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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K /A (Amendment No. 1)

(Mark One)

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

For the fiscal year ended December 31, 2008

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

For the transition period from
[           ] to
[           ]

Commission file number 000-52506

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

|Nevada                                                         | 98-0440762                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
|                                                               |                                     
|1255 Lions Club Road, Scott, LA                                | 70583                               
|(Address of principal executive offices)                       | (Zip Code)                          

Issuers telephone number (337) 706-7056

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act during the preceding 12 months (or for such shorter period that the
issuer was required to file such reports), and (2)has been subject to such
filing requirements for the past 90 days. Yes [X]    No [ 
 ]

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

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a

smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

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

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

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

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

Documents incorporated by reference: None

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

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TABLE OF CONTENTS

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

2

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EXPLANATORY NOTE

In November 2009, we concluded that it was necessary to amend
this Annual Report on Form 10-K in order to reflect the following items:

- Revise the accounting for the reverse acquisition of Pantera by ESP
  Resources on December 29, 2008. We initially determined that Pantera did not
  qualify as a business and that the acquisition should be valued based on the
  fair value of the net assets acquired. These financial statements have been
  restated to account for the acquisition based on the fair value of the common
  stock retained by the Pantera shareholders as determined by the trading price
  of the stock. As a result, the net assets acquired have increased by
  $2,559,879 which represents the value of goodwill acquired in the
  transactions. As of December 31, 2008, the Company determined that the
  goodwill acquired in the reverse acquisition was fully impaired and it was
  written off.
- We noted that the statements of operations and cash flow for ESP
  Petrochemicals, Inc. (the continuing entity acquired in the reverse
  acquisition) had not been included in the consolidated financial statements
  for the periods prior to its acquisition by the Company.
- Provide additional discussion about the process employed by the Company to
  evaluate oil and gas properties for impairment.
- Revise our conclusions regarding the effectiveness of the design and
  operation of our companys disclosure controls and procedures as a result of
the above restatements.

The financial statements and other financial information
included in this Amendment No. 1 to the December 31, 2008 Form 10-K have been
restated accordingly. Our shareholders should no longer rely on our previously
filed financial statements for the year ended December 31, 2008. These matters
have been discussed by our authorized officers and with our independent
registered public accounting firm.

This Amendment No. 1 is stated as of the file date of the
Original Filing and does not reflect events occurring after the filing date of
the Original Filing, or modify or update the disclosures therein in any way
other than as required to reflect the amendment described above.

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.

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

Business

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

ESP Petrochemicals, Inc.

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

ESPPI acts as manufacturer, distributor and marketer of
specialty chemicals. ESPPI supplies specialty chemicals for a variety of oil
field applications including separating suspended water and other contaminants
from crude oil, pumping enhancement, and cleaning, as well as a variety of
fluids and additives used in the drilling and production process. At each
drilling site or well that is in production, there exist a number of factors
that make each site unique. These include the depth of the producing formation,
the bottom-hole temperature of the producing well, the size of the well head
through which the producing fluids flow, the size and pressure ratings of the
production equipment, including the separators, heater-treaters, compression
equipment, size of production tubulars in the wellbore, size of the storage
tanks on the customers location, and pressure ratings of the sales lines for the
oil and gas products. Wells that are operating short distances from each other
in the same field can have very different characteristics. This variance in
operating conditions, chemical makeup of the oil, and the usage of diverse
equipment requires a very specific chemical blend to be used if maximum drilling
and production well performance is to be attained.

ESPPI's goal is first, to solve the customers problem at the
well and optimize drilling or production, and secondly, the sale of product.
Typically, the ESPPI team may gather information at a well site and enter this
data into the analytical system at the companys labs in Lafayette, Louisiana.
The system provides testing parameters and reproduces conditions at the
wellhead. This allows the ESPPI chemist to design and test a new chemical blend
in a very short time. In many cases, a new blend may be in service at the well
in as little as 24 hours.

Oil and Gas Exploration

Chaco Basin Concessions: Share Purchase Agreement

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

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

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| | (iii) | the terms of repayment of any outstanding amounts to our
      company;
| | ----- | -----------------------------------------------------------------------

| | (c) | Artemis agreed to:                                                                                                                                                                                                                                                                          
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                             
| |     | (i)                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                             
| |     | (ii)                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                             
| | (d) | We agreed to issue a share purchase warrant entitling
      Artemis to purchase up to 2,600,000 shares of our common stock at an
      exercise price of $0.27 per share, with the other terms and conditions of
      the warrants to be mutually agreed upon by Artemis and our
  company.

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

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 $402,000 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,
2048 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 does not expect to 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. 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.

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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.

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

Aurora and Boreal Chaco Basin Concessions

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

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

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

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

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

Block 83 84 Joint Venture

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In addition, 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. 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. 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 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.

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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. The Company has assessed that at this time it is more probable than not
that Trius will be able to perform. There is no assurance that this will occur,
and the Company is monitoring this factor carefully and is prepared to make the
appropriate impairments should conditions change.

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 were $8.29 per thousand cubic feet in March 2008 and averaged $3.90 for
the first six months of 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 and found not to be
impaired. 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 and found the carrying value not to be
impaired. 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 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 re-entry wells,
and a 10% discount rate, applied to our 10% working interest, the same being a
7.5% net revenue interest.

Taking in totality the risks and their likelihood, at this
time, the Company assessed that it is more likely than not that impairment has
not occurred, given the stress tests on volumes and gas prices, combined with
the technical data on Sibley 84#1, the probability of payment with the insurance
coverage, and commitments from Trius Energy according to the joint venture
agreement and private placement agreement to fund to completion. If, however,
the Sibley 84#1 cannot be completed for any reason, the Project value would
likely be impaired and result in a write-off. The maximum exposure to loss would
be assessed to the carrying value of the Project.

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.

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

The Investor shall receive 100% of the cash flows on the initial well (the Initial Well) until such cash flow received exceeds the $87,190 plus interest represented by a promissory note that we executed in favor of the Investor,
which bears interest at 5% per year and is due April 30, 2009.

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. The distributions that would otherwise be
payable to us pursuant to the immediately preceding sentence shall be paid to the Investor until the aggregate of such distributions paid to the Investor totals $175,000. The first $525,000 of cash flow received by us under the transaction
documents shall be used to satisfy its obligations to certain investors under an oil and gas certificate agreement.

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.

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- 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. Due to the current condition of the
well and the uncertainty regarding its production levels, its classification
will remain as an unproven property.

Distribution Methods

ESP Petrochemicals, Inc.: ESPPI's goal is first, to
solve the customers problem at the well and optimize drilling or production,
and secondly, the sale of product. Typically, the ESPPI team may gather
information at a well site and enter this data into the analytical system at the
companys labs in Lafayette, Louisiana. The system provides testing parameters
and reproduces conditions at the wellhead. This allows the ESPPI chemist to
design and test a new chemical blend in a very short time. In many cases, a new
blend may be in service at the well in as little as 24 hours.

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

This unique process shortens the chemical development time
frame from what might have been as long as two months or more to a few days or
hours. The exceptional service, response times and chemical products that the
ESPPI team is able to provide its customers is a differentiating factor within
the industry.

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

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

Competition

ESP Petrochemicals, Inc.: Currently, the market
distribution is shared by very few large participants, namely, Baker Petrolite,
Nalco, and Champion Technologies, Inc. There are several small to medium sized
businesses that are regionally located. The area of biggest growth in the
Specialty Chemical market is in the area of Production Treatment Chemicals. To
be competitive in the industry, ESPPI will continually enhance and update its
technology. ESPPI has allocated funds to research and development of new
technologies to maintain the efficacy of its technology and its ability to
compete so it can continue to grow its business.

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

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

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Additionally, new companies are constantly entering the market. This growth and fragmentation could also have a negative impact on ESPPIs ability to obtain additional market share. Larger companies which have been engaged in this business for
substantially longer periods of time may have access to greater financial and other resources. These companies may have greater success in recruiting and retaining qualified employees and in specialty chemical manufacturing and marketing, which may
give them a competitive advantage.

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

Licenses, concessions, royalty agreements or labor contracts

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

Government Approval and Regulation

We, together with ESPPI, are subject to federal, state and local environmental laws, rules, regulations, and ordinances, including those concerning emissions and discharges, and the generation, handling, storage, transportation, treatment, disposal
and import and export of hazardous materials. We do not anticipate having to expend significant resources to comply with any governmental regulations applicable to our operations.

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

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

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

Costs and Effects of Compliance with Environmental Laws

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

There can be no assurance that past or future operations will not result in the Company incurring material environmental liabilities and costs or that compliance with Environmental Laws will not require material capital expenditures by the Company,
each of which could have a material adverse effect on the Company's results of operations and financial condition.

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

Number of Employees

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

ITEM 1A. RISK FACTORS

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

RISKS RELATED TO OUR 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 $115,283 for the year ended December 31,
2008. As of December 31, 2008, we had a working capital deficit of $106,792. We do not expect positive cash flow from operations in the near term. There is no assurance that actual cash requirements will not exceed our estimates. In particular,
additional capital may be required in the event that costs increase beyond our expectations, such as drilling and completion costs, or we encounter greater costs associated with general and administrative expenses or offering costs.

The occurrence of any of the aforementioned events could adversely affect our ability to meet our business plans. If adequate additional financing is not available on reasonable terms, we may not be able to fund our future operations and we would
have to modify our business plans accordingly. There is no assurance that additional financing will be available to us.

We will depend almost exclusively on outside capital to pay for the continued exploration and development of our properties. Such outside capital may include the sale of additional stock and/or commercial borrowing. Capital may not continue to be
available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or
rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. The issuance of additional equity securities by us
would result 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, 2008, we have incurred aggregate losses of $530,020. Our net loss for the year ended December 31, 2008 was $115,283. There is no assurance that we will operate profitably or will generate positive cash
flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the general economic cycle, the market price of oil and gas and exploration and
development costs. If we cannot generate positive cash flows in the future, or raise sufficient financing to continue our normal operations, then we may be forced to scale down or even close our operations.

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

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

We have limited history of revenues from operations. Our wholly owned petrochemicals business, ESP Petrochemicals, Inc., was formed in November 2006 and began operations in February 2007 and has limited operating history. Accordingly, our business
has very limited operating results and therefore it is impossible for an investor to assess the performance of the company or to determine whether the company will ever become profitable. We have yet to generate positive earnings and there can be no
assurance that we will ever operate profitably.

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

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

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

Our specialty chemical business will be dependent on the oil and gas industry which has historically been volatile and could negatively affect our results of operations.

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

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

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

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

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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.

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.

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

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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.

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

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

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

---

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

There are no unresolved staff comments.

ITEM 2. PROPERTIES

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

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

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

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

Aurora has acquired the rights to concessions in northern
Paraguay consisting of three tracts: Tagua, Toro, and Cerro Cabrera. They are
located in the eastern extensions of the Chaco Basin, where, in Bolivia and
Argentina, significant reserves of gas, oil and condensate have been discovered.
The Chaco Basin extends across Paraguay, Bolivia and Argentina, and in Paraguay
, the Chaco Basin is composed of two Sub-Basins, the Curupayty and
Carandayty Sub-Basins. The sources for most of the known hydrocarbons in the
Chaco Basin are the Devonian Los Monos and Silurian Kirusillas shales. Both are
mixed oil and gas prone source rocks. The amalgamated fans and channel
sandstones of the Carboniferous Tarija and Tupambi formations are the main
producing reservoirs in the Chaco Basin. The Tagua tract, approximately 116
square miles in area, is located in the Carandayty Sub-Basin on the border with
Bolivia. It is approximately 12 miles from a Paraguayan well (Mendoza 1-R) that
tested gas from two zones and approximately 68 miles from the nearest producing
field in Bolivia. The Toro tract, approximately 927 square miles in area, is
located in the Curupayty Sub-Basin in north central Paraguay. The Cerro Cabrera
Block, approximately 1,996 square miles in area, is located in northern Paraguay
on the Bolivian border. It is located directly across the Izozog High from the
Mendoza 1-R and approximately 149 miles from the nearest producing fields in
Bolivia. Aurora entered into a Concession Contract with the government of
Paraguay on March 2, 2007. This Concession Contract is assigned Law Number
3,551, dated July 16, 2008, having been duly ratified by the Congress of
Paraguay and signed by President Nicanor Duarte Frutos. The Concession area for
Exploration is located and delimited by the following geographic coordinates:

TORO BLOCK

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

Approximate area: 593,053 acres.

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TAGUA BLOCK

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

Approximate area: 74,132 acres.

BLOCK: CERRO CABRERA

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

Approximate area: 1,277,535 acres.

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

PANTERA BLOCK

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

Approximate area: 741,316 acres.

BAHIA NEGRA BLOCK

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

Approximate area: 1,186,106 acres.

ITEM 3. LEGAL PROCEEDINGS

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

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

None.

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, 2008
      $0.17
      $0.03September 30, 2008
      $0.48
      $0.12June 30, 2008
      $0.77
      $0.35March 31, 2008
      $1.55
      $0.40December 31, 2007 (2)
      $1.99
      $1.05September 30, 2007
      N/A
      N/AJune 30, 2007
      N/A
      N/AMarch 31, 2007
      N/A
      N/A


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

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

Dividend Policy

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

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

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

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

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

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

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

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| | ii) | thereafter, on the condition the private placement closes
      $2,500,000 in total proceeds in aggregate, the subscriber shall receive 8%
      of the Companys net revenue interests in the Property pro rata based on
      the percentage of the amount subscribed as compared to the total proceeds
      in aggregate of the private placement,
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equity Compensation Plan Information

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

Purchases of Equity Securities by the Issuer and Affiliated
Purchasers

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

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

ITEM 6. SELECTED FINANCIAL DATA

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

Selected Historical Data

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


(1) Information on the results of operations for the year ended
December 31, 2007 includes the combined results for the periods from January 1,
2007 through June 30, 2007 and from July 1, 2007 through December 31, 2007.

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

Cautionary Notice Regarding Forward Looking
Statements

The information contained in Item 7 contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in this
report. Although management believes that the assumptions made and expectations
reflected in the forward-looking statements are reasonable, there is no
assurance that the underlying assumptions will, in fact, prove to be correct or
that actual results will not be different from expectations expressed in this
report.

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

---

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

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

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

Overview

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

Result of Operations

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

The following table summarizes the results of our operations
during year ended December 31, 2008 and the periods from July 1, 2007 through
December 31, 2007 and January 1, 2007 through June 30, 2007, and provides
information regarding the dollar and percentage increase or (decrease) from the
year ended December 31, 2008 to the year ended December 31, 2007, computed by
combining the results for the periods from July 1, 2007 through December 31,
2007 and January 1, 2007 through June 30, 2007.

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
transaction closing date was June 15, 2007, however for accounting purposes we
designated the accounting closing date as June 30, 2007. The financial
statements for the period prior to the reverse acquisition (January 1, 2007
through June 30, 2007) and after the reverse acquisition (July 1, 2007 through
December 31, 2007) were audited by two different independent registered public
accounting firms. Therefore, the financial statements are presented separately
rather than as a single set of financial statements. The accompanying financial
statements for the period from January 1, 2007 through June 30, 2007 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 2007 represent the results of operations
and cash flows for the continuing operations of ESP Petrochemicals, Inc. As a
result, it is most meaningful to compare the results for the year ended December
31, 2008 to the combined results for the periods from January 1, 2007 through
June 30, 2007 and from July 1, 2007 through December 31, 2007, because it
results in a comparison of a full year of results for the continuing entity for
each annual period.

July 1, 2007Year Ended
      
      
      through
      
      
      January 1, 2007December 31,
      
      
      December 31,
      
      
      through
      
      
      Increase
      
      
      % Increase2008
      
      
      2007
      
      
      June 30, 2008
      
      
      (Decrease)
      
      
      (Decrease)(Restated)
      
      
      (Restated)
      
      
      (Restated)Revenue
      $
      1,977,861
      
      $
      697,122
      
      $
      473,050
      
      $
      807,689
      
      
      69%Cost of Goods Sold
      
      1,223,356
      
      
      644,985
      
      
      235,925
      
      
      342,446
      
      
      39%Gross Profit
      
      754,505
      
      
      52,137
      
      
      237,125
      
      
      465,243
      
      
      161%Total General andGeneral and
        administrative expenses
      
      802,501
      
      
      428,897
      
      
      218,237
      
      
      155,367
      
      
      24%Depreciation
      
      25,858
      
      
      -
      
      
      28,537
      
      
      (2,679
      )
      
      (9)%Impairment of
        goodwill
      
      2,559,879
      
      
      -
      
      
      
      
      
      2,559,879
      
      
      N/ALoss (gain) on sale of assets
      
      (31,517
      )
      
      429
      
      
      -
      
      
      31,946
      
      
      7,447%Loss from Operations
      
      (2,602,216
      )
      
      (377,189
      )
      
      (9,649
      )
      
      (2,215,378
      )
      
      (573)%Total Other
        Income (expense)
      
      (72,946
      )
      
      (35,123
      )
      
      (2,795
      )
      
      35,028
      
      
      92%Net loss
      $
      (2,675,162
      )
      $
      (412,312
      )
      
      (12,444
      )
      
      (2,250,406
      )
      
      (530)%


---

Revenues

Sales revenue increased from
$1,170,172 for the year ended December 31, 2007 to $1,977,861 for the same
period of 2008, an increase of $807,689. The increase was due to several
factors. We commenced operations of ESPPI during the second quarter of 2007;
therefore, we did not have a full year of operations in ESPPI in 2007. The
customer base of ESPPI expanded during 2008 due to increased sales coverage in
the Southern Louisiana and East Texas regions. ESPPI increased sales volume to
several of our existing customers through supply of additional petrochemical
products at the customer wellsites in 2008.

Cost of goods sold and gross profit

Cost of goods sold for the year
ended December 31, 2008 was $1,223,356, an increase of $342,446 or 39% compared
to $880,910 over the same period in 2007. The increase in cost of goods sold for
the year ended December 31, 2008 as compared to that of 2007 was a result of the
increased sales revenue for 2008 and the fact that ESPPI did not commence
operations until the second quarter of 2007.

Our gross profit increased
$465,243, or 161%, to $754,505 for the year ended December 31, 2008 from
$289,262 during the same period in 2007. Gross profit as a percentage of revenue
was 38% for the year ended December 31, 2008, an increase of 14% from 24% during
the same period in 2007. Such increase was mainly contributed by economies of
increased purchases of raw materials on a per unit basis used in our blending
operations and a greater efficiency in the service of our company delivery team
resulting in a reduction in our service delivery cost.

General and Administrative

General and administrative
expenses increased from $647,134 in the year ended December 31, 2007 to $802,501
in the same period of 2008, representing an increase of $155,367 or 24%. The
increase in general and administrative expenses in the year ended December 31,
2008 compared to that of 2007 was primarily due to the increase in staff, an
increase in facility rental cost as ESPPI moved into a larger rental facility in
2008 to accommodate the increase in sales and staff, an increase in travel costs
associated with expansion of our customer base and direct sales efforts and the
fact that ESPPI did not commence operations until the second quarter of 2007.

Net loss

Net loss for the year ended
December 31, 2008 was $(2,675,162), representing an increase of $2,250,406
compared to a loss of $(424,756) for the same period in 2007. The increase is
primarily related to the increase in the impairment of goodwill in the amount of
$2,559,879 during the year ended December 31, 2008.

Liquidity and Capital Resources

Cash

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

Cash Flow

The cash flow for the year ended December 31, 2007 includes the
combined cash flows for the period from January 1, 2007 through June 30, 2007
and for the period from July 1, 2007 through December 31, 2007.

Year EndedDecember 31,2008
      
      
      2007(Restated)
      
      
      (Restated)Net cash used in operating activities
      $
      (233,829
      )
      $
      (475,954
      )Net cash used in investing activities
      $
      (4,626
      )
      $
      (98,515
      )Net cash provided by financing activities
      $
      132,999
      
      $
      706,380Net increase (decrease)
        in cash
      $
      (105,456
      )
      $
      131,913


Cash outflows from operations
during the year ended December 31, 2008 amounted to $233,829 as compared to net
cash outflows from operations of $475,954 in the same period of 2007. The
decrease in cash outflow was due primarily to the decrease in net loss and
increase in accounts payable.

Our cash outflows used in
investing activities during the year ended December 31, 2008 amounted to $4,626
as compared to $98,515 in the same period of 2007. Cash outflows for the change
in restricted cash decreased from $17,855 for the year ended December 31, 2008
to $5,221 for the same period of 2007. In addition, cash received from mergers
increased from $7,924 in 2007 to $13,260 in 2008.

Our cash inflows from financing
activities amounted to $132,999 in the year ended December 31, 2008 as compared
to $706,380 in the same period of 2007. During the year ended December 31, 2007,
we received a loan from an investor in the amount of $700,000.

---

Working Capital

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

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

Cash Requirements

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

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

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

We incurred a net loss of $2,675,162 for the year ended December 31, 2008. As indicated above, we anticipate that our projected operating expenses for the next twelve months will be $3,420,000. We will be
required to raise additional funds through the issuance of equity securities or through debt financing in order to carry-out our plan of operations for the next twelve month period. There can be no assurance that we will be successful in raising the
required capital or that actual cash requirements will not exceed our estimates.

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

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

Going Concern

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

We have historically incurred losses, and through December 31, 2008 have incurred losses of $(3,089,899) since our inception. Because of these historical losses, we will require additional working capital to develop our business operations. We
intend to raise additional working capital through private placements, public offerings, bank financing and/or advances from related parties or shareholder loans.

Our investments in Aurora Petroleos SA, Boreal Petroleos SA, our joint venture with Trius Energy, LLC are dependent on the efforts of others for the development of well sites and the generation of cash flow. There is no  guaranty that those
investments will not suffer material setbacks
or will ever become productive. For example, the Block 83 84 Project JV that is under the joint venture with Trius Energy, LLC experienced a well-head blowout on November 12, 2008, which has delayed the development of that well. If the parties
responsible for the development of such projects are unsuccessful in the development of those properties, the Company will lose its investments in those projects

---

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

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

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

Subsequent Events

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

Off-Balance Sheet Arrangements

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

Application of Critical Accounting Policies

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

Basic and Diluted Loss Per Share

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

Inventory

Inventory represents raw and blended chemicals and other items valued at the lower of cost or market with cost determined using the first-in first-out method, and with market defined as the lower of replacement cost or realizable value.

Property and equipment

Property and equipment of the Company is stated at cost. Expenditures for property and equipment which substantially increase the useful lives of existing assets are capitalized at cost and depreciated. Routine expenditures for repairs and
maintenance are expensed as incurred.

Depreciation is provided principally on the straight-line method over the estimated useful lives ranging from five to seven years for financial reporting purposes.

Investments

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

---

Oil and Gas Properties

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

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

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

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

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

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

Asset Retirement Obligations

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

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

Environmental Costs

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

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

Financial Instruments

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

Recent Accounting Pronouncements

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

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

---

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

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment ofFASB Statement No. 133" (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring
enhanced disclosures of an entity's derivative instruments and hedging activities and their effects on the entity's financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) as well as related hedged items, bifurcated derivatives, and non-derivative instruments that are designated and qualify as hedging instruments.

Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement.

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

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

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

---

ITEM 7A. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA

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

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

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

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors ESP Resources, Inc. 
  Scott, Louisiana

We have audited the accompanying consolidated balance sheet of
ESP Resources, Inc. (the Company) as of December 31, 2008, and the
consolidated statements of operations, stockholders deficit, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2008, and the results of its operations and its cash flows
for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, The Company has
incurred losses through December 31, 2008 and at December 31, 2008 had negative
working capital. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to this
matter are also described in Note 2. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

As discussed in Note 15 to the financial statements, errors in
accounting and presentation for previously filed financial statements were
discovered by management and adjustments have been made to correct those errors.

/s/MaloneBailey, LLP 
  www.malone-bailey.com 
  Houston,
Texas 
April 15, 2009 except for 
Note 15 which is dated March 3, 2010

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors 
  ESP Resources, Inc. 
Scott, Louisiana

We have audited the accompanying statements of operations,
stockholders deficit, and cash flows of ESP Petrochemicals, Inc. for the period
from January 1, 2007 to June 30, 2007. These statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on
these statements based on our audit.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the results of the Companys
operations and its cash flows for the period from January 1, 2007 to June 30,
2007, in conformity with accounting principles generally accepted in the United
States of America.

As discussed in Note 15 to the financial statements, errors in
accounting and presentation for previously filed financial statements were
discovered by management and adjustments have been made to correct those errors.

/s/MaloneBailey, LLP 
  www.malone-bailey.com 
  Houston,
Texas 
March 3, 2010

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheet of
ESP Resources, Inc. and Subsidiary (the Company) as of December 31, 2007, and
the related consolidated statement of operations, changes in stockholders
deficit and cash flow for the period July 1, 2007 to December 31, 2007
(Restated). These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly in all material respects, the financial position of ESP
Resources, Inc. as of December 31, 2007 and the results of its operations and
its cash flows for the period July 1, 2007 to December 31, 2007 (Restated) in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note B to the consolidated financial statements, the Company has a
net loss of $412,312, a negative cash flow from operations of $407,112, a
working capital deficiency of $121,696 and a stockholders' deficiency of
$412,737. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

WEBB & COMPANY, P.A. Certified Public Accountants

Boynton Beach, Florida 
  April 7, 2009, except for Note 15,
to which 
the date is March 3, 2010

---

ESP Resources, Inc.Consolidated Balance SheetsDecember 31, 2008

|ASSETS                                                                      |   |            |   |   |           |  
|--------------------------------------------------------------------------- | - | ---------- | - | - | --------- | -
|                                                                            |   | 2008       |   |   | 2007      |  
|                                                                            |   | (Restated) |   |   |           |  
|CURRENT ASSETS                                                              |   |            |   |   |           |  
|Cash and cash equivalents                                                   | $ | 27,367     |   | $ | 132,823   |  
|Accounts receivable, net                                                    |   | 450,882    |   |   | 185,804   |  
|Inventories, net                                                            |   | 221,575    |   |   | 147,015   |  
|Prepaid expenses and other
      current assets                             |   | 101,904    |   |   | 5,224     |  
|                                                                            |   |            |   |   |           |  
|Total current assets                                                        |   | 801,728    |   |   | 470,866   |  
|                                                                            |   |            |   |   |           |  
|Property and equipment, net                                                 |   | 285,293    |   |   | 301,267   |  
|Oil and gas properties, unproven                                            |   | 1,067,381  |   |   | -         |  
|Note receivable, net of allowance of
      $402,000 and $-, respectively    |   | 278,371    |   |   | -         |  
|Other assets                                                                |   | 74,326     |   |   | 41,358    |  
|                                                                            |   |            |   |   |           |  
|TOTAL ASSETS                                                                | $ | 2,507,099  |   | $ | 813,491   |  
|                                                                            |   |            |   |   |           |  
|                                                                            |   |            |   |   |           |  
|LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)                        |   |            |   |   |           |  
|                                                                            |   |            |   |   |           |  
|CURRENT LIABILITIES                                                         |   |            |   |   |           |  
|Accounts payable                                                            | $ | 279,522    |   | $ | 112,749   |  
|Factoring payable                                                           |   | 226,868    |   |   | 165,146   |  
|Accrued expenses                                                            |   | 106,446    |   |   | 13,447    |  
|Due to related parties                                                      |   | 76,100     |   |   | 100       |  
|Current maturities of long-term debt                                        |   | 219,584    |   |   | 57,728    |  
|                                                                            |   |            |   |   |           |  
|Total current liabilities                                                   |   | 908,520    |   |   | 349,170   |  
|                                                                            |   |            |   |   |           |  
|Loan from investor                                                          |   | 100,000    |   |   | 700,000   |  
|Long-term debt (less current
      maturities)                              |   | 367,431    |   |   | 177,058   |  
|Capital lease obligations                                                   |   | 35,829     |   |   | -         |  
|Deferred lease cost                                                         |   | 37,000     |   |   | -         |  
|                                                                            |   |            |   |   |           |  
|Total liabilities                                                           |   | 1,448,780  |   |   | 1,226,228 |  
|                                                                            |   |            |   |   |           |  
|STOCKHOLDERS' EQUITY (DEFICIT)                                              |   |            |   |   |           |  
|Common stock - $0.001 par value;
      1,200,000,000 shares authorized,     |   |            |   |   |           |  
|19,206,429
      and 14,634,146 shares issued and outstanding, respectively |   | 19,206     |   |   | 14,634    |  
|Additional paid-in capital                                                  |   | 4,130,012  |   |   | (11,634   | )
|Subscription receivable                                                     |   | (1,000     | ) |   | (1,000    | )
|Accumulated deficit                                                         |   | (3,089,899 | ) |   | (414,737  | )
|Total stockholders' equity (deficit)                                        |   | 1,058,319  |   |   | (412,737  | )
|                                                                            |   |            |   |   |           |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)                  | $ | 2,507,099  |   | $ | 813,491   |  

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

---

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

|                                       |   |                    |   |   | For the period    |   |   |                     |  
|-------------------------------------- | - | ------------------ | - | - | ----------------- | - | - | ------------------- | -
|                                       |   |                    |   |   | from July 1, 2007 |   |   | For the period from |  
|                                       |   |                    |   |   | through           |   |   | January 1, 2007     |  
|                                       |   | For the year ended |   |   | December 31,      |   |   | through June 30,    |  
|                                       |   | December 31, 2008  |   |   | 2007              |   |   | 2007                |  
|                                       |   | (Restated)         |   |   | (Restated)        |   |   | (Restated)          |  
|                                       |   |                    |   |   |                   |   |   |                     |  
|SALES, NET                             | $ | 1,977,861          |   | $ | 697,122           |   | $ | 473,050             |  
|COST OF GOODS SOLD                     |   | 1,223,356          |   |   | 644,985           |   |   | 235,925             |  
|                                       |   |                    |   |   |                   |   |   |                     |  
|GROSS PROFIT                           |   | 754,505            |   |   | 52,137            |   |   | 237,125             |  
|                                       |   |                    |   |   |                   |   |   |                     |  
|General and administrative             |   | 802,501            |   |   | 428,897           |   |   | 218,237             |  
|Depreciation                           |   | 25,858             |   |   | -                 |   |   | 28,537              |  
|Impairment of goodwill                 |   | 2,559,879          |   |   | -                 |   |   | -                   |  
|Loss (gain) on sale of assets          |   | (31,517            | ) |   | 429               |   |   | -                   |  
|                                       |   |                    |   |   |                   |   |   |                     |  
|LOSS FROM OPERATIONS                   |   | (2,602,216         | ) |   | (377,189          | ) |   | (9,649              | )
|                                       |   |                    |   |   |                   |   |   |                     |  
|OTHER INCOME (EXPENSES)                |   |                    |   |   |                   |   |   |                     |  
|Interest Expense                       |   | (14,985            | ) |   | (4,920            | ) |   | (4,696              | )
|Factoring Fees                         |   | (57,038            | ) |   | (29,979           | ) |   | -                   |  
|Interest Income                        |   | 433                |   |   | 37                |   |   | -                   |  
|Other income (expense)                 |   | (1,356             | ) |   | (261              | ) |   | 1,901               |  
|Total Other Income
      (Expenses)    |   | (72,946            | ) |   | (35,123           | ) |   | (2,795              | )
|                                       |   |                    |   |   |                   |   |   |                     |  
|NET LOSS                               | $ | (2,675,162         | ) | $ | (412,312          | ) | $ | (12,444             | )
|                                       |   |                    |   |   |                   |   |   |                     |  
|NET LOSS PER SHARE  Basic and diluted | $ | (0.18              | ) | $ | (0.03             | ) |   |                     |  
|                                       |   |                    |   |   |                   |   |   |                     |  
|WEIGHTED AVERAGE SHARES OUTSTANDING -  |   |                    |   |   |                   |   |   |                     |  
|Basic and diluted                      |   | 14,792,007         |   |   | 12,859,338        |   |   |                     |  

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

---

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

AdditionalCommon
        Stock
      
      
      Paid-in
      
      
      Subscription
      
      
      AccumulatedNumber *
      
      
      Par
      
      
      Capital
      
      
      Receivable
      
      
      Deficit
      
      
      TotalValueBalance at January 1, 2007 (restated)
      
      3,902,439
      
      $
      3,902
      
      $
      (2,902
      )
      $
      (1,000
      )
      $
      -
      
      $
      -Reverse acquisition of ESP Resources
      
      10,731,707
      
      
      10,732
      
      
      (8,732
      )
      
      -
      
      
      10,019
      
      
      12,019Net loss (restated)
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (12,444
      )
      
      (12,444
      )Balance at June 30, 2007 (restated)
      
      14,634,146
      
      
      14,634
      
      
      (11,634
      )
      
      (1,000
      )
      
      (2,425
      )
      
      (425
      )Net loss for the period (restated)
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (412,312
      )
      
      (412,312
      )Balance, December 31, 2007 (restated)
      
      14,634,146
      
      
      14,634
      
      
      (11,634
      )
      
      (1,000
      )
      
      (414,737
      )
      
      (412,737
      )Forgiveness of note payable to related 
               party
      
      -
      
      
      -
      
      
      685,000
      
      
      -
      
      
      -
      
      
      685,000Shares retained by Pantera 
              
        shareholders in reverse merger
      
      4,572,283
      
      
      4,572
      
      
      3,456,646
      
      
      -
      
      
      -
      
      
      3,461,218Net loss for period (restated)
      
      -
      
      
      -
      
      
      -
      
      
      
      
      
      (2,675,162
      )
      
      (2,675,162
      )Balance, December 31, 2008 (Restated)
      
      19,206,429
      
      $
      19,206
      
      $
      4,130,012
      
      $
      (1,000
      )
      $
      (3,089,899
      )
      $
      1,058,319


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

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

---

ESP Resources, Inc.Consolidated Statements of
Cash Flow

|                                                                                 |   |                    |   |   |                     |   |   | For the period   |  
|-------------------------------------------------------------------------------- | - | ------------------ | - | - | ------------------- | - | - | ---------------- | -
|                                                                                 |   |                    |   |   | For the period from |   |   | January 1, 2007  |  
|                                                                                 |   | For the year ended |   |   | July 1, 2007 to     |   |   | through June 30, |  
|                                                                                 |   | December 31, 2008  |   |   | December 31, 2007   |   |   | 2007             |  
|                                                                                 |   | (Restated)         |   |   | (Restated)          |   |   | (Restated)       |  
|CASH FLOW FROM OPERATING ACTIVITIES                                              |   |                    |   |   |                     |   |   |                  |  
|Net loss                                                                         | $ | (2,675,162         | ) | $ | (412,312            | ) | $ | (12,444          | )
|Adjustments to reconcile net loss to net
      cash used by operating activities |   |                    |   |   |                     |   |   |                  |  
|Impairment of goodwill                                                           |   | 2,559,879          |   |   | -                   |   |   | -                |  
|Depreciation                                                                     |   | 78,715             |   |   | 39,208              |   |   | 28,537           |  
|Allowance for uncollectible accounts                                             |   | -                  |   |   | 65,243              |   |   | -                |  
|Loss on disposal of fixed
      assets                                           |   | 31,517             |   |   | 429                 |   |   | -                |  
|Write off of related party receivable                                            |   | (30,000            | ) |   | -                   |   |   | -                |  
|Change in operating assets and
      liabilities:                                |   |                    |   |   |                     |   |   | -                |  
|Accounts
      receivable                                                        |   | (265,445           | ) |   | 80,856              |   |   | (237,876         | )
|Accounts receivable related parties                                             |   | -                  |   |   | -                   |   |   | (94,027          | )
|Inventory                                                                        |   | (74,560            | ) |   | (96,896             | ) |   | (50,121          | )
|Prepaid expenses                                                                 |   | (79,068            | ) |   | 7,946               |   |   | 17,439           |  
|Other assets                                                                     |   | (5,747             | ) |   | -                   |   |   | (21,381          | )
|Accounts payable                                                                 |   | 125,328            |   |   | (68,682             | ) |   | 56,749           |  
|Accounts payable
      related parties                                          |   | -                  |   |   | -                   |   |   | 208,105          |  
|Accrued expenses                                                                 |   | 84,068             |   |   | (22,906             | ) |   | 36,179           |  
|Accrued expenses 
      related parties                                         |   | 16,646             |   |   | -                   |   |   | -                |  
|Net cash used in operating activities                                            |   | (233,829           | ) |   | (407,114            | ) |   | (68,840          | )
|                                                                                 |   |                    |   |   |                     |   |   |                  |  
|CASH FLOW FROM INVESTING ACTIVITIES                                              |   |                    |   |   |                     |   |   |                  |  
|Cash received from merger, net                                                   |   | 13,260             |   |   | 7,924               |   |   | -                |  
|Restricted cash                                                                  |   | (5,221             | ) |   | (17,855             | ) |   | -                |  
|Purchase of property and equipment                                               |   | (12,665            | ) |   | (15,447             | ) |   | (73,137          | )
|Net cash used in investing activities                                            |   | (4,626             | ) |   | (25,378             | ) |   | (73,137          | )
|                                                                                 |   |                    |   |   |                     |   |   |                  |  
|CASH FLOW FROM FINANCING ACTIVITIES                                              |   |                    |   |   |                     |   |   |                  |  
|Bank overdraft                                                                   |   | -                  |   |   | (9,048              | ) |   | 1,624            |  
|Proceeds from issuance of
      common stock                                     |   | -                  |   |   | 2,000               |   |   | -                |  
|Net borrowing on factoring line of credit                                        |   | 61,722             |   |   | -                   |   |   | 160,754          |  
|Borrowing on notes payable                                                       |   | 76,432             |   |   | -                   |   |   | -                |  
|Repayment of notes payable                                                       |   | (90,155            | ) |   | (93,699             | ) |   | (47,401          | )
|Loan from investor                                                               |   | 85,000             |   |   | 700,000             |   |   | 27,000           |  
|Loan payable  related party                                                     |   | -                  |   |   | (34,042             | ) |   | -                |  
|Due from officers                                                                |   | -                  |   |   | -                   |   |   | (808             | )
|Net cash provided by financing activities                                        |   | 132,999            |   |   | 565,211             |   |   | 141,169          |  
|                                                                                 |   |                    |   |   |                     |   |   |                  |  
|Net increase (decrease) in cash during the period                                |   | (105,456           | ) |   | 132,721             |   |   | (808             | )
|Cash, beginning of the period                                                    |   | 132,823            |   |   | 100                 |   |   | 808              |  
|                                                                                 |   |                    |   |   |                     |   |   |                  |  
|Cash, end of the period                                                          | $ | 27,367             |   | $ | 132,821             |   | $ | -                |  
|                                                                                 |   |                    |   |   |                     |   |   |                  |  
|Non-cash investing and financing
      transactions:                             |   |                    |   |   |                     |   |   |                  |  
|Shares issued for assets in reverse merger                                       | $ | 3,461,218          |   | $ | -                   |   | $ | -                |  
|Forgiveness of debt to related
      party                                       | $ | 685,000            |   | $ | -                   |   | $ | -                |  
|Leasehold improvements                                                           | $ | 40,000             |   | $ | -                   |   | $ | -                |  
|Lease of equipment                                                               | $ | 41,591             |   | $ | -                   |   | $ | -                |  
|Notes issued for property and equipment                                          | $ | -                  |   | $ | -                   |   | $ | 280,857          |  
|Note issued for insurance                                                        | $ | -                  |   | $ | -                   |   | $ | 47,998           |  

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

---

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

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

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
transaction closing date was June 15, 2007, however for accounting purposes we
designated the accounting closing date as June 30, 2007. The financial
statements for the period prior to the reverse acquisition (January 1, 2007
through June 30, 2007) and after the reverse acquisition (July 1, 2007 through
December 31, 2007) were audited by two different independent registered public
accounting firms. Therefore, the financial statements are presented separately
rather than as a single set of financial statements. The accompanying financial
statements for the period from January 1, 2007 through June 30, 2007 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 2007 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 SFAS No. 141 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 has
reviewed the operations of ESP Nevada for the existence of intangible assets and
has determined that there are 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:

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


---

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 has estimated the fair value of this reporting
unit and has 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. 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.

Use of Estimates

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

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents. The Company had no cash equivalents at December 31, 2008 or 2007.

Accounts Receivable and Allowance for Doubtful Accounts

The Company generally does not require collateral, and the
majority of its trade receivables are unsecured. The carrying amount for
accounts receivable approximates fair value.

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

2008
      
      
      2007Trade receivables
      $
      248,690
      
      $
      185,804Trade receivable  acquisition target
      
      202,192
      
      
      -Receivable  Peak
      
      -
      
      
      65,243Less: Allowance for doubtful accounts
      
      -
      
      
      (65,243
      )Net accounts
        receivable
      $
      450,882
      
      $
      185,804


In February 2009, the Company entered into a non-binding letter
of intent (Letter of Intent) to acquire 100% of the outstanding stock of a
petrochemicals company (the Target).1Included in accounts
receivable at December 31, 2008 are amounts due from the Target 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 is not consummated these receivables will be repaid with five
percent interest. Management believes that the accounts receivable from the
Target are fully collectible.

ESP began discussions with the Target concerning a potential
acquisition of the assets and business of the Target in early July, 2008. An
approximate value of the acquisition was reviewed between the principals of the
Target and ESP along with descriptions of the assets, receivables, current
customer base, payables, debt structures, notes, and inventories of the Target.
The principals agreed that any purchase price of the Targets business would
have a cash component and a stock component of ESP stock. The principals of ESP
agreed to supply wholesale chemicals to the Target to assist the Target in
increasing their business prospects and supplying their current and potential
customer base while ESP continued the due diligence necessary to complete the
Target acquisition.

The principals of both companies agreed that any wholesale
chemicals supplied by ESP to the Target and invoiced during this period would be
deducted from the cash portion of the transaction at closing. During the period
from July 22, 2008 through December 29, 2008, ESP supplied the Target with
$202,192 of wholesale chemicals and storage equipment tanks. During this period,
the price of oil declined from $143 per barrel to below $35 per barrel. The
decline in oil product pricing caused several of the clients for the Target and
ESP to scale back their use of petrochemicals at their field locations. This event hampered
the ability of ESP to raise additional equity funds through the sale of
securities of the company. Discussions between the principals of the Target and
ESP continued and a letter of intent outlining the terms and conditions of a
purchase of the Target was executed in February 2009. At the time of signing of
the LOI, ESP anticipated the sale of company securities to raise approximately
$1,000,000 in new equity for the company. To date, we have not been successful
in the capital raise. The LOI with the Target has been extended indefinitely in
anticipation of a successful equity raise by ESP.

____________________________________ 1 The
Target is owned by a 6% shareholder of ESP who is also the cousin of one of
ESPs major shareholders.

---

ESP and the Target have agreed verbally that the purchase of
the Target business will no longer have a hard cash component, and will now
consist of all of the outstanding invoices and amounts due ESP as the cash
portion of the final negotiated purchase price plus ESP stock to fulfill the
remainder of the total purchase price. We anticipate closing the transaction
during the first quarter of 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. For the
year ended December 31, 2008 and the period from July 1, 2007 through December
31, 2007, the Company recorded a provision for doubtful accounts of $- and
$65,243, respectively.

Inventory

Inventory represents raw and blended chemicals and other items
valued at the lower of cost or market with cost determined using the first-in
first-out method, and with market defined as the lower of replacement cost or
realizable value.

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

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


Investments

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

Property and equipment

Property and equipment of the Company is stated at cost.
Expenditures for property and equipment which substantially increase the useful
lives of existing assets are capitalized at cost and depreciated. Routine
expenditures for repairs and maintenance are expensed as incurred.

Depreciation is provided principally on the straight-line
method over the estimated useful lives ranging from five to seven years for
financial reporting purposes.

Oil and Gas Properties

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

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

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

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

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

---

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

Impairment

Unevaluated properties which are excluded from amortization are
assessed at least annually to ascertain whether impairment has 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.

At December 31, 2008, the Company determined that there was no
impairment of the unevaluated unproved properties. Management determined that no
impairment of these properties existed based on the fact that these properties
were acquired in the last year, and they continue to represent viable drilling
prospects. The most significant factor which will determine the Companys
ability to extract the value from these properties is the ability to obtain
financing to drill these properties if necessary to meet a capital call to
preserve its rights, as described above. At December 31, 2008, the Company
believed that it would be able to obtain financing on commercially reasonable
terms and was exploring several financing opportunities. If the Company later
determines that financing is not available, these properties could be partially
or fully impaired at a later date.

Asset Retirement Obligations

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

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

Income Taxes

The Company uses the assets and liability method of accounting
for income taxes pursuant to SFAS No. 109 Accounting for Income Taxes. Under
the assets and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.

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

Concentrations

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

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


---

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

The Company has four major customers that together account for
83% of accounts receivable at December 31, 2007 and three major customers that
together account for 70% of the total revenues earned for the year then ended,
as follows:

AccountsReceivable
    
    
    RevenueCustomer A
    
    28%
    
    
    19%Customer B
    
    22%Customer C
    
    18%Customer D
    
    15%
    
    
    40%Customer E
    
    
    
    
    11%83%
    
    
    70%


The Company had three major customers that together accounted
for 61% of total revenues earned during the period from January 1, 2007 to June
30, 2007.

RevenueCustomer A
      
      35%Customer B
      
      15%Customer C
      
      11%61%


The Company has three vendors that together accounted for 77%
of purchases (Vendor A: 44%; Vendor B: 18%; Vendor C: 15%) for the period from
July 1, 2007 through December 31, 2007. The Company had one vendor that
accounted for 58% of purchases.

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

Revenue and Cost Recognition

The Company 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, 2008 and the period from
July 1, 2007 through December 31, 2007 was $1,117 and $196, respectively.
Advertising expense recognized by the Company for the period from January 1,
2007 to June 30, 2007 was $762.

Basic and Diluted Loss Per Share

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

---

Business Segments

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

Fair Value of Financial Instruments

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

Environmental Costs

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

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

New Accounting Standards

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

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

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

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring
enhanced disclosures of an entity's derivative instruments and hedging activities and their effects on the entity's financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) as well as related hedged items, bifurcated derivatives, and non-derivative instruments that are designated and qualify as hedging instruments.

Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement.

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

---

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

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

Note 2  Going Concern

The Company has net losses for the year ended December 31, 2008
and the period from July 1, 2007 through December 31, 2007 as well as negative
cash flows and negative working capital.

These factors raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

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

Note 3  Factoring Payable

On February 2, 2007, the Company entered into a combined
account factoring and security agreement with Midsouth Bank, which was renewed
on June 20, 2008 and expires April 30, 2009. The Company may obtain advances up
to 87 percent of eligible accounts receivable, subject to a three percent
factoring fee, and ten percent held in a reserve account, which is released to
the Company upon payment of the receivable. The factoring agreement is subject
to a revolving line of credit master note, which limits borrowing to $250,000.
The line of credit is payable upon demand, or if no demand is paid, with monthly
payments of interest at 15%. All outstanding principle plus accrued unpaid
interest is due on June 30, 2009. The payment terms of the line of credit will
not be enforced while the factoring agreement is in effect. The line of credit
is secured by all inventory, accounts, and equipment of the Company and a
commercial guarantee of a Company stockholder. The total borrowings under the
factoring agreement at December 31, 2008 and 2007 were $226,868 and $165,146,
respectively with $22,875 and $17,855 held in a restricted cash reserve account
for the same periods both of which are in other assets in the consolidated
balance sheets.

Note 4  Property and equipment

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

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


---

Depreciation expense was $24,104 and $39,208 for the year ended
December 31, 2008 and the period from July 1, 2007 through December 31, 2007,
respectively. The Company allocated $52,318 and $ 22,330 of depreciation to cost
of goods sold during the year ended December 31, 2008 and the period from July
1, 2007 through December 31, 2007, respectively. Depreciation expense was
$28,537 for the period from January 1, 2007 to June 30, 2007; no depreciation
was allocated to cost of goods sold during this period.

Note 5 - Notes receivable and investments

The Company held investments as follows:

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

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

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

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

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 $402,000 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,
2048 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 does not expect to 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. 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.

Note 6 - Oil And Gas Properties - Unproven

Block 83 and 84 Project

On March 6, 2008, Pantera purchased a 10% interest in a joint
venture formed pursuant to a joint venture agreement dated February 24, 2008
with Trius Energy, LLC, as the managing venturer, and certain other joint
venturers, in consideration for $800,000. The joint venture was formed for the
purpose of drilling certain oil and gas fields in Texas, USA. Upon entering into
this agreement, a director of Trius Energy, LLC was appointed as a director of
the Company. The initial well, the Sibley 84#1, was drilled and re-entered on
the property. 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. 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 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. The Company has assessed that at
this time it is more probable than not that Trius will be able to perform. There is no assurance that this will occur, and the Company is monitoring this factor carefully and is prepared to make the appropriate impairments should conditions
change.

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 were $8.29 per thousand cubic feet in March 2008 and averaged $3.90 for the first six months of 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 and found not to be impaired. 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 and found the carrying value not to be impaired. 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 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 re-entry wells, and a 10% discount rate, applied to our 10% working
interest, the same being a 7.5% net revenue interest.

---

Taking in totality the risks and their likelihood, at this
time, the Company assessed that it is more likely than not that impairment has
not occurred, given the stress tests on volumes and gas prices, combined with
the technical data on Sibley 84#1, the probability of payment with the insurance
coverage, and commitments from Trius Energy according to the joint venture
agreement and private placement agreement to fund to completion. If, however,
the Sibley 84#1 cannot be completed for any reason, the Project value would
likely be impaired and result in a write-off. The maximum exposure to loss would
be assessed to the carrying value of the Project.

Baker 80 Lease

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

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

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

The Company was given an indefinite verbal extension on the
payment of the $376,000 to acquire an additional 51.79% . The Company negotiated
a reduction in the purchase price for the final 51.79% to $87,190. On October
30, 2008, the Company 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 the Company issued a
promissory note to Investor for $87,190. The Companys 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
Ranch) located in Pecos County, Texas. According to the terms of the Agreement,
the Company 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 is 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.
The distributions that would otherwise be payable to us pursuant to the
immediately preceding sentence shall be paid to the Investor until the aggregate
of such distributions paid to the Investor totals $175,000. The first $525,000
of cash flow received by us under the transaction documents shall be used to
satisfy its obligations to certain investors under an oil and gas certificate
agreement.

Note 7  Capital Lease Obligation

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

---

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

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


Note 8  Long term debt

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

|                                                                                                                                                                                                                                                                  |   | 2008     |   |   | 2007    |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | - | - | ------- | -
|Note payable to Midsouth Bank dated May
      2007. The Note bears interest at 12.0 percent       per annum and is payable
      in monthly installments of $194, maturing May 2012. The note is
      secured by equipment and deposit accounts.                 | $ | 6,477    |   | $ | 7,804   |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Note payable to Midsouth Bank dated
      February 2007. The note bears interest at 12.0       percent per annum and
      is payable in monthly installments of$ 194, maturing February 2012 The
      note is secured by equipment and deposit accounts.        |   | 5,292    |   |   | 6,508   |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Note payable to FMC dated January 2007. The
      note bears interest at 2.90 percent per       annum and is payable in
      monthly installments of $945, maturing February 2012. The note is
      secured by a vehicle.                                       |   | 34,264   |   |   | 44,444  |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Note payable to FMC dated January 2007. The
      note bears interest at 2.9 percent per annum       and is payable in monthly
      installments of $902 maturing February 2012. The note is secured by a
      vehicle.                                         |   | -        |   |   | 42,457  |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Note Payable to FMC dated January 2007. The
      note bears interest at 2.90 percent per       annum and is payable in
      monthly installments of $902, maturing February 2012. The note is
      secured by a vehicle.                                       |   | 32,734,  |   |   | 42,457  |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Note payable to FMC dated January 2007. The
      note bears interest at 2.90 percent per       annum and is payable in
      monthly installments of $925 maturing February 2012. The note is
      secured by a vehicle.                                        |   | 33,562   |   |   | 43,532  |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Note assumed with vehicle purchase, payable
      to FMC dated December 2006. The note       bears interest at 9.90 percent
      per annum and is payable in installments of $724, maturing December
      2011. The notes is secured by a vehicle               |   | 22,484   |   |   | 28,606  |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Note assumed with vehicle purchase, payable
      to St. Martin Bank dated December 2005.       The note bears interest at
      7.10 percent per annum and is payable in installments of $852 maturing
      In December 2009. The note is secured by a vehicle. |   | 9,808    |   |   | 18,978  |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Unsecured notes payable. The notes bear
      interest at 5 percent per annum and are due between September 30, 2012
      and July 22, 2013                                                                                                                      |   | 273,000  |   |   | -       |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Promissory note payable in connection with
      the drilling program. The note bears interest at 5 percent per annum
      and is due April 30, 2009                                                                                                             |   | 87,190   |   |   | -       |  
|                                                                                                                                                                                                                                                                  |   |          |   |   |         |  
|Insurance financing and other short term
      financing                                                                                                                                                                                                          |   | 82,204   |   |   | -       |  
|Total                                                                                                                                                                                                                                                             |   | 587,015  |   |   | 234,786 |  
|Less Current Maturities                                                                                                                                                                                                                                           |   | (219,584 | ) |   | (57,728 | )
|Total long-term debt                                                                                                                                                                                                                                              | $ | 367,431  |   | $ | 177,058 |  

---

Maturities are as follows:

2009
    $
    219,5842010
    
    31,3992011
    
    56,2632012
    
    79,769thereafter
    
    200,000


Note 9 - Acquisition

On June 15, 2007, ESP purchased all the outstanding shares of
ESP Petrochemicals, Inc., a Louisiana corporation for 3,902,439 common
shares.  The transaction closing date was June 15, 2007, however for
accounting purposes we designated the accounting closing date as June 30, 2007.

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


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

2007Gross revenue
    $
    1,259,272Cost of goods sold
    $
    891,343Total expenses
    
    738,185Other Income (Expense)
    
    (42,056
    )Net income (loss) before taxes
    $
    (412,312
    )Loss per share
    $
    (0.03
    )Weighted average shares
    
    12,859,338


Note 10  Income taxes

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

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


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

---

Note 11  Stockholders Equity

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

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

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

Note 12  Commitments and contingencies

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

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

In February 2007, the Company entered into a lease for various
chemical tanks with lease terms varying from six months to one year. Rental fees
under this lease are determined on a per day basis in amounts of $1.65 per day
or $1.75 per day depending upon the model of tank rented. As of December 31,
2008, the Company leases these tanks on a day to day basis.

Note 13  Related party transaction

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

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


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

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

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

Note 14  Subsequent events

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

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

Note 15  Restatement

The financial statements presented herein as of December 31,
2008 have been restated for an error in the valuation of the net assets acquired
in the reverse acquisition of Pantera Petroleum. We initially determined that
Pantera did not qualify as a business and that the acquisition should be valued
based on the fair value of the net assets acquired. These financial statements
have been restated to account for the acquisition based on the fair value of the
common stock retained by the Pantera shareholders as determined by the trading
price of the stock. As a result, the net assets acquired have increased by
$2,559,879 which represents the value of goodwill acquired in the transactions.
As of December 31, 2008, the Company determined that the goodwill acquired in
the reverse acquisition was fully impaired and it was written off.

---

The effects of the restatement on the balance sheet as of
December 31, 2008 are summarized as follows:

|                                           |   | As Previously |   |   |             |   |   | As         |  
|------------------------------------------ | - | ------------- | - | - | ----------- | - | - | ---------- | -
|                                           |   | Reported      |   |   | Adjustments |   |   | Restated   |  
|                                           |   |               |   |   |             |   |   |            |  
|Total assets                               | $ | 2,507,099     |   | $ | -           |   | $ | 2,507,099  |  
|Total liabilities                          |   | 1,448,780     |   |   | -           |   |   | 1,448,780  |  
|                                           |   |               |   |   |             |   |   |            |  
|Common stock                               |   | 19,206        |   |   | -           |   |   | 19,206     |  
|Additional paid-in capital                 |   | 1,570,133     |   |   | 2,559,879   |   |   | 4,130,012  |  
|Subscription receivable                    |   | (1,000        | ) |   | -           |   |   | (1,000     | )
|Accumulated deficit                        |   | (530,020      | ) |   | (2,559,879  | ) |   | (3,089,899 | )
|Total stockholders equity                 |   | 1,058,319     |   |   | -           |   |   | (1,058,319 |  
|Total liabilities and stockholders equity | $ | 2,507,099     |   |   |             |   | $ | 2,507,099  |  

The effects of the restatement on the statement of operations
for the year ended December 31, 2008 are summarized as follows:

|                           |   | As Previously |   |   |             |  |   | As         |  
|-------------------------- | - | ------------- | - | - | ----------- |  | - | ---------- | -
|                           |   | Reported      |   |   | Adjustments |  |   | Restated   |  
|                           |   |               |   |   |             |  |   |            |  
|Gross profit               | $ | 754,505       |   | $ | -           |  | $ | 754,505    |  
|                           |   |               |   |   |             |  |   |            |  
|General and administrative |   | 802,501       |   |   | -           |  |   | 802,501    |  
|Depreciation               |   | 25,858        |   |   | -           |  |   | 25,858     |  
|Impairment of goodwill     |   | -             |   |   | 2,559,879   |  |   | 2,559,879  |  
|Loss on sale of assets     |   | (31,517       | ) |   | -           |  |   | (31,517    | )
|Loss from operations       |   | (42,337       | ) |   |             |  |   | (2,602,216 | )
|Total other expense        |   | (72,946       | ) |   | -           |  |   | (72,946    | )
|Net income                 | $ | (115,283      | ) |   |             |  | $ | (2,675,162 | )

The consolidated financial statements for the year ended
December 31, 2007 as previously reported incorrectly indicated that they
included the results of operations and cash flows for the full year of 2007.
These financial statements actually include the results of operation and cash
flows for the period from July 1, 2007 through December 31, 2007. These
financial statements have been corrected to properly indicate the periods
presented.

The financial statements of the continuing entity for the
period from January 1, 2007 through June 30, 2007 were not presented in the
financial statements as previously reported. These financial statements have
been restated to include the results of operations and cash flows of the
continuing entity for the period from January 1, 2007 through June 30, 2007.

---

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 whether it agrees with the above statements. A copy of BDOs letter dated January 23, 2009 is filed as Exhibit 16 to this Current Report on Form 8-K/A.

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

ITEM 9A. CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this annual report, being December 31, 2008, we have carried out an evaluation of the effectiveness of the design and operation of our
companys disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our companys management, including our companys President and Chief Executive Officer. Based upon that
evaluation, our principal executive officer and principal financial officer concluded that, as at the end of the period covered by this report, our disclosure controls and procedures were not effective to ensure that information required to be
reported in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported with the required time periods and is accumulated and communicated to our management , including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In connection with the restatement of this Form 10-K, we identified deficiencies that existed in the design or operation of our internal control
over financial reporting that it considers to be material weaknesses. The PCAOB has defined a material weakness as a significant deficiency or combination of significant deficiencies that results in more than a remote likelihood
that a material misstatement of the annual or interim financial statements will not be prevented or detected. The material weaknesses persisted during the period covered by this report.

These material weaknesses are the result of errors in the accounting for the reverse acquisition of Pantera Petroleum. This error caused us to understate the value of the net assets acquired by approximately $2.5 million. These material
weaknesses are a result of the lack of a formal communication procedure for reportable activities occurring in the Companys subsidiary, ESP Petrochemicals, Inc., to the chief executive officer of the Company, who is also the officer in charge
of the Companys reporting obligations.

Prior to the reverse acquisition, which occurred on December 30, 2008, there was one employee of ESP Resources, Inc., one physical location in Texas where employees maintained offices and the Company did not have any subsidiaries. Every Company
transaction was approved by the Companys chief executive and financial officer. Following the reverse merger transaction, the Companys chief executive and financial officer continued to handle the transactions involving the
Companys investments prior to December 30, 2008.  At that time, the chief executive officer of ESP Petrochemicals, Inc. was appointed the president of the Company and oversaw the operations of ESP Petrochemicals, Inc. The principal offices of
the Company were also moved from Texas to Louisiana. The Company continues to operate in this manner, with the Companys chief executive and financial officer residing and working in Texas and the Companys president residing and working at the Companys principal office in Louisiana.

---

While the Company (i) is not aware of any reportable events that have not been disclosed in a timely manner and (ii) together with its subsidiary, continues to employee less than ten people, the chief executive and financial officer believes that
the expansion of the Companys operations and geographic distance between the principal officers of the Company merit the implementation of a more formal procedure for periodically communicating the Companys activities to the chief
executive and financial officer. The Company proposes 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. The chief executive and financial officer feels that these additional procedures will provide reasonable assurance that the Companys controls and procedures will meet their objectives.

In order to respond to the risk described above, the Form 10-K was reviewed by both the Companys chief executive and president to confirm that all required transactions had been adequately disclosed.

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.

To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this quarterly report have been prepared in accordance with generally
accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods
presented.

There have been no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial
reporting.

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

Managements report on internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the 1934 Act. Management has assessed the effectiveness of our internal control over financial reporting
as at December 31, 2008, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting includes maintaining
records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance
with generally accepted accounting principles; providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and our directors; and providing reasonable assurance that unauthorized
acquisition, use or disposition of our assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. As a result of this assessment, management concluded that, as at December 31, 2008, our
internal control over financial reporting was not 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. . In connection with
the restatement of this Form 10-K, we identified deficiencies that existed in the design or operation of our internal control over financial reporting that it considers to be material weaknesses. The PCAOB has defined a material weakness
as a significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The
material weaknesses persisted during the period covered by this report.

These material weaknesses are the result of errors in the accounting for the reverse acquisition of Pantera Petroleum. This error caused us to understate the value of the net assets acquired by approximately $2.5 million. These material
weaknesses are a result of the lack of a formal communication procedure for reportable activities occurring in the Companys subsidiary, ESP Petrochemicals, Inc., to the chief executive officer of the Company, who is also the officer in charge
of the Companys reporting obligations.

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.

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

Business Experience

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

David Dugas- President and Director

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

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

Chris Metcalf Chief Executive Officer and Director

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

---

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

Scott Tyson  Director

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

Tony Primeaux-Director

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

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

William M. Cox-Director

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

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

Family Relationships

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

Involvement in Certain Legal Proceedings

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

|1. | any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                        
|2. | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                        
|3. | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities; or
|   |                                                                                                                                                                                                                                                                                                        
|4. | being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.             

---

Section 16(a) Beneficial Ownership Compliance

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

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

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

Code of Ethics

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

|1. | honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships;                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                              
|2. | full, fair, accurate, timely, and understandable
      disclosure in reports and documents that we file with, or submit to, the
      Securities and Exchange Commission and in other public communications made
      by us;
|   |                                                                                                                                                                                                                              
|3. | compliance with applicable governmental laws, rules and
      regulations;                                                                                                                                                   
|   |                                                                                                                                                                                                                              
|4. | the prompt internal reporting of violations of the Code
      of Business Conduct and Ethics to an appropriate person or persons
      identified in the Code of Business Conduct and Ethics; and                            
|   |                                                                                                                                                                                                                              
|5. | accountability for adherence to the Code of Business
      Conduct and Ethics.                                                                                                                                               

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

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

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

Nomination Process

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

---

Committees of the Board

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

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

Our company does not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. The board of directors believes that, given the early stage of our development, a specific nominating
policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the board of directors and we do
not have any specific process or procedure for evaluating such nominees. The board of directors assesses all candidates, whether submitted by management or shareholders, and makes recommendations for election or appointment.

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

Audit Committee Financial Expert

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

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

ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation

The particulars of compensation paid to the following persons:

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

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

---

SUMMARY COMPENSATION
        TABLEName and Principal
        Position
      Year
      Salary
        ($)
      Bonus
        ($)
      Stock
        Awards ($)
      Option
        ($)
      Non-Equity Incentive
        Plan Compensa-tion ($)
      Change in Pension Value
        and Nonqualified Deferred **Compensation**Earnings ($)
      All Other
        **Compensa** -tion ($)
      Total
        ($)Chris Metcalf 
        President 
        Chief
        Executive
        Officer
        and Director (1)
      2008 
        2007
      $135,000 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      $135,000 
        N/APeter Hughes 
        Secretary and
        Director (2)
      2008 
        2007
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        $24,000
      Nil 
        $24,000


(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

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

Executive Compensation

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

Equity Compensation Plan Information and Stock Options

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

Compensation of Directors

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

Pension, Retirement or Similar Benefit Plans

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

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

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

---

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

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

Change in Control

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

Equity Plan Compensation Information

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS, AND 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, 2008,
in which the amount involved in the transaction exceeded or exceeds the lesser
of $120,000 or one percent of the average of our total assets at the year end
for the last three completed fiscal years.

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

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

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

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

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

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

---

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

Corporate Governance

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

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

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

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

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

Audit Related Fees

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

Tax Fees

None.

All Other Fees

None.

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

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

---

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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

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

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
|--- | --------

|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)                                                                                                
|        |                                                                                                                                                                                                                                                                               
|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

---

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 Metcalf Chief
Executive Officer and Director (Principal Executive Officer and Principal
Financial Officer) Date: March 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 Metcalf Chief
Executive Officer and Director (Principal Executive Officer and Principal
Financial Officer) Date: March 23, 2010



By: /s/ David DugasDavid Dugas President
and Director Date: March 23, 2010



By: /s/ Tony PrimeauxTony Primeaux
Director Date: March 23, 2010



By: /s/ William M CoxWilliam M. Cox
Director Date: March 23, 2010

---