SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[x]     Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended March 31, 2012

-OR-

[ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities And Exchange Act of 1934 for the transaction period from _________ to________

Commission File Number  000-51489

Earth Energy Reserves, Inc.

 (Exact name of registrant as specified in its charter)

(303) 297-0500

 (Registrant's telephone number, including area code)

Indicate by check mark whether the issuer (1) 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 (section 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-accelerate filer, or a small reporting company as defined by Rule 12b-2 of the Exchange Act):

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

The number of outstanding shares of the registrant's common stock,

May 21, 2012:

Common Stock  -  12,012,202

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EARTH ENERGY RESERVES, INC.

FORM 10-Q

For the quarterly period ended March 31, 2012

INDEX

PART 1 – FINANCIAL INFORMATION

PART II – OTHER INFORMATION

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EARTH ENERGY RESERVES, INC.

BALANCE SHEETS

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

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EARTH ENERGY RESERVES, INC.

STATEMENT OF OPERATIONS

(UNAUDITED)

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

5

EARTH ENERGY RESERVES, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

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EARTH ENERGY RESERVES, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2012

(Unaudited)

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Earth Energy Reserves, Inc. (formerly Asian American Business Development Company) (“Company”) was incorporated in the State of Nevada on February 12, 2002 as Wiltex First, Inc.  On March 10, 2005, the Company filed a certificate of amendment with the State of Nevada changing its name to Asian American Business Development Company and, on March 13, 2006 the Company’s name was changed to Earth Energy Reserves, Inc.  

Basis of Presentation

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  All such adjustments are of a normal and recurring nature.  These financial statements should be read in conjunction with the audited financial statements at June 30, 2011.  Operating results for the nine months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending June 30, 2012.

NOTE 2: GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplates continuation of the Company as a going concern.  Since inception, the Company has incurred net operating losses.  The future success of the Company will depend on its ability to attain additional capital, or to find an acquisition to add value to its present shareholders and ultimately, upon its ability to attain future profitable operations.  

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EARTH ENERGY RESERVES, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2012

(Unaudited)

NOTE 3: EQUITY TRANSACTIONS

During the nine month period ended  March 31, 2012, the company had the following stock transactions:

The Company received $237,500 in Subscriptions Receivable from sale of common stock which had occurred during the fourth quarter of the previous fiscal year.

As of June 30, 2011, the Company had completed its Private Placement Memorandum involving Series 2 Units. Subsequently, a new Private Placement Memorandum offering Series 3 Units was initiated in July 2011, with the intent to raise $15 million in equity capital, by selling Units at $1.50 each. Each of the Series 3 Units consists of one common share and two three-year warrants. During the four months from December 2011 through March 2012, 265,000 Series 3 Units were sold to six new shareholders for a total capital infusion of $397,500. Significant additional Unit sales are expected next quarter.

Also during the nine months, the Company issued 100,000 common shares to a corporate officer upon meeting the required vesting schedule. The Company had also cancelled 22,500 common shares to correct an apparent discrepancy between the tabulated list of shares earned for services provided to the Company, dating back to 2007, and to the ledger of shares actually issued. The Company recorded $1,154,646 in share-based compensation consisting of both common shares and options.  As of March 31, 2012, the resulting number of common shares issued and outstanding is 12,012,282.

NOTE 4: QUASI RE-ORGANIZATION

Effective July 1, 2010 and with shareholder approval, the Company entered into a quasi-reorganization (also referred to as a corporate adjustment). As a result of the quasi-reorganization all prior period losses charged to accumulated deficit were eliminated against additional paid-in capital. A quasi-reorganization requires that retained earnings be dated for ten years after the quasi-reorganization takes place.

NOTE 5: SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date which the financial statements were available to be issued.

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EARTH ENERGY RESERVES, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2012

(Unaudited)

NOTE 5: SUBSEQUENT EVENTS (Continued)

On February 3, 2012, the Company executed the definitive Purchase and Sale Agreement for our previously announced acquisition of our “NOLA-A” property, with $50,000 good faith deposit placed with the seller. The NOLA-A property consists of various interests in producing oil and gas leases located in the state of Louisiana, on established 14,400 acre leasehold with 19 existing gas wells.  The purchase price is $1,050,000, subject to customary closing settlement adjustments. As of April 8, 2012, the Purchase and Sale Agreement was suspended, due to the Company’s delays in raising sufficient capital to close the transaction. The Company is in continual verbal conversations with the Seller, and fully expects the property to remain available for purchase, allowing the Company to revive the Agreement, contingent upon raising the capital in the coming weeks.

On December 9, 2011, the Company signed an extension to the previously announced letter of intent with a large mineral owner to enter an oil and gas lease of 71,900 acres in northern Louisiana for exploration and production of coal bed methane reservoirs, known internally as the “NOLA-B” Project. While the Company anticipated consummating the lease by February 29, 2012, due to the delays in raising the capital, the Letter of Intent technically expired. The Company is in continuing verbal conversations with the Mineral Owner, and expects the property to remain available for lease, allowing the Company to revive the agreement, contingent upon raising sufficient capital. An initial lease bonus payment of $719,000 will be paid by the Company upon signing of the lease.

On December 2, 2011, the Company engaged the services of an investment banking firm to pursue raising up to $30 million additional capital for operations in the form of mezzanine debt financing. The company has executed the preliminary term sheet, and is currently awaiting final approval of this debt facility, with final interest rate and other terms as yet not finalized. While the Company expected to close on this mezzanine debt financing on February 29, 2012, due to the precipitous decline in natural gas commodity pricing during the December 2011 to February 2012 period , the investment bank’s imminent approval has been delayed, but is still likely forthcoming.

Beginning in March, 2012, the Board of Directors has elected to modify the Company’s acquisition and development focus from one exclusively emphasizing natural gas development in northern Louisiana (our “NOLA” play), to a revised focus of evaluating and acquiring a producing, oil or gas field with significant current cash flow, that will more readily enable project financing. Pursuit of the NOLA gas project will follow

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EARTH ENERGY RESERVES, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2012

(Unaudited)

NOTE 5: SUBSEQUENT EVENTS (Continued)

closing on the producing property. Management is currently evaluating ten to fifteen such properties, with an imminent offer to purchase one or more properties forthcoming in the next few weeks.

On May 1, 2012, the Company’s Management attended an oil and gas industry exposition in Houston, TX, wherein the Company received renewed interest in the NOLA gas project from investment bankers, institutional capital sources, potential joint venture partners, as well as introduction to several additional producing oil and gas properties for sale. The Company is currently pursuing these leads for both a promising “back-up” source of NOLA project funding, and for a forthcoming purchase offer on one of the producing assets.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Trends and Uncertainties.  The Company intends to be an independent oil and natural gas company engaged in the acquisition, drilling, and production of oil and natural gas in the United States.  The Company’s future operations may be adversely affected by its competitors, fluctuating oil prices, changing foreign political environments, and any prolonged recessionary periods.

Capital and Source of Liquidity.  The Company is evaluating and pursuing several acquisitions in conventional oil and gas reservoirs, with the intent to maintain diversification in its asset portfolio.  The Company believes that there will be sufficient capital from recent equity financing and the proposed equity and debt financing to conduct operations for the next twelve months.

Presently, proceeds of the Company’s equity financing and cash comprise all of the total cash necessary to conduct operations.  Any proposed acquisitions will determine the amount of additional financing necessary to continue operations.

The Company is currently pursuing equity financing.  The board of directors shall determine the amount and type of any additional financing necessary as our financial situation dictates.

Investing Activities.  For the three months ended March 31, 2012, the Company made a $50,000 good-faith deposit on the purchase of the “NOLA-A” oil and gas properties, as compared to no activity in the three months ending March 31, 2011.  For the nine months ended March 31, 2012, the Company made a $50,000 good-faith deposit on the purchase of the “NOLA-A” oil and gas properties, and a $40,000 good-faith deposit on the acquisition of the “NOLA-B” natural gas lease.  As a result, the Company had net cash used by investing activities of $90,000.  Likewise, for the nine months ended March 31, 2011, the Company had made a $100,000 good-faith deposit on the purchase of oil and gas properties, resulting in net cash used by investing activities of $100,000.

Financing Activities.  For the nine months ended March 31, 2012, the Company received $30,000 in proceeds from a short-term note payable, and $44,300 short-term note from one Officer.  In addition to the cash received, the Company attached (to the $30,000 note) 15,000 Class B Warrants to purchase common shares of the Company’s common stock, par value $0.001, for a strike price of $1.75.  These warrants will expire three years from the date of the note issued.  The Company also received $397,500 in proceeds for the sale of 265,000 shares of common stock.  These 265,000 shares, as part of the Company’s Series 3 Private Placement Units, were also accompanied by 530,000 three-year warrants.  Finally, the Company received $237,500 in proceeds from stock subscriptions receivable from the sale of common stock, which had occurred during the fourth quarter of the

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previous fiscal year.  As a result, the Company’s net cash flows from financing activities for the nine months ended March 31, 2012 was $709,300.

For the nine months ended March 31, 2011, the Company sold common stock for cash in the amount of $112,000, as well as received proceeds from stock subscriptions receivable of $965,000.  Additionally, the Company re-purchased and subsequently retired Series A preferred stock of $90,611, resulting in net cash flows from investing activities for the nine months ended March 31, 2011of $986,389.

For the three months ended March 31, 2012, the Company sold common stock for cash in the amount of $142,500 in the form of the Series 3 Private Placement Units, and received the proceeds of $44,300 short-term note from one Officer. For the three months ended March 31, 2011, the Company sold common stock for cash in the amount of $50,000 in the form of the Series 2 Private placement Units.

Result of Operations.  The Company has had only minimal revenue since inception, with all recent activities funded through the sale of its common stock.  For the nine months ended March 31, 2012 and March 31, 2011, the Company received no revenues.

For the nine months ended March 31, 2012 the Company recorded general and administrative expenses of $2,261,920, compared to $2,598,646 for the nine months ended March 31, 2011.  The expenses for the nine months ended March 31, 2012 and 2011 consisted of salaries, stock-based compensation, and the expense of engineering and geological consultants, as well as customary legal, accounting, auditing, and general office overhead expenses.

Similarly, for the three months ended March 31, 2012 the Company recorded general and administrative expenses of $658,149, compared to $708,652 for the three months ended March 31, 2011, for the same categories of routine overhead expenses.

Plan of Operation.  The Company has developed an operating strategy that is based on acquiring underdeveloped oil and gas properties that include, or are adjacent to, existing active production; consequently, these properties are lower risk with attractive rates of return on the development potential.  The Company has elected directors and appointed and hired officers and consultants with substantial experience in unconventional gas production, including coal bed methane reservoirs, plus the expertise in horizontal wellbore drilling, and the Company has correspondingly pursued several acquisitions in this arena.  The Company is also evaluating and pursuing several acquisitions in conventional oil and gas reservoirs, with the intent to maintain diversification in its asset portfolio.  The Company has a bias towards desiring to be the operator of the properties it is acquiring but are not exclusively against acquiring non-operated positions in oil and gas assets.

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Earth Energy may experience problems, delays, expenses, and difficulties sometimes encountered by an enterprise in a similar stage, many of which are beyond the Company’s control.  These include, but are not limited to, unanticipated problems relating to additional costs and expenses that may exceed current estimates and competition.

Earth Energy is not delinquent in any of its obligations even though the Company has generated no operating revenues.  The Company intends to pursue its business plan utilizing cash made available from the private sale of its securities and future operations.  The Company’s management is of the opinion that the proceeds of the sales of its securities and future revenues will be sufficient to pay its expenses for the next twelve months.

Earth Energy is pursuing financing for its operations and seeking additional private investments.  In addition, the Company is seeking to expand its revenue base.  Failure to secure such financing or to raise additional equity capital and to expand its revenue base may result in the Company not being able to pay its obligations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  

We do not consider the effects of interest rate movements to be a material risk to our financial condition.  We do not hold any derivative instruments and do not engage in any hedging activities.   

ITEM 4.  CONTROLS AND PROCEDURES  

During the period ended March 31, 2012, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  

Evaluation of Disclosure Controls and Procedures  

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of March 31, 2012.  Based on this evaluation, our chief executive officer and chief principal financial officer have concluded such controls and procedures to be effective as of March 31, 2012 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and to ensure that

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information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

None

Item 1A.  Risk Factors  

Not applicable for smaller reporting companies

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

None

Item 3.   Defaults Upon Senior Securities.

None

Item 4.   Mine Safety Disclosures

Not Applicable

Item 5.   Other Information

None

Item 6.   Exhibits

Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of

2002

Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of

2002

101.INS**   XBRL Instance Document

101.SCH**   XBRL Taxonomy Extension Schema Document

101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB**   XBRL Taxonomy Extension Label Linkbase Document

101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document

*  Filed herewith

**XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 21, 2012

EARTH ENERGY RESERVES, INC.

By:

/s/Steven A. Kranker

Steven A. Kranker

Principal Executive Officer

By:

/s/Doyle Pennington

Doyle Pennington

Interim Principal Financial Officer

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