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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-QSB

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

For the quarterly period ended June 30,
2007

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT

For the transition period from _______________
to _______________

Commission file number 000-28305

Energy Quest Inc.(Exact
name of small business issuer as specified in its charter)

|Nevada                                           | 91-1880015                          
|------------------------------------------------ | ------------------------------------
|                                                 |                                     
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     
|                                                 |                                     
|850 South Boulder Hwy., Suite 169                |                                     
|Henderson, Nevada                                | 89015 - 7564                        
|(Address of principal executive offices)         | (Zip Code)                          

(702) 568 4131(Issuer's telephone number)

_______________(Former name, former address
and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was require to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. [ x ]
Yes [   ] No

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:

Check whether the registrant has filed all documents and reports
  required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
  Act of 1934 subsequent to the distribution of securities under a plan confirmed
  by a court. [   ] Yes [   ] No

APPLICABLE ONLY TO CORPORATE ISSUERS

As of August 14, 2007, the registrants outstanding common stock
consisted of 2,165,049shares.

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Table of Contents

|PART
      I - FINANCIAL INFORMATION | 1            
|------------------------------------ | -------------
|                                     | ITEM
      1.
|                                     | ITEM
      2.
|                                     | ITEM
      3.
|PART
      II  OTHER INFORMATION    | 12           
|                                     | ITEM
      1.
|                                     | ITEM
      2.
|                                     | ITEM
      3.
|                                     | ITEM
      4.
|                                     | ITEM
      5.
|                                     | ITEM
      6.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Our financial statements are stated in US dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles. All dollar amounts in this report refer to US dollars unless
otherwise indicated.

As used in this report, the terms "we", "us", "our", or "Energy
Quest" mean Energy Quest Inc., unless otherwise indicated.



Energy Quest Inc. 
  (Formerly Syngas International Corp.) 
  (A Development Stage Company)

June 30, 2007

|                                               | Index
|---------------------------------------------- | -----
|                                               |      
|Consolidated Balance Sheets                    | F-1  
|                                               |      
|Consolidated Statements of Operations          | F-2  
|                                               |      
|Consolidated Statements of Cash Flows          | F-3  
|                                               |      
|Notes to the Consolidated Financial Statements | F-4  

---

Energy Quest Inc. 
  (Formerly Syngas International Corp.) 
  (A Development Stage Company) 
  Consolidated Balance Sheets 
  (Expressed in US dollars) (unaudited)

|                                                                        |  | June 30,   |   |  | December 31, |  
|----------------------------------------------------------------------- |  | ---------- | - |  | ------------ | -
|                                                                        |  | 2007       |   |  | 2006         |  
|                                                                        |  | $          |   |  | $            |  
|Assets                                                                  |  |            |   |  |              |  
|Current Assets                                                          |  |            |   |  |              |  
|Cash and cash equivalents                                               |  | 3,349      |   |  | 4,694        |  
|Prepaid expenses and deposits                                           |  | 345,659    |   |  | 8,654        |  
|Note receivable                                                         |  | 61,039     |   |  |             |  
|Total Current Assets                                                    |  | 410,047    |   |  | 13,348       |  
|Intangible Asset (Note 4)                                               |  | 25,204     |   |  | 25,204       |  
|Total Assets                                                            |  | 435,251    |   |  | 38,552       |  
|                                                                        |  |            |   |  |              |  
|Liabilities and Stockholders' Deficit                                   |  |            |   |  |              |  
|Current Liabilities                                                     |  |            |   |  |              |  
|Accounts payable and accrued liabilities                                |  | 118,847    |   |  | 25,105       |  
|Accounts payable - related parties
      (Note 5(b),(c) and (d))        |  | 69,678     |   |  | 219,585      |  
|Loans
      payable (Note 6)                                            |  | 289,037    |   |  | 67,062       |  
|Total Liabilities                                                       |  | 477,562    |   |  | 311,752      |  
|Stockholders' Deficit                                                   |  |            |   |  |              |  
|Preferred Stock                                                         |  |            |   |  |              |  
|Authorized: 1,000,000 shares, with a $0.01 par
      value; none issued |  |           |   |  |             |  
|Common Stock                                                            |  |            |   |  |              |  
|Authorized: 200,000,000 shares, with a $0.001
      par value;          |  |            |   |  |              |  
|Issued: 2,165,049 shares (December
      31, 2006  1,992,518 shares)   |  | 2,165      |   |  | 1,993        |  
|Additional Paid-in Capital                                              |  | 3,114,272  |   |  | 2,603,944    |  
|Accumulated Other Comprehensive Loss                                    |  | (3,844     | ) |  | (1,097       | )
|Deficit Accumulated
      During the Development Stage                  |  | (3,154,904 | ) |  | (2,878,040   | )
|Total Stockholders Deficit                                             |  | (42,311    | ) |  | (273,200     | )
|Total Liabilities
      and Stockholders Deficit                       |  | 435,251    |   |  | 38,552       |  

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

F-1

---

Energy Quest Inc. 
  (Formerly Syngas International Corp.) 
  (A Development Stage Company) 
  Consolidated Statements of Operations 
  (Expressed in US dollars) 
  (unaudited)

For the
      
      
      For the
      
      
      For the
      
      
      For the
      
      
      Accumulated fromThree Months
      
      
      Three Months
      
      
      Six Months
      
      
      Six Months
      
      
      December 14, 2004Ended
      
      
      Ended
      
      
      Ended
      
      
      Ended
      
      
      (Date of Inception)June 30,
      
      
      June 30,
      
      
      June 30,
      
      
      June 30,
      
      
      to June 30,2007
      
      
      2006
      
      
      2007
      
      
      2006
      
      
      2007$
      
      
      $
      
      
      $
      
      
      $
      
      
      $Revenue
      
      
      
      
      
      
      
      
      
      
      
      
      
      ExpensesConsulting and management fees
      
      137,581
      
      
      803,314
      
      
      138,859
      
      
      1,156,651
      
      
      2,519,172General and administrative
      
      18,291
      
      
      4,688
      
      
      25,146
      
      
      12,120
      
      
      133,852Professional fees
      
      95,336
      
      
      20,148
      
      
      113,419
      
      
      32,439
      
      
      237,406251,208
      
      
      828,150
      
      
      277,424
      
      
      1,201,210
      
      
      2,890,430Loss before the following:
      
      (251,208
      )
      
      (828,150
      )
      
      (277,424
      )
      
      (1,201,210
      )
      
      (2,890,430
      )Interest income
      
      560
      
      
      
      
      
      560
      
      
      
      
      
      560Gain on write-off of debt
      
      
      
      
      
      
      
      
      
      
      
      
      
      5,826Loss on write-off of receivable
      
      
      
      
      
      
      
      
      
      
      
      
      
      (193,922
      )Net loss
      
      (250,648
      )
      
      (828,150
      )
      
      (276,864
      )
      
      (1,201,210
      )
      
      (3,077,966
      )Other comprehensive lossForeign currency translation adjustment
      
      (2,511
      )
      
      (1,213
      )
      
      (2,747
      )
      
      (1,194
      )
      
      (3,844
      )Total Comprehensive Income (Loss)
      
      (235,159
      )
      
      (829,363
      )
      
      (279,611
      )
      
      (1,202,404
      )
      
      (3,081,810
      )Net Income Per
        Share  Basic and Diluted
      
      (0.12
      )
      
      (0.43
      )
      
      (0.13
      )
      
      (0.62
      )Weighted Average Shares Outstanding
      
      2,116,000
      
      
      1,942,800
      
      
      2,054,000
      
      
      1,930,200


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

F-2

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Energy Quest Inc. 
  (Formerly Syngas International Corp.) 
  (A Development Stage Company) 
  Consolidated Statements of Cash Flows 
  (Expressed in US dollars) 
  (unaudited)

|                                                |  | For the    |   |  | For the    |   |  | Accumulated from       |  
|----------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------------------- | -
|                                                |  | Six Months |   |  | Six Months |   |  | December 14, 2004      |  
|                                                |  | Ended      |   |  | Ended      |   |  | (date of Inception) to |  
|                                                |  | June 30,   |   |  | June 30,   |   |  | June 30,               |  
|                                                |  | 2007       |   |  | 2006       |   |  | 2007                   |  
|                                                |  | $          |   |  | $          |   |  | $                      |  
|                                                |  |            |   |  |            |   |  |                        |  
|Cash Flows Used In Operating Activities         |  |            |   |  |            |   |  |                        |  
|Net income (loss)                               |  | (276,864   | ) |  | (1,201,210 | ) |  | (3,077,966             | )
|                                                |  |            |   |  |            |   |  |                        |  
|Adjustments to reconcile net loss to net cash   |  |            |   |  |            |   |  |                        |  
|used in operating
      activities:             |  |            |   |  |            |   |  |                        |  
|Stock based compensation                        |  | 74,795     |   |  | 654,801    |   |  | 1,069,358              |  
|Shares issued for
      expenses                |  |           |   |  | 499,284    |   |  | 1,295,504              |  
|Gain on write-off of debt                       |  |           |   |  |           |   |  | (5,826                 | )
|Loss on write-off
      of loan receivable      |  |           |   |  |           |   |  | 193,922                |  
|                                                |  |            |   |  |            |   |  |                        |  
|Changes in operating assets and liabilities:    |  |            |   |  |            |   |  |                        |  
|Accrued interest                                |  | (539       | ) |  |           |   |  | (539                   | )
|Accounts payable
      and accrued liabilities  |  | 93,742     |   |  | (10,914    | ) |  | 102,562                |  
|Accounts payable  related parties              |  | 58,267     |   |  | 1,117      |   |  | 58,267                 |  
|                                                |  |            |   |  |            |   |  |                        |  
|Net Cash Used in Operating
      Activities     |  | (50,599    | ) |  | (56,922    | ) |  | (364,718               | )
|                                                |  |            |   |  |            |   |  |                        |  
|Investing Activities                            |  |            |   |  |            |   |  |                        |  
|Net cash acquired
      on business acquisition |  |           |   |  |           |   |  | 565                    |  
|Purchase of intangible assets                   |  |           |   |  |           |   |  | (25,000                | )
|Loan receivable                                 |  | (60,500    | ) |  |           |   |  | (254,422               | )
|                                                |  |            |   |  |            |   |  |                        |  
|Net Cash Used In Investing Activities           |  | (60,500    | ) |  |           |   |  | (278,857               | )
|                                                |  |            |   |  |            |   |  |                        |  
|Financing Activities                            |  |            |   |  |            |   |  |                        |  
|Advances from related parties                   |  |           |   |  | 31,444     |   |  | 224,734                |  
|Proceeds from issuance
      of common stock    |  | 90,500     |   |  | 70,000     |   |  | 389,644                |  
|Loans payable                                   |  | 19,254     |   |  |           |   |  | 33,643                 |  
|                                                |  |            |   |  |            |   |  |                        |  
|Net Cash Provided
      By Financing Activities |  | 109,754    |   |  | 101,444    |   |  | 648,021                |  
|                                                |  |            |   |  |            |   |  |                        |  
|Effect of Exchange
      Rate Changes on Cash   |  |           |   |  | (1,194     | ) |  | (1,097                 | )
|                                                |  |            |   |  |            |   |  |                        |  
|Increase (Decrease) in Cash and Cash            |  |            |   |  |            |   |  |                        |  
|Equivalents                                     |  | (1,345     | ) |  | 43,328     |   |  | 3,349                  |  
|                                                |  |            |   |  |            |   |  |                        |  
|Cash and Cash Equivalents, beginning of period  |  | 4,694      |   |  | 2,810      |   |  |                       |  
|                                                |  |            |   |  |            |   |  |                        |  
|Cash and Cash Equivalents, end of period        |  | 3,349      |   |  | 46,138     |   |  | 3,349                  |  
|                                                |  |            |   |  |            |   |  |                        |  
|                                                |  |            |   |  |            |   |  |                        |  
|Supplemental Disclosures                        |  |            |   |  |            |   |  |                        |  
|                                                |  |            |   |  |            |   |  |                        |  
|Cash paid for taxes                             |  |           |   |  |           |   |  |                       |  
|Cash paid for interest                          |  |           |   |  |           |   |  |                       |  
|                                                |  |            |   |  |            |   |  |                        |  
|Non-Cash Financing and Investing Activities     |  |            |   |  |            |   |  |                        |  
|                                                |  |            |   |  |            |   |  |                        |  
|Common stock issued for intangible asset        |  |           |   |  |           |   |  | 204                    |  

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

F-3

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Energy Quest Inc. 
  (Formerly Syngas International Corp.) 
  (A Development Stage Company) 
  Notes to the Consolidated Financial Statements 
  (Expressed in US dollars) 
  (unaudited)

|1. | Nature of Operations and Going Concern Considerations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | On January 28, 2005, Energy Quest Inc. (Energy
        Quest) entered into two Share Exchange Agreements to acquire all
        of the shares of Syngas Energy Corp. (Syngas Energy). Syngas
        Energy was incorporated in the Province of British Columbia, Canada, on
        December 14, 2004, and its principal business involves an integrated gasification
        production system technology that combines modern gasification with turbine
        technologies to produce synthetic gas, hydrogen or electricity. Energy
        Quest intends to further develop the technology to make it commercially
        viable and intends to then sell or license the technology. Syngas Energy
        is in the development stage as defined under Statement of Financial Accounting
        Standards (SFAS) No. 7 Accounting and Reporting by
        Development Stage Enterprises.Effective June 30, 2005, the
        acquisition of Syngas Energy by Energy Quest was completed through the
        issuance of one share of Energy Quest common stock for each share of Syngas
        Energy outstanding. Energy Quest issued 30,047,500 (1,502,375 post reverse
        stock split) shares of common stock to the shareholders of Syngas Energy,
        and as a result, the former Syngas Energy shareholders own approximately
        82% of the outstanding common stock of Energy Quest. On May 31, 2007,
        Energy Quest changed its name from Syngas International Corp. to Energy
        Quest.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The acquisition of Syngas Energy by Energy Quest is
        considered a reverse acquisition and accounted for under the purchase
        method of accounting. Under reverse acquisition accounting, Syngas Energy
        is considered the acquirer for accounting and financial reporting purposes,
        and acquired the assets and assumed the liabilities of Energy Quest. Assets
        acquired and liabilities assumed are reported at their historical amounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | These consolidated financial statements include the
        accounts of Energy Quest since the effective date of the reverse acquisition
        (June 30, 2005) and the historical accounts of its wholly-owned subsidiary,
        Syngas Energy, since inception (collectively, the Company).
        All significant inter-company balances and transactions have been eliminated
        on consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | As of June 30, 2007, the Company had not reached a level
        of operations which would finance day-to-day activities. These financial
        statements have been prepared on the assumption that the Company is a
        going concern, meaning it will continue in operation for the foreseeable
        future and will be able to realize assets and discharge liabilities in
        the ordinary course of operations. Different bases of measurement may
        be appropriate when a company is not expected to continue operations for
        the foreseeable future. The Companys continuation as a going concern
        is dependent upon its ability to attain profitable operations and generate
        funds therefrom and/or raise equity capital or borrowings sufficient to
        meet current and future obligations. Management plans to raise equity
        financings of approximately $1,000,000 over the next twelve months to
        finance operations. There is no guarantee that the Company will be able
        to complete any of these objectives. The Company incurred losses from
        operations of $3,154,904 since inception and at June 30, 2007, has a working
        capital deficiency of $67,515 and these conditions, among others, give
        rise to substantial doubt about the Companys ability to continue
        as a going concern.                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | On July 17, 2007, the Company filed an SB-2 Registration
        Statement with the United States Securities and Exchange Commission which
        was declared effective on July 25, 2007, to register 1,679,000 shares
        of common stock. Of the 1,679,000 shares registered, 1,000,000 shares
        are being directly offered at $3.00 per share for gross proceeds of $3,000,000,
        and 679,000 shares are for resale by existing stockholders of the Company
        at prevailing market price established on the OTC Bulletin Board at the
        time of sale or any prices as the selling shareholders determine. The
        Company will not receive any proceeds from the resale of shares of common
        stock by the selling stockholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2. | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The unaudited financial information furnished herein
        reflects all adjustments, which in the opinion of management are necessary
        to fairly state the Companys financial position and the results
        of its operations for the periods presented. This report on Form 10-Q
        should be read in conjunction with the Companys financial statements
        and notes thereto included in the Companys Form 10-K for the fiscal
        year ended December 31, 2006. The Company assumes that the users of the
        interim financial information herein have read or have access to the audited
        financial statements for the preceding fiscal year and that the adequacy
        of additional disclosure needed for a fair presentation may be determined
        in that context. Accordingly, footnote disclosure, which would substantially
        duplicate the disclosure contained in the Companys Form 10-K for
        the fiscal year ended December 31, 2006, has been omitted. The results
        of operations for the six-month period ended June 30, 2007 are not necessarily
        indicative of results for the entire year ending December 31, 2007.                                                                                                                                                                                                                                                                                                                           

F-4

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Energy Quest Inc. 
  (Formerly Syngas International Corp.) 
  (A Development Stage Company) 
  Notes to the Consolidated Financial Statements 
  (Expressed in US dollars) 
  (unaudited)

|3. | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | In February 2007, the Financial Accounting Standards
        Board (FASB) issued SFAS No. 159, The Fair Value Option for Financial
        Assets and Financial Liabilities  Including an Amendment of FASB
        Statement No. 115. This statement permits entities to choose to
        measure many financial instruments and certain other items at fair value.
        Most of the provisions of SFAS No. 159 apply only to entities that elect
        the fair value option. However, the amendment to SFAS No. 115 Accounting
        for Certain Investments in Debt and Equity Securities applies to
        all entities with available-for-sale and trading securities. SFAS No.
        159 is effective as of the beginning of an entitys first fiscal
        year that begins after November 15, 2007. Early adoption is permitted
        as of the beginning of a fiscal year that begins on or before November
        15, 2007, provided the entity also elects to apply the provision of SFAS
        No. 157, Fair Value Measurements. The adoption of this statement
        is not expected to have a material effect on the Company's financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | In September 2006, the FASB issued SFAS No.
        157, Fair Value Measurements.The objective of SFAS
        No. 157 is to increase consistency and comparability in fair value measurements
        and to expand disclosures about fair value measurements. SFAS No. 157
        defines fair value, establishes a framework for measuring fair value in
        generally accepted accounting principles, and expands disclosures about
        fair value measurements. SFAS No. 157 applies under other accounting pronouncements
        that require or permit fair value measurements and does not require any
        new fair value measurements. The provisions of SFAS No. 157 are effective
        for fair value measurements made in fiscal years beginning after November
        15, 2007. The adoption of this statement is not expected to have a material
        effect on the Company's future reported financial position or results
        of operations.                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4. | Intangible Asset                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | On December 24, 2004, the Company purchased an integrated
        gasification production system from the CEO of the Company. The technology
        combines modern gasification with gas turbine technologies to produce
        synthetic gas, hydrogen or electricity. The Company intends to further
        develop the technology to make it commercially viable and intends to then
        sell or license the technology. The Company purchased the asset by issuing
        10,000,000 common shares of the Company and a $25,000 payment. If by January
        2006 the Company had not raised a minimum of $1,000,000 by way of equity
        private placements, it had the option, until June 30, 2007, of cancelling
        the 10,000,000 shares issued to 975110 Alberta Ltd. and subject to escrow,
        in consideration for the transfer to 975110 Alberta Ltd. of 100% of the
        interest in all of the enhanced gasification intellectual property and
        a small gasification unit. At June 30, 2007, the asset has been transferred
        to the Company and the 10,000,000 common shares were released from escrow.                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|5. | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| | a) | As at June 30, 2007, $222,171 (December 31, 2006 
        $201,764) is owing to former related companies. This amount is unsecured,
        non-interest bearing and has no terms of repayment. At June 30, 2007,
        this amount is included in loans payable.                                                                         
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                              
| | b) | As at June 30, 2007, $19,611 (December 31, 2006 - $17,821)
        is owing to a company with a common director. This amount is unsecured,
        non-interest bearing and has no terms of repayment.                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                              
| | c) | During the six month period ended June 30, 2007, the
        Company recorded $38,351 (2006 - $nil) for management services provided
        by the President of the Company. At June 30, 2007, the Company was owed
        $8,200 by the President of the Company. At June 30, 2007, $24,779 is included
        in due to related parties.
| |    |                                                                                                                                                                                                                                                                                                                                              
| | d) | During the six month period ended June 30, 2007, the
        Company recorded $25,288 (2006 - $nil) for management services provided
        by the Treasurer of the Company. At June 30, 2007, this amount is included
        in due to related parties.                                                                                   

|6. | Loans Payable                                                                   
|-- | --------------------------------------------------------------------------------
|   |                                                                                 
|   | Loans payable are unsecured, non-interest bearing and
        are due on demand.

F-5

---

Energy Quest Inc. 
  (Formerly Syngas International Corp.) 
  (A Development Stage Company) 
  Notes to the Consolidated Financial Statements 
  (Expressed in US dollars) 
  (unaudited)

|7. | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|8. | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | On February 25, 2005, the Company adopted
        a Stock Option Plan (the 2005 Stock Option Plan)under
        which the Company is authorized to grant options to acquire up to a total
        of 4,000,000 common shares. The term of any stock options granted under
        the plan is limited to ten years. On June 25, 2007, the Company terminated
        the 2005 Stock Option plan and cancelled all outstanding options granted
        under the 2005 Stock Option Plan. The Company removed from registration
        all remaining registered unissued options on July 17, 2007. Shares of
        the Companys common stock that have been offered, issued and sold
        upon the exercise of options remain effective. See Note 10(b).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | On July 19, 2005, the Company adopted the
        2005 Non-Qualified Stock Compensation Plan (the 2005 Non- Qualified
        Plan)under which the Company is authorized to issue up to 1,000,000
        shares of common stock. On September 26, 2005, these shares were registered
        on a Form S - 8 registration. On June 25, 2007, the Company terminated
        the 2005 Non-Qualified Plan and removed from registration all remaining
        registered unissued common shares on July 17, 2007. Shares of the Companys
        common stock that have been offered, issued and sold under the 2005 Non-Qualified
        Plan remain effective. See Note 10(b).                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | On September 16, 2005, the Company adopted
        the September 2005 Non-Qualified Stock Compensation Plan (the September
        2005 Non-Qualified Plan) under which the Company is authorized to
        issue up to 2,000,000 shares of common stock. On September 26, 2005, these
        shares were registered on a Form S - 8 registration. On June 25, 2007,
        the Company terminated the September 2005 Non-Qualified Plan and removed
        from registration all remaining registered unissued common shares on July
        17, 2007. Shares of the Companys common stock that have been offered,
        issued and sold under the 2005 Non-Qualified Plan remain effective. See
        Note 10(b).                                 

F-6

---

Energy Quest Inc. 
  (Formerly Syngas International Corp.) 
  (A Development Stage Company) 
  Notes to the Consolidated Financial Statements 
  (Expressed in US dollars) 
  (unaudited)

|8. | Stock Options (continued)                                              
|-- | -----------------------------------------------------------------------
|   |                                                                        
|   | A summary of the Companys stock option activity
        is as follows:

| |                                  |  |            |   |   | Weighted |  |  |             |  |  |           | 
| | -------------------------------- |  | ---------- | - | - | -------- |  |  | ----------- |  |  | --------- | 
| |                                  |  |            |   |   | Average  |  |  | Remaining   |  |  |           | 
| |                                  |  | Number of  |   |   | Exercise |  |  | Contractual |  |  | Intrinsic | 
| |                                  |  | Options    |   |   | Price    |  |  | Life        |  |  | Value     | 
| | Outstanding, January 1, 2007     |  | 2,079,667  |   | $ | 0.40     |  |  |             |  |  |           | 
| | Outstanding at date of reverse   |  |            |   |   |          |  |  |             |  |  |           | 
| | acquisition                      |  |           |   |   |         |  |  |             |  |  |           | 
| | Granted                          |  |           |   |   |         |  |  |             |  |  |           | 
| | Cancelled / Forfeited            |  | (2,079,667 | ) | $ | 0.40     |  |  |             |  |  |           | 
| | Exercised                        |  |           |   |   |         |  |  |             |  |  |           | 
| | Outstanding, June 30, 2007       |  |           |   |   |         |  |  |            |  |  |          | 
| | Exercisable, June
      30, 2007 |  |           |   |   |         |  |  |            |  |  |          | 

|9.  | Commitments      
|--- | -----------------
|    |                  
|    | a)               
|    |                  
|    | b)               
|    |                  
|    | c)               
|    |                  
|    | d)               
|    |                  
|10. | Subsequent Events
|    |                  
|    | a)               

F-7

---

Energy Quest Inc. 
  (Formerly Syngas International Corp.) 
  (A Development Stage Company) 
  Notes to the Consolidated Financial Statements 
  (Expressed in US dollars) 
  (unaudited)

|10. | Subsequent Events (continued)
|--- | -----------------------------
|    |                              
|    | b)                           

F-8

---

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION / PLAN OF OPERATIONS

Forward Looking Statements

This report on Form 10-QSB contains certain forward-looking
statements. All statements other than statements of historical fact are
forward-looking statements for purposes of these provisions, including any
projections of earnings, revenues, or other financial items; any statements of
the plans, strategies, and objectives of management for future operation; any
statements concerning proposed new products, services, or developments; any
statements regarding future economic conditions or performance; statements of
belief; and any statement of assumptions underlying any of the foregoing. Such
forward-looking statements are subject to inherent risks and uncertainties, and
actual results could differ materially from those anticipated by the
forward-looking statements.

Overview

We were incorporated as a Nevada company on June 20, 1997. We
are a development stage company. We have never generated any revenues, have
incurred losses since inception, and we have only recently begun operations. We
design, build, lease and in some cases operate the following gasification
technologies with broad potential application within the energy field:

- Pyrolysis Steam Reformer (PyStR) utilized for steam reformation of coal
  and other carbonaceous feedstocks, and separating hydrogen and carbon dioxide
  into separate streams;
- M2 Fluidized Bed Gas Generator (M2), an air blown fluid bed gasifier
  which converts waste solid fuel sources into gaseous form, and
- Modular Advanced Controlled Air Incinerator, which allows for incineration
  of waste, and is ideally suited to medical waste and moderately prepared
  municipal waste

Our principal offices are located at 850 South Boulder Highway,
Suite 169, Henderson, Nevada. Our fiscal year end is December 31. We changed our
name from Syngas International Corp. to Energy Quest Inc. on May 31, 2007.

We have one wholly-owned subsidiary, Syngas Energy Corp., and
its principal business involves an integrated gasification production system
technology that combines modern gasification with turbine technologies to
produce synthetic gas, hydrogen or electricity. Syngas Energy was incorporated
as a British Columbia company on December 14, 2004.

2

---

We are in the process of building equipment that we intend to
license and lease. On July 24, 2007 we entered into an agreement with I-Coda
Group, of Edmonton, Alberta, for the manufacture of units using our PyStR and
M2 gasification technology. In 2007 we also entered into other two agreements
for exclusive licenses of our technologies in geographic territories with two
companies. In addition, we engaged two marketing consultants for market
development and commercialization activities in 2007.

On May 31, 2007 we effected a reverse stock split in a ratio of
one new share for every twenty existing common shares of our outstanding stock.
Prior to the reverse stock split there were 43,300,364 shares of our common
stock outstanding, and after the reverse stock split there were 2,165,049 shares
of our common stock outstanding.

Over the next twelve months (beginning August 1, 2007) we plan
to spend approximately $2,960,000 on marketing our technology, developing our
PyStR technology and our operation expenses. We will be dependent on future
financing in order to maintain our operations and carry out our business plan.
We currently do not have sufficient financing to carry out our business plan and
there is no assurance that we will be able to obtain the necessary financing.
Accordingly, there is uncertainty about our ability to continue our operations.
If we cease our operations, you may lose your entire investment in our
stock.

Results of Operations

****Lack of Revenues

Since our inception on December 14, 2004 to June 30, 2007, we
  had not yet earned any revenues. As of June 30, 2007, we had an accumulated
  deficit of $3,154,904. At this time, our ability to generate any significant
  revenues continues to be uncertain. The auditor's report on our December 31,
  2006 financial statements contains an additional explanatory paragraph which
  identifies issues that raise substantial doubt about our ability to continue
  as a going concern. Our financial statements do not include any adjustment that
  might result from the outcome of this uncertainty.

Net Loss

We incurred net loss of $3,077,966 since December 14, 2004 (date
  of inception) to June 30, 2007. For the three months ended June 30, 2007, we
  had net income of $250,648 compared to net loss of $828,150 for the same period
  in 2006. For the six months ended June 30, 2007, we had net loss of $276,864
  compared to net loss of $1,201,210 for the same period in 2006. On June 25,
  2007, we terminated the 2005 Stock Option plan and cancelled all outstanding
  options granted under the 2005 Stock Option Plan.

For the three months ended June 30, 2007, our net income per
  share was $0.12, compared to net loss of $0.43 per share for the same period
  in 2006. For the six months ended June 30, 2007, our net income per share was
  $0.13, compared to net loss of $0.62 per share for the same period in 2006.

3

---

Expenses

Our total expenses from December 14, 2004 (date of inception)
  to June 30, 2007 were $2,890,430 and consisted of $2,519,172 in consulting and
  management fees, $133,852 in general and administrative fees, and $237,406 in
  professional fees. Total expenses for the three months ended June 30, 2007 were
  $251,208, compared to total expenses of $828,150 for the same period in 2006.
  Total expenses for the six months ended June 30, 2007 were $277,424, compared
  to total expenses of $1,201,210 for the same period in 2006.

Our consulting and management fees for the three months ended
  June 30, 2007 were $137,581, compared to $803,314 for the same period in 2006.
  Our consulting and management fees for the six months ended June 30, 2007 were
  $138,859, compared to $1,156,651 for the same period in 2006. Our consulting
  and management fees consisted mainly of amounts paid to our CEO and CFO and
  fees paid to our other officers and consultants.

Our general and administrative expenses increased to $13,603
from $4,688 for the three months ended June 30, 2006 to $18,291 for the same
period ended June 30, 2007. Our general and administrative expenses increased
$13,026 from $12,120 for the six months ended June 30, 2006 to $25,146 for the
same period ended June 30, 2007. The increase in general and administrative
expenses was mainly due to the increase in our day to day operating activities.
Our general and administrative expenses consist of office supplies, travel
expenses, rent, communication expenses (cellular, internet, fax, telephone),
office maintenance, courier and postage costs and office equipment.

Our professional fees increased $75,188 to $95,336 for the
three months ended June 30, 2007 from $20,148 for the same period in 2006. Our
professional fees increased $80,980 to $113,419 for the six months ended June
30, 2007 from $32,439 for the same period in 2006. The increase in professional
fees was due to additional legal and auditing services provided. Our
professional fees consisted primarily of legal, accounting and auditing fees.

Plan of Operation

We believe that we need approximately an additional $2,960,000
to meet our capital requirements over the next 12 months (beginning August 1,
2007) for the following estimated expenses:

Description
    Estimated ExpenseMarketing our
      gasification technology
    $600,000Development of our
      PyStR technology
    $1,200,000Payment of accounts payable and accrued liabilities
    $250,466General and
      administrative expenses
    $609,534Professional fees
    $100,000


4

---

Consulting fees
    $200,000Total
    $2,960,000


Our corporate strategy for the next 12 months includes the
following:

- Produce, sell, lease and maintain energy generators that we have
  developed;
- License our integrated gasification technology to third parties in North
  American, European and global markets;
- Retain an ownership in a portion of the co-generated energy, electricity,
  and synthesized liquid and gases, such as ethanol, methanol and methane being
  produced;
- Expand our business base through strategic relationships in worldwide
  markets;
- Identify partnerships that will benefit from having in-house energy
  production facilities;
- Identify technology acquisitions that will complement our technologies;
- Create additional service lines to complement current operations.

The PyStR Process

The PyStR technology is an inexpensive and simple method of
reforming hydrocarbons (carbonaceous materials) and calcining lime to chemically
separate hydrogen and carbon dioxide into two separate streams. It converts
common cheap ingredients (coal or wood, air, water) into near pure streams of
hydrogen (H2), carbon dioxide (CO2) and nitrogen (N2). It produces no flue
gas.

In February 2006 we completed the CO2 capture unit for our
PyStR technology. The captured CO2 can be injected into oil wells or coal seams
to enhance oil recovery or coal-bed methane recovery respectively.

We have agreed to begin construction on a demonstration sized
installation of the PyStR technology no later than February 14, 2008. Also, we
are obligated to sell at least one commercial installation using the PyStR
technology by the end of 2008. If we fail to carry out either of these
obligations, all rights and interests in the hydrogen technology will revert
back to the creator of the technology at the end of 2008.

M2 Fluidized Bed Gas Generator (Gasifier)

In Fiscal 2005 we acquired Syngas Energy along with all rights
and title to its advanced gasification process. Subsequently, we completed a
prototype of the gasification technology. The M2 is an air blown fluid bed
gasifier, which converts waste solid fuel sources into a gaseous form. The M2
gas produced can be used in most boilers, kilns and furnaces to offset the use
of natural gas.

The M2 fluidized bed gasification process offers substantial
benefits compared to simple burning processes, and other forms of gasification.
The gasifier has been successfully used to convert biomass wastes (i.e. wood
wastes, bark, and agricultural wastes) into a clean fuel gas that can be
used to fire various types of industrial equipment.

5

---

The overall thermal efficiency of fluid bed gasifiers is
typically in the range of 75% to over 90%, depending on the ash and moisture
content of the fuel. Unlike some burners (such as suspension burners) or old
style fixed bed gasifiers, the fluid bed gasifiers can operate satisfactorily
with highly variable feed materials ranging from coal, shredded wood and bark to
sawdust fines, or lump wood with particle sizes of less than 1 1/2 - 2 inches.
In contrast, other types of gasifiers or burners require either dry pellets,
nuggets of clean wood, or uniformly dry sander dust. Thus the various types of
fuels generally available around lumber mills can be used in fluid bed gasifiers
with good results. The fluid bed gasifier does not have moving grates or other
moving parts in the high temperature regions of the bed. Where there are moving
parts, heavy duty industrial components proven in lumber and pulp mill
operations are used. Reliability is thus high.

The size of energy conversion systems is generally dictated by
  their air flow. Because fluid bed gasifiers use comparatively small amounts
  of air, the equipment is comparatively small and compact. This permits systems
  to be completely shop fabricated and assembled on skids thereby reducing purchase
  price and installed costs. Because the process produces a fuel gas rather than
  just quantities of heat, it can be easily applied to a variety of industrial
  processes including boilers, dry kilns, veneer dryers, or several pieces of
  equipment at once. Operation with wood/bark fuels results in very low emissions,
  including low NOx, carbon monoxide, and particulate emissions. No
  "tail end" exhaust cleanup devices are required.

The Modular Advanced Controlled Air Incinerator

We have developed a Modular, Controlled Air, Factory Built and
Packaged incinerator. The unit is a Starved Ignition Chamber, Excess Air
Combustion Chamber. These are not Pyrolytic Units since air is introduced into
the ignition chamber. All units are designed and rated on a Burning Rate Basis,
meaning they will burn waste as fast as it is charged.

The integrated design of the ignition chamber, flame port and
combustion chamber allows proper and constant gas velocities to insure proper
air/fuel (waste) ratios for optimum combustion efficiency. The units are ideally
suited for medical waste and moderately prepared municipal waste disposal.

Licensing and Manufacturing Agreements

On April 9, 2007 we entered into a license agreement with Re-Gen
  International Corporation (“Re-Gen”). Under the terms of the agreement,
  we agreed to grant licensing rights for our PyStR and gasification technology
  in the U.S. We also granted Re-Gen a right of first refusal to manufacture and
  produce the PyStRTM technology throughout the United States. The term of
  the agreement is 10 years and is renewable at expiration for a further period
  of 10 years. Re-Gen must pay us a royalty of 12% of defined profit, to be calculated
  each month, or a minimum of $30,000 every three months for the first year, whichever
  is greater. After the first year, the minimum will be adjusted to $60,000 every
  three months.

6

---

Re-Gen will utilize the gasification equipment provided by us
to anchor a Full Green Circle ® project. Re-Gen will supply a chain of
affiliated companies in one location with the needed energy drawn from biomass
waste. Re-Gen is to begin a US-wide campaign of recycling a certain biomass
waste (railroad crossties) that until now has not been recycled. Our gasifiers
and fuel preparation fuel preparation equipment will be directed to this market
which will require numerous gasifiers and equipment throughout the US to process
the accumulated waste currently being generated. Re-Gen is also establishing
offices in the US, and other international areas to represent us and market our
gasification units and technologies.

On April 24, 2007, we entered into a licensing agreement with
Beaufort Energy Solutions, Inc. (BESI). Under the terms of the agreement, we
agreed to grant licensing rights for our gasification technology in the Province
of British Columbia, Canada. The term of the agreement is 20 years and is
renewable at expiration for a further period of 10 years. BESI must pay us a
royalty of 10% of defined net income, to be paid within 30 days after the end of
each quarterly accounting period.

The agreement provides for BESI to represent us on an exclusive
basis in the territory of British Columbia., Canada for marketing and sales of
the PyStR process and other gasification technologies. Pursuant to the
agreement, BESI will seek opportunities for our products throughout British
Columbia to provide electric power generation and liquid fuels to supply local
consumers, businesses, BC Hydro, government and semi-government end users. Also,
we anticipate that BESI will pursue installation of our technologies for waste
disposal, power generation, and productions of liquid fuels.

On July 24, 2007 we entered into a manufacturing agreement with
I-Coda Group, of Edmonton, Alberta, for the manufacture of units using our
PyStR and M2 gasification technology. Pursuant to the agreement, I-Coda has
agreed to manufacture and package both the PyStR and M2 gasification units, for
which we will pay the cost of manufacturing the units plus 15% and all taxes.
The parties have agreed to jointly develop commercial units using the PyStR
technology for use in emerging markets around the world. The agreement prohibits
I-Coda from manufacturing products that will compete with the gasification units
and allows us to retain all intellectual property relating to the design of the
units. Any intellectual property developed jointly by the parties pursuant to
the agreement will be our exclusive property. The term of the agreement is one
year and will be renewed annually unless terminated by either party on two
months notice.

Liquidity and Capital Resources

We do not expect to generate any revenues over the next twelve
  months. As of June 30, 2007, our current assets were $410,047, which was comprised
  of $3,349 in cash and cash equivalents, $345,659 in prepaid expenses and deposits,
  and $61,039 in loan receivable. As of June 30, 2007 we had a working capital
  deficit of $67,515. Our net loss of $3,077,966 from December 14, 2004 (date
  of inception) to June 30, 2007 was mostly funded by our equity financing. We
  expect to incur substantial losses over the next two years.

7

---

We registered, on a Form SB-2, declared effective on July 25,
2007, 1,000,000 common shares for sale at a price of $3.00 per share. The shares
will be sold for 180 days and, at our sole discretion, we may extend the
offering for an additional 90 days.

During the six months ended June 30, 2007, we received net cash
  of $90,500 from financing activities. We used net cash of $50,599 in operating
  activities and we did not use any cash in investing activities. The slight decrease
  in cash and cash equivalents was $1,345 during the period for the six months
  ended June 30, 2007.

We believe that we need approximately $2,960,000 to meet our
capital requirements over the next 12 months (beginning August 1, 2007). Of the
$2,960,000, we had $3,349 in cash and cash equivalents as of June 30, 2007, and
we intend to raise the balance of our cash requirements (approximately
$2,957,000) from private placements, loans, or possibly a registered public
offering (either self-underwritten or through a broker-dealer) within the next
few months. At this time we do not have any commitments from any broker-dealer
to provide us with financing. There is no guarantee that we will be successful
in raising any capital. If we fail in raising capital, our business may
fail.

To the extent that we consider acquisitions as a means to
expand, or if we decide to commence with the manufacture of applications of our
technology, we will require additional funds. We intend to sell stock to finance
our capital requirements. There is no assurance that we will be able to obtain
such additional funds on favorable terms, if at all. If we are unsuccessful in
raising enough money through private placements or a direct offering, we may
review other financing possibilities such as bank loans. If we cannot raise at
least $2,957,000 over the next 12 months we will not be able to carry out our
full business plan and we may not be able to become profitable and we may have
to cease operations.

We anticipate that we will generate revenues within the next
eighteen months from sales of our proprietary technologies. If we are successful
in generating such revenues, we plan to apply them towards our general and
administrative expenses. There are no assurances that we will receive any
revenues or that such revenues will be sufficient to cover our expenses. Our
inability to receive sufficient revenues could prevent us from implementing our
business plan.

Limited Operating History; Need for Additional Capital

There is limited historical financial information about us upon
which to base an evaluation of our performance. We are a development stage
company and have generated no revenues. We cannot guarantee we will be
successful in our business operations. Our business is subject to risks inherent
in the establishment of a new business enterprise, including limited capital
resources and possible cost overruns due to price and cost increases in services
and products.

To become profitable and competitive, we have to license our
technologies. We are seeking equity financing to provide for the capital
required to fully carry out our business plan and develop and market our
technology.

8

---

We have no assurance that future financing will be available to
us on acceptable terms. Obtaining additional financing will be subject to a
number of factors including market conditions, investor acceptance of our
business plan and investor sentiment. These factors may make the timing, amount,
terms and conditions of additional financing unattractive or unavailable to us.
If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations. If we are unable to raise additional
financing, we will have to significantly reduce our spending, delay or cancel
planned activities or substantially change our current corporate structure. In
such an event, we intend to implement expense reduction plans in a timely
manner. However, these actions would have material adverse effects on our
business, revenues, operating results, and prospects, resulting in a possible
failure of our business. If we raise funds through equity or convertible
securities, our existing stockholders may experience dilution and our stock
price may decline.

We have incurred operating losses from our inception and we are
dependent upon our ability to raise capital from stockholders or other sources
to sustain operations. These factors raise substantial doubt about our ability
to continue as a going concern.

Research and Development

Since our inception, we have spent approximately $250,000 on
research and development.

We anticipate that we will spend $1,200,000 on research and
development over the next twelve months to upgrade our PyStR technology,
including upgrading a prototype. If we are successful in acquiring other
technologies, we may increase our research and development budget.

Intellectual Property

On December 24, 2004, we purchased an integrated gasification
production system from our CEO. The technology combines modern gasification with
gas turbine technologies to produce synthetic gas or electricity. We intend to
further develop the technology to make it commercially viable and intend to then
sell or license the technology. We have not filed for any protection of our
trademarks.

Employees and Consultants

Over the next twelve months, we anticipate an increase in the
number of employees, if we complete our prototype gasification unit and begin
the sales cycle.

On March 8, 2006 we engaged Ecogestion Ltd to assist us in
marketing our technologies in the exclusive territory of Chile. Commissions will
be paid to Ecogestion Ltd. for consummated agreements to install our
technologies, and determined on a project by project basis.

9

---

On May 5, 2006, our board of directors appointed Wilf Ouellette
as our President, Chief Executive Officer and Chief Financial Officer. Mr.
Ouellette has been a director of us since July 1, 2005. Mr. Ouellette has been a
director and the Chief Executive Officer of Syngas Energy, our wholly owned
subsidiary, since February 2005. We entered into an executive employment
agreement with Mr. Ouellette dated April 17, 2007, for the position of Chief
Executive Officer, for a period of 60 months at a base salary of $150,000 per
year.

On April 20, 2007 we entered into an officer employment
agreement with Steve Eilers, for the position of Secretary and Treasurer, for a
period of 60 months at a base salary of $130,000 per year.

On April 26, 2007 we entered into a consulting agreement with
Ronald Foster for business development services for a period of one year, in
return for an aggregate of 100,000 shares of our common stock (post- split).

On April 30, 2007 we engaged Challenge Capital, Inc. to act as
our marketing consultant in the US, and to secure sales contracts with
utilities, municipalities and industrial and institutional end users of our
products, with a monthly required payment of $17,500.

On May 16, 2007 we engaged Walter Brown to assist us in
marketing our technologies in the exclusive territory of Brazil. Commissions
will be paid to Mr. Brown for consummated agreements to install our
technologies, and determined on a project by project basis.

We also engage people as outside contractors and consultants
for bookkeeping, legal, accounting, website development and audit functions. Any
increase in the number of employees or consultants may significantly increase
our monthly expenses. To facilitate our growth we anticipate hiring independent
sales and marketing consultants.

Known Material Trends and Uncertainties

As of June 30, 2007, we had no off balance sheet transactions
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in our financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.

In view of the uncertainties concerning our continued existence
as a going concern, our management plans to mitigate the effect of such
conditions, management intends to take the following steps in the event that we
are not able to raise sufficient funds to meet the needs of our business
plans:

- continue equity financing by private placements or a direct offering; and
- negotiate with our management and consultants to pay parts of salaries and
  fees with stock and stock options instead of cash.

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We believe that the above discussion contains a number of
forward-looking statements. Our actual results and our actual plan of operations
may differ materially from what is stated above. Factors which may cause our
actual results or our actual plan of operations to vary include, among other
things, decision of the Board of Directors not to pursue a specific course of
action based on a re-assessment of the facts or new facts, or changes in general
economic conditions.

Critical Accounting Policies

Our financial statements are impacted by the accounting
policies used and the estimates and assumptions made by management during their
preparation. A complete summary of these policies is included in the notes to
our historical financial statements. We have identified below the accounting
policy that is of particular importance in the presentation of our financial
position, results of operations and cash flows and which require the application
of significant judgment by management.

Intangible Asset

Intangible asset consist of an integrated gasification
production system. This technology combines modern gasification with gas turbine
technologies to produce synthetic gas, hydrogen or electricity. We intend to
further develop the technology to make it commercially viable and intend to then
sell or license the technology. The technology will be amortized on a systematic
basis upon commencement of revenue from the sale or license of the
technology.

On December 24, 2004, we purchased an integrated gasification
  production system from our CEO. The technology combines modern gasification
  with gas turbine technologies to produce synthetic gas, hydrogen or electricity.
  We intend to further develop the technology to make it commercially viable and
  intend to then sell or license the technology. We purchased the asset by issuing
  10,000,000 shares of our common stock and a $25,000 payment. If by January 2006
  we had not raised a minimum of $1,000,000 by way of equity private placements,
  we had the option, until June 30, 2007, of canceling the 10,000,000 shares issued
  to 975110 Alberta Ltd. and subject to escrow, in consideration for the transfer
  to 975110 Alberta Ltd. of 100% of the interest in all of the enhanced gasification
  intellectual property and a small gasification unit. At June 30, 2007, the asset
  has been transferred to us and the 10,000,000 common shares were released from
  escrow.

ITEM 3. CONTROL AND PROCEDURES

|(a) | Evaluation of disclosure controls and
  procedures
|--- | --------------------------------------------------

Our Chief Executive Officer and Chief Financial Officer
evaluated our disclosure controls and procedures (as defined in Rule 13a-14
(c) of the Securities Exchange Act of 1934 (the Exchange Act) as of a date
within 90 days before the filing date of this report and has concluded that as
of the evaluation date, our disclosure controls and procedures are effective to
ensure that information we are required to disclose in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commissions
rules and forms.

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|(b) | Changes in internal controls
|--- | ----------------------------

Subsequent to the date of their evaluation, there were no
significant changes in our internal controls over financial reporting or in
other factors that could significantly affect these controls. There were no
significant deficiencies or material weaknesses in our internal controls so no
corrective actions were taken.

PART II  OTHER INFORMATION

|ITEM 1. LEGAL PROCEEDINGS
|-------------------------

Management is not aware of any legal proceedings contemplated
by any governmental authority or any other party against us. None of our
directors, officers or affiliates are (i) a party adverse to us in any legal
proceedings, or (ii) have an adverse interest to us in any legal proceedings.
Management is not aware of any other legal proceedings that have been threatened
against us.

|ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
|-----------------------------------------------

None.

|ITEM 3. DEFAULTS UPON SENIOR SECURITIES
|---------------------------------------

None

|ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
|-----------------------------------------------------------------

None

|ITEM 5. OTHER INFORMATION
|-------------------------

None

|ITEM 6. EXHIBITS
|----------------

|Number | Description                                                                           
|------ | --------------------------------------------------------------------------------------
|       |                                                                                       
|3.1    | Certificate of Amendment filed
      on May 10, 2007 (1)                              
|       |                                                                                       
|10.1   | Executive Employment Agreement
      with Wilf Ouellette dated April 17, 2007 (1)     
|       |                                                                                       
|10.2   | License Agreement with Re-Gen International
      Corporation dated April 19, 2007 (1)
|       |                                                                                       
|10.3   | Executive Employment Agreement
      with Steve Eilers dated April 20, 2007 (1)       
|       |                                                                                       
|10.4   | License Agreement with Beaufort
      Energy Solutions, Inc. dated April 24, 2007 (1) 

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|10.5 | Consulting Agreement with Ronald Foster
        dated April 26, 2007. (1)                                                                                                                             
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                       
|10.6 | Letter of Intent with Challenge Capital
        Inc. for US Marketing Services dated April 30, 2007 (1)                                                                                               
|     |                                                                                                                                                                                                       
|10.7 | Representation Agreement for Brazil
        with Walter L. Brown dated May 16, 2007 (1)                                                                                                               
|     |                                                                                                                                                                                                       
|10.8 | Manufacturing
        Agreement with I-Coda Group dated July 24, 2007                                                                                                                                 
|     |                                                                                                                                                                                                       
|31.1 | Certification
        of Chief Executive Officer and Chief Financial Officer pursuant to Section
        302 of the Sarbanes-Oxley Act of 2002                                                        
|     |                                                                                                                                                                                                       
|32.1 | Certification
        of Chief Executive Officer and Chief Financial Officer pursuant to 18
        U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
        Oxley Act of 2002

(1) Included as exhibits on our Form SB-2 filed July 17,
2007.

SIGNATURES

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

|                      | Energy Quest Inc.
|--------------------- | -----------------
|                      |                  
|Date: August 14, 2007 | By:              
|                      |                  
|                      |                  
|                      |                  
|                      |                  

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