ESP Resources (ESPI) 10-Q 2010 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period endedMarch 31, 2010

[ ] TRANSITION REPORT PURSUANT TO 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.
(Exact name of registrant as specified in its charter)

Nevada	98-0440762
(State or other jurisdiction of incorporation or	(IRS Employer Identification No.)
organization)

1255 Lions Club Road, Scott LA 70583
(Address of principal executive offices) (Zip Code)

(337) 706-7056
(Issuer’s telephone number)

PANTERA PETROLEUM, INC.
(Former name, former address and former fiscal year, if changed since last report)

     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 of 1934 during the preceding 12 months (or for such shorter period that the registrant 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes[ ] No[ ]

     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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

55,588,088common shares issued and outstanding as of May 17, 2010.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

     It is the opinion of management that the interim financial statements for the quarter ended March 31, 2010 include all adjustments necessary in order to ensure that the interim financial statements are not misleading.

ESP Resources, Inc.

Consolidated Balance Sheets

(Unaudited)

		March 31,			December 31,
		2010			2009
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	187,472		$	25,107
Accounts receivable, net		803,399			815,703
Inventories, net		465,650			290,218
Prepaid expenses and other current assets		126,059			166,738
Total current assets		1,582,580			1,297,766
Property and equipment, net of accumulated depreciation of $255,677 and $219,341, respectively		697,875			683,403
Restricted cash		42,561			41,139
Intangible assets, net of amortization of $75,864 and $30,490, respectively		836,419			884,480
Other assets		25,750			26,786
Total assets	$	3,185,185		$	2,933,574
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable	$	744,009		$	589,284
Factoring payable		400,652			380,724
Accrued expenses		248,035			232,266
Due to related parties		402,478			359,010
Guarantee liability		120,000			120,000
Due to Turf shareholders for acquisition		-			263,700
Current maturities of long-term debt		299,626			325,170
Current portion of capital lease obligation		16,495			20,624
Loan from investor		58,039			58,039
Total current liabilities		2,289,334			2,348,817
Loan from investor, noncurrent		-			-
Long-term debt (less current maturities)		520,382			582,636
Capital lease obligations (less current maturities)		56,620			56,225
Contingent consideration payable for acquisition of Turf		350,000			350,000
Deferred lease cost		32,000			33,000
Total liabilities		3,248,336			3,370,678
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - $0.001 par value, 1,200,000,000 shares authorized,55,588,088 and 45,185,295           shares issued and outstanding, respectively
		55,588			45,185
Additional paid-in capital		8,189,412			7,398,877
Subscription receivable		(1,000	)		(1,000	)
Accumulated deficit		(8,307,151	)		(7,880,166	)
Total stockholders' equity (deficit)		(63,151	)		(437,104	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	3,185,185		$	2,933,574

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

ESP Resources, Inc.

Consolidated Statements of Operations

For the Three Months Ended March 31, 2010 and 2009

(Unaudited)

		Three months ended March 31,
		2010			2009
SALES, NET	$	1,015,576		$	569,093
COST OF GOODS SOLD		552,993			396,769
GROSS PROFIT		462,583			172,324
General and administrative		709,501			466,840
Depreciation and amortization		75,502			4,645
LOSS FROM OPERATIONS		(322,420	)		(299,161	)
OTHER EXPENSE
Interest expense		(88,228	)		(10,621	)
Factoring fees		(19,352	)		(18,964	)
Other income		3,000			-
Interest income		15			16
Other expense		-			(80	)
Total other expense		(104,565	)		(29,649	)
NET LOSS	$	(426,985	)	$	(328,810	)
NET LOSS PER SHARE (basic and diluted)	$	(0.01	)	$	(0.02	)
WEIGHTED AVERAGE SHARES OUTSTANDING		51,962,821			19,868,996

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

ESP Resources, Inc.

Statement of Stockholders’ Equity

For the three months ended March 31, 2010

(Unaudited)

	Common stock			Subscription		Accumulated
	Number	Par Value	APIC	Receivable		Deficit		Total
Balance, December 31, 2009	45,185,295	45,185	7,398,877	(1,000	)	(7,880,166	)	(437,104	)
Stock based compensation	158,506	159	159,980	-		-		160,139
Shares issued in connection with note conversion	2,180,000	2,180	74,120	-		-		76,300
Shares issued with PPM	8,064,287	8,064	556,435	-		-		564,499
Net loss	-	-	-	-		(426,985	)	(426,985	)
Balance, March 31, 2010	55,588,088	55,588	8,189,412	(1,000	)	(8,307,151	)	(63,151	)

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

ESP Resources, Inc. and Subsidiaries

Consolidated Statements of Cash Flow

(Unaudited)

		For the Three months ended
		March 31,
		2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(426,985	)	$	(328,810	)
Adjustments to reconcile net loss to net cash          used for operating activities:
Depreciation, including amounts included in cost of goods sold		85,700			19,472
Stock based compensation		160,139			137,566
Amortization of discount on debt		75,000			-
Changes in operating assets and liabilities:
Accounts receivable		12,304			(55,094	)
Inventory		(175,432	)		(29,053	)
Prepaid expenses and other current assets		40,679			38,384
Other assets		1,036			(12,922	)
Accounts payable		154,725			74,980
Accrued expenses		6,751			65,533
Accrued salaries to related parties		78,374			-
CASH USED IN OPERATING ACTIVITIES		12,291			(89,944	)
CASH FLOWS FROM INVESTING ACTIVITIES
Restricted cash		(1,422	)		(8,505	)
Cash payment for acquisition of Turf		(263,700	)		-
Purchase of fixed assets		(53,111	)		(12,053	)
CASH USED IN INVESTING ACTIVITIES		(318,233	)		(20,558	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long term debt		(32,215	)		(15,733	)
Repayment of capital leases		(3,734	)		(1,974	)
Net factoring advances		19,928			36,010
Payments on insurance financing		(51,229	)		(22,417	)
Borrowing (repayments) of loans from related parties		(28,942	)		(20,000	)
Proceeds from loans from related parties		-			170,000
Proceeds from sales of Units in private placement		564,499			-
CASH PROVIDED BY FINANCING ACTIVITIES		468,307			145,886
NET INCREASE IN CASH		162,365			35,384
CASH AT BEGINNING OF PERIOD		25,107			27,367
CASH AT END OF PERIOD	$	187,472		$	62,751
Non-cash investing and financing transactions:
Notes issued for purchase of property and equipment	$	-		$	45,757
Stock issued for debt conversion		76,300			-

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

ESP Resources, Inc.

Notes to Unaudited Consolidated Financial Statements

March 31, 2010

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

Basis of Presentation

ESP Resources, Inc. (“ESP Nevada”, and collectively with its subsidiaries, the “Company”) was incorporated in the State of Nevada on October 27, 2004. The accompanying unaudited 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.

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.

Interim Financial Statements

The condensed unaudited consolidated financial statements presented herein have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) and the accounting policies set forth in its audited financial statements for the period ended December 31, 2009 as filed with the Securities and Exchange Commission (the “SEC”) in the Company’s Annual Report on Form 10-K and should be read in conjunction with the notes thereto.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented. Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted. The results of operations presented for the three months ended March 31, 2010 are not necessarily indicative of the results to be expected for the year. These condensed consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Concentrations

The Company has four major customers that together account for 47% of accounts receivable at March 31, 2010 and four major customers that together account for 50% of the total revenues earned for the three months ended March 31, 2010.

	Accounts
	receivable	Revenue
Customer A	15%	13%
Customer B(1)	14%	N/A
Customer C	11%	21%
Customer D	7%	8%
Customer E(2)	N/A	8%
	47%	50%

(1)	Revenues from this customer were not significant during period.
(2)	Accounts receivable from this customer as of March 31, 2010 were not significant.

The Company has four vendors that accounted for 68% of purchases and 38% of the ending accounts payable at March 31, 2010.

	Accounts
	Payable	Purchases
Vendor A	15%	30%
Vendor B	5%	19%
Vendor C	11%	13%
Vendor D	7%	6%
	38%	68%

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 offloaded 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.

Basic and Diluted Loss Per Share

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

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

Accounts Receivable and Allowance for Doubtful Accounts

The Company generally does not require collateral, and the majority of its trade receivables are unsecured. The Company’s credit terms generally require payment within 30 days from the date of the sale. The carrying amount for accounts receivable approximates fair value.

Accounts receivable consisted of the following as of March 31, 2010 and December 31, 2009:

		March 31,		December 31,
		2010		2009
Trade receivables	$	803,399	$	815,703
Less: Allowance for doubtful accounts		-		-
Net accounts receivable	$	803,399	$	815,703

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

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

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

a) If the sale of Turf’s products results in at least $1,500,000 in revenue for the one year period beginning on January 1, 2010 (the “First Earnout Period”), not including any revenue from ESP Resources or any of its other affiliates (the “First Revenue Earnout Criteria”), then Turf shall be entitled to receive an aggregate of such number of shares of the

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

Management has estimated the fair value of the earn-out provision at $350,000 on the date of acquisition and recorded this as a contingent liability as of December 31, 2009 and March 31, 2010. 

Unaudited pro forma condensed combined financial statements

The following table reflects the unaudited pro forma results of operations for the three months ended March 31, 2009 as though the Turf Acquisition had occurred on January 1, 2009. The pro forma amounts are not necessarily indicative of the results that may be reported in the future:

		Three months
		ended
		March 31,
		2009
Revenues	$	742,455
Cost of Goods Sold		(450,846	)
Gross Profit		291,609
Total Operating Expenses		576,485
Net Loss	$	284,876

Intangible assets

Intangible assets relate to the customer list acquired with the acquisition of Turf described above. Intangible assets are being amortized over their estimated life of five years. The Company recognized amortization expense of $45,735 and $30,490 for the three months ended March 31, 2010 and 2009, respectively.

Recently Issued Accounting Pronouncements

In June 2009, the FASB issued guidance to change financial reporting by enterprises involved with variable interest entities (“VIEs”). The standard replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a VIE with an approach focused on identifying which enterprise has the power to direct the activities of a VIE and the obligation to absorb losses of the entity or the right to receive the entity’s residual returns. This standard was effective for us on January 1, 2010. ESP Resources does not have any interests in variable interest entities; therefore, this standard did not have any impact on its consolidated financial statements.

In January 2010, the FASB issued authoritative guidance intended to improve disclosures about fair value measurements. The guidance requires entities to disclose significant transfers in and out of fair value hierarchy levels, the reasons for the transfers and to present information about purchases, sales, issuances and settlements separately in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). Additionally, the guidance clarifies that a reporting entity should provide fair value measurements for each class of assets and liabilities and disclose the inputs and valuation techniques used for fair value measurements using significant other observable inputs (Level 2) and significant unobservable inputs (Level 3). This guidance was effective for ESP Resources on January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which will be effective for interim and annual periods beginning after December 15, 2010. As this guidance provides only disclosure requirements, the adoption of this standard did not impact the Company’s results of operations, cash flows or financial position.

Note 2 – Going Concern

The Company has net losses for the three months ended March 31, 2010 as well as minimal cash flows from operations 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 – 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.

Inventory consisted of the following as of March 31, 2010 and December 31, 2009:

		March 31,		December 31,
		2010		2009
Raw materials	$	374,688	$	236,129
Finished goods		90,962		54,089
Total inventory	$	465,650	$	290,218

Note 4 – Long-Term Debt

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

Note 5 – Commitments and Contingencies

A third party has threatened the Company with a civil action for money damages. The Company does not believe the allegations have merit, but has accrued a liability in the amount of $115,000 at March 31, 2010 and December 31, 2009 which is the amount that management believes would be required to settle the claim.

Note 6 – Stockholders’ Equity

In January, February, and March, 2010, The Company received proceeds of $564,500 from sales of 8,064,287 units in a private placement. Each unit consist of one share of common stock, one warrant for the purchase of share of common stock at an exercise price of $.25 for a period of one year, and a warrant for the purchase of a share of common stock at an exercise price of $.75 for a period of one year beginning on the first anniversary of the issuance of the warrant. The warrants were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $.05-$.14; warrant term of 1-2 years; expected volatility of 40.89% -46.13%; and discount rate of .33%-.51%. On March 23, 2009, the Company entered into consulting agreements with two individuals to provide services to the Company for a period of one and a half years. The Company issued a total of 2,000,000 shares of common stock to these individuals in payment for the services. The shares have a fair value of $800,000 and vest over the service period. The Company valued the shares based on market value on the date of the agreement, and recognized compensation expense of $133,334 and $418,519 as of March 30, 2010 and December 31, 2009. The fair value of the unvested shares is $248,147 as of March 31, 2010.

On May 26, 2009, ESP entered into a five year agreement with a human resources company (the “HR Company”), to provide employment services to screen and select qualified candidates to satisfy the manpower needs of ESP. ESP is contractually liable to pay the HR Company $100,000 each year in stock. The annual fee is due as a prepayment ten days after the effective date, on May 26, 2009. The number of shares to be issued to the HR Company is determined by dividing $100,000 by the average closing trade price of the stock over the 10 trading days immediately preceding the applicable payment date. The average trading price for the period from May 26, 2009 to June 8, 2009 was $0.240. The number of shares to be issued to the HR Company was calculated to be 335,570. The shares have a fair value of $83,890 and vest over the service period. The Company valued the shares based on market value on the date of agreement, and recognized compensation expense of 13,983 and $34,023 as of March 30, 2010 and December 31, 2009. The fair value of the unvested shares is $35,889 as of March 31, 2010.

The Company granted 158,506 shares of common stock to a consultant for the payment of January, February, and March, 2010 fees. The shares were valued at $12,822 based on the fair value of those shares on the 10 days of the month per share average. During the three months ended March 31, 2010, the Company recognized stock compensation expense of $147,316 related to stock issued during 2009 which vested during the period.

Note 7 – Related Party Transactions

Shareholders and management have advanced the Company $78,374 for the Company’s expanding operations and the Company has made $28,942 in payments toward the loan for the quarter ended March 31, 2010.

As of March 31, 2010 and December 31, 2009, the Company had balances due to stockholders and related parties as follows:

		March 31		December 31,
		2010		2009
Due to former shareholder	$	31,604	$	59,507
Due to CEO		246,500		216,500
Due to President		47,335		-
Due to ESP Enterprises		58,039		58,039
Due to entities owned by President		19,000		24,964
	$	402,478	$	359,010

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

     This quarterly report contains forward-looking statements as that term is defined in Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934. 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 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.

     Financial information contained in this quarterly report and in our unaudited interim financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our unaudited interim financial statements and the related notes that appear elsewhere in this quarterly report.

     As used in this quarterly report, and unless otherwise indicated, the terms “we”, “us” and “our” mean ESP Resources, Inc., unless otherwise indicated.

Corporate History

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

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

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

In December 2008, the Company entered into an agreement with ESP Resources, Inc., a Delaware corporation (ESP Delaware), whereby the Company acquired 100% ownership of ESP Delaware in exchange for 292,682,297 common shares. As a result of this acquisition, we changed our name from “Pantera Petroleum, Inc.” to “ESP Resources, Inc.” On January 27, 2009, we effected a one (1) for twenty (20) reverse stock split of our common stock and received a new ticker symbol. The name change and reverse stock split became effective with the OTC Bulletin Board at the opening of trading on January 27, 2009 under the new symbol “ESPI”. Our new CUSIP number is 26913L104.

Our Current Business

     We are 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.

Principal Products

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

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

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

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

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.

RESULTS OF OPERATIONS

     You should read the following discussion of our financial condition and results of operations together with the unaudited interim consolidated financial statements and the notes to the unaudited interim consolidated financial statements included in this quarterly report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.

For the three month periods ended March 31, 2010 and March 31, 2009

The following table summarizes the results of our operations during the three months ended March 31, 2010 and 2009, and provides information regarding the dollar and percentage increase or (decrease) from 2010 to 2009.

		Three months ended
		March 31,					$ Increase		% Increase
		2010			2009		(Decrease)		(Decrease)
Sales	$	1,015,576		$	569,093		446,483		78.46%
Cost of goods sold		552,993			396,769		156,224		39.37%
Gross profit		462,583			172,324		290,259		168.44%
Total general and administrative expenses		709,501			466,840		242,661		51. 98%
Depreciation expense		75,502			4,645		70,857		1525.45%
Loss from operations		(322,420	)		(299,161	)	(23,259	)	7.77%
Total other income (loss)		(104,565	)		(29,649	)	(74,916	)	252.68%
Net loss		(426,985	)		(328,810	)	(98,175	)	29.86%

Sales

Sales revenue increased to $1,015,576 for the three months ended March 31, 2010 compared to $569,093 for the same period of 2009, an increase of $446,483. The increase was due to several factors. The customer base expanded between the first quarter of 2009 and the first quarter of 2010 due to increased sales coverage in the Southern Louisiana, South Texas and East Texas regions. ESPPI hired additional field service technicians in the East Texas region in the third quarter of 2009 and their sales contacts resulted in a direct increase in sales volumes from this region of $80,380 during the first quarter of 2010. We effectively concluded the absorption of the Turf Chemistry business into our South Texas region on November 1, 2009. The sales for the first quarter of 2010 from this region increased $166,264. ESPPI increased sales volume to several of our existing customers through supply of additional petrochemical products at our customer well-sites in the first quarter of 2010 resulting in sales increases exceeding $200,000 for first quarter 2010 in comparison to first quarter 2009.

Cost of goods sold and gross profit

Cost of goods sold for the three months ended March 31, 2010 was $552,993, an increase of $156,224 or 39.37% compared to $396,769 over the same period in 2009. The increase is comparable to the increase in sales for the same period. Our gross profit increased to $462,583 for the three months ended March 31, 2010, an increase of $290,259 or 168.44% compared to $172,324 for the same period of 2009. Gross profit as a percentage of revenue was 46% for the first quarter ended March 31, 2010. Such increase was mainly contributed by economies of increased purchases of raw materials on a per unit basis used in our blending operations and a greater efficiency in the service of our company delivery team resulting in a reduction in our service delivery cost. In addition, we experienced an increase in sales of higher gross margin chemical blends during first quarter 2010 in comparison with 2009 primarily in our south and east Texas regions.

General and administrative expenses

General and administrative expenses increased to $709,501 for the three months ended March 31, 2010 compared to $466,840 for the same period of 2009. The increase in general and administrative expenses in the first quarter 2010 was primarily due to the increase in

staff, an increase in facility rental as ESPPI took over the expenses of a larger rental facility in the South Texas after the acquisition of the Turf Chemistry business and assets, and the opening of a sales and blending facility in our Longview, Texas region. The personnel level of ESPPI increased from six (6) employees in first quarter 2009 to nineteen (19) employees in 2010 to accommodate the increase in sales. The expenses in 2010 include stock based compensation of $160,139. Excluding this expense the increase in general and administrative expenses would have been $546,362. This increase was primarily related to temporarily higher costs associated with combining the companies acquired late in 2009.

Net loss

Our net loss increased to a loss of $426,985 for the three months ended March 31, 2010 compared to a loss of $328,810 for the same period of 2009. The primary reason for the increase in the net loss was the increase in general and administrative expenses, interest expense, and depreciation, and an increase in stock based compensation during 2010.

EBITDA:

 Earnings before interest, taxes, depreciation and amortization (“EBITDA”) are a non-GAAP financial measure. We use EBITDA as an unaudited supplemental financial measure to assess the financial performance of its assets without regard to financing methods, capital structures, taxes or historical cost basis; its liquidity and operating performance over time in relation to other companies that own similar assets and that we believe calculate EBITDA in a similar manner; and the ability of our assets to generate cash sufficient for us to pay potential interest costs. We also understand that such data are used by investors to assess our performance. However, the term EBITDA is not defined under generally accepted accounting principles and EBITDA is not a measure of operating income, operating performance or liquidity presented in accordance with generally accepted accounting principles. When assessing our operating performance or liquidity, investors should not consider this data in isolation or as a substitute for net income, cash flow from operating activities, or other cash flow data calculated in accordance with generally accepted accounting principles. EBITDA for the three months ended March 31, 2010 was ($103,131) compared to ($175,994), a decrease of $72,863 from the same prior year period.

		2010			2009
Net loss	$	(426,985	)	$	(328,810	)
Add back interest expense, net of interest income		88,213			10,605
Add back depreciation and amortization		75,502			4,645
Stock based compensation		160,139			137,566
EBITDA	$	(103,131	)	$	(175,994	)

Cash Flow Provided by Operating Activities

Operating activities provided cash of $12,291 for the three months ended March 31, 2010, compared to using $89,944 for the three months ended March 31, 2009. The decrease in cash used during the three months ended March 31, 2010, was primarily attributable to increases in depreciation, the amortization of discount on debt, and inventory, along with decreases in accounts receivable, and changes in our non-cash working capital balances related to operations, including prepaid expenses and other current assets, accounts payable, and accrued liabilities.

Cash Flow Used in Investing Activities

Investing activities used cash of $318,233 for the three month period ended March 31, 2010 compared to using $20,558 for the three month period ended March 31, 2010. The cash used in investing activities was a result of the cash payment for the acquisition of Turf and the purchases of fixed assets.

Cash Flow Provided by Financing Activities

Financing activities generated cash of $468,307 for the three month period ended March 31, 2010 compared to generating $145,886 for the three month period ended March 31, 2009. The cash generated from financing activities was a result of proceeds from the sales of units in a private placement.

Liquidity and Capital Resources

As of March 31, 2010, our total assets were $3,185,185 and our total liabilities were $3,248,336. We had cash of $187,472, current assets of $1,582,580 and current liabilities of $2,289,334 as of March 31, 2010. We had negative working capital of $706,754 on that date.

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.

Cash Requirements

Our plan of operations for the next 12 months involves 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 March 31, 2010, our company had cash of $187,472 and a working capital deficit of $706,754.

We estimate that our general operating expenses for the next twelve month period to include at least $2,000,000 for professional fees and general and administrative expenses. 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 $426,985 for the three months ended March 31, 2010. As indicated above, we anticipate that our projected operating expenses for the next twelve months will be $2,000,000. We will be required to raise additional funds through the issuance of equity securities or through debt financing in order to carry-out our plan of operations for the next twelve month period. There can be no assurance that we will be successful in raising the required capital or that actual cash requirements will not exceed our estimates.

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

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

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operation are based upon the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

Preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. There have been no changes to our critical accounting policies from those described in our annual report on Form 10-KSB for the year ended December 31, 2009.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4T. Controls and Procedures.

Evaluation of Disclosure 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 quarterly report, being March 31, 2010, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s President and Chief Executive Officer. Based upon that evaluation, our company’s President and Chief Executive Officer concluded that our company’s disclosure controls and procedures are effective as at the end of the period covered by this report. There have been no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

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

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 March 31, 2010, 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 March 31, 2010, our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. However, because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

This quarterly 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 quarterly report.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In January, February, and March, 2010, we sold 8,064,287 units in private placement and received proceeds of $564,500. Each unit consists of one share of common stock, one warrant for the purchase of share of common stock at an exercise price of $.25 for a period of one year, and a warrant for the purchase of a share of common stock at an exercise price of $.75 for a period of one year beginning on the first anniversary of the issuance of the warrant. Each purchaser of the Securities represented to the Company that such purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D. The Company sold these unregistered securities in accordance with Rule 506 of Regulation D under the Securities Act of 1933, as amended. Proceeds were used for working capital to fund continuing operations.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information

None.

Item 6. 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 Metcalf
Chris Metcalf
Chief Executive Officer and Director
(Principal Executive Officer and Principal
Financial Officer)
Date: May 17, 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 Metcalf
Chris Metcalf
Chief Executive Officer and Director
(Principal Executive Officer and Principal
Financial Officer)
Date: May 17, 2010

By:/s/ David Dugas
David Dugas
President and Director
Date: May 17, 2010

By:/s/ Tony Primeaux
Tony Primeaux
Director
Date: May 17, 2010

By:/s/ William M Cox
William M. Cox
Director
Date: May 17, 2010