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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

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

For the fiscal year ended December 31, 2009

[   ] 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, 2009: $1,848,334.

Number of the issuers Common Stock outstanding as of April 15,
2010: 53,405,088

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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                                                                                                                  | 5   
|Item
      1A  | Risk
      Factors                                                                                                        | 17  
|Item
      1B  | Unresolved
      Staff Comments                                                                                           | 25  
|Item
      2   | Properties                                                                                                                | 25  
|Item
      3   | Legal
      Proceedings                                                                                                   | 27  
|Item
      4   | Submission
      of Matters to a Vote of Security Holders                                                                 | 28  
|Part
      II  |                                                                                                                           |     
|Item
      5   | Market
      for Registrants Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities. | 28  
|Item
      6   | Selected
      Financial Data.                                                                                            | 29  
|Item
      7   | Managements
      Discussion and Analysis of Financial Condition and Results of Operation                                | 30  
|Item
      7A  | Quantitative
      and Qualitative Disclosures about Market Risk                                                          | 38  
|Item
      8   | Financial
      Statements and Supplementary Data                                                                         | 39  
|Item
      9   | Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure                          | 69  
|Item
      9A  | Controls
      and Procedures                                                                                             | 69  
|Item
      9B  | Other
      Information                                                                                                   | 71  
|Part
      III |                                                                                                                           |     
|Item
      10  | Directors
      and Executive Officers and Corporate Governance.                                                          | 72  
|Item
      11  | Executive
      Compensation                                                                                              | 77  
|Item
      12  | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters                | 79  
|Item
      13  | Certain
      Relationships and Related Transactions, and Director Independence.                                          | 80  
|Item
      14  | Principal
      Accounting Fees and Services                                                                              | 81  
|Part
      IV  |                                                                                                                           |     
|Item
      15  | Exhibits,
      Financial Statement Schedules                                                                             | 82  
|Signatures     |                                                                                                                           | 85  

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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, 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.

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.

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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 to (i) eliminate our
ownership interest in Aurora and Boreal, (ii) obtain promissory notes for
amounts paid under the Original Agreement, (iii) establish terms on which we may
acquire an interest in Aurora and Boreal in the future, and (iv) establish terms
on which Artemis may acquire an interest in the Company in the future.

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

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| | (b) | Boreal acknowledged and agreed to:
| | --- | ----------------------------------
| |     |                                   
| |     | (i)                               
| |     |                                   
| |     | (ii)                              
| |     |                                   
| |     | (iii)                             
| |     |                                   
| | (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 30-year warrants to our company to
  purchase                                          
| |      | A.                                                                                           
| |      | B.                                                                                           

| | (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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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.

Subsequent to the Companys amended agreement with Aurora,
Boreal and Artemis Energy PLC in September 2008, the Company has no ownership in
Aurora or Boreal or their underlying assets. The Company holds notes receivable
from Aurora and Boreal with a face value of $680,371. These notes are due
September 9, 2013. The notes represent a conversion of the Companys previous
ownership interests in Aurora and Boreal. The Company made cash advances
totaling $670,000 to acquire the ownership interests which were later converted
into notes receivable.

The notes have been reduced by an allowance of $670,000 and
interest income is not being accrued on the notes based on the uncertainty of
the collectability of the notes. In addition the Company has nominal options to
purchase 27% of Aurora and 30% of Boreal from a third party, Artemis Energy PLC,
at an exercise price of £10 for a term of 30 years; provided the fair market
value of the shares subject to the option exceeds the value of the debt held by
the Company under the aforementioned note receivable issued by such entity. The
valuation requirement has not been met for either option and we do not expect
that requirement to be met in the near future. Each option expires October 13,
2038 and carries and exercise price of £10. The options are considered nominal
and are valued at $- on the balance sheet of the Company. In late 2009, the
Company was informed that Artemis had decided to liquidate its assets under U.K.
law.

The Company did not exercise its option under the amended
agreement to provide Aurora a $500,000 investment in exchange for a note and an
additional option for 38% of its equity, or to provide Boreal a $500,000
investment in exchange for a note and an additional option for 35% of its equity
by the April 30, 2009 deadline, as per the agreement. This deadline was verbally
extended indefinitely. However, in order to focus on its core petrochemical
business and existing and potential domestic exploration assets in a tight
credit environment, the Company has elected to not pursue additional investments
under the amended agreement.

We believe that it is probable that the notes receivable from
Aurora and Boreal are impaired. The amount of the impairment has been estimated
based on managements judgment of the liquidation value of the underlying assets
in the companies. We provided a valuation allowance on our notes receivable from
Aurora and Boreal. In determining the amount of the valuation allowance,
management considered the following factors:

- Estimated potential sale prices of Aurora and Boreals concessions
  compared to other concession properties in Paraguay. While no exact
  comparisons are available as each concession is unique in geography and data
  available, potential liquidation value of the concessions is a factor. .
  Management has reviewed concessions in the area where possible; however, the
  availability of data is limited because each concession is privately held. In
  addition, each concession is unique and objective comparisons of value are
  virtually impossible. Management uses this information as a subjective
  indicator of value and trends in the area, matched with the value of the data
  available for the concessions held by Aurora and Boreal. While substantive
  quantitative work has been done to analyze the data available on the
  concessions from Aurora and Boreal, it is a unique property. Because of the
  lack of objective data from comparative properties, management has used its
  judgment and the review of qualitative information in order to value these
  notes.
- Our limited ability to compel Aurora and Boreal to sell the concessions in
  order to repay the notes
- Precipitous fall in oil and gas prices
- Contraction in credit and financing
- Curtailing of exploration activities by major oil and gas companies

Management used its experience and judgment to weigh these
factors and determine the amount of the allowance.

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.

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Block 83 84 Joint Venture

On March 6, 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, reentering, 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. Upon entering this agreement, a director of Trius Energy, LLC was
appointed as a director of the Company. 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 from the Devonian and Fusselman zones and began to
sell natural gas. Sales were suspended to allow the well to unload fluid, and a
separator was put in line with the stack-pak to better handle the formation
water. In addition, the operator performed an acidization procedure on the
perforations, or holes made in the production formation through which formation
gas enters the wellbore. While bottom hole pressure remained strong after the
acidization procedure, formation water from an undetermined zone continued to
cause 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 well is currently shut in due to
the blow out. Work to repair the blowout began in August 2009. The Company
expects that the operator will receive insurance reimbursement to cover the cost
of the repairs of the damage from the blow out.

Although the Sibley 84#1 was tied to the gas gathering sale
line and sold small amounts of natural gas, because of the blowout, Trius Energy
LLC acting as managing venturer has verbally extended the carried interest for
the Company in the Sibley 84#1 for the Fusselman or Devonian zones. Trius is
working to obtain additional funding for this well for this purpose and is
contractually committed to fund the remaining two wells, Gulf Baker 83#1 and the
Sibley 84#2, according to the joint venture agreement and private placement
agreement to completion.

Under the definition of 17 CFR Section 210.4 -10, Subsection
A(2), the Block 83 84 Project JVs three well project does not meet the
definition of proved reserves. While true there was production in 84#1 from the
Devonian and Fusselman zones, it was so limited as to not rise to the
definitional level of being economical to a reasonable certainty, especially in
light of the unexpected water problem very shortly after production began, in
addition to the subsequent blowout. The target zones in the 84#1 and 83#1 have
not produced in these particular wells, aside from the small production in 84#1
before the water inflow and blowout. For 84#1, along with 83#1 and the undrilled
prospect 84#2, the recovery of natural gas and crude oil is subject to
reasonable doubt because of uncertainty as to economic factors, geology, and
reservoir characteristics. As an example, 84#1s target zones of the Devonian
and Fusselman produced an uneconomical amount of water unexpectedly, and the
economical producibility of those zones does not rise to the level of reasonable
certainty. It is intended to obtain an independent reserve analysis once
economic producibility is supported to the level of a reasonable certainty, if
and when that occurs. At that time, we intend to obtain the analysis from an
independent, third party reserve engineer. Until that time, the properties are
classified as unproven.

In assessing the fair value of the Block 83 84 Project JV, the
Company evaluated several factors and considered each factor according to its
probability of its occurrence and its importance in the valuation process. There
are qualitative and quantitative considerations in each factor, and the Company
combined its own professional experience with that of external parties to assess
each factor. The first factor to be evaluated was the blow-out on the Sibley
84#1. While impossible for any operator or individual to definitively assess the
full extent of the damage without beginning the repair work, estimates were made
by the operator in its professional opinion. The operator carries a $5 million
policy which covers blow-outs, and the estimate for the repair does not amount
to 25% of the policy. Although work has begun to repair the blowout, there is a
risk that damage to the well may exceed the value of the insurance coverage. In
the Companys assessment of the policy and the repair work, this risk is not
inconsequential, but it does not rise to the threshold of more likely than not.
If it is in fact the case that the damage exceeds the value of the insurance
policy, there is a risk that there will not be additional financing above the
insured amount to repair the well with the result that the value of the
Companys interest in the project will likely be

8

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impaired. This risk would fall upon Trius Energy LLC acting as
managing venturer and all other joint venturers in the Sibley 84#1 for the
Fusselman or Devonian zones. As above, it is the assessment that the insurance
policy will more than likely cover the entire repair work.

There is the risk that upon completion of the work to repair
the well from the blow-out that there will be additional water from either the
Devonian or Fusselman that limits economic production. According to the
perforation reports, the well was producing from both the Devonian and the
Fusselman. While is it not uncommon for these formations to produce water, there
is the risk that the water does not decrease as expected over time. This risk is
assessed against the solution of testing and blocking off the formation causing
the water so as to produce the available gas unimpeded. If it is found that
neither the Devonian nor the Fusselman is commercially productive, then a
possible solution and recommendation is that the operator perforate in the Lower
Wolfcamp, which is a productive zone in the Gomez Field. The probability of both
the Fusselman and Devonian zones producing water is limited due to the high shut
in tubing pressure reading and casing pressure readings over time, in addition
to the high down hole pressure readings. The risk in both the Sibley 84#1 and
the Gulf Baker 83#1 is mitigated by the fact that they have multiple producible
zones including the Fusselman, Devonian, Wolfcamp, and Atoka. Based upon an
analysis of area production, well logs, and drilling and completion reports,
while the risk exists that no zone is economically producible, it is assessed as
not rising to the level of more likely than not because of the multiplicity of
production zones.

An additional factor in assessing the carrying value is the
ability of Trius Energy LLC as managing venturer to extend the carried interest
for the Company in the Sibley 84#1. This factor is assessed on two levels, one
for completing the Sibley 84#1 above the insurance policy maximum, and second,
for completion should there be excessive water produced. As stated above, it is
the second risk that is more probable, but is mitigated by two considerations.
The first consideration is that if Trius cannot or will not extend the carried
interest, then all joint venturers will be called for the capital. In this
instance, the Company would be required to give 10% of the completion costs, and
if not, it will be considered non-consent and lose rights to the wells cash
flow until such time as allowed under the non-consent provisions of the joint
operating agreement. Although Trius is a third party, privately held company and
does not allow access to its financial statements, it has verbally stated that
it is contractually obligated to extend the carried interest as it relates to
the Company and is in the process of liquidating other interests to fund the
testing and blocking off of formation water, if necessary. The risk that Trius
can liquidate interests can be assessed as higher than other risks, but the
Company assesses it as more probable than not that Trius will be able to
perform. Even if it cannot, this risk is mitigated by the number of joint
venturers and relatively low amount of assessed additional work. The Company
would need to have 10% to preserve its rights, and the Company assesses that it
would be able to either divert funds from ongoing operations or raise additional
money in the form of debt or equity. However, there is no assurance that this
will occur.

Similar to the assessment of the Sibley 84#1, the Company
assessed the risk for the completion of the Sibley 84#2, a new oil drill, and
the Baker 83#1 in evaluating the carrying value of the project. The main risk
here is the credit risk of Trius Energy. Although information is not complete,
and sales prices have declined, other factors such as drilling input costs, have
also declined, making it less expensive to drill new wells and re-enter shut-in
wells. Another factor used in assessing the project is the price of natural gas
and oil. The two gas re-entry wells are longer term assets with estimated
remaining useful lives in multiple zones of over 10 years. According to the
Energy Information Administration, U.S. Natural Gas Wellhead monthly prices
averaged $3.71 per thousand cubic feet in 2009. The Companys longer term
projections assume a higher price per thousand cubic feet rather than
incorporating short term, highly volatile prices. Although the Company believes
this average over time is appropriate, the Company has stressed each well with
lower prices and projected volumes. The stressed values were compared to sales
prices of working interests at volumes and prices comparable to stressed prices.
As the market for working interests is an illiquid market and may not
necessarily be relied upon, the Company also compared the results using
traditional present value analysis. As the project is inherently designed to
have failures in any one well or zone, the Company assesses the value in light
of the potential failures of completion. For impairment purposes only, the
Company used an expected value analysis, which is the weighted average of the
present value of a downside, base, and upside cases, along with a total failure
case, where the weights are the probabilities of occurrence of those values. The
84#2 is a new oil drill. Despite the drop in oil prices, the original expected
value per barrel of oil is comparable to prices today. The Company has also
stressed the production and pricing models, and compared them area production,
and assessed that projected pricing and production projections associated with
this well would not impair its contribution to the project.

Material assumptions for all cases included a $3.00/mmbtu for
gas prices and $60/barrel oil price, which are below the U.S. Government Energy
Information Administrations Annual Energy Outlook 2009 Reference Case
(Updated). The 84#1 assumed a base case of 2.5 million cubic feet per day
production with a target Devonian zone

9

---

while the 83#1 base case was the same from the target Lower
Wolfcamp zone, based upon the log analysis and area production, along with the
operators experience in the field. An 80 barrel per day production assumption
from the Yates/7-Rivers formation was used for the 84#2. Additional assumptions
included a 20% decline rate for the reentry wells, and a 10% discount rate,
applied to our 10% working interest, the same being a 7.5% net revenue
interest.

Management has determined that it would be more likely than not
that Trius, who is responsible for paying our carried interest, would not be
able to obtain the necessary funding to get the well operational. Management
also learned that a vendor had obtained a default judgement against the operator
of the well for unpaid invoices. Although the operator fully expects to resolve
the issue and Trius fully expects to obtain the necessary financing, taking in
totality the risks and their likelihood, at this time, the Company assessed that
it is more likely than not that impairment has occurred given these factors. As
a result, management has determined that this well is fully impaired.

Baker Ranch Block 80

By an agreement dated August 11, 2008, we 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 we make less than the required investment
amount to complete any of the payments, we shall be entitled to receive a
percentage of the Property lease assignments per the above described
percentages.

We were given an indefinite verbal extension on the payment of
the $376,000 to acquire an additional 51.79% . We negotiated a reduction in the
purchase price for the final 51.79% to $87,190. On October 30, 2008, we borrowed
$87,190 from a private equity drilling fund (the Investor) to purchase the
remaining 51.79% working interest in the Property. The Investor advanced the
funds directly to Lakehills, and we issued a promissory note to Investor for
$87,190. Our ownership in the Property is 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s Ranch) located in Pecos County, Texas. According to the terms of the
Agreement, we and Lakehills transferred to the Investor a combined 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 was due April 30, 2009.
This note has been verbally extended indefinitely. 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.

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Lakehills issued a non-consent filing to the investor in May
2009 under the terms of the Joint Operating Agreement dated October 30, 2008.
The Investor immediately disputed this filing; however, the Investor has not
performed as required in the agreement, and the Company believes that they do
not intend to perform. Efforts at replacing the Investor with alternate
financing have been ongoing without definitive success. Although efforts to find
alternative financing continue, without current financing to complete the well,
the Company has elected to write off its investment as of December 31, 2009.

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.
- 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. However, due to the current condition
of the well and the uncertainty regarding its production levels, its
classification will remain as an unproven property. The Companys interests in
the Block 83 84 Project JV and Baker Ranch Block 80 project are fully impaired,
as of December 31, 2009.

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.

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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.

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.

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

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

12

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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.

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 twenty employees
(fourteen as of December 31, 2009), all of whom are full time. We expect to
increase the number of employees as we implement our business objectives and
expand our

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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 BUSINESS

We 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 $4,790,267 for the year
ended December 31, 2009. As of December 31, 2009, we had a working capital
deficit of $1,051,051. 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 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.

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We have a history of losses and fluctuating operating
results.

From inception through to December 31, 2009, we have incurred
aggregate losses of $7,880,166. Our net loss for the year ended December 31,
2009 was $4,790,267. 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.

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

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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.

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.

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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 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.

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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 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

18

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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.

ESPPI has a total of forty customers, three of which are major
customers that together account for 39% of accounts receivable at December 31,
2009 and four of which account for 63% of the total revenues earned for the year
ended December 31, 2009. The loss of one of our major customers would have a
serious material negative economic

19

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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.

20

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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.

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.

21

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OFEQUITY 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:

OTC Bulletin Board(1)Quarter Ended
      High
      LowDecember 31, 2009
      $0.15
      $0.07September 30, 2009
      $0.4
      $0.082June 30, 2009
      $0.69
      $0.19March 31, 2009
      $1.93
      $0.40December 31, 2008
      $0.17
      $0.03September 30, 2008
      $0.48
      $0.12June 30, 2008
      $0.77
      $0.35March 31, 2008
      $1.55
      $0.40


|(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).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On April 21, 2010, the shareholders list of our common shares
showed 160 registered shareholders and 47,413,056 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.

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

None

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.

22

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Selected Historical Data

December
        31,2009
      
      
      2008Total Assets
      $
      2,933,574
      
      $
      2,507,099Total Liabilities
      $
      3,370,678
      
      $
      1,448,780Total Stockholders' Equity (Deficit)
      $
      (437,104
      )
      $
      1,058,319Net Working Capital (Deficit)
      $
      (1,051,051
      )
      $
      (106,792
      )Revenues (1)
      $
      2,738,266
      
      $
      1,977,861Loss from operations (1)
      $
      (4,231,184
      )
      $
      (2,602,216
      )Net Loss (1)
      $
      (4,790,267
      )
      $
      (2,675,162
      )


(1) Information on the results of operations for the years
ended December 31, 2009 and 2008.

ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTSOF 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 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.

23

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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, 2009 as Compared to Year ended
December 31, 2008

The following table summarizes the results of our operations
during years ended December 31, 2009 and 2008.

24

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|                                     |   | Year Ended   |   |   | Year Ended   |   |   |            |   |  |            |  
|------------------------------------ | - | ------------ | - | - | ------------ | - | - | ---------- | - |  | ---------- | -
|                                     |   | December 31, |   |   | December 31, |   |   | Increase   |   |  | % Increase |  
|                                     |   | 2009         |   |   | 2008         |   |   | (Decrease) |   |  | (Decrease) |  
|                                     |   |              |   |   |              |   |   |            |   |  |            |  
|Revenue                              | $ | 2,738,266    |   | $ | 1,977,861    |   | $ | 760,405    |   |  | 38.45%     |  
|Cost of Goods Sold                   |   | 1,506,212    |   |   | 1,223,356    |   |   | 282,865    |   |  | 23.12%     |  
|Gross Profit                         |   | 1,232,054    |   |   | 754,505      |   |   | 477,540    |   |  | 63.29%     |  
|                                     |   |              |   |   |              |   |   |            |   |  |            |  
|General and administrative expenses  |   | 4,022,523    |   |   | 802,501      |   |   | 3,220,022  |   |  | 401.25%    |  
|Depreciation and amortization        |   | 46,963       |   |   | 25,858       |   |   | 21,105     |   |  | 81.61%     |  
|Impairment of notes receivable       |   | 326,371      |   |   | -            |   |   | 326,371    |   |  | N/A        |  
|Impairment of oil and gas properties |   | 1,067,381    |   |   | -            |   |   | 1,067,381  |   |  | N/A        |  
|Impairment of goodwill               |   | -            |   |   | 2,559,879    |   |   | (2,559,879 | ) |  | (100.00%   | )
|Loss (gain) on sale of assets        |   | -            |   |   | (31,517      | ) |   | (31,517    | ) |  | N/A        |  
|Loss from Operations                 |   | (4,231,184   | ) |   | (2,602,216   | ) |   | (1,628,968 | ) |  | 62.60%     |  
|                                     |   |              |   |   |              |   |   |            |   |  |            |  
|Total Other Income (expense)         |   | (559,083     | ) |   | (72,946      | ) |   | (486,137   | ) |  | 666.43%    |  
|                                     |   |              |   |   |              |   |   |            |   |  |            |  
|Net loss                             | $ | (4,790,267   | ) |   | (2,675,162   | ) |   | (2,115,105 | ) |  | 79.06%     |  

Revenues

Sales revenue increased from
$1,977,861 for the year ended December 31, 2008 to $2,738,266 for the same
period of 2009, an increase of $760,405. The increase was due to several
factors. The customer base of ESPPI expanded during 2009 due to increased sales
coverage in the Southern Louisiana and East Texas regions. New customers
obtained during 2009 contributed in excess of $350,000 of new business to ESPPI
during 2009. We hired additional field service technicians in the East Texas
region in the third quarter 2009 and their sales contacts resulted in a direct
increase in sales volumes from this region of $50,860 during the fourth quarter
of 2009. We effectively concluded the absorption of the Turf Chemistry business
into our South Texas region on November 1, 2009. The sales for the fourth
quarter of 2009 from this region increased $102,510. ESPPI increased sales
volume to several of our existing customers through supply of additional
petrochemical products at the customer wellsites in 2009 resulting in sales
increases exceeding $250,000 for 2009 in comparison to 2008.

Cost of goods sold and gross profit

Cost of goods sold for the year
ended December 31, 2009 was $1,506,212, an increase of $282,856 or 23% compared
to $1,223,356 over the same period in 2008. Our gross profit increased $477,549,
or 63%, to $1,232,054 for the year ended December 31, 2009 from $754,505 during
the same period in 2008. Gross profit as a percentage of revenue was 45% for the
year ended December 31, 2009. 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. In addition, we
experienced an increase in sales of higher gross margin chemical blends during
2009 in comparison with 2008 primarily in our south and east Texas regions.

General and Administrative

General and administrative
expenses increased from $802,501 in the year ended December 31, 2008 to
$4,022,523 in the same period of 2009, representing an increase of $3,220,022 or
401.25% . The increase in general and administrative expenses in the year ended
December 31, 2009 compared to that of 2008 was primarily due to the increase in
staff, an increase in facility rental cost as ESPPI took over the expenses of a
larger rental facility in the South Texas region after the acquisition of the
Turf Chemistry business and assets. The personnel level of ESPPI increased from
seven (7) employees in 2008 to fourteen (14) employees in 2009 to accommodate
the increase in sales. We experienced an increase in travel costs associated
with expansion of our customer base and direct sales

25

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efforts. Compensation to the officers of ESPPI increased with
the execution of extended employment contracts with each executive in 2009. The
stock based compensation increased $2,252,644 in 2009 versus none in 2008.

Net loss

Net loss for the year ended
December 31, 2009 was $4,790,267, representing an increase of $2,115,105
compared to a loss of $2,675,162 for the same period in 2008. The increase is
primarily related to the increase in the general and administrative expenses
during the year ended December 31, 2009.

Liquidity and Capital Resources

Cash

As of December 31, 2009, the
Company had $25,107 of cash and cash equivalents as compared to $27,367 as of
December 31, 2008.

Cash Flow

The cash flow for the years ended December 31, 2009 and 2008
are summarized below:

Year Ended December 31,2009
      
      
      2008Net cash used in operating activities
      $
      (257,126
      )
      $
      (233,829
      )Net cash used in investing activities
      $
      (202,116
      )
      $
      (4,626
      )Net cash provided by financing activities
      $
      456,982
      
      $
      132,999Net increase (decrease)
        in cash
      $
      (2,260
      )
      $
      (105,456
      )


Cash outflows from operations
during the year ended December 31, 2009 amounted to $257,126 as compared to net
cash outflows from operations of $233,829 in the same period of 2008. The
increase in cash outflow was due primarily to the increase in net loss.

Our cash outflows used in
investing activities during the year ended December 31, 2009 amounted to
$202,116 as compared to $4,626 in the same period of 2008. Cash outflows for the
purchase of fixed assets increased to $108,323 for the year ended December 31,
2009 as compared to $12,665 for the same period in 2008. In addition, we used
cash of $75,530 for the acquisition of Turf.

Our cash inflows from financing activities amounted to $456,982
in the year ended December 31, 2009 as compared to $132,999 in the same period
of 2008, primarily from proceeds of private placement amounting to $229,000, and
proceeds from loans from related parties of $219,238.

Working Capital

We estimate that our general
operating expenses for the next twelve month period to include $2,000,000 for
professional fees and general and administrative expenses. Estimated operating
expenses include provisions for consulting fees, salaries, travel, telephone,
office and warehouse 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. In addition, ESPPI will be increasing
the size of the present workforce significantly during 2010 as we increase our
presence in the East and South Texas regions as well as expansion plans in place
for increases in sales in the Southeast Oklahoma and Arkansas regions. The
acquisition of the Turf Chemistry assets in the fourth quarter of 2009,
including the addition of a full service blending and distribution facility in
the South Texas region, should allow ESPPI to significantly increase the service
distribution footprint throughout the region.

As of December 31, 2009, the
working capital of the Company was a deficit of $1,051,051. 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,

26

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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.

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, 2009, our company had cash of $25,107 and a
working capital deficit of $1,051,051.

We estimate that our general
operating expenses for the next twelve month period to include $2,000,000 for
professional fees and general and administrative expenses for a total estimated
funding of at least $2,000,000. 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
$4,790,267 for the year ended December 31, 2009. As indicated above, we
anticipate that our projected operating expenses for the next twelve months will
be $2,000,000. 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.

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, 2009, 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,
2009 have incurred losses of $7,880,166 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.

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

27

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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.

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.

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 anti-dilutive.

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.

28

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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.

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 and 2009, our company had no asset
retirement obligations as we own no wells which we have the obligation to
plug.

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, 2009, 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

29

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managements opinion that our company is not exposed to
significant interest, currency or credit risks arising from these financial
instruments.

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.

Derivatives

The valuation of our embedded derivatives and warrant
derivatives are determined primarily by the Black-Scholes option pricing model.
An embedded derivative is a derivative instrument that is embedded within
another contract, which under the convertible note (the host contract) includes
the right to convert the note by the holder, certain default redemption right
premiums and a change of control premium (payable in cash if a fundamental
change occurs). In accordance with SFAS No. 133, as amended, ASC 815
Accounting for Derivative Instruments and Hedging Activities, as
amended, these embedded derivatives are marked-to-market each reporting period,
with a corresponding non-cash gain or loss charged to the current period. A
warrant derivative liability is determined in accordance with EITF 00-19, ASC
815. Based on EITF 00-19, ASC 815, warrants which are determined to be
classified as derivative liabilities are marked-to-market each reporting period,
with a corresponding non-cash gain or loss charged to the current period. The
practical effect of this has been that when our stock price increases so does
our derivative liability and resulting in a non-cash loss charge that reduces
our earnings and earnings per share. When our stock price declines, we record a
non-cash gain, increasing our earnings and earnings per share.

To determine the fair value of our embedded derivatives,
management evaluates assumptions regarding the probability of certain future
events. Other factors used to determine fair value include our period end stock
price, historical stock volatility, risk free interest rate and derivative term.
The fair value recorded for the derivative liability varies from period to
period. This variability may result in the actual derivative liability for a
period either above or below the estimates recorded on our consolidated
financial statements, resulting in significant fluctuations in other income
(expense) because of the corresponding non-cash gain or loss recorded.

Revenue and Cost Recognition

The Company through its wholly owned subsidiary, ESP
Petrochemicals, Inc., is a custom formulator of petrochemicals for the oil &
gas industry. Since the products are specific to each location, the receipt of
an order or purchase order starts the production process. Once the blending
takes place, the order is delivered to the land site or dock. When the
containers of blended petrochemicals are off-loaded at the dock, or they are
stored on the land site, a delivery ticket is obtained, an invoice is generated
and Company recognizes revenue. The invoice is generated based on the credit
agreement with the customer at the agreed-upon price.

Revenue is recognized when title and risk of loss have
transferred to the customer and when contractual terms have been fulfilled.
Transfer of title and risk of loss occurs when the product is delivered in
accordance with the contractual shipping terms, generally to a land site or
dock. Revenue is recognized based on the credit agreement with the customer at
the agreed upon price.

Recent Accounting Pronouncements

In June 2009, the FASBissued SFAS No. 168, The FASB
Accounting Standards Codification TM and the Hierarchy of Generally Accepted
Accounting Principles  a replacement of FASB Statement No. 162 (SFAS
168). The FASB Accounting Standards Codification TM, (Codification or
ASC) became the source of authoritative GAAP recognized by the FASB to be
applied by nongovernmental entities. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. On the effective date of SFAS 168, the Codification
superseded all then-existing non-SEC accounting and reporting standards. All
other non-grandfathered non-SEC accounting literature not included in the
Codification became non-authoritative.

Following SFAS 168, the FASB will no longer issue new standards
in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts; instead, it will issue Accounting Standards Updates (ASUs).

30

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The FASB will not consider ASUs as authoritative in their own
right; rather these updates will serve only to update the Codification, provide
background information about the guidance, and provide the bases for conclusions
on the change(s) in the Codification. SFAS No. 168 is incorporated in ASC Topic
105,Generally Accepted Accounting Principles.The Company adopted SFAS
No. 168 in the third quarter of 2009, and the Company will provide reference to
both the Codification topic reference and the previously authoritative
references related to Codification topics and subtopics, as appropriate.

In May 2009, the FASB issued SFAS No. 165, Subsequent
Events (SFAS 165). SFAS 165, which is incorporated in FASB ASC Topic No.
855,Subsequent Events, establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In particular,
this Statement sets forth: (1) the period after the balance sheet date during
which management of a reporting entity should evaluate events or transactions
that may occur for potential recognition or disclosure in the financial
statements; (2) the circumstances under which an entity should recognize events
or transactions occurring after the balance sheet date in its financial
statements; and (3) the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. In accordance with SFAS
165, an entity should apply the requirements to interim or annual financial
periods ending after June 15, 2009. The Company adopted SFAS 165 effective June
30, 2009 and the adoption did not have a material impact on its consolidated
financial statements. The date through which subsequent events have been
evaluated is November 16, 2009, the date on which the financial statements were
issued.

In June 2009, the FASB issued guidance which amends the
consolidation guidance applicable to variable interest entities. This guidance
is included in FASB ASC 810, Consolidation.The amendments significantly
reduce the previously required quantitative consolidation analysis, and require
ongoing reassessments of whether a company is the primary beneficiary of a
variable interest entity. This new guidance also requires enhanced disclosures
about an enterprises involvement with a variable interest entity. This
statement is effective for the beginning of the first annual reporting period
beginning after November 15, 2009. The Company does not currently expect the
adoption of the new guidance in FASB ASC 810 to impact its consolidated
financial statements.

In October 2009, the FASB issued guidance for amendments to FASB
  Emerging Issues Task Force on EITF Issue No. 09-1  Accounting for Own-Share
  Lending Arrangements in Contemplation of a Convertible Debt Issuance or Other
  Financing ( Subtopic 470-20 ) Subtopic. This accounting standards
  update establishes the accounting and reporting guidance for arrangements under
  which own-share lending arrangements issued in contemplation of convertible
  debt issuance. This Statement is effective for fiscal years, and interim periods
  within those fiscal years, beginning on or after December 15, 2009. Earlier
  adoption is not permitted. Management believes this Statement will have no impact
  on the consolidated financial statements of the Company once adopted.

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.

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

31

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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 sheets of
ESP Resources, Inc. (the Company) as of December 31, 2008 and 2009, and the
consolidated statements of operations, stockholders deficit, and cash flows for
the years 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 audits.

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 audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2008 and 2009, and the results of its operations and its cash
flows for the years 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, 2009 and has 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/MaloneBailey, LLPwww.malone-bailey.comHouston,
Texas

April 23, 2010

32

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ESP Resources, Inc.Consolidated Balance
SheetsDecember 31, 2009 and 2008

|                                                                                                                                                                      |   | 2009       |   |   | 2008        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | ----------- | -
|ASSETS                                                                                                                                                                |  
|CURRENT ASSETS                                                                                                                                                        |   |            |   |   |             |  
|Cash and cash equivalents                                                                                                                                             | $ | 25,107     |   | $ | 27,367      |  
|Accounts receivable, net                                                                                                                                              |   | 815,703    |   |   | 450,882     |  
|Inventories, net                                                                                                                                                      |   | 290,218    |   |   | 221,575     |  
|Prepaid expenses and other current assets                                                                                                                             |   | 166,738    |   |   | 101,904     |  
|Total current assets                                                                                                                                                  |   | 1,297,766  |   |   | 801,728     |  
|                                                                                                                                                                      |   |            |   |   |             |  
|Property and equipment, net of accumulated
      depreciation of $219,341 and $126,822, respectively                                                                  |   | 683,403    |   |   | 285,293     |  
|Oil and gas properties, unproven                                                                                                                                      |   | -          |   |   | 1,067,381   |  
|Note receivable, net of allowance of $- and
      $402,000, respectively                                                                                              |   | -          |   |   | 278,371     |  
|Restricted cash                                                                                                                                                       |   | 41,139     |   |   | 22,876      |  
|Intangible assets, net of amortization                                                                                                                                |   | 884,480    |   |   | -           |  
|Other assets                                                                                                                                                          |   | 26,786     |   |   | 51,451      |  
|                                                                                                                                                                      |   |            |   |   |             |  
|Total assets                                                                                                                                                          | $ | 2,933,574  |   | $ | 2,507,099   |  
|                                                                                                                                                                      |   |            |   |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                        |  
|CURRENT LIABILITIES                                                                                                                                                   |   |            |   |   |             |  
|Accounts payable                                                                                                                                                      | $ | 589,284    |   | $ | 279,522     |  
|Factoring payable                                                                                                                                                     |   | 380,724    |   |   | 226,868     |  
|Accrued expenses                                                                                                                                                      |   | 232,266    |   |   | 106,446     |  
|Due to related parties                                                                                                                                                |   | 359,010    |   |   | 76,100      |  
|Guarantee liability                                                                                                                                                   |   | 120,000    |   |   | -           |  
|Due to Turf shareholders
      for acquisition                                                                                                                        |   | 263,700    |   |   | -           |  
|Current maturities of long-term debt                                                                                                                                  |   | 325,170    |   |   | 219,584     |  
|Current portion of capital
      lease obligation                                                                                                                     |   | 20,624     |   |   | -           |  
|Loan from investor                                                                                                                                                    |   | 58,039     |   |   | -           |  
|Total current liabilities                                                                                                                                             |   | 2,348,817  |   |   | 908,520     |  
|                                                                                                                                                                      |   |            |   |   |             |  
|Loan from investor, noncurrent                                                                                                                                        |   | -          |   |   | 100,000     |  
|Long-term debt (less current maturities)                                                                                                                              |   | 582,636    |   |   | 367,431     |  
|Capital lease obligations (less current maturities)                                                                                                                   |   | 56,225     |   |   | 35,829      |  
|Contingent consideration payable for acquisition of Turf                                                                                                              |   | 350,000    |   |   | -           |  
|Deferred lease cost                                                                                                                                                   |   | 33,000     |   |   | 37,000      |  
|Total
      liabilities                                                                                                                                               |   | 3,370,678  |   |   | 1,448,780   |  
|                                                                                                                                                                      |   |            |   |   |             |  
|STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                                        |   |            |   |   |             |  
|Common stock
      - $0.001 par value, 1,200,000,000 shares authorized, 45,185,295 
                 and 19,206,429
      shares issued and outstanding, respectively |   | 45,185     |   |   | 19,206      |  
|Additional paid-in capital                                                                                                                                            |   | 7,398,877  |   |   | 4,130,012   |  
|Subscription receivable                                                                                                                                               |   | (1,000     | ) |   | (1,000      | )
|Accumulated deficit                                                                                                                                                   |   | (7,880,166 | ) |   | (3,089,899, | )
|Total stockholders' equity (deficit)                                                                                                                                  |   | (437,104   | ) |   | 1,058,319   |  
|                                                                                                                                                                      |   |            |   |   |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)                                                                                                            | $ | 2,933,574  |   | $ | 2,507,099   |  

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

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ESP Energy, Inc.Consolidated Statements of
OperationsFor the years ended December 31, 2009 and 2008

|                                       |   | For
      the year ended December 31, |  
|-------------------------------------- | - | ------------------------------------- | -
|                                       |   | 2009                                  |  
|SALES, NET                             | $ | 2,738,266                             |  
|COST OF GOODS SOLD                     |   | 1,506,212                             |  
|GROSS PROFIT                           |   | 1,232,054                             |  
|                                       |   |                                       |  
|General and administrative             |   | 4,022,523                             |  
|Impairment of goodwill                 |   | -                                     |  
|Impairment loss on notes receivable    |   | 326,371                               |  
|Impairment of oil and gas properties   |   | 1,067,381                             |  
|Depreciation and amortization          |   | 46,963                                |  
|Loss (gain) on sale of assets          |   | -                                     |  
|                                       |   |                                       |  
|LOSS FROM OPERATIONS                   |   | (4,231,184                            | )
|                                       |   |                                       |  
|OTHER INCOME (EXPENSE)                 |   |                                       |  
|Interest expense                       |   | (288,021                              | )
|Factoring fees                         |   | (86,203                               | )
|Other Income                           |   | 3,000                                 |  
|Interest Income                        |   | 77                                    |  
|Other Expense                          |   | (936                                  | )
|Loss on guarantee of asset             |   | (72,000                               | )
|Loss on legal settlement               |   | (115,000                              | )
|Total other income (expense)           |   | (559,083                              | )
|NET LOSS                               | $ | (4,790,267                            | )
|                                       |   |                                       |  
|NET LOSS PER SHARE  Basic and diluted | $ | (0.19                                 | )
|                                       |   |                                       |  
|WEIGHTED AVERAGE SHARES OUTSTANDING   |   |                                       |  
|Basic and diluted                      |   | 25,632,929                            |  

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

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ESP Resources, Inc.Statement of Stockholders
Equity (Deficit)For the Years Ended December 31, 2009 and 2008

AdditionalCommon
        stock
      
      
      Paid-In
      
      
      Subscription
      
      
      AccumulatedShares
      
      
      Par Value
      
      
      Capital
      
      
      Receivable
      
      
      Deficit
      
      
      TotalBalance, December 31, 2007
      
      14,634,146
      
      $
      14,634
      
      $
      (11,634
      )
      $
      (1,000
      )
      $
      (414,737
      )
      $
      (412,737
      )Conversion of note payable     to related
        party into     common stock
      
      -
      
      
      -
      
      
      685,000
      
      
      -
      
      
      -
      
      
      685,000Shares retained by Pantera    
        shareholders in reverse     merger
      
      4,572,283
      
      
      4,572
      
      
      3,456,646
      
      
      -
      
      
      -
      
      
      3,461,218Net loss
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (2,675,162
      )
      
      (2,675,162
      )Balance, December 31, 2008
      
      19,206,429
      
      
      19,206
      
      
      4,130,012
      
      
      (1,000
      )
      
      (3,089,899
      )
      
      1,058,319Stock based compensation
      
      13,437,454
      
      
      13,437
      
      
      2,239,207
      
      
      -
      
      
      -
      
      
      2,252,644Common stock and warrants issued 
           with debt
      
      1,700,000
      
      
      1,700
      
      
      92,949
      
      
      
      
      
      
      
      
      94,649Fair value of common stock     issued for conversion
        of     debt
      
      5,570,032
      
      
      5,570
      
      
      189,381
      
      
      -
      
      
      -
      
      
      194,951Common stock and warrants    
        issued in connection with     private placement
      
      3,271,380
      
      
      3,272
      
      
      225,728
      
      
      -
      
      
      -
      
      
      229,000Beneficial conversion     feature on advances
        on loans     to convertible notes.
      
      
      
      
      
      
      
      243,600
      
      
      
      
      
      
      
      
      243,600Shares in connection with acquisition 
           of Turf
      
      2,000,000
      
      
      2,000
      
      
      278,000
      
      
      
      
      
      
      
      
      280,000Net loss
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (4,790,267
      )
      
      (4,790,267
      )Balance, December 31, 2009
      
      45,185,295
      
      $
      45,185
      
      $
      7,398,877
      
      $
      (1,000
      )
      $
      (7,880,166
      )
      $
      (437,104
      )


35

---

ESP Resources, Inc.Consolidated Statements of
Cash Flow

|                                                                                  |   | For the year ended |  
|--------------------------------------------------------------------------------- | - | ------------------ | -
|                                                                                  |   | December
      31, |  
|                                                                                  |   | 2009               |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |   |                    |  
|Net loss                                                                          | $ | (4,790,267         | )
|Adjustments to reconcile net loss to net cash used in operating
      activities: |   |                    |  
|Impairment of goodwill                                                            |   | -                  |  
|Impairment of oil and gas properties                                              |   | 1,067,381          |  
|Depreciation and amortization
      (including cost of goods sold component)      |   | 183,453            |  
|Gain on disposal of fixed assets                                                  |   | -                  |  
|Write off of related party receivable                                             |   | -                  |  
|Stock based compensation                                                          |   | 2,252,644          |  
|Amortization of debt discounts                                                    |   | 263,249            |  
|Impairment loss on notes receivable                                               |   | 326,371            |  
|Loss on guarantee liability                                                       |   | 72,000             |  
|Changes in operating assets and liabilities:                                      |   |                    |  
|Accounts receivable                                                               |   | (364,821           | )
|Inventory                                                                         |   | (51,465            | )
|Prepaid expenses and other
      current assets                                   |   | 63,237             |  
|Other assets                                                                      |   | 24,664             |  
|Accounts payable                                                                  |   | 296,562            |  
|Accrued expenses                                                                  |   | 209,960            |  
|Accrued expenses-related
      parties                                            |   | 189,906            |  
|NET CASH USED IN OPERATING ACTIVITIES                                             |   | (257,126           | )
|                                                                                  |   |                    |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |   |                    |  
|Cash paid for acquisition of Turf                                                 |   | (75,530            | )
|Cash received from merger, net                                                    |   | -                  |  
|Restricted cash                                                                   |   | (18,264            | )
|Purchase of fixed assets                                                          |   | (108,323           | )
|NET CASH USED IN INVESTING ACTIVITIES                                             |   | (202,116           | )
|                                                                                  |   |                    |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |   |                    |  
|Proceeds from private placement                                                   |   | 229,000            |  
|Repayment of long term debt                                                       |   | (219,185           | )
|Repayment of capital lease obligations                                            |   | (9,591             | )
|Net factoring advances                                                            |   | 153,856            |  
|Borrowing on long-term debt                                                       |   | 150,000            |  
|Payments on insurance financing,
      included in long-term debt                 |   | -                  |  
|Loan from investor                                                                |   | (41,961            | )
|Repayments of loans from related
      parties                                    |   | (24,375            | )
|Proceeds from loans from related parties                                          |   | 219,238            |  
|                                                                                  |   |                    |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                         |   | 456,982            |  
|                                                                                  |   |                    |  
|NET INCREASE (DECREASE) IN CASH                                                   |   | (2,260             | )
|CASH AT BEGINNING OF PERIOD                                                       |   | 27,367             |  
|                                                                                  |   |                    |  
|CASH AT END OF PERIOD                                                             | $ | 25,107             |  

36

---

|Non-cash investing and financing
      transactions:                |   |         |  |   |           | 
|------------------------------------------------------------------- | - | ------- |  | - | --------- | 
|Shares issued for assets in reverse
      merger                    | $ | -       |  | $ | 3,461,218 | 
|Conversion of note
      payable to related party into common stock | $ | -       |  | $ | 685,000   | 
|Shares issued for conversion of
      long-term debt                | $ | 194,951 |  |   | -         | 
|Purchase of fixed
      assets with notes                           | $ | 205,926 |  |   | -         | 
|Lease of equipment                                                  | $ | -       |  | $ | 41,591    | 
|Prepaid insurance
      issued through issuance of notes            | $ | 128,071 |  |   | -         | 
|Leasehold improvements                                              | $ | -       |  | $ | 40,000    | 
|Discount
      on long-term debt                                    | $ | 372,000 |  |   | -         | 
|Guarantee                                                           | $ | 48,000  |  |   |           | 
|BCF and
      Shares issued to modify loan                          | $ | 75,000  |  |   |           | 

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

37

---

ESP Resources, Inc Notes to Consolidated Financial
StatementsDecember 31, 2008 and 2009

Note 1  Basis of Presentation, Nature of
Operationsand 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.

On June 15, 2007, ESP Delaware purchased all the outstanding
shares of ESP Petrochemicals, Inc. The transaction was accounted for as a
reverse acquisition with ESP Petrochemicals, Inc. being the continuing entity.
The accompanying financial statements for the period of December 31, 2008 and
2009 have been prepared to present the statements of operations and cash flows
of ESP Petrochemicals, Inc. for purposes of complying with the rules and
regulations of the Securities and Exchange Commission as required by S-X Rule
8-02. The combined results of the two periods in 2008 and 2009 represent the
results of operations and cash flows for the continuing operations of ESP
Petrochemicals, Inc.

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 FASC Topic 805,
Business Combinations, whereby ESP Delaware was considered the accounting
acquirer. The transaction was valued at $0.76 per share based on the average
trading price of the Companys stock for the three days before and after the
announcement of the transaction.

The total consideration paid was $3,461,218 based on the
4,572,283 shares of common stock retained by the existing shareholders of the
Company. The net assets of ESP Nevada were recorded at fair value on the date of
acquisition. Management reviewed the operations of ESP Nevada for the existence
of intangible assets and determined there were none. 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:

Reverse Merger (continued)

38

---

Cash
    $
    13,260Notes receivable
    
    278,004Property and equipment
    
    2,536Unproven Oil & Gas properties
    
    1,067,381Prepaid expenses
    
    16,102Deposit
    
    1,510Goodwill
    
    2,559,879Related party debt
    
    (67,354
    )Liabilities assumed
    
    (49,910
    )Notes payable, net
    
    (360,190
    )Net assets acquired
    $
    3,461,218


Purchase of Turf Chemistry, Inc by ESP Resources on
November 1, 2009

On November 1, 2009, ESP Resources purchased certain assets and
liabilities of Turf Chemistry Inc. (Turf), a Texas corporation. The assets and
liabilities acquired related to Turfs activities in the United States. Turf
operates in the same industry as ESP Resources and ESP Petrochemicals.

The acquisition of Turf was accounted for using purchase
accounting as ESP Resources acquired substantially all of the assets, debts,
employees, intangible contracts and business of Turf. Turfs results of
operations and cash flows are included in the accompanying consolidated
financial statements from the date of acquisition through December 31, 2009.

The purchase price of $1,172,972 includes the assumption of
bank and other debts of Turf totaling $203,742. On November 1, 2009, ESP
Resources paid $75,530 in cash and agreed to pay the remaining $263,700 on or
before March 16, 2010 and 2,000,000 shares of common stock of ESP Resources Inc
were issued. The required payment by the Company of $263,700 was made in March
2010. The fair value of the stock on the grant date is $280,000. The purchase
included the assumption of debt and assets including inventory, fixed assets,
vehicles, and supplies in exchange for cash and shares. The acquisition price
was allocated to the assets acquired and liabilities assumed based upon their
estimated fair values. The Company determined that assets acquired included an
intangible asset associated with the customer list for Turfs existing customer
relationships. The customer list was valued at $914,700 and has an estimated
life of five years. The following table summarizes the estimated fair values of
the assets acquired and liabilities assumed at the date of
acquisition:

AmountInventory
    $
    17,179Property and equipment
    
    176,380Supplies
    
    64,713Intangible assets
    
    914,700Total assets acquired
    
    1,172,972Debt assumed
    
    203,742Net assets acquired
    $
    969,230Advance payment to Turf
    $
    75,530Cash payable to Turf
    
    263,700Common stock issued to Turf shareholders
    
    280,000Contingent consideration payable to Turf
    
    350,000Total purchase price
    $
    969,230


As part of the acquisition agreement, ESP Resources agreed to
issue an aggregate number of shares of its common stock to Turf determined as
follows:

39

---

| | a) | If the sale of Turfs products results in at least
      $1,500,000 in revenue for the one year period beginning on January 1, 2010
      (the First Earnout Period), not including any revenue from ESP Resources
      or any of its other affiliates (the First Revenue Earnout Criteria),
      then Turf shall be entitled to receive an aggregate of such number of
      shares of the Companys common stock as equals the quotient obtained by
      dividing (i) the difference between the total revenue from the sale of
      Turfs products during the First Earnout Period minus $1,500,000 (ii) the
      average trading price of the Companys common stock over the fifteen day
      period immediately preceding the last day of the First Earnout
    Period.                                                                                                                                                                                                                                                                                                                                                             
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | b) | If the sale of Turfs products for the one year period
      beginning on the first day following the First Earnout Period and ending
      on the first anniversary of the First Earnout Period (the Second Earnout
      Period) results in revenue greater than the revenue earned in the First
      Earnout Period, not including any revenue from ESP Resources or any of its
      other affiliates (the Second Revenue Earnout Criteria), then Seller
      shall be entitled to receive an aggregate of such number of shares of the
      Companys common stock as equals the quotient obtained by dividing (i) the
      quotient of (A) the difference between the total revenue from the sale of
      Turfs products during the Second Earnout Period minus the revenue from
      the Sale of Turfs products during the First Earnout Period divided by (B)
      one and thirty-three one hundredths (1.33), by (ii) the average trading
      price of the Companys common stock over the fifteen day period
      immediately preceding the last day of the Second Earnout Period (the
      Second Year Earnout Shares).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | c) | If the sale of Turfs products for the one year period
      beginning on the first day following the Second Earnout Period and ending
      on the first anniversary of the Second Earnout Period (the Third Earnout
      Period) results in revenue greater than the revenue earned in the Second
      Earnout Period, not including any revenue from ESP Resources or any of its
      other affiliates (the Third Revenue Earnout Criteria), then Turf shall
      be entitled to receive an aggregate of such number of shares of the
      Companys common stock as equals the quotient obtained by dividing (i) the
      quotient of (A) the difference between the total revenue from the sale of
      Turfs products during the Third Earnout Period minus the revenue from the
      sale of Turfs products during the Second Earnout Period divided by (B)
      two, by (ii) the average trading price of Parents common stock over the
      fifteen day period immediately preceding the last day of the Third Earnout
      Period (the Third Year Earnout Shares).                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | d) | If the sale of Turfs products for the one year period
      beginning on the first day following the Third Earnout Period and ending
      on the first anniversary of the Third Earnout Period (the Fourth Earnout
      Period) results in revenue greater than the revenue earned in the Third
      Earnout Period, not including any revenue from the ESP Resources or any of
      its other affiliates (the Fourth Revenue Earnout Criteria), then Turf
      shall be entitled to receive an aggregate of such number of shares of the
      Companys common stock as equals the quotient obtained by dividing (i) the
      quotient of (A) the difference between the total revenue from the sale of
      Turfs products during the Fourth Earnout Period minus the revenue from
      the sale of Turfs products during the Third Earnout Period divided by (B)
      4, by (ii) the average trading price of the Companys common stock over
      the fifteen day period immediately preceding the last day of the Fourth
      Earnout Period (the Fourth Year Earnout Shares).                                             

Management has estimated the fair value of the earn out
provision at $350,000 on the date of acquisition. and recorded this as a
contingent liability.

Unaudited pro forma condensed combined financial
statements

The unaudited pro forma combined condensed financial statements
  are presented for informational purposes only and are not necessarily indicative
  of the results of operations that actually would have been achieved had each
  acquisition been consummated as of that time, nor are they intended to be a
  projection of future results.

The unaudited condensed combined pro forma results were as
follows:

40

---

Unaudited Pro Forma Combined Condensed Statement of
OperationsFor the Year Ended December 31, 2008 and 2009

2008
    
    
    2009Revenues
    $
    2,826,000
    
    $
    3,126,027Cost of Goods Sold
    
    (1,430,793
    )
    
    (1,595,470
    )Gross Profit
    
    1,395,207
    
    
    1,530,557Total Operating Expenses
    
    1,275,222
    
    
    3,762,723Net loss
    $
    2,670,429
    
    $
    5,293,280


Goodwill

All goodwill relates to the business acquired in the reverse
merger transaction described above. The changes in the carrying amount of
goodwill for the year ended December 31, 2008, are as follows.

Balance, December 31, 2007
    $
    -Goodwill acquired during the year
    
    2,559,880Impairment losses
    
    (2,559,880
    )Balance, December 31, 2008
    $
    -


Goodwill was tested for impairment as of December 31, 2008. All
goodwill relates to Pantera Petroleum, which was acquired in the reverse merger
on December 29, 2008. Management estimated the fair value of this reporting unit
and determined that the goodwill was impaired as of December 31, 2008. An
impairment loss of $2,559,879 was recognized for the year ended December 31,
2008. Management determined that no impairment loss was required to be
recognized for the year ended December 31, 2009. The fair value of that
reporting unit was estimated using the expected present value of future cash
flows. The goodwill was fully impaired because there were no expected future
cash flows in excess of those that were already used to value the oil and gas
properties at fair value on the date of acquisition which was two days
earlier.

Intangible assets

Intangible assets relate to the customer list acquired with the
acquisition of Turf described above. Intangible assets are being amortized over
their estimated life of five years. The Company evaluated intangible assets for
impairment as of December 31, 2009 and determined that no impairment was
indicated. The Company recognized amortization expense of $30,490 during the
year ended December 31, 2009.

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.

Principles of consolidation

The consolidated financial statements include the accounts of
ESP Resources and its wholly-owned subsidiaries for the years ended December 31,
2009 and 2008.

41

---

All significant inter-company transactions and balances have
been eliminated in consolidation.

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 $25,107 and $27,367 cash equivalents at December 31, 2009 or 2008.

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, 2009 and 2008:

2009
    
    
    2008Trade receivables
    $
    511,923
    
    $
    248,690Trade receivable  Turf
    
    303,780
    
    
    202,192Less: Allowance for doubtful
      accounts
    
    -
    
    
    -Net accounts receivable
    $
    815,703
    
    $
    450,882


In February 2009, the Company entered into a non-binding letter
of intent (Letter of Intent) to acquire 100% of the outstanding stock of
Turf.1The acquisition was completed on November 1, 2009. Included in
accounts receivable at December 31, 2008 are amounts due from the Turf for sales
of petrochemicals during 2008. These accounts receivable have exceeded the
normal 30-day payment terms. Under the terms of our Letter of Intent, if the
acquisition was not consummated these receivables would have been repaid with
five percent interest. The acquisition was closed on November 1, 2009, and all
amounts due from Turf were repaid in 2010.

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. Since the
inception of business in March, 2008, ESP has not experienced losses from bad
debts. Our receivable aging averaged less than 60 days since our inception. We
believe that our accounts receivable are fully collectible as of December 31,
2009. For the year ended December 31, 2009 and 2008, the Company recorded no
provision for doubtful accounts.

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, 2009 and 2008, inventory consisted of the
following:

2009
    
    
    2008Raw materials
    $
    236,129
    
    $
    178,828Finished goods
    
    54,089
    
    
    42,747Total inventory
    $
    290,218
    
    $
    221,575


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.



1 Turf is owned by a 6% shareholder of ESP at the time of
negotiations, whose percentage has decreased to less than 5% due to additional
issuances by the Company, and is also the cousin of one of ESPs major
shareholders.

42

---

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 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.

Impairment

Unevaluated properties which are excluded from amortization are
assessed at least annually to ascertain whether impairment occurred. Unevaluated
properties whose costs are individually significant shall be assessed
individually. Where it is not practicable to individually assess the amount of
impairment of properties for which costs are not individually significant, such
properties may be grouped for purposes of assessing impairment. Management
considers the following factors in assessing properties for impairment:

Impairment may be estimated by applying factors based on
historical experience and other data such as primary lease terms of the
properties, average holding periods of unproved properties, and geographic and
geologic data to groupings of individually insignificant properties and
projects. The amount of impairment assessed under either of these methods shall
be added to the costs to be amortized. In addition, management assesses the
availability of financing on commercially viable terms in order to finance the
development of the property. The Company individually evaluated the Block 83 and
84 Project and the Baker 80 Lease. These are the only unevaluated properties
owned by the Company; therefore, no properties were evaluated as a group. See
Note 6 for specific discussion of each of the unevaluated properties.

The Company determined that its investments in the Baker 80
Lease and Block 83 84 Project were impaired. As a result, the Company recognized
an impairment loss of $1,067,381 for the twelve months ended December 31, 2009.
See Note 6 below.

43

---

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, 2009 and 2008, no asset retirement obligation was required to be recorded.

Derivatives

The valuation of our embedded derivatives and warrant
derivatives are determined primarily by the Black-Scholes option pricing model.
An embedded derivative is a derivative instrument that is embedded within
another contract, which under the convertible note (the host contract) includes
the right to convert the note by the holder, certain default redemption right
premiums and a change of control premium (payable in cash if a fundamental
change occurs). In accordance with SFAS No. 133, as amended, ASC 815
Accounting for Derivative Instruments and Hedging Activities, as
amended, these embedded derivatives are marked-to-market each reporting period,
with a corresponding non-cash gain or loss charged to the current period. A
warrant derivative liability is determined in accordance with EITF 00-19, ASC
815. Based on EITF 00-19, ASC 815, warrants which are determined to be
classified as derivative liabilities are marked-to-market each reporting period,
with a corresponding non-cash gain or loss charged to the current period. The
practical effect of this has been that when our stock price increases so does
our derivative liability and resulting in a non-cash loss charge that reduces
our earnings and earnings per share. When our stock price declines, we record a
non-cash gain, increasing our earnings and earnings per share.

To determine the fair value of our embedded derivatives,
management evaluates assumptions regarding the probability of certain future
events. Other factors used to determine fair value include our period end stock
price, historical stock volatility, risk free interest rate and derivative term.
The fair value recorded for the derivative liability varies from period to
period. This variability may result in the actual derivative liability for a
period either above or below the estimates recorded on our consolidated
financial statements, resulting in significant fluctuations in other income
(expense) because of the corresponding non-cash gain or loss recorded.

Income Taxes

In accordance with SFAS No. 109, ASC 740 Accounting for
Income Taxes, the provision for income taxes is computed using the asset
and liability method. Under the asset and liability method, deferred income tax
assets and liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the currently enacted tax rates and laws. A valuation allowance is
provided for the amount of deferred tax assets that, based on available
evidence, are not expected to be realized.

Concentrations

The Company has three major customers that together account for
39% of accounts receivable at December 31, 2009 and four major customers that
together account for 63% of the total revenues earned for the year ended
December 31, 2009.

44

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Accountsreceivable
    
    
    RevenueCustomer A
    
    17%
    
    
    37%Customer B
    
    10%
    
    
    12%Customer C
    
    -%
    
    
    8%Customer D
    
    11%
    
    
    6%39%
    
    
    63%


The Company has four vendors that accounted for 29%, 14%, 11%
and 10%, respectively of purchases.

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 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. There were no
uninsured cash balances at December 31, 2009 and 2008.

Revenue and Cost Recognition

The Company through its wholly owned subsidiary, ESP
Petrochemicals, Inc., is a custom formulator of petrochemicals for the oil &
gas industry. Since the products are specific to each location, the receipt of
an order or purchase order starts the production process. Once the blending
takes place, the order is delivered to the land site or dock. When the
containers of blended petrochemicals are off-loaded at the dock, or they are
stored on the land site, a delivery ticket is obtained, an invoice is generated
and Company recognizes revenue. The invoice is generated based on the credit
agreement with the customer at the agreed-upon price.

Revenue is recognized when title and risk of loss have
transferred to the customer and when contractual terms have been fulfilled.
Transfer of title and risk of loss occurs when the product is delivered in
accordance with the contractual shipping terms, generally to a land site or
dock. Revenue is recognized based on the credit agreement with the customer at
the agreed upon price.

Advertising

Advertising costs are charged to operations when incurred.
Advertising expense for the year ended December 31, 2009 and 2008 were $433 and
$1,117, respectively.

45

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Basic and Diluted Loss Per Share

Basic and diluted earnings or loss per share (EPS) amounts in
the financial statements are computed in accordance SFAS No. 128, ASC 260  10
Earnings per Share, which establishes the requirements for presenting
EPS. Basic EPS is based on the weighted average number of common shares
outstanding. DilutedEPS is based on the weighted average number of
common shares outstanding and dilutive common stock equivalents. Basic EPS is
computed by dividing netincome/loss available to common stockholders
(numerator) by the weighted average number of common shares outstanding
(denominator) during the period.

Potentially dilutive securities were excluded from the calculation
  of diluted loss per share, because their effect would be anti-dilutive.

Reclassifications

Certain prior year amounts have been reclassified to conform to
current year presentation.

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.

Fair Value of Financial Instruments

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, 2009, there have been no environmental
expenses incurred by the Company.

New Accounting Standards

In June 2009, the FASB issued SFAS No. 168, The FASB
Accounting Standards Codification TM and the Hierarchy of Generally Accepted
Accounting Principles  a replacement of FASB Statement No. 162 (SFAS 168).
The FASB Accounting Standards Codification TM, (Codification or ASC) became
the source of authoritative GAAP recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. On the effective date of SFAS 168, the Codification superseded
all then-existing non-SEC accounting and reporting standards. All other
non-grandfathered non-SEC accounting literature not included in the Codification
became non-authoritative.

46

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Following SFAS 168, the FASB will no longer issue new standards
in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts; instead, it will issue Accounting Standards Updates (ASUs). The FASB
will not consider ASUs as authoritative in their own right; rather these
updates will serve only to update the Codification, provide background
information about the guidance, and provide the bases for conclusions on the
change(s) in the Codification. SFAS No. 168 is incorporated in ASC Topic 105,
Generally Accepted Accounting Principles. The Company adopted SFAS No. 168 in
the third quarter of 2009, and the Company will provide reference to both the
Codification topic reference and the previously authoritative references related
to Codification topics and subtopics, as appropriate.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events
(SFAS 165). SFAS 165, which is incorporated in FASB ASC Topic No. 855,
Subsequent Events, establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In particular,
this Statement sets forth: (1) the period after the balance sheet date during
which management of a reporting entity should evaluate events or transactions
that may occur for potential recognition or disclosure in the financial
statements; (2) the circumstances under which an entity should recognize events
or transactions occurring after the balance sheet date in its financial
statements; and (3) the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. In accordance with SFAS
165, an entity should apply the requirements to interim or annual financial
periods ending after June 15, 2009. The Company adopted SFAS 165 effective June
30, 2009 and the adoption did not have a material impact on its consolidated
financial statements. The date through which subsequent events have been
evaluated is November 16, 2009, the date on which the financial statements were
issued.

In June 2009, the FASB issued guidance which amends the
consolidation guidance applicable to variable interest entities. This guidance
is included in FASB ASC 810, Consolidation. The amendments significantly reduce
the previously required quantitative consolidation analysis, and require ongoing
reassessments of whether a company is the primary beneficiary of a variable
interest entity. This new guidance also requires enhanced disclosures about an
enterprises involvement with a variable interest entity. This statement is
effective for the beginning of the first annual reporting period beginning after
November 15, 2009. The Company does not currently expect the adoption of the new
guidance in FASB ASC 810 to impact its consolidated financial
statements.

In October 2009, the FASB issued guidance for amendments to
FASB Emerging Issues Task Force on EITF Issue No. 09-1  Accounting for
Own-Share Lending Arrangements in Contemplation of a Convertible Debt Issuance
or Other Financing ( Subtopic 470-20 ) Subtopic. This accounting standards
update establishes the accounting and reporting guidance for arrangements under
which own-share lending arrangements issued in contemplation of convertible debt
issuance. This Statement is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2009. Earlier
adoption is not permitted. Management believes this Statement will have no
impact on the consolidated financial statements of the Company once adopted.

Note 2  Going Concern

At December 31, 2009, the company had cash and cash equivalents
of $25,107 and working capital deficit of $1,051,051. The Company believes that
its existing capital resources may not be adequate to enable it to execute its
business plan. These conditions raise substantial doubt as to the Companys
ability to continue as a going concern. The Company estimates that it will
require additional cash resources during 2010 based on its current operating
plan and condition.

The Company expects 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 July 31, 2009 and expires June 30, 2010. The Company may obtain

47

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advances up to 100 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 $400,000. The factoring agreement was amended in January
2010 to raise the borrowing limit to $750,000. 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, 2010.
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, general intangibles, and equipment of the Company and a commercial
guarantee of a Company stockholder. The total borrowings under the factoring
agreement at December 31, 2009 and 2008 were $380,724 and $226,868, respectively
with $41,139 and $22,876 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,
2009 and 2008:

2009
    
    
    2008Plant, property and equipment
    $
    248,722
    
    $
    169,680Vehicles
    
    536,131
    
    
    233,538Equipment under capital lease
    
    77,265
    
    
    -Office furniture and equipment
    
    40,626
    
    
    8,897902,744
    
    
    412,115Less: accumulated depreciation
    
    (219,341
    )
    
    (126,822
    )Net property and equipment
    $
    683,403
    
    $
    285,293


Depreciation expense was $152,963 and $78,715 for the year
ended December 31, 2009 and 2008, respectively. The Company allocated $136,490
and $52,857 of depreciation to cost of goods sold during the year ended December
31, 2009 and 2008, respectively.

Note 5- Notes receivable and investments

Subsequent to the Companys amended agreement with Aurora,
Boreal and Artemis Energy PLC in September 2008, the Company has no ownership in
Aurora or Boreal or their underlying assets. The Company holds notes receivable
from Aurora and Boreal with a face value of $680,371. These notes are due
September 9, 2013. The notes represent a conversion of the Companys previous
ownership interests in Aurora and Boreal. The Company made cash advances
totaling $670,000 to acquire the ownership interests which were later converted
into notes receivable.

The notes have been reduced by an allowance of $670,000 and
interest income is not being accrued on the notes based on the uncertainty of
the collectability of the notes. In addition the Company has nominal options to
purchase 27% of Aurora and 30% of Boreal from a third party, Artemis Energy PLC,
at an exercise price of £10 for a term of 30 years; provided the fair market
value of the shares subject to the option exceeds the value of the debt held by
the Company under the aforementioned note receivable issued by such entity. The
valuation requirement has not been met for either option and we do not expect
that requirement to be met in the near future. Each option expires October 13,
2038 and carries and exercise price of £10. The options are considered nominal
and are valued at $- on the balance sheet of the Company.

The Company did not exercise its option under the amended
agreement to provide Aurora a $500,000 investment in exchange for a note and an
additional option for 38% of its equity, or to provide Boreal a $500,000
investment in exchange for a note and an additional option for 35% of its equity
by the April 30, 2009 deadline, as per the agreement. This deadline was verbally
extended indefinitely. However, in order to focus on its core petrochemical
business and existing and potential domestic exploration assets in a tight
credit environment, the Company elected to not pursue additional investments
under the amended agreement.

We believe that it is probable that the notes receivable from
Aurora and Boreal are impaired. The amount of the impairment has been estimated
based on managements judgment of the liquidation value of the underlying assets
in the companies. In determining the amount of the valuation allowance,
management considered the following factors:

- Estimated potential sale prices of Aurora and Boreals concessions
  compared to other concession properties in Paraguay. While no exact
  comparisons are available as each concession is unique in geography and data

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- Our limited ability to compel Aurora and Boreal to sell the concessions in
  order to repay the notes
- Precipitous fall in oil and gas prices
- Contraction in credit and financing
- Curtailing of exploration activities by major oil and gas companies

Management used its experience and judgment to weigh these
factors and determine the amount of the allowance.

During the twelve months ended December 31, 2009, the Company
increased the allowance on the notes receivable by $268,000 to $670,000 as a
result of increased uncertainty about the collectability of the notes. The
company also impaired the accrued interest receivable of $10,371. Due to the
uncertainty of collectability, no additional interest revenue was recorded
during the twelve months ended December 31, 2009. In addition, the Company
increased the impairment on notes receivable recorded in relation to the
guarantee liability by $48,000. (See further discussion in Note 12.) The Company
recognized total impairment expense of $326,371 during the twelve months ended
December 31, 2009.

Note 6 - Oil and Gas Properties - Unproven

Block 83 and 84 Project

On March 6, 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, reentering, 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. Upon entering this agreement, a director of Trius Energy, LLC was
appointed as a director of the Company. 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 from the Devonian and Fusselman zones and began to
sell natural gas. Sales were suspended to allow the well to unload fluid, and a
separator was put in line with the stack-pak to better handle the formation
water. In addition, the operator performed an acidization procedure on the
perforations, or holes made in the production formation through which formation
gas enters the wellbore. While bottom hole pressure remained strong after the
acidization procedure, formation water from an undetermined zone continued to
cause 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 well is currently shut in due to
the blow out. Work to repair the blowout began in August 2009. The Company
expects that the operator will receive insurance reimbursement to cover the cost
of the repairs of the damage from the blow out.

Although the Sibley 84#1 was tied to the gas gathering sale
line and sold small amounts of natural gas, because of the blowout, Trius Energy
LLC acting as managing venturer verbally extended the carried interest for the
Company in the Sibley 84#1 for the Fusselman or Devonian zones. Trius is working
to obtain additional funding for this well for this purpose and is contractually
committed to fund the remaining two wells, Gulf Baker 83#1 and the Sibley 84#2,
according to the joint venture agreement and private placement agreement to
completion.

49

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Under the definition of 17 CFR Section 210.4 -10, Subsection
A(2), the Block 83 84 Project JVs three well project does not meet the
definition of proved reserves. While true there was production in 84#1 from the
Devonian and Fusselman zones, it was so limited as to not rise to the
definitional level of being economical to a reasonable certainty, especially in
light of the unexpected water problem very shortly after production began, in
addition to the subsequent blowout. The target zones in the 84#1 and 83#1 have
not produced in these particular wells, aside from the small production in 84#1
before the water inflow and blowout. For 84#1, along with 83#1 and the undrilled
prospect 84#2, the recovery of natural gas and crude oil is subject to
reasonable doubt because of uncertainty as to economic factors, geology, and
reservoir characteristics. As an example, 84#1s target zones of the Devonian
and Fusselman produced an uneconomical amount of water unexpectedly, and the
economical producibility of those zones does not rise to the level of reasonable
certainty. It is intended to obtain an independent reserve analysis once
economic producibility is supported to the level of a reasonable certainty, if
and when that occurs. At that time, we intend to obtain the analysis from an
independent, third party reserve engineer. Until that time, the properties are
classified as unproven.

In assessing the fair value of the Block 83 84 Project JV, the
Company evaluated several factors and considered each factor according to its
probability of its occurrence and its importance in the valuation process. There
are qualitative and quantitative considerations in each factor, and the Company
combined its own professional experience with that of external parties to assess
each factor. The first factor to be evaluated was the blow-out on the Sibley
84#1. While impossible for any operator or individual to definitively assess the
full extent of the damage without beginning the repair work, estimates were made
by the operator in its professional opinion. The operator carries a $5 million
policy which covers blow-outs, and the estimate for the repair does not amount
to 25% of the policy. Although work has begun to repair the blowout, there is a
risk that damage to the well may exceed the value of the insurance coverage. In
the Companys assessment of the policy and the repair work, this risk is not
inconsequential, but it does not rise to the threshold of more likely than not.
If it is in fact the case that the damage exceeds the value of the insurance
policy, there is a risk that there will not be additional financing above the
insured amount to repair the well with the result that the value of the
Companys interest in the project will likely be impaired. This risk would fall
upon Trius Energy LLC acting as managing venturer and all other joint venturers
in the Sibley 84#1 for the Fusselman or Devonian zones. As above, it is the
assessment that the insurance policy will more than likely cover the entire
repair work.

There is the risk that upon completion of the work to repair
the well from the blow-out that there will be additional water from either the
Devonian or Fusselman that limits economic production. According to the
perforation reports, the well was producing from both the Devonian and the
Fusselman. While is it not uncommon for these formations to produce water, there
is the risk that the water does not decrease as expected over time. This risk is
assessed against the solution of testing and blocking off the formation causing
the water so as to produce the available gas unimpeded. If it is found that
neither the Devonian nor the Fusselman is commercially productive, then a
possible solution and recommendation is that the operator perforate in the Lower
Wolfcamp, which is a productive zone in the Gomez Field. The probability of both
the Fusselman and Devonian zones producing water is limited due to the high shut
in tubing pressure reading and casing pressure readings over time, in addition
to the high down hole pressure readings. The risk in both the Sibley 84#1 and
the Gulf Baker 83#1 is mitigated by the fact that they have multiple producible
zones including the Fusselman, Devonian, Wolfcamp, and Atoka. Based upon an
analysis of area production, well logs, and drilling and completion reports,
while the risk exists that no zone is economically producible, it is assessed as
not rising to the level of more likely than not because of the multiplicity of
production zones.

An additional factor in assessing the carrying value is the
ability of Trius Energy LLC as managing venturer to extend the carried interest
for the Company in the Sibley 84#1. This factor is assessed on two levels, one
for completing the Sibley 84#1 above the insurance policy maximum, and second,
for completion should there be excessive water produced. As stated above, it is
the second risk that is more probable, but is mitigated by two considerations.
The first consideration is that if Trius cannot or will not extend the carried
interest, then all joint venturers will be called for the capital. In this
instance, the Company would be required to give 10% of the completion costs, and
if not, it will be considered non-consent and lose rights to the wells cash
flow until such time as allowed under the non-consent provisions of the joint
operating agreement. Although Trius is a third party, privately held company and
does not allow access to its financial statements, it verbally stated that it is
contractually obligated to extend the carried interest as it relates to the
Company and is in the process of liquidating other interests to fund the testing
and blocking off of formation water, if necessary. The risk that Trius can
liquidate interests can be assessed as higher than other risks, but the Company
assesses it as more probable than not that Trius will be able to perform. Even
if it cannot, this risk is mitigated by the number of joint venturers and
relatively low amount of assessed additional work. The Company would need to
have 10% to preserve its rights, and the Company assesses that it would be able
to either divert funds from ongoing operations or raise additional money in the
form of debt or equity. However, there is no assurance that this will occur.

50

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Similar to the assessment of the Sibley 84#1, the Company
assessed the risk for the completion of the Sibley 84#2, a new oil drill, and
the Baker 83#1 in evaluating the carrying value of the project. The main risk
here is the credit risk of Trius Energy. Although information is not complete,
and sales prices have declined, other factors such as drilling input costs, have
also declined, making it less expensive to drill new wells and re-enter shut-in
wells. Another factor used in assessing the project is the price of natural gas
and oil. The two gas re-entry wells are longer term assets with estimated
remaining useful lives in multiple zones of over 10 years. According to the
Energy Information Administration, U.S. Natural Gas Wellhead monthly prices
averaged $3.71 per thousand cubic feet in 2009. The Companys longer term
projections assume a higher price per thousand cubic feet rather than
incorporating short term, highly volatile prices. Although the Company believes
this average over time is appropriate, the Company stressed each well with lower
prices and projected volumes. The stressed values were compared to sales prices
of working interests at volumes and prices comparable to stressed prices. As the
market for working interests is an illiquid market and may not necessarily be
relied upon, the Company also compared the results using traditional present
value analysis. As the project is inherently designed to have failures in any
one well or zone, the Company assesses the value in light of the potential
failures of completion. For impairment purposes only, the Company used an
expected value analysis, which is the weighted average of the present value of a
downside, base, and upside cases, along with a total failure case, where the
weights are the probabilities of occurrence of those values. The 84#2 is a new
oil drill. Despite the drop in oil prices, the original expected value per
barrel of oil is comparable to prices today. The Company also stressed the
production and pricing models, and compared them area production, and assessed
that projected pricing and production projections associated with this well
would not impair its contribution to the project.

Material assumptions for all cases included a $3.00/mmbtu for
gas prices and $60/barrel oil price, which are below the U.S. Government Energy
Information Administrations Annual Energy Outlook 2009 Reference Case
(Updated). The 84#1 assumed a base case of 2.5 million cubic feet per day
production with a target Devonian zone while the 83#1 base case was the same
from the target Lower Wolfcamp zone, based upon the log analysis and area
production, along with the operators experience in the field. An 80 barrel per
day production assumption from the Yates/7-Rivers formation was used for the
84#2. Additional assumptions included a 20% decline rate for the reentry wells,
and a 10% discount rate, applied to our 10% working interest, the same being a
7.5% net revenue interest.

Management determined that it would be more likely than not
that Trius, who is responsible for paying our carried interest, would not be
able to obtain the necessary funding to get the well operational. Management
also learned that a vendor had obtained a default judgement against the operator
of the well for unpaid invoices. Although the operator fully expects to resolve
the issue and Trius fully expects to obtain the necessary financing, taking in
totality the risks and their likelihood, at this time, the Company assessed that
it is more likely than not that impairment occurred given these factors. As a
result, management determined that this well is fully impaired.

Baker 80 Lease

By an agreement dated August 11, 2008, we 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 we make less than the required investment
amount to complete any of the payments, we shall be entitled to receive a
percentage of the Property lease assignments per the above described
percentages.

We were given an indefinite verbal extension on the payment of
the $376,000 to acquire an additional 51.79% . We negotiated a reduction in the
purchase price for the final 51.79% to $87,190. On October 30, 2008, we borrowed
$87,190 from a private equity drilling fund (the Investor) to purchase the
remaining 51.79% working interest in the Property. The Investor advanced the
funds directly to Lakehills, and we issued a promissory note to Investor for
$87,190. Our ownership in the Property is 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s

51

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Ranch) located in Pecos County, Texas. According to the terms
of the Agreement, we and Lakehills transferred to the Investor a combined 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 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 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 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 was due April 30, 2009.
This note has been verbally extended indefinitely. 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.

Lakehills issued a non-consent filing to the investor in May
2009 under the terms of the Joint Operating Agreement dated October 30, 2008.
The Investor immediately disputed this filing; however, the Investor has not
performed as required in the agreement, and the Company believes that they do
not intend to perform. Efforts at replacing the Investor with alternate
financing have been ongoing without definitive success. Although efforts to find
alternative financing continue, without current financing to complete the well,
the Company elected to write off its investment as of December 31, 2009.

Note 7-Long Term Debt

Long term debt consisted of the following at December 31, 2009
and 2008:

52

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|                                                                                                                                                                                                                                                            |   | 2009    |  |   | 2008    | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- |  | - | ------- | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|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.                 | $ | 4,835   |  | $ | 6,477   | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|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.        |   | 3,818   |  |   | 5,292   | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|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.                                             |   | 23,785  |  |   | 34,264  | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|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.                                             |   | 23,642  |  |   | 32,734, | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|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.                                              |   | 23,297  |  |   | 33,562  | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|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               |   | 17,474  |  |   | 22,484  | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|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   | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|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 |  |   | 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. The note has been extended indefinitely.                                                             |   | 87,190  |  |   | 87,190  | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|On February 12, 2009, the Company borrowed $41,415 for
      the purchase of a vehicle. The note bears interest at 6.75% per year, is
      secured by the vehicle purchased and is payable in 60 monthly payments of
      $817.                           |   | 35,420  |  |   | -       | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|On February 15, 2009, the Company borrowed $4,343 for the
      purchase of equipment. The note bears interest at 12% per year, is secured
      by the equipment purchased and is payable 36 monthly payments of $145                                      |   | 3,284   |  |   | -       | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|On November 10, 2009, the Company borrowed $52,586 for
      the purchase of a vehicle. The note bears interest at 6% per year, is
      secured by the vehicle purchased and is payable in 60 monthly payments of
      $789.                              |   | 51,392  |  |   | -       | 
|                                                                                                                                                                                                                                                            |   |         |  |   |         | 
|On November 10, 2009, the Company borrowed $57,372 for
      the purchase of a vehicle. The note bears interest at 6% per year, is
      secured by the vehicle purchased and is payable in 60 monthly payments of
      $842.                              |   | 56,523  |  |   |         | 

53

---

|Note assumed with the acquisition of Turf
      Chemicals, Inc. Note assumed with boat purchase, payable to Key Bank dated
      May 17, 2007. The note bears interest at 10.50% percent per annum and is
      payable in installments of $481, maturing May 17, 2022. The note is
      secured by a boat. |   | 39,948   |   |   | -        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | -------- | - | - | -------- | -
|                                                                                                                                                                                                                                                                                                             |   |          |   |   |          |  
|Note assumed with the acquisition of Turf
      Chemicals, Inc. Note assumed with vehicle purchase, payable to FMC dated
      April 2008. The note bears interest at 7.90 percent per annum and is
      payable in installments of $992, maturing April 2013. The note is secured
      by a vehicle.      |   | 36,646   |   |   | -        |  
|                                                                                                                                                                                                                                                                                                             |   |          |   |   |          |  
|Note assumed with the acquisition of Turf
      Chemicals, Inc. Note assumed with vehicle purchase, payable to FMC dated
      April 2008. The note bears interest at 7.99 percent per annum and is
      payable in installments of $614, maturing April 2013. The note is secured
      by a vehicle.      |   | 22,148   |   |   | -        |  
|                                                                                                                                                                                                                                                                                                             |   |          |   |   |          |  
|Note assumed with the acquisition of Turf
      Chemicals, Inc. Note assumed with vehicle purchase, payable to FMC dated
      April 2008. The note bears interest at 7.99 percent per annum and is
      payable in installments of $458, maturing April 2013. The note is secured
      by a vehicle.      |   | 16,093   |   |   | -        |  
|                                                                                                                                                                                                                                                                                                             |   |          |   |   |          |  
|Note assumed with the acquisition of Turf
      Chemicals, Inc. Note assumed with vehicle purchase, payable to FMC dated
      April 2008. The note bears interest at 7.99 percent per annum and is
      payable in installments of $693, maturing April 2013. The note is secured
      by a vehicle.      |   | 21,995   |   |   | -        |  
|                                                                                                                                                                                                                                                                                                             |   |          |   |   |          |  
|Unsecured note payable to Compass Bank. The
      note bears interest at the Wall Street Journal U.S. prime rate plus 1.50
      percent (4.75 percent at December 31, 2009) per annum, is payable in
      monthly installments of $4,050 and is due February 1, 2011                                       |   | 51,760   |   |   | -        |  
|                                                                                                                                                                                                                                                                                                             |   |          |   |   |          |  
|Insurance financing and other short term
      financing, bears interest at 6.63 percent per annum and is payable in
      monthly installments of $13,200                                                                                                                                                   |   | 115,556  |   |   | 82,204   |  
|Total                                                                                                                                                                                                                                                                                                        |   | 907,806  |   |   | 587,015  |  
|Less current maturities                                                                                                                                                                                                                                                                                      |   | (325,170 | ) |   | (219,584 | )
|Total long-term debt                                                                                                                                                                                                                                                                                         | $ | 582,636  |   | $ | 367,431  |  

On July 21, 2009, the Company borrowed $75,000 from a lender.
The note bore interest at 10% per year and had a term of 56 days. The note was
collateralized by 3,000,000 shares of common stock which were returned and
cancelled upon repayment of the note. In connection with the loan, the Company
issued 1,000,000 shares of common stock and warrants to purchase 250,000 shares
of common stock at an exercise price of $0.50 per share and warrants to purchase
250,000 shares of common stock at an exercise price of $1.25. The warrants have
a term of two years. The Company evaluated the warrants under current accounting
pronouncements and determined that they were properly classified as equity on
the balance sheet. The warrants were valued using the Black-Scholes option
pricing model with the following assumptions:

Stock price on the measurement date
    $ 0.14Risk-free interest rate
    0.96 %Dividend yield
    0 %Volatility factor
    86 %Expected life (years)
    2


The common stock was valued based on the trading price of the
stock on the date of issuance. The relative fair value of the common stock and
warrants was determined to be $46,752 and $2,275, respectively. This resulted in
a total discount of $49,027 which was recorded as a discount on the debt and an
increase in additional paid in capital. This discount was amortized over the
life of the loan. The loan was repaid in September 2009 with the proceeds from
the issuance of the note described below.

54

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On September 23, 2009, the Company borrowed $75,000 from a
lender. The note bears interest at 5% per year and has a term of 90 days. In
connection with the loan, the Company issued 500,000 shares of common stock to
the lender. The shares were valued based on the market value of the stock on the
date of issuance. The relative fair value of the note and the common stock was
determined to be $46,778 and $28,222, respectively. As a result, the Company
recorded a discount of $28,222 with a corresponding increase in equity. On
December 23, 2009, ESP entered into an agreement with the lender whereby the
maturity date of the December 23, 2009 note extended to February 21, 2010 and in
which the interest rate on the outstanding principal balance did not change. In
addition, the Company agreed to issue the holder 200,000 shares of the Companys
common stock. The shares were valued based on the market value of the stock on
the date of issuance. ESP evaluated the application of, ASC 470-50-40/55
(formerly EITF 96-19) Debtors Accounting for a Modification or Exchange of
Debt Instruments and concluded that the revised terms constituted a debt
modification rather than a debt extinguishment and accordingly, the relative
fair value of the common stock on the September 23, 2009 note of $28,222 has
been treated as interest expense in the accompanying income statement. As a
result, the Company also recorded a discount of $57,600 with a corresponding
increase in equity for the December 23, 2009 note. The discount is being
amortized over the life of the note. On February 1, 2010, the Company issued
2,180,000 shares of common stock in connection with the extinguishment of the VM
Consulting Debt for $76,300 in principal and interest. See Note 13.

Maturities are as follows:

2010
    $
    325,1702011
    
    401,7462012
    
    152,9772013
    
    261,016thereafter
    
    29,897


Note 8  Income taxes

The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities at December 31, 2009
and 2008 are as follows:

2009
    
    
    2008Deferred tax assets:
    $
    935,000
    
    $
    185,000Valuation Asset
    
    (935,000
    )
    $
    (185,000
    )Total Deferred Tax Asset
    $
    -
    
    $
    -


As of December 31, 2009, the Company has a net operating loss
carry forward of approximately $2,600,000 available to offset future taxable
income through 2029. The valuation allowance was $185,000 and $935,000 at
December 31, 2008 and 2009. The net change in the valuation allowance for the
year ended December 31, 2008 and 2009 was an increase of $27,583 and
$750,000.

Note 9  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 became due in full at December 31, 2009. The December 31, 2009 and
2008 balances are $100,000 and $58,038.This note is unsecured and has been
extended indefinitely.

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 shares of common stock to these individuals in payment for these
services. The shares have fair value of $843,030 and vest over the service
period. The Company valued the shares based on market value on the date of the
agreement, and recognized compensation expense of $843,030 for the twelve months
ended December 31, 2009. All shares are vested as of December 31, 2009.

On March 23, 2009, the Company entered into consulting
agreements with two individuals to provide services to the Company for a period
of one and a half years. The Company issued a total of 2,000,000 shares of
common stock to these individuals in payment for the services. The shares have a
fair value of $800,000 and vest over the service

55

---

period. The Company valued the shares based on market value on
the date of the agreement, and recognized compensation expense of $418,519 for
the twelve months ended December 31, 2009. The fair value of the unvested shares
is $382,482 as of December 31, 2009.

On May 26, 2009, ESP entered into a five year agreement with a
human resources company (the HR Company), to provide employment services to
screen and select qualified candidates to satisfy the manpower needs of ESP. ESP
is contractually liable to pay the HR Company $100,000 each year in stock. The
annual fee is due as a prepayment ten days after the effective date, on May 26,
2009. The number of shares to be issued to the HR Company is determined by
dividing $100,000 by the average closing trade price of the stock over the 10
trading days immediately preceding the applicable payment date. The average
trading price for the period from May 26, 2009 to June 8, 2009 was $0.240. The
number of shares to be issued to the HR Company was calculated to be 335,570.
The fair value of the vested shares is $34,023.

On July 17, 2009, the Company issued 1,500,000 shares of common
stock to each of David Dugas, the Companys president, and Chris Metcalf, the
Companys CEO. The shares were valued at $0.14 per share based on the market
value of the stock on the date of issuance. The Company recognized compensation
expense of $420,000 during the twelve months ended December 31, 2009. The shares
will vest if the individuals remain with the Company until June 1, 2010.

On July 17, 2009, the Company issued 750,000 shares of common
stock to an employee. The shares were valued at $0.14 per share based on the
market value of the stock on the date of issuance. The Company recognized
compensation expense of $105,000 during the twelve months ended December 31,
2009. The shares will vest if the employee remains with the Company until June
1, 2010.

On September 10, 2009, the Company entered into a consulting
agreement with an individual. Under the terms of the agreement, the Company
issued 150,000 shares of common stock upon signing the agreement and will make
monthly payments beginning September 30, 2009 of either (i) $5,000 in cash or
(ii) $6,000 of common stock determined by the average trading price of the stock
over the ten day trading period ending on the 30thof that month at
the Companys option. If, on the date the agreement terminates or expires, the
fair market value of the initial 150,000 shares of common stock is less than the
fair market value of the date of grant, the Company must issue such additional
number of shares of common stock to make the fair market value of all the shares
issued equal the fair market value on the date of grant. ESP Resources, Inc
evaluated the application of FAS 150, ASC 480-15Accounting for certain
financial instrument with characteristics of both liabilities and equity At
December 31, 2009, the fair market value of the initial shares was not below the
fair market value on the date of grant. The 150,000 shares of common stock were
valued at $16,500 based on the fair market value on the date of grant. This
amount was recognized as consulting expense in the twelve months ended December
31, 2009. The Company granted 40,000 shares of common stock to the
consultant for the payment of September 2009 fees. The shares were valued at
$4,360 based on the fair value of those shares on the measurement date. The
Company granted 165,767 shares of common stock to the consultant for the payment
of October, November, and December fees. The shares were valued at $17,212 based
on the fair value of those shares on the measurement date.

On December 31, 2009, the Company issued 2,000,000 shares of
common stock to David Dugas, ESP Resources Inc President, and Tony Primeaux, ESP
Petrochemicals, Inc President as a compensation for providing a personal
guarantee on the Factoring Line of Credit. The shares vest on the grant date and
ESP recognized a fair value of the stock based compensation of $280,000.

On December 31, 2009, the Company issued 200,000 shares of
common stock to a consultant as a compensation for services. The shares vest on
the grant date and ESP recognized a fair value of the stock based compensation
of $34,000.

On December 31, 2009, the Company issued 1,142,857 shares of
common to a consultant. The shares vest on the grant date and ESP recognized a
fair value of the stock based compensation of $80,000.

On July 21, 2009, the Company issued 1,000,000 shares of common
stock in connection with the issuance of debt with a relative fair value of
$49,027. On September 23, 2009 and December 23, 2009, respectively, the Company
issued 500,000 and 200,000 shares of common stock in connection with the
issuance of debt with relative fair values of $28,222 and $17,400, respectively.
See Note 7 above.

On September 16, 2009, ESP received proceeds of $40,000 from
the sale of 571,429 units in a private placement. Each unit consists of one
share of common stock, one warrant for the purchase of a share of common stock
at an

56

---

exercise price of $0.25 for a period of one year, and a warrant
for the purchase of a share of common stock at an exercise price of $1.00 for a
period of one year beginning on the first anniversary of the issuance of the
warrant. The warrants were valued using the Black-Scholes option pricing model
with the following assumptions: stock price on the measurement date of $0.10;
warrant term of 1-2 years; expected volatility of 71%; and discount rate of
0.38% - 1.01% . The proceeds were allocated as follows:

Common stock
    $
    37,736$0.25 warrant
    
    1,859$1.00 warrant
    
    405Total proceeds
    $
    40,000


In October, 2009, the Company received proceeds of $25,000 from
sales of 357,143 units in a private placement. Each unit consists of one share
of common stock, one warrant for the purchase of a share of common stock at an
exercise price of $0.25 for a period of one year, and a warrant for the purchase
of a share of common stock at an exercise price of $1.00 for a period of one
year beginning on the first anniversary of the issuance of the warrant. The
warrants were valued using the Black-Scholes option pricing model with the
following assumptions: stock price on the measurement date of $.09; warrant term
of  1-2 years; expected volatility of 69.10%; and discount rate of .38% . The
proceeds were allocated as follows:

Common stock
    $
    24,480$0.25 warrant
    
    717$1.00 warrant
    
    3Total proceeds
    $
    25,000


In November and December, 2009, the Company received proceeds
of $164,000 from sales of 2,342,808 units in a private placement. Each unit
consists of one share of common stock, one warrant for the purchase of a share
of common stock at an exercise price of $0.25 for a period of one year, and a
warrant for the purchase of a share of common stock at an exercise price of $.75
for a period of one year beginning on the first anniversary of the issuance of
the warrant The warrants were valued using the Black-Scholes option pricing
model with the following assumptions: stock price on the measurement date of
$.09-$.13; warrant term of 1-2years; expected volatility of 50.76% -59.37%; and
discount rate of .27%-.40% . The proceeds were allocated as follows:

Common stock
    $
    160,139$0.25 warrant
    
    3,831$0.75 warrant
    
    30Total proceeds
    $
    164,000


On December 31, 2009, the Company issued 5,570,032 shares of
common stock in connection with an extinguishment of related party debt for
$194,951. See Note 11.

Note 10  Capital Leases, Commitments and
Contingencies

ESP Petrochemicals leases certain offices, facilities,
equipment, and vehicles under non-cancelable operating and capital leases at
various dates through 2015.

At December 31, 2009, future minimum contractual obligations
were as follows:

Capital Leases
    
    
    Operating LeasesYear ending December 31, 2010
    $
    20,624
    
    
    105,000Year ending December 31, 2011
    
    20,624
    
    
    105,000Year ending December 31, 2012
    
    20,279
    
    
    105,000


57

---

Year ending December 31, 2013
    
      9,413
    
    
      26,250Year ending December 31, 2014
    
      18,414
    
    
      -Total minimum lease payments
    
      89,354
    
    
      341,250Less: amount representing interest
    
      (12,503
    )Present value of minimum
      lease payments
    $
      76,849


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 agreed to construct a laboratory building on the
  premises and a tank filling area and the Company 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,
2009, the Company leases these tanks on a day to day basis.

A third party has threatened the Company with a civil action
for money damages. The Company does not believe the allegations have merit, but
has accrued a liability in the amount of $115,000 at December 31, 2009 which is
the amount that management believes would be required to settle the claim.

Note 11  Related party transaction

During the years ended December 31, 2009 and 2008, DDA
Corporation LLC, which is wholly owned by the Companys president, made several
advances to the Company totaling $130,000 and $16,000, respectively. The
advances were unsecured, bore no interest, and were due on demand. On July 1,
2009, the Company issued six convertible notes evidencing the Companys
obligation to repay the advances. The notes bear interest at 5% per year and
mature on January 23, 2010.

On July 1, 2009, DDA Corporation assigned interest in those
notes to third parties. On December 31, 2009, the third parties converted those
notes in accordance with their terms and the $146,000 indebtedness in principal
and $7098 accrued interest was thereby satisfied by the issuance of 4,374,244
shares of common stock.

During the year ended December 31, 2009, Diversified
Consulting, LLC, which is wholly owned by the Companys president, advanced the
company $40,000 for the Companys expanding operations. The advance was
unsecured, bore no interest, and was due on demand. On July 1, 2009, the Company
issued a convertible promissory note to Diversified Consulting, LLC to evidence
the debt. On July 1, 2009, Diversified Consulting, LLC transferred that note to
a third party. On December 31, 2009, third party converted the promissory note
in accordance with its terms and the $41,853 indebtedness in principal and
accrued interest was thereby satisfied by the issuance of 1,195,788 shares of
common stock.

During the year ended December 31, 2009, shareholders and
management have advanced the company $370,624 for the Companys expanding
operations, and the Company repaid $21,750 in cash due to entities owned by its
President. On December 31, 2009, the third party assignees to the promissory
notes that were issued to entities owned by President elected to convert the
notes to common stock for settlement of the related party payable. The company issued 5,570,032 shares of stock valued $194,951. As
a result, the Company evaluated the terms of the notes in accordance with SFAS
No. 133, as amended, ASC 815 Accounting for Derivative Instruments and
Hedging Activities, and ASC 815EITF Issue 00-19, Accounting for
Derivative Financial Instruments to and Potentially Settled in a Companys Own
Stock. ESP Resources determined that advance from management should be
accounted as convertible note and not as a derivative instruments. ESP resources
evaluated the conversion feature under EITF 98-5 and EITF 00-27, ASC 470 and
determined that a beneficial conversion feature should be recognized and gave
rise to a debt discount of $186,000. The $186,000 in debt discounts was
accelerated and recorded as interest expense and has been treated as interest
expense in the accompanying income statement.

58

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At December 31, 2009 and 2008, the Company had balances due to
stockholders and related parties as follows:

2009
    
    
    2008Due to former shareholder
    
    -
    
    
    16,100Due to CEO
    
    216,500
    
    
    60,000Due to ESP Enterprises
    
    58,039
    
    
    100,000Due to entities owned by President
    $
    24,964
    
    $
    -


The Company accrued consulting expenses to related entity owned
by its President, Diversified Consulting, LLC. in
the amount $84,140 and $- for the year ended December 31, 2008 and 2009. The
amount is included in accrued expenses at December 31, 2008 and 2009.

On July 17, 2009, ESP entered into a three year employment
agreement with Chris Metcalf to serve as CEO of the Company. Mr. Metcalf will
receive cash compensation of $15,000 per month and normal employee benefits. In
addition, he received a one-time grant of 1,500,000 shares of common stock,
which will vest if he remains with the Company until June 1, 2010,

On July 17, 2009, ESP entered into a three year employment
agreement with David Dugas to serve as President of the Company. Mr. Dugas will
receive cash compensation of $15,000 per month and normal employee benefits. In
addition, he received a one-time grant of 1,500,000 shares of common stock,
which will vest if he remains with the Company until June 1, 2010.

On July 17, 2009, ESP entered into a three year employment agreement
  with Tony Primeaux to serve as President of ESP Petrochemicals. Mr. Primeaux
  will receive cash compensation of $10,000 per month and normal employee benefits.
  In addition, he received a one-time grant of 750,000 shares of common stock,
  which will vest if he remains with the Company until June 1, 2010.

Note 12  Guarantee liability

On November 3, 2008, ESP provided a guarantee to a director of
Aurora and Boreal who loaned $120,000 to Aurora and Boreal. ESP provided this
guarantee to encourage the directors continued employment and commitment ot the
development of the concessions held by Aurora and Boreal, which the Company
believed was vital to the future success of Aurora and Boreal. In the event that
Aurora and Boreal did not repay the loan by the due date of June 1, 2009, ESP
guaranteed to make the payment in the form of a convertible note due June 1,
2011. The convertible note is non interest bearing and is convertible into
common stock of ESP at $1.20 per share. In exchange for issuing the convertible
note to the director, ESP will receive the right to receive payments under the
directors note receivable from Aurora and Boreal. The required payments have
not been made by Aurora and Boreal. ESP has not received a demand for payment
from the lender to issue the convertible note.

In accordance with current accounting pronouncements, ESP
recorded the fair value of the guarantee liability at $48,000, which represents
the fair value of the note receivable from Aurora and Boreal which ESP would
take over from the director. The fair value of the note receivable was
determined using the face amount of the note of $120,000 reduced by a 60%
allowance consistent with ESPs other note receivable from Aurora and Boreal.
ESP recorded the corresponding receivable at the net amount of $48,000 ($120,000
face amount reduced by a $72,000 valuation allowance). This $48,000 is included
in notes receivable on the balance sheet. See further discussion in Note 5.

On June 1, 2009 when Aurora and Boreal did not make the
required payments on their notes payable to the director, ESP determined that
the value of the guarantee liability should be increased to the full face amount
of the guaranteed note of $120,000, resulting in a loss on guarantee liability
of $72,000.

Note 13  Subsequent events

In January, February, and March, 2010, The Company received
proceeds of $564,500 from sales of 8,064,287 units in a private placement. Each
unit consist of one share of common stock, one warrant for the purchase of share
of common stock at an exercise price of $.25 for a period of one year, and a
warrant for the purchase of a share of common stock at an exercise price of $.75
for a period of one year beginning on the first anniversary of the issuance

59

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of the warrant. The warrants were valued using the
Black-Scholes option pricing model with the following assumptions: stock price
on the measurement date of $.05-$.14; warrant term of 1-2 years; expected
volatility of 40.89% -46.13%; and discount rate of .33%-.51%. The proceeds were
allocated as follows

Common stock
    $
    563,174$0.25 warrant
    
    1,325$0.75 warrant
    
    1Total proceeds
    $
    564,500


The Company granted 158,506 shares of common stock to the
consultant for the payment of January, February, and March, 2010 fees. The
shares were valued and will recognize $12,822 as stock based compensation based
on the fair value of those shares on the 10 days of the month per share
average.

On February 1, 2010, the Company became obligated to issue
2,180,000 shares of common stock in connection with the extinguishment of the VM
Consulting Debt for $76,300 in principal and interest.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL 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

60

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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

During 2009, due to the expansion of the Companys operations
and geographic distance between the principal officers of the Company, the
Company implemented a more formal procedure for periodically communicating the
Companys activities to the chief executive and financial officer. The Company
proposed to conduct at least weekly conference calls to review the transactions
in which the Company and its subsidiary have participated in the previous week
and to immediately communicate of significant events. Subsequently, it was
determined that biweekly conference calls would be sufficient. The chief
executive and financial officer feels that, if followed, these additional
procedures will provide reasonable assurance that the Companys controls and
procedures will meet their objectives.

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, 2009, 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 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.

Our management, including our principal executive officer and
principal financial officer, does not expect that our disclosure controls and
procedures or our internal controls will prevent all error or fraud. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Due to the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, have been detected.

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, 2009, 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, 2009, 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.

61

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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.

|               |                                      |     | Dated             
|-------------- | ------------------------------------ | --- | ------------------
|               | Position Held                        |     | Appointed or      
|Name           | with the Company                     | Age | Elected           
|David Dugas    | President and Director               | 53  | December 29, 2008 
|Chris Metcalf  | Chief Executive Officer and Director | 40  | September 12, 2007
|Tony Primeaux  | Director                             | 54  | December 29, 2008 
|William M. Cox | Director                             | 50  | 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 31 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.

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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. 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 Sinobiomed, Inc., since March 2007.

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.

Tony Primeaux-Director

Mr. Primeaux has 33 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 27 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:

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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, 2009,, all filing
requirements applicable to our officers, directors and greater than 10% percent
beneficial owners were complied with, with the exception of the following:

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|              |                | Number of            |                
|------------- | -------------- | -------------------- | ---------------
|              |                | Transactions Not     |                
|              | Number of Late | Reported on a Timely | Failure to File
|Name          | Reports        | Basis                | Requested Forms
|Chris Metcalf | 1 (1)          | 2 (1)                | Nil            
|Scott Tyson   | 0              | Nil                  | 1 (2)          
|David Dugas   | 1(1)           | 1(4)                 | 1(4)           
|Tony Primeaux | 0              | 2(2)(4)              | 2(2)(4)        
|William Cox   | 0              | 1(2)                 | 1(2)           

|(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, did not file a Form 3  Initial Statement of
      Beneficial Ownership of Securities as required by applicable
law.     
|    |                                                                                                                                                                                                            
|(3) | The named officer, director or greater than 10%
      stockholder, as applicable, filed a late Form 4 - Statement of Changes in
      Beneficial Ownership of Securities.                                  
|    |                                                                                                                                                                                                            
|(4) | The named officer, director or greater than 10%
      stockholder, as applicable, did not file a Form 4 - Statement of Changes
      in Beneficial Ownership of Securities as required by applicable
  law.

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;                                                                                                                                                   
|   |                                                                                                                                                                                                                              
|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.

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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: ESP Resources Inc., of 1255 Lions Club Rd., Scott, LA 70503.

Nomination Process

As of December 31, 2009, 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 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

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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, 2009; 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, 2009,

who we will collectively refer to as the named executive
officers of our company for the years ended December 31, 2009 and 2008, 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
        TABLEName and Principal
        Position
      Year
      Salary
        ($)
      Bonus ($)
      Stock Awards ($)
      Option($)
      Non- EquityIncentive Plan **Compensa-** tion ($)
      Change in Pension Value
        and **Nonqualified** Deferred Compensation**Earnings** ($)
      All Other
        **Compensa** -tion ($)
      Total ($)Chris Metcalf 
        Chief Executive 
        Officer and Director (1)
      2009 
        2008 
        2007
      $180,000 
        $135,000 
        N/A
      Nil 
        Nil 
        N/A
      $210,000 
        Nil 
        N/A
      Nil 
        Nil 
        N/A
      Nil 
        Nil 
        N/A
      Nil 
        Nil 
        N/A
      Nil 
        Nil 
        N/A
      $345,000 
        $135,000 
        N/ADavid Dugas 
        President and 
        Director(1)
      2009
      $180,0000
      Nil
      $350,000
      Nil
      Nil
      Nil
      Nil
      $485,000


(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

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Executive Compensation

In addition, we have agreed to pay a monthly salary of $15,000
per month to each of Chris Metcalf and David Dugas in consideration of their
services as the president and chief executive officer of our company.

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. On
March 4, 2010 the board of directors approved the payment of 200,000 shares of
the Companys common stock to William Cox in remuneration for his services as an
independent member of the Companys board of directors.

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 AND RELATEDSTOCKHOLDER
MATTERS

The following table sets forth, as of December 31, 2009,
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.

|Name and Address of Beneficial Owner                            | Amount and Nature of Beneficial
      Ownership(1) | Percentage of Class(1)
|--------------------------------------------------------------- | -------------------------------------------------- | ----------------------
|                                                                |                                                    |                       
|Chris Metcalf c/o 1255 Lions Club RoadLafayette, LA 70598       | 3,900,000                                          | 8.63%                 
|                                                                |                                                    |                       
|David Dugas 1255 Lions Club Road
      Lafayette, LA 70598      | 3,500,000                                          | 7.75%                 
|                                                                |                                                    |                       
|Tony Primeaux 408 Kilbourne Circle
      Carencro, LA 70520     | 3,837,700                                          | 8.49%                 
|                                                                |                                                    |                       
|William Cox 1255 Lions Club Rd.
      Lafayette, LA 70503       | 247,583                                            | 0.55%                 
|                                                                |                                                    |                       
|L. Stacy Mitchell 5016 Elk Lane
      Edinburg, TX 78539        | 4,000,000                                          | 8.85%                 
|                                                                |                                                    |                       
|Directors and Executive Officers as a Group
      (two persons) | 11,485,283                                         | 25.42%                

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|(1) | Based on 45,185,295 shares of common stock issued and
      outstanding as of December 31, 2009. 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 DIRECTOR INDEPENDENCE

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, 2009,
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 had an agreement to pay a monthly salary of US$15,000 per
month to each of Chris Metcalf and David Dugas in consideration of their
services as the president and chief executive officer of our company. That oral
agreement was replaced by the employment agreement by and between the Company
and each of Mr. Metcalf and Mr. Dugas dated July 17, 2009 (see below)

We were charged $180,000 (2008: $135,000) for salaries for
Chris Metcalf, a director and officer of our company.

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 had an 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. This
agreement was replaced by the employment agreement entered into between the
Company and Mr. Dugas dated July 17, 2009 (see below). 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.

During the years ended December 31, 2009 and 2008, DDA
Corporation LLC, which is wholly owned by the Companys president, made several
advances to the Company totaling $130,000 and $16,000, respectively. The
advances were unsecured, bore no interest, and were due on demand. On July 1,
2009, the Company issued six convertible notes evidencing the Companys
obligation to repay the advances. The notes bear interest at 5% per year and
mature on January 23, 2010. On July 1, 2009, DDA Corporation assigned its
interest in those notes to various third parties. On December 31, 2009, the
third parties converted those notes in accordance with their terms and the
$146,000 indebtedness in principal and $7098 accrued interest was thereby
satisfied by the issuance of 4,374,244 shares of common stock.

69

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During the year ended December 31, 2009, Diversified
Consulting, LLC, which is wholly owned by the Companys president, advanced the
company $40,000 for the Companys expanding operations. The advance was
unsecured, bore no interest, and was due on demand. On July 1, 2009, the Company
issued a convertible promissory note to Diversified Consulting, LLC to evidence
the debt. On July 1, 2009, Diversified Consulting, LLC transferred that note to
a third party. On December 31, 2009, third party converted the promissory note
in accordance with its terms and the $41,853 indebtedness in principal and
accrued interest was thereby satisfied by the issuance of 1,195,788 shares of
common stock.

During the year ended December 31, 2009, shareholders and
management have advanced the company $370,624 for the Companys expanding
operations, and the Company repaid $21,750 in cash due to entities owned by its
President. On December 31, 2009, the third party assignees to the promissory
notes that were issued to entities owned by President elected to convert the
notes to common stock for settlement of the related
party payable. The company issued 5,570,032 shares of stock valued $194,951. As
a result, the Company recorded a discount of $186,000 with a corresponding
increase in equity and $186,000 has been treated as interest expense in the
accompanying income statement.

The Company accrued consulting expenses to related entity owned
by its President, Diversified Consulting, LLC. in the amount $84,140 and $- for
the year ended December 31, 2008 and 2009. The amount is included in accrued
expenses at December 31, 2008 and 2009.

On July 17, 2009, ESP entered into a three year employment
agreement with Chris Metcalf to serve as CEO of the Company. Mr. Metcalf will
receive cash compensation of $15,000 per month and normal employee benefits. In
addition, he received a one-time grant of 1,500,000 shares of common stock,
which will vest if he remains with the Company until June 1, 2010.

On July 17, 2009, ESP entered into a three year employment
agreement with David Dugas to serve as President of the Company. Mr. Dugas will
receive cash compensation of $15,000 per month and normal employee benefits. In
addition, he received a one-time grant of 1,500,000 shares of common stock,
which will vest if he remains with the Company until June 1, 2010.

On July 17, 2009, ESP entered into a three year employment agreement
  with Tony Primeaux to serve as President of ESP Petrochemicals. Mr. Primeaux
will receive cash compensation of $10,000 per month and normal employee
benefits. In addition, he received a one-time grant of 750,000 shares of common
stock, which will vest if he remains with the Company until June 1, 2010.

Corporate Governance

We currently act with four directors consisting of David Dugas,
Chris Metcalf, Tony Primeaux and William M. Cox. Willaim M. Cox is considered an
independent director as defined by Rule 5605(a)(2) of The NASDAQ Listing
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 MaloneBailey, LLP,
for professional services rendered for the audit of our annual financial
statements included in our annual report on Form 10-K for 2008 is $42,000 and
for 2009 is $80,000.

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Audit Related Fees

None

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 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:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | October 17, 2008, filed an 8K for: Item 1.02, Termination
      of a Material Definitive Agreement November 5, 2008,filed an 8K for: Item
      1.01 Entry into a Material Definitive Agreement, Item 2.01 Completion of
      Acquisition of Disposition of Assets, Item 9.01Agreement December 15,
      2008, filed an 8K for: Item 8.01 Other Events, Item 9.01 Letter of Intent
      December 29, 2009, filed an 8K for: Item 4.01 Changes in Registrants
      Certifying Accountant, Item 9.01 Letter January 6, 2009, filed an 8K for:
      Item 1.01 Entry into a Material Definitive Agreement, Item 2.01 Completion
      of Acquisition of Disposition of Assets, Item 5.01 Changes in Control of
      the Registrant, Item 5.02 Departure of Directors or Principal Officers;
      Election of Directors; Appointment of Officers, Item 9.01 Stock Purchase
      Agreements
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b) | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

71

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|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)         
|        |                                                                                                                                                                                                                                                      
|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)                                                                       

72

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|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)
|      |                                                                                                                                                                                                                                                                                                                     
|10.10 | Agreement dated October
        31, 2008 with Lakehills Production, Inc. and a private equity drilling
        fund (incorporated by reference from our Current Report on Form 8-K filed
        on November 5, 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 Principal Executive Officer pursuant to Rule 13a-14 or 15d-14 of the
        Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
        the Sarbanes-Oxley Act of 2002.                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                     
|31.2* | Certification
        of Principal Financial Officer pursuant to Rule 13a-14 or 15d-14 of the
        Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
        the Sarbanes-Oxley Act of 2002.                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                     
|32.1* | Certification
        of Principal Executive Officer 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 Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as
        adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                              

*Filed herewith

73

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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 MetcalfChris
MetcalfChief Executive Officer and Director(Principal Executive Officer
and PrincipalFinancial Officer)Date: April 23, 2010

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 MetcalfChris
MetcalfChief Executive Officer and Director(Principal Executive Officer
and PrincipalFinancial Officer)Date: April 23, 2010

By: /s/ David DugasDavid
DugasPresident and DirectorDate: April 23, 2010

By: /s/ Tony PrimeauxTony
PrimeauxDirectorDate: April 23, 2010

By: /s/ William M CoxWilliam M.
CoxDirectorDate: April 23, 2010

74

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