Special Situation Report:

Date: May 13, 2008

Introduction

Historians believe the likelihood of a Democratic President being elected at the end of the year is like never seen before in American History. With the approval ratings of George Bush at all time lows, the United States is in desperate need of "Change." We strongly believe Barack Obama will become our 44th President. As a Senator, Obama has fought successfully to increase our investment in renewable fuels, and he is well aware of climate change. As a result of climate change, glaciers are melting faster; the polar ice caps are shrinking; trees are blooming earlier; more people are dying in heat waves; species are migrating, and eventually many will become extinct. In addition, America's consumption of 20-million-barrel-a-day oil habit costs our economy $1.4 billion a day, and $500 billion in 2006 alone. Every single hour, we spend $41 million on foreign oil. As President, Obama will make numerous changes: Reduce Carbon Emissions 80 Percent by 2050, Invest in a Clean Energy Future, Set America on Path to Oil Independence, Improve Energy Efficiency 50 Percent by 2030, Restore U.S. Leadership on Climate Change, and "Support Next Generation Biofuels".

There are numerous green companies (i.e., companies striving to benefit our environment), that want to be a part of this massive grassroots movement. The objective of this movement is to not only help future generations prosper economically, but also to benefit the environments we live in and the betterment of our planet. The key ingredient to the success of these companies will be their commitment to operate in a socially responsible way and making a real contribution to our environment. Some very astute investors who can distinguish which start-up companies have a greater likelihood of maintaining a sustainable business in the years to come and buy shares in these companies now will be rewarded handsomely.

The Company we are presenting today is Earth Biofuels, Inc. since it fits the criteria of a company that wants to be part of this change for the betterment of our world. Earth Biofuels is one of the first of its kind in the biofuels industry, is highly undervalued, and has significant growth potential as a renewable energy company. We are proud to share this very exciting story with our members.


Newsbreak !

Earth Biofuels Subsidiary Signs Contract with City of San Bernardino to Supply LNG to its Municipal Fleet

May 12 -- Earth Biofuels, Inc. (OTCBB: EBOF) today announced that its subsidiary, Applied LNG Technologies, LLC (“ALT”) has entered a three year agreement to supply the City of San Bernardino, California with liquefied natural gas. The City of San Bernardino utilizes liquefied natural gas (“LNG”) as transportation fuel for its municipal fleet vehicles.

“We are pleased to be working with ALT in offering clean, domestically produced LNG to our municipal fleet and to the public in a convenient location,” stated Don W. Johnson, Fleet Manager for the city. “ALT has been a great partner in this effort.” Under the terms of the agreement, ALT will also provide maintenance for the city’s existing LNG public access station.

Kevin Markey, Vice President of ALT, commented, “Our agreement with the City of San Bernardino is a great addition to the growing strength of ALT. It allows ALT to provide LNG on a long term basis in a well-maintained public access station and gives San Bernardino peace of mind knowing that they have stability regarding their LNG supply.” Read the press release in its entirety.


Our Feature Profile:


Earth Biofuels, Inc.
(OTC BB: EBOF)

May 13, 2008: $0.016


About The Company

Earth Biofuels, Inc. (OTC-BB: EBOF) is a vertically integrated renewable energy company and one of the first of its kind in the biofuels industry. As a producer, distributor, and marketer of biodiesel fuel, the company operates at each level of the supply chain from raw materials to the retail level. Through an exclusive licensing agreement, the Company markets its biodiesel under Willie Nelson's brand name biodiesel, "BioWillie".

Applied LNG Technologies (ALT), a wholly-owned subsidiary of Earth Biofuels, is currently the second largest producers and marketers of vehicle-grade Liquefied Natural Gas (LNG) in the western United States. The company is also expanding, through research and development, construction or acquisition, into the ethanol market.


Business Summary:

Earth Biofuels, Inc. engages in the development, production, and distribution of petroleum diesel-based alternative fuels that include biodiesel, ethanol, and liquefied natural gas (LNG) in the United States. It produces pure biodiesel fuel (B100) for sale directly to wholesalers, as well as to be used as a blend stock to make B20 biodiesel. The company uses vegetable oils, such as soy and canola oil for the production of biodiesel fuel. It offers biodiesel products through a network of wholesale and retail outlets, as well as offers its LNG for municipal and commercial fleet customers. The company is headquartered in Dallas, Texas. Earth Biofuels, Inc. is a subsidiary of Apollo Resources International, Inc.


Mission Statement:

Through the increased use of clean, domestically produced fuels, Earth Biofuels' stated mission is to:

  • Reduce America’s dependence on foreign energy
  • Help support our nation’s farmers
  • Work to improve the environment

Earth Biofuels, Inc. is a publicly traded company on the Over the Counter Bulletin Board exchange. The company's ticker symbol is (OTC-BB: EBOF). Visit their web site at: EarthBiofuels.com.


Key Management:

EarthBiofuels possesses a strong management team, with each member having solid credentials in both education and work experience to manage a successful company. The company is led by the following individuals:

    • Dennis G. McLaughlin, III, Chairman and CEO
    • Christopher “Kit” Chambers, Executive Vice President, Secretary
    • Darren L. Miles, Chief Financial Officer
    • Randy Hepler, Senior Vice President of Sales and Operations
    • Kristin Herring, Vice President of Marketing and Public Relations

Click here for the full biographies of key management.


Background Information & History:

Earth Biofuels is one of the first companies to implement the strategy to vertically integrate the biofuels industries through the construction and operation of production facilities, the coordination and management of blending and transportation services, the marketing and implementation of a multi-state distribution program, and the building of a branded retail presence on a potentially nationwide scale. In addition, Earth Biofuels continues to facilitate the passage of legislative policies that integrate biofuels into our national fuel supply and that provide a sustainable business environment for the American biofuels industry.

Earth Biofuels was founded in Jackson, Mississippi, in 2004. The company began with a small pilot facility, which initially converted restaurant waste grease into biodiesel, in order to perfect the refining methods and processes. The product was sold to local farmers at first and then through an independent filling station that the company acquired.

In February of 2005, the company caught the attention of Apollo Resources International, a Dallas, Texas-based public energy company founded by Dennis McLaughlin, a seasoned veteran of the natural gas industry. McLaughlin immediately realized the market potential for biofuels in the same way he foresaw new opportunities for the deregulated natural gas industry in the late ‘80s. Apollo acquired a majority ownership stake in the company.

Earth Biofuels attracted support from two high-profile individuals: Oscar-winning actor Morgan Freeman and country music legend Willie Nelson. Because of their shared passion for promoting the use of clean-burning domestically produced fuels, both men joined the company as spokesmen for the company. Morgan Freeman also serves on the Board of Directors. Earth Biofuels acquired the exclusive license to sell and distribute Willie Nelson’s BioWillie biodiesel. BioWillie is the first branded biodiesel fuel in the United States and gained national attention and support throughout the country from truckers and even mainstream consumers largely due to Willie's tremendous fan base. The company went public in October 2005 on the Over The Counter Bulletin Board exchange under the ticker symbol EBOF, thereby becoming one of the first publicly traded biodiesel companies in the United States.


Philosophy:

Earth Biofuels is in the business of providing balanced energy solutions. By this, we mean that biofuels such as biodiesel and ethanol provide real solutions to the myriad challenges facing America with regard to our current and future energy needs. Further, biofuels are integral to restoring balance to the nation’s economy and air quality.

Balanced Energy -- Biofuels are a balanced energy solution.

  • Biofuels can provide a measurable reduction in America’s dependence on foreign oil by displacing petroleum-based fuels with their agricultural counterparts. Derived from crops such as corn, soybeans, canola, and sugar, biofuels can be produced domestically in significant quantities, thereby reducing oil imports by comparable volumes and relieving pressure from the nation’s already strained oil refineries. According to the Energy Information Administration, the U.S. produced over 3.9 billion gallons of ethanol in 2005, or approximately 3% of all gasoline consumed. Though biodiesel and ethanol are collectively referred to as biofuels, they are quite distinct in how they are produced and utilized.

  • Biodiesel can be refined from a variety of vegetable oils and animal fats to be burned in most any diesel engine. Production of biodiesel consists of a simple and efficient chemical process, whereby vegetable oil reacts with methanol in the presence of a catalyst to yield methyl esters (biodiesel) and glycerin, a co-product that can be used for pharmaceuticals, soaps, and other products. Following the refining process, the fuel is immediately ready for distribution as a substitute or additive to petrodiesel. The process yields a net energy gain of approximately 93%, according to a University of Minnesota study. (Jason Hill, Erik Nelson, David Tilman, Stephen Polasky, and Douglas Tiffany, "Environmental, economic, and energetic costs and benefits of biodiesel and ethanol biofuels," PNAS, Departments of "ecology, Evolution, and Behavior and Applied Economics, University of Minnesota, St. Paul, MN and Department of Biology, St. Olaf College, Northfield, MN, June 2, 2006.)

  • In the United States, ethanol is produced almost entirely from the fermentation of a corn/water mash. The ethanol is separated, distilled, and dehydrated before being blended with gasoline. Only 17% of the energy used to produce ethanol comes from liquid fuels such as gasoline and diesel, according to the Renewable Fuels Association. The remainder comes from domestic sources such as natural gas. The net energy gain is estimated at 25% by the aforementioned University of Minnesota study.

Balanced Air Quality -- Biofuels are a balanced air quality solution.

  • Petroleum diesel exhaust contains hundreds of constituent chemicals, including many that are human toxins, carcinogens, or present reproductive hazards. In addition, petroleum diesel is a major contributor to ozone air pollution, which is generated by nitrogen oxide and hydrocarbons from fuel combustion. According to the National Biodiesel Board, when biodiesel is blended at a ratio of just 20% with petroleum diesel (B20), harmful emissions and particulates are reduced by as much as 20%; while carbon monoxide, a prime contributor to global warming, is reduced by 12%. Likewise, ethanol reduces overall toxic emissions by as much as 30% and carbon monoxide greenhouse gases over 24% compared to gasoline, according to the American Coalition for Ethanol.


Biodiesel Introduction:

Earth Biofuels is a pioneer and leader in the biodiesel industry. With an emphasis on quality and efficiency, the company’s production and distribution divisions work hand-in-hand to ensure that Earth Biofuels biodiesel meets or exceeds ASTM specifications. The company uses various domestic feedstock sources from America's farmers and distributes fuel as close to the source of production as possible.

Earth Biofuels Distribution Company, Inc. (EBDC) is the sales and distribution division of Earth Biofuels, Inc. This wholly owned subsidiary markets the BioWillie B20 brand through blending facilities and fuel pump locations. Because the demand for biodiesel in the states where Earth Biofuels operates exceeds the production capacity, EBDC will continue to utilize third-party producers as well as selling 100% of the biodiesel that EBOF produces.


LNG Introduction:

Applied LNG Technologies ("ALT) is a wholly owned subsidiary of Earth Biofuels, Inc. The company owns a liquefied natural gas (LNG) processing facility in Topock, Arizona, which currently produces over 80,000 gallons of vehicle-grade LNG per day. LNG produced by the plant is sold primarily to municipal and commercial fleet customers located along the west coast, California, Arizona and other states.


Ethanol Introduction:

Earth Biofuels’ role as a leader in the biodiesel industry, factored together with the global oil crisis, is paving the way for entrance into the ethanol fuel business. EBOF continues to explore ethanol production methods and facilities as we work to enter this important segment of the biofuels industry. EBOF continues its support for developing new cellulosic biomass conversion technologies. All opportunities are being reviewed in light of our efforts to push forth the Company's corporate mission to reduce America's dependence on foreign oil and to improve and preserve our environment.


Earth Biofuels Technology Company:

Earth Biofuels Technology Company, LLC (EBTC) is a joint venture partnership between Earth Biofuels, Inc. and Professor Miguel Dabdoub. As a world-renowned biodiesel authority and the holder of proprietary technologies relating to the construction of biodiesel facilities, Dr. Dabdoub is an expert in the efficiencies, output capacities, and quality control measures relating to biodiesel production and processing. The company holds the exclusive rights to Dr. Dabdoub’s technologies throughout North America.

The purpose of Earth Biofuels Technology Company (EBTC), a subsidiary of Earth Biofuels, Inc, is to construct high quality biodiesel production plants in the US and Canada utilizing the proprietary technology of Dr. Miguel Dabdoub.

Recognizing the need for other sources of energy in the United States, Dr. Dabdoub turned his attention north at the behest of the founders of Earth Biofuels, Inc. After touring the country’s existing plants, he observed that the emerging industry was struggling with many technologies, none of which met the standards he had established. After much planning, EBTC was formed to offer these standards and this technology in the US and Canada.

The single barrier to market for most potential producers has been the cost associated with building a quality plant. While inexpensive compared to most energy projects, the cost of technology has still been relatively high, resulting in the elimination from the arena of many sound projects. Based on these observations, the mission of this company was formed: Earth Biofuels Technology will offer an advanced BQ9000 biodiesel plant to the market at a relatively low cost, utilizing the highest quality technology and equipment available on the market.


SEC Filings:

Edgar search results for all of EBOF's recent SEC filings can be found at:
http://finance.yahoo.com/q/sec?s=EBOF.OB


Recent Press Releases:

  1. May 12Earth Biofuels Subsidiary Signs Contract with City of San Bernardino to Supply LNG to its Municipal Fleet
  2. May 8Earth Biofuels Subsidiary to co-host Grand Opening of LNG/CNG Fueling Station
  3. May 6Form 10-K/A for Earth Biofuels
  4. April 18Videos of CEOs From National Investment Conference Presented by SCIA -- Southern California Investment Association in Newport Beach, CA
  5. April 7Powerful National Investment Conference This Saturday Morning Presented by SCIA -- Southern California Investment Association in Newport Beach, CA


Share Structure & Key Statistics:

Exchange and SymbolOTC-BB: EBOF
Recent Price$0.016, May 13, 2008
52-week High - Low$0.345 (high, 5/14/07) - $0.013 (low, 5/07/08)
Shares Outstanding~324M
Shares Float~124M
Market Capitalization~$5.2M
Industry / SectorSpecialty Chemicals / Basic Materials
Additional Statisticshttp://finance.yahoo.com/q/cf?s=EBOF.OB&annual


Contact Information:

Earth Biofuels, Inc.
3001 Knox Street, Suite 303
Dallas, Texas 75205
Phone: (866) 765-4940
Fax: (214) 520-0507
E-mail: investors@earthbiofuels.net
Web Site: EarthBiofuels.com




Technical Analysis

We are presenting Earth Biofuels (OTC-BB: EBOF) as a "long buy" candidate. We are bullish EBOF for these reasons:

  1. In early May, 2008, EBOF experienced a significant spike in buying volume. This suggests that the company is probably becoming aware by institutional investors.

  2. The stock has been trading in a downward channel for the past few months, and the spike in volume may have marked the bottom.

  3. We have drawn-in a couple of areas where the stock may find resistance. In the very least EBOF should bounce back to the 50-dma (50-day moving average), which will be a +50% return.

  4. Key technical indicators such as the moving average convergence/divergence (MACD) and the relative strength index (RSI) are both turning bullish.

  5. The fundamentals and growth potential of the company seem very favorable, so we believe the stock is well overdue for a surge in price.

We believe EBOF presents a low-risk buying opportunity. The stock is currently trading at $0.016. Our conservative one-month target is $0.027 for a +68% return. However, we believe EBOF has the potential of trading much higher. If the stock breaks-out above the 50-dma, the next level of overhead resistance at $0.042 will give a +150% return. Based on technical analysis alone, we are quite bullish EBOF.


Conclusion

Solid company fundamentals and the technical forecast portray an exciting future for Earth Biofuels (EBOF). The growth potential of EBOF has become very exciting with the Company being led by a strong management team with a proven track record for success. In brief, very favourable impacts such as: its engagement in the production, distribution, and sale of renewable fuels, with a focus on biodiesel fuel, in the United States, a strong balance sheet, and a clean corporate structure, magnifies how undervalued this company is and how much upside potential this company has. We are proud to be presenting this company to our members prior to Wall Street knowing its magnitude. In the long run, we believe investors will be rewarded handsomely by a much higher stock price. We believe EBOF is a very lucrative long-term investment.





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