liability for pollution. It
is not always possible to fully insure against such risks, and we do not
currently have any insurance

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against such risks nor do we intend to obtain such insurance in
the near future due to high costs of insurance. Should such liabilities arise,
they could reduce or eliminate any future profitability and result in an
increase in costs and a decline in value of the securities of our company.

We are not insured against most environmental risks. Insurance
against environmental risks (including potential liability for pollution or
other hazards as a result of the disposal of waste products occurring from
exploration and production) has not been generally available to companies within
the industry. We will periodically evaluate the cost and coverage of such
insurance. If we became subject to environmental liabilities and do not have
insurance against such liabilities, the payment of such liabilities would reduce
or eliminate our available funds and may result in bankruptcy. Should we be
unable to fully fund the remedial cost of an environmental problem, we might be
required to enter into interim compliance measures pending completion of the
required remedy.

Resource exploration involves many risks, regardless of the
experience, knowledge and careful evaluation of the property by our company.
These hazards include unusual or unexpected formations, formation pressures,
fires, power outages, labour disruptions, flooding, explosions and the inability
to obtain suitable or adequate machinery, equipment or labour.

Operations in which we will have a direct or indirect interest
will be subject to all the hazards and risks normally incidental to the
exploration, development and production of resource properties, any of which
could result in damage to or destruction of producing facilities, damage to life
and property, environmental damage and possible legal liability for any or all
damage. We do not currently maintain liability insurance and may not obtain such
insurance in the future. The nature of these risks is such that liabilities
could represent a significant cost to our company, and may ultimately force our
company to become bankrupt and cease operations.

Any change to government regulation/administrative practices
may have a negative impact on our ability to operate and/or our
profitability.

The laws, regulations, policies or current administrative
practices of any government body, organization or regulatory agency in the
United States or any other jurisdiction, may be changed, applied or interpreted
in a manner which will fundamentally alter the ability of our company to carry
on our business.

The actions, policies or regulations, or changes thereto, of
any government body or regulatory agency, or other special interest groups, may
have a detrimental effect on us. Any or all of these situations may have a
negative impact on our ability to operate and/or our profitably.

We may be unable to retain key personnel and there is no
guarantee that we could find a comparable replacement.

We may be unable to retain key employees or consultants or
recruit additional qualified personnel.Our extremely limited personnel
means that we would be required to spend significant sums of money to locate and
train new employees in the event any of our employees resign or terminate their
employment with us for any reason. Due to our limited operating history and
financial resources, we are entirely dependent on the continued service of our
President, David Dugas and our CEO, Chris Metcalf. Neither of these executives
lives is insured for the benefit of the Company by key man life insurance. We
may not have the financial resources to hire a replacement if we lost the
services of Mr. Dugas or Mr. Metcalf. The loss of service of Mr. Dugas or Mr.
Metcalf could therefore significantly and adversely affect our operations

The specialty chemicals business is highly competitive and
the competition may adversely affect our results of operations.

Our 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.

We are dependent on only a few major customers and the loss
of any one of these customers could have a material adverse impact on our
business.

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ESPPI has a total of twenty seven customers, three of which are
major customers that together account for 30% of accounts receivable at December
31, 2008 and 56% of the total revenues earned for the year ended December 31,
2008. The loss of one of our major customers would have a serious material
negative economic impact on our company and our ability to continue. There is no
guarantee that we could replace one of these customers and if we were able to
replace them, there is no guarantee that the revenues would be equal.

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.

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.

RISKS RELATED TO OUR COMMON STOCK

Our stock is a penny stock. Trading of our stock may be
restricted by the Securities and Exchange Commissions penny stock regulations
which may limit a stockholders ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the Securities and Exchange Commission which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customers
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customers confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must 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. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.

16

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The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements which may also limit a stockholders ability
to buy and sell our stock.

In addition to the penny stock rules described above, FINRA
has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customers financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for our shares.

Our common stock is illiquid and the price of our common
stock may be negatively impacted by factors which are unrelated to our
operations.

Our common stock currently trades on a limited basis on the OTC
Bulletin Board. Trading of our stock through the OTC Bulletin Board is
frequently thin and highly volatile. There is no assurance that a sufficient
market will develop in our stock, in which case it could be difficult for
shareholders to sell their stock. The market price of our common stock could
fluctuate substantially due to a variety of factors, including market perception
of our ability to achieve our planned growth, quarterly operating results of our
competitors, trading volume in our common stock, changes in general conditions
in the economy and the financial markets or other developments affecting our
competitors or us. In addition, the stock market is subject to extreme price and
volume fluctuations. This volatility has had a significant effect on the market
price of securities issued by many companies for reasons unrelated to their
operating performance and could have the same effect on our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

There are no unresolved staff comments.

ITEM 2. 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.

In March 2008, the Company entered into a five-year lease
requiring monthly payments of $8,750. The Company has the option to renew the
lease for a subsequent five-year term with monthly rent of $9,500. The Company
also has the option to buy the facilities during the second year of the lease
for the consideration of $900,000. If the Company elects not to purchase the
building during the second year of the lease, it has the option to purchase the
building during the remainder of the initial term of the lease for an increased
amount.

The landlord has agreed to construct a laboratory building on
the premises and a tank filling area and the Company has agreed to pay the
landlord an additional $20,000 at the end of the initial five year lease period
if it does not renew the lease for the second five year term. The Company will
amortize the additional costs over the initial period of the lease.

Pursuant to a share purchase agreement dated November 21, 2007,
as amended March 17, 2008 and July 30, 2008, and as restated on September 9,
2008, among our company, Artemis Energy PLC (formerly Pantera Oil and Gas PLC),
Aurora and Boreal, we have the right to purchase up to 85% of the shares of each
of Aurora and Boreal. Aurora and Boreal have acquired rights to concessions in
Paraguay representing approximately 3,872,000 acres or 6,050 square miles
pursuant to a Concession Contract with the government of Paraguay dated March 2,
2007. The concessions offer the exclusive right to explore the granted area for
a term of four years following the date of ratification by the Congress of
Paraguay, extendible for an additional two years in which the concessionaire
shall be obligated to fulfill a minimum work plan. The concessions offer a term
of twenty years for exploitation following the date entered into the
exploitation stage, extendible for an additional ten years at the
concessionaires request.

Aurora has acquired the rights to concessions in northern
Paraguay consisting of three tracts: Tagua, Toro, and Cerro Cabrera. They are
located in the eastern extensions of the Chaco Basin, where, in Bolivia and
Argentina, significant reserves of gas, oil and condensate have been discovered.
The Chaco Basin extends across Paraguay, Bolivia and Argentina, and in
Paraguay,the Chaco Basin is composed of two Sub-Basins, the Curupayty
and Carandayty Sub-Basins. The sources for most of the known hydrocarbons in the
Chaco Basin are the Devonian Los Monos and Silurian Kirusillas shales. Both are
mixed oil and gas prone

17

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source rocks. The amalgamated fans and channel sandstones of
the Carboniferous Tarija and Tupambi formations are the main producing
reservoirs in the Chaco Basin. The Tagua tract, approximately 116 square miles
in area, is located in the Carandayty Sub-Basin on the border with Bolivia. It
is approximately 12 miles from a Paraguayan well (Mendoza 1-R) that tested gas
from two zones and approximately 68 miles from the nearest producing field in
Bolivia. The Toro tract, approximately 927 square miles in area, is located in
the Curupayty Sub-Basin in north central Paraguay. The Cerro Cabrera Block,
approximately 1,996 square miles in area, is located in northern Paraguay on the
Bolivian border. It is located directly across the Izozog High from the Mendoza
1-R and approximately 149 miles from the nearest producing fields in Bolivia.
Aurora entered into a Concession Contract with the government of Paraguay on
March 2, 2007. This Concession Contract is assigned Law Number 3,551, dated July
16, 2008, having been duly ratified by the Congress of Paraguay and signed by
President Nicanor Duarte Frutos. The Concession area for Exploration is located
and delimited by the following geographic coordinates:

TORO BLOCK

COORDINATES
    LATITUDE:
    LONGITUDEA
    20° 1030
    59° 4807.2B
    20° 1030
    58° 3849.2C
    20° 2118
    58° 3849.2D
    20° 2118
    59° 4807.2


Approximate area: 593,053 acres.

TAGUA BLOCK

POINTS
    Longitude
    LatitudeA
    62° 0640.68
    20° 2118B
    61° 5508.4
    20° 2118C
    61° 5508.4
    20° 0451.6D Boundary Marker IV Gabino Mendoza
    61° 5521.13
    20° 0521.16


Approximate area: 74,132 acres.

BLOCK: CERRO CABRERA

POINTS
    Longitude
    LatitudeBoundary Marker V C. Cabrera
    61° 4406.44
    19° 3803.86Boundary Marker VI Palmar de las Islas
    60° 371.2
    19° 2736C
    60° 3419.2
    19° 2652.8D
    60° 3419.2
    19° 4846.8E
    60° 4550.4
    19° 4846.8F
    60° 4550.4
    19° 551.2G
    61° 401.2
    19° 551.2H
    61° 401.2
    19° 5938.4I
    61° 5237.2
    19° 5938.4


Approximate area: 1,277,535 acres.

Boreal has recently acquired the rights to concessions in northern
  Paraguay consisting of two tracts: Pantera and Bahia Negra. They are also located
  in the eastern extensions of the prolific Chaco Basin, where, in Bolivia and
  Argentina, significant

18

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reserves of gas, oil and condensate have been discovered. The
Pantera tract, approximately 1,158 square miles in area, is located in the
Curupayty Sub-Basin on the border with Bolivia. The Bahia Negra tract,
approximately 1,853 square miles in area, is located at the southern end of the
Curupayty Sub-Basin in north central Paraguay. Boreal entered into a Concession
Contract with the government of Paraguay on March 2, 2007. This Concession
Contract is assigned Law Number 3,478, dated May 13, 2008, having been duly
ratified by the Congress of Paraguay and signed by President Nicanor Duarte
Frutos. The Concession area for Exploration is located and delimited by the
following geographic coordinates:

PANTERA BLOCK

POINTS
    LONGITUDE
    LATITUDE:Boundary Marker VII C. Sanchez
    59o5840
    19o1740. 87Boundary Marker VIII C. Chovoreca
    59o0408.14
    19o1715.53C.
    59o0155.52
    19o1836D
    59o0155.52
    19o2707.2E
    59o5942
    19o2707.2F
    59o5942
    19o3758.8G
    60o2248
    19o3758.8H
    60o2248
    19o2352.8


Approximate area: 741,316 acres.

BAHIA NEGRA BLOCK

POINTS
    LONGITUDE
    LATITUDE:A
    59o0155.2
    20° 2118B
    58° 3849.2
    20° 2118C
    58° 3849.2
    21° 2620.4D
    59o0155.2
    21° 2620.4


Approximate area: 1,186,106 acres.

ITEM 3. LEGAL PROCEEDINGS

We know of no material, active or pending legal proceedings
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial shareholder,
is an adverse party or has a material interest adverse to our interest.

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

None.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS ANDISSUERPURCHASES OF EQUITY
SECURITIES

Our common shares were approved for quotation on the OTC
Bulletin Board on April 16, 2007, and are currently quoted for trading under the
symbol ESPI. The following quotations obtained from the OTC Bulletin Board
reflect the high and low bids for our common stock based on inter-dealer prices,
without retail mark-up, mark-down or commission an may not represent actual
transactions. The high and low bid prices of our common stock for the periods
indicated below are as follows:

19

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OTC Bulletin
      Board(1)Quarter Ended
    High
    LowDecember 31, 2008
    $0.17
    $0.03September 30, 2008
    $0.48
    $0.12June 30, 2008
    $0.77
    $0.35March 31, 2008
    $1.55
    $0.40December 31, 2007 (2)
    $1.99
    $1.05September 30, 2007
    N/A
    N/AJune 30, 2007
    N/A
    N/AMarch 31, 2007
    N/A
    N/A


| | (1) | OTC Bulletin Board quotations reflect inter-dealer prices
      without retail mark-up, mark-down or commission, and may not represent
      actual transactions. Our common shares are issued in registered form. The
      transfer agent and registrar for our common stock is American Stock
      Transfer and Trust Company, LLC (Telephone: (718) 921- 8521; Facsimile:
      (718) 765-8742).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                      
| | (2) | Our common shares were approved for quotation on the OTC
      Bulletin Board on April 16, 2007. The first trade of our stock on the OTC
      Bulletin Board as indicated on Yahoo Finance occurred on October 9,
      2007.                                                                                                                                                                       

On April 3, 2009, the shareholders list of our common shares
showed 14 registered shareholders and 22,859,689 shares outstanding.

Dividend Policy

No cash dividends have been paid by our company on our common
stock. We anticipate that our companys future earnings will be retained to
finance the continuing development of our business. The payment of any future
dividends will be at the discretion of our companys board of directors and will
depend upon, among other things, future earnings, any contractual restrictions,
the success of business activity, regulatory and corporate law requirements and
the general financial condition of our company.

Recent Sales of Unregistered Securities incurred by Pantera
prior to the merger and change of control with ESP Resources

(All share amounts, number of shares and per share amounts in
this section are pre-split)

On February 25, 2008, we entered into a subscription agreement
with Trius Energy, LLC, of which Scott Tyson is a significant shareholder,
whereby we agreed to issue 1,200,000 shares of our common stock for aggregate
proceeds of $720,000.

On April 3, 2008, we entered into a subscription agreement with
one accredited investor, whereby we agreed to issue 1,111,111 units for gross
proceeds of $500,000, pursuant to a private placement subscription agreement.
Each unit is comprised of one common share and one common share purchase
warrant. Each warrant entitles the holder thereof to purchase an additional
common share at $0.75 per share up to April 3, 2009 and at $1.00 per share from
April 4, 2009 to April 3, 2010. The units were issued relying on Section 4(2)
and/or Rule 506 of Regulation D of the Securities Act of 1933.

Between August 11 and August 18, 2008, the Company completed
three private placements for a total of 1,750,000 units at $0.20 per unit for
gross proceeds of $350,000. Each unit is comprised of one common share in the
capital of the Company and oil and gas net revenue interests in the Baker 80
lease (the Property) as follows:

| | i)  | the subscriber shall receive 51% of the Companys net
      revenue interests in the Property, defined as up to the amount that is
      equal to 150% of the gross amount paid by the subscriber for the private
      placement, pro rata based on the percentage of the amount subscribed as
      compared to the total proceeds in aggregate of the private placement;
      and,
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                       
| | ii) | thereafter, on the condition the private placement closes
      $2,500,000 in total proceeds in aggregate, the subscriber shall receive 8%
      of the Companys net revenue interests in the Property pro rata based on
      the percentage of the amount subscribed as compared to the total proceeds
      in aggregate of the private placement,                                

20

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Equity Compensation Plan Information

We currently do not have any stock option or equity
compensation plans or arrangements.

Purchases of Equity Securities by the Issuer and Affiliated
Purchasers

Other than as set out below, we did not purchase any of our
shares of common stock or other securities during our fiscal year ended December
31, 2008.

In connection with Peter Hughes resignation as the secretary
and a director of our company, on February 26, 2008, we entered into a return to
treasury agreement with Peter Hughes, whereby Mr. Hughes agreed to return
27,000,000 shares of our common stock which he held to the treasury of our
company for the sole purpose of our company retiring such shares.

ITEM 6. SELECTED FINANCIAL DATA

The following financial data is derived from, and should be
read in conjunction with, the Financial Statements and notes thereto.
Information concerning significant trends in the financial condition and results
of operations is contained in Managements Discussion and Analysis of Financial
Condition and Results of Operations.

***Selected Historical
Data***

December 31,2008
    
    
    2007Total Assets
    $
    2,507,099
    
    $
    813,491Total Liabilities
    $
    1,448,780
    
    $
    1,226,228Total Stockholders' Equity (Deficit)
    $
    1,058,319
    
    $
    (412,737
    )Net Working Capital (Deficit)
    $
    (106,792
    )
    $
    121,696Revenues
    $
    1,977,861
    
    $
    697,122Operating Expenses
    $
    2,020,198
    
    $
    1,073,882Net Loss
    $
    (115,283
    )
    $
    (412,312
    )


ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Cautionary Notice Regarding Forward Looking
Statements

The information contained in Item 7 contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
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 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 results will not be different from expectations expressed in this
report.

We desire to take advantage of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. This filing contains a
number of forward-looking statements which reflect managements current views
and expectations with respect to our business, strategies, products, future
results and events, and financial performance. All statements made in this
filing other than statements of historical fact, including statements addressing
operating performance, events, or developments which management expects or
anticipates will or may occur in the future, including statements related to
distributor channels, volume growth, revenues, profitability, new products,
adequacy of funds from operations, statements expressing general optimism about
future operating results, and non-historical information, are forward looking
statements. In particular, the words believe, expect, intend,
anticipate, estimate, may, variations of such words, and similar
expressions identify forward-looking statements, but are not the exclusive means
of identifying such statements, and their absence does not mean that the
statement is not forward-looking. These forward-looking statements are subject
to certain risks and uncertainties, including those discussed below. Our actual
results, performance or achievements could differ materially from historical
results

21

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as well as those expressed in, anticipated, or implied by these
forward-looking statements. We do not undertake any obligation to revise these
forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on these
forward-looking statements, which are based on managements current expectations
and projections about future events, are not guarantees of future performance,
are subject to risks, uncertainties and assumptions (including those described
below), and apply only as of the date of this filing. Our actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements. Factors which could cause
or contribute to such differences include, but are not limited to, the risks to
be discussed in our Annual Report on form 10-K and in the press releases and
other communications to shareholders issued by us from time to time which
attempt to advise interested parties of the risks and factors which may affect
our business. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.

Use of Generally Accepted Accounting Principles (GAAP)
Financial Measures

We use GAAP financial measures in the section of this report
captioned "Managements Discussion and Analysis or Plan of Operation"
(MD&A). All of the GAAP financial measures used by us in this report
relate to the inclusion of financial information. This discussion and analysis
should be read in conjunction with our financial statements and the notes
thereto included elsewhere in this annual report. All references to dollar
amounts in this section are in United States dollars unless expressly stated
otherwise. Please see our Risk Factors for a list of our risk factors.

Overview

This subsection of MD&A provides an overview of the
important factors that management focuses on in evaluating our businesses,
financial condition and operating performance, our overall business strategy and
our earnings for the periods covered.

Result of Operations

Year ended December 31, 2008 as Compared to Year ended
December 31, 2007

The following table summarizes the results of our operations
during year ended December 31, 2008 and 2007, and

provides information regarding the dollar and percentage
increase or (decrease) from the year ended December 31, 2008 to the year ended
December 31, 2007.

|                        |   |                         |   |   |          |   |   |            |  
|----------------------- | - | ----------------------- | - | - | -------- | - | - | ---------- | -
|                        |   | Year Ended December 31, |   |   | Increase |   |   | % Increase |  
|                        |   | 2008                    |   |   | 2007     |   |   | (Decrease) |  
|                        |   |                         |   |   |          |   |   |            |  
|Revenue                 | $ | 1,977,861               |   | $ | 697,122  |   | $ | 1,280,739  |  
|Cost of Goods Sold      |   | 1,223,356               |   |   | 644,985  |   |   | 578,371    |  
|Gross Profit            |   | 754,505                 |   |   | 52,137   |   |   | 702,368    |  
|Total General and       |   |                         |   |   |          |   |   |            |  
|Administrative Expenses |   | 802,501                 |   |   | 428,897  |   |   | 373,446    |  
|Loss from Operation     |   | (42,337                 | ) |   | (377,189 | ) |   | (334,852   | )
|Total Other Income      |   |                         |   |   |          |   |   |            |  
|(expense)               |   | (72,946                 | ) |   | (35,552  | ) |   | 5,877      |  
|Net loss                | $ | (115,283                | ) | $ | (412,312 | ) |   | (297,029   | )
|                        |   |                         |   |   |          |   |   |            |  

Revenues

Sales revenue increased
from $697,122 for the year ended December 31, 2007 to $1,977,861 for the same
period of 2008, an increase of $1,280,739. The increase was due to several
factors. We commenced operations of ESPPI during the second quarter of
2007;therefore, we did not have a full year of operations in ESPPI in 2007. The
customer base of ESPPI

22

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expanded during 2008 due to increased sales coverage in the
Southern Louisiana and East Texas regions. ESPPI increased sales volume to
several of our existing customers through supply of additional petrochemical
products at the customer wellsites in 2008..

Cost of goods sold and gross profit

Cost of goods sold for the year
ended December 31, 2008 was $1,223,356, an increase of $578,371 or 90% compared
to $644,985 over the same period in 2007. The increase in cost of goods sold for
the year ended December 31, 2008 as compared to that of 2007 was a result of the
increased sales revenue for 2008 and the fact that ESPPI did not commence
operations until the second quarter of 2007.

Our gross profit increased
$702,368, or 1,347%, to $754,505 for theyear ended December 31, 2008 from
$52,137 during the same period in 2007. Gross profit as a percentage of revenue
was 38% for the year ended December 31, 2008, an increase of 31% from 7% during
the same period in 2007. Such increase was mainly contributed by economies of
increased purchases of raw materials on a per unit basis used in our blending
operations and a greater efficiency in the service of our company delivery team
resulting in a reduction in our service delivery cost.

General and Administrative

General and administrative
expenses increased from $428,897 in the year ended December 31, 2007 to $802,501
in the same period of 2008, representing an increase of $373,446 or 87%. The
increase in general and administrative expenses in the year ended December 31,
2008 compared to that of 2007 was primarily due to the increase in staff , an
increase in facility rental cost as ESPPI moved into a larger rental facility in
2008 to accommodate the increase in sales and staff, an increase in travel costs
associated with expansion of our customer base and direct sales efforts and the
fact that ESPPI did not commence operations until the second quarter of 2007.

Net loss

Net loss for the year ended
December 31, 2008 was $(115,283), representing a decrease of $297,029 compared
to a loss of $(412,312) for the same period in 2007. The decrease in the net
loss was mainly due to the increase in revenue and improved gross profit as a
percentage of revenue.

Liquidity and Capital Resources

Cash

As of December 31, 2008, the
Company had $27,367 of cash and cash equivalents as compared to $132,823 as of
December 31, 2007.

Cash Flow

Year Ended December 31,2008
    
    
    2007Net cash used in operating activities
    $
    (233,829
    )
    $
    (407,114
    )Net cash used in investing activities
    $
    (4,626
    )
    $
    (25,378
    )Net cash provided by financing activities
    $
    132,999
    
    $
    565,211Net increase
      (decrease) in cash
    $
    (105,456
    )
    $
    132,721


Cash outflows from operations
during the year ended December 31, 2008 amounted to $233,829 as compared to net
cash outflows from operations of $407,114 in the same period of 2007. The
decrease in cash outflow was due primarily to the decrease in net loss and
increase in accounts payable.

23

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Our cash outflows used in investing
  activities during the year ended December 31, 2008 amounted to $4,626 as compared
  to $25,378 in the same period of 2007. Cash outflows for the change in restricted
  cash decreased from $17,855 for the year ended December 31, 2008 to $5,221 for
  the same period of 2007. In addition, cash received from mergers increased from
  $7,924 in 2007 to $13,260 in 2008.

Our cash inflows from financing
  activities amounted to $132,999 in the year ended December 31, 2008 as compared
  to $565,211 in the same period of 2007. During the year ended December 31, 2007,
  we received a loan from an investor in the amount of $700,000.

Working Capital

As of December 31, 2008, the working
  capital of the Company was a deficit of $106,792. We will require additional
  funds to implement our growth strategy. To date, we have had negative cash flows
  from operations and we have been dependent on sales of our equity securities
  and debt financing to meet our cash requirements. We expect this situation to
  continue for the foreseeable future. We anticipate that we will have negative
  cash flows during the next twelve months. Funds may be raised through equity
  financing, debt financing, or other sources, which may result in further dilution
  in the equity ownership of our shares. There is still no assurance that we will
  be able to maintain operations at a level sufficient for an investor to obtain
  a return on his investment in our common stock. Further, we may continue to
  be unprofitable.

On October 10, 2008 we terminated
  the equity financing agreement dated February 12, 2008 between our company and
  FTS Financial Investments Ltd. Both the termination and the original agreement
  occurred prior to our reverse merger with ESP Resources, Inc., a Delaware corporation,
  and, therefore, the FTS equity financing agreement and termination is not reflected
  in our financial statements. We terminated the agreement upon receipt of notice
  from FTS Financial Investments informing our company that FTS Financial Investments
  would be unable to comply with our drawdown notice dated September 26, 2008,
  delivered pursuant to the terms of the agreement, due to the downturn in the
  financial markets. Pursuant to Section 7.01 of the agreement, our company could
  terminate the agreement at any time. As at December 31, 2008, no shares were
  issued under the February 12, 2008 equity financing agreement

Cash Requirements

Our plan of operations for the
  next 12 months involves the exploration of our oil and gas investments, the
  growth of our petrochemical business through the expansion of regional sales,
  and the research and development of new chemical and analytical services in
  areas of waste remediation, water treatment and specialty biodegradable cleaning
  compounds. As of December 31, 2008, our company had cash of $27,367 and a working
  capital deficit of $106,792.

We estimate that our general operating
  expenses for the next twelve month period to include at least $3,000,000for
  exploration expenses and $420,000 for professional fees and general and administrative
  expenses for a total estimated funding of at least $3,420,000. Estimated operating
  expenses include provisions for consulting fees, salaries, travel, telephone,
  office rent, and ongoing legal, accounting, and audit expenses to comply with
  our reporting responsibilities as a public company under the United States Exchange
  Act of 1934, as amended.

We will require additional funds
  to continue our operations and implement our growth strategy in exploration
  operations. To date, we have had negative cash flows from operations and we
  have been dependent on sales of our equity securities and debt financing to
  meet our cash requirements. We expect this situation to continue for the foreseeable
  future. We anticipate that we will have negative cash flows during the next
  twelve month period. These funds may be raised through equity financing, debt
  financing, or other sources, which may result in further dilution in the equity
  ownership of our shares. There is still no assurance that we will be able to
  maintain operations at a level sufficient for an investor to obtain a return
  on his investment in our common stock. Further, we may continue to be unprofitable.

We incurred a net loss of $115,283
  for the year ended December 31, 2008. As indicated above, we anticipate that
  our projected operating expenses for the next twelve months will be $3,420,000.
  We will be required to raise additional funds through the issuance of equity
  securities or through debt financing in order to carry-out our plan of operations
  for the next twelve month period. There can be no assurance that we will be
  successful in raising the required capital or that actual cash requirements
  will not exceed our estimates.

24

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Given that we have had limited revenues to date, our cash
requirements are subject to numerous contingencies and risk factors beyond our
control, including operation and acquisition risks, competition from well-funded
competitors, and our ability to manage growth. We can offer no assurance that
our company will generate cash flow sufficient to achieve profitable operations
or that our expenses will not exceed our projections. If our expenses exceed
estimates, we will require additional monies during the next twelve months to
execute our business plan.

There are no assurances that we will be able to obtain funds
required for our continued operation. There can be no assurance that additional
financing will be available to us when needed or, if available, that it can be
obtained on commercially reasonable terms. If we are not able to obtain
additional financing on a timely basis, we will not be able to meet our other
obligations as they become due and we will be forced to scale down or perhaps
even cease the operation of our business.

Going Concern

Due to our net losses, negative cash flow and negative working
capital, in their report on our audited financial statements for the year ended
December 31, 2008, our independent auditors included an explanatory paragraph
regarding substantial doubt about our ability to continue as a going
concern.

We have historically incurred losses, and through December 31,
2008 have incurred losses of $(530,020) since our inception. Because of these
historical losses, we will require additional working capital to develop our
business operations. We intend to raise additional working capital through
private placements, public offerings, bank financing and/or advances from
related parties or shareholder loans.

Our investments in Aurora Petroleos SA, Boreal Petroleos SA,
our joint venture with Trius Energy, LLC are dependent on the efforts of others
for the development of well sites and the generation of cash flow. There is not
guaranty that those investments will not suffer material setbacks or will ever
become productive. For example, the Block 83 84 Project JV that is under the
joint venture with Trius Energy, LLC experienced a well-head blowout on November
12, 2008, which has delayed the development of that well. If the parties
responsible for the development of such projects are unsuccessful in the
development of those properties, the Company will lose its investments in those
projects

The continuation of our business is dependent upon obtaining
further financing and achieving a break even or profitable level of operations.
The issuance of additional equity securities by us could result in a significant
dilution in the equity interests of our current or future stockholders.
Obtaining commercial loans, assuming those loans would be available, will
increase our liabilities and future cash commitments.

There are no assurances that we will be able to achieve a level
of revenues adequate to generate sufficient cash flow from operations. To the
extent that funds generated from operations and any private placements, public
offerings and/or bank financing are insufficient, we will have to raise
additional working capital. No assurance can be given that additional financing
will be available, or if available, will be on terms acceptable to us. If
adequate working capital is not available we may not increase our operations.

These conditions raise substantial doubt about our ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should we be unable to continue as a going concern.

Subsequent Events

On January 27, 2009, subsequent to the date of this report, we
effected a one (1) for twenty (20) reverse stock split of the common stock of
the Company and received a new ticker symbol. The name change and reverse stock
split became effective with the OTC Bulletin Board at the opening of trading on
January 27, 2009 under the new symbol ESPI. Our new CUSIP number is 26913L104.
The Company plans to file an 8K/A shortly with a more in-depth description of
the combined company.

Off-Balance Sheet Arrangements

Our company has no outstanding derivative financial
instruments, off-balance sheet guarantees, interest rate swap transactions or
foreign currency contracts. Our company does not engage in trading activities
involving non-exchange traded contracts.

25

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Application of Critical Accounting Policies

The preparation of financial statements in conformity with
United States generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying disclosures of our company. Although these estimates
are based on managements knowledge of current events and actions that our
company may undertake in the future, actual results may differ from such
estimates.

Basic and Diluted Loss Per Share

We report basic loss per share in accordance with the Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share. Basic loss per share is computed using
the weighted average number of shares outstanding during the period. Diluted
earnings (loss) per share are computed similar to basic income (loss) per share
except that the denominator is increased to include the number of common stock
equivalents (primarily outstanding options and warrants). Common stock
equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, at either the beginning of the
respective period presented or the date of issuance, whichever is later, and
only if the common stock equivalents are considered dilutive based upon our net
income (loss) position at the calculation date. Diluted loss per share has not
been provided as it would be antidilutive.

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.

Property and equipment

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.

Investments

Investments in companies and joint ventures where no
significant influence exists are carried at the lower of cost or fair value. The
investments are assessed for impairment when it appears the amount may not be
recovered.

Oil and Gas Properties

We follow the full cost method of accounting for oil and gas
operations whereby all costs of exploring for and developing oil and gas
reserves are initially capitalized on a country-by-country (cost centre) basis.
Such costs include land acquisition costs, geological and geophysical expenses,
carrying charges on non-producing properties, costs of drilling and overhead
charges directly related to acquisition and exploration activities.

Costs capitalized, together with the costs of production
equipment, will be depleted and amortized on the unit-of-production method based
on the estimated gross proved reserves. Petroleum products and reserves are
converted to a common unit of measure, using 6 MCF of natural gas to one barrel
of oil.

Costs of acquiring and evaluating unproved properties are
initially excluded from depletion calculations. These unevaluated properties are
assessed periodically to ascertain whether impairment has occurred. When proved
reserves are assigned or the property is considered to be impaired, the cost of
the property or the amount of the impairment is added to costs subject to
depletion calculations.

If capitalized costs, less related accumulated amortization and
deferred income taxes, exceed the full cost ceiling the excess is expensed in
the period when such excess occurs. The full cost ceiling is determined based
on the present value of estimated future net revenues attributed to proved
reserves, using current prices less estimated future expenditures plus the lower
of cost and fair value of unproven properties within the cost centre.

26

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Future net cash flows from proved reserves using period-end,
non-escalated prices and costs are discounted to present value and compared to
the carrying value of oil and gas properties.

Proceeds from a sale of petroleum and natural gas properties
are applied against capitalized costs, with no gain or loss recognized, unless
such a sale would alter the rate of depletion by more than 25%. Royalties paid
net of any tax credits received are netted with oil and gas sales.

Asset Retirement Obligations

We recognize the fair value of a liability for an asset
retirement obligation in the year in which it is incurred when a reasonable
estimate of fair value can be made. The carrying amount of the related
long-lived asset is increased by the same amount as the liability.

Changes in the liability for an asset retirement obligation due
to the passage of time will be measured by applying an interest method of
allocation. The amount will be recognized as an increase in the liability and an
accretion expense in the statement of operations. Changes resulting from
revisions to the timing or the amount of the original estimate of undiscounted
cash flows are recognized as an increase or a decrease in the carrying amount of
the liability for an asset retirement obligation and the related asset
retirement cost capitalized as part of the carrying amount of the related
long-lived asset. At December 31, 2008, our company had no asset retirement
obligations as we recently entered into a new development stage.

Environmental Costs

Environmental expenditures that relate to current operations
are expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are expensed. Liabilities are recorded
when environmental assessments and/or remedial efforts are probable, and the
cost can be reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of completion of a feasibility study or our companys
commitments to a plan of action based on the then known facts.

As at December 31, 2008, we have not incurred any environmental
expenditures.

Financial Instruments

The carrying value of our financial instruments consisting of
cash, accounts payable and accrued liabilities and due to related parties
approximate their fair value due to the short-term maturity of such instruments.
Loan payable is carried at cost plus accrued interest and the carrying value is
equal to the fair value. Unless otherwise noted, it is managements opinion that
our company is not exposed to significant interest, currency or credit risks
arising from these financial instruments.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements. This Statement defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosure related to the use of fair
value measures in financial statements. The Company adopted SFAS No. 157 as of
January 1, 2008. The adoption of this Statement had no impact on its financial
position or results of operations.

On February 15, 2007, the FASB issued SFAS No. 159 The Fair
Value Option for Financial Assets and Financial Liabilities. This Statement
establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. The Company adopted SFAS No. 159 as of
January 1, 2008. The adoption of this Statement had no impact on its financial
position or results of operations.

In December 2007, the Financial Accounting Standards Board
(FASB) issued SFAS No. 160, "Noncontrolling Interests in Consolidated
Financial Statements- an amendment ofARB 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
non-controlling 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
non-controlling equity investment in the former subsidiary be initially measured
at fair value,

27

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entities provide sufficient disclosures that clearly identify
and distinguish between the interests of the parent and the interests of the
non-controlling owners. 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 ofthis 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 ofFASB 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 non-derivative 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.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles, (SFAS No. 162), which identifies a
consistent framework for selecting accounting principles to be used in preparing
financial statements for nongovernmental entities that are presented in
conformity with United States generally accepted accounting principles (GAAP).
The current GAAP hierarchy was criticized due to its complexity, ranking
position of FASB Statements of Financial Accounting Concepts and the fact that
it is directed at auditors rather than entities. SFAS No. 162 will be effective
60 days following the United States Securities and Exchange Commissions (SECs)
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles. The FASB does not expect that SFAS No. 162 will result in
a change in current practice, and the Company does not believe that SFAS 162
will have an impact on operating results, financial position or cash flows.

In December 2007, the FASB issued SFAS No. 141(R), Business
Combinations (SFAS No. 141(R)). SFAS No. 141(R) replaces SFAS No. 141,
Business Combinations, however it retains the fundamental requirements that
the acquisition method of accounting be used for all business combinations and
for an acquirer to be identified for each business combination. SFAS No. 141(R)
requires an acquirer to recognize the assets acquired, liabilities assumed, and
any noncontrolling interest in the acquiree at the acquisition date, be measured
at their fair values as of that date, with specified limited exceptions. Changes
subsequent to that date are to be recognized in earnings, not goodwill.
Additionally, SFAS No. 141 (R) requires costs incurred in connection with an
acquisition be expensed as incurred. Restructuring costs, if any, are to be
recognized separately from the acquisition. The acquirer in a business
combination achieved in stages must also recognize the identifiable assets and
liabilities, as well as the noncontrolling interests in the acquiree, at the
full amounts of their fair values. SFAS No. 141(R) is effective for business
combinations occurring in fiscal years beginning on or after December 15, 2008.
The Company will apply the requirements of SFAS No. 141(R) upon its adoption on
January 1, 2009 and is currently evaluating whether SFAS No. 141(R) will have an
impact on its financial position and results of operations.

In May 2008, the FASB issued SFAS No. 163, "Accounting for
Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No.
60." Diversity exists in practice in accounting for financial guarantee
insurance contracts by insurance enterprises under FASB Statement No. 60,
Accounting and Reporting by Insurance Enterprises. This results in
inconsistencies in the recognition and measurement of claim liabilities. This
Statement requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement
requires expanded disclosures about financial guarantee insurance contracts. The
accounting and disclosure requirements of the Statement will improve the quality
of information provided to users of financial statements. SFAS 163 is effective
for financial statements issued for fiscal years beginning after December
15,2008, and interim periods within those fiscal years. The adoption of FASB 163
is not expected to have a material impact on the Company's financial position.

ITEM 7A. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT
MARKET RISK

We are a smaller reporting company, as defined by Rule
229.10(f)(1) and are not required to provide the information required by this
Item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA

Our financial statements are stated in United States dollars
and are prepared in accordance with United States generally accepted accounting
principles.

28

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It is the opinion of management that the audited financial
statements for the fiscal years ended December 31, 2008 and 2007 include all
adjustments necessary in order to ensure that the audited financial statements
are not misleading.

The following financial statements are filed as part of this
annual report:

29

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of DirectorsESP Resources, Inc. Scott,
Louisiana

We have audited the accompanying consolidated balance sheet of
ESP Resources, Inc. (the Company) as of December 31, 2008, and the
consolidated statements of operations, stockholders deficit, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated 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 an audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing 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 financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2008, 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 2 to the consolidated financial statements, The Company has
incurred losses through December 31, 2008 and at December 31, 2008 had negative
working capital. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to this
matter are also described in Note 2. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

/s/Malone & Bailey, PC
www.malone-bailey.comHouston, Texas April 15, 2009

30

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors of:ESP Resources, Inc.

We have audited the accompanying consolidated balance sheet of
ESP Resources, Inc. and Subsidiary (the Company) as of December 31, 2007, and
the related consolidated statement of operations, changes in stockholders
deficit and cash flow 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
Resources, 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 $412,312, a negative cash flow from operations of $407,112, a
working capital deficiency of $121,696 and a stockholders' deficiency of
$412,737. 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
AccountantsBoynton Beach, Florida April 7, 2009

31

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ESP Resources, Inc.Consolidated Balance SheetsDecember 31, 2008

|ASSETS                                                                   |  
|------------------------------------------------------------------------ | -
|                                                                         |  
|CURRENT ASSETS                                                           |  
|Cash and cash equivalents                                                | $
|Accounts receivable, net                                                 |  
|Inventories, net                                                         |  
|Prepaid expenses and other current assets                                |  
|                                                                         |  
|Total current assets                                                     |  
|                                                                         |  
|Property and equipment, net                                              |  
|Oil and gas properties, unproven                                         |  
|Note receivable, net of allowance of $402,000 and $-,
      respectively |  
|Other assets                                                             |  
|                                                                         |  
|TOTAL
      ASSETS                                                       | $
|                                                                         |  
|                                                                         |  
|LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)                     |  
|                                                                         |  
|CURRENT LIABILITIES                                                      |  
|Accounts payable                                                         | $
|Factoring payable                                                        |  
|Accrued expenses                                                         |  
|Due to related parties                                                   |  
|Current maturities of
      long-term debt                               |  
|                                                                         |  
|Total current liabilities                                                |  
|                                                                         |  
|Loan from investor                                                       |  
|Long-term debt (less current maturities)                                 |  
|Capital lease obligations                                                |  
|Deferred lease cost                                                      |  
|                                                                         |  
|Total liabilities                                                        |  
|                                                                         |  
|STOCKHOLDERS' EQUITY (DEFICIT)                                           |  
|Common stock - $0.001
      par value; 1,200,000,000 shares authorized,  |  
|19,206,429 and 14,634,146
      shares issued and outstanding,           |  
|respectively                                                             |  
|Additional paid-in capital                                               |  
|Subscription receivable                                                  |  
|Accumulated deficit                                                      |  
|Total stockholders' equity (deficit)                                     |  
|                                                                         |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)               | $

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

32

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ESP Resources, Inc.Consolidated Statements of
OperationsFor the Years Ended December 31, 2008 and 2007

|                                       |   | For the year ended December 31, |  
|-------------------------------------- | - | ------------------------------- | -
|                                       |   | 2008                            |  
|                                       |   |                                 |  
|SALES, NET                             | $ | 1,977,861                       |  
|COST OF GOODS SOLD                     |   | 1,223,356                       |  
|                                       |   |                                 |  
|GROSS PROFIT                           |   | 754,505                         |  
|                                       |   |                                 |  
|General and administrative             |   | 802,501                         |  
|Depreciation                           |   | 25,858                          |  
|Loss (gain) on sale of assets          |   | (31,517                         | )
|                                       |   |                                 |  
|LOSS FROM OPERATIONS                   |   | (42,337                         | )
|                                       |   |                                 |  
|OTHER INCOME (EXPENSES)                |   |                                 |  
|Interest Expense                       |   | (14,985                         | )
|Factoring Fees                         |   | (57,038                         | )
|Interest Income                        |   | 433                             |  
|Other expense                          |   | (1,356                          | )
|Total
      Other Income (Expenses)    |   | (72,946                         | )
|                                       |   |                                 |  
|NET LOSS                               | $ | (115,283                        | )
|                                       |   |                                 |  
|NET LOSS PER SHARE  Basic and diluted | $ | (0.01                           | )
|                                       |   |                                 |  
|WEIGHTED AVERAGE SHARES OUTSTANDING -  |   |                                 |  
|Basic and diluted                      |   | 14,792,007                      |  

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

33

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ESP Resources, Inc.Statement of Stockholders
Equity (Deficit)For the Years Ended December 31, 2008 and 2007

|                                       |  |              |  |   |                 |  |   | Additional   |   |   |             |   |   |          |   |   |           |  
|-------------------------------------- |  | ------------ |  | - | --------------- |  | - | ------------ | - | - | ----------- | - | - | -------- | - | - | --------- | -
|                                       |  | Common Stock |  |   | Paid-in         |  |   | Subscription |   |   | Accumulated |   |   |          |  
|                                       |  | Number *     |  |   | Par
      Value |  |   | Capital      |   |   | Receivable  |   |   | Deficit  |   |   | Total     |  
|Balance, January 1, 2007               |  | 10,731,707   |  | $ | 10,732          |  | $ | (8,732       | ) | $ | -           |   | $ | (2,425   | ) | $ | (425      | )
|                                       |  |              |  |   |                 |  |   |              |   |   |             |   |   |          |   |   |           |  
|Acquisition of ESP Petrochemicals      |  | 3,902,439    |  |   | 3,902           |  |   | (2,902       | ) |   | (1,000      | ) |   | -        |   |   | -         |  
|Net loss for the period                |  | -            |  |   | -               |  |   | -            |   |   | -           |   |   | (412,312 | ) |   | (412,312  | )
|                                       |  |              |  |   |                 |  |   |              |   |   |             |   |   |          |   |   |           |  
|Balance, December 31, 2007             |  | 14,634,146   |  |   | 14,634          |  |   | (11,634      | ) |   | (1,000      | ) |   | (414,737 | ) |   | (412,737  | )
|                                       |  |              |  |   |                 |  |   |              |   |   |             |   |   |          |   |   |           |  
|Forgiveness of note payable to related |  |              |  |   |                 |  |   |              |   |   |             |   |   |          |   |   |           |  
|party                                  |  | -            |  |   | -               |  |   | 685,000      |   |   | -           |   |   | -        |   |   | 685,000   |  
|Shares retained by Pantera             |  |              |  |   |                 |  |   |              |   |   |             |   |   |          |   |   |           |  
|shareholders in reverse merger         |  | 4,572,283    |  |   | 4,572           |  |   | 896,767      |   |   | -           |   |   | -        |   |   | 901,339   |  
|Net loss for period                    |  | -            |  |   | -               |  |   | -            |   |   |             |   |   | (115,283 | ) |   | (115,283  | )
|                                       |  |              |  |   |                 |  |   |              |   |   |             |   |   |          |   |   |           |  
|Balance, December 31, 2008             |  | 19,206,429   |  | $ | 19,206          |  | $ | 1,570,133    |   | $ | (1,000      | ) | $ | (530,020 | ) | $ | 1,058,319 |  

| | * | The common stock issued has been retroactively restated
      to reflect the one for twenty reverse stock split which was effective
      January 27, 2009.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------

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

34

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ESP Resources, Inc.Consolidated Statements of
Cash FlowFor the Years Ended December 31, 2008 and 2007

|                                                                      |   | Year ended December 31, |  
|--------------------------------------------------------------------- | - | ----------------------- | -
|                                                                      |   | 2008                    |  
|CASH FLOW FROM OPERATING ACTIVITIES                                   |   |                         |  
|Net loss                                                              | $ | (115,283                | )
|Adjustments to reconcile net loss to net cash used by
      operating |   |                         |  
|activities                                                            |   |                         |  
|Depreciation                                                          |   | 78,715                  |  
|Allowance for uncollectible
      accounts                            |   | -                       |  
|Loss on disposal of fixed assets                                      |   | 31,517                  |  
|Write off of related party
      receivable                           |   | (30,000                 | )
|Change in operating assets and liabilities:                           |   |                         |  
|Accounts
      receivable                                             |   | (265,445                | )
|Inventory                                                             |   | (74,560                 | )
|Prepaid
      expenses                                                |   | (79,068                 | )
|Other assets                                                          |   | (5,747                  | )
|Accounts
      payable                                                |   | 125,329                 |  
|Accrued expenses                                                      |   | 84,068                  |  
|Accrued
      expenses  related parties                              |   | 16,646                  |  
|Net cash used in operating activities                                 |   | (233,829                | )
|                                                                      |   |                         |  
|CASH FLOW FROM INVESTING ACTIVITIES                                   |   |                         |  
|Cash received from merger, net                                        |   | 13,260                  |  
|Restricted cash                                                       |   | (5,221                  | )
|Purchase of property and
      equipment                              |   | (12,665                 | )
|Net cash used in investing activities                                 |   | (4,626                  | )
|                                                                      |   |                         |  
|CASH FLOW FROM FINANCING ACTIVITIES                                   |   |                         |  
|Bank overdraft                                                        |   | -                       |  
|Proceeds from issuance of common stock                                |   | -                       |  
|Net borrowing on factoring
      line of credit                       |   | 61,722                  |  
|Borrowing on notes payable                                            |   | 76,432                  |  
|Repayment of notes payable                                            |   | (90,155                 | )
|Loan from investor                                                    |   | 85,000                  |  
|Loan payable  related party                                          |   | -                       |  
|Net cash provided by financing activities                             |   | 132,999                 |  
|                                                                      |   |                         |  
|Net increase (decrease) in cash during the period                     |   | (105,456                | )
|Cash, beginning of the period                                         |   | 132,823                 |  
|                                                                      |   |                         |  
|Cash, end of the period                                               | $ | 27,367                  |  
|                                                                      |   |                         |  
|Non-cash investing and financing
      transactions:                  |   |                         |  
|Shares issued for assets in reverse merger                            | $ | 901,339                 |  
|Forgiveness of debt to related
      party                            | $ | 685,000                 |  
|Leasehold improvements                                                | $ | 40,000                  |  
|Lease of equipment                                                    | $ | 41,591                  |  

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

35

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ESP Resources, Inc.Notes to Consolidated
Financial StatementsDecember 31, 2008

Note 1  Basis of Presentation, Nature of Operations and
Significant Accounting Policies

Basis of Presentation

ESP Resources, Inc. (ESP Nevada, and collectively with its
subsidiaries, the Company) (formerly Pantera Petroleum, Inc.) was incorporated
in Nevada on October 27, 2004. The accompanying consolidated financial
statements include the accounts of ESP Resources, Inc. and its wholly owned
subsidiaries, ESP Petrochemicals, Inc. and ESP Resources, Inc. (ESP Delaware).
All significant inter-company balances and transactions have been eliminated in
the consolidation. The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United States of
America.

Nature of the Business

The Companys current business is the acquisition and
exploration of oil and gas properties in North and South America. ESP Delaware,
which was incorporated in Delaware in November, 2006, was formed as a holding
company for ESP Petrochemicals, Inc. On June 15, 2007, ESP Delaware acquired all
of the stock of ESP Petrochemicals Inc. ESP Petrochemicals Inc was incorporated
in Louisiana on November 7, 2006 and 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.

Reverse Merger

On December 29, 2008, the Company closed an Agreement for Share
Exchange with ESP Delaware and ESP Enterprises, Inc. (Enterprises), a Colorado
corporation and the sole shareholder of ESP Delaware (Enterprises) whereby the
Company acquired 100% ownership of ESP Delaware in exchange for 14,634,146
shares of common stock of the Company which represented approximately 76% of the
Company. Immediately prior to the share exchange, the Company had 4,572,283
shares issued and outstanding.

Due to the change in control of the Company this transaction
was accounted for as a reverse merger in accordance with SFAS No. 141 whereby
ESP Delaware was considered the accounting acquirer. Prior to this acquisition,
the Company did not meet the definition of a business under GAAP and therefore
recapitalization accounting was followed. The net assets of ESP Nevada were
recorded at fair value on the date of acquisition, which approximated their
carrying value. The go-forward financial statements presented herein are those
of ESP Delaware. The results of operations of ESP Nevada are included from the
date of the acquisition forward. Net assets acquired were as follows:

Cash
    $
    13,260Notes receivable
    
    278,004Property and equipment
    
    2,536Unproven Oil & Gas properties
    
    1,067,382Prepaid expenses
    
    16,102Deposit
    
    1,510Related party debt
    
    (67,354
    )Liabilities assumed
    
    (49,911
    )Notes payable, net
    
    (360,190
    )Net assets acquired
    $
    901,339


36

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The statements at December 31, 2008 include ESP Nevada, ESP
Delaware and ESP Petrochemicals Inc. All significant inter-company balances and
transactions have been eliminated in the consolidation.

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.

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, 2008 or 2007.

Accounts Receivable and Allowance for Doubtful
Accounts

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.

Accounts receivable consisted of the following as of December
31, 2008 and 2007:

2008
    
    
    2007Trade receivables
    $
    450,882
    
    $
    185,804Receivable  Peak
    
    -
    
    
    65,243Less: Allowance for doubtful accounts
    
    -
    
    
    (65,243
    )Net accounts receivable
    $
    450,882
    
    $
    185,804


Accounts receivable are periodically evaluated for
collectability based on past credit history with clients. Provisions for losses
on accounts receivable are determined on the basis of loss experience, known and
inherent risk in the account balance and current economic conditions. For the
years ended December 31, 2008 and 2007, the Company recorded a provision for
doubtful accounts of $- and $65,243, 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.

As of December 31, 2008 and 2007, inventory consisted of the
following:

2008
    
    
    2007Raw materials
    $
    178,828
    
    $
    111,157Finished goods
    
    42,747
    
    
    35,858Total inventory
    $
    221,575
    
    $
    147,015


Investments

Investments in companies and joint ventures where no
significant influence exists are carried at the lower of cost or fair value. The
investments are assessed for impairment when it appears the amount may not be
recovered.

37

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*Property and equipment*

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.

Oil and Gas Properties

The Company follows the full cost method of accounting for oil
and gas operations whereby all costs of exploring for and developing oil and gas
reserves are initially capitalized on a country-by-country (cost centre) basis.
Such costs include land acquisition costs, geological and geophysical expenses,
carrying charges on non-producing properties, costs of drilling and overhead
charges directly related to acquisition and exploration activities.

Costs capitalized, together with the costs of production
equipment, will be depleted and amortized on the unit-of-production method based
on the estimated gross proved reserves. Petroleum products and reserves are
converted to a common unit of measure, using 6 MCF of natural gas to one barrel
of oil.

Costs of acquiring and evaluating unproved properties are
initially excluded from depletion calculations. These unevaluated properties are
assessed periodically to ascertain whether impairment has occurred. When proved
reserves are assigned or the property is considered to be impaired, the cost of
the property or the amount of the impairment is added to costs subject to
depletion calculations.

If capitalized costs, less related accumulated amortization and
deferred income taxes, exceed the full cost ceiling the excess is expensed in
the period when such excess occurs. The full cost ceiling is determined based
on the present value of estimated future net revenues attributed to proved
reserves, using current prices less estimated future expenditures plus the lower
of cost and fair value of unproven properties within the cost center.

Future net cash flows from proved reserves using period-end,
non-escalated prices and costs are discounted to present value and compared to
the carrying value of oil and gas properties.

Proceeds from a sale of petroleum and natural gas properties
are applied against capitalized costs, with no gain or loss recognized, unless
such a sale would alter the rate of depletion by more than 25%. Royalties paid
net of any tax credits received are netted with oil and gas sales.

Asset Retirement Obligations

The Company recognizes the fair value of a liability for an
asset retirement obligation in the year in which it is incurred when a
reasonable estimate of fair value can be made. The carrying amount of the
related long-lived asset is increased by the same amount as the liability.

Changes in the liability for an asset retirement obligation due
to the passage of time will be measured by applying an interest method of
allocation. The amount will be recognized as an increase in the liability and an
accretion expense in the statement of operations. Changes resulting from
revisions to the timing or the amount of the original estimate of undiscounted
cash flows are recognized as an increase or a decrease in the carrying amount of
the liability for an asset retirement obligation and the related asset
retirement cost capitalized as part of the carrying amount of the related
long-lived asset. At December 31, 2008, no asset retirement obligation was
required to be recorded.

Income Taxes

The Company uses the assets and liability method of accounting
for income taxes pursuant to SFAS No. 109 Accounting for Income Taxes. Under
the assets and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statements 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.

38

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In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48). The interpretation
clarifies the accounting for uncertainty in income taxes recognized in a
companys financial statements in accordance with SFAS No. 109, Accounting for
Income Taxes. Specifically, the pronouncement prescribes a recognition
threshold and a measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return.
The interpretation also provides guidance on the related derecognition,
classification, interest and penalties, accounting for interim periods,
disclosure and transition of uncertain tax positions. The Company adopted this
interpretation effective January 1, 2007. The adoption of FIN 48 did not have a
material impact on the Companys financial position, results of operations or
cash flows.

Concentrations

The Company has two major customers that together account for
30% of accounts receivable at December 31, 2008 and two major customers that
together account for 56% of the total revenues earned for the year ended
December 31, 2008.

Accountsreceivable
    
    
    RevenueCustomer A
    
    14%
    
    
    39%Customer B
    
    16%
    
    
    17%30%
    
    
    56%


The Company has two vendors that accounted for 71% of purchases
(Vendor A: 48%; Vendor B: 23%) for the year ended December 31, 2008.

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:

AccountsReceivable
    
    
    RevenueCustomerA
    
    28%
    
    
    19%CustomerB
    
    22%CustomerC
    
    18%CustomerD
    
    15%
    
    
    40%CustomerE
    
    
    
    
    11%83%
    
    
    70%


The Company has three vendors that together accounted for 77%
of purchases (Vendor A: 44%; Vendor B: 18%; Vendor C: 15%) for the year ended
December 31, 2007.

The Company places its cash and cash equivalents with financial
institutions that are insured by the Federal Deposit Insurance Corporation
(FDIC) up to $100,000. From time to time, the Companys cash balances exceeded
FDIC insured limits. In October 2008, the Federal government temporarily
increased the FDIC insured limits up to a maximum of $250,000 per depositor
until December 31, 2009, after which time the insured limits will return to
$100,000. The Company mitigates this concentration of credit risk by monitoring
the credit worthiness of financial institutions and its customers. The Company
had no uninsured cash balances at December 31, 2008. At December 31, 2007, the
Company had $17,309 of uninsured cash balances.

Revenue and Cost Recognition

The Company recognizes revenue from the sale of petrochemicals
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

39

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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.

Advertising

Advertising costs are charged to operations when incurred.
Advertising expense for the years ended December 31, 2008 and 2007 was $1,117
and $196, respectively.

Basic and Diluted Loss Per Share

The Company reports basic loss per share in accordance with the
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings Per Share. Basic loss per share is
computed using the weighted average number of shares outstanding during the
period. Diluted earnings (loss) per share are computed similar to basic income
(loss) per share except that the denominator is increased to include the number
of common stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, at either the beginning of the
respective period presented or the date of issuance, whichever is later, and
only if the common stock equivalents are considered dilutive based upon the
Companys net income (loss) position at the calculation date. Diluted loss per
share has not been provided as it would be antidilutive.

Business Segments

The Company operates on one segment and therefore segment
information is not presented.

Fair Value of Financial Instruments

The carrying amounts of the companys financial instruments
including accounts payable, accrued expenses, and notes payable approximate fair
value due to the relative short period for maturity these instruments.

Environmental Costs

Environmental expenditures that relate to current operations
are expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are expensed. Liabilities are recorded
when environmental assessments and/or remedial efforts are probable, and the
cost can be reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of completion of a feasibility study or the Companys
commitments to a plan of action based on the then known facts.

As of December 31, 2008, there have been no environmental
expenses incurred by the Company.

New Accounting Standards

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements. This Statement defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosure related to the use of fair
value measures in financial statements. The Company adopted SFAS No. 157 as of
January 1, 2008. The adoption of this Statement had no impact on its financial
position or results of operations.

On February 15, 2007, the FASB issued SFAS No. 159 The Fair
Value Option for Financial Assets and Financial Liabilities. This Statement
establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. The Company adopted SFAS No. 159 as of
January 1, 2008. The adoption of this Statement had no impact on its financial
position or results of operations.

In December 2007, the Financial Accounting Standards Board
(FASB) issued SFAS No. 160, "Noncontrolling Interests in Consolidated
Financial Statements- an amendment ofARB No.51 ". This statement
improves the

40

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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
non-controlling 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
non-controlling 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
non-controlling owners. 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 ofthis 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 ofFASB 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 non-derivative 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.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles, (SFAS No. 162), which identifies a
consistent framework for selecting accounting principles to be used in preparing
financial statements for nongovernmental entities that are presented in
conformity with United States generally accepted accounting principles (GAAP).
The current GAAP hierarchy was criticized due to its complexity, ranking
position of FASB Statements of Financial Accounting Concepts and the fact that
it is directed at auditors rather than entities. SFAS No. 162 will be effective
60 days following the United States Securities and Exchange Commissions (SECs)
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles. The FASB does not expect that SFAS No. 162 will result in
a change in current practice, and the Company does not believe that SFAS 162
will have an impact on operating results, financial position or cash flows.

In December 2007, the FASB issued SFAS No. 141(R), Business
Combinations (SFAS No. 141(R)). SFAS No. 141(R) replaces SFAS No. 141,
Business Combinations, however it retains the fundamental requirements that
the acquisition method of accounting be used for all business combinations and
for an acquirer to be identified for each business combination. SFAS No. 141(R)
requires an acquirer to recognize the assets acquired, liabilities assumed, and
any noncontrolling interest in the acquiree at the acquisition date, be measured
at their fair values as of that date, with specified limited exceptions. Changes
subsequent to that date are to be recognized in earnings, not goodwill.
Additionally, SFAS No. 141 (R) requires costs incurred in connection with an
acquisition be expensed as incurred. Restructuring costs, if any, are to be
recognized separately from the acquisition. The acquirer in a business
combination achieved in stages must also recognize the identifiable assets and
liabilities, as well as the noncontrolling interests in the acquiree, at the
full amounts of their fair values. SFAS No. 141(R) is effective for business
combinations occurring in fiscal years beginning on or after December 15, 2008.
The Company will apply the requirements of SFAS No. 141(R) upon its adoption on
January 1, 2009 and is currently evaluating whether SFAS No. 141(R) will have an
impact on its financial position and results of operations.

In May 2008, the FASB issued SFAS No. 163, "Accounting for
Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No.
60." Diversity exists in practice in accounting for financial guarantee
insurance contracts by insurance enterprises under FASB Statement No. 60,
Accounting and Reporting by Insurance Enterprises. This results in
inconsistencies in the recognition and measurement of claim liabilities. This
Statement requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when

41

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there is evidence that credit deterioration has occurred in an
insured financial obligation. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. SFAS 163 is effective for financial statements
issued for fiscal years beginning after December 15,2008, and interim periods
within those fiscal years. The adoption of FASB 163 is not expected to have a
material impact on the Company's financial position.

Note 2  Going Concern

The Company has net losses for the years ended December 31,
2008 and 2007 as well as negative cash flows and negative working capital.

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 the
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. 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.

Note 3  Factoring Payable

On February 2, 2007, the Company entered into a combined
account factoring and security agreement with Midsouth Bank, which was renewed
on June 20, 2008 and expires April 30, 2009. The Company may obtain advances up
to 87 percent of eligible accounts receivable, subject to a three percent
factoring fee, and ten percent held 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 $250,000.
The line of credit is payable upon demand, or if no demand is paid, with monthly
payments of interest at 15%. All outstanding principle plus accrued unpaid
interest is due on June 30, 2009. 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, 2008 and 2007 were $226,868 and $165,146,
respectively with $22,875 and $17,855 held in a restricted cash reserve account
for the same periods both of which are in other assets in the consolidated
balance sheets.

Note 4  Property and equipment

Property and equipment includes the following at December 31,
2008 and 2007:

2008
    
    
    2007Plant, property and equipment
    $
    169,680
    
    $
    93,037Vehicles
    
    233,538
    
    
    265,596Office furniture and equipment
    
    8,897
    
    
    10,594412,115
    
    
    369,227Less: accumulated depreciation
    
    (126,822
    )
    
    (67,960
    )Net property and equipment
    $
    285,293
    
    $
    301,267


Depreciation expense was $24,104 and $39,208 for the year ended
December 31, 2008 and 2007, respectively. The Company allocated $52,318 and $
22,330 of depreciation to cost of goods sold in 2008 and 2007, respectively.

Note 5 - Notes receivable and investments

The Company held investments as follows:

42

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On November 21, 2007 and amended on March 17, 2008, July 30,
2008 and September 9, 2008, our predecessor entity Pantera entered into a share
purchase agreement with Artemis Energy PLC (formerly Pantera Oil and Gas PLC)
(Artemis), whereby the Company issued 4,000,000 common shares (valued at
$4,000) to Artemis and paid $50,000 in consideration for the right to acquire up
to 85% of the shares of each of Aurora Petroleos SA (Aurora) and Boreal
Petroleos SA (Boreal). The Company advanced an additional $620,710 in cash.

On September 9, 2008, the share purchase agreement was amended
as follows:

| | i)   | Aurora and Boreal, in consideration for cash advances
      totaling $620,000 and the payment of $50,000 as the partial consideration
      for the right to acquire up to 85% of the shares of Aurora and Boreal,
      each issued a five year note bearing interest at 5% for $335,000 and for
      any additional amounts paid under this agreement. If after the date of
      this agreement, there occurs a sale, consolidation, amalgamation or merger
      or the transfer of assets to another entity of Aurora or Boreal which
      results in either company receiving cash proceeds, then that company will
      repay each of the Company and Artemis equal payments until the Company and
      Artemis each receive $221,126 plus accumulated interest, in the case of
      Aurora and $193,041 plus accumulated interest, in the case of Boreal. Once
      $221,126 plus accumulated interest, in the case of Aurora, or $193,041
      plus accumulated interest, in the case of Boreal, is repaid, then Aurora
      or Boreal will repay any further amounts that the Company has advanced
      under these notes.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ii)  | Artemis returned 2,600,000 of the 4,000,000 common shares
      issued by the Company. These shares were subsequently cancelled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | iii) | Artemis issued to the Company options to purchase 27% of
      the outstanding shares of Aurora and 30% of the outstanding shares of
      Boreal. The options have a cumulative exercise price of £10 and a term of
      30 years commencing on October 13, 2008. The options may only be exercised
      if the fair value of 27% or 30% of the equity of Aurora and Boreal,
      respectively, is greater than the debt held by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | iv)  | Artemis will issue to the Company additional options to
      enable the Company to purchase 38% of the outstanding shares of Aurora and
      35% of the outstanding shares of Boreal, in exchange for the Company
      making a payment of $500,000 each on or before April 30, 2009 (Aurora and
      Boreal Investment Three). On completion of both the Aurora and Boreal
      Investment Three, the Company will issue to Artemis warrants to purchase
      1,200,000 shares of common stock of the Company at $0.27 per share,
      exercisable for a period of five years from the date of
issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | v)   | Subject to the completion of Aurora and Boreal Investment
      Three, Artemis will issue to the Company additional options to enable the
      Company to purchase 20% of the outstanding shares of Aurora and 20% of
      Boreal, in exchange for the Company making a payment of $1,500,000 each on
      or before January 10, 2010 (Aurora and Boreal Investment Four). On
      completion of both the Aurora and Boreal Investment Four, the Company will
      issue to Artemis warrants to purchase 1,400,000 shares of common stock of
      the Company at $0.27 per share, exercisable for a period of five
    years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

In the event that the Company makes less than the required
investment amount to complete any of Aurora or Boreal Investments Three or Four,
the Company shall be entitled to receive an option to purchase a portion of the
additional percentage of the issued and outstanding shares of Aurora or Boreal
pro rata based on the percentage of the amount paid as compared to the total
required to be paid.

The notes receivable from Aurora and Boreal have been reduced
by valuation allowance of $402,000 based on managements estimate of the
collectability of these notes.

Note 6 - Oil And Gas Properties - Unproven

Block 83 and 84 Project, JV

On March 6, 2008, our predecessor entity Pantera purchased a
10% interest in a joint venture formed pursuant to a joint venture agreement
dated February 24, 2008 with Trius Energy, LLC, as the managing venturer, and
certain other joint venturers, in consideration for $800,000. The joint venture
was formed for the purpose of drilling certain

43

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oil and gas fields in Texas, USA. Upon entering into this
agreement, a director of Trius Energy, LLC was appointed as a director of the
Company.

Baker 80 Lease

By an agreement dated August 11, 2008, our predecessor entity
Pantera agreed to acquire a 95% working interest and 71.25% revenue interest, in
the Baker 80 Lease located in Pecos County, Texas (the Property) from
Lakehills Production, Inc. (Lakehills) in consideration for $10,000 previously
advanced and $726,000 to be paid as follows:

| | i.   | $150,000 on or before August 11, 2008 15.66%
    (paid)          
| | ---- | ------------------------------------------------------------------
| | ii.  | $200,000 on or before August 20, 2008  27.55%
    (paid)         
| | iii. | $376,000 on or before September 30, 2008  51.79% (not
      paid)

In the event that the Company makes less than the required
investment amount to complete any of the payments, the Company shall be entitled
to receive a percentage of the Property lease assignments per the above
described percentages.

The Company had been given an indefinite verbal extension on
the payment of the $376,000 to acquire an additional 51.79% . The Companys
ownership in the Property will be governed by the drilling program described
below.

On October 30, 2008, we entered into and closed the definitive
documents for the transaction with Lakehills and a private equity drilling fund
(the Investor). Pursuant to the terms of the Agreement, we, along with
Lakehills, entered into drilling arrangements with the Investor whereby we and
Lakehills granted the Investor an exclusive option to fund the drilling,
re-entry and completion of certain wells located in the West Gomez field (Baker
Ranch) located in Pecos County, Texas. According to the terms of the Agreement,
the Investor acquired a 100% working interest in the wells. Upon tie-in of each
well, the Investor will own a 95% working interest in such well and the Investor
will grant to Lakehills a 5% working interest. The Investors working interest
shall remain 95% until such time as the Investor has achieved a 12% internal
rate of return from its investment (IRR) in the well. Thereafter, the Investor
will grant to us a 5% working interest and the Investors working interest
percentage will be reduced to 90% until such time as the Investor has achieved a
20% IRR from its investment in the Well Program. Thereafter, the Investor will
grant to us an additional 10% working interest such that our working interest
will be 15% and the Investors working interest will be reduced to 80% until
such time as the Investor has achieved a 25% IRR from its investment in the Well
Program. Thereafter, the Investor will grant to us an additional 6% working
interest such that our interest in such Well will be 21% and the Investors
working interest will be reduced to 74% accordingly. In all cases, Lakehills
working interest will remain at 5%.

The Investor shall receive 100% of the cash flows on the
initial well (the Initial Well) until such cash flow received exceeds the
$87,190 plus interest represented by a promissory note that we executed in favor
of the Investor, which bears interest at 5% per year and is due April 30, 2009.
No cash distributions shall be paid to us or to Lakehills until the Note has
been paid in full. Upon full payment of the Note, we shall receive 100% of the
cash flow from the Initial Well until the aggregate amount of such cash flow
received by us totals $350,000. No cash distributions shall be made or otherwise
accrue to the Investor or Lakehills during this period. Thereafter, the Investor
will receive 50% of the Initial Wells operating cash flow and we will receive
50% of the Initial Wells operating cash flow until each party receives $175,000
(i.e., an aggregate of $350,000). No cash distributions shall be made or
otherwise accrue to Lakehills during this period. Thereafter, cash distributions
shall be calculated in accordance with the then current working interest
ownership percentages associated with the Initial Well as outlined in the
paragraph above. The distributions that would otherwise be payable to us
pursuant to the immediately preceding sentence shall be paid to the Investor
until the aggregate of such distributions paid to the Investor totals $175,000.
The first $525,000 of cash flow received by us under the transaction documents
shall be used to satisfy its obligations to certain investors under an oil and
gas certificate agreement.

44

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**Note 7  Capital Lease Obligation**

During March 2008, ESP Petrochemicals leased a forklift from a
bank under a capital lease. The economic substance of the lease is that ESP
Petrochemicals is financing the acquisition of the asset through the lease, and,
accordingly, it is recorded in the Companys assets and liabilities. The lease
contains a bargain purchase option at the end of the lease term. The Company
included $43,087 for the value of the capital lease and property and
equipment.

The following is a schedule of the future minimum payments
required under the lease together with their present value as of December 31,
2008:

AmountYear ending December 31, 2009
    $
    9,831Year ending December 31, 2010
    
    9,831Year ending December 31, 2011
    
    9,831Year ending December 31, 2012
    
    9,831Year ending December 31, 2013
    
    1,261Total minimum lease payments
    
    40,585Less: amount representing interest
    
    (4,756
    )Present value of minimum lease payments
    $
    35,829


Note 8  Long term debt

Long term debt consisted of the following at December 31, 2008
and 2007:

| |                                                                                                                                                                                                                                                      |   | 2008    |  |   | 2007   | 
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- |  | - | ------ | 
| | Note payable to Midsouth Bank dated May
      2007. The Note bears interest at 12.0 percent per annum and is payable in
      monthly installments of $194, maturing May 2012. The note is secured by
      equipment and deposit accounts.          | $ | 6,477   |  | $ | 7,804  | 
| |                                                                                                                                                                                                                                                      |   |         |  |   |        | 
| | Note payable to Midsouth Bank dated
      February 2007. The note bears interest at 12.0 percent per annum and is
      payable in monthly installments of$ 194, maturing February 2012 The note
      is secured by equipment and deposit accounts. |   | 5,292   |  |   | 6,508  | 
| |                                                                                                                                                                                                                                                      |   |         |  |   |        | 
| | Note payable to FMC dated January 2007. The
      note bears interest at 2.90 percent per annum and is payable in monthly
      installments of $945, maturing February 2012. The note is secured by a
      vehicle.                                |   | 34,264  |  |   | 44,444 | 
| |                                                                                                                                                                                                                                                      |   |         |  |   |        | 
| | Note payable to FMC dated January 2007. The
      note bears interest at 2.9 percent per annum and is payable in monthly
      installments of $902 maturing February 2012. The note is secured by a
      vehicle.                                  |   | -       |  |   | 42,457 | 
| |                                                                                                                                                                                                                                                      |   |         |  |   |        | 
| | Note Payable to FMC dated January 2007. The
      note bears interest at 2.90 percent per annum and is payable in monthly
      installments of $902, maturing February 2012. The note is secured by a
      vehicle.                                |   | 32,734, |  |   | 42,457 | 
| |                                                                                                                                                                                                                                                      |   |         |  |   |        | 
| | Note payable to FMC dated January 2007. The
      note bears interest at 2.90 percent per annum and is payable in monthly
      installments of $925 maturing February 2012. The note is secured by a
      vehicle.                                 |   | 33,562  |  |   | 43,532 | 
| |                                                                                                                                                                                                                                                      |   |         |  |   |        | 
| | Note assumed with vehicle purchase, payable
      to FMC dated December 2006. The note bears interest at 9.90 percent per
      annum and is payable in installments of $724, maturing December 2011. The
      notes is secured by a vehicle        |   | 22,484  |  |   | 28,606 | 

45

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| | Note assumed with vehicle purchase, payable
      to St. Martin Bank dated December 2005. The note bears interest at 7.10
      percent per annum and is payable in installments of $852 maturing In
      December 2009. The note is secured by a vehicle. |   | 9,808    |   |   | 18,978  |  
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | - | - | ------- | -
| |                                                                                                                                                                                                                                                             |   |          |   |   |         |  
| | Unsecured notes payable. The notes bear
      interest at 5 percent per annum and are due between September 30, 2012 and
      July 22, 2013                                                                                                                |   | 273,000  |   |   | -       |  
| |                                                                                                                                                                                                                                                             |   |          |   |   |         |  
| | Promissory note payable in connection with
      the drilling program. The note bears interest at 5 percent per annum and
      is due April 30, 2009                                                                                                       |   | 87,190   |   |   | -       |  
| |                                                                                                                                                                                                                                                             |   |          |   |   |         |  
| | Insurance financing and other short term
      financing                                                                                                                                                                                                    |   | 82,204   |   |   | -       |  
| | Total                                                                                                                                                                                                                                                       |   | 587,015  |   |   | 234,786 |  
| | Less Current Maturities                                                                                                                                                                                                                                     |   | (219,584 | ) |   | (57,728 | )
| | Total long-term debt                                                                                                                                                                                                                                        | $ | 367,431  |   | $ | 177,058 |  

Maturities are as follows:



|2009       | $219,584
|---------- | --------
|2010       | 31,399  
|2011       | 56,263  
|2012       | 79,769  
|thereafter | 200,000 

Note 9 - Acquisition

On June 15, 2007, ESP purchased all the outstanding shares of
ESP Petrochemicals, Inc., a Louisiana corporation for 3,902,439 common shares.

Purchase Price
    $
    800Cash
    $
    7,924Accounts receivable
    
    331,903Property and equipment
    
    325,457Inventory
    
    50,121Prepaid expenses
    
    10,559Deposit
    
    3,503Loan to shareholder
    
    20,000Liabilities assumed
    
    (225,036
    )Notes payable, net
    
    (493,631
    )Net assets acquired
    $
    800


The table below summarizes the unaudited pro forma information of
the results of operations as though the acquisition had been completed as of
January 1, 2007:

2007Gross revenue
    $
    1,259,272Cost of goods sold
    $
    891,343Total expenses
    
    738,185


46

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Other Income (Expense)
    
    (42,056
    )Net income (loss) before taxes
    $
    (412,312
    )Loss per share
    $
    (0.03
    )Weighted average shares
    
    12,859,338


Note 10  Income taxes

The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities at December 31, 2008
and 2007 are as follows:

2008
    
    
    2007Deferred tax assets:
    $
    185,000
    
    $
    157,417Valuation Asset
    
    (185,000
    )
    $
    (157,417
    )Total Deferred Tax Asset
    $
    -
    
    $
    -


As of December 31, 2008, the Company has a net operating loss
carry forward of approximately $500,000 available to offset future taxable
income through 2028. The valuation allowance was $185,000 at December 31, 2008.
The net change in the valuation allowance for the year ended December 31, 2008
was an increase of $27,583.

Note 11  Stockholders Equity

On December 15, 2008, ESP Enterprises Inc, (formerly the sole
shareholder of ESP Delaware) converted a portion of a note receivable from ESP
Delaware of $685,000 into paid in capital. At the same time a note for the
remaining portion of the payable to Enterprises of $100,000 bears interest at 5%
per annum and becomes due in full at December 31, 2009. This note is unsecured.

In January 2009, the Company effected a one for twenty reverse
stock split. All share and per share amounts have been retroactively restated
for the effect of the reverse split.

In June 2007, two shareholders exchanged 1,000,000 shares of
common stock in ESP Petrochemicals for 3,902,439 shares of common stock of ESP
Delaware.

Note 12  Commitments and contingencies

In March 2008, the Company entered into a five-year lease
requiring monthly payments of $8,750. The Company has the option to renew the
lease for a subsequent five-year term with monthly rent of $9,500. The Company
also has the option to buy the facilities during the second year of the lease
for $900,000. If the Company elects not to purchase the building during the
second year of the lease, it has the option to purchase the building during the
remainder of the initial term of the lease for an increased amount.

The landlord has agreed to construct a laboratory building on
the premises and a tank filling area and the Company has agreed to pay the
landlord an additional $20,000 at the end of the initial five year lease period
if it does not renew the lease for the second five year term. The Company will
amortize the additional costs over the initial period of the lease.

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. As of December 31,
2008, the Company leases these tanks on a day to day basis.

47

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Note 13  Related party transaction

At December 31, 2008 and 2007, the Company had balances due
from stockholders and related parties as follows:

2008
    
    
    2007Due from ESP Enterprises
    $
    -
    
    $
    20,000Due to former shareholder
    
    16,100
    
    
    100Due to CEO
    
    60,000
    
    
    -Due to ESP Enterprises
    
    100,000
    
    $
    700,000


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.

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.

During the current year, the Company accrued consulting
expenses to related entity in the amount $84,140. The amount is included in
accrued expenses at December 31, 2008.

Note 14  Subsequent events

On March 4, 2009, the Company entered into consulting
agreements with two individuals to provide strategic planning and financial
consulting services for a period of six months. The Company issued a total of
1,653,000 common shares in payment for these services.

On March 23, 2009, the Company entered into consulting
agreements with two individuals to provide services to the Company for a period
of two years. The Company issued a total of 2,000,000 common shares in payment
for the services.

48

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING ANDFINANCIAL DISCLOSURE

As approved by the Registrants Board of Directors on December
22, 2008, the accounting firm of Malone & Bailey, P.C. was engaged to take
over the audit responsibilities of the registrant from BDO Dunwoody LLP (BDO)
and BDO was dismissed on that same date. In addition, Malone & Bailey took
over the audit of ESP Resources from Webb & Company. Webb was ESPs auditor
for 2007 and prior.

BDO had served as the Registrants independent auditor since
January 31, 2008. BDO became the Registrants auditor as a result of a merger
between BDO and Amisano Hanson (the Companys former accountant who had served
the Registrant since inception). The Registrant announced this change on Form
8-K on February 20, 2008 and Amisano Hanson provided a letter. According to the
Form 8-K filed, there were no disagreements with Amisano Hanson on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Amisano Hanson would have caused it to make reference to such disagreements in
its reports.

Except as described below, the audit reports of BDO since its
engagement on those consolidated financial statements of Pantera Petroleum, Inc.
did not contain an adverse opinion or a disclaimer of opinion, and was not
qualified or modified as to audit scope or accounting principles. BDOs audit
report relating to the audit of Panteras financial statements for the year
ended May 31, 2008 indicated the auditors substantial doubt about the Companys
ability to continue as a going concern because, at that time, the Company had
not yet achieved profitable operations, had accumulated losses since its
inception, did not have adequate cash to fund its operations and expected to
incur further losses in the development of its business. BDO stated that the
Companys ability to continue as a going concern is dependent upon its ability
to generate future profitable operations and/or to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due.

Since the engagement of BDO, the Registrant (or someone on its
behalf) has not consulted with Malone & Bailey, P.C., or any other auditor,
regarding any accounting or audit concerns, to include, but not by way of
limitation, those stated in Item 304 of Regulation S-K.

During the period that BDO served as the Registrants
independent auditor and through the date of dismissal, the Registrant has not
had any disagreements with BDO, whether resolved or not resolved, on any matter
of accounting principals or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved to said accountants'
satisfaction, would have caused it to make reference to the subject matter of
the disagreements(s) in connection with its report. Additionally, there have
been no reportable events within the meaning set forth in Item 304 of Regulation
S-Registrant has provided BDO with a copy of this Current Report on Form 8-K/A
before it was filed and requested that BDO furnish it with a letter addressed to
the Securities and Exchange Commission stating whether it agrees with the above
statements. A copy of BDOs letter dated January 23, 2009 is filed as Exhibit 16
to this Current Report on Form 8-K/A.

Registrant has provided BDO with a copy of a Current Report on
Form 8-K/A, which has been filed and requested that BDO furnish it with a letter
addressed to the Securities and Exchange Commission stating whether it agrees
with the above statements, which they provided and was filed on January 23, 2009
as Exhibit 16 to the Current Report on Form 8-K/A.

ITEM 9A. CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of
1934, as of the end of the period covered by this annual report, being December
31, 2008, we have carried out an evaluation of the effectiveness of the design
and operation of our companys disclosure controls and procedures. This
evaluation was carried out under the supervision and with the participation of
our companys management, including our companys President and Chief Executive
Officer. Based upon that evaluation, our companys President and Chief Executive
Officer concluded that

49

---

our companys disclosure controls and procedures are effective
as at the end of the period covered by this report. There have been no changes
in our internal controls over financial reporting that occurred during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect our internal controls over financial reporting.

Disclosure controls and procedures and other procedures that
are designed to ensure that information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time period specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934 is accumulated and communicated to management
including our President and Chief Executive Officer, to allow timely decisions
regarding required disclosure.

Managements report on internal control over financial
reporting

Management is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined in Rule 13a-15(f)
of the 1934 Act. Management has assessed the effectiveness of our internal
control over financial reporting as at December 31, 2008, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Our internal control over
financial reporting includes maintaining records that in reasonable detail
accurately and fairly reflect our transactions and dispositions of our assets;
providing reasonable assurance that transactions are recorded as necessary for
preparation of our financial statements in accordance with generally accepted
accounting principles; providing reasonable assurance that receipts and
expenditures are made in accordance with authorizations of management and our
directors; and providing reasonable assurance that unauthorized acquisition, use
or disposition of our assets that could have a material effect on our financial
statements would be prevented or detected on a timely basis. As a result of this
assessment, management concluded that, as at December 31, 2008, our internal
control over financial reporting was effective in providing reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. However, because of its inherent limitations, internal
control over financial reporting may not provide absolute assurance that a
misstatement of our financial statements would be prevented or detected.

This annual report does not include an attestation report of
our independent auditors regarding internal control over financial reporting.
Management's report was not subject to attestation by our independent auditors
pursuant to temporary rules of the SEC that permit our company to provide only
management's report in this annual report.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE

Directors and Executive Officers, Promoters and Control
Persons

All directors of our company hold office until the next annual
meeting of our shareholders and until such directors successor is elected and
has been qualified, or until such directors earlier death, resignation or
removal. The following table sets forth the names, positions and ages of our
executive officers and directors. Our board of directors elects officers and
their terms of office are at the discretion of our board of directors.

50

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**Name**
    **Position Held** **with the
      Company**
    **Age**
    **Dated****Appointed or**
      **Elected**David Dugas
    President and Director
    52
    December 29, 2008Chris Metcalf
    Chief Executive Officer and
      Director
    39
    September 12, 2007Scott Tyson
    Director
    40
    February 26, 2008Tony Primeaux
    Director
    53
    December 29, 2008William M. Cox
    Director
    49
    December 29, 2008


Business Experience

The following is a brief account of the education and business
experience during at least the past five years of our directors and executive
officers, indicating their principal occupations during that period, and the
name and principal business of the organizations in which such occupation and
employment were carried out.

David Dugas- President and Director

Mr. Dugas has 30 years of professional engineering and
management experience. Early in his career, Mr. Dugas gained petroleum
engineering and senior management experience in the oil and gas industry holding
positions of increasing responsibility in the areas of production, drilling and
reservoir exploitation along with property and acquisition evaluations,
operations management and completion design with Chevron and Texas Pacific Oil
and Gas. Mr. Dugas continued his management and engineering development as an
owner and operator of several service companies supplying equipment, goods and
consulting services to the oil and gas industry in North and South America, West
Africa, and the Far East. Mr. Dugas was a founding member and co-owner of the
company that became Ocean Energy, a NYSE listed company with a multi-billion
dollar market capitalization. Mr. Dugas was the Executive Vice-President of the
company with responsibility for the property acquisition, management, production
and reservoir engineering functions of the company. In November, 2006, Mr. Dugas
founded ESP Resources, Inc. to provide petrochemicals and related services to
the Oil and Gas industry in the Gulf of Mexico, Louisiana, Texas, Mississippi,
and Oklahoma regions through a wholly-owned subsidiary, ESP Petrochemicals, Inc.

Mr. Dugas received his B.S. degree in Petroleum Engineering
from the University of Louisiana at Lafayette graduating with highest honors. He
is a member of the Society of Petroleum Engineers, a lifetime member of Phi Beta
Kappa, a member of Tau Beta Pi National Engineering Society and is a licensed
professional petroleum engineer in the state of Louisiana.

Chris Metcalf Chief Executive Officer and
Director

Mr. Metcalf is an executive with extensive private equity and
investment banking experience, with expertise in early to growth stage oil and
gas companies, along with many technology and financial services companies. He
brings oil and gas investment and acquisition experience in west Texas and the
Gulf of Mexico. In addition, Mr. Metcalf brings with him venture capital
experience in advanced oil and gas discovery technologies, including 3D seismic
interpretive software and surface geochemical survey technologies. Prior to
joining the Company, Mr. Metcalf was a Vice President with GF Private Equity
Group LLC, where he served on the investment committee responsible for all
aspects of the funds venture capital portfolio in early to growth stage
companies across several sectors, including energy and clean technology,
application and enterprise software, and financial services. Mr. Metcalf was
also the President of Altitude Funds LLC, which sponsors and manages premier
private equity partnerships on behalf of the GF Private Equity Group. From
October, 2002 to February, 2006, Mr. Metcalf was a Vice President of Morgan
Stanley where he was a portfolio and research analyst covering a variety of
private equity and hedge fund investments in the U.S., Europe, Asia, and South
America. Graystone Research Group builds customized private equity, real estate,
and hedge fund portfolios for Morgan Stanleys corporate institutional, pension,
and ultra high net worth clients. Mr. Metcalf also serves on the board of
directors of Uranium 308 Corp., since November 2007, and Sinobiomed, Inc., since
March 2007.

51

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Mr. Metcalf received a Bachelor of Science in Commerce from the
University of Virginia, a Juris Doctor Degree from the University of Virginia
School of Law, and an MBA from the University of Chicago Graduate School of
Business where he graduated with honors. Mr. Metcalf is currently a member of
the California and Virginia State Bar Associations.

Scott Tyson  Director

Mr. Tyson is the President and CEO of Trius Energy LLC, a
privately held independent oil and gas producer that has a major presence as a
re-entry specialist in the West Gomez Field in Pecos County, Texas. Trius
specializes in low risk developmental wells that offset proven production and
reserves in Texas. Mr. Tyson oversees the daily operations of the company and
leads its leasehold acquisition program. Mr. Tyson brings vast operational
experience across the exploration and production cycle, including his work with
other oilfield related businesses dealing with disposal wells, vacuum truck
services, mobile frac tank rentals, and drilling fluid sales. Mr. Tyson earned
his BBA from the University of Texas at Austin at the McCombs School of
Business.

Tony Primeaux-Director

Mr. Primeaux has 32 years of professional experience in the
value-added specialty chemical market. Mr. Primeaux began his career as a
service and sales technician for Oilfield Chemicals, Inc., a large petrochemical
supplier to Oil and Gas companies along the Gulf Coast and was subsequently
promoted to Operations Manager of the company. Mr. Primeaux became an
owner/operator of Chemical Control, Inc., a specialty chemical company, in the
1980s that was sold to Coastal Chemicals, a larger competitor, after 11 years
of successful operations. Mr. Primeaux has expertise in advanced interpretation
and application petrochemical technologies having designed chemical programs to
achieve maximum effectiveness in some of the most hostile environments in the
operating world of production operations for the Oil and Gas industry.

Mr. Primeaux founded ESP Petrochemicals, Inc. in March, 2007
and currently serves as President of the organization. ESP Petrochemicals became
a wholly owned subsidiary of ESP Resources in June, 2007. Mr. Primeaux received
a degree in Business Management from the University of Louisiana at Lafayette
and has furthered his education attending numerous industry sponsored courses in
quality control and implementation, strategic planning and marketing, and
drilling, production and workover chemistry programs.

William M. Cox-Director

Mr. Cox is an executive with extensive experience in the Oil
and Gas industry having served in various capacities as a geologist and asset
manager for 26 years. Mr. Cox currently serves as the Exploration Manager for
Stone Energy Corporation,a NYSE listed Oil and Gas Company. His experience as an
interpretation and exploration geologist has contributed significantly to the
discovery of substantial Oil and Gas reserves in the offshore and deepwater Gulf
of Mexico including development of opportunities in the East Breaks, Green
Canyon, and Garden Banks regions of the Gulf of Mexico where water depths often
exceed 5000 feet.

Mr. Cox received his Bachelor of Science degree in Geology from
the University of Louisiana at Lafayette and is a Certified Petroleum Geologist
and a Texas Board Certified Licensed Professional Geologist.

Family Relationships

There are no family relationships among our directors or
executive officers.

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not
been involved in any of the following events during the past five years:

52

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|1. | any bankruptcy petition 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;                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                
|2. | any conviction in a criminal proceeding or being subject
      to a pending criminal proceeding (excluding traffic violations and other
      minor offenses);                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                
|3. | being 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; or
|   |                                                                                                                                                                                                                                                                                                                                
|4. | being found by a court of competent jurisdiction (in a
      civil action), the Securities and Exchange Commission or the Commodity
      Futures Trading Commission to have violated a federal or state securities
      or commodities law, and the judgment has not been reversed, suspended, or
      vacated.             

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act requires our
executive officers and directors, and persons who own more than 10% of our
common stock, to file reports regarding ownership of, and transactions in, our
securities with the Securities and Exchange Commission and to provide us with
copies of those filings. Based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons, we
believe that during fiscal year ended December 31, 2008, all filing requirements
applicable to our officers, directors and greater than 10% percent beneficial
owners were complied with, with the exception of the following:

Name
    Number of Late
      Reports
    Number of
      Transactions Not Reported on a Timely
      Basis
    Failure to
      File Requested FormsChris Metcalf
    1(1)
    2(1)
    NilScott Tyson
    1(1)
    Nil
    1Peter Hughes
    1(2)
    1
    1ESP Enterprises, Inc.
    1(1)
    1
    1


|(1) | The named officer, director or greater than 10%
      stockholder, as applicable, filed a late Form 3  Initial Statement of
      Beneficial Ownership of Securities.   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                          
|(2) | The named officer, director or greater than 10%
      stockholder, as applicable, filed a late Form 4 - Statement of Changes in
      Beneficial Ownership of Securities.

Code of Ethics

Effective August 17, 2007, our companys board of directors
adopted a Code of Business Conduct and Ethics that applies to, among other
persons, our companys president (being our principal executive officer,
principal financial officer and principal accounting officer), as well as
persons performing similar functions. As adopted, our Code of Business Conduct
and Ethics sets forth written standards that are designed to deter wrongdoing
and to promote:

|1. | honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships;                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                              
|2. | full, fair, accurate, timely, and understandable
      disclosure in reports and documents that we file with, or submit to, the
      Securities and Exchange Commission and in other public communications made
      by us;
|   |                                                                                                                                                                                                                              
|3. | compliance with applicable governmental laws, rules and
      regulations;                                                                                                                                                   

53

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|4. | the prompt internal reporting of violations of the Code
      of Business Conduct and Ethics to an appropriate person or persons
      identified in the Code of Business Conduct and Ethics; and
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                  
|5. | accountability for adherence to the Code of Business
      Conduct and Ethics.                                                                                                                   

Our Code of Business Conduct and Ethics requires, among other
things, that all of our companys personnel shall be accorded full access to our
president with respect to any matter which may arise relating to the Code of
Business Conduct and Ethics. Further, all of our companys personnel are to be
accorded full access to our companys board of directors if any such matter
involves an alleged breach of the Code of Business Conduct and Ethics by our
president.

In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly managers and/or supervisors, have a
responsibility for maintaining financial integrity within our company,
consistent with generally accepted accounting principles, and federal,
provincial and state securities laws. Any employee who becomes aware of any
incidents involving financial or accounting manipulation or other
irregularities, whether by witnessing the incident or being told of it, must
report it to his or her immediate supervisor or to our companys president. If
the incident involves an alleged breach of the Code of Business Conduct and
Ethics by the president, the incident must be reported to any member of our
board of directors. Any failure to report such inappropriate or irregular
conduct of others is to be treated as a severe disciplinary matter. It is
against our company policy to retaliate against any individual who reports in
good faith the violation or potential violation of our companys Code of
Business Conduct and Ethics.

Our Code of Business Conduct and Ethics was filed as an exhibit
with our annual report on Form 10-KSB filed with the Securities and Exchange
Commission on August 28, 2007. We will provide a copy of the Code of Business
Conduct and Ethics to any person without charge, upon request. Requests can be
sent to: Pantera Petroleum Inc., of 111 Congress Avenue, Suite 400, Austin,
Texas 78701.

Nomination Process

As of December 31, 2008, we did not effect any material changes
to the procedures by which our shareholders may recommend nominees to our board
of directors. Our board of directors does not have a policy with regards to the
consideration of any director candidates recommended by our shareholders. Our
board of directors has determined that it is in the best position to evaluate
our companys requirements as well as the qualifications of each candidate when
the board considers a nominee for a position on our board of directors. If
shareholders wish to recommend candidates directly to our board, they may do so
by sending communications to the president of our company at the address on the
cover of this annual report.

Committees of the Board

All proceedings of our board of directors were conducted by
resolutions consented to in writing by all the directors and filed with the
minutes of the proceedings of the directors. Such resolutions consented to in
writing by the directors entitled to vote on that resolution at a meeting of the
directors are, according to the corporate laws of the State of Nevada and the
bylaws of our company, as valid and effective as if they had been passed at a
meeting of the directors duly called and held.

Our company currently does not have nominating, compensation or
audit committees or committees performing similar functions nor does our company
have a written nominating, compensation or audit committee charter. Our board of
directors does not believe that it is necessary to have such committees because
it believes that the functions of such committees can be adequately performed by
our board of directors.

Our company does not have any defined policy or procedure
requirements for shareholders to submit recommendations or nominations for
directors. The board of directors believes that, given the early stage of our
development, a specific nominating policy would be premature and of little
assistance until our business operations

54

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develop to a more advanced level. Our company does not
currently have any specific or minimum criteria for the election of nominees to
the board of directors and we do not have any specific process or procedure for
evaluating such nominees. The board of directors assesses all candidates,
whether submitted by management or shareholders, and makes recommendations for
election or appointment.

A shareholder who wishes to communicate with our board of
directors may do so by directing a written request addressed to our president,
at the address appearing on the first page of this annual report.

Audit Committee Financial Expert

Our board of directors has determined that we do not have a
board member that qualifies as an audit committee financial expert as defined
in Item 407(d)(5)(ii) of Regulation S-B.

We believe that our board of directors is capable of analyzing
and evaluating our financial statements and understanding internal controls and
procedures for financial reporting. The board of directors of our company does
not believe that it is necessary to have an audit committee because our company
believes that the functions of an audit committee can be adequately performed by
our board of directors. In addition, we believe that retaining an independent
director who would qualify as an audit committee financial expert would be
overly costly and burdensome and is not warranted in our circumstances given the
early stages of our development.

ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation

The particulars of compensation paid to the following
persons:

|(a) | our principal executive officer;                                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                        
|(b) | each of our two most highly compensated executive
      officers who were serving as executive officers at the end of the year
      ended December 31, 2008; and                                                                      
|    |                                                                                                                                                                                                                                        
|(c) | up to two additional individuals for whom disclosure
      would have been provided under (b) but for the fact that the individual
      was not serving as our executive officer at the end of the year ended
      December 31, 2008,

who we will collectively refer to as the named executive
officers of our company for the years ended December 31, 2008 and 2007, are set
out in the following summary compensation table, except that no disclosure is
provided for any named executive officer, other than our principal executive
officer, whose total compensation does not exceed $100,000 for the respective
fiscal year:



|SUMMARY
      COMPENSATION TABLE            
|--------------------------------------------
|Name and
      Principal Position           
|Chris Metcalf PresidentChief                
|Executive
      Officer and Director(1)     
|Peter Hughes
      Secretary and Director(2)

55

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(1)     Chris Metcalf was appointed as our
president and chief executive officer and as a director of our company on
September 12, 2007. On December 29, 2008 Chris Metcalf submitted his resignation
as President of the Company to the Board of Directors, which accepted the
resignation on the same day. On December 29, 2008 Dave Dugas was appointed as
President and director of the Company

(2)     Peter Hughes resigned as our
president and chief executive officer of our company on September 12, 2007 and
as our secretary and as a director on February 26, 2008.

Executive Compensation

During the year ended December 31, 2008, we did not pay any
management fees owing to Peter Hughes and during the year ended December 31,
2007, we paid management fees owing to Peter Hughes totalling $24,000. In
addition, we have agreed to pay a monthly salary of $15,000 per month to Chris
Metcalf in consideration for his services as the president and chief executive
officer of our company. During the year ended December 31, 2008, we paid a total
of $135,000 to Chris Metcalf.

Equity Compensation Plan Information and Stock
Options

We do not currently have any equity compensation plans or any
outstanding stock options.

Compensation of Directors

We currently have no formal plan for compensating our directors
for their services in their capacity as directors, although we may elect to
issue stock options to such persons from time to time. Directors are entitled to
reimbursement for reasonable travel and other out-of-pocket expenses incurred in
connection with attendance at meetings of our board of directors. Our board of
directors may award special remuneration to any director undertaking any special
services on our behalf other than services ordinarily required of a
director.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or
a committee thereof.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS

The following table sets forth, as of December 31, 2008,
certain information with respect to the beneficial ownership of our common stock
by each stockholder known by us to be the beneficial owner of more than 5% of
our common stock and by each of our current directors and executive officers.
Each person has sole voting and investment power with respect to the shares of
common stock. Beneficial ownership consists of a direct interest in the shares
of common stock, except as otherwise indicated.

56

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Name and Address of Beneficial Owner
    Amount and Nature of
      Beneficial Ownership(1)
    Percentage of
      Class(1)Chris Metcalf c/o 111 Congress Avenue, Suite 400
      Austin, TX 78701
    2,400,000
    12%Scott Tyson c/o 111 Congress Avenue,
      Suite 400 Austin, TX 78701
    Nil
    NilESP Enterprises, Inc. David Dugas
      1255 Lions Club Road Lafayette, LA 70598
    14,634,146
    76%Directors and Executive Officers as a Group
      (two persons)
    17,034,146
    89%


|(1) | Based on 19,206,429 shares of common stock issued and
      outstanding as of December 31, 2008. Except as otherwise indicated, we
      believe that the beneficial owners of the common stock listed above, based
      on information furnished by such owners, have sole investment and voting
      power with respect to such shares, subject to community property laws
      where applicable. Beneficial ownership is determined in accordance with
      the rules of the Securities and Exchange Commission and generally includes
      voting or investment power with respect to
securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Change in Control

We are not aware of any arrangement that might result in a
change in control of our company in the future.

Equity Plan Compensation Information

Our company does not currently have a stock option plan or
other form of equity plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS, AND DIRECTORINDEPENDENCE

Except as described below, no director, executive officer,
principal shareholder holding at least 5% of our common shares, or any family
member thereof, had any material interest, direct or indirect, in any
transaction, or proposed transaction, during the year ended December 31, 2008,
in which the amount involved in the transaction exceeded or exceeds the lesser
of $120,000 or one percent of the average of our total assets at the year end
for the last three completed fiscal years.

We have agreed to pay a monthly salary of US$15,000 per month
to Chris Metcalf in consideration for his services as the president and chief
executive officer of our company.

We were charged $135,000 (2007: nil) for salaries for Chris
Metcalf, a director and officer of our company. In addition, we were charged,
$6,000 (2007: $24,000) for management services to Peter Hughes, a former
director and officer of our company, and $1,200 (2007: $4,800) for rent to
Celine Totman, a former director and an officer of our company.

During the year ended December 31, 2008, Peter Hughes and
Celine Totman forgave amounts due to them totalling $80,925 ($69,382 for Peter
Hughes; $11,543 for Celine Totman). This forgiveness has been recorded as a
capital contribution.

57

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Amounts due to related parties of $67,060 at December 31, 2007
are for cash advances, management fees, rent and office expenses incurred or
paid on behalf of our company by Peter Hughes and Celine Totman. These amounts
were non-interest bearing and comprise a portion of the amount forgiven, as
noted above.

David Dugas is a director and an executive officer of the
Company. Mr. Dugas is also an officer and majority equity owner of each of
Diversified Consulting, LLC and DDA Corporation, LLC. The Company has a oral
agreement to pay Diversified Consulting, LLC a fee of $10,500 per month in
consideration of the officer and director services provided by Mr. Dugas. In
2008 and prior to the acquisition of ESP Resources, Inc. by the Company, DDA
Corporation loaned $16,000 to ESP Resources, Inc. The repayment terms of that
loan have not been documented, but is a liability assumed by the Company in the
acquisition of ESP Resources, Inc.

In 2008, prior to the acquisition of ESP Resources, Inc. by the
Company, ESP Resources, Inc. loaned $30,000 to ESP Enterprises, Inc., a
beneficial owner of more than 10% of the Companys outstanding shares. The
repayment terms of the loan have not been documents, but the right to receive
the repayment of the loan was an asset acquired by the Company when it acquired
ESP Resources, Inc.

On February 25, 2008, we entered into a subscription agreement
  with Trius Energy, LLC, of which Scott Tyson, a director of the Company, is
  a significant shareholder, whereby we agreed to issue 1,200,000 pre-split shares
  of our common stock for aggregate proceeds of $720,000.

Corporate Governance

We currently act with five directors consisting of David Dugas,
Chris Metcalf, Scott Tyson, Tony Primeaux and William M. Cox. Scott Tyson, Tony
Primeaux and Willaim M. Cox are each considered an independent director as
defined by Rule 4200(a)(15) of the Rules of Nasdaq Marketplace Rules.

We do not have a standing audit, compensation or nominating
committee, but our entire board of directors acts in such capacities. We believe
that the members of our board of directors are capable of analyzing and
evaluating our financial statements and understanding internal controls and
procedures for financial reporting. The board of directors of our company does
not believe that it is necessary to have a standing audit, compensation or
nominating committee because we believe that the functions of such committees
can be adequately performed by the board of directors, consisting of Chris
Metcalf and Scott Tyson. In addition, we believe that retaining one or more
additional directors who would qualify as independent as defined in Rule
4200(a)(15) of the Rules of Nasdaq Marketplace Rules would be overly costly and
burdensome and is not warranted in our circumstances given the early stages of
our development and the fact the we have not generated any revenues from
operations to date.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES

Audit Fees

The aggregate fees billed or to be billed by Malone &
Bailey, PC, for professional services rendered for the audit of our annual
financial statements included in our annual report on Form 10-K for 2008 is
$30,000.

The aggregate fees billed by Webb & Company, for
professional services rendered for the audit of our annual financial statements
for 2007 was $36,044.

Audit Related Fees

For the fiscal year ended December 31, 2007, the aggregate fees
billed for assurance and related services by Webb & Company, relating to the
performance of the audit of our financial statements which are not reported
under the caption Audit Fees above, was $13,760.

58

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Tax Fees

None.

All Other Fees

None.

Our board of directors, who acts as our audit committee, has
adopted a policy governing the pre-approval by the board of directors of all
services, audit and non-audit, to be provided to our company by our independent
auditors. Under the policy, the board or directors has pre-approved the
provision by our independent auditors of specific audit, audit related, tax and
other non-audit services as being consistent with auditor independence. Requests
or applications to provide services that require the specific pre-approval of
the board of directors must be submitted to the board of directors by the
independent auditors, and the independent auditors must advise the board of
directors as to whether, in the independent auditors view, the request or
application is consistent with the Securities and Exchange Commissions rules on
auditor independence.

The board of directors has considered the nature and amount of
the fees billed by Malone & Bailey, PC and Webb and Company and believes
that the provision of the services for activities unrelated to the audit is
compatible with maintaining the independence of both firms.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES

Item 6. Exhibits and Reports of Form 8-K.

|(a) | During the quarter ending December 31, 2008, the Company
      filed the following Exhibits and Form 8Ks:
|--- | ---------------------------------------------------------------------------------------------------------
|    |                                                                                                          
|    |                                                                                                          
|    |                                                                                                          
|    |                                                                                                          
|    |                                                                                                          
|(b) | Exhibits                                                                                                 

| | Exhibit | Description                                                                                                                                                                                                                                 
| | ------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Number  |                                                                                                                                                                                                                                             
| |         |                                                                                                                                                                                                                                             
| | 1.1     | Licensing Agreement with Peter
      Hughes (incorporated by reference from our Registration Statement on Form
      SB-2 filed on April 18, 2006)                                                                                          
| |         |                                                                                                                                                                                                                                             
| | 3.1     | Articles of Incorporation
      (incorporated by reference from our Registration Statement on Form SB-2
      filed on April 18, 2006)                                                                                                      
| |         |                                                                                                                                                                                                                                             
| | 3.2     | Bylaws (incorporated by
      reference from our Registration Statement on Form SB-2 filed on April 18,
      2006)                                                                                                                         
| |         |                                                                                                                                                                                                                                             
| | 3.3     | Articles of Merger filed with
      the Secretary of State of Nevada on September 19, 2007 and which is
      effective September 28, 2007 (incorporated by reference from our Current
      Report on Form 8-K filed on September 28, 2007)

59

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| | 3.4  | Certificate of Change filed with the Secretary of State
      of Nevada on September 19, 2007 and which is effective September 28, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      September 28, 2007)                                                            
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                            
| | 4.1  | Regulation S Securities Subscription Agreement
      (incorporated by reference from our Registration Statement on Form SB-2
      filed on April 18, 2006)                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                            
| | 10.1 | Share Purchase Agreement dated November 21, 2007 among
      our company, Pantera Oil and Gas PLC, Aurora Petroleos SA and Boreal
      Petroleos SA (incorporated by reference from our Current Report on Form
      8-K filed on November 26, 2007)                                                      
| |      |                                                                                                                                                                                                                                                                                                            
| | 10.2 | Form of Advisory Board Agreement (incorporated by
      reference from our Current Report on Form 8-K filed on February 4,
      2008)                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                            
| | 10.3 | Equity Financing Agreement dated February 12, 2008 with
      FTS Financial Investments Ltd. (incorporated by reference from our Current
      Report on Form 8-K filed on February 15, 2008)                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                            
| | 10.4 | Return to Treasury Agreement dated February 26, 2008 with
      Peter Hughes (incorporated by reference from our Current Report on Form
      8-K filed on February 28, 2008)                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                            
| | 10.5 | Amending Agreement dated March 17, 2008 with Artemis
      Energy PLC, Aurora Petroleos SA and Boreal Petroleos SA (incorporated by
      reference from our Current Report on Form 8- K filed on March 19,
    2008)                                                                                      
| |      |                                                                                                                                                                                                                                                                                                            
| | 10.6 | Subscription Agreement dated February 28, 2008 with Trius
      Energy, LLC (incorporated by reference from our Quarterly Report on Form
      10-QSB filed on April 14, 2008)                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                            
| | 10.7 | Joint Venture Agreement dated February 24, 2008 with
      Trius Energy, LLC (incorporated by reference from our Quarterly Report on
      Form 10-QSB filed on April 14, 2008)                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                            
| | 10.8 | Second Amending Agreement dated July 30, 2008 among our
      company, Artemis Energy PLC (formerly Pantera Oil and Gas PLC), Aurora
      Petroleos SA and Boreal Petroleos SA (incorporated by reference from our
      Current Report on Form 8-K filed on August 5, 2008)                              
| |      |                                                                                                                                                                                                                                                                                                            
| | 10.9 | Amended and Restated Share Purchase Agreement dated
      September 9, 2008 among company, Artemis Energy PLC (formerly Pantera Oil
      and Gas PLC), Aurora Petroleos SA and Boreal Petroleos SA (incorporated by
      reference from our Annual Report on for 10-KSB filed on September 15,
      2008
| |      |                                                                                                                                                                                                                                                                                                            
| | 14.1 | Code of Ethics (incorporated by reference from our Annual
      Report on Form 10-KSB filed on August 28,
2007)                                                                                                                                                                                            

| | 31.1* | Certification
        of Chris Metcalf pursuant to 18 U.S.C. Section 1350 as adopted pursuant
        to Section 302 of the Sarbanes-Oxley Act of 2002. 
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                         
| | 31.2* | Certification
        of Chris Metcalf, pursuant to 18 U.S.C. Section 1350 as adopted pursuant
        to Section 302 of the Sarbanes-Oxley Act of 2002.
| |       |                                                                                                                                                         
| | 32.1* | Certification
        of Chris Metcalf pursuant to 18 U.S.C. Section 1350 as adopted pursuant
        to Section 906 of the Sarbanes-Oxley Act of 2002. 
| |       |                                                                                                                                                         
| | 32.2* | Certification
        of Chris Metcalf, pursuant to 18 U.S.C. Section 1350 as adopted pursuant
        to Section 906 of the Sarbanes-Oxley Act of 2002.

60

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*Filed herewith

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,
thereunto duly authorized.

|ESP RESOURCES, INC.                       
|------------------------------------------
|                                          
|By: /s/ Chris Metcalf                     
|Chris Metcalf                             
|Chief Executive Officer and Director      
|(Principal Executive Officer and Principal
|Financial Officer)                        
|Date: April 15, 2009                      

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.

|By:                                        | */s/ Chris Metcalf* | 
|------------------------------------------ | ------------------- | 
|Chris Metcalf                              |                    
|Chief Executive Officer and Director      
|(Principal Executive Officer and Principal
|Financial Officer)                         |                    
|Date: April 15, 2009                       |                    
|                                           |                    
|By:                                        | */s/ David Dugas*   | 
|David Dugas                                |                    
|President and Director                     |                    
|Date: April 15, 2009                       |                    

|By:                  | */s/ Scott Tyson*   | 
|-------------------- | ------------------- | 
|Scott Tyson          |                    
|Director             |                    
|Date: April 15, 2009 |                    
|                     |                    
|By:                  | */s/ Tony Primeaux* | 
|Tony Primeaux        |                    
|Director             |                    
|Date: April 15, 2009 |                    
|                     |                    
|By:                  | */s/ William M Cox* | 
|William M. Cox       |                    
|Director             |                    
|Date: April 15, 2009 |                    

61

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