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EARTH GEN-BIOFUEL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

EARTH GEN-BIOFUEL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Nature of Operations and Basis of Presentation

Earth Gen-Biofuel, Inc. (the “Company” or “Earth Gen”) was incorporated in the state of Nevada on August 28, 2012 to pursue the business of becoming an international agricultural company focused on growing plants that are the basis for providing renewable sources for manufacturing processes and energy.

On September 25, 2012, Earth Gen entered into an Agreement of Share Exchange and Plan of Reorganization (the “Exchange Agreement”) with EarthBlock Technologies, Inc. (“EarthBlock”), a Nevada publicly traded corporation, pursuant to which EarthBlock acquired 100% of the ownership of the Company in exchange for 63,666,400 shares of EarthBlock’s common stock (the “Exchange”) on the basis of four shares of EarthBlock for one share of Earth Gen outstanding as of October 14, 2012.

Upon the completion of the Exchange, Earth Gen operated as a wholly owned subsidiary of EarthBlock and focused its efforts to begin its international agricultural operations. In October of 2012, Earth Gen began to organize farmers and government related agencies in Laos and Vietnam to control land for growing castor beans. Prior to Earth Gen becoming a subsidiary of EarthBlock, Earth Gen’s management had spent over two years creating the relationships and working with local farmers to build an organization and obtain the knowledge and expertise to become a major grower of castor beans in these countries.

The common stock of EarthBlock was registered with the SEC under the Exchange Act and was quoted on OTCQB operated by the OTC Markets Group Inc. EarthBlock failed to comply with Exchange Act Section 13(a) because it had not filed any periodic reports with the SEC since the period ended December 31, 2007. EarthBlock consented to a deregistration order of the SEC, and pursuant to Section 12(j) of the Exchange Act, registration of EarthBlock’s common stock was revoked and trading in EarthBlock’s common stock was suspended.

Additionally, the shareholders of Earth Gen were not made aware of the full extent of a material liability of EarthBlock that resulted from the operations of EarthBlock’s non-operational subsidiary EarthBlock Texas Homes, Inc. As a result of the liability not being included in proper detail and information regarding its effect on EarthBlock’s financial statements, EarthBlock’s previously disclosed financial condition was inaccurate.

On September 25, 2013, the Board of Directors of EarthBlock and of Earth Gen voted to rescind the acquisition of Earth Gen by EarthBlock and authorized the officers of the Corporation to take the steps required to complete the rescission of the Exchange.

A rescission agreement dated October 28, 2013 (the “Rescission Agreement”) was entered into by and among EarthBlock, Earth Gen and the shareholders. A majority of Earth Gen shareholders approved the Rescission Agreement on October 28, 2013. The Rescission Agreement sets forth the terms and provisions where the parties agreed to take all steps necessary and proper to unwind the Exchange including the surrender of the Exchange Shares for cancellation and Earth Gen to issue to each Exchange Share shareholder his respective original equity interests in Earth Gen. The Additional Shares will remain outstanding and will ratably dilute the Exchange Share shareholders pre-Exchange, original equity ownership in Earth Gen as a result.

The Rescission Agreement offer terminated on October 10, 2014. Pursuant to the terms of the Rescission Agreement, Earth Gen issued a total of 50,645,600 Earth Gen common stock shares to participating holders of Exchange Shares commensurate with the holders’ respective original equity interests in Earth Gen. Earth Gen also issued a total of 7,030,400 Additional Shares. No additional Earth Gen common stock shares will be issued as a result of the rescission of the Reverse Merger. One Shareholder owning 7,560,000 Exchange Shares did not become a party to the Rescission Agreement and will retain his EarthBlock common stock shares and with no equity interest in Earth Gen.

In March 2014, Earth Gen-Biofuel Lao Sole Co Ltd (“Earth Gen Laos”) was formed under the laws of Laos to meet Laos’s regulatory and legal requirements to do business in Laos. This company is 100% controlled by Earth Gen. Earth Gen Laos has its own in-country bank accounts denominated in US dollars through which it pays all local operating expenses of the business activities of Earth Gen in Laos.

In March of 2016, Earth-Eco Agriculture Inc. (“Earth-Eco”) was formed as a Nevada corporation and 100% owned subsidiary of Earth Gen-Biofuel Inc. There were no operation of Earth-Eco Agriculture for the period ended March 31, 2016. Earth-Eco Agriculture Inc. was formed for the management of Earth Gen-Biofuel Inc’s non-castor bean operations.

Note 2—Going Concern

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of June 30, 2015,March 31, 2016, the Company has an accumulated deficit since inception. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 3—Significant Accounting Policies

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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary. All inter-company accounts and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

These unaudited interim financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2015.2016.

The balance sheets and certain comparative information as of December 31, 20142015 are derived from the audited financial statements and related notes for the year ended December 31, 20142015 (“20142015 Annual Financial Statements”), included in the Company’s 20142015 Annual Report on Form 10-K. TheThese unaudited interim financial statements should be read in conjunction with the 20142015 Annual Financial Statements.

Basic and Diluted Loss per Common Share

Basic loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted loss per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Diluted loss per share excludes all dilutive potential shares if their effect is anti-dilutive.

The Company has issued common stock purchase warrants and entered into convertible note; however, they are anti-dilutive given the net loss incurred for the periods presented. As a result, 4,889,2867,139,286 potentially dilutive common stock equivalents (presented post-dividend and post-split) were excluded from the calculation of diluted loss per common share as of June 30, 2015.March 31, 2016. Therefore, dilutive and basic losses per common share are equal.

Inventory

Inventory consists of raw materials consisting of castor bean seeds. Inventories are recorded at the lower of cost or market, using the first-in, first-out method. Cost is determined at the actual cost for raw materials.

Expenditures on growing crops are valued at the lower of cost or market and are deferred and charged to cost of sales when the related crops are harvested and sold. The deferred growing costs included in inventories in the balance sheets consist primarily of land rental cost and service costs.

In assessing the ultimate realization of inventories, the management makes judgments as to future demand requirements compared to current or committed inventory levels. The Company’s reserve requirements generally increase or decrease with its projected demand requirements and market conditions. The Company estimates the demand requirements based on market conditions, forecasts prepared by its customers, sales contracts and orders in hand.

In addition, the Company estimates net realizable value based on intended use, current market value and inventory ageing analyses. The Company writes down the inventories for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventories and the estimated market value based upon assumptions about future demand and market conditions.

Based on the above assessment, the Company recorded an inventory reserve of $123,352$28,466 and $64,320 as$115,963as of June 30, 2015March 31, 2016 and December 31, 2014,2015, respectively.

Timber Rights

Timber rights represent the exclusive rights acquired by the Company to extract and purchase all commercial timber logs extractable from a designated timber concession area.

Timber rights are stated at cost less accumulated amortization and impairment loss, if any.

The timber rights are amortized on the basis of the volume of timber logs extracted during the year as a proportion of the total estimated timber logs extractable over the remaining period of timber extraction.

Revenue Recognition

Revenue from sales of the Company’s products is recognized upon customer acceptance, which occurs at the time of delivery to the customer, provided persuasive evidence of an arrangement exists, such as signed sales contract, the significant risks and rewards of ownership have been transferred to the buyer at the time when the products are delivered to its customers with no significant post-delivery obligation on our part, the sales price is fixed or determinable and collection is reasonably assured. The Company does not provide its customers with contractual rights of return and post-delivery discount for any of its products. When there is any significant post-delivery performance obligations exists, revenue is recognized only after such obligations are fulfilled. The Company evaluates the terms of sales agreement with its customers in order to determine whether any significant post-delivery performance obligations exist.

New Accounting Pronouncements

Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For organizations defined as public business entities, for the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. For other organizations, for the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required. The revised consolidation standards are effective two years later, in annual periods beginning after December 15, 2016. Early adoption is permitted. The adoption of this pronouncement will not have a material impact on the Company’s financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance regarding management’s responsibility to assess whether substantial doubt exists regarding the ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are currently evaluating the new guidance and have not determined the impact this standard may have on our condensed financial statements.

We do not believe there are any other recently issued standards not yet effective that will have a material impact on our financial statements when the standards become effective.

Note 4—Inventory

Inventory consists of:

Note 5— Property and Equipment

Property and equipment consist of:

For the sixthree months ended June 30,March 31, 2016 and 2015, and 2014, depreciation expenses were $1,924$962 and $629,$962, respectively.

Note 6— Timber Rights

On March 16, 2016, Earth-Eco purchased the rights to all products derived from Phonehong Tree Farms, a farm located in the Laos People’s Democratic Republic. The farm covers nearly 27 acres and has approximately 9,000 Aguilaria trees, which are cultivated to produce Agarwood. According to the purchase agreement, Phonehong Tree Farms assigned the rights to all Agarwood trees on the land and the future rights to all products grown on the land for a period of 40 years to Earth-Eco. In exchange for the rights, Earth Gen issued 2,500,000 shares of its restricted common stock to the owner of Phonehong Tree Farms. The shares were valued at $625,000, which was the fair value of the stock at the time of entering the purchasing agreement.

Note 6— Due from Related Parties

The Company and EarthBlock advanceadvanced each other monies in the normal course of business. During the period ended December 31, 2014 net funds provided to EarthBlock were $58,058.The advances do not have written note, do not accrued interest and are due on demand. There have been no new advances foradvances. At December 31, 2015, the six month period ended June 30, 2015. The advances do not haveCompany recorded a written note, do not accrue interest and are due on demand.reserve of $58,058.

As of March 31, 2016 and December 31, 2014,2015, the Company owed $55,641$34,444 and $19,444 to George Shen, CEO and shareholder of the Company for accrued service fees and monies advanced to and repaid by the Company in the normal course of business. On June 29, 2015, the Company paid all accrued service fees of $70,700 to Mr. ShenThe advances do not have written note, do not accrue interest and money advanced by Mr. Shen of $7,000 with the issuance of 1,100,000 shares of the Company’s restricted common stock. As a result, the Company was owed $390 by Mr, Shen as of June 30, 2015.are due on demand.

Prior to September 30, 2013, the Company was provided office space at no charge by George Shen,Shen. Starting July 1, 2014,2013, the Company has been paying office rent at $3,360 under a month-to-month lease agreement.agreement and is now paying $3,495 per month. Starting in February 2016, the Company has sub-leased part of the office space to a company in which George Shen is also a shareholder.

The Company obtained a promissory note of $2,000 on December 18, 2014short-term loans from a company in which George Shen is also an officer. The promissory note bears interest at 2% per annumofficer and due July 30, 2015. On June 3, 2015, the Company obtained another $7,000 loan from this company with a due date on October 30, 2015, but was paid off by George Shen on June 29, 2015.certain shareholders for working capital purposes.

The Company obtained aPromissory note from related parties consists of:

For the over-due promissory note of $5,000 on June 28, 2013 from one of its shareholders. The promissory note bearsnotes, there has been no interest and was due July 30, 2013 and was still outstanding as of June 30, 2015. The shareholder has not demandeddemand for repayment. On June 29, 2015, the Company obtained another promissory note of $2,000 from this shareholder that bears no interest and will be due on October 30, 2015, if the promissory note is not paid when due, the outstanding balance shall bear a default interest rate of 5% per annum.

Note 7— Notes Payable

The Company obtained short-term loans from an unrelated party for working capital purposes.

The

Note payable consists of:

The note was paid off in February 2015. On June 2, 2015, the Company obtained another $3,500 loan from this unrelated party which was paid off on June 4, 2015.

Note 8— Convertible Note

On December 15, 2014, the Company issued a $7,000 convertible note. The convertible note bears interest at 2% per annum, due July 30, 2015, convertible into common stock of the Company anytime after June 20, 2015 at a conversion price of $0.07 per share. If the outstanding balance of the convertible note is not paid when due, the default interest is 5% per annum above the rate that would otherwise be in effect with the default interest accruing, from and including such due date, on a cumulative, compounding basis. Note is in default, there has been no demand for repayment.

On October 29, 2014, the Company issued a $36,000 convertible note. The convertible note bears interest at 5% per annum, due December 15, 2015, convertible into common stock of the Company anytime after May 15, 2015 at a conversion price of $0.07 per share. If the outstanding balance of the convertible note is not paid when due, the default interest is 2% per annum above the rate that would otherwise be in effect with the default interest accruing, from and including such due date, on a cumulative, compounding basis. Note is in default, there has been no demand for repayment.

On September 30, 2014, the Company issued a $40,000 convertible note. The convertible note bears interest at 5% per annum, due September 15, 2015, convertible into common stock of the Company anytime after January 30, 2015 at a conversion price of $0.10 per share. If the outstanding balance of the convertible note is not paid when due, the default interest is 2% per annum above the rate that would otherwise be in effect with the default interest accruing, from and including such due date, on a cumulative, compounding basis. Note is in default, there has been no demand for repayment.

The Company calculated $63,000 for the intrinsic value of the beneficial conversion feature (“BCF”) of the convertible notes (based on the last sale price of $0.15 per share) and recorded the $63,000 BCF as a debt discount and as an addition to additional paid-in capital on effective date of the notes. The debt discount is being amortized to interest expense over the term of the note. As of June 30, 2015, a total of $43,920 wasThe BCF has been fully amortized to interest expense, leaving unamortized debt discount of $19,080. For the six months ended June 30, 2015, $32,559 of BCF (Beneficial Conversion Feature) debt discount was amortized to interest expense. There was no convertible note and related debt discount at June 30, 2014.since December 31, 2015.

.

Note 9—Stockholders’ Equity

At June 30, 2015,March 31, 2016, the Company is authorized to issue 690,000,000 shares of $0.0001 par value common stock and 10,000,000 of $0.0001 par value preferred stock.

In anticipation of the rescission of the exchange agreement with EarthBlock and to prevent dilution to existing shareholders of the Company, on October 15, 2013, the board of directors of the Company approved a stock dividend of three shares for each outstanding share. The stock dividend is being treated as a stock split due to its high volume. All share and per share information has been retroactively adjusted to reflect the stock split.

On March 27, 2014, the Company’s shareholders approved a recapitalization of the capital stock in the form of reverse stock split of its common stock in a ratio of 1-for-25. The shareholders also approved an amendment to the Articles of Incorporation to reduce the number of authorized shares of stock to 700,000,000 from 3,000,000,000. Of the 700,000,000 authorized shares, there are 10,000,000 shares of preferred stock and 690,000,000 shares of common stock.

As of June 30, 2015, 78,613,718March 31, 2016, 83,993,431 shares were issued and outstanding. As a result of above stock split and reverse split, atAt December 31, 2014, 75,080,8172015, 81,256,574 shares were issued and outstanding after adjusted for the stock split and reverse split.outstanding.

Private Placements of Common Stock

From January 1, 20152016 to June 30, 2015,March 31, 2016, Earth Gen issued to investors 2,396,501150,000 shares of its common stock at the offering price of $0.07 to $0.15$0.10 per share for an aggregate amount of $233,600. No commissions$15,000. There were paid. There was no agreement to register100,000 shares offered in this private placement.

The securities described abovefully paid that were not yet issued as of March 31, 2016 and were issued to investors in reliance upon the exemption from registration requirements of the Securities Act, as set forth in Section 4(2) under the Securities Act and Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering. No commissions were paid and no agreements to register shares were offered in the private placements. All Purchasers of shares described above represented to us in connection with their purchase that they were accredited investors and were acquiring the shares for their own account for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration.on April 4, 2016.

Restricted Stock Awards (“RSA”) Issued for Services

All reference to numbers of shares issued for warrants and per share price is based on a post-stock-dividend and post-reverse-split amount. During six months ended June 30, 2015 and year ended Decemberthe period January 1, 2016 through March 31, 2014,2016 the Company granted 36,400 and 3,299,267186,857 RSAs to various consultants for their services provided to the Company.

Company and valued at $40,174. As of June 30, 2015 and DecemberMarch 31, 2014,2016, all RSAs are vested and there was no unrecognized compensation cost related to RSAs.

For the six months ended June 30, 2015 and 2014, stock-based compensation expense was $2,548 and $186,240, respectively. The value of the shares issued was based on the fair value of the stock at the time of it was issued whichor agreed upon value of services rendered.

Common Stock Issued for Acquisition

On March 16, 2016, Earth-Eco Agriculture Inc. was based on the most recent saleformed as a Nevada corporation and 100% owned subsidiary of Earth Gen-Biofuel Inc. Earth Gen-Biofuel Inc. issued 2,500,000 shares of Earth Gen-Biofuel Inc. ‘restricted” common stock for cash.the purchase of the rights to the Agarwood production from a 27-acre Phonehong Tree Farm in the Laos People’s Democratic. The shares were valued at $625,000.

Warrants

In connection with the 2013 private placements, the Company issued warrants for 6,400,000 shares of Earth Gen Common Stock on August 1, 2013 and 1,600,000 warrants on September 12, 2013. Each of these warrants entitled the holder to purchase one (1) share of Earth Gen common stock at $0.03 per share starting on January 1, 2014 and ending on December 15, 2016. As of June 30, 2015,December 31, 2014, 1,000,000 warrants have been exercised in exchange for total cash proceeds of $31,250 or $0.03 per share.

In connection with the January 2014 private placement, the Company issued warrants to purchase 202,000 shares of Earth Gen common stock on March 20, 2014. Each warrant entitles the holder to purchase one (1) share of Earth Gen common stock at $0.50 per share starting on July 15, 2014 and ending on September 30, 2016.

In connection with the April 2015 private placement, the Company issued warrants to purchase 3,000,000 shares of Earth Gen common stock on April 26, 2014.2015. Each warrant entitles the holder to purchase one (1) share of Earth Gen common stock at $0.07 per share starting on May 1, 2015 and ending on December 15, 2015.

In connection with the April 2015 private placement, the Company issued warrants to purchase 6,000,000 shares of Earth Gen common stock on April 26, 2014.2015. Each warrant entitles the holder to purchase one (1) share of Earth Gen common stock at $0.07 per share starting on May 1, 2015 and ending on March 31, 2016.

These warrants have standard anti-dilution language to allow for recapitalizations and distributions. The warrants are equity classified and amounts attributable to the warrants are classified within additional paid-in capital. All reference to numbers of shares issued for warrants and per share price is based on a post-stock-dividend and post-reverse-split amount.

A summary of the status of the Company’s warrants outstanding as of June 30, 2015March 31, 2016 is presented below:

The following table summarizes information about warrants outstanding as of June 30, 2015:March 31, 2016:

For the three months ended March 31, 2016 and 2015, stock-based compensation expense was $54,577 and $0, respectively.

Note 10—Income Taxes

The Company is subject to taxation in the United States. As of March 31, 2016, the Company had Federal net tax operating loss carry forwards of approximately $2,741,583 available to offset future taxable income. The carry forwards expire in varying amounts through 2034.

Uncertain Tax Positions

Interest associated with unrecognized tax benefits are classified as income tax and penalties are classified in general and administrative expenses in the consolidated statements of operations.

For the three months ended March 31, 2016 and 2015, the Company had no unrecognized tax benefits and related interest and penalties expenses. Currently, the Company is not subject to examination by major tax jurisdictions.

Note 11—Commitments and Contingencies

Farm Lease Agreements

On March 10, 2014, Earth Gen entered into a lease agreement for 136 hectares of farm land located at Phoengam Neua Village, Pek Districk, Xiengkhuang Province in the People’s Republic of Lao. The term of the lease is for twelve years with an option for Earth Gen to renew for an additional twelve years. Earth Gen is obligated to pay taxes on the land of up to $1,000 per year;year any taxes in excess of that amount are the obligation of the landowner. In addition, Earth Gen is obligated to provide all elements required to grow castor beans on the land and start using the land in partial or in full for castor bean farming operations before the end of 2014. The compensation to the landowner under the agreement is $50.00 per metric ton of castor beans harvested and is due ninety days after the harvest.

In addition to this agreement, Earth Gen has entered into two additional agreements, under the terms substantially equivalent to the original agreement described above, for 103 additional hectares in Xiengkhuang Province in close proximity to the Phoengram Neua Village farm.

Note 1112 – Subsequent Events

JulyApril 1, 20152016 through August 10, 2015May 18, 2016 Private Placement of Common Stock

The Company received $3,000$60,000 for the purchase of 400,000 shares of Restricted Common stock during the period from April 1, 2016 to May 18, 2016. There was a subscription owing on the purchase of 20,000 shares of restricted common stock. The shares were pending issue as of August 13, 2015.on May 18, 2016.

During the period April 1, 2016 through May 18, 2016 the Company granted 101,000 RSAs to various consultants for their services provided to the Company and valued at $23,440. The securities described above are to be issued in reliance upon the exemption from registration requirementsvalue of the Securities Act, as set forth in Section 4(2) undershares issued was based on the Securities Act and Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering. No commissions were paid and no agreements to register shares were offered infair value of the private placements. All Purchasersstock at the time of shares described above represented to us in connection with their purchase that they were accredited investors and were acquiring the shares for their own account for investment purposes only and not with a view to,it was issued or for sale in connection with, any distribution thereof. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration.agreed upon value of services rendered.

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

In this section, “Earth Gen,” “we,” “our,” “ours,” “us” and the “Company” refer to Earth Gen-Biofuel, Inc. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q consists of forward-looking statements such as statements regarding our expectations about the trials, regulatory approval, manufacturing, distribution and commercialization of our current and future product candidates and statements regarding our anticipated revenues, expenses, margins, profits and use of cash. In this Quarterly Report on Form 10-Q, the words “anticipates,” “believes,” “expects,” “intends,” “future,” “could,” “estimates,” “plans,” “would,” “should,” “potential,” “continues” and similar words or expressions (as well as other words or expressions referencing future events, conditions or circumstances) often identify forward-looking statements.

These forward-looking statements are based on our current expectations. These statements are not promises or guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results to be materially different from any future results expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: our limited operating history and expectations of losses for the foreseeable future; the absence of revenue from our product candidates for the foreseeable future; our potential inability to obtain any necessary additional financing; our substantial dependence on the success of our lead product candidates, which may not be successfully commercialized even if they are approved for marketing; the effect of competition; our potential inability to obtain regulatory approval for our existing or future product candidates; our dependence on third parties to conduct some of our development activities; our dependence upon third-party manufacturers for supplies of our product candidates; uncertainties regarding the outcomes of trials regarding our product candidates; our potential failure to attract and retain senior management and key scientific personnel; uncertainty about our ability to develop a satisfactory sales organization; our significant costs of operating as a public company; our potential inability to obtain patent protection and other intellectual property protection for our product candidates; potential claims by third parties alleging our infringement of their patents and other intellectual property rights; our potential failure to comply with regulatory requirements, which are subject to change on an ongoing basis; the potential volatility of our stock price; and the significant control over our business by our principal stockholders and management.

Overview

Our primary business is the cultivation of non-food agricultural products for use in manufacturing processes, renewable energy and transportation fuel. Currently, our focus is on the cultivation of castor beans, an agricultural crop currently in high demand and short supply. Castor beans are an integral component in processing manufactured products for many countries and have attracted attention as a “renewable energy crop” with great value due to its high oil content in comparison to other oil seed crops.

Our goal is to become a major producer of castor beans in Southeast Asia and other tropical growing areas. Our business model is to supply the growing demand for castor beans by cultivating and growing in areas not suitable for food crops. Our plan to use areas of relatively poor soil conditions allows us to produce castor beans without competing with potentially more valuable products.

We plan to build our business by providing castor beans to chemical conversion facilities, which utilize chemical processes that require the use castor oil, in China and other countries such as Japan, Taiwan, Europe and the United States. Furthermore, as the world supply of castor beans grows along with our own production, we will benefit from a “tipping point” created when there is enough surplus castor bean supply to allow for its use as biodiesel. Based on current commercial demand for castor bean oil, long term need for clean fuel, and favorable industry conditions in China, the United States and Europe, we believe that, subject to obtaining the necessary capital, we are positioned for rapid near and long term growth.

Earth Gen-Biofuel Inc. formed a new wholly owned subsidiary Earth-Eco Agriculture Inc. (“Earth-Eco”) as a Nevada corporation on March 16, 2016. This new subsidiary was formed to manage agricultural operations that are not Castor Bean related for its parent company Earth Gen-Biofuel Inc.

On March 16, 2016 Earth-Eco purchased the rights to the Agarwood production from a 27-acre plantation in the Laos People’s Democratic Republic containing over 9,000 matureAquilaria trees for the production ofAgarwood. Earth Gen-Biofuel Inc. issued 2,500,000 shares of 21“restricted” Common stock to the Seller to complete the purchase. The shares were valued at $625,000.