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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-Q

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

For the quarterly period ended June 30, 2009

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
OF 1934

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)

Indicate by check mark whether the registrant (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. Yes [X]No [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):

|Large accelerated filer [   ] | Accelerated filer [   ] | Non-accelerated filer [   ] | **Smaller reporting company**[
      x ]
|----------------------------- | ----------------------- | --------------------------- | ----------------------------------------

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of August 14, 2009, the registrants outstanding common stock
consisted of 11,768,294 shares.

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Table of Contents

|PART
      I - FINANCIAL INFORMATION                                                                     | 2 
|-------------------------------------------------------------------------------------------------------- | --
|ITEM
      2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS. | 3 
|ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS.                                | 7 
|ITEM
      4. CONTROL AND PROCEDURES                                                                     | 8 
|ITEM
      4T. CONTROL AND PROCEDURES.                                                                   | 8 
|PART
      II  OTHER INFORMATION                                                                        | 9 
|ITEM
      1. LEGAL PROCEEDINGS.                                                                         | 9 
|ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES.                                                   | 9 
|ITEM
      3. DEFAULTS UPON SENIOR SECURITIES.                                                           | 9 
|ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                       | 9 
|ITEM
      5. OTHER INFORMATION.                                                                         | 9 
|ITEM
      6. EXHIBITS.                                                                                  | 10

1

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PART I - FINANCIAL INFORMATION

Energy Quest Inc.(A Development Stage Company)

June 30, 2009

|                                                                                     | Index
|------------------------------------------------------------------------------------ | -----
|Consolidated Balance Sheets
      (Unaudited)                                        | F-1  
|Consolidated Statements of Operations and
      Other Comprehensive Loss (Unaudited) | F-2  
|Consolidated Statements of
      Cash Flows (Unaudited)                              | F-3  
|Notes to the Consolidated Financial
      Statements                                 | F-4  

2

---

|Energy Quest Inc.            
|-----------------------------
|(A Development Stage Company)
|Consolidated Balance Sheets  
|(Unaudited)                  

|                                                                        |  | June 30,   |   |  | December 31, |  
|----------------------------------------------------------------------- |  | ---------- | - |  | ------------ | -
|                                                                        |  | 2009       |   |  | 2008         |  
|                                                                        |  | $          |   |  | $            |  
|Assets                                                                  |  |            |   |  |              |  
|Current Assets                                                          |  |            |   |  |              |  
|Cash and cash equivalents                                               |  | 76,406     |   |  | 792          |  
|Total Current Assets                                                    |  | 76,406     |   |  | 792          |  
|Intangible Assets, net                                                  |  | 2,853,528  |   |  | 2,927,078    |  
|Total Assets                                                            |  | 2,929,934  |   |  | 2,927,870    |  
|                                                                        |  |            |   |  |              |  
|Liabilities and Stockholders' Equity                                    |  |            |   |  |              |  
|Current Liabilities                                                     |  |            |   |  |              |  
|Accounts payable and accrued liabilities                                |  | 60,722     |   |  | 54,829       |  
|Amounts due to related parties                                          |  | 273,003    |   |  | 244,488      |  
|Notes payable  related parties                                         |  | 65,390     |   |  | 22,457       |  
|Note payable                                                            |  |           |   |  | 6,755        |  
|Advances from
      former Shareholders                                 |  | 288,226    |   |  | 287,702      |  
|Total Liabilities                                                       |  | 687,341    |   |  | 616,231      |  
|Stockholders' Equity                                                    |  |            |   |  |              |  
|Preferred Stock                                                         |  |            |   |  |              |  
|Authorized: 1,000,000 shares, with a $0.01 par value; none
      issued |  |            |   |  |              |  
|or outstanding                                                          |  |           |   |  |             |  
|                                                                        |  |            |   |  |              |  
|Common Stock                                                            |  |            |   |  |              |  
|Authorized: 200,000,000 shares, with a $0.001 par value;                |  |            |   |  |              |  
|Issued and outstanding: 11,668,294 shares
      (December 31, 2008 -    |  |            |   |  |              |  
|9,555,270 shares)                                                       |  | 11,668     |   |  | 9,555        |  
|Additional Paid-in Capital                                              |  | 8,245,746  |   |  | 7,877,004    |  
|Accumulated Other Comprehensive Income                                  |  | 1,414      |   |  | 122          |  
|Deficit Accumulated During the Development Stage                        |  | (6,016,235 | ) |  | (5,575,042   | )
|Total
      Stockholders Equity                                        |  | 2,242,593  |   |  | 2,311,639    |  
|Total Liabilities and Stockholders Equity                              |  | 2,929,934  |   |  | 2,927,870    |  

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

F-1

---

|Energy Quest Inc.                                                       
|------------------------------------------------------------------------
|(A Development Stage Company)                                           
|Consolidated Statements of Operations and Other
      Comprehensive Loss
|(Unaudited)                                                             

|                                             |  |               |   |  |               |   |  |              |   |  |              |   |  | Period from         |  
|-------------------------------------------- |  | ------------- | - |  | ------------- | - |  | ------------ | - |  | ------------ | - |  | ------------------- | -
|                                             |  |               |   |  |               |   |  |              |   |  |              |   |  | December 14, 2004   |  
|                                             |  | For the Three |   |  | For the Three |   |  | For the Six  |   |  | For the Six  |   |  | (Date of Inception) |  
|                                             |  | Months Ended  |   |  | Months Ended  |   |  | Months Ended |   |  | Months Ended |   |  | to                  |  
|                                             |  | June 30,      |   |  | June 30,      |   |  | June 30,     |   |  | June 30,     |   |  | June 30,            |  
|                                             |  | 2009          |   |  | 2008          |   |  | 2009         |   |  | 2008         |   |  | 2009                |  
|                                             |  | $             |   |  | $             |   |  | $            |   |  | $            |   |  | $                   |  
|Revenue                                      |  |              |   |  |              |   |  |             |   |  |             |   |  | 5,164               |  
|                                             |  |               |   |  |               |   |  |              |   |  |              |   |  |                     |  
|Expenses                                     |  |               |   |  |               |   |  |              |   |  |              |   |  |                     |  
|Consulting and management fees               |  | 150,812       |   |  | 94,606        |   |  | 253,687      |   |  | 189,331      |   |  | 4,708,584           |  
|General and administrative                   |  | 48,186        |   |  | 13,805        |   |  | 55,274       |   |  | 27,826       |   |  | 383,809             |  
|Professional fees                            |  | 24,636        |   |  | 20,035        |   |  | 41,356       |   |  | 74,817       |   |  | 419,259             |  
|Research and development                     |  | 14,338        |   |  | 4,922         |   |  | 14,338       |   |  | 9,922        |   |  | 60,449              |  
|Depreciation, depletion, and impairment      |  | 37,500        |   |  |              |   |  | 75,000       |   |  |             |   |  | 173,077             |  
|Other                                        |  |              |   |  |              |   |  |             |   |  | 80,000       |   |  | 80,000              |  
|                                             |  | 275,472       |   |  | 133,368       |   |  | 439,655      |   |  | 381,896      |   |  | 5,825,178           |  
|Loss from operations:                        |  | (275,472      | ) |  | (133,368      | ) |  | (439,655     | ) |  | (381,896     | ) |  | (5,820,014          | )
|Interest income                              |  |              |   |  | 754           |   |  |             |   |  | 1,508        |   |  | 2,085               |  
|Interest expense                             |  | (965          | ) |  | (1,240        | ) |  | (1,538       | ) |  | (6,759       | ) |  | (10,210             | )
|Gain on write-off of debt                    |  |              |   |  |              |   |  |             |   |  |             |   |  | 5,826               |  
|Loss on write-off of loan receivable         |  |              |   |  |              |   |  |             |   |  |             |   |  | (193,922            | )
|Net loss                                     |  | (276,437      | ) |  | (133,854      | ) |  | (441,193     | ) |  | (387,147     | ) |  | (6,016,235          | )
|Other comprehensive income (loss)            |  |               |   |  |               |   |  |              |   |  |              |   |  |                     |  
|Foreign currency translation adjustment      |  | 1,273         |   |  | (13           | ) |  | 1,293        |   |  | 33           |   |  | 1,415               |  
|Total Comprehensive Loss                     |  | (275,164      | ) |  | (133,867      | ) |  | (439,900     | ) |  | (387,114     | ) |  | (6,014,820          | )
|Net Loss Per Share
       Basic and Diluted |  | (0.03         | ) |  | (0.03         | ) |  | (0.04        | ) |  | (0.12        | ) |  |                     |  
|Weighted Average Shares Outstanding         |  |               |   |  |               |   |  |              |   |  |              |   |  |                     |  
|Basic and Diluted                            |  | 10,771,000    |   |  | 3,955,000     |   |  | 10,167,000   |   |  | 3,260,000    |   |  |                     |  

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

F-2

---

|Energy Quest Inc.                    
|-------------------------------------
|(A Development Stage Company)        
|Consolidated Statements of Cash Flows
|(Unaudited)                          

|                                                             |  |              |   |  |              |   |  | Accumulated from       |  
|------------------------------------------------------------ |  | ------------ | - |  | ------------ | - |  | ---------------------- | -
|                                                             |  | For the Six  |   |  | For the Six  |   |  | December 14, 2004      |  
|                                                             |  | Months Ended |   |  | Months Ended |   |  | (Date of Inception) to |  
|                                                             |  | June 30,     |   |  | June 30,     |   |  | June 30,               |  
|                                                             |  | 2009         |   |  | 2008         |   |  | 2009                   |  
|                                                             |  | $            |   |  | $            |   |  | $                      |  
|                                                             |  |              |   |  |              |   |  |                        |  
|Cash Flows Used In Operating Activities                      |  |              |   |  |              |   |  |                        |  
|Net loss                                                     |  | (441,193     | ) |  | (387,147     | ) |  | (6,016,235             | )
|                                                             |  |              |   |  |              |   |  |                        |  
|Adjustments to reconcile net loss to net cash
      used in  |  |              |   |  |              |   | 
|operating activities:                                        |  |              |   |  |              |   |  |                        |  
|Stock-based compensation                                     |  | 120,750      |   |  |             |   |  | 2,607,613              |  
|Shares issued for services                                   |  | 37,500       |   |  |             |   |  | 1,553,693              |  
|Loss on shares issued for amounts due to related parties     |  | 15,976       |   |  |             |   |  | 15,976                 |  
|Write-off on restricted cash                                 |  |             |   |  | 80,000       |   |  | 80,000                 |  
|Loss on write-off of loan receivable                         |  |             |   |  |             |   |  | 193,922                |  
|Amortization of intangible assets                            |  | 75,000       |   |  |             |   |  | 173,077                |  
|Gain on write-off of debt                                    |  |             |   |  |             |   |  | (5,826                 | )
|                                                             |  |              |   |  |              |   |  |                        |  
|Changes in operating assets and liabilities:                 |  |              |   |  |              |   |  |                        |  
|Prepaid expenses and other current assets                    |  |             |   |  | (1,508       | ) |  |                       |  
|Accounts payable and accrued liabilities                     |  | 5,946        |   |  | (8,307       | ) |  | 31,178                 |  
|Due to related parties                                       |  | 46,629       |   |  | 191,792      |   |  | 567,875                |  
|                                                             |  |              |   |  |              |   |  |                        |  
|Net Cash Used in Operating Activities                        |  | (139,392     | ) |  | (125,170     | ) |  | (798,727               | )
|                                                             |  |              |   |  |              |   |  |                        |  
|Investing Activities                                         |  |              |   |  |              |   |  |                        |  
|Loan receivable                                              |  |             |   |  |             |   |  | (193,922               | )
|Net cash acquired on business acquisition                    |  |             |   |  |             |   |  | 565                    |  
|Change in restricted cash                                    |  |             |   |  |             |   |  | (80,000                | )
|Purchase of intangible assets                                |  |             |   |  |             |   |  | (25,000                | )
|                                                             |  |              |   |  |              |   |  |                        |  
|Net Cash Used In Investing Activities                        |  |             |   |  |             |   |  | (298,357               | )
|                                                             |  |              |   |  |              |   |  |                        |  
|Financing Activities                                         |  |              |   |  |              |   |  |                        |  
|Proceeds from issuance of common stock                       |  | 180,000      |   |  | 125,000      |   |  | 634,144                |  
|Proceeds from notes payable                                  |  | 41,448       |   |  |             |   |  | 546,768                |  
|Re-payment of note
      payable                             |  | (6,808       | ) |  |             |   |  | (6,808                 | )
|                                                             |  |              |   |  |              |   |  |                        |  
|Net Cash Provided
      By Financing Activities              |  | 214,640      |   |  | 125,000      |   |  | 1,174,104              |  
|                                                             |  |              |   |  |              |   |  |                        |  
|Effect of Exchange
      Rate Changes on Cash                |  | 366          |   |  | (4           | ) |  | (614                   | )
|                                                             |  |              |   |  |              |   |  |                        |  
|(Decrease) increase in Cash and Cash Equivalents             |  | 75,614       |   |  | (174         | ) |  | 76,406                 |  
|                                                             |  |              |   |  |              |   |  |                        |  
|Cash and Cash
      Equivalents, beginning                   |  | 792          |   |  | 1,733        |   |  |                       |  
|                                                             |  |              |   |  |              |   |  |                        |  
|Cash and Cash
      Equivalents, end                         |  | 76,406       |   |  | 1,559        |   |  | 76,406                 |  
|                                                             |  |              |   |  |              |   |  |                        |  
|                                                             |  |              |   |  |              |   |  |                        |  
|Supplemental Disclosures                                     |  |              |   |  |              |   |  |                        |  
|                                                             |  |              |   |  |              |   |  |                        |  
|Cash paid for taxes                                          |  |             |   |  |             |   |  |                       |  
|Cash paid for
      interest                                 |  |             |   |  |             |   |  |                       |  
|                                                             |  |              |   |  |              |   |  |                        |  
|Non-Cash Activities                                          |  |              |   |  |              |   |  |                        |  
|                                                             |  |              |   |  |              |   |  |                        |  
|Common stock issued for intangible assets                    |  |             |   |  | 3,000,000    |   |  | 3,000,204              |  
|Common stock issued for stock payable                        |  |             |   |  |             |   |  | 161,550                |  
|Common stock
      issued for amounts due to related parties |  | 16,629       |   |  |             |   |  | 344,651                |  

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

F-3

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|Energy Quest Inc.                                       
|--------------------------------------------------------
|(A Development Stage company)                           
|Notes to the Unaudited Consolidated Financial Statements

|1. | Basis of Presentation
|-- | ---------------------

The accompanying unaudited interim consolidated financial
statements of Energy Quest, Inc. (Energy Quest or the company), have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the audited consolidated
financial statements and notes thereto contained in Energy Quests Annual Report
filed with the SEC on Form 10-K. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods
presented have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year. Notes to the consolidated financial statements which substantially
duplicate the disclosure contained in the audited consolidated financial
statements for fiscal 2008 as reported in the Form 10-K have been omitted.

ReclassificationsCertain reclassifications have been
made to the prior periods financial statements to conform to the current
periods presentation.

|2. | Going Concern
|-- | -------------

These consolidated 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 there-from, and/or raises equity capital or borrowings sufficient
to meet current and future obligations. Management plans to raise equity
financings 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 has incurred losses from operations since inception and at June 30,
2009, has a working capital deficiency and an accumulated deficit that creates
substantial doubt about the companys ability to continue as a going
concern.

|3. | Recently Adopted Pronouncements
|-- | -------------------------------

Energy Quest does not expect the adoption of recently issued
accounting pronouncements to have a significant impact on the companys results
of operations, financial position or cash flows.

|4. | Intangible Assets
|-- | -----------------

On May 5, 2008, the company issued 2,000,000 shares of common
stock with a fair value of $3,000,000 for a one time payment for the purchase of
two patents acquired under a purchase/assignment agreement entered into in March
2008. The shares were valued on the closing date of the agreement. At June 30,
2009, the total cost of $3,000,000 is recorded as an intangible asset, net of
accumulated amortization of $173,077. Amortization expense for the six months
ended June 30, 2009 and 2008 was $75,000 and $0, respectively. Amortization is
calculated based on the expected legal useful life of 20 years.

|5. | Related Party Transactions                                                                                                                                                                                   
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                              
|   | The following details Amounts due to related
    parties:                                                                                                                                                    
|   |                                                                                                                                                                                                              
|   | a.                                                                                                                                                                                                           
|   |                                                                                                                                                                                                              
|   | b.                                                                                                                                                                                                           
|   |                                                                                                                                                                                                              
|   | c.                                                                                                                                                                                                           
|   |                                                                                                                                                                                                              
|   | d.                                                                                                                                                                                                           
|   |                                                                                                                                                                                                              
|   | On June 11, 2009, the company issued 163,024 shares of
      common stock, of which, $16,629 reduced Amounts due to related parties and
      a loss was recognized. See note 8 Equity for further
  details.

F-4

---

|Energy Quest Inc.                                       
|--------------------------------------------------------
|(A Development Stage company)                           
|Notes to the Unaudited Consolidated Financial Statements

The following details Notes payable 
related parties:

| | e. | On November 5, 2007, the company received $21,000 in
      exchange for a promissory note payable. The note bears interest at 6% per
      annum, calculated annually, and is due on demand. As at June 30, 2009,
      accrued interest of $2,082 (December 31, 2008 - $1,457) is
  recorded.                                                     
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                    
| | f. | During the six period ended June 30, 2009, the company
      received $41,448 in proceeds from a related consultant. At June 30, 2009,
      this amount is included in note payable  related party along with related
      accrued interest of $860. There were no such proceeds received during the
      six month period ended June 30, 2008.
| |    |                                                                                                                                                                                                                                                                                                                                                    
| | g. | During the six month period ended June 30, 2009, the
      company recorded $Nil (2008 - $65,000) for management services provided by
      the former Treasurer of the company.                                                                                                                                                                   

|6. | Note Payable
|-- | ------------

On October 28, 2008, the company received $6,684 (CDN$ 8,000)
in exchange for a promissory note payable. The note bears interest at 6% per
annum, calculated annually, and is due on demand. As at June 30, 2009, accrued
interest of $0 (December 31, 2008 - $71) is recorded. The company paid the
amount in full during the six-month period ended June 30, 2009. There were no
similar payments made during the six month period ended June 30, 2008.

|7. | Commitments
|-- | -----------

On July 1, 2008, the company signed an agreement with a
consultant for consulting services for a period of one year. The company paid
the consultant $241,500, which is the fair value of the 57,500 shares issued.
During the year ended December 31, 2008, $120,750 was charged to consulting
fees. The company issued the shares on April 26, 2007. However, per companys
understanding of the transaction, the company treated the shares as not issued
until vested. At December 31, 2008 $120,750 is treated as vested and the other
$120,750 is treated as unvested and not reflected in the financial statements
because the shares are forfeitable. During the six month period ended June 30,
2009, $120,750 was treated as vested and was recognized as stock-based
compensation.

|8. | Equity
|-- | ------

| | a. | On May 4, 2009, the company issued 1,800,000 shares of
      common stock pursuant to a private placement. The company received $0.10
      per share of common stock for total proceeds of $180,000.                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                    
| | b. | On May 28, 2009, the company issued 150,000 shares of
      common stock with a fair value of $37,500 for services received.                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                    
| | c. | On June 11, 2009, the company issued 163,024 shares of
      common stock with a fair value of $32,605 for settlement of amounts due to
      related party. Since the fair value of the shares issued was more than the
      amounts due to related party, the company recognized a loss on the shares
      issued for amounts due to related party for $15,976.
| |    |                                                                                                                                                                                                                                                                                                                                                                    
| | d. | $120,750 of stock-based compensation was recognized for
      the six month period ended June 30, 2009. See note 7 Commitments for
      further details.                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                    
| | e. | As of December 31, 2008, there were 107,700 warrants
      outstanding with an average weighted exercise price of $2.00. In April
      2009, the warrants expired. There were no warrants granted during the six
      months period ended June 30, 2009, leaving zero warrants outstanding as of
      June 30, 2009.                                            

|9. | Subsequent Event
|-- | ----------------

| | a. | On July 10, 2009, the company issued 100,000 shares of
      common stock pursuant to a private placement. The company received $0.10
      per share of common stock for total proceeds of $10,000.    
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                         
| | b. | In accordance with SFAS No. 165 Subsequent Events, we
      have evaluated subsequent events through August 14, 2009, the date of
      issuance of the unaudited consolidated financial
  statements.

F-5

---

ITEM 2. Management Discussion and Analysis of Financial
Condition and Results of Operations.

Safe Harbor Statement

This report on Form 10-Q 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.

These forward-looking statements involve significant risks and
uncertainties, including, but not limited to, the following: competition,
promotional costs, and risk of declining revenues. Our actual results could
differ materially from those anticipated in such forward-looking statements as a
result of a number of factors. These forward-looking statements are made as of
the date of this filing, and we assume no obligation to update such
forward-looking statements. The following discusses our financial condition and
results of operations based upon our consolidated financial statements which
have been prepared in conformity with accounting principles generally accepted
in the United States. It should be read in conjunction with our financial
statements and the notes thereto included elsewhere herein.

The following discussion should be read in conjunction with our
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Form 10-Q. The discussions of results, causes and trends
should not be construed to imply any conclusion that these results or trends
will necessarily continue into the future.

Overview

We are engaged in the development and production of
hydrogen-enriched alternative fuels. We plan to employ gasification technologies
and catalytic conversion processes to produce clean fuels. We design, build,
lease and in some cases operate the gasification technologies with broad
potential application within the energy field. Our various technologies allow
for the use of steam for reformation of coal and other carbonaceous feedstocks,
conversion of waste solid fuel sources into gaseous form and allow for
incineration of waste in an environmentally friendly manner.

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.

Liquidity and Capital Resources

As of June 30, 2009, we had cash and cash equivalents of
$76,406 and a working capital deficiency of $610,935. As of June 30, 2009 our
accumulated deficit was $6,016,235. For the six months ended June 30, 2009 our
net loss was $441,193 compared to $387,147 during the same period in 2008. This
increase was due mostly to higher consulting and management fees.

3

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Our loss was funded by proceeds from shareholder loans. During
the six months ended June 30, 2009, we raised in net proceeds $214,640 through
financing activities and our cash position increased by $75,614.

We used net cash of $139,392 in operating activities for the
six months ended June 30, 2009 compared to net cash of $125,170 in operating
activities for the same period in 2008. We did not use any money in investing
activities for the six months ended June 30, 2009 nor did we use any money for
investing activities during the same period in 2008. The effect of exchange
rates on cash was an increase in cash of $366 for the six months ended June 30,
2009 compared to a decrease of $4 during six months ended June 30, 2008.

During the six months ended June 30, 2009 our monthly cash
requirement was approximately $46,464, compared to approximately $41,723 for the
same period in 2008. We expect to require a total of approximately $26,585,000
to fully carry out our business plan over the next twelve months beginning
September 2009 as set out in this table:

|Description                                           |   | Estimated Expense | 
|----------------------------------------------------- | - | ----------------- | 
|Marketing our gasification technologies               | $ | 200,000           | 
|Continued improvement of our PyStR and               |   |                   | 
|other technologies                                    | $ | 1,200,000         | 
|Further commercializing our gasification              |   |                   | 
|technologies                                          | $ | 400,000           | 
|Manufacturing of
      Modular Bio-energy units       | $ | 400,000           | 
|Payment of accounts payable and accrued               |   |                   | 
|liabilities                                           | $ | 250,000           | 
|General and administrative expenses                   | $ | 500,000           | 
|Professional fees                                     | $ | 100,000           | 
|Consulting fees                                       | $ | 200,000           | 
|Investor relations
      expenses                     | $ | 100,000           | 
|Patent application costs (including legal fees)       | $ | 100,000           | 
|Heavy Oil Upgrader
      Plant (Northern Alberta Oil) | $ | 23,135,000        | 
|Total                                                 | $ | 26,585,000        | 

We intend to meet our cash requirements for the next 12 months
through external sources: a combination of debt financing and equity financing
through private placements. We are currently not in good short-term financial
standing. We anticipate that we may not generate any revenues in the near future
and we will not have enough positive internal operating cash flow until we can
generate substantial revenues, which may take the next few years to fully
realize. There is no assurance we will achieve profitable operations. We have
historically financed our operations primarily by cash flows generated from the
sale of our equity securities and through cash infusions from officers and
outside investors in exchange for debt and/or common stock.

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These consolidated financial statements have been prepared on
the assumption that we are a going concern, meaning we 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. Our continuation as a going concern is
dependent upon our ability to attain profitable operations and generate funds
there-from, and/or raise equity capital or borrowings sufficient to meet current
and future obligations. Management plans to raise equity financings over the
next twelve months to finance operations. There is no guarantee that we will be
able to complete any of these objectives. We have incurred losses from
operations since inception and at June 30, 2009, have a working capital
deficiency and an accumulated deficit that creates substantial doubt about our
ability to continue as a going concern.

On September 4, 2007, we entered into a 0% convertible
debenture due September 4, 2012 with Jain Vasant whereby Mr. Vasant agreed to
loan us $120,000,000. At any time after September 4, 2012 and until September 4,
2017 Mr. Vasant has the right to convert all, or a portion of, the principal
amount of the convertible debenture into our common shares at a conversion price
of $50.00 per share. Pursuant to the convertible debenture the funds will be
transferred to us within 10 business days after the convertible debenture
documents are successfully posted on Euroclear. As of August 11, 2009, the
transaction has not yet closed and we have not yet received any funds. We
anticipate that this agreement will close shortly.

Once the $120,000,000 debenture transaction is closed, we will
have enough capital to meet our cash requirements over the next twelve months.
However, we cannot guarantee that the agreement will be successfully closed on a
timely basis. If the agreement fails to close, we intend to raise the balance of
our cash requirements (approximately $26,585,000) 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. There is no
assurance that we will be able to obtain such additional funds on favorable
terms, if at all. If we fail in raising capital, our business may fail and we
may curtail or cease our operations.

On May 19, 2009 we entered into an Investment Agreement with
First Nation Moosomin Band (Moosomin). The agreements specifies that Moosomin
will make an investment of US $5,000,000 into us by way of a purchase of
2,500,000 Class A Preferred Shares at $2.00 per share which may be converted
into common stock at the option of Moosomin. The investment will be finalized in
a formal agreement which has not yet been executed.

Results of Operations for the three months ended June 30,
2009 compared to the three months ended June 30, 2008 and from inception to June
30, 2009.

Limited Revenues

Since our inception on December 14, 2004 to June 30, 2009, we
have earned limited revenue of $5,164. As of June 30, 2009, we have an
accumulated deficit of $6,016,235 and we did not earn any revenues during the
three months ending on June 30, 2009. At this time, our ability to generate any
significant revenues continues to be uncertain. Our financial statements contain
an additional explanatory paragraph in Note 2, 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.

5

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Net Loss

We incurred a net loss of $276,437 for the three months ended
June 30, 2009, compared to a net loss of $133,854 for the same period in 2008.
This increase in net loss is mostly due to higher consulting and management
fees, general and administrative fees and research and development expenses.
From inception on December 14, 2004 to June 30, 2009, we have incurred a net
loss of $6,016,235. Our basic and diluted loss per share was $0.03 for the three
months ended June 30, 2009, and $0.03 for the same period in 2008.

Expenses

Our total operating expenses increased from $133,368 to $275,472
  for the three months ended June 30, 2009 compared to the same period in 2008.
  This increase in expenses is mostly due to higher consulting and management
  fees, general and administrative fees and research and development expenses.
  Since our inception on December 14, 2004 to June 30, 2009, we have incurred
  total operating expenses of $5,825,178.

Our consulting and management fees increased $56,206 from
$94,606 to $150,812 for the three months ended June 30, 2009 compared to the
same period in 2008. This increase was largely due to higher payments made to
our consultants. Since our inception on December 14, 2004 until June 30, 2009 we
have spent $4,708,584 on consulting and management fees.

Our general and administrative expenses consist of bank
charges, travel, meals and entertainment, office maintenance, communication
expenses (internet, fax, and telephone), courier, postage costs, office
supplies. Our general and administrative expenses increased $34,381 from $13,805
to $48,186 for the three months ended June 30, 2009 compared to the same period
in 2008. Since our inception on December 14, 2004 until June 30, 2009 we have
spent $383,809 on general and administrative expenses.

We spent $14,338 on research and development expenses for the
  three months ended June 30, 2009 compared to $4,922 spent on research and development
  during the three months ended June 30, 2008. Since our inception on December
  14, 2004 until June 30, 2009 we have spent $60,449 research and development.
  Going forward, we anticipate that we will spend approximately $1,600,000 on
  research and development during the next 12 months. Our professional fees, consisting
  primarily of legal, accounting and auditing fees, increased by $4,601 to $24,636
  for the three months ended June 30, 2009 from $20,035 for the same period in
  2008, mainly due to slightly increased legal and auditing services provided
  in the three month periods ended June 30, 2009.

Results of Operations for the six months ended June 30, 2009
compared to the six months ended June 30, 2008

Limited Revenues

We did not earn any revenues during the six months ending on
June 30, 2009, nor did we earn any revenues in the same period in 2008. At this
time, our ability to generate any significant revenues continues to be
uncertain.

6

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Net Loss

We incurred a net loss of $441,193 for the six months ended
June 30, 2009, compared to a net loss of $387,147 for the same period in 2008.
This increase in net loss is mostly due to higher consulting and management fees
as well as general and administrative fees. Our basic and diluted loss per share
was $0.04 for the six months ended June 30, 2009, and $0.12 for the same period
in 2008.

Expenses

Our total operating expenses increased from $381,896 to $439,655
  for the six months ended June 30, 2009 compared to the same period in 2008.
  This increase in expenses is mostly due to higher consulting and management
  fees as well as general and administrative fees.

Our consulting and management fees increased $64,356 from
$189,331 to $253,687 for the six months ended June 30, 2009 compared to the same
period in 2008. This increase was largely due to higher payments made to our
consultants.

Our general and administrative expenses consist of bank
charges, travel, meals and entertainment, office maintenance, communication
expenses (internet, fax, and telephone), courier, postage costs, office
supplies. Our general and administrative expenses increased $27,448 from $55,274
to $27,826 for the six months ended June 30, 2009 compared to the same period in
2008.

We spent $14,338 on research and development expenses for the
six months ended June 30, 2009 compared to $9,922 spent on research and
development during the six months ended June 30, 2008.

Our professional fees, consisting primarily of legal,
accounting and auditing fees, decreased by $33,461 to $41,356 for the six months
ended June 30, 2009 from $74,817 for the same period in 2008, mainly due to
decreased legal and auditing services provided in the six month period ended
June 30, 2009.

Inflation

The amounts presented in the financial statements do not
provide for the effect of inflation on our operations or financial position. The
net operating losses shown would be greater than reported if the effects of
inflation were reflected either by charging operations with amounts that
represent replacement costs or by using other inflation adjustments.

Off-Balance Sheet Arrangements

As of June 30, 2009, 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.

ITEM 3. Quantitative and Qualitative Disclosure About Market
Risks.

Not applicable.

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ITEM 4. Control and Procedures

Not applicable

ITEM 4T. Control and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures have been designed to ensure
that information required to be disclosed by the Company is collected and
communicated to management to allow timely decisions regarding required
disclosures. The Chief Executive Officer and the Chief Financial Officer have
concluded, based on their evaluation as of June 30, 2009 that, as a result of
the following material weaknesses in internal control over financial reporting
as described further in our Annual Report on Form 10-K filed with the SEC on
April 14, 2009, disclosure controls and procedures were ineffective in providing
reasonable assurance that material information is made known to them by others
within the Company:

a) We did not maintain sufficient personnel with an appropriate
level of technical accounting knowledge, experience, and training in the
application of generally accepted accounting principles commensurate with our
complexity and our financial accounting and reporting requirements. We have
limited experience in the areas of financial reporting and disclosure controls
and procedures. Also, we do not have an independent audit committee. As a
result, there is a lack of monitoring of the financial reporting process and
there is a reasonable possibility that material misstatements of the
consolidated financial statements, including disclosures, will not be prevented
or detected on a timely basis; and

b) Due to our small size, we do not have a proper segregation
of duties in certain areas of our financial reporting process. The areas where
we have a lack of segregation of duties include cash receipts and disbursements,
approval of purchases and approval of accounts payable invoices for payment.
This control deficiency, which is pervasive in nature, results in a reasonable
possibility that material misstatements of the financial statements will not be
prevented or detected on a timely basis.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial
reporting during the fiscal quarter ended June 30, 2009 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

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Limitations On The Effectiveness Of Internal Controls

Our management, including the CEO and CFO, does not expect that
our disclosure controls and procedures or our internal control over financial
reporting will necessarily prevent all fraud and material error. An internal
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of the control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the internal control. The design of any system of controls also is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Over time, control may
become inadequate because of changes in conditions, and/or the degree of
compliance with the policies or procedures may deteriorate.

PART II  OTHER INFORMATION

ITEM 1. Legal Proceedings.

As of August 11, 2009 there are no material pending legal
proceedings, other than ordinary routine litigation incidental to our business,
to which we or any of our subsidiaries are a party or of which any of our
properties is the subject. Also, our management is not aware of any legal
proceedings contemplated by any governmental authority against us.

ITEM 2. Unregistered Sales of Equity Securities.

On May 4, 2009, we issued 1,800,000 shares of common stock
pursuant to a private placement to two investors. The shares were issued at
$0.10 per share total proceeds of $180,000.

On June 11, 2009, we issued 163,024 shares of common stock with
a fair value of $32,605 for settlement of debt.

ITEM 3. Defaults Upon Senior Securities.

None.

ITEM 4. Submission of Matters to a Vote of Security Holders.

None.

ITEM 5. Other Information.

None.

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ITEM 6. Exhibits.

|Number | Description                                                                                                                                                  
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                              
|31.1   | Certification of Chief Executive Officer pursuant to
  Section 302 of the Sarbanes- Oxley Act of 2002                                                        
|       |                                                                                                                                                              
|31.2   | Certification of Chief Financial Officer pursuant to
      Section 302 of the Sarbanes- Oxley Act of 2002                                                    
|       |                                                                                                                                                              
|32.1   | Certification of Chief Executive Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
|       |                                                                                                                                                              
|32.2   | Certification of Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002

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.                                 
|--------------------- |  | --------------------------------------------------
|                      |  | (REGISTRANT)                                      
|                      |  |                                                   
|Date: August 14, 2009 |  | /s/
      Wilf Ouellette                          
|                      |  | Wilf
      Ouellette                              
|                      |  | President,
      Chief Executive Officer, Director
|                      |  | (Authorized
      Officer for Registrant)         
|                      |  |                                                   
|Date: August 14, 2009 |  | /s/
      Vasant K, Jain                          
|                      |  | Vasant K,
      Jain                              
|                      |  | Chief
      Financial Officer, Director, Principal
|                      |  | Accounting
      Officer                          

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