U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               AMENDMENT NO. 1 TO

                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                   For the fiscal year ended December 31, 2007

[ ]  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 000-32131


                          QUEST MINERALS & MINING CORP.
           (Name of small business issuer as specified in its charter)


                  Utah                                      87-0429950
    (State or other jurisdiction of                      (I.R.S. Employer
     incorporation or organization)                     Identification No.)


                               18B East 5th Street
                               Paterson, NJ 07524
          (Address of principal executive offices, including zip code)


  Registrant's telephone number, including area code:  (973) 684-0075
  Securities registered pursuant to Section 12(b) of the Act: None
  Securities registered pursuant to Section 12(g) of the Act:  Common Stock,
                                                               $.001 par value
                               ___________________

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 is a shell company (as
defined in Rule 12b-2 of the Exchange Act. [ ]

         Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         The issuer's revenues for the most recent fiscal year were $153,213.

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant was approximately $805,756 as of April
8, 2008. Shares of common stock held by each officer and director and by each
person or group who owns 10% or more of the outstanding common stock amounting
to 1,326,025 shares have been excluded in that such persons or groups may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

         As of April 8, 2008, 213,367,219 shares of our common stock were issued
and outstanding.

         Documents Incorporated by Reference: None.

         Transitional Small Business Disclosure Format: No.

<PAGE>

                                EXPLANATORY NOTE

         This Amendment No. 1 to annual report on Form 10-KSB is being filed to
provide the financial statements required by Item 310 of Regulation S-B,
management's discussion and analysis required by Item 303 of Regulation S-B,
disclosure controls and procedures required by Item 307 of Regulation S-B,
internal control over financial reporting required by Item 308 of Regulation
S-B, and certifications required under Rule 13a-14 of the Securities Exchange
Act of 1934, as amended, and Section 1350 of the Sarbanes-Oxley Act of 2002,
which items were not available for filing with the annual report on Form 10-KSB
filed by us on April 15, 2008.

                                     PART I

         Quest Minerals & Mining Corp., including all its subsidiaries, are
collectively referred to herein as "Quest Minerals," "Quest," "the Company,"
"us," or "we."

Item 1.   DESCRIPTION OF BUSINESS

General

         Quest Minerals & Mining Corp. acquires and operates energy and mineral
related properties in the southeastern part of the United States. Quest focuses
its efforts on properties that produce quality compliance blend coal.

         Quest is a holding company for Quest Minerals & Mining, Ltd., a Nevada
corporation, or Quest (Nevada), which in turn is a holding company for Quest
Energy, Ltd., a Kentucky corporation, or Quest Energy, and of Gwenco, Inc., a
Kentucky corporation, or Gwenco.

         Gwenco leases over 700 acres of coal mines, with approximately
12,999,000 tons of coal in place in six seams. In 2004, Gwenco had reopened
Gwenco's two former drift mines at Pond Creek and Lower Cedar Grove, and had
begun production at the Pond Creek seam. This seam of high quality compliance
coal is located at Slater's Branch, South Williamson, Kentucky.

Fiscal 2007 and First Quarter 2008 Developments

         Logan & Kanawha Purchase Order. In April 2008, our wholly owned
subsidiary, Gwenco, Inc., received a purchase order for up to $8 million of coal
through December 2008 from Logan & Kanawha Co., LLC, a West Virginia company

         Rehabilitation and Reopening of Pond Creek Mine. In January 2007,
Gwenco received a permit from the Kentucky Department of Natural Resources to
conduct coal mining at its Pond Creed mine. In February 2007, Gwenco's
engineering firm, Alchemy Engineering of Prestonburg, Kentucky, completed one
and five year mine plan and maps required by the Kentucky Department of Mines
and Minerals in connection with the permit to conduct coal mining at Pond Creek.
Gwenco had retained General Mining, LLC of Wallins, Kentucky to rehabilitate the
Pond Creek mine in February 2007 and further retained General Mining to conduct
mining operations at Pond Creek in March 2007. The company completed its initial
rehabilitation of the Pond Creek mine, recommenced mining operations, and began
shipping commercial coal for sale in May 2007. The company completed all
rehabilitation the week of July 30, 2007. In January 2008, we retained White
Star Mining to conduct all mining operations at Pond Creek. White Star retained
all necessary permits to being mining operations in February 2008, and we expect
to resume mining operations in the second fiscal quarter of 2008.

         March 2008 Financing. On March 11, 2008, we signed a 15% per annum
promissory note with a third party lender for $75,000 due on March 10, 2009. The
note is convertible at the option of the holder at a conversion price of 50% of
the average of the three lowest per share market values during the ten (10)
trading days immediately preceding a conversion date. The holder may not convert
any outstanding principal amount of this note or accrued and unpaid interest
thereon to the extent such conversion would result in the holder beneficially
owning in excess of 4.999% of the then issued and outstanding common shares of
the Company.

                                       2
<PAGE>

         Letter of Intent with McCoy Heirs. In January 2008, we entered into a
letter of intent on a joint venture with the McCoy Heirs, owners of coal
property in southern Kentucky. The project was intended to encompass 1,000,000
tons of recoverable coal reserves from the Elkhorn # 3 coal seam structured
through a lease agreement to mine property held by the McCoy Heirs. This letter
of intent has since been abandoned.

         Gwenco, Inc. Chapter 11 Reorganization. On March 2, 2007, Quest's
wholly owned subsidiary, Gwenco, Inc., filed a voluntary petition for
reorganization under Chapter 11 of .the U.S. Bankruptcy Code with the United
States Bankruptcy Court for the Eastern District of Kentucky. Management felt
this was a necessary step to further the company's financial restructuring
initiative and to protect Gwenco's assets from claims, debts, judgments,
foreclosures, and forfeitures of those creditors and stakeholders with whom both
Quest and Gwenco were unable to negotiate restructured agreements. The company
is currently overseeing Gwenco's operations as a debtor in possession, subject
to court approval of matters outside the ordinary course of business. Gwenco is
currently seeking court approval for debtor in possession financing from holders
of Gwenco's existing debt obligations in order to fund operating expenses. The
company intends to continue its mining operations at Pond Creek mine at Slater's
Branch while this matter is completed. Under Chapter 11, claims against Gwenco
in existence prior to the filing of the petitions for reorganization relief
under the federal bankruptcy laws are stayed while Gwenco is in bankruptcy. On
August 3, 2007, the Bankruptcy Court approved Gwenco's request for
debtor-in-possession financing in an amount of up to $2,000,000. In February
2008, Gwenco submitted a preliminary plan of reorganization to the court for
approval.

         Letter of Intent with Parsons Branch. On July 21, 2006, Quest signed a
non-binding letter of intent with Parsons Branch Development to acquire a permit
to mine the Elkhorn #2 seam on Parsons Branch located in Mud Creek, Kentucky.
Parsons Branch Development has approximately 450,000 tons of clean coal under
lease at this location. Upon completion of the transfer of the permit to Quest,
it will retain all revenues from coal sales after payment of a royalty to
Parsons Branch of $1.50 per clean ton mined and expenses of mine operations,
which are expected to be carried out by a contract miner. Management determined
not to pursue this transaction during fiscal 2007.

                                       3
<PAGE>

Industry Overview

         Coal is the second most widely used form of energy in the United
States, accounting for nearly one-fourth of the nation's total energy
consumption, according to the BP Statistical Review of World Energy ("BP"), June
2007. In 2006, coal was the fuel source of 50% of the electricity generated
nationwide, as reported by the Energy Information Administration ("EIA"), a
statistical agency of the United States Department of Energy.

         The United States is the second largest coal producer in the world,
exceeded only by China. Other leading coal producers include India, Australia,
South Africa, Russia and Indonesia. The United States has the largest coal
reserves in the world, with proved reserves totaling 247 billion tons. Russia
ranks second in proved coal reserves with 157 billion tons, followed by China
with 115 billion tons, according to BP.

         United States coal reserves are more plentiful than oil or natural gas
with 234 years of supply at current consumption rates. Proved United States
reserves of oil amount to 12 years of supply at current production rates and
proved United States reserves of natural gas amount to 11 years of supply at
current levels of consumption, as reported by the BP study.

         United States coal production has more than doubled over the last 40
years. In 2006, total United States coal production, as estimated by the EIA,
was 1.2 billion tons.

         Coal is used in the United States by utilities to generate electricity,
by steel companies to make steel products, and by a variety of industrial users
to produce heat and to power foundries, cement plants, paper mills, chemical
plants and other manufacturing and processing facilities. Significant quantities
of coal are also exported from both East and Gulf Coast terminals. The breakdown
of 2006 United States coal consumption, as estimated by the EIA, is as follows:



End Use                                                              % of Total
----------------------------------------------------------------  -------------
Electrical Power                                                            93%
Other Industrial                                                             5%
Coke                                                                         2%
Residential and Commercial                                                  <1%
                                                                  ------------
Total                                                                      100%

         Coal has long been favored as an electricity generating fuel because of
its basic economic advantage. The largest cost component in electricity
generation is fuel. This fuel cost is typically lower for coal than competing
fuels such as oil and natural gas on a Btu-comparable basis. Platts, which
provides global commodity news and information, estimated the average total
production costs of electricity, using coal and competing generation
alternatives in 2006 as follows:


                                                               Cost per million
                                                                    Kilowatt
Electricity Generation Source                                         Hours
----------------------------------------------------------------  -------------
Oil                                                               $      14.69
Natural Gal                                                       $       7.97
Coal                                                              $       2.19
Nuclear                                                           $       1.84

         There are factors other than fuel cost that influence each utility's
choice of electricity generation mode, including facility construction cost,
access to fuel transportation infrastructure, environmental restrictions, and
other factors. The breakdown of United States electricity generation by fuel
source in 2006, as estimated by EIA, is as follows:

                                       4
<PAGE>

                                                                   % of Total
                                                                   Electricity
Electricity Generation Source                                      Generation
----------------------------------------------------------------  -------------
Coal                                                                        50%
Nuclear                                                                     20%
Natural Gas                                                                 19%
Hydroelectric                                                                7%
Oil and other (solar, wind, etc.)                                            4%
                                                                  ------------
Total                                                                      100%
                                                                  ------------


         Demand for electricity has historically been driven by United States
economic growth, but it can fluctuate from year to year depending on weather
patterns. In 2006, electricity consumption in the United States increased 0.2%,
but the average growth rate in the past decade was approximately 1.5% per year,
according to EIA estimates. Because coal-fired generation is used in most cases
to meet base load requirements, coal consumption has generally grown at the pace
of electricity demand growth.

         According to the World Coal Institute ("WCI"), in 2006, the United
States ranked seventh among worldwide exporters of coal. Australia was the
largest exporter, with other major exporters including Indonesia, China, South
Africa, Russia, Columbia and Canada. According to EVA, United States exports
increased by 19% from 2006 to 2007. The usage breakdown for 2007 was that United
States exports of 59 million tons were 45% for electricity generation and 55%
for steel production. In 2007, the United States coal exports were shipped to
more than 30 countries. The largest purchaser of United States exported utility
coal in 2007 continued to be Canada, which took 14.6 million tons, or 55%, of
total utility coal exports. This was down 4% compared to the 15.2 million tons
exported to Canada in 2006. Overall steam coal exports increased 22% in 2007
compared to 2006. The largest purchasers of United States exported metallurgical
coal were Brazil, which imported approximately 6.5 million tons, or 20%, and
Canada, which imported 3.7 million tons, or 12%. In total, metallurgical coal
exports increased 16% in 2007 compared to 2006.

         Depending on the relative strength of the United States dollar versus
currencies in other coal producing regions of the world, United States producers
may export more or less coal into foreign countries as they compete on price
with other foreign coal producing sources. Likewise, the domestic coal market
may be impacted due to the relative strength of the United States dollar to
other currencies, as foreign sources could be cost-advantaged based on a coal
producing region's relative currency position. During 2007, the United States
dollar weakened, making imported coal less competitive with United States
produced coal, and positively impacting the competitiveness of United States
exports in some overseas markets.

         From 2003 to February 2008, the global marketplace for coal experienced
swings in the demand/supply balance. In periods of supply shortfall, as occurred
from 2003 to early 2006 and again in late 2007 through February 2008, the prices
for coal reached record highs in the United States. Increased worldwide demand
has been primarily driven by higher prices for oil and natural gas and economic
expansion, particularly in China, India, and elsewhere in Asia. At the same
time, infrastructure and regulatory limitations in China contributed to a
tightening of worldwide coal supply, affecting global prices of coal. The growth
in China and India caused an increase in worldwide demand for raw materials and
a disruption of expected coal exports from China to Japan, Korea, and other
countries.

         Metallurgical grade coal is distinguished by special quality
characteristics that include high carbon content, volatile matter, low expansion
pressure, low sulfur content, and various other chemical attributes. High vol
met coal is also high in heat content (as measured in Btus), and therefore is
desirable to utilities as fuel for electricity generation. Consequently, high
vol met coal producers have the ongoing opportunity to select the market that
provides maximum revenue and profitability. The premium price offered by steel
makers for the metallurgical quality attributes is typically higher than the
price offered by utility coal buyers that value only the heat content. The
primary concentration of United States metallurgical coal reserves is located in
the Central Appalachian region. EVA estimates that the Central Appalachian
region supplied 89% of domestic metallurgical coal and 73% of United States
exported metallurgical coal during 2006.

                                       5
<PAGE>

         For utility coal buyers, the primary goal is to maximize heat content,
with other specifications like ash content, sulfur content, and size varying
considerably among different customers. Low sulfur coals, such as those produced
in the western United States and in Central Appalachia, generally demand a
higher price due to restrictions on sulfur emissions imposed by the Clean Air
Act of 1963 ("Clean Air Act") and the volatility in SO2 allowance prices that
occurred in recent years when the demand for all specifications of coal
increased. SO2 allowances permit utilities to emit a higher level of SO2 than
otherwise required under the Clean Air Act regulations. The demand and premium
price for low sulfur coal is expected to diminish as more utilities install
scrubbers at their coal-fired plants. Coal shipped for North American
consumption is typically sold at the mine loading facility with transportation
costs being borne by the purchaser. Offshore export shipments are normally sold
at the ship-loading terminal, with the purchaser paying the ocean freight.
According to the National Mining Association ("NMA"), approximately two-thirds
of United States coal production in recent years was shipped via railroads.
Final delivery to consumers often involves more than one transportation mode. A
significant portion of United States production is delivered to customers via
barges on the inland waterway system and ships loaded at Great Lakes ports.

Market Opportunity

         In the past, coal price declines lead to widespread mine shutdowns.
Beginning in the fourth quarter of 2003, coal prices began a steady increase.
Traditionally, coal price increases have been caused by harsh North American
weather or labor stoppages. Current upward pricing trends have no specific
driver outside of general price increases in all energy sources, which appear to
be driven by geo-political concerns and the current non-renewable
characteristics of fossil fuels. Equivalent current natural gas prices imply
that coal should currently be trading at U.S. $175 per ton. Nymex July 2004 coal
deliveries were trading just above $80 per ton as of the beginning of March
2004. As coal prices strengthen, Quest believes that it could become highly
lucrative to re-open the best of these recently closed mines.

Gwenco Mines

         Gwenco holds approximately 30 coal leases, covering an estimated 700
acres, with a projected 12,999,000 tons of coal in place in six seams with
possible additional reserves on adjacent leases. From 1997 to 2001, Gwenco
operated two deep mines in the Lower Cedar Grove and Pond Creek seams -- until a
downturn in coal prices made continued operations unfeasible, and the mines were
shut down. As discussed above, Gwenco has recently re-opened the Pond Creek mine
is starting to mine the Pond Creek seam.

         The primary reserves are in the Pond Creek, Lower Cedar Grove, and
Taylor seams. Both the Pond Creek and Lowers Cedars Grove seams are permitted
and bonded and have been mined to a limited extent. The coal in the Pond Creek
seam is low-sulfur, compliance coal, running at an average of 12,000 to 12,500
BTUs when mined clean. The coal in the Lower Cedar Grove seam has a shale
parting and must be washed to be commercial. When cleaned it is a high BTU coal
with certain metallurgical coal qualities.

Mining Techniques

         There are several basis techniques for mining drift or adit mines.
Quest has used, and intends to use, a continuous miner on the Pond Creek seam at
its Gwenco facility. Quest has used, and intends to use, a Joy 14-10AA
continuous miner at the Gwenco mines. In this technique, the miner has a cutting
head that tears the coal from it natural deposit and transfers the coal to a
gather head and then to shuttle cars that can carry from 3 to 10 tons depending
on the size. This method can create higher volume mining than the conventional
method, but may mine the coal with a higher content of ash.

Expansion Strategy

         Quest seeks to acquire new mines and contracting to produce and market
additional coal in its geographic focus area. Quest intends to acquire and
operate high quality coal properties with established field personnel, primarily
in the eastern Kentucky coalfields, with additional properties in southwestern
West Virginia and western Virginia. This region has an excellent infrastructure
of workers, truckers, rail sidings on the CSX and N&W rail lines and low cost

                                       6
<PAGE>

access to the Big Sandy barge docks near Ashland, KY, for effective coal
distribution. Quest intends to use its local knowledge to pursue high returns on
investment from re-opening profitable properties in this region. It intends to
grow by additional accretive acquisitions, contract mining, and internal
development of owned properties.

         Quest is also seeking to diversify its operations into other sectors of
the energy industry, including the oil and gas sector. Quest's coal miners
collectively have over 50 years of mining experience. Quest may also engage key
industry experts to assist in the analysis and funding of these properties.
Quest management believes that a successful diversification into the oil and gas
field would provide Quest with an opportunity to improve its results of
operations while hedging on coal production and prices.

Customers

         Quest currently has one customer, which has delivered a purchase order
purchase order for up to $8 million of coal through December 2008. To the extent
that Quest produces coal in excess of this order, it intends to sell its
remaining coal to other purchasers or on the spot market to coal brokers. Quest
may seek to enter into long-term contracts (exceeding one year in duration) with
customers if economic circumstances indicate that such arrangements would
maximize profitability. These arrangements would allow customers to secure a
supply for their future needs and provide Quest with greater predictability of
sales volume and sales prices.

Competition

         The coal industry in the United States is highly competitive. Quest
competes with many large producers and other small coal producers. Quest also
competes with other producers primarily on the basis of price, coal quality,
transportation cost and reliability of supply. Continued demand for coal is also
dependent on factors outside of Quest's control, including demand for
electricity, environmental and governmental regulations, weather, technological
developments, and the availability and cost of alternative fuel sources.

         The price at which Quest's production can be sold is dependent upon a
variety of factors, many of which are beyond Quest's control. Quest sells coal
on the spot-market and seeks to sell coal under long-term contracts. Generally,
the relative competitiveness of coal vis-a-vis other fuels or other coals is
evaluated on a delivered cost per heating value unit basis. In addition to
competition from other fuels, coal quality, the marginal cost of producing coal
in various regions of the country and transportation costs are major
determinants of the price for which Quest's production can be sold. Factors that
directly influence production cost include geological characteristics (including
seam thickness), overburden ratios, depth of underground reserves,
transportation costs and labor availability and cost. Underground mining has
higher labor (including reserves for future costs associated with labor benefits
and health care) and capital (including modern mining equipment and construction
of extensive ventilation systems) costs than those of surface mining. In recent
years, increased development of large surface mining operations, particularly in
the western United States, and more efficient mining equipment and techniques,
have contributed to excess coal production capacity in the United States.
Competition resulting from excess capacity has encouraged producers to reduce
prices and to pass productivity gains through to customers. Demand for Quest's
low sulfur coal and the prices that Quest will be able to obtain for it will
also be affected by the price and availability of high sulfur coal, which can be
marketed in tandem with emissions allowances.

         Transportation costs are another fundamental factor affecting coal
industry competition. Coordination of the many eastern loadouts, the large
number of small shipments, terrain and labor issues all combine to make
shipments originating in the eastern United States inherently more expensive on
a per-mile basis than shipments originating in the western United States.
Historically, coal transportation rates from the western coal producing areas
into Central Appalachian markets limited the use of western coal in those
markets. More recently, however, lower rail rates from the western coal
producing areas to markets served by eastern producers have created major
competitive challenges for eastern producers. Barge transportation is the lowest
cost method of transporting coal long distances in the eastern United States,
and the large numbers of eastern producers with river access keep coal prices
competitive. Quest believes that many utilities with plants located on the Ohio
River system are well positioned for deregulation as competition for river
shipments should remain high for Central Appalachian coal. Quest also believes
that with close proximity to competitively-priced Central Appalachian coal,
utilities with plants located on the Ohio River system will become price setters
in a deregulated environment.

                                       7
<PAGE>

         Although undergoing significant consolidation, the coal industry in the
United States remains highly fragmented. It is possible that Quest's costs will
not permit it to compete effectively with other producers seeking to provide
coal to a customer; however, it is Quest's goal to maintain low production
costs, offer a variety of products and have develop access to multiple
transportation systems that will enable it to compete effectively with other
producers.

Environmental, Safety and Health Laws and Regulations

         The coal mining industry is subject to regulation by federal, state and
local authorities on matters such as the discharge of materials into the
environment, employee health and safety, permitting and other licensing
requirements, reclamation and restoration of mining properties after mining is
completed, management of materials generated by mining operations, surface
subsidence from underground mining, water pollution, water appropriation and
legislatively mandated benefits for current and retired coal miners, air quality
standards, protection of wetlands, endangered plant and wildlife protection,
limitations on land use, and storage of petroleum products and substances that
are regarded as hazardous under applicable laws. The possibility exists that new
legislation or regulations may be adopted that could have a significant impact
on our mining operations or on our customers' ability to use coal.

         Numerous governmental permits and approvals are required for mining
operations. Regulations provide that a mining permit or modification can be
delayed, refused, or revoked if an officer, director, or a stockholder with a
10% or greater interest in the entity is affiliated with or is in a position to
control another entity that has outstanding permit violations. Thus, past or
ongoing violations of federal and state mining laws by individuals or companies
no longer affiliated with us could provide a basis to revoke existing permits
and to deny the issuance of addition permits. We are required to prepare and
present to federal, state, or local authorities data and/or analysis pertaining
to the effect or impact that any proposed exploration for or production of coal
may have upon the environment, public and employee health and safety. All
requirements imposed by such authorities may be costly and time-consuming and
may delay commencement or continuation of exploration or production operations.
Accordingly, the permits we need for our mining and gas operations may not be
issued, or, if issued, may not be issued in a timely fashion. Permits we need
may involve requirements that may be changed or interpreted in a manner that
restricts our ability to conduct our mining operations or to do so profitably.
Future legislation and administrative regulations may increasingly emphasize the
protection of the environment, health and safety and, as a consequence, our
activities may be more closely regulated. Such legislation and regulations, as
well as future interpretations of existing laws, may require substantial
increases in equipment and operating costs, delays, interruptions or a
termination of operations, the extent of which cannot be predicted.

         While it is not possible to quantify the expenditures we incur to
maintain compliance with all applicable federal and state laws, those costs have
been and are expected to continue to be significant. We post surety performance
bonds or letters of credit pursuant to federal and state mining laws and
regulations for the estimated costs of reclamation and mine closing, often
including the cost of treating mine water discharge when necessary. Compliance
with these laws has substantially increased the cost of coal mining for all
domestic coal producers. We endeavor to conduct our mining operations in
compliance with all applicable federal, state, and local laws and regulations.
However, even with our substantial efforts to comply with extensive and
comprehensive regulatory requirements, violations during mining operations could
occur from time to time.

         Mine Safety and Health

         Stringent health and safety standards have been in effect since
Congress enacted the Federal Coal Mine Health and Safety Act of 1969. The
Federal Coal Mine Safety and Health Act of 1977 significantly expanded the
enforcement of safety and health standards and imposed safety and health
standards on all aspects of mining operations. A further expansion occurred in
June 2006 with the enactment of the Mine Improvement and New Emergency Response
Act of 2006 ("MINER Act").

         The MINER Act and related Mine Safety and Health Administration
("MSHA") regulatory action require, among other things, improved emergency
response capability, increased availability of emergency breathable air,
enhanced communication and tracking systems, more available mine rescue teams,
increased mine seal strength and monitoring of sealed areas in underground
mines, as well as larger penalties by MSHA for noncompliance by mine operators.
Coal producing states, including West Virginia and Kentucky, passed similar
legislation. The bituminous coal mining industry was actively engaged throughout
2007 in activities to achieve compliance with these new requirements. These
compliance efforts will continue into 2008.

                                       8
<PAGE>

         On February 8, 2008, MSHA published a final rule that revises existing
standards for mine rescue teams for underground coal mines. This final rule
implements Section 4 of the MINER Act to improve overall mine rescue capability,
mine emergency response time, and mine rescue team effectiveness. It also calls
for increased quantity and quality of mine rescue team training. Additional
substantive legislation is also possible in 2008 with the passage by the United
States House of Representatives in January 2008 of the Supplementary Mine
Improvement and New Emergency Response Act, ("S-MINER Act"). The House
legislation augments portions of the MINER Act and proposes changes to retreat
mining practices, study of substance abuse issues, and the use of coal dust
monitors to reduce miner respirable dust exposure.

         Kentucky, the state in which we currently operate, has state programs
for mine safety and health regulation and enforcement. Collectively, federal and
state safety and health regulation in the coal mining industry is perhaps the
most comprehensive and pervasive system for protection of employee health and
safety affecting any segment of industry in the United States. While regulation
has a significant effect on our operating costs, our United States competitors
are subject to the same degree of regulation.

         Our goal is sustainable excellence in our safety and health
performance. We are committed to doing our best, and then learning to do even
better. We recognize each employee's and consultant's contributions to our
collective safety and health efforts and reward outstanding performance. We
measure our success in this area primarily through the use of occupational
injury and illness frequency rates. We believe that a superior safety and health
regime is inherently tied to achieving productivity and financial goals, with
overarching benefits for our shareholders, the community, and the environment.

         Black Lung. Under federal black lung benefits legislation, each coal
mine operator is required to make payments of black lung benefits or
contributions to: (i) current and former coal miners totally disabled from black
lung disease; and (ii) certain survivors of a miner who dies from black lung
disease. The Black Lung Disability Trust Fund, to which we must make certain tax
payments based on tonnage sold, provides for the payment of medical expenses to
claimants whose last mine employment was before January 1, 1970 and to claimants
employed after such date, where no responsible coal mine operator has been
identified for claims or where the responsible coal mine operator has defaulted
on the payment of such benefits. In addition to federal acts, we are also liable
under various state statutes for black lung claims. Federal benefits are offset
by any state benefits paid.

         Environmental Laws

         Surface Mining Control and Reclamation Act. The Surface Mining Control
and Reclamation Act, ("SMCRA"), which is administered by the Office of Surface
Mining Reclamation and Enforcement ("OSM"), establishes mining, environmental
protection and reclamation standards for all aspects of surface mining as well
as many aspects of deep mining. The SMCRA and similar state statutes require,
among other things, the restoration of mined property in accordance with
specified standards and an approved reclamation plan. In addition, the Abandoned
Mine Land Fund, which is part of the SMCRA, imposes a fee on all current mining
operations, the proceeds of which are used to restore mines closed before 1977.
The maximum tax is $0.315 per ton on surface-mined coal and $0.135 per ton on
deep-mined coal. A mine operator must submit a bond or otherwise secure the
performance of its reclamation obligations. Mine operators must receive permits
and permit renewals for surface mining operations from the OSM or, where state
regulatory agencies have adopted federally approved state programs under the
act, the appropriate state regulatory authority. We accrue for reclamation and
mine-closing liabilities in accordance with Statement of Financial Accounting
Standard ("SFAS") No. 143, "Accounting for Asset Retirement Obligations" ("SFAS
143").

         Clean Water Act. Section 301 of the Clean Water Act prohibits the
discharge of a pollutant from a point source into navigable waters of the United
States except in accordance with a permit issued under either Section 402 or
Section 404 of the Clean Water Act. Navigable waters are broadly defined to
include streams, even those that are not navigable in fact, and may include
wetlands. All mining operations in Appalachia generate excess material, which
must be placed in fills in adjacent valleys and hollows. Likewise, coal refuse
disposal areas and coal processing slurry impoundments are located in valleys
and hollows. Almost all of these areas contain intermittent or perennial
streams, which are considered navigable waters under the Clean Water Act. An
operator must secure a Clean Water Act permit before filling such streams. For

                                       9
<PAGE>

approximately the past twenty-five years, operators have secured Section 404
fill permits that authorize the filling of navigable waters with material from
various forms of coal mining. Operators have also obtained permits under Section
404 for the construction of slurry impoundments although the use of these
impoundments, including discharges from them, requires permits under Section
402. Section 402 discharge permits are generally not suitable for authorizing
the construction of fills in navigable waters.

         Clean Air Act. Coal contains impurities, including sulfur, mercury,
chlorine, nitrogen oxide, and other elements or compounds, many of which are
released into the air when coal is burned. The Clean Air Act and corresponding
state laws extensively regulate emissions into the air of particulate matter and
other substances, including sulfur dioxide, nitrogen oxide and mercury. Although
these regulations apply directly to impose certain requirements for the
permitting and operation of our mining facilities, by far their greatest impact
on us and the coal industry generally is the effect of emission limitations on
utilities and other customers. Owners of coal-fired power plants and industrial
boilers have been required to expend considerable resources in an effort to
comply with these air pollution standards. The United States Environmental
Protection Agency ("EPA") has imposed or attempted to impose tighter emission
restrictions in a number of areas, some of which are currently subject to
litigation. The general effect of such tighter restrictions could be to reduce
demand for coal. This in turn may result in decreased production and a
corresponding decrease in revenue and profits.

         National Ambient Air Quality Standards. In 1997, EPA adopted a new
National Ambient Air Quality Standard ("NAAQS") for very fine particulate matter
and a more stringent NAAQS for ozone. Ozone is produced by a combination of two
precursor pollutants: volatile organic compounds and nitrogen oxide, a
by-product of coal combustion. States were required to submit to EPA revisions
to their State Implementation Plans ("SIPs") that demonstrate the manner in
which the states will attain the fine particulate NAAQS by December 18, 2007.
The ozone NAAQS has been the subject of litigation and, during the course of
this litigation, EPA has proposed revisions to the ozone NAAQS that are more
stringent than the standards being litigated. EPA intends to begin the
promulgation process for the new, more stringent ozone NAAQS in the spring of
2008. Revised SIPs could require electric power generators to further reduce
nitrogen oxide and sulfur dioxide emissions. In addition to the SIP process, the
Clean Air Act permits states to assert claims against sources in other "upwind"
states alleging that emission sources including coal fired power plants in the
upwind states are preventing the "downwind" states from attaining a NAAQS. All
these actions could result in additional controls being required on coal fired
power plants and we are unable to predict the effect on coal production.

         Acid Rain Control Provisions. The acid rain control provisions
promulgated as part of the Clean Air Act Amendments of 1990 in Title IV of the
Clean Air Act ("Acid Rain program") required reductions of sulfur dioxide
emissions from power plants. The Acid Rain program is now a mature program and
we believe that any market impacts of the required controls have likely been
factored into the price of coal in the national coal market.

         Regional Haze Program. EPA promulgated a regional haze program designed
to protect and to improve visibility at and around so-called Class I Areas,
which are generally National Parks, National Wilderness Areas, and International
Parks. This program may restrict the construction of new coal-fired power plants
whose operation may impair visibility at and around the Class I Areas. Moreover,
the program requires certain existing coal-fired power plants to install
additional control measures designed to limit haze-causing emissions, such as
sulfur dioxide, nitrogen oxide and particulate matter. States were required to
submit Regional Haze SIPs to EPA by December 17, 2007. Many states did not meet
the December 17, 2007, deadline, and we are unable to predict the impact on the
coal market of the failure to submit Regional Haze SIPs by the deadline.

         New Source Review Program. Under the Clean Air Act, new and modified
sources of air pollution must meet certain new source standards ("New Source
Review Program"). In the late 1990s, the EPA filed lawsuits against many
coal-fired plants in the eastern United States alleging that the owners
performed non-routine maintenance, causing increased emissions that should have
triggered the application of these new source standards. Some of these lawsuits
have been settled, with the owners agreeing to install additional pollution
control devices in their coal-fired plants. The remaining litigation and the
uncertainty around the New Source Review Program rules could adversely impact
utilities' demand for coal in general or coal with certain specifications,
including the coal produced by us.

         Multi-Pollutant Strategies. In March 2005, EPA issued two closely
related rules designed to significantly reduce levels of sulfur dioxide,
nitrogen oxide and mercury: the Clean Air Interstate Rule and the Clean Air
Mercury Rule. The Clean Air Interstate Rule sets a cap-and-trade program in 28

                                       10
<PAGE>

states and the District of Columbia to establish emissions limits for sulfur
dioxide and nitrogen oxide, by allowing utilities to buy and sell credits to
assist in achieving compliance with the NAAQS for 8-hour ozone and fine
particulates. The Clean Air Mercury Rule as promulgated will cut mercury
emissions nearly 70% by 2018 through a cap-and-trade program. Both rules were
challenged in numerous lawsuits. Portions of each of these rules are still in
litigation, and on February 8, 2008, the United States Court of Appeals for the
District of Columbia Circuit vacated the entire mercury rule and remanded it to
EPA for reconsideration. Immediately following the decision, EPA announced that
it has not decided how to respond. Regardless of the outcome of litigation on
either rule, a form of each of the rules will likely be promulgated and
ultimately directly affect coal producers, suppliers, and utilities in the
eastern and western regions of the United States, by requiring revisions to the
SIPs in many eastern states. Any such controls may have an impact on the demand
for our coal and possibly give the users of western sub-bituminous coal a
significant competitive advantage over eastern bituminous coal users.

         Comprehensive Environmental Response, Compensation and Liability Act.
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), and similar state laws affect coal mining operations by, among other
things, imposing cleanup requirements for threatened or actual releases of
hazardous substances that may endanger public health or welfare or the
environment. Under CERCLA and similar state laws, joint and several liability
may be imposed on waste generators, site owners, and lessees and others
regardless of fault or the legality of the original disposal activity. Although
the EPA excludes most wastes generated by coal mining and processing operations
from the hazardous waste laws, such wastes can, in certain circumstances,
constitute hazardous substances for the purposes of CERCLA. In addition, the
disposal, release, or spilling of some products used by coal companies in
operations, such as chemicals, could implicate the liability provisions of the
statute. Under the EPA's Toxic Release Inventory process, companies are required
annually to report the use, manufacture, or processing of listed toxic materials
that exceed defined thresholds, including chemicals used in equipment
maintenance, reclamation, water treatment, and ash received for mine placement
from power generation customers. Our current and former coal mining operations
may incur expenditures associated with the investigation and remediation of
facilities and environmental conditions under CERCLA.

         Operations - Permitting; Compliance. Quest has obtained all the permits
required for its current operations under the SMCRA, the Clean Water Act, the
Clean Air Act, and corresponding state laws. Quest intends to be in compliance
in all material respects with such permits and intends to routinely correct in a
timely fashion violations of which it receives notice in the normal course of
operations. The expiration dates of the permits are largely immaterial as the
law provides for a right of successive renewal. The cost of obtaining surface
mining, clean water, and air permits can vary widely depending on the scientific
and technical demonstrations that must be made to obtain the permits. However,
the cost of obtaining a permit is rarely more than $500,000 and of obtaining a
renewal is rarely more than $5,000. It is impossible to predict the full impact
of future judicial, legislative, or regulatory developments on Quest's
operations because the standards to be met, as well as the technology and length
of time available to meet those standards, continue to develop and change.

         The imposition of more stringent requirements under environmental laws
or regulations, new developments or changes regarding site cleanup costs or the
allocation of such costs among potentially responsible parties, or a
determination that Quest is potentially responsible for the release of hazardous
substances at sites other than those currently identified, could result in
additional expenditures or the provision of additional accruals in expectation
of such expenditures.

Coal Reserves

         Quest estimates that, as of December 31, 2007, it has total recoverable
reserves of approximately twelve million tons consisting of both proven and
probable reserves. "Reserves" are defined by Securities and Exchange Commission
Industry Guide 7 as that part of a mineral deposit, which could be economically
and legally extracted or produced at the time of the reserve determination.
"Recoverable" reserves mean coal that is economically recoverable using existing
equipment and methods under federal and state laws currently in effect.
Approximately three million tons of Quest's reserves are classified as proven
reserves. "Proven (Measured) Reserves" are defined by Securities and Exchange
Commission Industry Guide 7 as reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or
quality are computed from the results of detailed sampling and (b) the sites for
inspection, sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth and mineral content of
reserves are well-established. None of Quest's reserves are classified as

                                       11
<PAGE>

probable reserves. "Probable reserves" are defined by Securities and Exchange
Commission Industry Guide 7 as reserves for which quantity and grade and/or
quality are computed from information similar to that used for proven (measured)
reserves, but the sites for inspection, sampling, and measurement are farther
apart or are otherwise less adequately spaced. The degree of assurance, although
lower than that for proven (measured) reserves, is high enough to assume
continuity between points of observation.

         Information about Quest's reserves consists of estimates based on
engineering, economic, and geological data assembled and analyzed by its
contracted engineers, geologists, and finance associates. Reserve estimates are
updated as deemed necessary by management using geologic data taken from drill
holes, adjacent mine workings, outcrop prospect openings and other sources. Coal
tonnages are categorized according to coal quality, seam thickness, mineability,
and location relative to existing mines and infrastructure. In accordance with
applicable industry standards, proven reserves are those for which reliable data
points are spaced no more than 2,700 feet apart. Probable reserves are those for
which reliable data points are spaced 2,700 feet to 7,900 feet apart. Further
scrutiny is applied using geological criteria and other factors related to
profitable extraction of the coal. These criteria include seam height, roof and
floor conditions, yield and marketability.

         As with most coal-producing companies in Central Appalachia, all of
Quest's coal reserves are controlled pursuant to leases from third party
landowners. These leases convey mining rights to the coal producer in exchange
for a per ton or percentage of gross sales price royalty payment to the lessor.
The royalties for coal reserves from Quest's producing properties was
approximately $55,000 for the year ended December 31, 2007 and $55,000 for the
year ended December 31, 2006.

Employees

         Quest currently employs one person, our President, Eugene Chiaramonte,
Jr. All other personnel who provide services for Quest, whether in
administration or in mining operations, either work on an independent contractor
basis or work for White Star Mining under a contract mining arrangement. None of
Quest's employees are represented by a labor union, and Quest has not entered
into a collective bargaining agreement with any union. Quest has not experienced
any work stoppages and believes that it has good relations with its employees.


                                       12
<PAGE>

Item 1A.  RISK FACTORS AND CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
          INFORMATION

         An investment in Quest common stock involves a high degree of risk. You
should carefully consider the following risk factors and the other information
in this report before investing in Quest common stock. Quest's business and
results of operations could be seriously harmed by any of the following risks.
The trading price of Quest's common stock could decline due to any of these
risks, and you may lose part or all of your investment.

         Our wholly owned subsidiary, Gwenco, Inc., has filed for bankruptcy
protection. On March 2, 2007, our wholly owned subsidiary, Gwenco, Inc., filed a
voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy
Code with the United States Bankruptcy Court for the Eastern District of
Kentucky. We are currently overseeing Gwenco's operations as a debtor in
possession, subject to court approval of matters outside the ordinary course of
business. We are currently seeking court approval for debtor in possession
financing from holders of Gwenco's existing debt obligations in order to fund
operating expenses. We intend to continue our mining operations at Pond Creek
Mine at Slater's Branch while this matter is completed. Under Chapter 11, claims
against us in existence prior to the filing of the petitions for reorganization
relief under the federal bankruptcy laws are stayed while we are in bankruptcy.
On August 3, 2007, the Bankruptcy Court approved Gwenco's request for
debtor-in-possession financing in an amount of up to $2,000,000. In February
2008, Gwenco submitted a preliminary plan of reorganization to the court for
approval. If we are unable to procure sufficient debtor in possession financing
and/or if we are unable to negotiate an acceptable plan of reorganization with
Gwenco's creditors, we may be forced to file for protection under Chapter 7 of
the U.S Bankruptcy Code and liquidate all or Gwenco's assets, in which case,
Quest would cease to have an operating business.

         We have only recently recommenced mining operations, and it is possible
that we may need to stop mining again if we have insufficient working capital.
Due to lack of working capital, Quest was forced to cease mining operations at
the Pond Creek mine at Slater's Branch, Kentucky in June 2005. In January 2007,
Gwenco received a permit from the Kentucky Department of Natural Resources to
conduct coal mining at its Pond Creed mine. In February 2007, Gwenco's
engineering firm, Alchemy Engineering of Prestonburg, Kentucky, completed a one
and five year mine plan and maps required by the Kentucky Department of Mines
and Minerals in connection with the permit to conduct coal mining at Pond Creek.
Gwenco had retained General Mining, LLC of Wallins, Kentucky to rehabilitate the
Pond Creek mine in February 2007 and further retained General Mining to conduct
mining operations at Pond Creek in March 2007. The company completed its initial
rehabilitation of the Pond Creek mine, recommenced mining operations, and began
shipping commercial coal for sale in May 2007. In January 2008, Quest retained
White Star Mining to conduct all mining operations at Pond Creek. White Star
retained all necessary permits to being mining operations in February 2008, and
Quest expects to resume mining operations in the second fiscal quarter of 2008.
However, it is possible that Quest may not be able to maintain sufficient
working capital to continue mining operations and that we may need to cease
operations again in the future.

         Pending and threatened litigation could result in Quest losing its
primary operating assets. Currently, Quest is a party to various pending
lawsuits and judgments, including judgments in favor of Interstellar Holdings
and Duke Energy Merchants. The judgment creditors have sought to foreclose on
our assets, including our leasehold interests in the mines. These foreclosure
actions were stayed by the bankruptcy proceedings. While one judgment creditor
has agreed to forbear on further collections, enforcement, and foreclosure with
respect to this indebtedness, such investor may withdraw such forbearance if we
do not comply with our covenants with the creditor. It is possible that, in
connection with a foreclosure action, the leasehold interests or other assets of
Quest could be sold to one or more of the judgment or other creditors or to a
third party. In the event that the leasehold interests or the other assets are
put up for sale, Quest intends to bid on them, but it is possible that it may
not be able to purchase the leasehold interests or the other assets, either
because it does not have the assets with which to make a competitive bid or
because it is simply outbid by one of its creditors or a third party. In the
event that either the bank or a third party purchases the leasehold interests or
the other assets, Quest would no longer have any operating business.

                                       13
<PAGE>

         We have issued a substantial number of securities convertible into
shares of our common stock which will result in substantial dilution to the
ownership interests of our existing stockholders. As of December 31, 2007,
approximately 577,354,189 shares of our common stock were required for issuance
upon exercise or conversion of the following securities: (i) 297,437,731 shares
representing shares of common stock issuable upon conversion in full of our
outstanding convertible promissory notes (without regard to any limitations on
conversion); (ii) 279,916,458 shares of common stock issuable upon conversion of
our Series A Preferred. The exercise or conversion of these securities will
result in a significant increase in the number of outstanding shares and
substantially dilute the ownership interests of our existing shareholders. In
addition, any decrease in our stock price will result in additional shares of
common stock required for issuance upon exercise or conversion of the securities
set forth above.

         The issuance of shares upon conversion of our convertible securities
may cause immediate and substantial dilution to our existing stockholders. The
issuance of shares upon conversion of our outstanding convertible notes or
Series A Preferred Stock may result in substantial dilution to the interests of
other stockholders since the selling stockholders may ultimately convert and
sell the full amount issuable on conversion. Although the selling stockholders
may not convert their convertible notes if such conversion would cause them to
own more than 4.99% of our outstanding common stock, this restriction does not
prevent the selling stockholders from converting some of their holdings and then
converting the rest of their holdings. In this way, the selling stockholders
could sell more than this limit while never holding more than this limit. There
only upper limit on the number of shares that may be issued is the number of
shares of common stock authorized for issuance under our articles of
incorporation. The issuance of shares upon conversion of the convertible notes
will have the effect of further diluting the proportionate equity interest and
voting power of holders of our common stock.

         Quest's former President and Chief Executive Officer has been convicted
by a federal jury, which may negatively effect the public's perception of Quest
and its operations. In May, 2006, a federal grand jury indicted Mr. Runyon, Ms.
Holbrook, James Daniel Stollings, and Quest's former President and Chief
Executive Officer, William R. Wheeler on charges of bank fraud. Mr. Wheeler
resigned as an officer or director of Quest on May 31, 2006. In connection with
the indictments, Mr. Runyon and Ms. Holbrook each pled guilty. In December 2006,
a federal jury convicted Mr. Stollings and Mr. Wheeler of bank fraud. Mr.
Wheeler has appealed the conviction. Quest denies any wrongdoing in connection
with these matters. Although Quest does not believe that this conviction will
affect the business plans of Quest, it is possible that Mr. Wheeler, Quest, or
one or more of Quest's subsidiaries may be the subject of civil or
administrative actions based on the allegations set forth in the indictment. As
a result, Quest may incur civil or administrative liability based on these
allegations. Further, it is possible that the public perception of Quest may be
negatively affected by these allegations, which in turn may cause a drop in the
market price of Quest's common stock.

         Quest will need to continue to finance its operations through
additional bank borrowings or other capital financings, and if it is unable to
obtain additional capital, it may not be able to continue as a going concern.
Quest had a working capital deficit as of December 31, 2007 of approximately
$7,000,000. As of the date of this annual report, Quest does not believe that it
will be able to fund its operations, working capital requirements, and debt
service requirements over the fiscal year 2008 through cash flows generated from
operations. Quest will need to continue to finance its operations through
additional borrowings or other capital financings. Quest's collateral may not be
sufficient to borrow additional amounts at such time. Quest may also seek equity
financing in the form of a private placement or a public offering. Such
additional financing may not be available to Quest, when and if needed, on
acceptable terms or at all. If Quest is unable to obtain additional financing in
sufficient amounts or on acceptable terms, its operating results and prospects
could be further adversely affected.

         Quest has substantial indebtedness outstanding, and its operations are
significantly leveraged. In order to finance its operations, Quest has incurred
substantial indebtedness. Quest is not in compliance with its debt covenants
under its loan agreements, and it has defaulted on substantially all of its loan
obligations, which has resulted in lawsuits, judgments, and foreclosure
proceedings against Quest and its assets. Quest has no cash flows from
operations, and without additional financing or cash flows from operations, it
cannot service its debt obligations. Quest's subsidiary, Gwenco, Inc., has
already filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Quest
is currently negotiating with its creditors to reorganize and restructure its
debt obligations, both within the Chapter 11 reorganization at the Gwenco level
and outside the Chapter reorganization at other corporate levels, but if it is
unable to do so, there is a significant chance that Quest or its other

                                       14
<PAGE>

subsidiaries may be forced to seek protection under the U.S. Bankruptcy code, or
that its creditors could foreclose on its remaining assets, in which case it
would cease to continue as a going concern.

         Quest may be unable to continue as a going concern, in which case its
securities will have little or no value. Quest's independent auditor has noted
in its report concerning Quest's financial statements as of December 31, 2007
that it has incurred recurring losses from operations and has a working capital
deficiency, which raises substantial doubt about its ability to continue as a
going concern. As shown in the consolidated financial statements included in
this report, Quest has incurred recurring losses from operations in 2007 and
2006, and has an accumulated deficit and a working capital deficit as of
December 31, 2007. These conditions raise substantial doubt as to Quest's
ability to continue as a going concern. It is possible that Quest will not
achieve operating profits in the future.

         The level of Quest's indebtedness could adversely affect its ability to
grow and compete and prevent it from fulfilling its obligations under its
contracts and agreements. Quest has significant debt, lease, and royalty
obligations. Its ability to satisfy debt service, lease, and royalty obligations
and to effect any refinancing of its indebtedness will depend upon future
operating performance, which will be affected by prevailing economic conditions
in the markets that it serves as well as financial, business and other factors,
many of which are beyond its control. Quest may be unable to generate sufficient
cash flow from operations and future borrowings, or other financings may be
unavailable in an amount sufficient to enable it to fund its debt service,
lease, and royalty payment obligations or its other liquidity needs.

         Quest's relative amount of debt could have material consequences to its
business, including, but not limited to, the following: (i) making it more
difficult to satisfy debt covenants and debt service, lease payment, and other
obligations; (ii) increasing its vulnerability to general adverse economic and
industry conditions; (iii) limiting its ability to obtain additional financing
to fund future acquisitions, working capital, capital expenditures, or other
general corporate requirements; (iv) reducing the availability of cash flows
from operations to fund acquisitions, working capital, capital expenditures, or
other general corporate purposes; (v) limiting its flexibility in planning for,
or reacting to, changes in its business and the industry in which it competes;
or (vi) placing it at a competitive disadvantage when compared to competitors
with less relative amounts of debt.

         If transportation for Quest's coal becomes unavailable or uneconomic
for its customers, Quest's ability to sell coal could suffer. Transportation
costs represent a significant portion of the total cost of coal and, as a
result, the cost of transportation is a critical factor in a customer's
purchasing decision. Increases in transportation costs could make coal a less
competitive source of energy or could make some of Quest's operations less
competitive than other sources of coal. Coal producers depend upon rail, barge,
trucking, overland conveyor, and other systems to deliver coal to markets. While
U.S. coal customers typically arrange and pay for transportation of coal from
the mine to the point of use, disruption of these transportation services
because of weather-related problems, strikes, lock-outs or other events could
temporarily impair Quest's ability to supply coal to its customers and thus
could adversely affect Quest's results of operations. For example, the high
volume of coal shipped from one region of mines could create temporary
congestion on the rail systems servicing that region.

         Risks inherent to mining could increase the cost of operating Quest's
business. Quest's mining operations are subject to conditions beyond its control
that can delay coal deliveries or increase the cost of mining at particular
mines for varying lengths of time. These conditions include weather and natural
disasters, unexpected maintenance problems, key equipment failures, variations
in coal seam thickness, variations in the amount of rock and soil overlying the
coal deposit, variations in rock, and other natural materials and variations in
geologic conditions. In addition, the United States and over 160 other nations
are signatories to the 1992 Framework Convention on Climate Change, which is
intended to limit emissions of greenhouse gases, such as carbon dioxide. In
December 1997, in Kyoto, Japan, the signatories to the convention established a
binding set of emission targets for developed nations. Although the specific
emission targets vary from country to country, the United States would be
required to reduce emissions to 93% of 1990 levels over a five-year budget
period from 2008 through 2012. Although the United States has not ratified the
emission targets and no comprehensive regulations focusing on U.S. greenhouse
gas emissions are in place, these restrictions, whether through ratification of
the emission targets or other efforts to stabilize or reduce greenhouse gas
emissions, could adversely impact the price of and demand for coal. According to
the Energy Information Administration's Emissions of Greenhouse Gases in the
United States 2002, coal accounts for 30% of greenhouse gas emissions in the
United States, and efforts to control greenhouse gas emissions could result in
reduced use of coal if electricity generators switch to sources of fuel with
lower carbon dioxide emissions. Further developments in connection with
regulations or other limits on carbon dioxide emissions could have a material
adverse effect on Quest's financial condition or results of operations.

                                       15
<PAGE>

         Quest's future success depends upon its ability to continue acquiring
and developing coal reserves that are economically recoverable. Quest's
recoverable reserves decline as it produces coal. Quest has not yet applied for
the permits required or developed the mines necessary to use all of its
reserves. Furthermore, Quest may not be able to mine all of its reserves as
profitably as it does at its current operations. Quest's future success depends
upon its conducting successful exploration and development activities or
acquiring properties containing economically recoverable reserves. Quest's
planned mine development projects and acquisition activities may not result in
significant additional reserves, and it may not have continuing success
developing additional mines. Most of Quest's mining operations are conducted on
properties owned or leased by Quest. Because title to most of its leased
properties and mineral rights are not thoroughly verified until a permit to mine
the property is obtained, Quest's right to mine some of its reserves may be
materially adversely affected if defects in title or boundaries exist. In
addition, in order to develop its reserves, Quest must receive various
governmental permits. Quest cannot predict whether it will continue to receive
the permits necessary for it to operate profitably in the future. Quest may not
be able to negotiate new leases from the government or from private parties or
obtain mining contracts for properties containing additional reserves or
maintain its leasehold interest in properties on which mining operations are not
commenced during the term of the lease. From time to time, Quest has experienced
litigation with lessors of our coal properties and with royalty holders.

         If the coal industry experiences overcapacity in the future, our
profitability could be impaired. During the mid-1970s and early 1980s, a growing
coal market and increased demand for coal attracted new investors to the coal
industry, spurred the development of new mines, and resulted in added production
capacity throughout the industry, all of which led to increased competition and
lower coal prices. Similarly, an increase in future coal prices could encourage
the development of expanded capacity by new or existing coal producers. Any
overcapacity could reduce coal prices in the future.

         Quest's ability to operate effectively could be impaired if it loses
key personnel. Quest manages its business with a number of key personnel, the
loss of a number of whom could have a material adverse effect on Quest. In
addition, as its business develops and expands, Quest believes that its future
success will depend greatly on its continued ability to attract and retain
highly skilled and qualified personnel. It is possible that key personnel will
not continue to be employed by Quest and that we will be not able to attract and
retain qualified personnel in the future. Quest does not have "key person" life
insurance to cover its executive officers. Failure to retain or attract key
personnel could have a material adverse effect on Quest.

         Coal markets are highly competitive and affected by factors beyond
Quest's control. Quest competes with coal producers in various regions of the
U.S. for domestic sales and with both domestic and overseas producers for sales
to international markets. Continued domestic demand for Quest's coal and the
prices that it will be able to obtain primarily will depend upon coal
consumption patterns of the domestic electric utility industry and the domestic
steel industry. Consumption by the domestic utility industry is affected by the
demand for electricity, environmental and other governmental regulations,
technological developments and the price of competing coal and alternative fuel
supplies including nuclear, natural gas, oil and renewable energy sources,
including hydroelectric power. Consumption by the domestic steel industry is
primarily affected by the demand for U.S. steel. Quest's sales of metallurgical
coal are dependent on the continued financial viability of domestic steel
companies and their ability to compete with steel producers abroad. The cost of
ocean transportation and the valuation of the U.S. dollar in relation to foreign
currencies significantly impact the relative attractiveness of Quest's coal as
it competes on price with other foreign coal producing sources.

         Coal prices are affected by a number of factors and may vary
dramatically by region. The two principal components of the price of coal are
the price of coal at the mine, which is influenced by mine operating costs and
coal quality, and the cost of transporting coal from the mine to the point of
use. The cost of mining the coal is influenced by geologic characteristics such
as seam thickness, overburden ratios and depth of underground reserves.
Underground mining is generally more expensive than surface mining as a result
of high capital costs, including costs for modern mining equipment and
construction of extensive ventilation systems and higher labor costs due to
lower productivity. Quest currently engages in three principal coal mining
techniques: underground room and pillar mining, underground longwall mining and
highwall mining. Because underground longwall mining, surface mining, and

                                       16
<PAGE>

highwall mining are high-productivity, low-cost mining methods, Quest seeks to
increase production from its use of these methods to the extent permissible and
cost effective.

         Quest depends on continued demand from its customers. Reduced demand
from Quest's largest customers could have an adverse impact on its ability to
achieve its projected revenue. When Quest's contracts with its current customers
reach expiration, it is possible that that the customers will not extend or
enter into new long-term contracts or, in the absence of long-term contracts,
that they will not continue to purchase the same amount of coal as they have in
the past or on terms, including pricing terms, as favorable as under existing
agreements.

         Quest faces numerous uncertainties in estimating its economically
recoverable coal reserves, and inaccuracies in its estimates could result in
lower than expected revenues, higher than expected costs and decreased
profitability. There are numerous uncertainties inherent in estimating
quantities and values of economically recoverable coal reserves, including many
factors beyond Quest's control. As a result, estimates of economically
recoverable coal reserves are by their nature uncertain. Information about
Quest's reserves consists of estimates based on engineering, economic, and
geological data assembled and analyzed by Quest's staff. Some of the factors and
assumptions that impact economically recoverable reserve estimates include the
following:

     o   geological conditions;

     o   historical production from the area compared with production from other
         producing areas;

     o   the assumed effects on regulations and taxes by governmental agencies;

     o   assumptions governing future prices; and

     o   future operating costs.

         Each of these factors may in fact vary considerably from the
assumptions used in estimating reserves. For these reasons, estimates of the
economically recoverable quantities of coal attributable to a particular group
of properties may vary substantially. As a result, Quest's estimates may not
accurately reflect its actual reserves. Actual production, revenues, and
expenditures with respect to its reserves will likely vary from estimates, and
these variances may be material.

         Union represented labor creates an increased risk of work stoppages and
higher labor costs. As of December 31, 2007, none of Quest's workforce was
represented by a union. However, in the event that Quest is required to hire
union labor, there may be an increased risk of strikes and other related work
actions, in addition to higher labor costs associated with union labor. Quest
has experienced some union organizing campaigns at some of its open shop
facilities within the past five years. If some or all of Quest's current open
shop operations were to become union represented, Quest could be subject to
additional risk of work stoppages and higher labor costs. Increased labor costs
or work stoppages could adversely affect the stability of production and reduce
its net income.

         Severe weather may affect Quest's ability to mine and deliver coal.
Severe weather, including flooding and excessive ice or snowfall, when it
occurs, can adversely affect Quest's ability to produce, load, and transport
coal.

         Shortages of skilled labor in the Central Appalachian coal industry may
pose a risk to achieving high labor productivity and competitive costs. Coal
mining continues to be a labor intensive industry. In 2001, the coal industry
experienced a shortage of trained coal miners in the Central Appalachian region
causing many companies to hire mine workers with less experience. While Quest
did not experience a comparable labor shortage in 2003, if another such shortage
of skilled labor were to arise, Quest's productivity could decrease and our
costs could increase. Such a lack of skilled miners could have an adverse impact
on Quest's labor productivity and costs and its ability to expand production in
the event there is an increase in the demand for coal.

         If the coal industry experiences overcapacity in the future, Quest's
profitability could be impaired. Historically, a growing coal market and
increased demand for coal attract new investors to the coal industry, spur the
development of new mines and result in added production capacity throughout the
industry, all of which can lead to increased competition and lower coal prices.

                                       17
<PAGE>

Similarly, an increase in future coal prices could encourage the development of
expanded capacity by new or existing coal producers. Any overcapacity could
reduce coal prices and therefore reduce Quest's revenues.

         Terrorist attacks and threats, escalation of military activity in
response to such attacks, or acts of war may negatively affect Quest's cash
flows, results of operations, or financial condition. Terrorist attacks and
threats, escalation of military activity in response to such attacks or acts of
war may negatively affect Quest's cash flows, results of operations, or
financial condition. Quest's business is affected by general economic
conditions, fluctuations in consumer confidence and spending, and market
liquidity, which can decline as a result of numerous factors outside of its
control, such as terrorist attacks and acts of war. Future terrorist attacks
against U.S. targets, rumors or threats of war, actual conflicts involving the
U.S. or its allies, or military or trade disruptions affecting Quest's customers
may materially adversely affect its operations. As a result, there could be
delays or losses in transportation and deliveries of coal to Quest's customers,
decreased sales of its coal, and extension of time for payment of accounts
receivable from its customers. Strategic targets such as energy-related assets
may be at greater risk of future terrorist attacks than other targets in the
U.S. In addition, disruption or significant increases in energy prices could
result in government-imposed price controls. It is possible that any, or a
combination, of these occurrences could have a material impact on Quest's cash
flows, results of operations, or financial condition.

         Quest may not be able to identify quality strategic acquisition
candidates, and if it does make strategic acquisitions, it may not be able to
successfully integrate their operations. Quest intends to acquire companies in
the coal mining industry that offer complementary products and services to its
current business operations. For each acquisition, Quest will be required to
assimilate the operations, products, and personnel of the acquired business and
train, retain, and motivate its key personnel. Quest may be unable to maintain
uniform standards, controls, procedures, and policies if it fails in these
efforts. Similarly, acquisitions may subject Quest to liabilities and risks that
are not known or identifiable at the time of the acquisition or may cause
disruptions in its operations and divert management's attention from day-to-day
operations, which could impair Quest's relationships with its current employees,
customers, and strategic partners. Quest may have to incur debt or issue equity
securities to pay for any future acquisitions. The issuance of equity securities
could be substantially dilutive to Quest's stockholders. In addition, Quest's
profitability may suffer because of acquisition related costs. Quest currently
has no agreements or commitments concerning any such additional acquisitions,
and it may not be able to identify any companies that satisfy its acquisition
criteria.

         The government extensively regulates Quest's mining operations, which
imposes significant costs on Quest, and future regulations could increase those
costs or limit Quest's ability to produce coal. Federal, state, and local
authorities regulate the coal mining industry with respect to matters such as
employee health and safety, permitting and licensing requirements, air quality
standards, water pollution, plant and wildlife protection, reclamation and
restoration of mining properties after mining is completed, the discharge of
materials into the environment, surface subsidence from underground mining, and
the effects that mining has on groundwater quality and availability. In
addition, significant legislation mandating specified benefits for retired coal
miners affects Quest's industry. Numerous governmental permits and approvals are
required for mining operations. Quest is required to prepare and present to
federal, state, or local authorities data pertaining to the effect or impact
that any proposed exploration for or production of coal may have upon the
environment. The costs, liabilities, and requirements associated with these
regulations may be costly and time-consuming and may delay commencement or
continuation of exploration or production. The possibility exists that new
legislation and/or regulations and orders may be adopted that may materially
adversely affect Quest's mining operations, its cost structure, and/or its
customers' ability to use coal. New legislation or administrative regulations
(or judicial interpretations of existing laws and regulations), including
proposals related to the protection of the environment that would further
regulate and tax the coal industry, may also require Quest or its customers to
change operations significantly or incur increased costs. The majority of
Quest's coal supply agreements contain provisions that allow a purchaser to
terminate its contract if legislation is passed that either restricts the use or
type of coal permissible at the purchaser's plant or results in specified
increases in the cost of coal or its use. These factors and legislation, if
enacted, could have a material adverse effect on Quest's financial condition and
results of operations.

         There is a limited active trading market for Quest shares. Quest common
stock is traded on the OTC Bulletin Board under the symbol "QMNM.OB." Trading
activity in Quest common stock has fluctuated widely and at times has been
limited. Quest considers its common stock to be "thinly traded" and any last
reported sale prices may not be a true market-based valuation of the common
stock. A consistently active trading market for Quest's stock may not develop at

                                       18
<PAGE>

any time in the future. Stockholders may experience difficulty selling their
shares if they choose to do so because of the illiquid market and limited public
float for Quest stock.

         Quest's common stock is considered to be a "penny stock" and, as such,
the market for Quest common stock may be further limited by certain SEC rules
applicable to penny stocks. As long as the price of Quest's common stock remains
below $5.00 per share or Quest has net tangible assets of $2,000,000 or less,
Quest's common shares are likely to be subject to certain "penny stock" rules
promulgated by the SEC. Those rules impose certain sales practice requirements
on brokers who sell penny stock to persons other than established customers and
accredited investors (generally institutions with assets in excess of $5,000,000
or individuals with net worth in excess of $1,000,000). For transactions covered
by the penny stock rules, the broker must make a special suitability
determination for the purchaser and receive the purchaser's written consent to
the transaction prior to the sale. Furthermore, the penny stock rules generally
require, among other things, that brokers engaged in secondary trading of penny
stocks provide customers with written disclosure documents, monthly statements
of the market value of penny stocks, disclosure of the bid and asked prices and
disclosure of the compensation to the brokerage firm and disclosure of the sales
person working for the brokerage firm. These rules and regulations make it more
difficult for brokers to sell Quest common shares and limit the liquidity of
Quest's securities.

         Quest has no immediate plans to pay dividends. Quest has not paid any
cash dividends to date and does not expect to pay dividends for the foreseeable
future.

         Our sole officer and director controls our voting rights, and as long
as he does, he will be able to control the outcome of stockholder voting.
Quest's sole officer and director is the owner of all of the outstanding shares
of Quest's Series C Preferred Stock, pursuant to which he holds approximately
67% of the outstanding voting rights for Quest's capital stock. As long as he
controls our voting rights, our other stockholders will generally be unable to
affect or change the management or the direction of our company without the
support of our officers and directors. As a result, some investors may be
unwilling to purchase our common stock. If the demand for our common stock is
reduced because our officers and directors have significant influence over our
company, the price of our common stock could be materially depressed. Our sole
officer and director will be able to exert significant influence over the
outcome of all corporate actions requiring stockholder approval, including the
election of directors, amendments to our certificate of incorporation and
approval of significant corporate transactions.

         Quest's articles of incorporation authorizes Quest's board of directors
to designate and issue preferred stock with rights, preferences and privileges
that may be adverse to the rights of the holders of Quest's common stock.
Quest's board of directors has the authority to issue up to an additional
21,140,000 shares of preferred stock and to determine the price, rights,
preferences, and privileges of those shares without any further vote or action
by Quest's stockholders. To date, Quest has issued 2,000,000 shares of Series A
preferred stock, 1,600,000 shares of Series B preferred stock and 260,000 shares
of Series C preferred stock. Any preferred stock issued by Quest's board of
directors may, and in certain cases, do contain rights and preferences adverse
to the voting power and other rights of the holders of common stock.

                         Cautionary Statement Concerning
                           Forward-Looking Information

         This annual report and the documents to which Quest refers you and
incorporate into this annual report by reference contain forward-looking
statements. In addition, from time to time, Quest, or its representatives, may
make forward-looking statements orally or in writing. These are statements that
relate to future periods and include statements regarding Quest's future
strategic, operational and financial plans, potential acquisitions, anticipated
or projected revenues, expenses and operational growth, markets and potential
customers for Quest's products and services, plans related to sales strategies
and efforts, the anticipated benefits of Quest's relationships with strategic
partners, growth of its competition, its ability to compete, the adequacy of its
current facilities and its ability to obtain additional space, use of future
earnings, and the feature, benefits and performance of its current and future
products and services.

         You can identify forward-looking statements by those that are not
historical in nature, particularly those that use terminology such as "may,"
"will," "should," "expects," "anticipates," "contemplates," "estimates,"
"believes," "plans," "projected," "predicts," "potential," "seek" or "continue"
or the negative of these or similar terms. In evaluating these forward-looking
statements, you should consider various factors. These factors may cause Quest's

                                       19
<PAGE>

actual results to differ materially from any forward-looking statement. Quest
cautions you not to place undue reliance on these forward-looking statements.

         Quest bases these forward-looking statements on its expectations and
projections about future events, which it derives from the information currently
available to it. Such forward-looking statements relate to future events or
future performance. Forward-looking statements are only predictions. The
forward-looking events discussed in this annual report, the documents to which
Quest refers you and other statements made from time to time by Quest or its
representatives, may not occur, and actual events and results may differ
materially and are subject to risks, uncertainties and assumptions about Quest.
For these statements, Quest claims the protection of the "bespeaks caution"
doctrine. The forward-looking statements speak only as of the date hereof, and
Quest expressly disclaims any obligation to publicly release the results of any
revisions to these forward-looking statements to reflect events or circumstances
after the date of this filing.

                                       20
<PAGE>

Item 2.  PROPERTIES

PROPERTIES

         Quest's executive offices are located in Paterson, New Jersey and
consist of approximately 1,000 square feet of leased space. Quest leases this
space at the rate of $500 per month from a related party corporation.

         Gwenco leases over 700 acres of coal mines in Pike County, Kentucky,
with approximately 12,999,000 tons of coal in place in six seams. Gwenco is
required to make annual minimum lease payments of approximately $55,000 per
year.

         All of Quest's current facilities are adequate for its current
operations. Quest anticipates that additional facilities will be leased or
purchased as needed and that sufficient facilities for its needs are readily
available.

Item 3.  LEGAL PROCEEDINGS

Litigation

         Gwenco, Inc. Chapter 11 Reorganization. On March 2, 2007, our wholly
owned subsidiary, Gwenco, Inc., filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy
Court for the Eastern District of Kentucky. Management felt this was a necessary
step to further our financial restructuring initiative and to protect Gwenco's
assets from claims, debts, judgments, foreclosures, and forfeitures of those
creditors and stakeholders with whom both Quest and Gwenco were unable to
negotiate restructured agreements. We are currently overseeing Gwenco's
operations as a debtor in possession, subject to court approval of matters
outside the ordinary course of business. We are currently seeking court approval
for debtor in possession financing from holders of Gwenco's existing debt
obligations in order to fund operating expenses. We intend to continue our
mining operations at Pond Creek Mine at Slater's Branch while this matter is
completed. Under Chapter 11, claims against Gwenco in existence prior to the
filing of the petitions for reorganization relief under the federal bankruptcy
laws are stayed while Gwenco is in bankruptcy. On August 3, 2007, the Bankruptcy
Court approved Gwenco's request for debtor-in-possession financing in an amount
of up to $2,000,000. In February 2008, Gwenco submitted a preliminary plan of
reorganization to the court for approval.

         In or about May, 2004, National City Bank of Kentucky commenced an
action in Boyd County Court, Kentucky against Quest's indirect wholly-owned
subsidiary, Gwenco, Inc., and Albert Anderson for breach of various promissory
notes issued by Gwenco. Duke Energy Merchants and First Sentry Bank were joined
in the action. National City Bank and Duke Energy are collectively seeking
approximately $1,100,000 in principal as well as interests, fees, and costs.
National City Bank and Duke Energy have been granted summary judgment in this
action and both obtained judgment.

         In March, 2006, National City Bank commenced an action commenced an
action in Pike County Court, Kentucky against Quest, Gwenco, and Quest Energy,
seeking to be adjudged a lien on certain real and personal property of Gwenco
pursuant to the aforementioned judgment and that said real and personal property
be sold to satisfy the aforesaid lien, and that the liens of National City Bank
attach to the proceeds of the sale. In July, 2006, National City Bank of
Kentucky sold its right, title, and interest in and to the various judgments,
judgment liens, security interests, and lines of credit to a third party
investor. The third party investor has agreed to forbear on further collection,
enforcement, and foreclosure with respect to this indebtedness, in exchange for
which Gwenco agreed to grant the investor a royalty on gross profits of Gwenco.
This foreclosure action was stayed against Gwenco as a result of Gwenco's
Chapter 11 filing.

         On or about August 25, 2004, Valley Personnel Services, Inc. commenced
an action in the Circuit Court of Mingo County, West Virginia against Quest's
indirect wholly-owned subsidiaries, D&D Contracting, Inc. and Quest Energy, Ltd.
for damages in the amount of approximately $150,000, plus pre and post judgment
interest as provided by law, costs, and fees. This action was stayed against
Gwenco as a result of Gwenco's Chapter 11 filing.

         The Federal Insurance Company, the insurer for Community Trust Bank,
commenced an action in Pike County Court, Kentucky against Quest Energy for
subrogation of monies it has paid to the bank and repayment of deductibles by
Community Trust as a part of an alleged criminal scheme and conspiracy by Mr.
Runyon, Ms. Holbrook, Mr. Stollings, and Mr. Wheeler. The insurer alleged that

                                       21
<PAGE>

former employees or associates of Quest Energy, including Mr. Runyon and Mr.
Wheeler, were primarily involved in the alleged scheme, that Quest Energy is
accordingly responsible for the actions of these former employees and
associates, and that Quest Energy obtained a substantial material benefit as a
result of this alleged scheme. Quest Energy has denied these allegations, that
it had any involvement with or responsibility for any of the actions alleged by
the insurer, and it further denies that it has benefited from any such alleged
scheme. Further, Quest Energy filed a counterclaim against the Federal Insurance
Company and Community Trust contending that the negligent actions and inactions
by Community Trust caused severe damage and loss to Quest Energy and Quest. The
court granted Community Trust's motion to dismiss the counterclaim.

         Mountain Edge Personnel has commenced an action in the Circuit Court of
Mingo County, West Virginia against Quest's now-dissolved indirect wholly-owned
subsidiary, J. Taylor Mining, for damages in the amount of approximately
$115,000, plus pre and post judgment interest as provided by law, costs, and
fees.

         An action has been commenced in the Circuit Court of Pike County,
Kentucky against Quest and its indirect, wholly-owned subsidiaries, Gwenco,
Inc., Quest Energy, Ltd., and J. Taylor Mining, for unspecified damages
resulting from personal injuries suffered while working for Mountain Edge
Personnel, an employee leasing agency who leased employees to Quest's
subsidiaries. Quest Energy is actively defending the action. This action was
originally stayed against Gwenco as a result of Gwenco's Chapter 11 filing.
However, in March, 2008, the plaintiff obtained relief from stay and as a result
the lawsuit has reopened against Gwenco.

         BHP, Inc. commenced an action in the Circuit Court of Pike County,
Kentucky against Quest's indirect, wholly-owned subsidiary, Quest Energy, Ltd.,
for damages resulting an alleged failure to pay for certain equipment leases in
the amount of approximately $225,000, plus pre and post judgment interest as
provided by law, costs, and fees. July 10, 2006, Quest Energy entered into a
settlement arrangement with BHP for the bill of sale on two pieces of equipment,
of which Quest Energy had retained possession while in default of prior lease
payments. On October 10, 2006, the Pike County Circuit Court entered an order
enforcing this settlement agreement, and on December 19, 2006, BHP was awarded
summary judgment in the amount of $35,000 plus 8% accrued interest from August
9, 2006. BHP, Inc. has since repossessed the equipment.

         Christopher Younger and Sharon Preece commenced an action in the
Circuit Court of Pike County against Quest's indirect, wholly-owned subsidiary,
Gwenco, Inc., for damages resulting from an alleged failure to pay past
royalties and other amounts allegedly due. The plaintiffs have obtained a
default judgment in this action in the amount of approximately $600,000, from
which Gwenco has taken appeal. The plaintiffs then amended their complaint,
seeking to be adjudged a lien on certain real and personal property of Gwenco
pursuant to the aforementioned judgment and that said real and personal property
be sold to satisfy the aforesaid lien, and that the liens of the plaintiffs
attach to the proceeds of the sale. This foreclosure action was stayed against
Gwenco as a result of Gwenco's Chapter 11 filing. In 2007, Gwenco settled the
claim Sharon Preece for $150,000. The settlement was approved by the bankruptcy
court.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.


                                       22
<PAGE>

                                     PART II

Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Quest's common stock is traded on the OTC Bulletin Board under the
symbol "QMNM." The following table shows the high and low bid prices for Quest's
common stock for each quarter since January 1, 2006 as reported by the OTC
Bulletin Board. All share prices have been adjusted to provide for the 1-4
reverse split effected in August 2007 and the 1-10 reverse split effected in
December 2007. Quest considers its stock to be "thinly traded" and any reported
sale prices may not be a true market-based valuation of its stock. Some of the
bid quotations from the OTC Bulletin Board set forth below may reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.

2006 (OTC Bulletin Board)                High Bid        Low Bid
----------------------------------------------------------------
First quarter                                7.24           3.16
Second quarter                               6.08           0.12
Third quarter                                1.60           0.64
Fourth quarter                               0.76           0.16

2007 (OTC Bulletin Board)                High Bid        Low Bid
----------------------------------------------------------------
First quarter                                9.60           1.12
Second quarter                               2.96           1.88
Third quarter                                2.08           0.51
Fourth quarter                               4.50           0.01

         As of April 15, 2008, there were approximately 522 record holders of
Quest's common stock.

         Quest has not paid any cash dividends since its inception and does not
contemplate paying dividends in the foreseeable future. It is anticipated that
earnings, if any, will be retained for the operation of its business.

         Shares eligible for future sale could depress the price of Quest's
common stock, thus lowering the value of your investment. Sales of substantial
amounts of Quest's common stock, or the perception that such sales could occur,
could adversely affect prevailing market prices for shares of Quest's common
stock.

         Quest's revenues and operating results may fluctuate significantly from
quarter to quarter, which can lead to significant volatility in the price and
volume of its stock. In addition, stock markets have experienced extreme price
and volume volatility in recent years. This volatility has had a substantial
effect on the market prices of securities of many smaller public companies for
reasons unrelated or disproportionate to the operating performance of the
specific companies. These broad market fluctuations may adversely affect the
market price of Quest's common stock.

Recent Sales of Unregistered Securities

1.       On March 10, 2008, we entered into a Convertible Note Purchase
Agreement with a single accredited investor pursuant to which we agreed to issue
a $75,000 convertible promissory note. The convertible note has a 1 year term
and bear interest at fifteen percent (15%) payable at the maturity date of the
note. The note is convertible into our common stock pursuant to a "variable
conversion price" equal to 50% of the average of the 3 lowest closing bid prices
for our common stock during the 10 trading day period prior to conversion. The
note contains monetary penalties for late delivery of shares and certain other
items as more specifically defined therein. In addition, the purchase agreement
provides liquidated damages (2-3% per month based on the principal outstanding)
to the extent we are not current in our public filings.

         Under the terms of note, the note is convertible by holder only to the
extent that the number of shares of common stock issuable pursuant to such
securities, together with the number of shares of common stock owned by such
holder and its affiliates (but not including shares of common stock underlying
unconverted shares of the note) would not exceed 4.99% of our then outstanding
common stock as determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended

                                       23
<PAGE>

         We intend to use the proceeds from sale of the convertible promissory
note for purchase of equipment for mine operations, supplies and payroll for
mine operations, professional fees, and working capital.

         We relied on the exemption from registration provided by Section 4(2)
of the Securities Act of 1933, as amended, for the offer and sale of the notes
and the warrants.

2.       During the quarter ended December 31, 2007, Quest issued an aggregate
of 3,910,148 shares of common stock upon conversions of amended and restated 7%
convertible notes. The aggregate principal and interest amount of these notes
that were converted was $72,026. The issuances were exempt pursuant to Section
3(a)(9) of the Securities Act as well as Section 4(2) of the Securities Act.

3.       During the quarter ended December 31, 2007, Quest issued an aggregate
of 3,400,000 shares of common stock upon conversion of 5,467 shares of its
series A preferred stock. The issuances were exempt pursuant to Section 3(a)(9)
of the Securities Act as well as Section 4(2) of the Securities Act.

4.       During the quarter ended December 31, 2007, Quest issued an aggregate
of 5,900,000 shares of common stock upon partial conversion of a secured note
and judgment thereon. The aggregate principal and interest amount of this
judgment that was converted was $64,009. The issuances were exempt pursuant to
Section 3(a)(9) of the Securities Act as well as Section 4(2) of the Securities
Act.

                                       24
<PAGE>

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with Quest's financial statements and related notes included in this report.
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The statements contained in
this report that are not historic in nature, particularly those that utilize
terminology such as "may," "will," "should," "expects," "anticipates,"
"estimates," "believes," or "plans" or comparable terminology are
forward-looking statements based on current expectations and assumptions.
Various risks and uncertainties could cause actual results to differ materially
from those expressed in forward-looking statements. Please refer to the Risk
Factors section of this report on page 4 for a description of these risks and
uncertainties.

         All forward-looking statements in this document are based on
information currently available to Quest as of the date of this report, and
Quest assumes no obligation to update any forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results to differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements.

General

         Quest Minerals & Mining Corp. acquires and operates energy and mineral
related properties in the southeastern part of the United States. Quest focuses
its efforts on properties that produce quality compliance blend coal.

         Quest is a holding company for Quest Minerals & Mining, Ltd., a Nevada
corporation, or Quest (Nevada), which in turn is a holding company for Quest
Energy, Ltd., a Kentucky corporation, or Quest Energy, and of Gwenco, Inc., a
Kentucky corporation, or Gwenco. Quest Energy is the parent corporation of E-Z
Mining Co., Inc, a Kentucky corporation, or E-Z Mining, and of Quest Marine
Terminal, Ltd., a Kentucky corporation, or Quest Marine.

         Gwenco leases over 700 acres of coal mines, with approximately
12,999,000 tons of coal in place in six seams. In 2004, Gwenco had reopened
Gwenco's two former drift mines at Pond Creek and Lower Cedar Grove, and had
begun production at the Pond Creek seam. This seam of high quality compliance
coal is located at Slater's Branch, South Williamson, Kentucky.

Fiscal 2007 and First Quarter 2008 Developments

         Logan & Kanawha Purchase Order. In April 2008, our wholly owned
subsidiary, Gwenco, Inc., received a purchase order for up to $8 million on coal
through December 2008 from Logan & Kanawha Co., LLC, a West Virginia company

         Rehabilitation and Reopening of Pond Creek Mine. In January 2007,
Gwenco received a permit from the Kentucky Department of Natural Resources to
conduct coal mining at its Pond Creed mine. In February 2007, Gwenco's
engineering firm, Alchemy Engineering of Prestonburg, Kentucky, completed a one
and five year mine plan and maps required by the Kentucky Department of Mines
and Minerals in connection with the permit to conduct coal mining at Pond Creek.
Gwenco has retained General Mining, LLC of Wallins, Kentucky to rehabilitate the
Pond Creek mine in February 2007 and further retained General Mining to conduct
mining operations at Pond Creek in March 2007. The company completed its initial
rehabilitation of the Pond Creek mine, recommenced mining operations, and began
shipping commercial coal for sale in May 2007. The company completed all
rehabilitation the week of July 30, 2007. In January 2008, we retained White
Star Mining to conduct all mining operations at Pond Creek. White Star retained
all necessary permits to being mining operations in February 2008 and we expect
to resume mining operations in the second fiscal quarter of 2008.

         March 2008 Financing. On March 11, 2008, the Company signed a 15% per
annum promissory note with a third party lender for $75,000 due on March 10,
2009. The note is convertible at the option of the holder at a conversion price
of 50% of the average of the three lowest per share market values during the ten
(10) trading days immediately preceding a conversion date. The holder may not
convert any outstanding principal amount of this note or accrued and unpaid

                                       25
<PAGE>

interest thereon to the extent such conversion would result in the holder
beneficially owning in excess of 4.999% of the then issued and outstanding
common shares of the Company.

         Letter of Intent with McCoy Heirs. In January 2008, we entered into a
letter of intent on a joint venture with the McCoy Heirs, owners of coal
property in southern Kentucky The project was intended to encompass 1,000,00
tons of recoverable coal reserves from the Elkhorn # 3 coal seam structured
through a lease agreement to mine property held by the McCoy Heirs. This letter
of intent has since been abandoned.

         Gwenco, Inc. Chapter 11 Reorganization. On March 2, 2007, Quest's
wholly owned subsidiary, Gwenco, Inc., filed a voluntary petition for
reorganization under Chapter 11 of .the U.S. Bankruptcy Code with the United
States Bankruptcy Court for the Eastern District of Kentucky. Management felt
this was a necessary step to further the company's financial restructuring
initiative and to protect Gwenco's assets from claims, debts, judgments,
foreclosures, and forfeitures of those creditors and stakeholders with whom both
Quest and Gwenco were unable to negotiate restructured agreements. The company
is currently overseeing Gwenco's operations as a debtor in possession, subject
to court approval of matters outside the ordinary course of business. Gwenco is
currently seeking court approval for debtor in possession financing from holders
of Gwenco's existing debt obligations in order to fund operating expenses. The
company intends to continue its mining operations at Pond Creek mine at Slater's
Branch while this matter is completed. Under Chapter 11, claims against Gwenco
in existence prior to the filing of the petitions for reorganization relief
under the federal bankruptcy laws are stayed while Gwenco is in bankruptcy. On
August 3, 2007, the Bankruptcy Court approved Gwenco's request for
debtor-in-possession financing in an amount of up to $2,000,000. In February
2008, Gwenco submitted a preliminary plan of reorganization to the court for
approval.

         Letter of Intent with Parsons Branch. On July 21, 2006, Quest signed a
non-binding letter of intent with Parsons Branch Development to acquire a permit
to mine the Elkhorn #2 seam on Parsons Branch located in Mud Creek, Kentucky.
Parsons Branch Development has approximately 450,000 tons of clean coal under
lease at this location. Upon completion of the transfer of the permit to Quest,
it will retain all revenues from coal sales after payment of a royalty to
Parsons Branch of $1.50 per clean ton mined and expenses of mine operations,
which are expected to be carried out by a contract miner. Management determined
not to pursue this transaction during fiscal 2007.

                                       26
<PAGE>

Business Development of Quest

         Quest Minerals (Nevada), was organized on November 19, 2003 to acquire
and operate privately held coal mining companies in the southeast United States.
On January 1, 2004, Quest Minerals (Nevada) acquired E-Z Mining Co., Inc. On
February 9, 2004, Quest Minerals (Nevada) completed a "reverse merger" with
Tillman International, Inc., or Tillman, a publicly-traded shell corporation and
a fully reporting company registered under the Securities Exchange Act of 1934.
On April 8, 2004, Tillman changed its name to "Quest Minerals & Mining Corp."

         E-Z Mining Acquisition. On January 1, 2004, Quest Minerals (Nevada)
acquired E-Z Mining pursuant to a stock purchase agreement whereby Quest Energy
acquired 100% of the outstanding shares of capital stock of E-Z Mining. Under
the stock purchase agreement, Quest Minerals (Nevada) issued 2,000,000 shares of
its Series A convertible preferred stock and 23,000 shares of its common stock
to the stockholders of E-Z Mining in exchange for all of the outstanding shares
of capital stock of E-Z Mining.

         Each share of Quest Minerals (Nevada) Series A preferred stock is now
convertible into a maximum of five (5) shares of Quest common stock, or such
lesser shares as determined by dividing $3.00 by the average closing bid price
of one share of Quest common stock during the ten trading days preceding actual
receipt of a notice of conversion, subject to proportional adjustment for
stock-splits, stock dividends, recapitalizations, and subsequent dilutive
issuances of common stock. The Series A preferred stock is convertible at the
option of the holder. The holders of the Series A preferred stock shall be
entitled to receive cumulative dividends at the rate of $0.0001 per share per
annum in preference to the holders of common stock. The holders of the Series A
preferred stock shall also be entitled to receive, upon liquidation, an amount
equal to $3.00 per share for the Series A preferred stock plus all declared and
unpaid dividends, in preference to the holders of the common stock. After March
31, 2004, Quest has the option of redeeming the Series A preferred stock at a
price equal to $3.00 per share for the Series A preferred stock plus all
declared and unpaid dividends. The Series A Preferred Stock has no voting
rights. As of June 9, 2005, 1,546,667 shares of the Series A preferred stock had
been converted into an aggregate of 2,004,689 shares of Quest common stock.

         On November 27, 2007 Quest Minerals (Nevada) made effective; and on
December 19, 2007 filed a Certificate of Amendment to provide for a reduced
conversion price set forth as such that (1) Each share of Series A Preferred
Stock shall be convertible at any time into that number of shares of Quest
common stock as determined by multiplying each share of Series A Preferred Stock
by a fraction: the numerator of which is $3.00 and the denominator is equal to
the greater of (i) 0.001 or (ii) 40% of closing price per share of common stock.
A holder of Series A Preferred Stock may not convert his shares to the extent
that such conversion would result in the Holder, together with any affiliate
thereof, beneficially owning, pursuant to Section 13(d) of the Securities
Exchange of 1934, in excess of 4.999% of the then issued and outstanding common
stock of the company. The provisions of this section may be waived by a holder
upon not less than 61 days prior notice to Quest. As of the twelve months ended
December 31, 2007, 5,467 shares have been converted into 3,400,000 shares.

         Reverse Merger. Quest was incorporated on November 21, 1985 in the
State of Utah under the name "Sabre, Inc." It subsequently changed its name to
Tillman International, Inc., or Tillman. On February 9, 2004, Tillman acquired
100% of the outstanding common stock of Quest Minerals (Nevada) pursuant to a
securities purchase agreement and plan of reorganization. Under the plan of
reorganization, Tillman issued 20,700,000 shares of its common stock to the
stockholders of Quest Minerals (Nevada) in exchange for all of the outstanding
shares of common stock of Quest Minerals (Nevada). In addition, Tillman agreed
to issue to the stockholders of Quest Minerals (Nevada) an additional 1,800,000
shares of its common stock upon completion of an amendment to its articles of
incorporation to increase the authorized common stock of Tillman to 250,000,000
shares. Pursuant to the plan of reorganization, 22,464,358 shares of Tillman
common stock held by Silvestre Hutchinson, the former President of Tillman and
one of its former directors, were cancelled. Upon the completion of the
reorganization, William R. Wheeler and Eugene Chiaramonte, Jr., the former
directors of Quest Minerals (Nevada), were appointed as directors of Tillman. On
April 8, 2004, Tillman amended its articles of incorporation to change its name
to "Quest Minerals & Mining Corp." The additional 1,800,000 shares of Quest
common stock were issued in May 2004.

         Gwenco Acquisition. Effective April 28, 2004, Quest Minerals (Nevada)
acquired 100% of the outstanding capital stock of Gwenco in exchange for
1,600,000 shares of Series B preferred stock of Quest Minerals (Nevada) and the
assumption of up to $1,700,000 in debt. Each share of Series B preferred stock
carries a liquidation preference of $2.50 per share. In addition, each share of

                                       27
<PAGE>

Series B Preferred Stock is convertible into one share of Quest common stock.
After the acquisition, the parties agreed to a post-closing adjustment to the
purchase price to adjust for the liabilities of Gwenco exceeding $1,700,000. As
a result of this adjustment, the number of shares of Series B preferred stock
issued to the former stockholders of Gwenco was reduced to 1,386,275. On
November 1, 2004, 1,000,000 shares of the Series B preferred stock were
converted into 1,000,000 shares of Quest common stock. In connection with this
acquisition, Quest appointed Albert Anderson, the former principal stockholder
of Gwenco, to Quest's board of directors.

         On March 24, 2005, the board of directors asked Albert Anderson to
resign as a director of Quest, and on April 4, 2005, Mr. Anderson submitted his
resignation. In connection with his resignation, Mr. Anderson alleged that Quest
has defaulted under the stock purchase agreement by and between Quest, Gwenco,
Inc., and the former stockholders of Gwenco, which includes Mr. Anderson. Quest
has denied Mr. Anderson's allegations, believes that the allegations are
baseless and without merit, and further believes that it has several claims
against Mr. Anderson which it could assert.

         In or about May, 2004, National City Bank of Kentucky commenced an
action in Boyd County Court, Kentucky against Gwenco, Inc. and Albert Anderson
for breach of various promissory notes issued by Gwenco. Duke Energy Merchants
and First Sentry Bank were joined in the action. National City Bank and Duke
Energy are collectively seeking approximately $1,100,000 in principal as well as
interests, fees, and costs. National City Bank and Duke Energy have been granted
summary judgment in this action. National City Bank has obtained judgment in
that action in the amount of approximately $340,000.

         In that action, Anderson has filed a third-party complaint against
Quest (Nevada) and Taylor Mining, two of Quest's subsidiaries, for breach of
contract, fraud in the inducement, breach of the covenant of good faith and fair
dealing, unjust enrichment, conversion, and breach of fiduciary duties. On July
27, 2006, Quest settled the third party complaint with Anderson. As part of the
settlement, Gwenco received mining permit renewal and transfer documentation
which Gwenco is required to obtain in order to recommence mining operations at
its Pond Creek mine at Slater's Branch, Kentucky. Further, Anderson agreed to
provide all reasonable cooperation in recommencing mining operations at the
Slater's Branch mine. The parties also agreed to terminate all remaining rights,
duties, and obligations under the original stock purchase agreement entered into
in connection with the acquisition of Gwenco by Quest. Quest made a one-time
cash payment of $75,000 and issued 3,500,000 shares of common stock, subject to
a lock-up/leak out agreement, to Anderson, upon conversion of his Series B
Preferred Stock, the terms of which were amended under the settlement agreement.
Quest also granted Anderson a sliding scale royalty on coal sales. The parties
mutually dismissed their respective counter-claims against each other in the
civil action pending in Boyd County Court, Kentucky.

Critical Accounting Policies

         The discussion and analysis of Quest's financial conditions and results
of operations is based upon Quest's consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles
in the United States. The preparation of financial statements requires managers
to make estimates and disclosures on the date of the financial statements. On an
on-going basis, Quest evaluates its estimates, including, but not limited to,
those related to revenue recognition. It uses authoritative pronouncements,
historical experience, and other assumptions as the basis for making judgments.
Actual results could differ from those estimates. Quest believes the following
critical accounting policies affect its more significant judgments and estimates
in the preparation of our consolidated financial statements.

Mineral Interests

         The purchase acquisition costs of mineral properties are deferred until
the properties are placed into production, sold or abandoned. These deferred
costs will be amortized on the unit-of-production basis over the estimated
useful life of the properties following the commencement of production or
written-off if the properties are sold, allowed to lapse or abandoned.

         Mineral property acquisition costs include any cash consideration and
the fair market value of common shares and preferred shares, based on the
trading price of the shares, or, if no trading price exists, on other indicia of
fair market value, issued for mineral property interests, pursuant to the terms
of the agreement or based upon an independent appraisal.

                                       28
<PAGE>

         Administrative expenditures are expensed in the year incurred.

Coal Acquisition Costs

         The costs to obtain coal lease rights are capitalized and amortized
primarily by the units-of-production method over the estimated recoverable
reserves. Amortization occurs either as Quest mines on the property or as others
mine on the property through subleasing transactions.

         Rights to leased coal lands are often acquired through royalty
payments. As mining occurs on these leases, the accrued royalty is charged to
cost of coal sales.

Mining Acquisition Costs

         The costs to obtain any interest in third-party mining operations are
expensed unless significantly proven reserves can be established for the entity.
At that point, capitalization would occur.

Mining Equipment

         Mining equipment is recorded at cost. Expenditures that extend the
useful lives of existing plant and equipment or increase the productivity of the
asset are capitalized. Mining equipment is depreciated principally on the
straight-line method over the estimated useful lives of the assets, which range
from three to 15 years.

Deferred Mine Equipment

         Costs of developing new mines or significantly expanding the capacity
of existing mines are capitalized and amortized using the units-of-production
method over the estimated recoverable reserves that are associated with the
property being benefited.

Asset Impairment

         If facts and circumstances suggest that a long-lived asset may be
impaired, the carrying value is reviewed. If the review indicates that the value
of the asset will not be recoverable, as determined based on projected
undiscounted cash flows related to the asset over its remaining life, then the
carrying value of the asset is reduced to its estimated fair value.

Revenue Recognition

         Coal sales revenues are sales to customers of coal produced at Quest's
operations. Quest recognizes revenue from coal sales at the time title passes to
the customer.

Income Taxes

         Quest provides for the tax effects of transactions reported in the
financial statements. The provision, if any, consists of taxes currently due
plus deferred taxes related primarily to differences between the basis of assets
and liabilities for financial and income tax reporting. The deferred tax assets
and liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of the year ended December 31, 2007,
Quest had no material current tax liability, deferred tax assets, or liabilities
to impact on its financial position because the deferred tax asset related to
Quest's net operating loss carry forward was fully offset by a valuation
allowance. However, Quest has not filed its corporate income tax returns since
2002.

                                       29

<PAGE>

Fair Value

         Quest's financial instruments, as defined by SFAS No. 107, "Disclosure
about Fair Value of Financial Instruments", include cash, advances to affiliate,
trade accounts receivable, investment in securities available-for-sale,
restricted cash, accounts payable and accrued expenses and short-term
borrowings. All instruments other than the investment in securities
available-for-sale are accounted for on a historical cost basis, which, due to
the short maturity of these financial instruments, approximates fair value as at
December 31, 2006.

Earnings loss per share

         Quest adopted SFAS No. 128, which provides for the calculation of
"basic" and "diluted" earnings per share. Basic earnings per share includes no
dilution and is computed by dividing net income available to common stockholders
by the weighted average common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution of securities that could share
in the earnings similar to fully diluted earnings per share.

Stock Split

         All references to common stock and per share data have been
retroactively restated to account for the 1 for 4 reverse stock split
effectuated on August 17, 2007.

         All references to common stock and per share data have been
retroactively restated once more to account for the 1 for 10 reverse stock split
effectuated on December 14, 2007.

Other Recent Accounting Pronouncements

         Quest does not expect that the adoption of other recent pronouncements
from the Public Company Oversight Board to have any impact on its financial
statements.

                                       30
<PAGE>

Results of Operations

Basis of Presentation

         The following table sets forth, for the periods indicated, certain
audited selected financial data:

                                                          Year Ended
                                                         December 31,
                                                 ---------------------------
                                                    2007            2006
                                                 -----------     -----------
Revenues                                         $   153,213     $        --
Production costs                                     577,094              --
Selling, general and administrative                3,977,694       4,447,356
Stock Compensation                                        --         286,108
Interest                                             393,354         747,259
Depreciation and amortization                         95,690          49,392
Beneficial conversion expense                        279,300              --
                                                 -----------     -----------

Operating income (loss)                                           (5,530,115)
                                                 -----------     -----------

Comparison of the year ended December 31, 2007 and 2006

         Net sales. Revenues for Quest were $153,213 for the year ended December
31, 2007, as compared to $0 for the year ended December 31, 2006. In the second
quarter of 2007, Quest resumed mining operations at its Pond Creek Mine at
Slater's Branch. Before that time, Quest had not been generating revenues from
any of its mines since June 2005, when, due to equipment breakdowns, licensing
and permit issues, and a lack of working capital, Quest had to shut down the
mines.

         Production costs. Production costs were $577,094 for the year ended
December 31, 2007 as compared to $0 for the year ended December 31, 2006. In the
second quarter of 2007, Quest resumed mining operations at its Pond Creek Mine
at Slater's Branch. During the quarter, Quest was required to conduct extensive
rehabilitation of the mine, which resulted in production costs well in excess of
the revenue generated. Before resuming mining operations, Quest had no
production costs due to its lack of mining operations.

         Selling, general, and administrative. Selling, general and
administrative expenses decreased to $3,977,694, or 10.6%, for the year ended
December 31, 2006, from $4,447,356 for the year ended December 31, 2006. The
selling, general, and administrative expenses result primarily from the issuance
of shares of common stock upon conversion of debt at a discount to the market
price for common stock and from the issuance of shares of common stock upon
conversion of debt at a discount to the market price for common stock, resulting
in approximate $2,338,636 associated with debt conversions. The Company also
issued shares of common stock for services, resulting in an additional non-cash
expense of approximately $713,355.

         Stock compensation expense. Stock compensation expense increased to $0
for the year ended December 31, 2007 from $268,108 for the prior year, resulting
from the issuance and vesting of stock options during the 2006 fiscal year.

         Interest. Interest expense decreased to $393,354, or 47.4%, for the
year ended December 31, 2007, from $747,259 for the year ended December 31,
2006. Quest's interest expense results from various outstanding debt
obligations, including obligations that Quest assumed in connection with the
acquisition of Gwenco and various notes issued in various financings since
October 2004. The decrease in interest expense results primarily from the

                                       31
<PAGE>

reduction of our outstanding indebtedness by means of conversions of such
indebtedness into common stock, as well as reduced interest rates on refinanced
debts.

         Depreciation and amortization. Depreciation expense increased to
$95,690, or 93.7%, for the year ended December 31, 2006, from $49,392 for the
year ended December 31, 2006. Quest's depreciation expense increased due to an
adjustment to equipment due to a re-appraisal of the equipment. In addition,
Quest has revised its estimate of the useful life of this equipment fifteen
years to five years, which accelerates the depreciation costs. Quest has also
put additional equipment into service in the 2007 fiscal year.

         Beneficial conversion expense. Quest incurred beneficial conversion
expense of $292,500 for the nine months ended September 30, 2007. This expense
resulted from the issuance of shares of Series C Preferred Stock, which is
convertible into shares of common stock at the lesser of (i) $0.008 per share or
(ii) 100% of the average of the 5 closing bid prices of the common stock
immediately preceding such conversion date.

         Operating loss. Quest incurred an operating loss of $5,169,899 for the
year ended December 31, 2007, compared to an operating loss of $5,530,115 for
the year ended December 31, 2006. It had lower operating losses in 2007 as
compared to 2007 primarily from increase in revenues associated with the
reopening of the mines as well as decreased selling, general and administrative
and interest expenses.

Liquidity and Capital Resources

         Quest has financed its operations, acquisitions, debt service, and
capital requirements through cash flows generated from operations until June 30,
2005, and through issuance of debt and equity securities. Its working capital
deficit at December 31, 2007 was $7,358,784. It had cash of $4,644 as of
December 31, 2007.

         Quest used $884,282 of net cash in operating activities for the year
ended December 31, 2007, compared to using $670,304 in the year ended December
31, 2006. Cash used in operating activities for the year ended December 31, 2007
was mainly due to an increase in prepaid expenses of $84,900. This was offset by
non-cash expenses of $95,690 in depreciation and amortization, $113,900 in
deferred consulting amortization, $104,998 of stock issued for interest,
$590,556 of stock issued for services, $2,699,788 for warrant issuances and
conversions expenses, $1,462,440 of derivative expense, $292,500 for issuance of
preferred stock, $335,764 for increase in DIP payables, and an increase of
accounts payable and accrued expenses of 137,321.

         Net cash flows used by investing activities was $83,394 for the year
ended December 31, 2007, resulting from the purchase of equipment and providing
a security deposit and offset by mine development, as compared to $15,801 of net
cash flows used by investing activities for the comparable period in 2006.

         Net cash flows provided by financing activities were $972,678 for the
year ended December 31, 2007, compared to net cash flows provided by financing
activities of $669,742 for the year ended December 31, 2006. This increase in
net cash provided by financing activities is due to Quest's borrowings of
$1,013,903, offset by repayment of $41,225 of debt.

Financings and Debt Restructurings

         From December 2005 through January 2006, Quest issued 1,500,000 shares
of its common stock in an offshore private placement at $0.20 per share. In
addition, Quest also issued a convertible secured promissory note in the
principal amount of $335,000. The note was due on December 8, 2006, bore
interest at a rate of eight percent (8%), and was convertible into Quest common
shares at an initial conversion price of $0.20 per share, subject to adjustment.
In January, 2007, Quest and these investors entered into an exchange agreement,
pursuant to which the shares and the note were exchanged for new notes in the
aggregate principal amount of $635,000. The notes are due on April 1, 2008, with
an annual interest rate of eight percent (8%). The notes are convertible into
the Company's common shares at an initial conversion price equal to the greater
of (a) $0.02 per share, and (b) 50% of the average market price during the three
trading days immediately preceding any conversion date.

         On April 5, 2006, Quest issued an aggregate of 1.25 units at a price of
$100,000 per unit. Each unit consists of a convertible promissory note in the
principal amount of $100,000 and warrants to purchase shares of Quest common
stock at an exercise price of $0.84 per share. The unit notes are due on July 5,
2007. The notes bear interest at a rate of six percent (6%) and are convertible

                                       32
<PAGE>

into Quest common shares at an initial conversion price of $0.42 per share. On
July 27, 2007, an investor holding a unit note in the amount of $25,000
exchanged the note for 836,925 shares of our common stock.

         On May 16, 2005, Quest entered into a credit agreement with a third
party lender in which $245,000 was issued as a 10% note due August 19, 2005.
Additionally, the lender was issued 2,565,007 warrants. The loans subject to the
credit agreement are secured by certain assets of Quest. The warrants have an
exercise price of $0.10 per share, subject to adjustment, and expire on May 31,
2007. On February 14, 2006, in connection with a settlement agreement with the
lender, Quest made a payment of $264,000 and issued an amended and restated 10%
note in the amount of $100,000. The note covered accrued interest and additional
legal fees. The amended and restated note is convertible into Quest's common
stock at a rate of $0.40 per share and was due February 22, 2007. Quest amended
and restated the warrant issuance to reflect a $0.20 per share exercise price.
Quest also issued 1,250,000 new warrants exercisable at $0.40 per share as part
of a settlement agreement with one of its lenders. They are due to expire in
2009. In June, 2007, Quest entered into an exchange agreement with the third
party lender, under which the holder exchanged the $100,000 note and the
remaining warrants held by such lender for a new convertible promissory note in
the aggregate principal amount of $100,000. The new note is due on June 6, 2008,
with an annual interest rate of seven percent (7%), and is convertible
intoQuest's common shares at a conversion price of 70% of the average of the 5
closing bid prices of the common stock immediately preceding such conversion
date.

         A third-party lender advances operational funding to Quest. Since there
has been no formal agreement regarding the balance owed, Quest accrues a 5%
annual interest on the principal with the intent that a mutual arrangement will
be resolved between both parties.

         On August 15, 2007, the U.S. Bankruptcy Court approved a DIP Financing
Motion authorizing the Company's wholly owned subsidiary, Gwenco, Inc., which is
currently in Chapter 11 reorganization proceedings, to borrow up to $2,000,000
in post-petition debt from a pre-petition creditor pursuant to a Debtor-In
-Possession loan agreement and promissory note between Gwenco and the lender
dated June 29, 2007. Additionally, the Court approved prior budgeted advances
from July of up to $350,000, which, in turn, adjusted the total facility to
$1,700,000. The loan advances will carry a 17% interest rate per annum and
mature on July 31, 2008.

                                       33
<PAGE>

Capital Requirements

         The report of Quest's independent accountants for the fiscal year ended
December 31, 2007 states that Quest has incurred operating losses since
inception and requires additional capital to continue operations, and that these
conditions raise substantial doubt about its ability to continue as a going
concern. Quest believes that, as of the date of this report, in order to fund
its plan of operations over the next 12 months, it will need to fund its
operations out of cash flows generated from operations, to the extent such
operations are resumed, and from the sale of additional securities.

         Quest is continuing to seek to fund its capital requirements over the
next 12 months from the additional sale of its debt and equity securities. It is
possible that Quest will be unable to obtain sufficient additional capital
through the sale of its securities as needed. Quest has also obtained
debtor-in-possession financing through the Gwenco bankruptcy proceedings to fund
the capital requirements of Gwenco, Inc.

         Part of Quest's growth strategy is to acquire additional coal mining
operations. Where appropriate, Quest will seek to acquire operations located in
markets where it currently operates to increase utilization at existing
facilities, thereby improving operating efficiencies and more effectively using
capital without a proportionate increase in administrative costs. Quest does not
currently have binding agreements or understandings to acquire any other
companies.

         Quest intends to retain any future earnings to pay its debts, finance
the expansion of its business and any necessary capital expenditures, and for
general corporate purposes.

                                       34
<PAGE>

Item 7.  FINANCIAL STATEMENTS

                         QUEST MINERALS AND MINING CORP.

                                      INDEX
                                      -----

                                                                            PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                       F2

CONSOLIDATED BALANCE SHEET                                                    F3

CONSOLIDATED STATEMENTS OF OPERATIONS                                         F4

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)                       F5

CONSOLIDATED STATEMENTS OF CASH FLOWS                                         F6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                F7-F48


                                      F-1
<PAGE>

KEMPISTY & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS, P.C.
--------------------------------------------------------------------------------
15 MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038
TEL (212) 406-7272 - FAX (212) 513-1930

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Quest Minerals & Mining Corp.

We have audited the accompanying consolidated balance sheets of Quest Minerals &
Mining Corp. as of December 31, 2007, and 2006 and the related statements of
operations, changes in stockholders' equity (deficit) and cash flows for each of
the years in the two years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quest Minerals & Mining Corp.
at December 31, 2007 and 2006 and the results of its operations and cash flows
for each of the years in the two year period then ended in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 16 to the consolidated financial statements, the Company is
a defendant in several lawsuits, and one of the Company's significant
subsidiaries is in bankruptcy. An adverse ruling could result in the loss of the
Company's operating assets. It is not possible at this time to predict the
outcome of these legal proceedings.

The accompanying financial statements have been prepared assuming that Quest
Minerals & Mining Corp. will continue as a going concern. As more fully
described in Note 3, the Company has incurred operating losses since inception
and requires additional capital to continue operations. Additionally, the
Company could lose all of its operating assets through current and/or pending
litigation. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans regarding these matters are
described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


/s/ Kempisty & Company CPAs, P.C.

Kempisty & Company
Certified Public Accountants PC
New York, New York
April 11, 2008

                                       F-2
<PAGE>
<TABLE>
<CAPTION>

                          QUEST MINERALS & MINING CORP.

                           CONSOLIDATED BALANCE SHEET


                                                                          As of December 31,
                                                                     ----------------------------
                                                                         2007            2006
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
                                     ASSETS
Current Assets
  Cash                                                               $      4,464    $         52
  Receivables                                                                  --              --
                                                                     ------------    ------------
      Total current assets                                                  4,464              52


Leased Mineral Reserves, net (Note 2 & 5)                               5,208,524       5,210,471
Equipment, net (Note 6)                                                   166,273         176,384
Deposits                                                                   40,643          38,300
Prepaid consulting expense                                                 27,000          71,000
Other receivables, net (Note 7)                                                --              --
DIP Cash, Restricted (Note 16)                                              1,166              --
DIP Receivables, Restricted (Note 16)                                          --              --
                                                                     ------------    ------------

        TOTAL ASSETS                                                 $  5,448,070    $  5,496,207
                                                                     ============    ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
  Accounts payable and accrued expenses (Note 8)                     $  2,735,718    $  2,598,397
  Loans payable (Note 9)                                                2,937,716       3,679,384
  Bank loans (Note 9)                                                   1,017,525       1,017,525
  Related party loans (Note 9)                                            672,289         713,514
                                                                     ------------    ------------

TOTAL CURRENT LIABILITIES                                               7,363,248       8,008,820

Other Liabilities
  Derivative Liability (Note 8)                                         2,841,203       1,420,588
  Unearned revenues (Note 8)                                                   --              --
  DIP Financing (Note 9)                                                  335,764              --
                                                                     ------------    ------------

        TOTAL LIABILITIES                                              10,540,215       9,429,408

Commitments and Contingencies

Stockholders' equity
  Preferred stock, par value $0.001, 10,000,000 shares authorized;
    SERIES A - issued and outstanding 447,533 shares                          448             453
    SERIES B - issued and outstanding 48,284 shares                            48              48
    SERIES C - issued and outstanding 260,000 shares                          260              --

  Common stock, par value $0.001, 975,000,000 shares authorized;
    issued and outstanding 46,793,684 shares                               46,796           5,323

  Equity held in escrow (Note 12)                                        (587,500)       (587,500)

  Equity allowance (Note 12)                                              (29,326)             --

  Deferred Stock Compensation (Note 13)                                        --         (95,370)

  Paid-in capital                                                      51,981,253      46,835,715
  Accumulated Deficit                                                 (56,504,124)    (50,091,870)
                                                                     ------------    ------------

Total Stockholders' Equity                                             (5,092,145)     (3,933,201)
                                                                     ------------    ------------

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $  5,448,070    $  5,496,207
                                                                     ============    ============
</TABLE>

                       See Notes to Financial Statements.

                                       F-3
<PAGE>

                          QUEST MINERALS & MINING CORP.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                For the years ended
                                                     December 31,
                                             ----------------------------
                                                 2007            2006
                                             ------------    ------------
Revenue:
   Coal revenues                             $    153,213    $         --
                                             ------------    ------------

          Total Revenues                          153,213              --
                                             ------------    ------------

Expenses:
   Production costs                               577,094              --
   Selling, general and administrative          3,977,674       4,447,356
   Interest                                       393,354         747,259
   Stock compensation expense                          --         286,108
   Depreciation and Amortization                   95,690          49,392
   Beneficial conversion expense                  279,300              --

          Total Operating Expenses              5,323,112       5,530,115
                                             ------------    ------------

Loss from Operations                           (5,169,899)     (5,530,115)

Other Income (Expense):
   Gain (Loss) on Settlement Costs                178,261              --
   Gain (Loss) on Derivatives                  (1,420,615)      5,137,142
                                             ------------    ------------

Income loss before income taxes                (6,412,253)       (392,973)
                                             ------------    ------------

Provision for Income taxes                             --              --
                                             ------------    ------------

Net loss                                     $ (6,412,253)   $   (392,973)
                                             ============    ============

Basic and diluted loss per common share      $    (0.3258)   $    (0.1462)
                                             ============    ============


Weighted average common shares outstanding     19,680,156       2,687,329
                                             ============    ============


                       See Notes to Financial Statements.

                                       F-4
<PAGE>
<TABLE>
<CAPTION>

                                                           QUEST MINERALS & MINING CORP.

                                                 STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
                                                     For the years ended December 31, 2007 and 2006

                                                                                            Escrow /
                                 Common Stock          Preferred Stock      Additional    Adjustments
                           -----------------------    ------------------     Paid-in        Common
                              Shares       Amount      Shares    Amount      Capital        Stock          Deficit        Totals
                           -----------    --------    --------   -------   -----------    ----------    ------------    -----------
<S>                          <C>             <C>        <C>          <C>    <C>             <C>          <C>             <C>
Balances at
 January 1, 2006             1,737,519       1,738      839608       839    43,116,895      (587,500)    (49,698,897)    (7,166,925)

Stock Options                                                                  381,477                                      381,477

Deferred Compensation                                                                        (95,369)                       (95,369)

Common Stock issued under
 Rule 144
   For Consulting              120,000         120                             434,180                                      434,300
   For notes payable and
      interest expense       2,294,009       2,294                           1,803,058                                    1,805,352
   For warrant conversions      91,250          91                             250,099                                      250,190

Common Stock issued under
 Reg. S
   For cash and
      investment
      expense                   12,500          13                              74,987                                       75,000
   For consulting              342,595         343                             267,205                                      267,548
   For services                637,500         638                             507,563                                      508,201

Series B Preferred
 Conversion                     87,500          88    (337,991)     (338)          251                                            1

Net Loss for twelve
 months ended
 December 31, 2006                                                                                          (392,973)      (392,973)
                           -----------    --------    --------   -------   -----------    ----------    ------------    -----------
Balances at
 January 1, 2007             5,322,873    $  5,323     501,617   $   501    46,835,715    $ (682,869)   $(50,091,870)   $(3,933,201)

Deferred Compensation                                                          (95,369)       95,369                             --

Common Stock issued under
 Rule 144
   For notes payable and
      interest expense      25,054,437      25,055                           3,935,078                                    3,960,133
   For warrant conversions       1,667           2                                 525                                          527

Common Stock issued under
 Reg. S
   For consulting            4,275,000       4,275                             291,080                                      295,355
   For services              5,545,000       5,545                             340,855                                      346,400
   For employee benefits     1,250,000       1,250                             102,750                                      104,000

Returned Stock                (150,000)       (150)                            (33,450)                                     (33,600)

Series A Preferred
 Conversion                  3,400,000       3,400      (5,467)       (5)       24,600                                       27,995

Series C Preferred
 Issued                                                260,000       260       552,240                                      552,500

Equity Allowance from
   Issuance Error -
   December 14, 2007         2,094,707       2,095                              27,231       (29,326)                            --

Net Loss for twelve
 months ended
 December 31, 2007                                                                                        (6,412,253)    (6,412,253)
                           -----------    --------    --------   -------   -----------    ----------    ------------    -----------
Balances at
 December 31, 2007          46,793,684    $ 46,795     756,150   $   756    51,981,255    $ (616,826)   $(56,504,124)   $(5,092,144)
                           ===========    ========    ========   =======   ===========    ==========    ============    ===========
</TABLE>

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

                                      F-5
<PAGE>
<TABLE>
<CAPTION>

                          QUEST MINERALS & MINING CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                      For the Twelve Months Ended
                                                                             December 31,
                                                                     ----------------------------
                                                                         2007            2006
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
Operating Activities
--------------------
   Net loss                                                          $ (6,412,253)   $   (392,973)
   Adjustments to reconcile net loss to net cash provided
      (used) by operating activities:
   Depreciation and amortization                                           95,690          49,392
   Deferred Consulting amortization                                       113,900         766,000
   Stock issued for interest                                              104,998          77,038
   Stock issued for services                                              590,556       1,209,748
   Preferred C Stock Issued                                               292,500
   Warrants issuances and conversions                                   2,699,788         849,000
   Loss on asset impairments                                                   --         279,323
   Gain on debt settlement                                               (178,261)             --
   Stock issued for Investment                                                 --       1,462,440
   Deferred stock compensation                                                            286,107
   Changes in operating assets and liabilities:
   Loss (gain) on derivatives                                           1,420,615      (5,137,142)
   (Increase) decrease in receivables                                          --              --
   (Increase) decrease in prepaid expenses                                (84,900)       (233,000)
   Increase (decrease) in DIP payables                                    335,764              --
   Increase (decrease) in accounts payable and accrued expenses           137,321         113,763
                                                                     ------------    ------------
   Net cash used by operating activities                                 (884,282)       (670,304)

Investing Activities
--------------------
   Mine development                                                         1,991              --
   Equipment purchased                                                    (83,632)         22,499
   Security deposits                                                       (2,343)        (38,300)
                                                                     ------------    ------------
   Net cash used by investing activities                                  (83,984)        (15,801)

Financing Activities
--------------------
   Sale of Common Stock                                                        --          24,990
   Repayments                                                             (41,225)        (31,383)
   Borrowings                                                           1,013,903         676,135
                                                                     ------------    ------------
   Net cash provided by financing activities                              972,678         669,742
                                                                     ------------    ------------
   Increase (decrease) in cash                                              4,412         (16,363)
   Cash at beginning of period                                                 52          16,415
                                                                     ------------    ------------
   Cash at end of period                                             $      4,464    $         52
                                                                     ============    ============

Supplemental Disclosures of Cash Flow Information:
  Cash paid during year for:
     Interest                                                        $      5,774    $         --
                                                                     ============    ============
     Commissions                                                               --              --
                                                                     ============    ============
     Income taxes                                                              --    $         --
                                                                     ============    ============

  Stock issued during year for:
     Services                                                        $    590,556    $  1,209,748
                                                                     ============    ============
     Stock Compensation                                                                   286,107
                                                                     ============    ============
     Interest                                                             104,998          77,038
                                                                     ============    ============
     Investment                                                                --         375,000
                                                                     ============    ============
     Series C Preferred Stock for officer indemnification                 260,000              --
                                                                     ============    ============
     Advertising                                                               --              --
                                                                     ============    ============

</TABLE>

                       See Notes to Financial Statements.

                                      F-6
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 1 - ORGANIZATION & OPERATIONS

         Quest Minerals & Mining Corp. (the "Registrant" or the "Company") was
         incorporated in Utah on November 21, 1985. The Company has leasehold
         interests in certain properties in Eastern Kentucky, is seeking to
         re-commence full coal mining operations on these properties, and is
         looking to acquire additional coal properties.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation

         The consolidated financial statements include the accounts of the
         Company and its wholly owned subsidiaries, Quest Mineral & Mining,
         Ltd., Quest Energy, Ltd., and Gwenco, Inc. (collectively, the
         "Company"). All significant intercompany transactions and balances have
         been eliminated in consolidation.

         Management Estimates

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States 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.

         Mineral Interests

         The purchase acquisition costs of mineral properties are deferred until
         the properties are placed into production, sold or abandoned. These
         deferred costs will be amortized on the unit-of-production basis over
         the estimated useful life of the properties following the commencement
         of production or written-off if the properties are sold, allowed to
         lapse or abandoned.

         Mineral property acquisition costs include any cash consideration and
         the fair market value of common shares and preferred shares, based on
         the trading price of the shares, or, if no trading price exists, on
         other indicia of fair market value, issued for mineral property
         interests, pursuant to the terms of the agreement or based upon an
         independent appraisal.

         Administrative expenditures are expensed in the year incurred.

         Coal Acquisition Costs

         The costs to obtain coal lease rights are capitalized and amortized
         primarily by the units-of-production method over the estimated
         recoverable reserves. Amortization occurs either as the Company mines
         on the property or as others mine on the property through subleasing
         transactions.

         Rights to leased coal lands are often acquired through royalty
         payments. As mining occurs on these leases, the accrued royalty is
         charged to cost of coal sales.

         Mining Acquisition Costs

         The costs to obtain any interest in third-party mining operations are
         expensed unless significantly proven reserves can be established for
         the entity. At that point, capitalization would occur.

                                       F-7
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 2 - SIGNICANT ACCOUNTING POLICIES (Continued)

         Mining Equipment

         Mining equipment is recorded at cost. Expenditures that extend the
         useful lives of existing plant and equipment or increase the
         productivity of the asset are capitalized. Mining equipment is
         depreciated principally on the straight-line method over the estimated
         useful lives of the assets, which range from three to 15 years.

         Deferred Mine Expense

         Costs of developing new mines or significantly expanding the capacity
         of existing mines are capitalized and amortized using the
         units-of-production method over the estimated recoverable reserves that
         are associated with the property being benefited.

         Asset Impairment

         If facts and circumstances suggest that a long-lived asset may be
         impaired, the carrying value is reviewed under the guidance of IAS 36,
         pursuant to SEC Industry Guide 7. If the review indicates that the
         value of the asset will not be recoverable, as determined based on
         projected undiscounted cash flows related to the asset over its
         remaining life, then the carrying value of the asset is reduced to its
         estimated fair value.

         Revenue Recognition

         Coal sales revenues are sales to customers of coal produced at the
         Company's operations. The Company recognizes revenue from coal sales at
         the time title passes to the customer.

         Stock-Based Compensation

         Effective January 1, 2006, the Company began recording compensation
         expense associated with stock options and other forms of equity
         compensation in accordance with Statement of Financial Accounting
         Standards ("SFAS") No. 123R, Share-Based Payment, as interpreted by SEC
         Staff Accounting Bulletin No. 107. Prior to January 1, 2006, the
         Company had accounted for stock options according to the provisions of
         Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
         to Employees, and related interpretations, and therefore no related
         compensation expense was recorded for awards granted with no intrinsic
         value. The Company adopted the modified prospective transition method
         provided for under SFAS No. 123R, and, consequently, has not
         retroactively adjusted results from prior periods.

         There were 250,000 options issued to employees and non-employee
         directors during the year ending December 31, 2006, and there were no
         options issued to employees or non-employee directors during the year
         ended December 31, 2005. As of December 31, 2007, 75,000 options remain
         outstanding. See Note 13 for details.

                                      F-8
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 2 - SIGNICANT ACCOUNTING POLICIES (Continued)

         Income Taxes

         The Company provides for the tax effects of transactions reported in
         the financial statements. The provision, if any, consists of taxes
         currently due plus deferred taxes related primarily to differences
         between the basis of assets and liabilities for financial and income
         tax reporting. The deferred tax assets and liabilities, if any,
         represent the future tax return consequences of those differences,
         which will either be taxable or deductible when the assets and
         liabilities are recovered or settled. As of December 31, 2007, the
         Company had no material current tax liability, deferred tax assets, or
         liabilities to impact on the Company's financial position because the
         deferred tax asset related to the Company's net operating loss carry
         forward was fully offset by a valuation allowance.

         Fair Value

         The Company's financial instruments, as defined by SFAS No. 107,
         "Disclosure about Fair Value of Financial Instruments," include cash,
         advances to affiliate, trade accounts receivable, investment in
         securities available-for-sale, restricted cash, accounts payable and
         accrued expenses and short-term borrowings. All instruments other than
         the investment in securities available-for-sale are accounted for on a
         historical cost basis, which, due to the short maturity of these
         financial instruments, approximates fair value at December 31, 2006.
         The Company had no securities available-for-sale at December 31, 2007.

         Earnings loss per share

         The Company adopted SFAS No. 128, which provides for the calculation of
         "basic" and "diluted" earnings per share. Basic earnings per share
         includes no dilution and is computed by dividing net income available
         to common stockholders by the weighted average common shares
         outstanding for the period; after provisions for cumulative dividends
         on Series A preferred stock. Diluted earnings per share reflect the
         potential dilution of securities that could share in the earnings
         similar to fully diluted earnings per share.

         Stock Split

         All references to common stock and per share data have been
         retroactively restated to account for the 1 for 4 reverse stock split
         effectuated on August 17, 2007. See Note 12 for details.

         All references to common stock and per share data have been
         retroactively restated once more to account for the 1 for 10 reverse
         stock split effectuated on December 14, 2007. See Note 12 for details.

         Other Recent Accounting Pronouncements

         The Company does not expect that the adoption of other recent
         accounting pronouncements to have any impact on its financial condition
         or results of operations.

                                      F-9
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 3 - GOING CONCERN

         The accompanying financial statements have been prepared on a going
         concern basis, which contemplates the realization of assets and the
         satisfaction of liabilities in the normal course of business. The
         Company incurred net operating losses of $5,530,115 and $4,434,984 for
         the years ended December 31, 2006 and 2005 and had a working capital
         deficit of $8,008,768 at December 31, 2006. For the twelve months ended
         December 31, 2007,the Company had a net operating loss of $5,169,899.
         The working capital deficit as of December 31, 2007 was $7,358,784.
         These factors indicate that the Company's continuation as a going
         concern is dependent upon its ability to obtain adequate financing.

         The Company will require substantial additional funds to finance its
         business activities on an ongoing basis and will have a continuing
         long-term need to obtain additional financing. The Company's future
         capital requirements will depend on numerous factors including, but not
         limited to, continued progress developing additional mines and
         increasing mine production. Currently, the Company is in the process of
         seeking additional funding to achieve its operational goals.

NOTE 4 - LEASEHOLD INTERESTS

         The Company maintains a number of coal leases with minimum lease or
         royalty payments that vary by lease as defined in the separate
         agreements. Several of the landowners have contended that the Company
         is in default under certain of these leases and that said leases are
         terminated. The Company disputes these contentions.

         Certain former owners of the Company's indirect, wholly-owned
         subsidiary, Gwenco, Inc. ("Gwenco") commenced an action in the Circuit
         Court of Pike County against Gwenco for damages resulting from an
         alleged failure to pay past royalties and other amounts allegedly due.
         On May 19, 2006, the former owners obtained a default judgment in this
         action in the amount of $687,391, from which Gwenco has taken appeal.
         The plaintiffs then amended their complaint, seeking to be adjudged a
         lien on certain real and personal property of Gwenco pursuant to the
         aforementioned judgment and that said real and personal property be
         sold to satisfy the aforesaid lien, and that the liens of the
         plaintiffs attach to the proceeds of the sale. Gwenco believes that it
         has several meritorious defenses and counterclaims to this action and
         intends to defend it vigorously. This foreclosure action was stayed
         against Gwenco as a result of Gwenco's filing of a voluntary petition
         for reorganization under Chapter 11 of the U.S. Bankruptcy Code. (See
         Note 16.) On June 20, 2007, Gwenco entered into a settlement agreement
         with one of the former owners, pursuant to which the former owner
         agreed to accept payment of $150,000 in exchange for a release of the
         judgment amount of $458,260. The Bankruptcy Court approved the
         settlement agreement on July 17, 2007. On August 3, 2007, the Court
         approved Gwenco's debtor-in-possession financing and the settlement
         agreement became effective. The escrowed funds were released on August
         10, 2007 to complete the settlement.

         As of December 31, 2007, Gwenco owed approximately $235,925 in lease
         payments in addition to the reduced judgment amount of $229,130.

                                      F-10
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 5 - LEASED MINERAL RESERVES

         All of the Company's existing reserves remain in Gwenco, Inc., a wholly
         owned subsidiary. The total reserves are a combination of several coal
         seams throughout the spectrum of leased properties.

         At December 31, 2007, the leased mineral reserves, valued at
         $5,208,524, consisted of the following:

                                                                      Proven
                                                                     Reserves
         Seams                                                         Tons
         -----                                                     ------------
         Winifrede                                                      214,650
         Taylor                                                       1,783,500
         Cedar Grove                                                  3,702,600
         Pond Creek                                                   4,092,572
                                                                   ------------
                    Total Reserves                                    9,793,322
                                                                   ============

         The Company maintains a number of coal leases with minimum lease or
         royalty payments that vary by lease as defined in the separate
         agreements. Several of the landowners have contended that the Company
         is in default under certain of these leases and that said leases are
         terminated. The Company disputes these contentions. Pursuant to IAS 36,
         management has reviewed the recoverable value of the Company's mineral
         reserves and has determined that no impairment loss has occurred. As
         long as the recoverable amount continues to exceed its carrying value,
         amortization will occur based on a proportionate ratio of depleted
         reserves as a result of future coal mining activity.

NOTE 6 - EQUIPMENT

         Equipment consisted of the following:

                                                   December 31,     December 31,
                                                       2007            2006
                                                   ------------    ------------
         Mining equipment (a)                      $    866,353         782,721
                                                   ----------------------------
         Less accumulated depreciation                 (344,260)       (250,517)
         Less allowance for Impairment (b)             (355,820)       (355,820)
                                                   ----------------------------

         Equipment - net                           $    166,273         176,384
                                                   ============================

         All of the equipment currently in use by the Company is owned by the
         Company's wholly-owned subsidiary, Gwenco, Inc., which is currently in
         Chapter 11 bankruptcy proceedings.

         (a) The Company depreciates its mining equipment over a 5 year period,
         while the office equipment is depreciated over a 7 year period. In both
         cases, the straight-line method is used. Depending on the type of
         equipment needed at any given point in production, the Company will
         sell existing equipment and replace it with new or used machinery,which
         can reflect a fluctuation in the asset valuation.

                                      F-11
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 6 - EQUIPMENT (Continued)

         (b) On July 10, 2006, the Company entered into a settlement arrangement
         with an existing equipment lessor for the bill of sale on two pieces of
         equipment, of which the Company had retained possession while in
         default of prior lease payments. On October 10, 2006, the Pike County
         Circuit court entered an order enforcing this settlement agreement, and
         on December 19, 2006, the lessor was awarded summary judgment in the
         amount of $35,000 plus 8% accrued interest from August 9, 2006. As of
         December 31, 2007, the Company has accrued allowances against the
         equipment, as some of it has been repossessed with the understanding
         that it will be returned upon satisfaction of existing lease contracts,
         while the remaining equipment is unusable until required restoration
         and repairs can be made.


                                      F-12
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 7 - OTHER RECEIVABLES

         Other Receivables consisted of the following:

                                                   December 31,    December 31,
                                                       2007            2006
                                                   ------------    ------------
         D&D Contracting, Inc.(a)                  $    678,349         678,349
         Braxton Coal (b)                                57,109          57,109
         Less allowance                                (735,458)       (735,458)
                                                   ----------------------------

         Other Receivables - net                   $         --              --
                                                   ============================

         (a)      The receivable with D&D Contracting, Inc. exists as a result
                  of the rescission agreement dated November 1, 2004. The
                  Company holds an equipment lease and a limited royalty
                  agreement totaling $668,000. Unearned revenues have been
                  recorded as an allowance. The remaining balance is the cash
                  and account deposits that have not yet been reimbursed. The
                  Company has booked an allowance against this amount. As of
                  December 31, 2007, D&D was in default of their obligations to
                  the Company. The Company is currently negotiating with the
                  existing leaseholders to receive subsidized payments from the
                  coal mined by D&D to secure their lease payments. As a result,
                  the Company has accrued an additional allowance on the entire
                  receivable until a settlement can be determined.

         (b)      During the twelve months ended December 31, 2006, the Company
                  hired a contract miner to mine the coal from the Gwenco
                  properties. The receivables represent initial startup and
                  maintenance expenses, which were to be paid back through a
                  royalty arrangement once coal production began. As of December
                  31, 2007, the agreement with this contract miner has expired.
                  The Company has since retained a new contract miner. As a
                  result, the Company has accrued an allowance against the
                  receivable until a settlement can be negotiated to recoup
                  these initial expenses.

                                      F-13
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 8 - ACCOUNTS PAYABLE & ACCRUED EXPENSES

         Accounts payable and accrued expenses consist of the following:

                                                   December 31,    December 31,
                                                       2007            2006
                                                   ------------    ------------
          Accounts payable                         $    294,604         364,695
          Accrued royalties
           payable-operating (a)                        235,925         193,142
          Accrued bank claim (b)                        650,000         650,000

          Accrued taxes                                  87,315          87,436
          Accrued interest                              609,289         291,597
          Accrued expenses (c)                          858,585       1,011,527
                                                   ----------------------------
                                                      2,735,718       2,598,397

         Derivative Liability (d)                     2,841,203       1,420,588
         Unearned Revenues (e)                               --              --

                                                   $  5,576,921       4,018,985
                                                   ============================

         (a)      The Company maintains a number of coal leases with minimum
                  lease or royalty payments that vary by lease as defined in the
                  separate agreements. Several of the landowners have contended
                  that the Company is in default under certain of these leases
                  and that said leases are terminated. The Company disputes
                  these contentions. Certain former owners of Gwenco commenced
                  an action in the Circuit Court of Pike County against Gwenco
                  for damages resulting from an alleged failure to pay past
                  royalties and other amounts allegedly due. On May 19, 2006,
                  the former owners obtained a default judgment in this action
                  in the amount of $687,391, from which Gwenco has taken appeal.
                  Gwenco believes that it has several meritorious defenses and
                  counterclaims to this action and intends to defend it
                  vigorously. Since the judgment was approximately $500,000
                  above what the Company believes to have owed, the Company
                  reclassified the difference and recorded additional expense to
                  account for the liability. On June 20, 2007, Gwenco entered
                  into a settlement agreement with one of the former owners,
                  pursuant to which the former owner agreed to accept payment of
                  $150,000 in exchange for a release of the judgment amount of
                  $458,260. The Bankruptcy Court approved the settlement
                  agreement on July 17, 2007. On August 3, 2007, the Court
                  approved Gwenco's debtor-in-possession financing and the
                  settlement agreement became effective. The escrowed funds were
                  later released on August 10, 2007 to complete the settlement.
                  As of December 31, 2007, Gwenco owed approximately $235,925 in
                  lease and/or royalty payments in addition to the reduced
                  judgment of $229,130 against Gwenco.

         (b)      During the period ended December 31, 2004, the Company's bank
                  initiated a claim for an overdraft recovery. Since it was
                  later determined that there was a much larger malice
                  perpetrated against the Company by existing bank employees,
                  allowances have been accrued until a resolution can be
                  determined. The Company has filed suit against the bank and
                  all parties involving several counts of fraudulent misconduct.
                  As of December 31, 2007, no resolution has been determined.

                                      F-14
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 8 - ACCOUNTS PAYABLE & ACCRUED EXPENSES (Continued)

         (c)      The Company recorded an accrued liability for indemnification
                  obligations of $390,000 to its officers, which represents the
                  fair value of shares of the Company's common stock, which the
                  officers pledged as collateral for personal guarantees of a
                  loan to the Company. In January 2007, the Company satisfied
                  $260,000 of this accrued liability by issuing 260,000 shares
                  of Series C Preferred Stock. See Note 11. Upon default by the
                  Company, the lender foreclosed on the officer's pledged
                  shares. In addition, during the period ended December 31,
                  2004, the Company had acquired these accrued expenses from its
                  subsidiaries, E-Z Mining Co. and Gwenco, Inc. The Company
                  continues to carry these balances until further validity can
                  be determined.

         (d)      The Company has issued convertible notes at a discounted rate
                  relative to the market price of the underlying common stock,
                  as well as warrants. The Company has accrued additional
                  derivative liability allowances based on the market price
                  volatility of the common stock using the Black-Scholes method.
                  The valuations are adjusted each quarter to present a fair
                  representation of the liability until the underlying note or
                  warrant has matured, expired, or has been exercised,
                  cancelled, or satisfied. The Company's operating losses are
                  increased or decreased relative to the derivative liability
                  allowance. These adjusted valuations also remain relative to
                  the future capitalization costs that would incur from exercise
                  of the warrant issuances or settlement of existing debt
                  through conversion.

         (e)      As part of the rescission agreement with D&D on November 1,
                  2004, the Company posted receivables based on a two-year lease
                  agreement for equipment still owned as well as a limited
                  2,000,000 ton royalty payout of $0.25 per ton. Management has
                  initiated a liability allowance until the receivables are
                  recognized. As of the twelve months ended December 31, 2007,
                  D&D was in default of this agreement. The Company is currently
                  negotiating with the existing leaseholders to receive
                  subsidized payments from the coal mined by D&D to secure D&D's
                  obligations to the Company. As a result, the Company has
                  reclassified the allowance under Other Receivables until a
                  settlement can be determined.


                                      F-15
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007
<TABLE>
<CAPTION>

NOTE 9 - NOTES PAYABLE

Notes payable consist of the following:                                   December 31,    December 31,
                                                                              2007            2006
                                                                          ------------    ------------
<S>                                                                       <C>                  <C>
         QUEST MINERALS & MINING CORP.
            0% Notes payable (a).                                         $    202,864         202,864
            12% Notes payable to Gross Foundation (b).                          32,399         218,623
            7% Notes payable to Greenwood Partners (c).                             --          78,000
            7% Notes payable to Professional Traders Fund (c).                      --         184,000
            7% Notes payable to First Mirage (c).                                   --         191,597
            7% Notes payable to Investors (d).                                  50,000          75,000
            7% Notes payable to Greenwood Partners (e).                             --         175,000
            7% Notes payable to First Mirage (e).                               50,000          50,000
            7% Notes payable to Professional Traders Fund (f).                 100,000         100,000
            8% Notes payable to Cornway Co (g).                                     --         335,000
            8% Notes payable to Interstellar Holdings. (g).                    535,000              --
            5% Advances from Interstellar Holdings (h).                      1,010,049         430,837
            0% Notes payable (i).                                              217,684         126,000
            6% Notes payable to Westor Capital Group (j).                      100,000         125,000
            8% Notes payable to Kaila (k).                                     300,000         300,000
            10% Notes payable to IMR (l).                                       10,000              --
         QUEST ENERGY, LTD.
            8% Summary Judgment payable to BH&P (m).                            35,000          35,000

         GWENCO, INC.: (Bank Loans)
            12% Judgment to Duke Energy Merchants (n).                         726,964         726,964
             9% Assigned Judgment to Interstellar Holdings (o).                     --         278,796
            12.75% Assigned Judgment to Interstellar Holdings (o).              65,589          86,276
            9.5% Note payable to First Sentry Bank (p)                         262,402         262,402
            6% Note payable to United National Bank (p)                         28,159          28,159
            0% Default Judgment to Third-Party (q)                             229,130         687,391
            17% DIP Financing - Interstellar Holdings (r)                      335,764              --

         GWENCO, INC.: (Related-Party Loans)
            5.26% Notes payable to Scott Whitson (s).                          672,289         713,514
                                                                          ----------------------------
                                                                             4,963,294       5,410,423
            Less current portion                                             4,963,294       5,410,423
                                                                          ----------------------------
         Long-Term Debt:                                                  $         --              --
                                                                          ============================

</TABLE>


                                      F-16
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 9 - NOTES PAYABLE (Continued)

         (a)      On December 31, 2005, the Company closed E-Z Mining Co., Inc.
                  During the period ended December 31, 2004, the Company's bank
                  initiated a claim for an overdraft recovery. Since it was
                  later determined that there was a much larger malice
                  perpetrated against the Company by existing bank employees,
                  allowances have been accrued until a resolution can be
                  determined. These current notes consist of various third
                  parties related to the former CFO of the Company. All notes
                  are due on demand except $110,000, which is due from future
                  royalties. All notes are non-interest bearing.

         (b)      On December 17, 2004, the Company signed a 15% per annum
                  promissory note with Gross Foundation for $300,000 due on June
                  17, 2005. The note was secured by certain of the Company's
                  equipment. In the event of default, the note became
                  convertible into shares of the Company's common stock at the
                  option of the holder at a conversion price of $4.00 per share.
                  As additional compensation to the lender, the Company issued
                  7,500 common stock warrants at $60.00. The warrants have
                  anti-dilution privileges and piggyback registration rights. On
                  December 20, 2005, the Company issued 50,000 shares of common
                  stock at $4.00 per share to Gross Foundation as a partial
                  conversion pursuant to their promissory note, which matured on
                  June 17, 2005. The lender continues to make periodic partial
                  conversion requests to pay down the principal and accrued
                  interest. On July 26, 2006, the note was amended and restated
                  at 12%, due on April 18, 2007, with a new balance of $258,091,
                  which included the remaining principal and interest from the
                  original note. The note is convertible at the option of the
                  holder at a conversion price of $3.00 per share; provided,
                  that if the market price of the Company's common stock was
                  less than $4.00 per share for ten consecutive trading days,
                  the conversion price would reduced to $2.00 per share;
                  provided, further, that if the market price of the Company's
                  common stock was less than $2.00 per share for ten consecutive
                  trading days, the conversion price would become the lesser of
                  (i) $2.00 per share or (ii) 70% of the average of the 5
                  closing bid prices of the common stock immediately preceding
                  such conversion date. The lender makes periodic partial
                  conversions of the principal and accruing interest. Since the
                  convertible notes were issued at a discount to the market
                  price of the underlying common stock, the Company has taken
                  into consideration the cost of issuing the common stock to
                  settle the debt at the time of issuance and has accrued
                  additional allowances based on a valuation of market price
                  volatility. As of December 31, 2007, the amended note was in
                  default.


                                      F-17
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 9 - NOTES PAYABLE (Continued)

         (c)      On February 22, 2005, the Company signed a series of unit
                  purchase agreements with three individual third-party lenders
                  for a total sale amount of $650,000. Each unit was sold at
                  $25,000 and consisted of a 7% senior secured convertible note
                  due March 6, 2006 and 3,750 Series A Warrants. The notes are
                  secured by certain of the Company's assets and were initially
                  convertible into shares of the Company's common stock at the
                  rate of $20.00 per share, which conversion price was subject
                  to adjustment. Each Series A Warrant was exercisable into one
                  (1) share of common stock at an exercise price of $20.00 and
                  one (1) Series B Warrant. Each Series B Warrant was
                  exercisable into one (1) share of common stock at an exercise
                  price of $40.00. The Company categorized the convertible notes
                  as a liability in the amount of $650,000. A 10% commission was
                  paid to the agent who arranged the transaction. On February
                  14, 2006, the Company amended and restated a 7% convertible
                  note in the principal amount of $350,000, which is now due
                  February 22, 2007, to one of the third party lenders. On June
                  5, 2006, the Company amended and restated the remaining 7%
                  convertible notes in the principal amounts of $100,000 and
                  $200,000, respectively, which are also now due February 22,
                  2007. The notes are convertible at the option of the holder at
                  a conversion price of $3.00 per share; provided, that if the
                  market price of the Company's common stock was less than $4.00
                  per share for ten consecutive trading days, the conversion
                  price would reduced to $2.00 per share; provided, further,
                  that if the market price of the Company's common stock was
                  less than $2.00 per share for ten consecutive trading days,
                  the conversion price would become the lesser of (i) $2.00 per
                  share or (ii) 70% of the average of the 5 closing bid prices
                  of the common stock immediately preceding such conversion
                  date. During the twelve months ended December 31, 2007, the
                  lenders made periodic partial conversions to pay down the
                  remaining principal on the notes. Only a partial amount of
                  accrued interest remains. Since the convertible notes were
                  issued at a discount to the market price of the underlying
                  common stock, the Company has taken into consideration the
                  cost of issuing the common stock to settle the debt at the
                  time of issuance and has accrued additional allowances based
                  on a valuation of market price volatility.


                                      F-18
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 9 - NOTES PAYABLE (Continued)

         (d)      On March 4, 2005, the Company signed a series of unit purchase
                  agreements with thirteen individual third-party lenders for a
                  total sale amount of $375,000. Each unit was sold at $25,000
                  and consisted of a 7% senior secured convertible note due
                  March 6, 2006 and 3,750 Series A Warrants. The notes are
                  secured by certain of the Company's assets and were initially
                  convertible into shares of the Company's common stock at the
                  rate of $20.00 per share, which conversion price is subject to
                  adjustment. Each Series A Warrant was exercisable into one (1)
                  share of common stock at an exercise price of $20.00 and one
                  (1) Series B Warrant. Each Series B Warrant was exercisable
                  into one (1) share of common stock at an exercise price of
                  $40.00. The Company categorized the convertible notes as a
                  liability in the amount of $375,000. A 10% commission was paid
                  to the agent who arranged in the transaction. During the
                  twelve months ended December 31, 2006, the Company amended and
                  restated 7% convertible notes in the aggregate principal
                  amount of $325,000, which are now due February 22, 2007. The
                  notes are convertible at the option of the holder at a
                  conversion price of $3.00 per share; provided, that if the
                  market price of the Company's common stock was less than $4.00
                  per share for ten consecutive trading days, the conversion
                  price would reduced to $2.00 per share; provided, further,
                  that if the market price of the Company's common stock was
                  less than $2.00 per share for ten consecutive trading days,
                  the conversion price would become the lesser of (i) $2.00 per
                  share or (ii) 70% of the average of the 5 closing bid prices
                  of the common stock immediately preceding such conversion
                  date. During the twelve months ended December 31, 2007,
                  several of the lenders made periodic partial conversions of
                  the principal and accruing interest. Since the convertible
                  notes were issued at a discount to the market price of the
                  underlying common stock, the Company has taken into
                  consideration the cost of issuing the common stock to settle
                  the debt at the time of issuance and has accrued additional
                  allowances based on a valuation of market price volatility. As
                  of December 31, 2007, the remaining notes are in default.


                                      F-19
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 9 - NOTES PAYABLE (Continued)

         (e)      On April 18, 2005, the Company signed a series of unit
                  purchase agreements with two third-party lenders for a total
                  sale amount of $400,000. Each unit was sold at $25,000 and
                  consisted of a 7% senior secured convertible note due March 6,
                  2006 and 3,750 Series A Warrants. The notes are secured by
                  certain of the Company's assets and were initially convertible
                  into shares of the Company's common stock at the rate of
                  $20.00 per share, which conversion price is subject to
                  adjustment. Each Series A Warrant was exercisable into one (1)
                  share of common stock at an exercise price of $20.00 and one
                  (1) Series B Warrant. Each Series B Warrant was exercisable
                  into one (1) share of common stock at an exercise price of
                  $40.00. The Company categorized the convertible notes as a
                  liability in the amount of $400,000. A $14,000 commission was
                  paid to the agent who arranged in the transaction. On June 5,
                  2006, the Company amended and restated the 7% convertible
                  notes in the principal amounts of $100,000, $125,000, and
                  $50,000, respectively, which are now due April 18, 2007. As
                  part of the amendment and restatement, one of the noteholders
                  forgave a 7% senior secured convertible note in the principal
                  amount of $125,000. The notes are convertible at the option of
                  the holder at a conversion price of $3.00 per share; provided,
                  that if the market price of the Company's common stock was
                  less than $4.00 per share for ten consecutive trading days,
                  the conversion price would reduced to $2.00 per share;
                  provided, further, that if the market price of the Company's
                  common stock was less than $2.00 per share for ten consecutive
                  trading days, the conversion price would become the lesser of
                  (i) $2.00 per share or (ii) 70% of the average of the 5
                  closing bid prices of the common stock immediately preceding
                  such conversion date. During the twelve months ended December
                  31, 2007, the lenders made periodic partial conversions of the
                  principal and accruing interest. Since the convertible notes
                  were issued at a discount to the market price of the
                  underlying common stock, the Company has taken into
                  consideration the cost of issuing the common stock to settle
                  the debt at the time of issuance and has accrued additional
                  allowances based on a valuation of market price volatility.

                                      F-20
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 9 - NOTES PAYABLE (Continued)

         (f)      On May 16, 2005, the Company entered into a credit agreement
                  with a third party lender in which $245,000 was issued as a
                  10% note due August 19, 2005. According to the credit
                  agreement, the lender may, in its sole and absolute
                  discretion, make additional loans to the Company of $255,000
                  for an aggregate total of $500,000. Additionally, the lender
                  was issued 256,501 warrants. The loans subject to the credit
                  agreement are secured by certain assets of the Company. The
                  warrants have an exercise price of $4.00 per share, subject to
                  adjustment, and expire on May 31, 2007. As of December 31,
                  2005, the Company had made a payment of $5,500. On February
                  14, 2006, in connection with a settlement agreement with the
                  lender, the Company made a payment of $264,000 and issued an
                  amended and restated 10% note in the amount of $100,000. The
                  note covered accrued interest and additional legal fees. The
                  amended and restated note is convertible into the Company's
                  common stock at a rate of $4.00 per share and was due February
                  22, 2007. Since the convertible note was issued at a discount
                  to the market price of the underlying common stock, the
                  Company has taken into consideration the cost of issuing the
                  common stock to settle the debt at the time of issuance and
                  has accrued additional allowances based on a valuation of
                  market price volatility. On June 6, 2007, the Company entered
                  into an exchange agreement with the lender, under which the
                  holder exchanged the $100,000 note and all remaining warrants
                  held by such lender for a new convertible promissory note in
                  the aggregate principal amount of $100,000. The new note is
                  due on June 6, 2008, with an annual interest rate of seven
                  percent (7%), and is convertible into Quest's common shares at
                  a conversion price of 70% of the average of the 5 closing bid
                  prices of the common stock immediately preceding such
                  conversion date. Since the convertible note was issued at a
                  discount to the market price of the underlying common stock,
                  the Company has taken into consideration the cost of issuing
                  the common stock to settle the debt at the time of issuance
                  and has accrued additional allowances based on a valuation of
                  market price volatility.

         (g)      On December 8, 2005, the Company issued a convertible secured
                  promissory note in the principal amount of $335,000. The note
                  was due on December 8, 2006, with an annual interest rate of
                  eight percent (8%), and is convertible into the Company's
                  common shares at an initial conversion price of $2.00 per
                  share, subject to adjustment. As of December 31, 2006, the
                  Company was in default. In January, 2007, the Company entered
                  into an exchange agreement with the note holder and holders of
                  150,000 shares of the Company's common stock, under which the
                  holders exchanged the note and the 150,000 shares of the
                  Company's common stock for a series of new convertible
                  promissory notes in the aggregate principal amount of
                  $635,000. The new notes were due on March 31, 2007, with an
                  annual interest rate of eight percent (8%), and are
                  convertible into the Company's common shares at an initial
                  conversion price of the greater of (i) $0.20 per share or (ii)
                  50% of the average of the 5 closing bid prices of the common
                  stock immediately preceding such conversion date. During the
                  first quarter of 2007, the note holders made partial
                  conversions of the principal and accruing interest. Since the
                  convertible notes were issued at a discount to the market
                  price of the collaterzied common stock, the Company has taken
                  into consideration the cost of issuing the common stock to
                  settle the debt at the time of issuance and has accrued
                  additional allowances based on a valuation of market price
                  volatility. As of December 31, 2007, the obligation was in
                  default.

                                      F-21
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 9 - NOTES PAYABLE (Continued)

         (h)      During January of 2006, the Company entered into a loan
                  agreement to receive up to $300,000 in funds for operations in
                  return for a 12% percent note due in May of 2006. As
                  additional collateral, the officers of the Company guaranteed
                  the loan and pledged their own shares of common stock. As of
                  the three months ended March 31, 2006, the lender has made
                  advances totaling $132,000. On April 3, 2006, the lender
                  declared a default under the terms of the loan agreement. The
                  Company failed to repay the lender as required under the loan
                  agreement. The lender then enforced guarantees made by the
                  officers of the Company and foreclosed on shares of the
                  officer's common stock pledged to the lender to secure the
                  guarantee. Along with accrued interest, the Company recorded a
                  capital contribution from its officers of $390,000. The
                  Company has indemnified one officer and is currently
                  negotiating the terms of indemnification of the other officer
                  as a result of this foreclosure. During the twelve months
                  ended December 31, 2007, the lender continued to advance
                  operational funding into the Company. Since there has been no
                  formal agreement regarding the balance owed, the Company
                  accrues a 5% annual interest on the principal with the intent
                  that a mutual arrangement will be resolved between both
                  parties.

         (i)      Periodically, the Company borrows funds from third party
                  lenders. The loans are due on demand and carry a 0% interest
                  rate.

         (j)      On April 5, 2006, the Company issued an aggregate of 1.25
                  units at a price of $100,000 per unit. The aggregate gross
                  proceeds from the sale of the units were $125,000. Each unit
                  consists of a convertible promissory note in the principal
                  amount of $100,000 and warrants to purchase shares of the
                  Company's common stock at an exercise price of $8.40 per
                  share. The unit notes are due on July 5, 2007. The notes bear
                  interest at a rate of six percent (6%) and are convertible
                  into Quest common shares at an initial conversion price of
                  $4.20 per share, subject to adjustment, including a
                  "weighted-average" reduction of the conversion price in the
                  event that the Company issued additional stock or stock
                  equivalents at a price lower than the conversion price.
                  Commencing on the fifth month of the notes, the Company must
                  make amortizing payments of the outstanding principal amount
                  and interest on each note until the principal amount and
                  interest have been paid in full, either in cash of 102% of the
                  monthly amount due or by conversion of such amount into our
                  common shares at a conversion rate of seventy-five percent of
                  the volume weighted average price of our common shares for the
                  five trading days prior to a conversion date, subject to
                  certain limitations. Since the convertible notes were issued
                  at a discount to the market price of the underlying common
                  stock, the Company has taken into consideration the cost of
                  issuing the common stock to settle the debt at the time of
                  issuance and has accrued additional allowances based on a
                  valuation of market price volatility. On June 27, 2007, the
                  Company entered into an agreement with one of the note holders
                  to exchange a note in the principal amount of $25,000 for
                  83,693 shares of common stock. Since the exchange transaction
                  valued the stock at greater than market, the Company incurred
                  no additional expense at the time of issuance. As of December
                  31, 2007, the remaining note was in default, and the Company
                  is in the process of re-negotiating the note with the holder.

                                      F-22
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 9 - NOTES PAYABLE (Continued)

         (k)      On April 1, 2006, the Company entered into a settlement and
                  release agreement with a third party individual pursuant to
                  which the Company issued a convertible secured promissory note
                  in the principal amount of $300,000. The note is due on April
                  1, 2008, with an annual interest rate of eight percent (8%).
                  The note is convertible into the Company's common shares at an
                  initial conversion price equal to the greater of (a) $0.20 per
                  share, and (b) 50% of the average market price during the
                  three trading days immediately preceding any conversion date.
                  The holder may not convert any outstanding principal amount of
                  this note or accrued and unpaid interest thereon to the extent
                  such conversion would result in the holder beneficially owning
                  in excess of 4.999% of the then issued and outstanding common
                  shares of the Company. Since the convertible note was issued
                  at a discount to the market price of the underlying common
                  stock, the Company has taken into consideration the cost of
                  issuing the common stock to settle the debt at the time of
                  issuance and has accrued additional allowances based on a
                  valuation of market price volatility.

         (l)      On May 1, 2007, the Company entered into a settlement and
                  release agreement with a third party pursuant to which the
                  Company issued a convertible secured promissory note in the
                  principal amount of $10,000. The note is due on May 1, 2008,
                  with an annual interest rate of ten percent (10%). The note is
                  convertible into the Company's common shares at a fixed rate
                  of $0.16 per share. The holder may not convert any outstanding
                  principal amount of this note or accrued and unpaid interest
                  thereon to the extent such conversion would result in the
                  holder beneficially owning in excess of 4.999% of the then
                  issued and outstanding common shares of the Company. Since the
                  convertible note was issued at a discount to the market price
                  of the underlying common stock, the Company has taken into
                  consideration the cost of issuing the common stock to settle
                  the debt at the time of issuance and has accrued additional
                  allowances based on a valuation of market price volatility.

         (m)      On July 10, 2006, the Company entered into a settlement
                  arrangement with an existing equipment lessor for the bill of
                  sale on two pieces of equipment, of which the Company had
                  retained possession while in default of prior lease payments.
                  On October 10, 2006, the Pike County Circuit Court entered an
                  order enforcing this settlement agreement, and on December 19,
                  2006, the lessor was awarded summary judgment in the amount of
                  $35,000 plus 8% accrued interest from August 9, 2006. As of
                  December 31, 2007, the Company remains in default.

         (n)      On April 28, 2004, in connection with the Company's
                  acquisition of Gwenco, Inc., the Company assumed a promissory
                  note which was in default. The note was secured by certain
                  assets of Gwenco. The former stockholder of Gwenco has
                  personally guaranteed most of the above loans. On May 20,
                  2005, the lender, Duke Energy, was awarded a judgment of
                  $670,964 plus legal fees of $56,000, which accrues interest at
                  the rate of twelve percent. As of December 31, 2007, the
                  balance remains outstanding. Duke Energy has obtained a
                  judgment lien against the Company and its assets. (See Note
                  16.)

                                      F-23
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 9 - NOTES PAYABLE (Continued)

         (o)      On April 28, 2004, in connection with the Company's
                  acquisition of Gwenco, Inc., the Company assumed a commercial
                  installment note and a commercial time note, both of which
                  were in default. The notes were secured by certain assets of
                  Gwenco. The former stockholder of Gwenco has personally
                  guaranteed most of the above loans. In 2005, the Company
                  entered into an agreed judgment in with the lender, National
                  City Bank of Kentucky, with respect to the defaulted notes.
                  National City Bank obtained a judgment lien against the
                  Company and its assets. On July 19, 2006, National City Bank
                  sold its right, title, and interest in and to the various
                  judgments, judgment liens, security interests, and lines of
                  credit, all of which are based on the notes issued to National
                  City Bank of Kentucky, also referenced in Note 16, to a third
                  party investor. The third party investor has agreed to forbear
                  on further collection, enforcement, and foreclosure with
                  respect to this indebtedness until further notice. In
                  connection therewith, the Company granted the investor a
                  royalty on fifty percent of the Company's gross profits
                  generated from coal mining at the Company's leased mine. Also
                  in connection therewith, the Company entered into a judgment
                  conversion agreement where the investor shall have the right,
                  but not the obligation, to convert all or any portion of the
                  then aggregate outstanding amounts due under the judgments
                  into the Company's common shares at the rate of $0.001 per
                  share. The investor shall not be entitled to convert any
                  portion of the judgment if such conversion would result in
                  beneficial ownership by the investor of more than 4.99% of the
                  outstanding common shares of the Company. Since the
                  convertible note was issued at a discount to the market price
                  of the underlying common stock, the Company has taken into
                  consideration the cost of issuing the common stock to settle
                  the debt at the time of issuance and has accrued additional
                  allowances based on a valuation of market price volatility.

         (p)      On July 27, 2006, the Company assumed two promissory notes in
                  connection with a settlement agreement with the former owner
                  of Gwenco. The notes are in default.

         (q)      Certain former owners of Gwenco commenced an action in the
                  Circuit Court of Pike County against Gwenco for damages
                  resulting from an alleged failure to pay past royalties and
                  other amounts allegedly due. On May 19, 2006, the former
                  owners obtained a default judgment in this action in the
                  amount of $687,391, from which Gwenco has taken appeal. The
                  plaintiffs then amended their complaint, seeking to be
                  adjudged a lien on certain real and personal property of
                  Gwenco pursuant to the aforementioned judgment and that said
                  real and personal property be sold to satisfy the aforesaid
                  lien, and that the liens of the plaintiffs attach to the
                  proceeds of the sale. Gwenco believes that it has several
                  meritorious defenses and counterclaims to this action and
                  intends to defend it vigorously. This foreclosure action was
                  stayed against Gwenco as a result of Gwenco's filing of a
                  voluntary petition for reorganization under Chapter 11 of the
                  U.S. Bankruptcy Code. (See Notes 16 & 17.) On June 20, 2007,
                  Gwenco entered into a settlement agreement with one of the
                  former owners, pursuant to which the former owner agreed to
                  accept payment of $150,000 in exchange for a release of the
                  judgment amount of $458,260. On July 17, 2007, the Bankruptcy
                  Court approved the settlement agreement. On August 3, 2007,
                  the Court approved Gwenco's debtor-in-possession financing and
                  the settlement agreement became effective. On August 10, 2007,
                  the escrowed funds were transferred to complete the
                  settlement. As of the twelve months ended December 31, 2007,
                  the Company continues to negotiate the remaining balance of
                  the judgment with its former owners.

                                      F-24
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 9 - NOTES PAYABLE (Continued)

         (r)      On August 15, 2007, the U.S. Bankruptcy Court approved a DIP
                  Financing Motion authorizing the Company's wholly owned
                  subsidiary, Gwenco, Inc., which is currently in Chapter 11
                  reorganization proceedings, to borrow up to $2,000,000 ("Total
                  Facility") in post-petition debt from a pre-petition creditor
                  pursuant to a Debtor-In-Possession loan agreement and
                  promissory note between Gwenco and the lender dated June 29,
                  2007. Additionally, the Court approved prior budgeted advances
                  from July of up to $350,000, which, in turn, adjusted the
                  Total Facility to $1,700,000. The loan advances will carry a
                  17% interest rate per annum and mature on July 31, 2008.

         (s)      The Company has guaranteed payment on a note in the amount of
                  $300,000 made to a former stockholder of Gwenco by another
                  former stockholder of Gwenco. This note is secured by 50% of
                  the outstanding capital stock of Gwenco. The debt required 4
                  annual payments of approximately $75,000 plus interest. As of
                  December 31, 2005, the Company was in default. Additionally, a
                  3.7% annual rate note in the amount of $495,000 due in
                  December 2007 was agreed upon in consideration for royalties
                  to be paid out on a schedule based on the level of production
                  from the mine. Since the initial agreement was made effective
                  in March of 2004, the Company has accrued two years of
                  interest expense and has adjusted its paid in capital to
                  reflect the future correction on the issuance of preferred
                  stock associated with the original acquisition of Gwenco, Inc.
                  On August 24, 2006, the Company amended the original note of
                  $300,000 to $180,884, which included the remaining principal
                  and interest, which has an interest rate of 5.21% and is due
                  on September 24, 2009. The Company also amended the $495,000
                  note due on December 10, 2007 to $545,473, which also included
                  the accrued interest; having an interest rate of 5.26% to be
                  paid through monthly payments equal to the sum of $.50 per
                  clean sellable ton of coal removed the property.


                                      F-25
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 10 - INCOME TAXES

         Due to the Company's net loss, there was no provision for income taxes.
         The Company has net operating loss carry forwards for income tax
         purposes of approximately $33,000,000 at December 31, 2007, and
         $28,000,000 at December 31, 2006. These carry forward losses are
         available to offset future taxable income, if any, and expire starting
         in the year 2015. The Company's utilization of this carry forward
         against future taxable income may become subject to an annual
         limitation due to a cumulative change in ownership of the Company of
         more than 50 percent.
<TABLE>
<CAPTION>

         The components of the Company's tax provision were as follows:

                                                                    2007            2006
                                                                ------------    ------------
<S>                                                             <C>             <C>
         Current income tax (benefit) expense                   $ (1,894,000)   $ (1,680,000)

         Deferred income tax expense (benefit)                     1,894,000       1,680,000
                                                                ------------    ------------
                                                                $         --    $         --
                                                                ============    ============

</TABLE>

         The reconciliation of the income tax computed at the U.S. Federal
         statutory rate to income tax expense for the periods ended December 31,
         2007 and 2006:
<TABLE>
<CAPTION>

                                                                    2007            2006
                                                                ------------    ------------
<S>                                                             <C>             <C>
         Tax expense (benefit) at Federal rate (34%)            $ (1,595,000)   $ (1,428,000)
         State and local income tax, net of Federal
          benefit                                                   (299,000)       (252,000)
         Effect of timing difference                                      --              --

         Change in valuation allowance                             1,894,000       1,680,000
                                                                ------------    ------------
                Net income tax (benefit) allowance              $         --    $         --
                                                                ============    ============
</TABLE>

         Deferred income taxes reflect the net income tax effect of temporary
         differences between the carrying amounts of the assets and liabilities
         for financial reporting purposes and amounts used for income taxes. The
         Company's deferred income tax assets and liabilities consist of the
         following:
<TABLE>
<CAPTION>

         Deferred tax asset:
                                                                December 31,    December 31,
                                                                    2007            2006
                                                                ------------    ------------
<S>                                                             <C>             <C>
         Deferred tax asset from loss carry forward             $ 13,286,000    $ 11,392,000

         Valuation allowance                                     (13,286,000)    (11,392,000)
                                                                ------------    ------------
         Net deferred tax assets                                $          0    $          0
                                                                ============    ============
</TABLE>

                                      F-26
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 10 - INCOME TAXES (Continued)

         The Company recognized no income tax benefit for the loss generated for
         the periods through December 31, 2007.

         SFAS No. 109 requires that a valuation allowance be provided if it is
         more likely than not that some portion or all of a deferred tax asset
         will not be realized. The Company's ability to realize the benefit of
         its deferred tax asset will depend on the generation of future taxable
         income. Because the Company has yet to recognize significant revenue
         from the sale of its products, it believes that the full valuation
         allowance should be provided.

        The Company has not filed corporate federal, state, or local income tax
         returns since 2002, and believes that, due to its operating losses, it
         does not have a material tax liability.

NOTE 11 - PREFERRED STOCK

         Series A

         Each share of Quest Series A Preferred Stock is convertible into a
         maximum of five (5) shares of the Company's common stock, or such
         lesser shares as determined by dividing $3.00 by the average closing
         bid price of one share of the Company's common stock during the ten
         trading days preceding actual receipt of a notice of conversion,
         subject to proportional adjustment for stock-splits, stock dividends,
         recapitalizations, and subsequent dilutive issuances of common stock.
         The Series A Preferred Stock is convertible at the option of the
         holder. The holders of the Series A Preferred Stock shall be entitled
         to receive cumulative dividends at the rate of $0.0001 per share per
         annum in preference to the holders of common stock. The holders of the
         Series A Preferred Stock shall also be entitled to receive, upon
         liquidation, an amount equal to $3.00 per share for the Series A
         Preferred Stock plus all declared and unpaid dividends, in preference
         to the holders of the common stock. After March 31, 2004, the Company
         has the option of redeeming the Series A Preferred Stock at a price
         equal to $3.00 per share for the Series A Preferred Stock plus all
         declared and unpaid dividends. The Series A Preferred Stock has no
         voting rights.

         On December 19, 2007, the Company amended the terms of the Series A
         Preferred Stock to provide for a reduced conversion price set forth as
         such that (1) Each share of Series A Preferred Stock shall be
         convertible at any time into a shares of common stock, par value, $.001
         per share of the Company as determined by multiplying each share of
         Series A Preferred Stock by a fraction, the numerator of which is $3.00
         and the denominator of which is equal to the greater of (i) $0.001 or
         (ii) 40% of closing price per share of common stock. A holder of Series
         A Preferred Stock may not convert shares of the Series A Preferred
         Stock to the extent that such conversion would result in the Holder,
         together with any affiliate thereof, beneficially owning, pursuant to
         Section 13(d) of the Securities Exchange of 1934, in excess of 4.999%
         of the then issued and outstanding common stock of the Company. The
         provisions of this section may be waived by a holder upon not less than
         61 days prior notice to the Corporation.

                                      F-27
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 11 - PREFERRED STOCK (Continued)

         Series A

         Since the Series A Preferred shares are now convertible at a discount
         to the market price of the Company's common stock, the Company has
         taken into consideration the beneficial cost liabilities associated
         with future conversions and has accrued additional liability allowances
         relative to the future capitalization costs that would incur from these
         conversions. Allowances are based on a valuation of market price
         volatility using the Black-Scholes method.

         In the twelve months ended December 31, 2007, 5,467 shares were
         converted.

         Series B

         Effective July 2006, each share of the Company's Series B Preferred
         Stock is convertible into 10.355 shares of the Company's common stock,
         subject to proportional adjustment for stock-splits, stock dividends,
         and recapitalizations. The Series B Preferred Stock is convertible at
         the option of the holder, but shall be automatically converted into the
         Company's common stock, at the then applicable conversion price, in the
         event that, during any period of fifteen (15) consecutive trading days,
         the average closing price per share of Quest's common stock as reported
         on a national securities exchange, the NASDAQ NMS or Small Cap Market,
         or the OTC Bulletin Board, equals or exceeds $4.00 (subject to
         anti-dilution, recapitalization, and reorganization adjustments). The
         holders of the Series B Preferred Stock shall be entitled to receive
         dividends on a pro-rata, as-if converted basis with the Series A
         Preferred Stock. The holders of the Series B Preferred Stock shall also
         be entitled to receive, upon liquidation, an amount equal to $2.50 per
         share for the Series B Preferred Stock plus all declared and unpaid
         dividends, in preference to the holders of the common stock.

         On July 27, 2006, the Company settled a third party complaint by the
         former owner of Gwenco. As part of the settlement, the Company issued
         87,500 shares of common stock for the conversion of 337,991 shares of
         Series B Preferred Stock issued pursuant to the purchase agreement with
         Gwenco, Inc.

         On August 17, 2007, the company effectuated a 4 to 1 reverse stock
         split. As a result of the reverse split, the conversion price was
         adjusted from $0.241422 to $0.965688.

         On December 14, 2007, the company effectuated a 10 to 1 reverse stock
         split. As a result of the reverse split, the conversion price was
         adjusted from $0.965688 to $9.65688.

                                      F-28
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 11 - PREFERRED STOCK (Continued)

         Series C

         On January 17, 2007, the Company created a series of preferred stock
         known as Series C Preferred Stock, par value $0.001 per share. The
         conversion price at which shares of common stock shall be deliverable
         upon conversion of Series C Preferred Stock without the payment of any
         additional consideration by the holder thereof is the lesser of (i)
         $0.008 per share or (ii) 100% of the average of the 5 closing bid
         prices of the common stock immediately preceding such conversion date.
         Holders of the Series C Preferred Stock shall be entitled to receive
         dividends or other distributions with the holders of our common stock
         on an as converted basis when, as, and if declared by our board of
         directors. The holders of the Series C Preferred Stock shall also be
         entitled to receive, upon liquidation, an amount equal to $1.00 per
         share of the Series C Preferred Stock plus all declared but unpaid
         dividends with respect to such shares. The shares of Series C Preferred
         Stock are not redeemable.

         On all matters submitted to a vote of the holders of the common stock,
         including, without limitation, the election of directors, a holder of
         shares of the Series C Preferred Stock shall be entitled to the number
         of votes on such matters equal to the product of (a) the number of
         shares of the Series C Preferred Stock held by such holder, (b) the
         number of issued and outstanding shares of our common stock, as of the
         record date for the vote, or, if no such record date is established, as
         of the date such vote is taken or any written consent of stockholders
         is solicited, and (c) 0.000008.

         On January 12, 2007, the Company entered into an indemnity agreement
         with the Company's President, who is also the Company's Secretary and
         sole director. Under the indemnity agreement, the Company issued
         260,000 shares of its Series C Preferred Stock to the President to
         indemnify him for a loss he incurred when he delivered a personal
         guarantee in connection with a loan agreement. Under the loan
         agreement, the President personally guaranteed repayment of the loan
         and pledged 2,000,000 shares of common stock held by him as collateral
         for the amounts loaned under the loan agreement. The Company eventually
         defaulted under the loan agreement, and the lender foreclosed on the
         shares which the President had pledged. On the date of foreclosure, the
         President's shares had a market value of approximately $260,000. The
         board of directors has determined that the President delivered the
         guarantee and pledged the shares in the course and scope of his
         employment, as an officer and director, and for benefit of the Company.
         The board of directors has further determined that the President's
         conduct was in good faith and that he reasonably believed that his
         conduct was in, or not opposed to, the best interests of the Company.
         The Company recorded a beneficial conversion expense of $292,500 as a
         result of the issuance of the Series C Preferred Stock.

         The issuance of the Series C Preferred Stock to the President
         effectively transferred control of the Company to the President.

         On August 17, 2007, the Company effectuated a 4 to 1 reverse common
         stock split. As a result of the reverse split, the conversion price was
         adjusted from the lower of $0.008 or 100% of the 5-day average to the
         lower of $0.032 or 100% of the 5-day average.

         On December 14, 2007, the Company effectuated a 10 to 1 reverse common
         stock split. As a result of the reverse split, the conversion price was
         adjusted from the lower of $0.032 or 100% of the 5-day average to the
         lower of $0.32 or 100% of the 5-day average.

                                      F-29
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 12 - COMMON STOCK

         On February 9, 2007, the Company amended its articles of incorporation
         to increase the number of shares of common stock that were authorized
         to issue form 250,000,000 to 975,000,000.

         On August 17, 2007, the Company effectuated a 1 to 4 reverse stock
         split resulting in a 644,867,576 reduction of shares from 859,823,718
         common shares outstanding to 214,956,142 common shares outstanding. The
         reverse stock split did not affect the amount of authorized shares of
         the Company. Additionally, the board approved the issuance of up to 500
         shares of the Company's common stock for rounding up of fractional
         shares in connection with the reverse stock split, of which, 213 shares
         were issued. In conjunction with the reverse stock split, the Company's
         stock symbol on the OTC Bulletin Board Symbol was changed to QMMC.

         On December 14, 2007, the Company effectuated a 1 to 10 reverse stock
         split resulting in a 331,309,124 reduction of shares from 368,121,581
         common shares outstanding to 36,812,457 common shares outstanding. The
         reverse stock split did not affect the amount of authorized shares of
         the Company. Additionally, the board approved the issuance of up to 500
         shares of the Company's common stock for rounding up of fractional
         shares in connection with the reverse stock split. In conjunction with
         the reverse stock split, the Company's stock symbol on the OTC Bulletin
         Board Symbol was changed to QMNM.

         During the year ended December 31, 2006, holders of Amended and
         Restated 7% Senior Secured Promissory Notes effectuated a series of
         partial conversions and were issued an aggregate of 1,568,498 shares of
         common stock at a conversion price averaging approximately $0.37 per
         share. In the aggregate, these issuances reduced the debt by $497,403
         in principal and $57,005 in accrued interest, and the Company expensed
         an additional $209,236 due to the difference in market value at the
         time of the respective issuances.

         During the year ended December 31, 2006, the Holder of a 15% Promissory
         Note effectuated a series of partial conversions pursuant to its
         default section at the maturity date of June 17, 2005 and were issued
         an aggregate of 22,140 shares of common stock at a conversion price of
         $4.00 per share. In the aggregate, these issuances reduced the debt by
         $82,213 in principal and $6,349 in accrued interest, and the Company
         expensed an additional $16,177 due to the difference in market value at
         the time of the respective issuances.

         During the year ended December 31, 2006, the Holder of an Amended and
         Restated 12% Promissory Note effectuated a series of partial
         conversions and were issued an aggregate of 190,872 shares of common
         stock at a conversion price averaging approximately $0.52 per share. In
         the aggregate, these issuances reduced the debt by $50,997 in principal
         and $2,708 in accrued interest, and the Company expensed an additional
         $65,732 due to the difference in market value at the time of the
         respective issuances.

         During the year ended December 31, 2006, the Holder of various
         judgments, judgment liens, security interests, and lines of credit,
         based on notes issued to National City Bank of Kentucky, effectuated a
         series of partial conversions and were issued an aggregate of 387,500
         shares of common stock at a conversion price averaging approximately
         $0.093 per share. In the aggregate, these issuances reduced the debt by
         $31,500 in principal and the Company expensed an additional $190,450
         due to the difference in market value at the time of the respective
         issuances.

                                      F-30
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 12 - COMMON STOCK (Continued)

         In the year ended December 31, 2006, the Company issued an aggregate of
         1,098,845 shares of common stock to various consultants. Expense of
         $1,209,996 was recorded related to these shares, which was the market
         value of such shares issued at prices varying from $0.24 to $4.40 per
         share.

         In the year ended December 31, 2006, the Company issued an aggregate of
         71,250 shares of common stock to satisfy cashless exercises of 648,750
         Series A and Series B Warrants. Expense of $222,644 was recorded
         related to these shares, which was the market value of such shares
         issued at prices averaging $2.07 per share.

         In the year ended December 31, 2006, the Company issued an aggregate of
         20,000 shares of common stock to satisfy cashless exercises of 125,000
         warrants. Expense of $31,600 was recorded related to these shares,
         which was the market value of such shares issued at prices averaging
         $1.58 per share.

         On January 4, 2006, the Company sold 12,500 shares of common stock to
         an unrelated third party at $2.00 per share pursuant to a unit deal
         transaction for proceeds of $25,000. The Company expensed $50,000 to
         interest for the difference in market value when the shares were
         issued.

         On February 1, 2006, the Company issued 1,250 shares of common stock at
         $4.00 per share in order to satisfy a stock purchase agreement
         originally booked as an advance. The Company expensed $1,500 due to the
         difference in market value at the time of issuance.

         On February 8, 2006, the Company issued 125,000 shares of common stock
         at $2.00 per share to satisfy an outstanding note with an unrelated
         third party lender. The Company expensed $325,000 to interest for the
         difference in market value when the shares were issued.

         On July 31, 2006, the Company issued 87,500 shares of common stock for
         the conversion of 337,991 shares of Preferred Series B issued pursuant
         to the purchase agreement with the former stockholder of Gwenco, Inc.

         During the year ended December 31, 2007, holders of Amended and
         Restated 7% Senior Secured Promissory Notes effectuated a series of
         partial conversions and were issued an aggregate of 5,186,698 shares of
         common stock at a conversion price averaging approximately $0.17 per
         share. In the aggregate, these issuances reduced the debt by $671,598
         in principal and $65,849 in accrued interest, and the Company expensed
         an additional $350,423 due to the difference in market value at the
         time of the respective issuances.

         During the year ended December 31, 2007, the Holder of an Amended and
         Restated 12% Promissory Note effectuated a series of partial
         conversions and were issued an aggregate of 2,158,728 shares of common
         stock at a conversion price averaging approximately $0.128 per share.
         In the aggregate, these issuances reduced the debt by $180,692 in
         principal and $15,858 in accrued interest, and the Company expensed an
         additional $167,113 due to the difference in market value at the time
         of the respective issuances.

                                      F-31
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 12 - COMMON STOCK (Continued)

         During the year ended December 31, 2007, the Holder of various
         judgments, judgment liens, security interests, and lines of credit,
         based on notes issued to National City Bank of Kentucky, effectuated a
         series of partial conversions and were issued an aggregate of
         17,125,000 shares of common stock at a conversion price averaging
         approximately $0.031 per share. In the aggregate, these issuances
         reduced the debt by $389,745 in principal and $34,255 in accrued
         interest, and the Company expensed an additional $1,821,100 due to the
         difference in market value at the time of the respective issuances.

         During the year ended December 31, 2007, holders of the Company's
         Series A Preferred Stock converted an aggregate of 5,467 shares into
         3,400,000 shares of common stock, at a conversion price averaging
         $0.0048 per share. The Company expensed an additional $41,195 due to
         the difference in market value at the time of issuance.

         In the year ended December 31, 2007, the Company issued an aggregate of
         9,820,000 shares of common stock to various consultants. Expense of
         $609,355 was recorded related to these shares, which was the market
         value of such shares issued at prices varying from $0.011 to $0.48 per
         share.

         During the year ended December 31, 2007, the Company issued 1,250,000
         shares of common stock as compensation towards back salaries owed to
         the Company's President. Expense of $110,000 was recorded related to
         these shares, which was the market value of such shares issued, at
         prices varying from $0.06 to $0.17 per share.

         In January, 2007, the Company entered into an exchange agreement with a
         noteholder and holders of 150,000 shares of the Company's common stock,
         under which the holders exchanged the note and the 150,000 shares of
         the Company's common stock for a series of new 8% Secured Convertible
         Promissory Notes in the aggregate principal amount of $635,000. See
         Note 9. The Company credited $33,600 to stockholder's equity based on
         the market value of the 150,000 shares received as of the date of the
         exchange. The shares were returned to treasury.

         On February 20, 2007, holders of these notes effectuated a series of
         conversions and were issued 500,000 shares of common stock at a
         conversion price of $0.20 per share. These issuances reduced the debt
         by $100,000 in principal, and the Company expensed $140,000 due to the
         difference in market value at the time of issuance.

         On March 5, 2007, the Company issued 1,667 shares of common stock at
         $0.04 per share upon cashless exercise of 3,750 Series A and Series B
         Warrants. The Company expensed $460 due to the difference in market
         value at the time of issuance.

         On June 27, 2007, the Company issued 83,693 shares of common stock in
         exchange for an outstanding convertible promissory note in the
         principal amount of $25,000 pursuant to an exchange agreement.

         On December 14, 2007, the Company issued 2,094,707 shares of common
         stock at $0.001 per share in error to Gross Foundation due to a
         communication oversight to the transfer agent relating to the time in
         which the 1 to 10 reverse split was effectuated. The Company valued the
         issuance at market price and has posted a capital allowance of $29,326
         until the issuance can be reconciled.

                                      F-32
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007


NOTE 13 - STOCK OPTION / WARRANTS
<TABLE>
<CAPTION>

 Stock Option / Warrant Issuances Outstanding consist of the following:

                                                                                                               December 31,
                                                                                                                   2007
                                                                                                 Exercise      ------------
                                                                                 Warrants          Price         Valuation
                                                                               ------------    ------------    ------------
<S>                                                                                  <C>              <C>        <C>
December 17, 2004 issuance of 15,000 warrants; expiration 2009 (a).                  15,000           60.00               0
December 21, 2004 issuance of 5,000 warrants; expiration 2009 (b).                    5,000           60.00               0
March 4, 2005 issuance of 18,750 series A warrants; expiration 2010 (c).             18,750           20.00               0
March 4, 2005 issuance of 18,750 series B warrants; expiration 2010 (c).             18,750           40.00               0
April 5, 2006 issuance of 29,677 warrants; expiration 2009 (d).                      29,677            8.40               1
May 18, 2006 issuance of 75,000 options; expiration 2011 (e).                        75,000            2.00         143,054
                                                                               ------------                    ------------

                                                                 TOTALS:            162,177                    $    143,055
                                                                               ============                    ============

<CAPTION>


                                                                                                  Avg.
                                                                                 Warrants      Ex. Price ($)     Valuation
                                                                               ------------    ------------    ------------
<S>                                                                                  <C>              <C>           <C>
Total Options / Warrants outstanding as of December 31, 2006                        566,178    $        .80         383,022
---------------------------------------------------------------------------------------------------------------------------

Options / Warrants Issued                                                                 0               0               0

Options / Warrants Expired / Cancelled                                             (396,501)          (2.00)       (234,792)

Options / Warrants Exercised                                                         (7,500)          (2.00)             (0)

Derivative Valuation Adjustment                                                                                      (5,175)
---------------------------------------------------------------------------------------------------------------------------

Total Options / Warrants outstanding as of December 31, 2007                        162,177    $      16.80         143,055
                                                                               ============================================
</TABLE>
                                      F-33
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 13 - STOCK OPTION / WARRANTS (Continued)

         (a)      On December 17, 2004, the Company signed a 15% per annum
                  promissory note with two third parties, each for $300,000 due
                  on June 17, 2005. The notes are secured by certain of the
                  Company's equipment. In the event of default, the notes become
                  convertible into shares of the Company's common stock at the
                  option of the holder at a conversion price of $4.00 per share.
                  As additional compensation to these lenders, the Company
                  agreed to issue them 15,000 common stock warrants at $60.00.
                  The warrants have anti-dilution privileges and piggyback
                  registration rights. Based on the market price volatility of
                  the common stock, the warrants are valued using the
                  Black-Scholes method. The Company accrues additional liability
                  allowances relative to the future capitalization costs that
                  would incur from exercise.

         (b)      On December 21, 2004, the Company issued 5,000 common stock
                  warrants at $60.00 as finder's fee. The warrants have
                  anti-dilution privileges and piggyback registration rights.
                  Based on the market price volatility of the common stock, the
                  warrants are valued using the Black-Scholes method. The
                  Company accrues additional liability allowances relative to
                  the future capitalization costs that would incur from
                  exercise.

         (c)      On March 4, 2005, the Company signed a series of unit purchase
                  agreements with thirteen individual third-party lenders for a
                  total sale amount of $375,000. Each unit was sold at $25,000
                  and consisted of a 7% senior secured convertible note due
                  March 6, 2006 and 3,750 Series A Warrants. The notes are
                  secured by certain of the Company's assets and were initially
                  convertible into shares of the Company's common stock at the
                  rate of $20.00 per share, which conversion price is subject to
                  adjustment. Each Series A Warrant is exercisable into one (1)
                  share of common stock at an exercise price of $20.00 and one
                  (1) Series B Warrant. Each Series B Warrant is exercisable
                  into one (1) share of common stock at an exercise price of
                  $40.00. Based on the market price volatility of the common
                  stock, the warrants are valued using the Black-Scholes method.
                  The Company accrues additional liability allowances relative
                  to the future capitalization costs that would incur from
                  exercise. During the three months ended March 31, 2007, 37,500
                  Series A and Series B warrants were exercised on a cashless
                  basis pursuant to the agreements.

         (d)      On April 5, 2006, the Company issued an aggregate of 1.25
                  units at a price of $100,000 per unit. The aggregate gross
                  proceeds from the sale of the units were $125,000. Each unit
                  consists of a convertible promissory note in the principal
                  amount of $100,000 and warrants to purchase shares of the
                  Company's common stock at an exercise price of $8.40 per
                  share. The unit notes are due on July 5, 2007. The notes bear
                  interest at a rate of six percent (6%) and are convertible
                  into Quest common shares at an initial conversion price of
                  $4.20 per share, subject to adjustment, including a
                  "weighted-average" reduction of the conversion price in the
                  event that the Company issued additional stock or stock
                  equivalents at a price lower than the conversion price.
                  Commencing on the fifth month of the notes, the Company must
                  make amortizing payments of the outstanding principal amount
                  and interest on each note until the principal amount and
                  interest have been paid in full, either in cash of 102% of the
                  monthly amount due or by conversion of such amount into our
                  common shares at a conversion rate of seventy-five percent of
                  the volume weighted average price of our common shares for the
                  five trading days prior to a conversion date, subject to
                  certain limitations. Based on the calculation terms of the
                  agreement, a total of 29,677 warrants were issued. Based on
                  the market price volatility of the common stock, the warrants
                  are valued using the Black-Scholes method. The Company accrues
                  additional liability allowances relative to the future
                  capitalization costs that would incur from exercise. As of the
                  twelve months ended December 31, 2007, the notes were in
                  default.

                                      F-34
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 13 - STOCK OPTION / WARRANTS (Continued)

         (e)      On May 18, 2006, the Company granted non-qualified options to
                  honor employment agreements previously entered into with each
                  of its President and Vice President. Each agreement called for
                  the President and Vice President to receive options to
                  purchase up to 125,000 shares of the Company's common stock
                  pursuant to a new stock compensation plan adopted by the
                  Company. The options would be exercisable at $2.00 per share,
                  the fair market value at the time of grant, and would vest as
                  follows: (i) options to purchase up to 50,000 shares vesting
                  immediately, (ii) options to purchase up to 50,000 shares
                  vesting upon the Company's receipt of an aggregate of $25,000
                  in cash or cash equivalents in its accounts, and (iii) options
                  to purchase up to 25,000 shares vesting six months after the
                  date of the option agreements. The 250,000 options were valued
                  at $476,846 using the Black Scholes method, of which $286,108
                  was deferred against Paid-in capital. Since 50,000 of these
                  options would vest six months from issuance and 100,000 would
                  vest upon a stipulated performance, the Company has accrued a
                  deferred stock compensation allowance against the issued
                  capitalization. On May 31, 2006, the Company's then-President
                  resigned. The Company and the former President then entered
                  into a consulting agreement, under which it was agreed that
                  50,000 options initially awarded to him would remain vested
                  and 25,000 options would be allowed to vest in six months.
                  50,000 options that vested upon the Company's raising one
                  million dollars were mutually voided. The Company credited
                  both the deferred stock compensation and the accrued paid-in
                  capital by $95,369, which reversed the valued portion of the
                  issuance. On November 18, 2006, the 50,000 options vested
                  pursuant to the agreements. The Company adjusted the deferred
                  stock compensation and expensed $95,369 for compensation. On
                  January 2, 2007, the current President (former Vice President)
                  and the Company mutually agreed to cancel his stock option
                  agreement.

NOTE 14 - STOCK COMPENSATION PLAN

         On May 8, 2006, the board of directors of the Company adopted its 2006
         Stock Incentive Plan, which allows for the issuance of up to 23,000,000
         shares of the Company's Common Stock to officers, employees, directors,
         consultants, and advisors. The board of directors also authorized the
         filing of a Form S-8 Registration Statement with the Securities and
         Exchange Commission for the issuance of shares under the Plan.

         On September 27, 2006, the board of directors of the Company adopted
         its 2006 Stock Incentive Plan No. 2, which allows for the issuance of
         up to 30,000,000 shares of the Company's Common Stock to officers,
         employees, directors, consultants, and advisors. The board of directors
         also authorized the filing of a Form S-8 Registration Statement with
         the Securities and Exchange Commission for the issuance of shares under
         the Plan.

         On February 21, 2007, the board of directors of the Company adopted its
         2007 Stock Incentive Plan, which allows for the issuance of up to
         70,000,000 shares of the Company's Common Stock to officers, employees,
         directors, consultants, and advisors. The board of directors also
         authorized the filing of a Form S-8 Registration Statement with the
         Securities and Exchange Commission for the issuance of shares under the
         Plan.

         On November 19, 2007, the board of directors of the Company adopted its
         2007 Stock Incentive Plan No. 2, which allows for the issuance of up to
         97,500,000 shares of the Company's Common Stock to officers, employees,
         directors, consultants, and advisors. The board of directors also
         authorized the filing of a Form S-8 Registration Statement with the
         Securities and Exchange Commission for the issuance of shares under the
         Plan.

                                      F-35
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 15 - RELATED PARTY TRANSACTIONS

         The Company has guaranteed payment on a note in the amount of $300,000
         made to a former stockholder of Gwenco by another former stockholder of
         Gwenco. This note is secured by 50% of the outstanding capital stock of
         Gwenco. The debt required 4 annual payments of approximately $75,000
         plus interest. As of December 31, 2005, the Company was in default.
         Additionally, a 3.7% annual rate note in the amount of $495,000 due in
         December 2007 was agreed upon in consideration for royalties to be paid
         out on a schedule based on the level of production from the mine. Since
         the initial agreement was made effective in March of 2004, the Company
         has accrued two years of interest expense and has adjusted its paid in
         capital to reflect the future correction on the issuance of preferred
         stock associated with the original acquisition of Gwenco. On August 24,
         2006, the Company amended the original note of $300,000 to $180,884,
         which included the remaining principal and interest, which has an
         interest rate of 5.21% and is due on September 24, 2009. The Company
         also amended the $495,000 note due on December 10, 2007 to $545,473,
         which also included the accrued interest; having an interest rate of
         5.26% to be paid through monthly payments equal to the sum of $.50 per
         clean sellable ton of coal removed the property.

         During January of 2006, the Company entered into a loan agreement to
         receive up to $300,000 in funds for operations in return for a 12%
         percent note due in May of 2006. As additional collateral, the officers
         of the Company guaranteed the loan and pledged their own shares of
         common stock. As of the three months ended March 31, 2006, the lender
         had made advances totaling $132,000. On April 3, 2006, the lender
         declared a default under the terms of the loan agreement. The Company
         failed to repay the lender as required under the loan agreement. The
         lender then enforced guarantees made by the officers of the Company and
         foreclosed on shares of the officer's common stock pledged to the
         lender to secure the guarantee. Along with accrued interest, the
         Company recorded an accrued liability for indemnification obligations
         to the officers of $390,000, the fair value of the pledged shares lost
         in the foreclosure.

         On January 12, 2007, the Company entered into an indemnity agreement
         with the Company's President, who is also the Company's Secretary and
         sole director. Under the indemnity agreement, the Company issued
         260,000 shares of its Series C Preferred Stock to the President to
         indemnify him for the loss he incurred as a result of the foreclosure
         by the lender on the shares, which the President had pledged. On the
         date of foreclosure, the President's shares had a market value of
         approximately $260,000. The board of directors has determined that the
         President delivered the guarantee and pledged the shares in the course
         and scope of his employment, as an officer and director, and for
         benefit of the Company. The board of directors has further determined
         that the President's conduct was in good faith and that he reasonably
         believed that his conduct was in, or not opposed to, the best interests
         of the Company. The Company recorded a beneficial conversion expense of
         $292,500 as a result of the issuance of the Series C Preferred Stock.
         The issuance of the Series C Preferred Stock to the President
         effectively transferred control of the company to the President. The
         Company is currently negotiating the terms of indemnification of with
         the other former officer as a result of this foreclosure.

                                      F-36
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 16 - COMMITMENTS AND CONTINGENCIES

         The Company is subject to certain asserted and unasserted claims
         encountered in a fraud action committed by former employees of the
         Company against a local bank. It is the Company's belief that the
         resolution of these matters will not have a material adverse effect on
         the financial position or results of operations, however, the Company
         cannot provide assurance that damages that result in a material adverse
         effect on its financial position or results of operations will not be
         imposed in these matters.

         On or about December 21, 2004, the Company terminated its Chief
         Financial Officer for cause, as it had reason to believe he had
         participated in a bank fraud scheme. The Chief Financial Officer's
         replacement has not been appointed at this time.

         During the period ended December 31, 2004, the Company's bank initiated
         a claim for an overdraft recovery. Since it was later determined that
         there was a much larger malice perpetrated against the Company by
         existing bank employees, allowances have been accrued until a
         resolution can be determined. The bank's insurer commenced an action in
         Pike County Court, Kentucky against Quest Energy, the Company's
         subsidiary, for subrogation of monies it has paid to the bank and
         repayment of deductibles by the bank as a part of an alleged criminal
         scheme and conspiracy by former employees of the bank and other
         individuals. The insurer alleged that former employees or associates of
         Quest Energy, including the Company's former CEO and CFO, were
         primarily involved in the alleged scheme, that Quest Energy is
         accordingly responsible for the actions of these former employees and
         associates, and that Quest Energy obtained a substantial material
         benefit as a result of this alleged scheme. Quest Energy has denied
         these allegations, that it had any involvement with or responsibility
         for any of the actions alleged by the insurer, and it further denies
         that it has benefited from any such alleged scheme. Further, Quest
         Energy filed a counterclaim against the bank and the insurer contending
         that the negligent actions and inactions by the bank caused severe
         damage and loss to Quest Energy and the Company.

         Since management has determined that the existing liabilities and debt
         from the Company were all related to the issues involving these claims,
         the assets have been written down in consideration for the allowance
         already accrued by the Company. The Company has accrued the existing
         liabilities until validity can be determined. As of December 31, 2007,
         no outcome has been determined.

         In light of these occurrences and due in part to the apparent
         participation of its former Chief Financial Officer in this scheme, the
         Company determined that the design and operation of its disclosure
         controls and procedures, as defined in Exchange Act Rule 13a-15(f) have
         not been effective to ensure that information required to be disclosed
         in its Exchange Act reports is recorded, processed, summarized and
         reported within the time periods specified in the Securities and
         Exchange Commission's rules and forms, and that such information is
         accumulated and communicated to them to allow timely decisions
         regarding required disclosure. The Company is currently reviewing and
         revising its controls and procedures to increase the effectiveness of
         its disclosure controls and procedures.

         In or about May 2004, National City Bank of Kentucky commenced an
         action in Boyd County Court, Kentucky against the Company's indirect
         wholly owned subsidiary, Gwenco, Inc., and a former director of the
         Company for breach of various promissory notes issued by Gwenco. Duke
         Energy Merchants and First Sentry Bank were joined in the action.
         National City Bank and Duke Energy are collectively seeking
         approximately $1,100,000 in principal as well as interests, fees, and
         costs. National City Bank has obtained judgment in that action in the
         amount of approximately $340,000, and Duke Energy has obtained judgment
         as well.

                                      F-37
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 16 - COMMITMENTS AND CONTINGENCIES (Continued)

         In March, 2006, National City Bank commenced an action commenced an
         action in Pike County Court, Kentucky against the Company, Gwenco,
         Inc., and Quest Energy, Ltd. seeking to be adjudged a lien on certain
         real and personal property of Gwenco pursuant to the aforementioned
         judgment and that said real and personal property be sold to satisfy
         the aforesaid lien, and that the liens of National City Bank attach to
         the proceeds of the sale. The Company intends to defend this action
         while continuing negotiations with National City Bank. On July 19,
         2006, National City Bank of Kentucky sold its right, title, and
         interest in and to various judgments, judgment liens, security
         interests, and lines of credit, all of which are based on the Gwenco
         notes issued to National City Bank of Kentucky, to a third party
         investor. The third party investor has agreed to forbear on further
         collection, enforcement, and foreclosure with respect to this
         indebtedness until further notice.

         On May 11, 2005, the former director of the Company, who is also the
         former stockholder of Gwenco, filed a third party complaint in this
         action against the Company and its subsidiary, Taylor Mining, seeking
         control of the mines leased by Gwenco and/or damages for fraud in the
         inducement of the Gwenco purchase agreement. On July 27, 2006, the
         Company settled the third party complaint by the former owner of
         Gwenco. As part of the settlement, Gwenco received mining permit
         renewal and transfer documentation, which Gwenco is required to obtain
         in order to recommence mining operations at its Pond Creek mine at
         Slater's Branch, Kentucky. Further, the former Gwenco owner agreed to
         provide all reasonable cooperation in recommencing mining operations at
         the Slater's Branch mine. The parties also agreed to terminate all
         remaining rights, duties, and obligations under the original stock
         purchase agreement entered into in connection with the acquisition of
         Gwenco by the Company. The Company made a one-time cash payment of
         $75,000 and issued 350,000 shares of the Company's common stock,
         subject to a lock-up/leak out agreement, to the former owner of Gwenco,
         upon conversion of his Series B Preferred Stock, the terms of which
         were amended under the settlement agreement. The Company also granted
         the former owner of Gwenco a sliding scale royalty on coal sales. The
         Company also assumed two promissory notes made by the former owner of
         Gwenco in the aggregate principal amount of $290,561. The notes are in
         default. The parties mutually dismissed their respective counter-claims
         against each other in the civil action pending in Boyd County Court,
         Kentucky.

         The Company has not filed corporate federal, and state and local income
         tax returns since 2002, and believes that, due to its operating losses,
         it does not have a material tax liability.

         On July 10, 2006, the Company entered into a settlement arrangement
         with an existing equipment lessor for the bill of sale on two pieces of
         equipment, of which the Company had retained possession while in
         default of prior lease payments. On October 10, 2006, the Pike County
         Circuit court entered an order enforcing this settlement agreement, and
         on December 19, 2006, the lessor was awarded summary judgment in the
         amount of $35,000 plus 8% accrued interest from August 9, 2006. As of
         December 31, 2007, the Company remains in default.

                                      F-38
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 16 - COMMITMENTS AND CONTINGENCIES (Continued)

         Certain former owners of Gwenco commenced an action in the Circuit
         Court of Pike County against Gwenco for damages resulting from an
         alleged failure to pay past royalties and other amounts allegedly due.
         On May 19, 2006, the former owners obtained a default judgment in this
         action in the amount of $687,391, from which Gwenco has taken appeal.
         The plaintiffs then amended their complaint, seeking to be adjudged a
         lien on certain real and personal property of Gwenco pursuant to the
         aforementioned judgment and that said real and personal property be
         sold to satisfy the aforesaid lien, and that the liens of the
         plaintiffs attach to the proceeds of the sale. Gwenco believes that it
         has several meritorious defenses and counterclaims to this action and
         intends to defend it vigorously. This foreclosure action was stayed
         against Gwenco as a result of Gwenco's filing of a voluntary petition
         for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

         On February 28, 2007, one of the Company's wholly-owned subsidiaries,
         Gwenco, Inc., filed a voluntary petition for reorganization under
         Chapter 11 of the U.S. Bankruptcy Code. Neither the Company nor any of
         its other subsidiaries were included in the filing. As a result, all
         pending legal actions against Gwenco, including the pending foreclosure
         actions, were automatically stayed.

         On June 20, 2007, Gwenco entered into a settlement agreement with one
         of the former owners, pursuant to which the former owner agreed to
         accept payment of $150,000 in exchange for a release of the judgment
         amount of $458,260. The settlement agreement is subject to approval by
         the Bankruptcy Court. On July 17, 2007, the Bankruptcy Court approved
         the settlement agreement, subject to Gwenco's receipt of
         debtor-in-possession financing. On August 3, 2007, the Court approved
         Gwenco's debtor-in-possession financing and the settlement agreement
         became effective. On August 10, 2007, escrowed funds were transferred
         to complete the settlement.

         On August 15, 2007, the U.S. Bankruptcy Court approved a DIP Financing
         Motion authorizing the Company's wholly owned subsidiary, Gwenco, Inc.,
         which is currently in Chapter 11 reorganization proceedings, to borrow
         up to $2,000,000 ("Total Facility") in post-petition debt from a
         pre-petition creditor pursuant to a Debtor-In -Possession loan
         agreement and promissory note between Gwenco and the lender dated June
         29, 2007. Additionally, the Court approved prior budgeted advances from
         July of up to $350,000, which, in turn, adjusted the Total Facility to
         $1,700,000. The loan advances will carry a 17% interest rate per annum
         and mature on July 31, 2008.

         As of December 31, 2007, Gwenco had assets of $5,416,607, which
         included all of the mineral rights of the Company valued at $5,208,524
         and liabilities (other than liabilities that have been guaranteed by
         the Company or another of its wholly-owned subsidiaries) of $5,085,815.
         Of these liabilities, $2,714,297 was owed to Quest Minerals & Mining
         and Quest Energy, Ltd. These receivables are unsecured and Quest
         Minerals & Mining and Quest Energy, Ltd have reserved 100% of the
         receivable as doubtful at December 31, 2007. Gwenco also currently
         holds all of the company's current receivables, which are restricted to
         specific limitations, since the company now acts as a Debtor in
         possession (DIP) as per the Chapter 11 requirements.

         The following is the combined balance sheet of the Company at December
         31, 2007, which includes Gwenco, Inc. and the Company and its other
         subsidiaries:

                                      F-39
<PAGE>
<TABLE>
<CAPTION>

                          QUEST MINERALS & MINING CORP.

                             COMBINED BALANCE SHEET
                                DECEMBER 31, 2007


                                                                      QUEST & SUB        GWENCO      ADJUSTMENTS       COMBINED
                                                                     ------------    ------------    ------------    ------------
<S>                                                                         <C>      <C>             <C>             <C>
                                     ASSETS
Current Assets
   Cash                                                                     4,464              --    $               $      4,464
                                                                     ------------    ------------    ------------    ------------
      Total current assets                                                  4,464              --                           4,464


Leased Mineral Reserves, net (Note 2 & 5)                                      --       5,208,524                       5,208,524
Equipment, net (Note 6)                                                        --         166,273                         166,273
Deposits                                                                       --          40,643                          40,643
Prepaid consulting Expense                                                 27,000              --                          27,000
Intercompany,net                                                               --
Other receivables, net (Note 7)
DIP Cash, restricted                                                                        1,167                           1,167
DIP Receivable, restricted                                                     --              --              --              --
                                                                     ------------    ------------    ------------    ------------

         TOTAL ASSETS                                                $     31,464    $  5,416,607    $         --    $  5,448,071
                                                                     ============    ============    ============    ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
  Accounts payable and accrued expenses (Note 8)                     $  1,946,618    $    789,100    $               $  2,735,718
  Loans payable (Note 9)                                                2,708,586         229,130                       2,937,716
  Bank loans (Note 9)                                                          --       1,017,524                       1,017,524
  Related party loans (Note 9)                                            672,289              --              --         672,289
                                                                     ------------    ------------    ------------    ------------

         TOTAL CURRENT LIABILITIES                                      5,327,493       2,035,754                       7,363,247

Other Liabilities
  Intercompany                                                                 --       2,714,297      (2,714,297)             --
  Derivative Liability (Note 8)                                         2,841,203                                       2,841,203
  Unearned revenues (Note 8)                                                   --                                              --
  DIP Financeing (Note 9)                                                      --         335,764              --         335,764
                                                                     ------------    ------------    ------------    ------------

         TOTAL LIABILITIES                                              8,168,696       5,085,815      (2,714,297)     10,540,214

Commitments and Contingencies

Stockholders' equity
  Preferred stock, par value $0.001, 10,000,000 shares authorized;
    SERIES A - issued and outstanding 447,533 shares                          448              --                             448
    SERIES B - issued and outstanding 48,284 shares                            (0)             48                              48
    SERIES C - issued and outstanding 260,000 shares                          260              --                             260

  Common stock, par value $0.001, 975,000,000 shares authorized;
    issued and outstanding 732,704,185 shares                              46,798           4,500          (4,500)         46,798

  Equity held in escrow (Note 12)                                        (587,500)             --                        (587,500)

  Equity allowance (Note 12)                                              (29,326)             --                         (29,326)

  Paid-in capital (Note 14)                                            49,424,204       2,557,049                      51,981,253
  Accumulated Deficit                                                 (56,992,115)     (2,230,806)      2,718,797     (56,504,124)
                                                                     ------------    ------------    ------------    ------------

Total Stockholders' Equity                                             (8,137,232)        330,792       2,714,297      (5,092,143)
                                                                     ------------    ------------    ------------    ------------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $     31,464    $  5,416,607    $         --    $  5,448,071
                                                                     ============    ============    ============    ============
</TABLE>

                       See Notes to Financial Statements.

                                      F-40
<PAGE>
                         QUEST MINERALS AND MINING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2007

NOTE 17 - SUBSEQUENT EVENTS

         On January 6, 2008, the Company amended a two-year agreement acquiring
         administrative services from a third party consulting company owned by
         the son of its president originally dated June 6, 2006. The agreement
         consisted of 1,000,000 shares of common stock as an initial grant under
         a Stock Incentive Plan, along with a monthly payment of $6,500. The
         initial shares were valued at $35,000 and are being amortized over the
         term of the agreement. The amendment consisted of an increase of the
         monthly payment to $9,900 due to providing additional services with
         regards to the reorganization of the Company's wholly owned subsidiary,
         Gwenco, Inc., which is currently under Chapter 11.

         On March 11, 2008, the Company signed a 15% per annum promissory note
         with a third party lender for $75,000 due on March 10, 2009. The note
         is convertible at the option of the holder at a conversion price of 50%
         of the average of the three lowest per share market values during the
         ten (10) trading days immediately preceding a conversion date. The
         holder may not convert any outstanding principal amount of this note or
         accrued and unpaid interest thereon to the extent such conversion would
         result in the holder beneficially owning in excess of 4.999% of the
         then issued and outstanding common shares of the Company.

         On March 20, 2008, Gross Foundation returned 2,094,707 shares of common
         stock that were issued to them in error on December 14, 2007. The
         Company had issued 2,094,707 shares of common stock in error to due to
         a communication oversight to the transfer agent relating to a
         conversion notice during the time in which the Company's 1 to 10
         reverse split was effectuated. The issuance was valued at market price
         and a capital allowance of $29,326 was posted until it could be
         reconciled. The shares were subsequently cancelled and the allowance
         was credited.

         On April 1, 2008, the Company defaulted on a $300,000 convertible
         promissory note. On April 1, 2006, the Company entered into a
         settlement and release agreement with a third party individual pursuant
         to which the Company issued a convertible secured promissory note in
         the principal amount of $300,000. The note was due on April 1, 2008,
         with an annual interest rate of eight percent (8%). The note is
         convertible into the Company's common shares at an initial conversion
         price equal to the greater of (a) $0.20 per share, and (b) 50% of the
         average market price during the three trading days immediately
         preceding any conversion date. The holder may not convert any
         outstanding principal amount of this note or accrued and unpaid
         interest thereon to the extent such conversion would result in the
         holder beneficially owning in excess of 4.999% of the then issued and
         outstanding common shares of the Company.

                                      F-41
<PAGE>

Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         None.

Item 8A. CONTROLS AND PROCEDURES.

         We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our reports that we file
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized, and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure based on the definition of "disclosure controls and
procedures" in Rule 13a-15(e). In designing and evaluating the disclosure
controls and procedures, our management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

         At the end of the period covered by this Annual Report on Form 10-KSB,
we carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on the foregoing, our Chief Executive Officer and
our Chief Financial Officer concluded that our disclosure controls and
procedures were not effective to ensure that all material information required
to be disclosed in this Annual Report on Form 10-KSB has been made known to them
in a timely fashion. In addition, our Chief Executive Officer and Chief
Financial Officer have identified significant deficiencies that existed in the
design or operation of our internal control over financial reporting that they
consider to be "material weaknesses." The Public Company Accounting Oversight
Board has defined a material weakness as a "significant deficiency or
combination of significant deficiencies that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected." In light of the material
weaknesses described below, we performed additional procedures to ensure that
the consolidated financial statements are prepared in accordance with generally
accepted accounting principles. Accordingly, management believes that the
financial statements included in this Annual Report fairly present in all
material respects our financial condition, results of operations and cash flows
for the periods presented.

         We did not design and maintain effective entity-level controls as
defined in the Internal Control--Integrated Framework published by the Committee
of Sponsoring Organizations of the Treadway Commission ("COSO"). Specifically:

         1.       We lacked the technical expertise and did not maintain
adequate procedures to ensure that the accounting for derivative financial
instruments under SFAS No. 133, Accounting for Derivative Instruments, and under
Emerging Issues Task Force 00-19, was appropriate. Procedures relating to
convertible debt and warrant financing transactions did not operate effectively
to (a) properly evaluate embedded derivative liability and warrant liability
accounting treatment, (b) meet the documentation requirements of SFAS No. 133
and EITF 00-19, and (c) adequately assess and measure derivative liability
values on a quarterly basis. This material weakness resulted in a restatement of
prior financial statements, as described in Note 18 to the Consolidated
Financial Statements and, if not remediated, has the potential to cause a
material misstatement in the future.

         2.       We did not maintain a sufficient complement of personnel with
an appropriate level of technical accounting knowledge, experience, and training
in the application of generally accepted accounting principles commensurate with
our financial accounting and reporting requirements and low materiality
thresholds. This material weakness contributed to the restatement of prior
financial statements, as described in Note 18 to the Consolidated Financial
Statements and, if not remediated, has the potential to cause a material
misstatement in the future.

         3.       Due to the previously reported material weaknesses, as
evidenced by the restatements related to derivative liabilities, management has
concluded that the controls over the period-end financial reporting process were

                                       35
<PAGE>

not operating effectively. Specifically, controls were not effective to ensure
that significant non-routine transactions, accounting estimates, and other
adjustments were appropriately reviewed, analyzed, and monitored on a timely
basis. A material weakness in the period-end financial reporting process could
result in our not being able to meet our regulatory filing deadlines and, if not
remediated, has the potential to cause a material misstatement or to miss a
filing deadline in the future.

         These conditions constitute deficiencies in both the design and
operation of entity-level controls. As a result of these deficiencies, our
original Annual Report on Form 10-KSB did not contain all material information
which is required to be disclosed, and in particular, our financial statements
for the fiscal years ended December 31, 2007 and 2006. In addition, we have
restated our financial statements for the fiscal years ended December 31, 2005
and 2004 and the interim financial statements for the periods ending March 31,
2005, June 30, 2005, September 30, 2005, March 31, 2006, June 30, 2006, and
September 30, 2006.

         These significant deficiencies in the design and operation of our
internal controls include the needs to hire additional staffing and to provide
training to existing and new personnel in SEC reporting requirements and
generally accepted accounting principles. Furthermore, the deficiencies include
the need for formal control systems for journal entries and closing procedures,
the need to form an independent audit committee as a form of internal checks and
balances and oversight of our management, to implement budget and reporting
procedures, and the need to provide internal review procedures for schedules,
SEC reports, and filings prior to submission to the auditors and/or filing with
the SEC.

         These deficiencies have been disclosed to our Board of Directors.
Additional effort is needed to fully remedy these deficiencies and we are
seeking to improve and strengthen our control processes and procedures. We are
in the process of improving our internal control over financial reporting in an
effort to remediate these deficiencies by adding additional accounting
personnel, improving supervision and increasing training of our accounting staff
with respect to generally accepted accounting principles, providing additional
training to our management regarding use of estimates in accordance with
generally accepted accounting principles, increasing the use of contract
accounting assistance, and increasing the frequency of internal financial
statement review. We will continue to take additional steps necessary to
remediate the material weaknesses described above.

         Our Chief Executive Officer and Chief Financial Officer have also
evaluated whether any change in our internal controls occurred during the last
fiscal quarter and have concluded that there were no changes in our internal
controls or in other factors that occurred during the last fiscal quarter that
has materially affected, or is reasonably likely to materially affect, these
controls.


Item 8B. OTHER INFORMATION.

         None.

                                       36
<PAGE>

                                    PART III

Item 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; CORPORATE
         GOVERNANCE AND COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Executive Officer and Directors

         Our executive officers and directors, the positions held by them, and
their ages are as follows:

        Name                    Age                     Position
-----------------------         ---      ---------------------------------------
Eugene Chiaramonte, Jr.         62       President, Secretary, and sole Director

         Eugene Chiaramonte, Jr. is Quest's President and Secretary and Quest's
sole director. Mr. Chiaramonte was appointed as Secretary and Vice President in
February, 2004 and President in May, 2006. Mr. Chiaramonte also serves as the
President and sole director of our wholly owned subsidiary Gwenco, Inc. and
serves as the President and director of our subsidiary Quest Minerals and Mining
Corp., a Nevada corporation. From 1995 to 2003, Mr. Chiaramonte was a director
and was the president and chief executive officer of the Auxer Group. He assumed
the position of secretary and treasurer of the Auxer Group in 1998. Mr.
Chiaramonte was a founder and served as director and secretary of the Auxer
Group's subsidiary, CT Industries from June 1994 through 2003. Additionally, he
has served as director and secretary of the Harvey Westbury Corp. since October
1996 and a co-founder, director and secretary of Hardyston Distributors since
April 1999. Mr. Chiaramonte has also been a director and secretary of Auxer
Telecom Inc. since August 2000.

Information about our Board and its Committees.

         Quest does not have either an audit committee, compensation committee,
or a nominating committee. It is the view of the board of directors that it is
appropriate to not have any of these committees since they are not required to
maintain its listing on the OTC Bulletin Board, since it only has one director
who would serve to act as the committee in any event, and due to the additional
and unnecessary costs associated with administering the committees.

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

         A stockholder who wishes to communicate with our board of directors may
do so by directing a written request to our Company addressed to our Chief
Executive Officer. We intend to hold annual meetings of stockholders during the
summer season, at which meetings our directors will be up for re-election. We
currently do not have a policy regarding the attendance of board members at the
annual meeting of stockholders.

Family Relationships

         There are no family relationships between or among any of the current
directors, executive officers or persons nominated or charged by the Company to
become directors or executive officers.

Involvement in Certain Legal Proceedings

         Except as describe below, none of our directors or executive officers
has, during the past five years:

                                       37
<PAGE>

         o        been convicted in a criminal proceeding or been subject to a
                  pending criminal proceeding (excluding traffic violations and
                  other minor offences);

         o        had any bankruptcy petition filed by or against any business
                  of which he was a general partner or executive officer, either
                  at the time of the bankruptcy or within two years prior to
                  that time; except for Eugene Chiaramonte who was an officer
                  and director of our wholly owned subsidiary Gwenco, Inc. which
                  filed for Chapter 11 reorganization in March 2007;

         o        been subject to any order, judgment, or decree, not
                  subsequently reversed, suspended or vacated, of any court of
                  competent jurisdiction, permanently or temporarily enjoining,
                  barring, suspending or otherwise limiting his involvement in
                  any type of business, securities, futures, commodities or
                  banking activities; or

         o        been found by a court of competent jurisdiction (in a civil
                  action), the Securities and Exchange Commission or the
                  Commodity Futures Trading Commission to have violated a
                  federal or state securities or commodities law, and the
                  judgment has not been reversed, suspended, or vacated.

Director Independence

         Our board of directors has determined that currently none of it members
qualify as "independent" as the term is used in Item 407 of Regulation S-B as
promulgated by the SEC and in the listing standards of The Nasdaq Stock Market,
Inc. - Marketplace Rule 4200.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors, executive officers, and stockholders holding more than
10% of our outstanding common stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in beneficial
ownership of our common stock. Executive officers, directors and
greater-than-10% stockholders are required by SEC regulations to furnish us with
copies of all Section 16(a) reports they file. To our knowledge, based solely on
review of the copies of such reports furnished to us for the period ended
December 31, 2007, all Section 16(a) reports required to be filed by our
executive officers, directors, and greater-than-10% stockholders were filed on a
timely basis, except that Mr. Chiaramonte failed to stock award grants on
September 6, and 28, 2007 on Form 4. These awards were reported on a Form 5
filed by Mr. Chiaramonte on February 13, 2008

Code of Ethics

         We have adopted a code of ethics that applies to the principal
executive officer and principal financial and accounting officer. We will
provide to any person without charge, upon request, a copy of our code of
ethics. Requests may be directed to our principal executive offices at 18B East
5th Street, Paterson, New Jersey 07524.

Item 10. EXECUTIVE COMPENSATION

         The following table sets forth the compensation paid to the Chief
Executive Officer and our other executive officers ("Named Executive Officers")
for services rendered during the fiscal years ended December 31, 2007 and 2006.

                                       38
<PAGE>

<TABLE>
<CAPTION>

                                              Summary Compensation Table
----------------------------------------------------------------------------------------------------------------

                                                               Stock         Option       All Other
Name and Position         Year     Salary       Bonus         Awards ($)     Awards ($)  Compensation   Total ($)
-----------------------  ------  -----------   --------      -----------   -----------   ------------   --------
<S>                       <C>    <C>           <C>          <C>           <C>           <C>            <C>
Eugene Chiaramonte        2007   $180,000(1)                 $366,000(2)                                $440,000
President and Secretary   2006    120,000(2)         --            --      $143,053(3)          --      $263,053

William R. Wheeler        2007        N/A           N/A           N/A           N/A           N/A            N/A
Former Chairman,          2006   $ 50,000(4)         --      $ 69,620(5)   $143,053(3)   $ 303,442(6)   $566,115
President and Chief
Executive Officer
(Resigned May 31, 2006)
</TABLE>

         (1)      $27,000 has been accrued but not paid.

         (2)      $106,000 was paid as a stock award for accrued salary. In
                  addition, Mr. Chiaramonte received 260,000 shares of Series C
                  Preferred Stock to indemnify him from a loss suffered in
                  respect of a personal guarantee on a loan agreement.

         (2)      $44,000 has been accrued but not paid.

         (3)      On May 18, 2006, we granted each of Mr. Chiaramonte and Mr.
                  Wheeler a stock option to purchase up to 5,000,000 shares of
                  our common stock at a price of $0.05 per share pursuant to
                  their employment agreements. The value represents the
                  compensation costs of stock options for financial reporting
                  purposes for the year under FAS 123R.

         (4)      $10,650 has been accrued but not paid.

         (5)      Mr. Wheeler provided consulting services to us in 2006, for
                  which we paid him a total of 3,881,818 shares of our common
                  stock valued at $69,620 at the time of grant, which value
                  represents the compensation costs of the stock awards for
                  financial reporting purposes for the year under FAS 123R.

         (6)      This amount represents amounts accrued and common stock issued
                  for payment of legal fees incurred by Mr. Wheeler which Quest
                  has been paying under its indemnification arrangements with
                  Mr. Wheeler.


                                       39
<PAGE>

Grants of Plan-Based Awards

         The following table sets forth information concerning the number of
shares of common stock underlying restricted stock awards and stock options
granted to the Named Executive Officers in Fiscal 2007.

<TABLE>
<CAPTION>


                                        Estimated       Estimated
                                         Future          Future
                                         Payouts         Payouts                                          Exercise or    Grant Date
                                        Under Non-        Under                                           Base Price    Fair Value
                                         Equity          Equity         All Other       All Other         of Option    of Stock and
                  Grant    Approval     Incentive       Incentive         Stock          Option             Awards        Option
Name              Date       Date      Plan Awards     Plan Awards       Awards:         Awards:            ($/Sh)        Awards
------------    --------   --------   -------------    -----------  --------------    --------------    ------------   -------------
                                                                        Number of        Number of
                                                                        Shares of       Securities
                                                                        Stock or        Underlying
                                                                        Units (#)     Options (#)(1)
                           --------   -------------    -----------  --------------    --------------    ------------   -------------

<S>             <C>        <C>          <C>           <C>              <C>            <C>                <c>            <C>
Eugene          7/23/07    7/23/07                                       250,000                                          $44,000
 Chiaramonte    9/28/08    9/28/08                                     1,000,000                                          $60,000
</TABLE>

Outstanding Equity Awards at Fiscal Year-End

         The following table sets forth all outstanding equity awards made to
each of the Named Executive Officers that are outstanding at the end of Fiscal
2007.
<TABLE>
<CAPTION>

                                                         Option Awards (1)                                Stock Awards
                                    --------------------------------------------------------     -------------------------------

                                     Number of      Number of                                      Number of
                                    Securities      Securities                                      Shares        Market Value
                                    Underlying      Underlying                                     or Units       of Shares or
                                    Unexercised    Unexercised       Option         Option      of Stock That    Units of Stock
                                    Options (#)    Options (#)      Exercise      Expiration       Have Not       That Have Not
Name                                Exercisable    Unexercisable    Price ($)        Date          Vested (#)        Vested
---------------------------------   -----------   --------------   ----------     ----------     ------------    ---------------
<S>                                 <C>                    <C>         <C>          <C>            <C>                    <C>
Eugene Chiarmonte                            --              --           --              --               --                --
</TABLE>

Option Exercises and Stock Vested

No stock options vested or were exercised by any Named Executive Officers in
Fiscal 2007.

Employment Agreements

         On December 8, 2005, Quest entered into an employment agreement with
Eugene Chiaramonte, Jr. pursuant to which Quest employs Mr. Chiaramonte as its
Vice President. The agreement is for five years and provides for an annual base
salary during the term of the agreement as follows: (i) an annual base salary of
$120,000 for the first year of the agreement; (ii) an annual base salary of
$180,000 for the second year of the agreement; (iii) an annual base salary of
$240,000 for the third year of the agreement; (ii) an annual base salary of
$300,000 for the fourth year of the agreement; (ii) an annual base salary of
$360,000 for the fifth year of the agreement. In addition, Mr. Chiaramonte
received options to purchase up to 5,000,000 shares of Quest's common stock at
an exercise price of $0.05 per share. The options will vest as follows: (i)
options to purchase up to 2,000,000 shares will vest immediately, (ii) options
to purchase up to 2,000,000 shares will vest upon Quest's receipt of an
aggregate of $1,000,000 in cash or cash equivalents in its accounts, and (iii)
options to purchase up to 1,000,000 shares will vest six months after the date
of the employment agreement.

         The agreement also contains the following material provisions: (i)
participation in Quest's executive bonus plan on the same basis as other senior
executive officers of Quest; (ii) reimbursement for all reasonable travel and

                                       40
<PAGE>

other out-of-pocket expenses incurred in connection with his employment; (iii)
four (4) weeks paid vacation leave, which shall accumulate in the event that Mr.
Chiaramonte elects not to take such vacation leave in any fiscal year; (iv)
medical and dental benefits as those provided to other senior executive officers
of Quest; (v) a severance payment of six (6) month's salary at the
then-applicable base salary rate in the event that Quest terminates Mr.
Chiaramonte's employment without cause; (vi) a severance payment of all base
salary due under the remaining term of the employment agreement in the event
that Mr. Chiaramonte's employment is terminated due to death or disability;
(vii) a payment of 5,000,000 shares of Quest's common stock in the event of a
change in control of Quest as such term is defined in the employment agreement;
(viii) a severance payment, at Mr. Chiaramonte's election, in the event that (a)
Mr. Chiaramonte is required to relocate as a condition of employment, (b) there
is a substantial change in Mr. Chiaramonte's responsibilities at the direction
of Quest's board of directors, or (c) a change in control of Quest.

Potential Payments upon Termination

         Eugene Chiaramonte has entered into an employment agreement. Under the
terms of his Employment Agreement, Mr. Chiaramonte is entitled to a severance
payment of (i) six (6) month's salary at the then-applicable base salary rate in
the event that Quest terminates Mr. Chiaramonte's employment without cause; or
(ii) all base salary due under the remaining term of the employment agreement in
the event that Mr. Chiaramonte's employment is terminated due to death or
disability.

         The following table sets forth quantitative information with respect to
potential payments to be made to Mr. Chiaramonte upon termination in various
circumstances. The potential payments are based on each of the Mr. Chiaramonte's
Employment Agreement discussed above. For a more detailed description of the
Employment Agreement, see the "Employment Agreements" section above.


                               Termination           Termination due to death
Name                         without cause(1)            or disability(2)
--------------------------   -----------------       ------------------------
Eugene Chiaramonte           $120,000-$180,000           $240,000-$900,000


(1)  Employee entitled to six months severance at the then applicable base
     salary rate. Mr. Chiaramonte's base salary in the remaining 3 years under
     his contract are $240,000, $300,000 and $360,000.

(2)  Employee is entitled to all base salary due under the remaining term of the
     employment agreement Mr. Chiaramonte's base salary in the remaining 3 years
     under his contract are $240,000, $300,000 and $360,000.


Consulting Agreement

         On May 31, 2006, Quest entered into a consulting agreement with William
R. Wheeler, Quest's former Chief Executive Officer. The agreement is for one
year and is renewal for successive periods of two (2) years. The agreement
provides for a monthly consulting fee, payable in cash or as a stock award under
a stock incentive plan. In addition, Quest shall pay Mr. Wheeler a one percent
royalty on gross sales on all mine products that originate from mines and/or
wells introduced to Quest by Mr. Wheeler. With respect to the options to
purchase up to 5,000,000 shares of Quest's common stock granted to Mr. Wheeler,
options to purchase up to 2,000,000 shares were deemed vested, options to
purchase up to 1,000,000 shares will vest six months after the date of the
consulting agreement, and the balance of the options were voided.

Compensation of Directors

         All directors receive reimbursement for reasonable out-of-pocket
expenses in attending board of directors meetings and for promoting Quest's
business. From time to time, Quest may engage certain members of the board of
directors to perform services on Quest's behalf. In such cases, Quest
compensates the members for their services at rates no more favorable than could
be obtained from unaffiliated parties.

                                       41
<PAGE>

         From time to time we may engage certain members of the Board of
Directors to perform services on our behalf. In such cases, we compensate the
members for their services at rates no more favorable than could be obtained
from unaffiliated parties. Other than as set forth above, we did not engage any
members of the Board of Directors to perform services our behalf in 2006.

         Securities Authorized for Issuance Under Equity Compensation Plans. The
following provides information concerning compensation plans under which Quest's
equity securities have been authorized for issuance as of December 31, 2007:
[Update]
<TABLE>
<CAPTION>

                                                        (a)                            (b)                           (c)
------------------------------------------    -------------------------     --------------------------   ---------------------------
Plan Category                                 Number of securities to           Weighted-average            Number of securities
                                              be issued upon exercise           exercise price of          remaining available for
                                              of outstanding options,         outstanding options,          future issuance under
                                                warrants and rights            warrants and rights        equity compensation plans
                                                                                                            (excluding securities
                                                                                                          reflected in column (a))
------------------------------------------    -------------------------     --------------------------   ---------------------------
<S>                                                        <C>                          <C>                      <C>
Equity compensation plans approved by                          --                       $   --                            --
security holders

Equity compensation plans not approved                     75,000                       $ 2.00                   166,312,405
by security holders (1)(2)(3)(4)

Total                                                      75,000                       $ 2.00                   166,312,405
</TABLE>

         (1)      2006 Stock Incentive Plan. The purpose of our 2006 Stock
                  Incentive Plan is to advance the best interests of the company
                  by providing those persons who have a substantial
                  responsibility for our management and growth with additional
                  incentive and by increasing their proprietary interest in the
                  success of the company, thereby encouraging them to maintain
                  their relationships with us. Further, the availability and
                  offering of stock options and common stock under the plan
                  supports and increases our ability to attract and retain
                  individuals of exceptional talent upon whom, in large measure,
                  the sustained progress, growth and profitability which we
                  depend. The total number of shares available for the grant of
                  either stock options or compensation stock under the plan is
                  23 million shares, subject to adjustment, and to date, we have
                  issued 466,095 shares and have reserved 75,000 shares for
                  option grants.

                  Our compensation committee which is appointed by our board of
                  directors administers our plan and has full power to grant
                  stock options and common stock, construe and interpret the
                  plan, establish rules and regulations and perform all other
                  acts, including the delegation of administrative
                  responsibilities, it believes reasonable an proper. Any
                  decision made, or action taken, by the compensation committee
                  or our board of directors arising out of or in connection with
                  the interpretation and administration of the plan is final and
                  conclusive.

                  The compensation committee or our board of directors, in its
                  absolute discretion, may award common stock to employees of,
                  consultants to, and directors of the company, and such other
                  persons as the board of directors or compensation committee
                  may select, and permit holders of common stock options to
                  exercise such options prior to full vesting therein and hold
                  the common stock issued upon exercise of the option as common
                  stock. Stock options may also be granted by our board of
                  directors or compensation committee to non-employee directors
                  of the company or other persons who are performing or who have
                  been engaged to perform services of special importance to the
                  management, operation or development of the company.

                  In the event that our outstanding common stock is changed into
                  or exchanged for a different number or kind of shares or other
                  securities of the company by reason of merger, consolidation,
                  other reorganization, recapitalization, combination of shares,
                  stock split-up or stock dividend, prompt, proportionate,

                                       42
<PAGE>

                  equitable, lawful and adequate adjustment shall be made of the
                  aggregate number and kind of shares subject to stock options
                  which may be granted under the plan.

                  Our board of directors may at any time, and from time to time,
                  suspend or terminate the plan in whole or in part or amend it
                  from time to time in such respects as our board of directors
                  may deem appropriate and in our best interest.

         (2)      2006 Stock Incentive Plan No. 2. The purpose of our 2006 Stock
                  Incentive Plan No. 2 is to advance the best interests of the
                  company by providing those persons who have a substantial
                  responsibility for our management and growth with additional
                  incentive and by increasing their proprietary interest in the
                  success of the company, thereby encouraging them to maintain
                  their relationships with us. Further, the availability and
                  offering of stock options and common stock under the plan
                  supports and increases our ability to attract and retain
                  individuals of exceptional talent upon whom, in large measure,
                  the sustained progress, growth and profitability which we
                  depend. The total number of shares available for the grant of
                  either stock options or compensation stock under the plan is
                  30 million shares, subject to adjustment, and to date, we have
                  issued 434,000 shares.

                  Our compensation committee which is appointed by our board of
                  directors administers our plan and has full power to grant
                  stock options and common stock, construe and interpret the
                  plan, establish rules and regulations and perform all other
                  acts, including the delegation of administrative
                  responsibilities, it believes reasonable an proper. Any
                  decision made, or action taken, by the compensation committee
                  or our board of directors arising out of or in connection with
                  the interpretation and administration of the plan is final and
                  conclusive.

                  The compensation committee or our board of directors, in its
                  absolute discretion, may award common stock to employees of,
                  consultants to, and directors of the company, and such other
                  persons as the board of directors or compensation committee
                  may select, and permit holders of common stock options to
                  exercise such options prior to full vesting therein and hold
                  the common stock issued upon exercise of the option as common
                  stock. Stock options may also be granted by our board of
                  directors or compensation committee to non-employee directors
                  of the company or other persons who are performing or who have
                  been engaged to perform services of special importance to the
                  management, operation or development of the company.

                  In the event that our outstanding common stock is changed into
                  or exchanged for a different number or kind of shares or other
                  securities of the company by reason of merger, consolidation,
                  other reorganization, recapitalization, combination of shares,
                  stock split-up or stock dividend, prompt, proportionate,
                  equitable, lawful and adequate adjustment shall be made of the
                  aggregate number and kind of shares subject to stock options
                  which may be granted under the plan.

                  Our board of directors may at any time, and from time to time,
                  suspend or terminate the plan in whole or in part or amend it
                  from time to time in such respects as our board of directors
                  may deem appropriate and in our best interest.

         (3)      2007 Stock Incentive Plan. The purpose of our 2007 Stock
                  Incentive Plan is to advance the best interests of the company
                  by providing those persons who have a substantial
                  responsibility for our management and growth with additional
                  incentive and by increasing their proprietary interest in the
                  success of the company, thereby encouraging them to maintain
                  their relationships with us. Further, the availability and
                  offering of stock options and common stock under the plan
                  supports and increases our ability to attract and retain
                  individuals of exceptional talent upon whom, in large measure,
                  the sustained progress, growth and profitability which we
                  depend. The total number of shares available for the grant of
                  either stock options or compensation stock under the plan is
                  70 million shares, subject to adjustment, and to date, we have
                  issued 6,687,500 shares.

                  Our compensation committee which is appointed by our board of
                  directors administers our plan and has full power to grant
                  stock options and common stock, construe and interpret the
                  plan, establish rules and regulations and perform all other
                  acts, including the delegation of administrative
                  responsibilities, it believes reasonable an proper. Any
                  decision made, or action taken, by the compensation committee
                  or our board of directors arising out of or in connection with
                  the interpretation and administration of the plan is final and
                  conclusive.

                                       43
<PAGE>

                  The compensation committee or our board of directors, in its
                  absolute discretion, may award common stock to employees of,
                  consultants to, and directors of the company, and such other
                  persons as the board of directors or compensation committee
                  may select, and permit holders of common stock options to
                  exercise such options prior to full vesting therein and hold
                  the common stock issued upon exercise of the option as common
                  stock. Stock options may also be granted by our board of
                  directors or compensation committee to non-employee directors
                  of the company or other persons who are performing or who have
                  been engaged to perform services of special importance to the
                  management, operation or development of the company.

                  In the event that our outstanding common stock is changed into
                  or exchanged for a different number or kind of shares or other
                  securities of the company by reason of merger, consolidation,
                  other reorganization, recapitalization, combination of shares,
                  stock split-up or stock dividend, prompt, proportionate,
                  equitable, lawful and adequate adjustment shall be made of the
                  aggregate number and kind of shares subject to stock options
                  which may be granted under the plan.

                  Our board of directors may at any time, and from time to time,
                  suspend or terminate the plan in whole or in part or amend it
                  from time to time in such respects as our board of directors
                  may deem appropriate and in our best interest.

         (4)      2007 Stock Incentive Plan No. 2. The purpose of our 2007 Stock
                  Incentive Plan No. 2 is to advance the best interests of the
                  company by providing those persons who have a substantial
                  responsibility for our management and growth with additional
                  incentive and by increasing their proprietary interest in the
                  success of the company, thereby encouraging them to maintain
                  their relationships with us. Further, the availability and
                  offering of stock options and common stock under the plan
                  supports and increases our ability to attract and retain
                  individuals of exceptional talent upon whom, in large measure,
                  the sustained progress, growth and profitability which we
                  depend. The total number of shares available for the grant of
                  either stock options or compensation stock under the plan is
                  97.5 million shares, subject to adjustment, and to date, we
                  have issued 46,045,000 shares.

                  Our compensation committee which is appointed by our board of
                  directors administers our plan and has full power to grant
                  stock options and common stock, construe and interpret the
                  plan, establish rules and regulations and perform all other
                  acts, including the delegation of administrative
                  responsibilities, it believes reasonable an proper. Any
                  decision made, or action taken, by the compensation committee
                  or our board of directors arising out of or in connection with
                  the interpretation and administration of the plan is final and
                  conclusive.

                  The compensation committee or our board of directors, in its
                  absolute discretion, may award common stock to employees of,
                  consultants to, and directors of the company, and such other
                  persons as the board of directors or compensation committee
                  may select, and permit holders of common stock options to
                  exercise such options prior to full vesting therein and hold
                  the common stock issued upon exercise of the option as common
                  stock. Stock options may also be granted by our board of
                  directors or compensation committee to non-employee directors
                  of the company or other persons who are performing or who have
                  been engaged to perform services of special importance to the
                  management, operation or development of the company.

                  In the event that our outstanding common stock is changed into
                  or exchanged for a different number or kind of shares or other
                  securities of the company by reason of merger, consolidation,
                  other reorganization, recapitalization, combination of shares,
                  stock split-up or stock dividend, prompt, proportionate,
                  equitable, lawful and adequate adjustment shall be made of the
                  aggregate number and kind of shares subject to stock options
                  which may be granted under the plan.

                  Our board of directors may at any time, and from time to time,
                  suspend or terminate the plan in whole or in part or amend it
                  from time to time in such respects as our board of directors
                  may deem appropriate and in our best interest.

                                       44
<PAGE>

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding the
beneficial ownership of our common stock as of April 9, 2008 by the following
persons:

         o        each person who is known to be the beneficial owner of more
                  than five percent (5%) of our issued and outstanding shares of
                  common stock;

         o        each of our directors and executive officers; and

         o        all of our directors and executive officers as a group.
<TABLE>
<CAPTION>

                                                                   Number Of Shares
                     Name And Address                             Beneficially Owned          Percentage Owned (1)
         -----------------------------------------------------    ------------------          --------------------
<S>                                                                   <C>                            <C>
         Eugene Chiaramonte, Jr...............................        66,326,025(2)                  23.8%

         All directors and officers as a group................        66,326,025                     23.8
</TABLE>

         (1)      Based on 213,367,219 shares outstanding on April 8, 2008.

         (2)      Includes 65,000,000 shares of common stock issuable upon
                  conversion of 260,000 shares of Series C Preferred Stock. The
                  conversion price at which shares of common stock shall be
                  deliverable upon conversion of Series C Preferred Stock
                  without the payment of any additional consideration by the
                  holder thereof is the lesser of (i) $0.32 per share or (ii)
                  100% of the average of the 5 closing bid prices of the common
                  stock immediately preceding such conversion date. Mr.
                  Chiaramonte is our President, Secretary, and sole director.
                  Mr. Chiaramonte's address is 18B East 5th Street, Paterson, NJ
                  07524.

         Beneficial ownership is determined in accordance with the rules and
regulations of the SEC. The number of shares and the percentage beneficially
owned by each individual listed above include shares that are subject to options
held by that individual that are immediately exercisable or exercisable within
60 days from the date of this report and the number of shares and the percentage
beneficially owned by all officers and directors as a group includes shares
subject to options held by all officers and directors as a group that are
immediately exercisable or exercisable within 60 days from the date of this
report.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
         INDEPENDENCE

         On January 12, 2007, we entered into an indemnity agreement with Eugene
Chiaramonte, Jr., our President, Secretary, and sole director. Under the
indemnity agreement, we issued 260,000 shares of our Series C Preferred Stock to
Mr. Chiaramonte to indemnify him for a loss he incurred when he delivered a
personal guarantee in connection with a loan agreement. Under the loan
agreement, Mr. Chiaramonte personally guaranteed repayment of the loan and
pledged 2,000,000 shares of our common stock held by him as collateral for the
amounts loaned under the loan agreement. We eventually defaulted under the loan
agreement, and the lender foreclosed on the shares which Mr. Chiaramonte had
pledged. On the date of foreclosure, Mr. Chiaramonte's shares had a market value
of approximately $260,000. The board of directors has determined that Mr.
Chiaramonte delivered the guarantee and pledged the shares in the course and
scope of his employment with us, as our director, and for our benefit. The board
of directors has further determined that Mr. Chiaramonte's conduct was in good
faith and that he reasonably believed that his conduct was in, or not opposed
to, our best interests.

         Our board of directors authorized the creation of a series of preferred
stock of the company to be known as Series C Preferred Stock, par value $0.001
per share. The conversion price at which shares of common stock shall be
deliverable upon conversion of Series C Preferred Stock without the payment of
any additional consideration by the holder thereof is the lesser of (i) $0.32

                                       45
<PAGE>

per share or (ii) 100% of the average of the 5 closing bid prices of the common
stock immediately preceding such conversion date. Holders of the Series C
Preferred Stock shall be entitled to receive dividends or other distributions
with the holders of our common stock on an as converted basis when, as, and if
declared by our board of directors. The holders of the Series C Preferred Stock
shall also be entitled to receive, upon liquidation, an amount equal to $1.00
per share of the Series C Preferred Stock plus all declared but unpaid dividends
with respect to such shares. The shares of Series C Preferred Stock are not
redeemable.

         Pursuant to the articles of amendment to articles of incorporation
establishing the Class C Preferred Stock, on all matters submitted to a vote of
the holders of the common stock, including, without limitation, the election of
directors, a holder of shares of the Series C Preferred Stock shall be entitled
to the number of votes on such matters equal to the product of (a) the number of
shares of the Series C Preferred Stock held by such holder, (b) the number of
issued and outstanding shares of our common stock, as of the record date for the
vote, or, if no such record date is established, as of the date such vote is
taken or any written consent of stockholders is solicited, and (c) 0.000008.

         The issuance of the Series C Preferred Stock to Mr. Chiaramonte
effectively transferred control of the company to Mr. Chiaramonte.

         On June 6, 2006, Quest entered into a two-year agreement to acquire
administrative services from a third party consulting company owned by Gene
Chiaramonte III, the son of Eugene Chiaramonte, Jr., Quest's President and
Secretary. The agreement consisted of an initial 1,000,000 shares common stock
issued under a Stock Incentive Plan, along with a monthly payment of $6,500. On
January 6, 2008, Quest amended this two-year agreement acquiring administrative
services from a third party consulting company owned by the son of its acting
president originally dated June 6, 2006. The agreement consisted of an initial
1,000,000 shares common stock issued under a Stock Incentive Plan, along with a
monthly payment of $6,500. The initial shares were valued at $35,000 and are
being amortized over the term of the agreement. The amendment consisted of an
increase of the monthly payment to $9,900 due to providing additional services
with regards to the reorganization of the company's wholly owned subsidiary,
Gwenco, Inc., which is currently under Chapter 11.

         On May 31, 2006, Quest entered into a consulting agreement with William
R. Wheeler, Quest's former Chief Executive Officer. The agreement is for one
year and is renewal for successive periods of two (2) years. The agreement
provides for a monthly consulting fee, payable in cash or as a stock award under
a stock incentive plan. In addition, Quest shall pay Mr. Wheeler a one percent
royalty on gross sales on all mine products that originate from mines and/or
wells introduced to Quest by Mr. Wheeler. With respect to the options to
purchase up to 5,000,000 shares of Quest's common stock granted to Mr. Wheeler,
options to purchase up to 2,000,000 shares were deemed vested, options to
purchase up to 1,000,000 shares will vest six months after the date of the
consulting agreement, and the balance of the options were voided.

         We believe that the foregoing transactions were in our best interests.
Consistent with the Utah Business Corporation Act, it is our current policy that
all transactions between us and our officers, directors and their affiliates
will be entered into only if such transactions are approved by a majority of the
disinterested directors, are approved by vote of the stockholders, or are fair
to us as a corporation as of the time it is us at is authorized, approved or
ratified by the board. We will conduct an appropriate review of all related
party transactions on an ongoing basis, and, where appropriate, we will utilize
our audit committee for the review of potential conflicts of interest.

Director Independence

         For our description of director independence, see "Director
Independence" under the section entitled "Directors, Executive Officers,
Promoters, Control Persons and Corporate Governance; Compliance with Section
16(a) of the Exchange Act" above.

                                       46
<PAGE>

Item 13. EXHIBITS

Exhibit No.     Description

3.1             Restated Articles of Incorporation of Sabre, Inc. (now known as
                Quest Minerals & Mining Corp.), incorporated by reference to
                Quest's Registration Statement on Form 10-SB filed on December
                18, 2000.

3.2             Articles of Amendment to Articles of Incorporation of Tillman
                International, Inc. (now known as Quest Minerals & Mining
                Corp.), incorporated by reference to Quest's Definitive
                Information Statement on Schedule 14C filed on March 16, 2004.

3.3             Articles of Amendment to Articles of Incorporation of Quest
                Minerals & Mining Corp., incorporated by reference to our Annual
                Report on Form 10 KSB/A for the year ended December 31, 2006,
                filed on July 19, 2007.

3.4             Articles of Amendment to Articles of Incorporation of Quest
                Minerals & Mining Corp., incorporated by reference to our Annual
                Report on Form 10 KSB/A for the year ended December 31, 2006,
                filed on July 19, 2007.

3.5             Articles of Amendment to Articles of Incorporation of Quest
                Minerals & Mining Corp., incorporated by reference to Quest's
                Current Report on Form 8-K filed on January 30, 2007.

3.6             Articles of Amendment to Articles of Incorporation of Quest
                Minerals & Mining Corp., incorporated by reference to Quest's
                Definitive Information Statement on Schedule 14C filed on
                January 29, 2007.

3.7             Bylaws of Tillman International, Inc. (now known as Quest
                Minerals & Mining Corp), incorporated by reference to Quest's
                Registration Statement on Form 10-SB filed on December 18, 2000.

3.8             Certificate of Amendment to Certificate of Designation of Class
                A Preferred Stock of Quest Minerals & Mining Ltd. filed with the
                Nevada Secretary of State of December 19, 2007, incorporated by
                reference to Quest's Current Report no Form 8-K filed on
                December 21, 2007.

4.1             Specimen Certificate of Quest Mineral & Mining Corp.'s common
                stock, incorporated by reference to our Annual Report on Form 10
                KSB/A for the year ended December 31, 2006, filed on July 19,
                2007.

4.2             Amended and restated convertible promissory note, filed
                herewith.

4.3             Form of amended and restated convertible promissory note,
                incorporated by reference to Quest's Current Report on Form 8-K
                filed on June 17, 2006.

4.4             Convertible promissory note, incorporated by reference to our
                Annual Report on Form 10 KSB/A for the year ended December 31,
                2006, filed on July 19, 2007.

4.5             Secured promissory note, incorporated by reference to our Annual
                Report on Form 10 KSB/A for the year ended December 31, 2006,
                filed on July 19, 2007.

4.6             Form of convertible promissory note, incorporated by reference
                to our Annual Report on Form 10 KSB/A for the year ended
                December 31, 2006, filed on July 19, 2007.

4.7             Convertible promissory note, incorporated by reference to our
                Annual Report on Form 10 KSB/A for the year ended December 31,
                2006, filed on July 19, 2007.

4.8             Promissory Note dated February 21, 2000, as amended,
                incorporated by reference to our Annual Report on Form 10 KSB/A
                for the year ended December 31, 2006, filed on July 19, 2007.

                                       47
<PAGE>

4.9             Commercial Installment Note dated January 20, 1997, incorporated
                by reference to our Annual Report on Form 10 KSB/A for the year
                ended December 31, 2006, filed on July 19, 2007

4.10            Commercial Time Note dated February 21, 2000, incorporated by
                reference to our Annual Report on Form 10 KSB/A for the year
                ended December 31, 2006, filed on July 19, 2007

4.11            Amended Promissory Note dated August 24, 2006, incorporated by
                reference to our Annual Report on Form 10 KSB/A for the year
                ended December 31, 2006, filed on July 19, 2007.

4.12            Amended Promissory Note dated August 24, 2006, incorporated by
                reference to our Annual Report on Form 10 KSB/A for the year
                ended December 31, 2006, filed on July 19, 2007.

4.13            Warrant, incorporated by reference to Quest's Current Report on
                Form 8-K filed on October 25, 2005.

4.14            Form of Warrant, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

4.15            Form of Series A Warrant, incorporated by reference to our
                Annual Report on Form 10 KSB/A for the year ended December 31,
                2006, filed on July 19, 2007.

4.16            Form of Series B Warrant, incorporated by reference to our
                Annual Report on Form 10 KSB/A for the year ended December 31,
                2006, filed on July 19, 2007

4.17            Warrant, incorporated by reference to Quest's Current Report on
                Form 8-K filed on February 21, 2006.

4.18            Amended and Restated Warrant, incorporated by reference to
                Quest's Current Report on Form 8-K filed on February 21, 2006.

4.19            Form of Warrant, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.1            Securities Purchase Agreement and Plan of Reorganization dated
                February 9, 2004, incorporated by reference to Quest's Current
                Report on Form 8-K filed on February 24, 2004.

10.2            Securities Purchase Agreement and Plan of Reorganization by and
                among Tillman International, Inc., Quest Minerals & Mining,
                Ltd., Gwenco, Inc., and the stockholders of Gwenco, Inc., dated
                as of April 28, 2004, incorporated by reference to Quest's
                Current Report on Form 8-K filed on May 6, 2004.

10.3            William R. Wheeler Employment Agreement, incorporated by
                reference to Quest's Quarterly Report on Form 10-QSB for the
                quarter ending September 30, 2005.

10.4            Eugene Chiaramonte, Jr. Employment Agreement, incorporated by
                reference to Quest's Quarterly Report on Form 10-QSB for the
                quarter ending September 30, 2005.

10.5            William R. Wheeler Consulting Agreement, filed herewith.

10.6            Eugene Chiaramonte, Jr. Indemnification Agreement, incorporated
                by reference to Quest's Current Report on Form 8-K filed on
                January 30, 2007.

10.7            2006 Stock Incentive Plan, incorporated by reference to Quest's
                Registration Statement on Form S-8, filed on May 9, 2006 (File
                No. 333-133939).

10.8            2006 Stock Incentive Plan No. 2, incorporated by reference to
                Quest's Registration Statement on Form S-8, filed on September
                28, 2006 (File No. 333-137645).

                                       48
<PAGE>

10.9            Coal Mining Agreement dated February 23, 2007, incorporated by
                reference to our Annual Report on Form 10 KSB/A for the year
                ended December 31, 2006, filed on July 19, 2007.

10.10           Stock Purchase Agreement, incorporated by reference to our
                Annual Report on Form 10 KSB/A for the year ended December 31,
                2006, filed on July 19, 2007.

10.11           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.12           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.13           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.14           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.15           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.16           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.17           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.18           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.19           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.20           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.21           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.22           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.23           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.24           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.25           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.26           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

10.27           Lease Agreement, incorporated by reference to our Annual Report
                on Form 10 KSB/A for the year ended December 31, 2006, filed on
                July 19, 2007.

                                       49
<PAGE>

10.28           Forbearance Agreement, incorporated by reference to our Annual
                Report on Form 10 KSB/A for the year ended December 31, 2006,
                filed on July 19, 2007.

10.29           Conversion Agreement, incorporated by reference to our Annual
                Report on Form 10 KSB/A for the year ended December 31, 2006,
                filed on July 19, 2007.

10.30           Royalty Agreement, incorporated by reference to our Annual
                Report on Form 10 KSB/A for the year ended December 31, 2006,
                filed on July 19, 2007.

21.1            Subsidiaries of Quest Minerals and Mining Corp., incorporated by
                reference to our Annual Report on Form 10 KSB/A for the year
                ended December 31, 2006, filed on July 19, 2007

23.1            Consent of Independent Public Accountants, Kempisty & Company.

31.1            Certification of Eugene Chiaramonte, Jr. pursuant to Rule
                13a-14(a).

32.1            Certification of Eugene Chiaramonte, Jr. pursuant to 18 U.S.C
                Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.

__________________


Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Appointment of Auditors

         Our Board of Directors has not yet selected independent accountants to
audit our financial statements for the year ending December 31, 2008. Kempisty &
Company previously audited our consolidated financial statements for the fiscal
year ended December 31, 2007 and 2006.

Audit Fees

         Kempisty & Company billed us $35,000 in fees for our 2007 annual audit,
$25,000 in fees for our 2006 annual audit, $16,000 in fees for the review of our
quarterly financial statements in 2007, and $15,000 in fees for the review of
our quarterly financial statements for 2006.

Audit-Related Fees

         We did not pay any fees to Kempisty & Company for assurance and related
services that are not reported under Audit Fees above in 2007 or 2006.

Tax Fees

         We did not pay any fees to Kempisty & Company for tax compliance, tax
advice or tax planning in 2007 or 2006.

All Other Fees

         In 2007, Kempisty & Company billed us $4,000 for work in connection
with our registration statements on Form S-8, and $0 for all other fees.

         In 2006, Kempisty & Company billed us $1,500 for work in connection
with our registration statements on Form S-8, and $0 for all other fees.

                                       50
<PAGE>

Pre-Approval Policies and Procedures

         We have implemented pre-approval policies and procedures related to the
provision of audit and non-audit services. Under these procedures, our board of
directors pre-approves all services to be provided by Kempisty & Company and the
estimated fees related to these services.

         All audit, audit related, and tax services were pre-approved by the
audit committee, which concluded that the provision of such services by Kempisty
& Company was compatible with the maintenance of that firm's independence in the
conduct of its auditing functions. Our pre-approval policies and procedures
provide for the board of directors' pre-approval of specifically described
audit, audit-related, and tax services on an annual basis, but individual
engagements anticipated to exceed pre-established thresholds must be separately
approved. The policies and procedures also require specific approval by the
audit committee if total fees for audit-related and tax services would exceed
total fees for audit services in any fiscal year. The policies and procedures
authorize the audit committee to delegate to one or more of its members
pre-approval authority with respect to permitted services.


                                       51
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                       QUEST MINERAL AND MINING CORP.


                                       By: /s/ Eugene Chiaramonte, Jr.
                                           -------------------------------------
                                           Eugene Chiaramonte, Jr.
                                           President
                                           (Principal Executive Officer and
                                           Principal Accounting Officer)


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated.


Signatures                             Title                          Date
--------------------------------------------------------------------------------
/s/ Eugene Chiaramonte, Jr.    President and sole Director        April 28, 2008
Eugene Chiaramonte, Jr.



                                       52