**U.
      S. SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**


(Mark
      One)





[**X**]
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934


For
      the
      fiscal year ended **March
      31, 2006**





[
                ]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934


For
      the
      transition period from ___________ to _____________





Commission
      File Number: **1089104**





**QUEST
      OIL CORPORATION**




(Name
      of
      small business issuer as specified in its charter)





**Nevada**
            **90-0281227**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)**2038
                Corte Del Nogal, Suite 110**
              **Carlsbad,
                CA 92011**
              **________________________________________________________________________**
              (Address
                of principal executive offices, including zip
                code)




Registrant’s
      telephone number, including area code:   ( **760)
      804-8844**


Securities
      registered pursuant to Section 12(b) of the Act:  **None**


Securities
      registered pursuant to Section 12(g) of the Act:  **$.001
      par value common stock**


___________________




Check
      whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90 days.  Yes  **X**  No




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





The
      issuer’s revenues for the most recent fiscal year were $1,560,443





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant was approximately $5,721,465 as of August,
      14,
      2006. Shares of common stock held by each officer and director and by each
      person or group who owns 10% or more of the outstanding common stock amounting
      to 1,402,950 shares have been excluded in that such persons or groups may be
      deemed to be affiliates. This determination of affiliate status is not
      necessarily a conclusive determination for other purposes.





**As
      of August 15, 2006, 72,921,266 shares of our common stock were issued and
      outstanding.**





Documents
      Incorporated by Reference: None.





Transitional
      Small Business Disclosure Format: No.











**PART
      I**





**Item
      1. Description of Business**





**Our
      Company**





Quest
      Oil
      Corporation is in the business of acquiring and participating in exploration
      stage oil and gas properties around the globe.





Our
      executive offices are currently located at 2038 Corte Del Nogal, Suite 110,
      Carlsbad, CA 92011, (760 ) 804-8844. We maintain a website at www.questoil.com .




**Corporate
      History**





We
      were
      originally incorporated in the State of Nevada on January 19, 1999, under the
      name of Luna Technologies, Inc. We have changed our name several times as
      follows: Luna Medical Technologies, Inc. (May 31, 1999), Lanwerx Entertainment,
      Inc. (May 19, 2003), GameState Entertainment, Inc. (September 24, 2003) and
      Quest Oil Corporation (September 7, 2004).





Currently,
      we own the following wholly owned subsidiaries: Quest Canada Corporation;
      Wallstin Petroleum LLC; and Petrostar Oil Services, Inc. Quest Canada
      Corporation was created for the purpose of holding Alberta oil and gas property
      acquisitions.  Wallstin Petroleum LLC was acquired for their management
      expertise and contacts in Texas.  Petrostar Oil Services Inc. was created
      for the purpose of servicing the oil and gas properties in Texas.





**Our
      Business**





**Overview
      and Philosophy**





We
      are a
      growing independent oil and gas company that intends to actively utilize
      secondary and enhanced oil recovery, or “EOR,” methods to increase production
      and proved reserves at our existing properties and future acquisitions. Our
      primary focus is crude oil and our target acquisitions are onshore U.S.
      properties and natural gas production in the plains of Alberta, Canada. Our
      focus on domestic, mature oil fields and proven gas reserves reduces exploration
      risks and logistical uncertainties inherent in international operations. We
      use
      secondary water flooding and EOR methods for our oil leases and advanced 3D
      seismic acquisition to strategize our horizontal drilling programs.





Our
      philosophy in regards to acquisition of any properties, joint-venture deals
      or
      farm-ins continues to be operating the properties ourselves unless we can team
      with a quality partner. When we are not operators, we will only pick up a small
      interest, 10% or less. This will be done in areas we deem probable candidates
      for future expansion and plan to become operators. This approach accelerates
      the
      learning curve in areas where we have no previous operational experience and
      can
      take advantage of operators that have been in the area for several years. We
      still firmly believe in operating our own properties and think by operating,
      we
      can control the evolution of our business model and control the direction we
      want to take the company. Properties that we acquire are for the purposes of
      developing and are an essential element in our growth strategy. Our philosophy
      in regards to our prospect portfolio will change to include some higher risk
      plays that have the potential for real growth of the Company.





Our
      Texas
      properties are an excellent example of significant growth opportunities.
 Major energy companies and large independents continue to focus their
      attention and resources toward the exploration and production of large
      fields.  In the past several years, the major companies have been divesting
      themselves of their mature, smaller oil fields. During recent years, the
      energy industry has predominately focused on natural gas exploration and
      production, and has been significantly less focused on crude oil.  The
      recent economics of the oil and gas market have improved as prices have risen
      substantially.  These conditions provide ample opportunities for smaller
      independent companies such as Quest to acquire and exploit mature North American
      petroleum leases.  Our emphasis on EOR methods positions us in a unique
      niche segment in the oil and gas industry.  Our acquisition targets are
      proven, mature oil fields that possess significant proved
      reserves.




**Recent
      Developments**





On
      or
      about March 20, 2006, our legal counsel, The Baum Law Firm, PC, in connection
      with our fiscal year end, discovered that there was not a legal and valid
      adoption by a majority of the directors of the company, of the resolution
      appointing Mr. William Huntington Stinson to our board of directors and as
      our
      President and Chief Executive Officer. Mr. Stinson’s nomination followed the
      resignation of Mr. Cameron King from all positions he held with the company.
      Following Mr. King’s resignation, there were four members of our board: Mr. Jim
      Irwin, Mr. Joseph F. Wallen, Mr. Douglas Brown and Mr. Doug Blackman.





On
      March
      31, 2006, Mr. Blackman resigned from his position on our board of
      directors.





On
      March
      31, 2006, pursuant to Section 4 of our Bylaws, Mr. Joseph Wallen nominated,
      and
      our board appointed, Mr. James B. Panther, II and Mr. Chris Philips as directors
      of the company. All of our directors approved the appointments of Messrs.
      Panther, II and Philips to our board.





On
      March
      31, 2006, following the discovery that Mr. Stinson was not a validly appointed
      officer of the company, pursuant to Section 4 of our Bylaws, our board appointed
      Mr. James B. Panther, II as our interim President and Chief Executive
      Officer.





On
      April
      2, 2006, a majority of the voting members of our board, Wallen, Irwin, Brown
      and
      Philips, voted to terminate Mr. William Huntington Stinson from his
      position as Chief Operating Officer of the company.





On
      April
      4, 2006, we filed a Petition and Application For Temporary Restraining Order,
      Temporary Injunction and Permanent Injunction, and Request for Order for
      Deposition to Investigate Claims against our former Chief Operating Officer,
      William Huntington Stinson, Nana Asomani-Arko and Norman S. Neidell in the
      11 th Judicial
      District in the District Court of Harris County, Texas.




On
      April
      10 th ,
      2006, a
      settlement was reached in the Petition lawsuit and read into the court record.
      As a condition for our dismissing the lawsuit, Mr. Stinson agreed, in part,
      as
      follows: (i) that Mr. Stinson did not dispute the authority of our board of
      directors that was appointed in our March 31, 2006 board resolution; (ii) that
      Mr. Stinson would assist in transferring control of company monies he had
      control of into a company account that he was not a signatory; and (iii) that
      as
      of the date of the settlement, Mr. Stinson did not claim to be a member of
      our
      board of directors or an officer of the company.




On
      April
      18, 2006, we filed a non-suit in the Petition lawsuit, dismissing the case
      against all defendants.


On
      April
      19, 2006, Jim Irwin resigned from his position on our board of directors.
      Currently, four persons serve on our board of directors: Douglas Brown, James
      B.
      Panther, II, Chris Phillips and Joseph F. Wallen.





On
      April
      21, 2006, pursuant to the terms of the settlement agreement with Mr. Stinson,
      we
      appeared at 9:00 a.m. at our Houston, Texas office for the scheduled meeting
      with Mr. Stinson which had been confirmed by Mr. Stinson’s former counsel. Mr.
      Stinson failed to appear for the meeting.





On
      April
      24, 2006, our board of directors resolved that because: (i) we had in good
      faith
      attempted to comply with the terms of the settlement agreement with Mr. Stinson;
      (ii) Mr. Stinson failed to attend the meeting; (iii) there were significant
      costs associated with making additional attempts to meet with Mr. Stinson;
      and
      (iv) the members of the Board of Directors were disinterested in doing any
      business with Mr. Stinson, we would not make any further attempts to deal
      directly with Mr. Stinson relative to complying with this term of the settlement
      agreement.





On
      April
      24, 2006, we received a compensation demand from Mr. Stinson claiming wages
      owed
      from August 2005 through April 2006. On April 12, 2006, we receive a
      compensation demand from N.S. Neidell & Associates claiming that we owned
      him compensation for his services. We do not believe that either Mr. Stinson
      or
      Mr. Neidell are legally entitled to the compensation they claim.





On
      April
      24, 2006, we entered into, and our board of directors approved, an employment
      agreement with James B. Panther II, who for a term of 24 months, shall serve
      as
      our President and Chief Executive Officer.





On
      April
      24, 2006, we entered into, and our board of directors approved, an employment
      agreement with Mark L. Baum, Esq. who, for a term of 24 months, shall serve
      as
      our General Counsel.





On
      April
      24, 2006, we entered into, and our board of directors approved, a 12 month
      employment agreement with Joseph Wallen to serve as our Chief Financial
      Officer.





On
      April
      24, 2006, we entered into, and our board of directors approved, a 24 month
      consulting agreement with Business Consulting Group Unlimited, Inc. Under the
      terms of the agreement, BCGU will provide the Company with a part-time
      Controller, bookkeeping, reception, clerical, filing, data management and
      staffing services.





On
      April
      24, 2006, we entered into, and our board of directors approved, our 2006
      Directors Annual Compensation Program.





On
      April
      24, 2006, we entered into, and our board of directors approved, a 3 year
      sublease agreement with Business Consulting Group Unlimited, Inc., allowing
      us
      to have access to the entire BCGU office space.





On
      May
      24, 2006, we canceled the February 15 , 2006, Memorandum with L-TEXX Petroleum,
      LP, L-TEXX Management, LLC and Longleaf Production, LLC. The cancellation
      terminated our possible acquisition of the Longleaf entities and/or their
      assets.





On
      May
      31, 2006, we entered into a new oil purchase agreement with Big Tex Crude,
      Inc.
      The contract is for 30 days and continues month to month
      thereafter.





**Summary
      of Current Projects**





We
      currently hold interests in six oil and gas properties: the Acadia North and
      Empress properties in Alberta, Canada; and the Hawkeye, Nettie Gardner, and
      Midkiff lease properties in Texas, and the Odom-Martin Ranch No. 1 well in
      Texas. Our Canadian ownership is held by Transaction in trust for Quest Canada
      Corp. for sections 1, 11, 12 and 23 and by Morraine Resources for sections
      22
      and 34.





Mergers,
      acquisitions, and farm-ins have added additional potential for adding proved
      gas
      reserves most notably the two additional sections of sections of land in the
      Acadia Project area.  We will be updating the proved reserve estimates from
      Chapman Engineering once the new 3D seismic data collected and processed over
      our current five sections in Acadia North is interpreted.





We
      successfully brought Acadia North well “10-22 ” on-line effective October 15,
      2005. The well was producing an average of 1.82 MMCF for a total of 130 MMCF
      of
      natural gas since production began. However, due to forces of nature, Well
      10-22
      was shut in from on March 22, 2006 until April 24, 2006. Well 10-22 is currently
      operating but at a reduced rate of production. Well 10-22 contributed $1,560,443
      in revenues for the year with a total production of 215.38 MMCF.





In
      addition, with the purchase of the Midkiff Field that is contiguous with the
      Hawkeye Field, we realized significant increase in our oil holdings. The oil
      located in our Hawkeye, Nettie Gardner, and Midkiff leases are located in
      Eastland and McCulloch counties, in Central Texas. Reports prepared by Gleason
      Engineering on each of these acquisitions indicate that oil was recoverable
      from
      previously produced reservoirs, primarily the Adams Branch Limestone. These
      properties were acquired not for their existing production in the Shallow Adams
      Branch Limestone but their upside potential in the deeper reservoirs, including
      the Caddo Limestone, Marble Falls Limestone, Ellenberger, and the Barnett Shale.
      While these zones have not been evaluated on our leases, the Marble Falls and
      Caddo limestones are known to be productive in the area. All surrounding leased
      lands are productive in the Adams Branch limestone in the immediate area. A
      discovery in any one of the deeper zones could increase our proved reserve
      base
      significantly. Our Hawkeye, Midkiff and Nettie Gardner leases are mature and
      have established infrastructure consisting of approximately 200 well heads
      with
      oil and gas behind pipe.





Seven
      drilling locations have been surveyed on the Texas properties. Five wells on
      the
      Nettie Gardner lease (Exoc Field) and two in the Hawkeye Field area are planned
      as soon as practical. Approval to start the Nettie Gardner drilling program
      by
      the Texas Railroad Commission has been received. The Nettie Gardner program
      involves the drilling to eleven hundred feet through the Gardner sand zone,
      the
      main productive unit in the field. The primary objective is the Jennings’s gas
      sand at approximately 950 feet which overlies the Gardner sand. This sand was
      productive in the Gardner No.1 well and placed online by the previous operator
      with a one-mile feeder line into the main gas pipeline to the east. A dispute
      with the buyer on pricing scenario led to the abandonment of the well and
      dismantling of the line. The Jennings gas sand is also present in the Gardner
      No.2 well and preliminary analyses indicate that it will be productive. The
      development scenario includes putting the five new drills online, a
      re-completion of the Gardner No.1 well, perfing the Jennings sand in the Gardner
      No.1 well and placing all seven wells online.





Our
      financial results depend on a number of factors with the biggest factor being
      commodity prices. Commodity prices are largely out of our control and are
      anticipated to remain volatile for the foreseeable future. Natural gas prices
      in
      particular have been particularly volatile for the past four years and are
      anticipated to be so during the next four or five years. Other factors such
      as
      pipeline availability, changes in market demand, weather, capacity constraints,
      and inventory storage levels can affect deliverability.





This
      instability of prices has led us to formulate plans to periodically enter into
      price-risk-management scenarios. These scenarios will include futures, options,
      swaps, and collars on some portion of our production. We believe these scenarios
      will help us, in the near future, to reduce our exposure to price fluctuations.





We
      will
      continue to invest a substantial portion of our operating cash flows into
      acquiring producing/infill drilling opportunities and the acquisition of 3D
      seismic data to thoroughly evaluate opportunities.





**Exploration
      Activities**





**Acadia
      North Project, Alberta**





The
      Acadia Project was first announced in December 2004, by signing a farm-in
      agreement with Vega Resources for two sections 34-25-02W4M and 22-25-02W4M
      in
      February 2005.  The lease is located approximately 160 miles east of the
      City of Calgary, Alberta. On September 9, 2005 we announced the successful
      bid
      for section 23-25-2W4M with drilling right from surface to basement.
 Section 23 was released from Husky Oil and returned to Crown for sale.
 Section 23 is a known producer.





In
      the
      third quarter we reached a significant milestone with the successful tie-in
      and
      commencement of production from gas well 10-22 on October 15, 2005. Production
      started at a rate of 2 million cubic feet of gas per day (mmcfd) and achieved
      an
      average flow rate of 1.82 mmcfd for the quarter.  A total of 130 MMscf was
      produced from well 10-22 contributing to our entire revenue of $1,126,859 for
      the quarter.





On
      November 16, 2005 the Company was successful in our bid for Section 11, Twp
      26
      Rge 2 W4M and Section 12, Twp 26 Rge 2 W4M.  The Acadia North project now
      consists of five sections for a total 3,200 acres.





On
      December 7, 2005, PetroSearch was retained to manage and conduct 3D seismic
      acquisition over 10 square miles in the Acadia Valley.  Acquisition of data
      was completed in early January 2006 and we are in the process of evaluating
      the
      date to interpret the hydrocarbon reservoir delineation.  Once results are
      available and feasibility is determined, we will commence drilling
      operations.





In
      our
      third fiscal quarter we concluded a 3D acquisition program over our main
      Canadian project Acadia North. We incurred capital expenditures of approximately
      $750,000 with the collection of approximately 10 square miles of high quality
      3D
      data. The purpose of this program was to accelerate the development of the
      Acadia North properties by coming up with possible alternative development
      scenarios including the use of medium-length laterals in the Viking sand
      reservoir section and assessing the deeper potential on our
      acreage.





We
      are
      currently in the process of interviewing industry recognized independent third
      party firms to review and analyze our three dimensional geophysical data in
      Acadia. Until the data has been properly analyzed by the third party firms,
      we
      do not intend to allocate any cash resources towards new drilling projects
      in
      Acadia.




**Empress
      Prospect, Alberta**





Our
      Empress leases consist of approximately four sections of Crown P&NG rights
      in Eastern Alberta approximately 160 miles due east of Calgary. This prospect
      is
      a combination oil and gas play with prospective reservoirs at several levels.
      Gas wells in the area have produced at rates of up to three million cubic feet
      a
      day at the Viking sandstone level. One well was drilled at the end of the third
      quarter. Testing of three oil and gas bearing zones has been completed and
      results are currently being processed to determine commercial viability and
      production levels.  The well is presently in “shut-in” status waiting for
      the scheduling of 3D seismic crews.  Upon completion of seismic
      acquisition, interpretation and feasibility studies, we will implement a drill
      program designed to exploit the gas bearing zones.





**Hawkeye
      Property, Eastland County, Texas**





We
      formally acquired Wallstin Petroleum, LLC, “Wallstin,” on August 8, 2005.
 Wallstin brought with it a management team with industry experience in
      junior development plays and recognizing undervalued opportunities.
      Additionally, Wallstin’s relationships with leaseholders helped us acquire
      leases located in Eastland County, Texas and McCulloch County, Texas. This
      led
      to the acquisition of the Midkiff extension to the Hawkeye area.





The
      Eastland County, Texas leases, “Hawkeye/Midkiff,” consist of 11 oil leases
      totaling just over a thousand acres, more or less, with approximately 200
      existing wells. On December 1, 2005 we purchased the Hawkeye/Midkiff leases
      for
      $300,000.  This property consists of 1,070 acres consisting of 7 leases and
      91 wells of which 69 are known producers, 16 are injection wells, and there
      are
      8 water supply wells.  We own 100% of the working interest with an average
      73% net revenue interest in all the leases.  Production on the
      Hawkeye/Midkiff occurs from the shallow Adams Branch Limestone in the Canyon
      Group at a depth of approximately 1,100 feet. Further analysis of the
      Hawkeye/Midkiff revealed that of the 200 existing wells there are approximately
      140 capable of being placed on production. After the initial flush production,
      the estimated daily production per well on average is 4-5 barrels of oil per
      day. The addition of the Midkiff wells have lowered our production estimate
      per
      well from last quarter based on some of the preliminary production figures
      but
      we still anticipate a low initial capital expenditure per well to place them
      on
      production. These leases remain an attractive investment.





**Nettie
      Gardner Property, McCulloch County, Texas**





The
      McCulloch County, Texas lease, “Gardner,” consists of 116 acres, more or less,
      with 2 existing wells—one gas and one oil.  We purchased the Gardner lease
      in July, 2005 for $17,500. We have a 100% working interest with an 80% net
      revenue interest in the Gardner leases.  Production on the Gardner occurs
      from the Jennings gas sand and the Gardner oil sand at a total depth of 1,050
      feet.  We have located a drilling contractor and will sign a drilling
      contract as soon as practical.  Five new wells are proposed on the Gardner
      lease consisting of five gas wells depending on whether the Jennings gas sand
      is
      present in all wells. The Gardner oil sand is present in all the wells in the
      area and will be completed if the Jennings sands are not encountered. A
      work-over project is planned for the existing gas well, the Gardner No. 1 well.
      This well will be cleaned up and placed back on production. The neutron-density
      log for Gardner No.2 well indicates that the Jennings sand above the Gardner
      sand contains gas and has not been perforated and should be as productive as
      the
      Jennings sand in the Gardner No.1 well. The initial plan after drilling and
      completion of the gas wells is still to place a dehydrator on the lease and
      establish gas production to the main gas line.





On
      February 1, 2006 we were notified by the Texas Railroad Commission that the
      five
      (5) well drilling program for Nettie Gardner lease was approved and an estimated
      spud date of February 8, 2006 was acknowledged by the drilling company. However
      we were unable to begin drilling at that time. We are currently in the process
      of renegotiating the “surface damage” clause of the Gardner lease and hope to
      reschedule the spud date as soon as the lease has been finalized. The Hawkeye
      field also received TRRC approval for two (2) deep wells into the Barnett Shale
      to test for deep gas.  Our spud of these wells is planed to commence
      following the Nettie Gardner drilling program.





**Odum-Martin
      Ranch No. 1, Parker County, Texas**





On
      February 6, 2006 we signed a joint venture participation agreement with Gaither
      Petroleum for a 4.5% interest in the Odum-Martin Ranch No. 1 horizontal well.
       Other participants include Sauder Management Company, Triad Oil and Gas
      LLC, Ryder Scott Oil Company and Carrizo Oil and Gas Inc. (NASD:CRZO).  The
      well has been spud and when drilling begins, is expected to take a month to
      drill to TVD of 6,200 feet and MD of 9,500 feet.  Our commitment will be
      4.5% of $3,000,000 or $135,000.





**Other
      Activities**





**Petrostar
      Oil Services**





In
      September 2005, we formed a drilling services company, known as Petrostar Oil
      Services, Inc. as our wholly owned subsidiary. At this time, Petrostar has
      purchased a service rig and this newly formed company will be our oil and gas
      service division to conduct the workover operations on the Hawkeye and Gardner
      leases.  The service rig is on the Hawkeye location ready to conduct
      workover operations.  In addition, Petrostar will generate revenues by
      conducting workover operations for third party companies when not operating
      on
      our leases.





**Termination
      of Longleaf Transaction**





On
      February 15, 2006 we executed the Longleaf Purchase Memorandum with L-TEXX
      Petroleum, LP, L-TEXX Management, LLC and Longleaf Production, LLC. Both
      companies are managed by L-TEXX Management.





We
      intended to incorporate the Longleaf Purchase Memorandum into a formal
      Acquisition Agreement which would close 45 days following an exclusive
      opportunity to conduct due diligence on Longleaf. As of the date of this Report,
      the 45 day exclusive period has passed, we have not closed on the Longleaf
      transaction and we have terminated our relationship with Longleaf.





**Competition**





We
      compete in the sale of oil and natural gas on the basis of price, and on the
      ability to deliver products.  The oil and natural gas industry is intensely
      competitive in all phases, including the exploration for new production and
      the
      acquisition of equipment and labor necessary to conduct drilling
      activities.  The competition comes from numerous major oil companies as
      well as numerous other independent operators.  There is also competition
      between the oil and natural gas industry and other industries in supplying
      the
      energy and fuel requirements of industrial, commercial and individual
      consumers.  We are a minor participant in the industry and compete in the
      oil and natural gas industry with many other companies having far greater
      financial, technical and other resources.





**Governmental
      Regulation**





Both
      Canada and the United States have regulatory provisions relating to permits
      for
      the drilling of wells, the spacing of wells, the prevention of oil and natural
      gas waste, allowable rates of production and other matters.  The amount of
      oil and natural gas produced is subject to control by regulatory agencies in
      each province and state that periodically assign allowable rates of
      production.  The Province of Alberta and Government of Canada also monitor
      and regulate the volume of natural gas that may be removed from the province
      and
      the conditions of removal.




The
      right
      to explore for and develop oil and natural gas on lands in Alberta, Saskatchewan
      and British Columbia is controlled by the governments of each of those
      provinces.  Changes in royalties and other terms of provincial leases,
      permits and reservations may have a substantial effect on our operations. 
In addition to the foregoing, in the future, our Canadian operations may be
      affected from time to time by political developments in Canada and by Canadian
      Federal, provincial and local laws and regulations, such as restrictions on
      production and export, oil and natural gas allocation and rationing, price
      controls, tax increases, expropriation of property, modification or cancellation
      of contract rights, and environmental protection controls. Furthermore,
      operations may also be affected by United States import fees and
      restrictions.




**Employees**





We
      currently have seven employees among the parent and all subsidiary companies.
      We
      intend to hire additional personnel and our employees will be entitled to paid
      vacation, paid sick days, and personal days off depending on job classification,
      length of service, and other factors.  Our policy will be to recognize the
      cost of compensated absences when actually paid to employees.





We
      have
      not entered into a collective bargaining agreement with any union.  We have
      not experienced any work stoppages and consider the relations with the
      individuals working for us to be good.





**Item
      1A. Risk Factors and Cautionary Statement Regarding Forward-Looking
      Information**





An
      investment in our common stock involves a high degree of risk. You should
      carefully consider the following risk factors and the other information in
      this
      prospectus before investing in our common stock. Our business and results of
      operations could be seriously harmed by any of the following risks. The trading
      price of our common stock could decline due to any of these risks.





**Our
      former Chief Operating Officer, William Huntington Stinson and Mr. Norman S.
      Neidell may have a potential lawsuit against us.**





Our
      former Chief Operating Officer, William Huntington Stinson and Norman S. Neidell
      may have claims against us for certain monies they claimed they were owed in
      connection to their services as our Chief Operating Officer and as an alleged
      outside consultant. We believe that Mr. Stinson is claiming approximately
      $41,500 and Mr. Neidell is claiming approximately $18,000.





**Our
      Acadia North well “10-22” was shut in and not producing for approximately one
      month.**





Due
      to
      forces of nature, Well 10-22 was shut in from March 22, 2006 until April 24,
      2006. Well 10-22 is currently operating, but at a reduced rate of production.
      Well 10-22 contributed $1,126,859 in revenues for our third quarter. As of
      March
      31, 2006, Well 10-22 has total production of 215.38 MMCF. We make no guarantee
      that Well 10-22 will stay in production.





**We
      are currently in default on our Senior Secured Convertible Promissory Notes
      and
      Zero Coupon Notes.**




On
      October 6, 2005, we entered into a senior secured convertible note financing
      transaction with twenty five (25) accredited investors pursuant to which the
      investors agreed to loan us an aggregate principal amount of $8 million. The
      notes are released in two tranches of which $6 million was received at closing
      and the balance of $2 million will be released to us upon the successful
      effectiveness of a Registration Statement. We are in default under the terms
      of
      the notes for failing to obtain an effective Registration Statement within
      the
      time period prescribed under the terms of the notes. Our default could: (i)
      trigger the “cashless exercise” provision of the Series A, B & C warrants
      which would allow the warrants to be exercised by the holder without any funds
      being paid to us; or (ii) cause the notes to become immediately due and payable.
      If all of the notes were to become immediately due and payable, we would not
      have sufficient cash on hand to pay the notes and such demands for payment
      could
      potentially cause the company to become insolvent. In addition, because we
      have
      failed to obtain an effective Registration Statement within the time period
      prescribed by the Note and Warrant Purchase Agreement, the investors could
      view
      our failure as a breach of Section 4.1 of the Note and Warrant Purchase
      Agreement and, therefore, provide a basis for the investors not to provide
      the
      second $2 million tranche of the original $8 million investment.





**We
      are in default under the terms of the Senior Secured Convertible due to our
      failure to make the required principal and interest
      payments.**





We
      are
      required to make monthly principal and interest payments under the terms of
      our
      Senior Secured Convertible Promissory Notes. If a Registration Statement
      registering the shares underlying the notes is not effective, we are required
      to
      make the monthly payments in cash instead of registered shares of our common
      stock. Because a Registration Statement is not effective, we have made the
      first
      three required principal and interest payments in cash pursuant to the terms
      of
      the notes. However, due to our current cash position, we do not intend to make
      any additional principal and interest payments in cash to the investors. Making
      the payments in cash would impair our ability to operate on a day-to-day basis.
      Should a Registration Statement become effective, we will be able to make any
      delinquent and future principal and interest payments under the terms of the
      notes to the investors in the form of registered shares of our common stock.
      The
      fact that we will not make the June 2006 principal and interest payments to
      our
      investors in cash will mean that we will be in default under the terms of the
      notes. Such a default may provide the basis for the investors to force a
      liquidation of our assets because all of our assets are secured by the notes.
      In
      the case of the liquidation of our assets, our common shareholders will likely
      lose all of their investment in our common stock.





**The
      warrants issued pursuant to the October 6, 2005 Senior Secured Promissory Note
      and Zero Coupon Note financing contain a “cashless exercise” provision which may
      not bring in any cash to the company.**





Pursuant
      to the October 6, 2005 senior secured convertible note financing transaction
      with twenty five (25) accredited investors, we issued Series A, B and C
      warrants. We also issued Series A, B, C and D warrants to the Placement Agent.
      Assuming all of the warrants are exercised for cash, we may receive up to
      $37,025,000 from the exercise of the warrants. However, the Series A, B and
      C
      warrants issued to the investors contain a “cashless exercise” provision whereby
      the holders may exercise the warrant without payment to us. The “cashless
      exercise” provision may be utilized by the holder only if one year has elapsed
      since the date of issuance of the warrant and a Registration Statement
      registering the common stock underlying the warrant is not in effect as
      required. The Series A, B, C and D warrants issued to the Placement Agent also
      contain a “cashless exercise” provision which may be utilized by the holder
      without restriction.





**There
      may be a conflict of interest between Messrs. Panther, II and Baum and the
      company.**





Messrs.
      James B. Panther, II and Mark L. Baum, Esq. are officers of the company as
      well
      as principals of Business Consulting Group Unlimited Inc. which has been
      retained to provide internal business operations services. A potential conflict
      may arise between the duties of Messrs. Panther, II and Baum while acting as
      an
      officer of the company and while acting simultaneously as principals of Business
      Consulting Group Unlimited, Inc.





**We
      are not subject to the corporate governance rules of any national securities
      exchange.**




Our
      common stock is not listed or quoted on the New York Stock Exchange, the Nasdaq
      National Market or the American Stock Exchange.  As a result, we are not
      subject to the corporate governance requirements of those regulatory
      organizations. These requirements are generally intended to increase the
      likelihood that boards will make decisions in the best interests of
      stockholders. Specifically, we are not required to have a majority of our
      directors be independent or to have compensation, nominating and corporate
      governance committees comprised solely of independent directors. As a result,
      our stockholders are not afforded the protections of these corporate governance
      requirements.





**The
      agreements we entered in connection with our October 2005 financing contain
      covenants and restrictions that may limit our ability to operate our
      business.**




The
      agreements relating to our October 2005 financing limit our ability to, among
      other things: declare or pay dividends or distributions on any equity
      securities, create or incur additional indebtedness, create additional liens
      on
      our assets and repurchase common stock.  These restrictions could adversely
      affect our ability to borrow additional funds or raise additional equity to
      fund
      our future operations. In addition, if we fail to comply with any of the
      covenants contained in the agreements or otherwise default under the documents,
      the holders may accelerate the indebtedness, and we may not have
      sufficient funds available to make the required payments.  We are currently
      in breach of certain of the terms of these documents.





**We
      are an exploration stage company and we have limited
      history.**





We
      are an
      exploration stage company that has limited operations. Our plans and businesses
      are “proposed” and “intended” but we may not be able to successfully implement
      them. Our primary business purpose is to acquire and participate in exploration
      stage oil and gas properties around the globe. As of the date of this
      prospectus, our operations are limited to two operating projects. As an
      exploration stage company, our prospects are subject to all of the risks,
      expenses, and uncertainties frequently encountered by companies in the oil
      and
      gas business. In addition, we are subject to all of the risks, uncertainties,
      expenses, delays, problems, and difficulties typically encountered in the
      establishment of a new business. We expect that unanticipated expenses,
      problems, and technical difficulties will occur and that they will result in
      material delays in the development of our projects. We
      may
      not obtain sufficient capital or achieve a significant level of operations
      and,
      even if we do, we may not be able to conduct such operations on a profitable
      basis.





**There
      is a limited trading market for our common stock.**





Our
      common stock is traded on the OTC Bulletin board under the symbol “QOIL” There
      has been limited trading activity in our common stock recently, and when it
      has
      traded, the price has fluctuated widely. We consider our common stock to be
      “thinly traded” and any last reported sale prices may not be a true market-based
      valuation of the common stock. A consistently active trading market for our
      common stock may not develop at any time in the future. Stockholders may
      experience difficulty selling their shares if they choose to do so because
      of
      the illiquid market and limited public float for our common stock. It is
      possible that even
      a
      limited public market for our common stock will not be sustained after the
      date
      of this prospectus or at a time at which you may desire to sell your shares.





**Trading
      in our securities could be subject to extreme price fluctuations that could
      adversely affect your investment.**





The
      market prices for securities of energy related companies, particularly those
      that are not profitable, have been historically highly volatile. Publicized
      events and announcements may have a significant impact on the market price
      of
      our common stock. In addition, the stock market from time to time experiences
      extreme price and volume fluctuations which particularly affect the market
      prices for emerging and energy companies, such as ours, and which are often
      unrelated to the operating performance of the affected companies.





These
      broad market fluctuations may adversely affect the ability of a stockholder
      to
      dispose of our common stock at a price equal to or above the price at which
      the
      common stock was purchased. In addition, in the past, following periods of
      volatility in the market price of a company’s securities, securities
      class-action litigation has often been instituted against that company. This
      type of litigation, if instituted, could result in substantial costs and a
      diversion of management’s attention and resources, which could materially
      adversely affect our business, financial condition and results of operations.




**Our
      common stock is considered to be a “penny stock” and, as such, the market for
      our common stock may be further limited by certain SEC rules applicable to
      penny
      stocks.**





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





**Substantial
      sales of our common stock may impact the market price of our common stock.**




Future
      sales of substantial amounts of our common stock, including shares that we
      may
      issue upon exercise of warrants, could adversely affect the market price of
      our
      common stock. Further, if we raise additional funds through the issuance of
      common stock or securities convertible into or exercisable for common stock,
      the
      percentage ownership of our stockholders will be reduced and the price of our
      common stock may fall.




**Outstanding
      secured convertible notes may substantially increase the number of outstanding
      shares of our common stock.**





On
      October 6, 2005, we entered into a convertible note financing transaction with
      twenty five (25) accredited investors pursuant to which the investors agreed
      to
      loan us an aggregate principal amount of $8,000,000. We agreed to issue to
      the
      investors; senior secured convertible notes, zero coupon convertible notes
      and
      common stock purchase warrants. The senior secured convertible notes are due
      October 6, 2007, and bear interest, in arrears, at a rate per annum equal to
      ten
      percent (10%), payable annually on October 1 of each year commencing October
      1,
      2006 at our option in (A) cash, (B) additional senior secured convertible
      promissory, or (C) in registered shares of our common stock. Interest is
      computed on the basis of a 360-day year of twelve (12) 30-day months. The senior
      secured convertible notes are convertible at any time, at the option of the
      note
      holder, into such number of fully paid and non-assessable shares of our common
      stock as is determined by dividing (x) that portion of the outstanding principal
      balance plus any accrued but unpaid interest under the notes at the date that
      the note holder elects to convert by (y) the conversion price of forty cents
      ($0.40) which is subject to adjustment.





**We
      do not expect to pay dividends for the foreseeable future.**





For
      the
      foreseeable future, it is anticipated that earnings, if any, that may be
      generated from our operations will be used to finance our operations and that
      cash dividends will not be paid to holders of our common stock.





**Any
      projections used in this prospectus may not be accurate** .





Any
      and
      all projections and estimates contained in this prospectus or otherwise prepared
      by us are based on information and assumptions which management believes to
      be
      accurate; however, they are mere projections and no assurance can be given
      that
      actual performance will match or approximate the projections.





**As
      a result of our intensely competitive industry, we may not gain enough market
      share to be profitable.**




The
      oil
      and gas industry is intensely competitive. We have numerous competitors in
      the
      United States and elsewhere. Because we are pursuing potentially large markets,
      our competitors include major, multinational oil and gas companies. Many of
      these competitors have greater financial, research and other resources than
      we
      do. If we are unable to compete successfully, we may never be able to sell
      enough products at a price sufficient to permit us to generate profits.





**We
      may not have sufficient funds to operate our business and may not be able to
      obtain additional financing.**





If
      we do
      not operate within our budget, we will require additional funds to continue
      our
      business. We may not be able to obtain additional financing as needed, on
      acceptable terms, or at all, which would force us to delay our plans for growth
      and implementation of our strategy which could seriously harm our business,
      financial condition, and results of operations. If we need additional funds,
      we
      may seek to obtain them primarily through stock or debt financings. Those
      additional financings could result in dilution to our stockholders.





**We
      may need to raise additional money before we achieve profitability; if we fail
      to raise additional money, it could be difficult to continue our business.**




Based
      on
      our current plans, we believe that we may not have sufficient financial
      resources to meet our operating expenses and capital requirements. We may seek
      additional funding through public or private financing or through collaborative
      arrangements with strategic partners.




You
      should be aware that in the future:




•
            we
                may not obtain additional financial resources when necessary or on
                terms
                favorable to us, if at all;





•  any
      available additional financing may not be adequate; and





•  we
      may be
      required to sell shares of our common stock at extremely discounted prices
      in
      order for us to obtain additional financing.




If
      we
      cannot raise additional funds when needed, or on acceptable terms, we will
      not
      be able to continue to operate.




**We
      require substantial capital requirements to finance our
      operations.**





We
      have
      substantial anticipated capital requirements. Although we believe we have
      sufficient capital to fund current operations, we may require additional capital
      for future operations. We plan to finance anticipated ongoing expenses and
      capital requirements with funds generated from the following
      sources:





•
cash
      provided by operating activities;





•
      available cash and cash investments; and





•
capital
      raised through debt and equity offerings.





Although
      we believe the funds provided by these sources will be sufficient to meet our
      anticipated cash requirements, the uncertainties and risks associated with
      future performance and revenues will ultimately determine our liquidity and
      our
      ability to meet anticipated capital requirements. If declining prices cause
      our
      anticipated revenues to decrease, we may be limited in our ability to replace
      our proved reserves, to maintain current production levels and to undertake
      or
      complete future drilling and acquisition activities. As a result, our production
      and revenues would decrease over time and may not be sufficient to satisfy
      our
      projected capital expenditures. We may not be able to obtain additional
      financing in such a circumstance.





**The
      oil and natural gas market is volatile and exposes us to financial
      risks.**





Our
      profitability, cash flow and the carrying value of our oil and gas properties
      are highly dependent on the market prices of oil and natural gas. Historically,
      the oil and natural gas markets have proven cyclical and volatile as a result
      of
      factors that are beyond our control. These factors include changes in tax laws,
      the level of consumer product demand, weather conditions, the price and
      availability of alternative fuels, the price and level of imports and exports
      of
      oil and natural gas, worldwide economic, political and regulatory conditions,
      and action taken by the Organization of Petroleum Exporting Countries. Any
      significant decline in oil and natural gas prices or any other unfavorable
      market conditions could have a material adverse effect on our financial
      condition and on the carrying value of our proved reserves consequently, we
      may
      not be able to generate sufficient cash flows from operations to meet our
      obligations and to make planned capital expenditures.




**Failure
      to fund continued capital expenditures could adversely affect
      results.**





If
      our
      anticipated revenues substantially decrease as a result of lower oil and gas
      prices or otherwise, we may have a limited ability to expend the capital
      necessary to replace our proved reserves or to maintain production at expected
      levels, resulting in a decrease in production over time. We expect that we
      will
      continue to make capital expenditures for the acquisition, exploration and
      development of oil and gas. Historically, we have financed these expenditures
      primarily with proceeds from debt and equity financings. We believe that we
      will
      have sufficient cash flow from operations and financings to fund capital
      expenditures. However, if our cash flow from anticipated operations is not
      sufficient to satisfy our capital expenditure requirements, there can be no
      assurance that additional debt or equity financing or other sources of capital
      will be available to meet these requirements. If we are not able to fund our
      capital expenditures, our interests in some of our properties may be reduced
      or
      forfeited and our future cash generation may be materially adversely affected
      as
      a result of the failure to find and develop additional oil and gas
      fields.





**We
      depend heavily on key personnel, and loss of the services of one or more of
      our
      key executives or a significant portion of any prospective local management
      personnel could weaken our management team adversely affecting our operations.**





Our
      success largely depends on the skills, experience and efforts of our senior
      management, particularly our interim President, Chief Executive Officer and
      Director, James B. Panther, II, our Chief Financial Officer and Director, Joseph
      F. Wallen, and our Director, Chris Phillips, CPA. The loss of services of one
      or
      more members of our senior management or of a significant portion of any of
      our
      local management staff could weaken significantly our management expertise
      and
      our ability to operate efficiently. We do not maintain key man life insurance
      policies on any of our officers, although we may obtain such insurance policies
      in the future.





**There
      are warrants to purchase up to 67,604,606 shares of our common stock currently
      outstanding.**





We
      have
      granted warrants to purchase an aggregate of 67,604,606 shares of our common
      stock to various persons and entities, of which warrants to purchase up to
      67,604,606 shares of our common stock are currently exercisable. The exercise
      prices on these warrants range from $0.1503 per share to $0.80 per share. If
      issued, the shares underlying the warrants would significantly increase the
      number of shares of our common stock currently outstanding and will dilute
      the
      holdings and voting rights of our existing stockholders.





**Issuing
      preferred stock with rights senior to those of our common stock could adversely
      affect holders of common stock.**




Our
      charter documents give our board of directors the authority to issue series
      of
      preferred stock without a vote or action by our stockholders. The board also
      has
      the authority to determine the terms of preferred stock, including price,
      preferences and voting rights. The rights granted to holders of preferred stock
      may adversely affect the rights of holders of our common stock. For example,
      a
      series of preferred stock may be granted the right to receive a liquidation
      preference - a pre-set distribution in the event of a liquidation - that would
      reduce the amount available for distribution to holders of common stock. In
      addition, the issuance of preferred stock could make it more difficult for
      a
      third party to acquire a majority of our outstanding voting stock. As a result,
      common stockholders could be prevented from participating in transactions that
      would offer an optimal price for their shares.





**Costs
      of legal matters, environmental liabilities and regulation could exceed
      estimates.**





We
      may
      become parties to a number of legal and administrative proceedings involving
      environmental and/or other matters pending in various courts or agencies. These
      include proceedings associated with facilities currently or previously owned,
      operated or used by us and include claims for personal injuries and property
      damages. Our current operations may involve management of regulated materials
      and are subject to various environmental laws and regulations. These laws and
      regulations obligate us and/or our subsidiaries to clean up various sites at
      which petroleum and other hydrocarbons, chemicals, low-level radioactive
      substances and/or other materials have been disposed of or released. It is
      not
      possible for us to estimate reliably the amount and timing of all future
      expenditures related to environmental and legal matters and other contingencies
      because:





•
some
      sites are in the early stages of investigation, and other sites may be
      identified in the future





•
cleanup
      requirements are difficult to predict at sites where remedial investigations
      have not been completed or final decisions have not been made regarding cleanup
      requirements, technologies or other factors that bear on cleanup
      costs





•
      environmental laws frequently impose joint and several liability on all
      potentially responsible parties, and it can be difficult to determine the number
      and financial condition of other potentially responsible parties and their
      share
      of responsibility for cleanup costs





•
      environmental laws and regulations are continually changing, and court
      proceedings are inherently uncertain





•
some
      legal matters are in the early stages of investigation or proceeding or their
      outcomes otherwise may be difficult to predict, and other legal matters may
      be
      identified in the future





**Our
      estimates may prove to be inaccurate and future net cash flows are
      uncertain.**





Our
      estimates of the quantities of proved reserves and our projections of both
      future production rates and the timing of development expenditures are uncertain
      and may prove to be inaccurate. You should not construe these proved reserve
      estimates as the current market value of our oil and natural gas proved
      reserves. Any downward revisions of these estimates could adversely affect
      our
      financial condition. We also make certain assumptions regarding future oil
      and
      natural gas prices, production levels, and operating and development costs
      that
      may prove incorrect when judged against our actual experience. Any significant
      variance from these assumptions could greatly affect our estimates of proved
      reserves, future net cash flows and our ability to borrow funds.





**We
      compete against significant players in the oil and natural gas industry, and
      our
      failure in the long-term to complete future acquisitions successfully could
      reduce our earnings and cause revenues to decline.**





The
      oil
      and natural gas industry is highly competitive. Our ability to acquire
      properties and to discover additional proved reserves depends on our ability
      to
      consummate transactions in this highly competitive environment. We compete
      with
      major oil companies, other independent oil and natural gas companies, and
      individual producers and operators. Many of these competitors have access to
      greater financial and personnel resources than those to which we have access.
      Moreover, the oil and natural gas industry competes with other industries in
      supplying the energy and fuel needs of industrial, commercial and other
      consumers. Increased competition causing oversupply or depressed prices could
      materially adversely affect our revenues.





**The
      oil and natural gas market is heavily regulated.**





We
      are
      subject to various federal, state and local laws and regulations. These laws
      and
      regulations govern safety, exploration, development, taxation and environmental
      matters that are related to the oil and natural gas industry. To conserve oil
      and natural gas supplies, regulatory agencies may impose price controls and
      may
      limit our production. Certain laws and regulations require drilling permits,
      govern the spacing of wells and the prevention of waste, and limit the total
      number of wells drilled or the total allowable production from successful wells.
      Other laws and regulations govern the handling, storage, transportation and
      disposal of oil and natural gas and any byproducts produced in oil and natural
      gas operations. These laws and regulations could materially adversely impact
      our
      operations and our revenues.





Laws
      and
      regulations that affect us may change from time to time in response to economic
      or political conditions. Thus, we must also consider the impact of future laws
      and regulations that may be passed in the jurisdictions where we operate. We
      anticipate that future laws and regulations related to the oil and natural
      gas
      industry will become increasingly stringent and cause us to incur substantial
      compliance costs.





**The
      nature of our operations exposes us to environmental
      liabilities.**





Our
      operations create the risk of environmental liabilities. We may incur liability
      to governments or to third parties for any unlawful discharge of oil, gas or
      other pollutants into the air, soil or water. We could potentially discharge
      oil
      or natural gas into the environment in any of the following ways:





•
from
      a
      well or drilling equipment at a drill site





•
from
      a
      leak in storage tanks, pipelines or other gathering and transportation
      facilities





•
from
      damage to oil or natural gas wells resulting from accidents during normal
      operations





•
from
      blowouts, cratering or explosions





Environmental
      discharges may move through the soil to water supplies or adjoining properties,
      giving rise to additional liabilities. Some laws and regulations could impose
      liability for failure to obtain the proper permits for, to control the use
      of,
      or to notify the proper authorities of a hazardous discharge. Such liability
      could have a material adverse effect on our financial condition and our results
      of operations and could possibly cause our operations to be suspended or
      terminated on such property.





We
      may
      also be liable for any environmental hazards created either by the previous
      owners of properties that we purchase or lease or by acquired companies prior
      to
      the date we acquire them. Such liability would affect the costs of our
      acquisition of those properties. In connection with any of these environmental
      violations, we may also be charged with remedial costs. Pollution and similar
      environmental risks generally are not fully insurable.





Although
      we do not believe that our environmental risks are materially different from
      those of comparable companies in the oil and natural gas industry, we cannot
      assure you that environmental laws will not result in


decreased
      production, substantially increased costs of operations or other adverse effects
      to our combined operations and financial condition.





**Our
      operations entail inherent casualty risks for which we may not have adequate
      insurance.**





Our
      business plan anticipates that we will continually acquire, explore and develop
      new oil and natural gas proved reserves to replace those produced and sold.
      There is no assurance that we will be successful with our drilling, acquisition
      or exploration activities. Casualty risks and other operating risks could cause
      proved reserves and revenues to decline.





Our
      operations are subject to inherent casualty risks such as fires, blowouts,
      cratering and explosions. Other risks include pollution, the uncontrollable
      flows of oil, natural gas, brine or well fluids, and the hazards of marine
      and
      helicopter operations such as capsizing, collision and adverse weather
      conditions. These risks may result in injury or loss of life, suspension of
      operations, environmental damage or property and equipment damage, all of which
      would cause us to experience substantial financial losses.





Our
      drilling operations involve risks from high pressures and from mechanical
      difficulties such as stuck pipes, collapsed casings and separated cables.
      Although we carry insurance that we believe is in accordance with customary
      industry practices, we are not fully insured against all casualty risks incident
      to our business. We do not carry business interruption insurance. Should an
      event occur against which we are not insured, that event could have a material
      adverse effect on our financial position and our results from
      operations.




**We
      may not be able to market effectively our oil and natural gas
      production.**





We
      may
      encounter difficulties in the marketing of our oil and natural gas production.
      Effective marketing depends on factors such as the existing market supply and
      demand for oil and natural gas and the limitations imposed by governmental
      regulations. The proximity of our proved reserves to pipelines and the available
      capacity of such pipelines and other transportation, processing and refining
      facilities also affect our marketing efforts. When we discover hydrocarbons
      in
      commercial quantities, a substantial period of time may elapse before we begin
      commercial production. If pipeline facilities in an area are insufficient,
      we
      may have to wait for the construction or expansion of pipeline capacity before
      we can market production from that area. Also, natural gas wells may be shut
      in
      for lack of market demand or because of the inadequate capacity or
      unavailability of natural gas pipelines or gathering systems.





**Terrorist
      attacks and threats or actual war may negatively affect our business, financial
      condition and results of operations.**





Our
      business is affected by general economic conditions and fluctuations in consumer
      confidence and spending, which can decline as a result of numerous factors
      outside of our control, such as terrorist attacks and acts of war. Recent
      terrorist attacks in the United States, as well as events occurring in response
      to or in connection with them, including future terrorist attacks against U.S.
      targets, rumors or threats of war, actual conflicts involving the United States
      or its allies, or military or trade disruptions impacting our suppliers or
      our
      customers, may adversely impact our operations. Strategic targets such as
      energy-related assets may be at greater risk of future terrorist attacks than
      other targets in the United States. These occurrences could have an adverse
      impact on energy prices, including prices for our natural gas and crude oil
      production. In addition, disruption or significant increases in energy prices
      could result in government-imposed price controls. It is possible that any
      or a
      combination of these occurrences could have a material adverse effect on our
      business, financial condition and results of operations.





**Natural
      gas and oil drilling is a speculative activity and involves numerous risks
      and
      substantial and uncertain costs that could adversely affect us.**




Drilling
      for natural gas and oil involves numerous risks, including the risk that no
      commercially productive natural gas or oil reservoirs will be discovered. The
      cost of drilling, completing and operating wells is substantial and uncertain,
      and drilling operations may be curtailed, delayed or canceled as a result of
      a
      variety of factors beyond our control, including:





•
      unexpected or adverse drilling conditions





•
      elevated pressure or irregularities in geologic formations





•
      equipment failures or accidents





•
adverse
      weather conditions





•
      compliance with governmental requirements





•
      shortages or delays in the availability of drilling rigs, crews and
      equipment





Even
      if
      drilled, our completed wells may not produce proved reserves of natural gas
      or
      oil that are economically viable or that meet our earlier estimates of
      economically recoverable proved reserves. Our overall drilling success rate
      or
      our drilling success rate for activity within a particular project area may
      decline. Unsuccessful drilling activities could result in a significant decline
      in our production and revenues and materially harm our operations and financial
      condition by reducing our available cash and resources.





**We
      are subject to various operating and other casualty risks that could result
      in
      liability exposure or the loss of production and revenues.**





The
      natural gas and oil business involves operating hazards such as:





•
well
      blowouts





•
      mechanical failures





•
      explosions





•
      uncontrollable flows of oil, natural gas or well fluids





•
      fires





•
      geologic formations with abnormal pressures





•
      pipeline ruptures or spills





•
      releases of toxic gases





•
other
      environmental hazards and risks





Any
      of
      these hazards and risks can result in the loss of hydrocarbons, environmental
      pollution, personal injury claims and other damage to our properties and the
      property of others.





**Currency
      risks and fluctuations could negatively impact our
      company.**




We
      anticipate that some of our revenues may be received in Canadian dollars or
      other currencies other than US Dollars depending on where in the world we are
      producing oil & gas. Foreign currency can fluctuate against the US dollar in
      which the Company’s financial statements are prepared. There is no assurance
      that any currency exchange will be favorable and given that some of our major
      expenses are fixed in US dollars, our operating results could be negatively
      impacted by such currency fluctuations.
















**Cautionary
      Statement Concerning**


**Forward-Looking
      Statements**





Some
      of
      the statements in this annual report are forward looking statements, which
      are
      subject to risks and uncertainties. These risks and uncertainties could cause
      actual results to differ materially from those expressed in forward-looking
      statements. We base these forward-looking statements on our expectations and
      projections about future events, which we derive from the information currently
      available to us. Such forward-looking statements relate to future events or
      our
      future performance. Forward-looking statements are only predictions. The
      forward-looking events discussed in this annual report, the documents to which
      we refer you and other statements made from time to time by us or our
      representatives, may not occur, and actual events and results may differ
      materially and are subject to risks, uncertainties and assumptions about us.
      For
      these statements, we claim the protection of the “bespeaks caution” doctrine.
      The forward-looking statements speak only as of the date hereof, and we
      expressly disclaim any obligation to publicly release the results of any
      revisions to these forward-looking statements to reflect events or circumstances
      after the date of this filing.





**Item
      2. Description of Property**





At
      present, we do not own any property. Our executive offices are currently located
      at 2038 Corte Del Nogal, Suite 110, Carlsbad, CA 92011 and telephone number
      (760) 804-8844 and we rent a small office in Calgary, Alberta,
      Canada.





We
      have
      closed our offices located in Arlington, Texas, Houston, Texas and Vancouver,
      British Columbia, Canada. We remain obligated to our landlord in Houston, Texas.
      King Capital Corporation assumed our Vancouver lease beginning May 1, 2006,
      through the balance of the lease and provided us with a $35,000 note accruing
      interest at a rate of 8% as payment for the furniture and fixtures in the
      office.





Including
      rent and other miscellaneous expenditures, the ongoing monthly obligation until
      the end of the term of the lease is approximately $4,000 per month. It is
      possible that the Houston lease obligation will end before the term of the
      lease
      ends.





On
      April
      24, 2006, our board of directors authorized a sub-lease of space from Business
      Consulting Group Unlimited, Inc. The sub-lease will provide us with access
      to
      approximately 2,800 sq. ft. of Class A office space in San Diego County,
      California. The term of the sub-lease is 3 years with monthly rent of $5,000
      per
      month including, phone, computers, internet, utilities and office furniture
      rental.





**Item
      3. Legal Proceedings**





On
      April
      4, 2006, our board authorized the retention of the law firm of Zimmerman,
      Axelrad, Meyer, Stern & Wise, P.C. of Houston, Texas to represent the
      company as litigation counsel. Zimmerman, on behalf of the company, filed a
      Petition and Application For Temporary Restraining Order, Temporary Injunction
      and Permanent Injunction, and Request for Order for Deposition to Investigate
      Claims against our former Chief Operating Officer, William Huntington Stinson,
      Nana Asomani-Arko and Norman S. Neidell in the 11thJudicial
      District in the District Court of Harris County, Texas. The litigation arose
      from a dispute with our former Chief Operations Officer, William Huntington
      Stinson, concerning his alleged appointment as a Director, President, and Chief
      Executive Officer of the company.





On
      Thursday, April 6, 2006, our request for a Temporary Restraining Order was
      heard
      and denied by the Court. At the time that the denial for a Temporary Restraining
      Order was issued, the Presiding Judge set the hearing for our Temporary
      Injunction request for Monday, April 10, 2006. On the morning of April 10,
      2006,
      after denying a Motion and Request for Continuance filed by Mr. Stinson, Judge
      Mark Davidson commenced the Temporary Injunction hearing. During the middle
      of
      Mr. Stinson’s examination, Mr. Stinson’s counsel initiated settlement
      discussions.





On
      the
      afternoon of April 10 th ,
      2006, a
      settlement was reached and read into the court record. As a condition for our
      dismissing the lawsuit, Mr. Stinson agreed, in part, as follows: (i) that Mr.
      Stinson did not dispute the authority of our board of directors that was
      appointed in our March 31, 2006 board resolution (which was reported in Section
      5.02 of our Current Report on Form 8-K filed on April 7, 2006); (ii) that Mr.
      Stinson would assist in transferring control of company monies he had control
      of
      (and which were “frozen”) into a company account that he was not a signatory;
      and (iii) that as of the date of the settlement, Mr. Stinson did not claim
      to be
      a member of our board of directors or an officer of the company.





As
      a part
      of the settlement, we agreed to: (i) hold a meeting, attended by two members
      of
      our board of directors to discuss a proposal made by Mr. Stinson regarding
      the
      possibility of him continuing to provide services to the company; (ii) subject
      to our financial claims against Messrs. Stinson and Neidell, pay Messrs. Stinson
      and Neidell or their assigns, certain monies they claimed they were owed in
      connection to their service as our Chief Operating Officer and outside
      consultant, respectively.





On
      April
      21, 2006, pursuant to the terms of the settlement agreement with Mr. Stinson,
      we
      appeared at 9:00 a.m. at our Houston, Texas office for the scheduled meeting
      with Mr. Stinson which had been confirmed by Mr. Stinson’s former counsel. Mr.
      Stinson failed to appear for the meeting. On April 24, 2006, our board of
      directors resolved that because: (i) we had in good faith attempted to comply
      with the terms of the settlement agreement with Mr. Stinson; (ii) Mr. Stinson
      failed to attend the meeting; (iii) there were significant costs associated
      with
      making additional attempts to meet with Mr. Stinson; and (iv) the members of
      the
      Board of Directors were disinterested in doing any business with Mr. Stinson,
      we
      would not make any further attempts to deal directly with Mr. Stinson relative
      to complying with this term of the settlement agreement.





On
      April
      18, 2006, the Company filed a non-suit in the above lawsuit, dismissing the
      case
      against all defendants.





On
      April
      24, 2006, we received a compensation demand from Mr. Stinson claiming wages
      owed
      from August 2005 through April 2006. On April 12, 2006, we receive a
      compensation demand from N.S. Neidell & Associates claiming that we owned
      him compensation for his services. We do not believe that either Mr. Stinson
      or
      Mr. Neidell are legally entitled to the compensation they claim.





Currently,
      we are not a party to any pending legal proceedings.





**Item
      4. Submission of Matters to a Vote of Security Holders**





None





**PART
      II**





**Item
      5. Market for Common Equity and Related Stockholder
      Matters.**




Our
      common stock trades on the OTC Bulletin Board under the symbol “QOIL” The
      following table shows the high and low bid prices for our common stock for
      each
      quarter since April 1, 2004 as reported by the OTC Bulletin Board. We consider
      our stock to be “thinly traded” and any reported sale prices may not be a true
      market-based valuation of the stock. Some of the bid quotations from the OTC
      Bulletin Board set forth below may reflect inter-dealer prices, without retail
      mark-up, mark-down or commission and may not represent actual transactions.





**April
                1, 2005 to March 31, 2006 (OTC Bulletin Board)****High
                Bid**
            **Low
                Bid**First
                Quarter
            
            $
                .69
            $
                .09Second
                quarter
            
            .85
            .21Third
                quarter
            
            .70
            .26Fourth
                quarter
            
            .45
            .27




**April
                1, 2005 to March 31, 2006 (OTC Bulletin Board)****High
                Bid**
            **Low
                Bid**First
                Quarter (1)
            
            $
                -
            $
                -Second
                quarter
            
            .77
            .37Third
                quarter
            
            1.25
            .60Fourth
                quarter
            
            .95
            .13




(1)
      Our
      shares of common stock began trading on June 10, 2004.





**Trading
      Symbol**





Our
      common stock currently trades on the OTC Bulletin Board under the symbol “QOIL.”





**Holders**





As
      of
      August 1, 2006 there are approximately 3,871 holders of record of our common
      stock.





**Dividends**





We
      do not
      anticipate the payment of cash dividends on its common stock in the foreseeable
      future.





**Securities
      authorized for issuance under equity compensation plans**





The
      following provides information concerning compensation plans under which our
      equity securities are authorized for issuance as of the date of this
      prospectus: ****




**(a)**
            
            **(b)**
            
            **(c)****Plan
                Category**
            
            **Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))**Equity
                compensation plans approved by security holders (1)
            
            -0-
            
            n/a
            
            -0-Equity
                compensation plans not approved by security holders (3)(4)
            
            -0-
                (2)
            
            n/a
                (2)
            
            1,471,160Total
            
            0
            
            n/a
                (2)
            
            1,471,160





(1)  We
      do not
      have any equity compensation plans approved by the security
      holders.





(2)  Our
      2004
      Stock Incentive Plan and 2005 Stock Incentive Plan allows our board of directors
      to grant either stock options or compensation stock under the plans. To date,
      we
      have not granted any stock options under either plan. We have issued all of
      the
      available shares under our 2004 Stock Incentive plan.





(3)  **2004
      Stock Incentive Plan** . **** Our
      board
      of directors adopted our 2004 Stock Incentive Plan on August 5, 2004. The
      purpose of the plan is to provide us with a means of compensating selected
      key
      employees, including officers, directors and consultants for their services
      rendered in connection with the development of the company with shares of our
      common stock. The total number of shares available for the grant of either
      stock
      options or compensation stock under the plan is 6,000,000 shares, subject to
      adjustment. To date, we have issued all 6,000,000 shares of common stock
      available under the 2004 plan.




(4)  **2005
      Stock Incentive Plan** .
      Our
      board of directors adopted our 2005 Stock Incentive Plan on July 6, 2005. The
      purpose of the plan is to further align the interests of employees, directors
      and non-employee consultants with those of the stockholders by providing
      incentive compensation opportunities tied to the performance of our common
      stock
      and by promoting increased ownership of our common stock by such individuals.
      The 2005 plan is also intended to advance our interests and the interests of
      the
      stockholders of the company by attracting, retaining and motivating key
      personnel upon whose judgment, initiative and effort we are largely dependent.





The
      total
      number of shares available for the grant of either stock options or compensation
      stock under the 2005 plan is 3,000,000 shares, subject to adjustment. As of
      July
      10, 2006, we have issued 2,888,840 shares of common stock available under the
      plan.





Our
      2005
      Stock Incentive Plan is administered by a committee comprised of one or more
      members of our board of directors, or if no such committee exists, our entire
      board.





The
      committee shall have such powers and authority as may be necessary or
      appropriate for the committee to carry out its functions as described in the
      plan. Subject to the express limitations of the plan, the committee shall have
      authority in its discretion to determine the eligible persons to whom, and
      the
      time or times at which, awards may be granted, the number of shares, units
      or
      other rights subject to each award, the exercise, base or purchase price of
      an
      award (if any), the time or times at which an award will become vested,
      exercisable or payable, the performance goals and other conditions of an award,
      the duration of the award, and all other terms of the award. Subject to the
      terms of the plan, the committee shall have the authority to amend the terms
      of
      an award in any manner that is not inconsistent with the plan, provided that
      no
      such action shall adversely affect the rights of a participant with respect
      to
      an outstanding award without the participant’s consent. All interpretations,
      determinations and actions by the committee shall be final, conclusive, and
      binding upon all parties.





If
      there
      shall occur any change with respect to the outstanding shares of our common
      stock by reason of any recapitalization, reclassification, stock dividend,
      extraordinary dividend, stock split, or other distribution with respect to
      the
      shares of common stock, or any merger, reorganization, consolidation,
      combination, spin-off or other similar corporate change, or any other change
      affecting the common stock, the committee may, in the manner and to the extent
      that it deems appropriate and equitable to the participants and consistent
      with
      the terms of the plan, cause an adjustment to be made in (i) the maximum number
      and kind of shares provided, (ii) the number and kind of shares of common stock,
      or other rights subject to then outstanding awards, (iii) the exercise or base
      price for each share or other right subject to then outstanding awards, and
      (iv)
      any other terms of an award that are affected by the event.





Notwithstanding
      anything contained in the 2005 plan to cover the contrary, including any
      adjustments, the maximum aggregate number of shares of common stock that may
      be
      issued and sold under all awards granted under the plan shall be anti-dilutive
      in the event of a reverse stock split by the company and shall not result in
      any
      reduction in the number of shares available and authorized under the plan at
      the
      effective time of such reverse stock split(s).





The
      2005
      plan shall terminate on the tenth anniversary of the date of its adoption.
      Our
      board may, in its discretion and at any earlier date, terminate the plan.
      However, no termination of the plan shall adversely affect any award theretofore
      granted without the consent of the participant or the permitted transferee
      of
      the award.





**Item
      6. Management’s Discussion and Analysis**





The
      following discussion and analysis should be read in conjunction with our audited
      consolidated financial statements and related notes included in this report.
      The
      statements contained in this report that are not historic in nature,
      particularly those that utilize terminology such as “may,” “will,” “should,”
“expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable
      terminology are forward-looking statements based on current expectations and
      assumptions.





Various
      risks and uncertainties could cause actual results to differ materially from
      those expressed in forward-looking statements. Factors that could cause actual
      results to differ from expectations include, but are not limited to, those
      set
      forth under the section “Risk Factors” set forth in this report.





The
      forward-looking events discussed in this prospectus, the documents to which
      we
      refer you and other statements made from time to time by us or our
      representatives, may not occur, and actual events and results may differ
      materially and are subject to risks, uncertainties and assumptions about us.
      For
      these statements, we claim the protection of the “bespeaks caution” doctrine.
      All forward-looking statements in this document are based on information
      currently available to us as of the date of this report, and we assume no
      obligation to update any forward-looking statements. Forward-looking statements
      involve known and unknown risks, uncertainties and other factors that may cause
      the actual results to differ materially from any future results, performance
      or
      achievements expressed or implied by such forward-looking
      statements.





**General**





We
      are an
      independent exploration stage oil and natural gas company that explores for,
      acquires and develops oil and natural gas properties. Currently, our operations
      are currently focused in the United States and on the Canadian oil and gas
      fields of Alberta. We are also exploring other various global
      opportunities.




**Corporate
      History**





We
      were
      originally incorporated in the State of Nevada on January 19, 1999 under the
      name of Luna Technologies, Inc. We have changed our name several times as
      follows: Luna Medical Technologies, Inc. (May 31, 1999), Lanwerx Entertainment,
      Inc. (May 19, 2003), GameState Entertainment, inc. (September 24, 2003) and
      Quest Oil Corporation (September 7, 2004). In 2004, we formed Quest Canada
      Corp., a wholly owned Canadian subsidiary, which was created to serve as a
      holding company for our anticipated oil and gas projects in Alberta.  In
      August 2005, we acquired Wallstin Petroleum LLC. Petrostar Oil Services Inc.
      was
      created for the purpose of servicing the oil and gas properties in
      Texas.





**Results
      of Operations**





For
      our
      fiscal year ended March 31, 2006, we had a net loss of $9,258,172 compared
      to a
      net loss of $997,616 for the previous year ended March 31, 2005.  This
      increase in expenses is a result of the significant increase in operating
      expenses since we commenced oil and gas operations in October of 2004.
 Contributing factors for the increased loss are salaries and wages of
      $777,901, consulting fees of $1,501,988, financing fees of $101,121, lease
      operating expenses of $370,598, payment of principal on outstanding notes of
      $600,000 and interest expense of $4,329,489.





**Liquidity
      and Capital Resources**





At
      March
      31, 2006, we had cash of $1,558,146 compared to $3,197 at March 31, 2005.





On
      October 6, 2005, we entered into a convertible note financing transaction with
      twenty five (25) accredited investors pursuant to which the investors agreed
      to
      loan us an aggregate principal amount of $8 million. The notes are released
      in
      two tranches of which $6 million was received at closing and the balance of
      $2
      million will be released to us upon the successful effectiveness of a
      Registration Statement. At their election, the investors are also entitled
      to
      invest up to an additional $2 million. Each investor will receive a Zero Coupon
      Note equal to 5% of total amount invested by each investor. We agreed to issue
      to the investors, senior secured convertible notes, zero coupon convertible
      notes and common stock purchase warrants.





The
      senior secured convertible notes issued at the initial closing are due October
      6, 2007, and bear interest, in arrears, at a rate per annum equal to ten percent
      (10%), payable annually on October 1 of each year commencing October 1, 2006
      at
      our option in (A) cash, (B) additional senior secured convertible promissory
      notes, or (C) in registered shares of our common stock. Interest is computed
      on
      the basis of a 360-day year of twelve (12) 30-day months.





Commencing
      on the fifth (5 th )
      month
      following the issuance of the senior secured convertible notes and continuing
      thereafter on the first (1 st )
      business day of each month we are required to pay an amount to each note holder
      equal to 1/20 th of the
      original principal amount of the senior secured convertible notes plus any
      accrued but unpaid interest. Payment may be made at our option in cash or
      registered shares of our common stock. If we elect to make payments in
      registered shares of our common stock, the number of shares issued to the note
      holder shall be discounted to eighty-seven and one-half percent (87.5%) of
      the
      average of the closing bid price of our common stock for the ten (10) trading
      days immediately preceding the payment date. Payment may be made in registered
      shares of our common stock only if: (A) the Registration Statement providing
      for
      the resale of the shares of common stock issuable upon conversion of the senior
      convertible notes is effective and has been effective, without lapse or
      suspension of any kind, for a period of twenty (20) consecutive calendar days,
      (B) trading in our common stock has not been suspended by the Securities and
      Exchange Commission or the OTC Bulletin Board (or other exchange or market
      on
      which our common stock is trading), (C) we are in material compliance with
      the
      terms and conditions of the senior secured convertible notes and other financing
      documents, and (D) the issuance of shares of common stock to each note holder
      does not violate the note holder’s 4.9% or 9.9% ownership cap
      restrictions.





The
      senior secured convertible notes are convertible at any time, at the option
      of
      the note holders, into such number of fully paid and non-assessable shares
      of
      our common stock as is determined by dividing (x) that portion of the
      outstanding principal balance plus any accrued but unpaid interest under the
      notes at the date that the note holder elects to convert by (y) the conversion
      price of forty cents ($0.40) which is subject to adjustment.





We
      may
      cause the conversion of the senior secured convertible notes if, at any time
      following the effective date of the Registration Statement which registers
      the
      shares underlying the notes, the closing bid price exceeds $0.80 for a period
      of
      ten (10) consecutive trading days and the average daily trading volume for
      such
      ten (10) consecutive trading day period exceeds 250,000 shares of common stock
      subject to certain conditions. Upon mandatory conversion, the principal amount
      of the senior secured convertible notes plus all accrued and unpaid interest
      shall convert into a number of fully paid and nonassessable shares of common
      stock equal to the quotient of (i) the principal amount of the notes plus all
      accrued and unpaid interest outstanding on the mandatory conversion date divided
      by (ii) the conversion price in effect on the mandatory conversion
      date.





So
      long
      as the Registration Statement is effective, in the event that the closing bid
      price of the common stock is greater than $0.40 and less than $1.25, the maximum
      number of shares of common stock that may be issued upon conversion of the
      notes
      shall not exceed the greater of (1) twenty-five percent (25%) of the aggregate
      trading volume for the prior fifteen (15) days or (2) twenty percent (20%)
      of
      the original principal amount of the notes.





Prepayment
      of the senior secured convertible notes may be required at the option of the
      note holder subject to certain conditions. In addition, so long as ten (10%)
      of
      the original principal amount of the notes are outstanding, we can require
      prepayment of the notes by paying in cash, all or portion of the outstanding
      principal amount of the notes together with all accrued and unpaid interest
      thereon with thirty (30) days prior written notice to the note holder at a
      price
      equal to one hundred twenty-five percent (125%) of the aggregate principal
      amount of the notes plus any accrued but unpaid interest.





The
      senior secured convertible notes are secured by a security agreement that we
      and
      our subsidiaries entered into with the investors. The security agreement grants
      the investors a secured interest in all of the collateral, as defined in the
      agreement, of the company and its subsidiaries until such time as our
      obligations under the senior secured convertible notes have been meet. In
      addition to the security agreement, Quest Canada Corp., our wholly owned
      Canadian subsidiary has entered into a guarantee and indemnity agreement with
      the investors, whereby Quest Canada has guaranteed payment of the notes and
      agreed to indemnify the investors against losses arising from our failure to
      meet the obligations of the notes. Quest Canada has also entered into a pledge
      and debenture agreement with the investors whereby Quest Canada has pledged
      $15
      million in favor of the investors as a continuing collateral security for the
      payment and fulfillment of the notes. We and our wholly owned subsidiary,
      Wallstin Petroleum, LLC have entered into a deed of trust, security agreement,
      financing statement and assignment of rents and leases with the investors
      whereby some of our Texas properties, rents, royalties and proceeds have been
      conveyed to the trustee as collateral security for the notes.





The
      zero
      coupon convertible notes are also due on October 6, 2007 and have terms which
      are substantially similar to the senior secured convertible notes. However,
      the
      zero coupon convertible notes do not bear interest.





Also
      in
      connection with the transactions, we issued to each of the note holders, and
      to
      the Placement Agent, four types of warrants to acquire shares of our common
      stock, which are classified as “Series A,” “Series B,” “Series C” and “Placement
      Agent Series A,” “Placement Agent Series B,” “Placement Agent Series C,” and
“Placement Agent Series D” Warrants. As discussed below, all warrants have
      substantially similar terms and conditions except for the exercise prices,
      the
      expiration dates and the absence of a call provision.





We
      issued
      to each of the note holders and to the Placement Agent, “Series A” warrants
      entitling the investors and the Placement Agent to acquire an aggregate of
      27,500,000 shares of our common stock at an exercise price of $0.80 per share.
      The warrants issued to the investors have a “cashless exercise” provision which
      may be utilized by the holder only if one year has elapsed since the date of
      issuance of the warrant and a Registration Statement registering the common
      stock underlying the warrant is not in effect as required. The warrants issued
      to the Placement Agent have a “cashless exercise” provision which may be
      utilized by the holder without restriction. Subject to certain conditions,
      including the effectiveness of a Registration Statement providing for the resale
      of the common stock underlying the warrants, we may call the Series A warrants
      at any time so long as the value of our common stock is greater than $1.60
      for a
      period of 10 consecutive days immediately prior to the call notice and the
      average daily trading volume during the 10 day call notice period exceeds
      250,000 shares of common stock. The Series A warrants issued to the note holders
      are exercisable for a period of three (3) years. The Placement Agent Series
      A
      warrants are exercisable for a period of five (5) years.





We
      issued
      to each of the note holders and to the Placement Agent, “Series B” warrants
      entitling the investors and the Placement Agent to acquire an aggregate of
      13,750,000 shares of our common stock at an exercise price of $0.46 per share.
      The warrants issued to the investors have a “cashless exercise” provision which
      may be utilized by the holder only if one year has elapsed since the date of
      issuance of the warrant and a Registration Statement registering the common
      stock underlying the warrant is not in effect as required. The warrants issued
      to the Placement Agent have a “cashless exercise” provision which may be
      utilized by the holder without restriction. Subject to certain conditions,
      including the effectiveness of a Registration Statement providing for the resale
      of the common stock underlying the warrants, we may call the Series B warrants
      at any time so long as the value of our common stock is greater than $0.56
      for a
      period of 10 consecutive days immediately prior to the call notice and the
      average daily trading volume during the 10 day call notice period exceeds
      250,000 shares of common stock. The Series B warrants issued to the note holders
      are exercisable for a period of two (2) years following the effective date
      of
      the Registration Statement providing for the resale of the shares of common
      stock underlying the warrants and the shares of common stock issuable upon
      conversion of the notes. The Placement Agent Series B warrants are exercisable
      for a period of five (5) years.





We
      issued
      to each of the note holders and to the Placement Agent, “Series C” warrants
      which entitle the investors and the Placement Agent to acquire an aggregate
      of
      13,750,000 shares of our common stock at an exercise price of $0.56 per share.
      The warrants issued to the investors have a “cashless exercise” provision which
      may be utilized by the holder only if one year has elapsed since the date of
      issuance of the warrant and a Registration Statement registering the common
      stock underlying the warrant is not in effect as required. The warrants issued
      to the Placement Agent have a “cashless exercise” provision which may be
      utilized by the holder without restriction. The Series C warrants issued to
      the
      note holders are exercisable for a period of seven (7) years. There is no call
      provision in the Series C warrants. However, the Series C warrants are only
      exercisable for the number of shares of common stock that has been issued to
      the
      warrant holder pursuant to the warrant holder’s exercise of its Series B
      Warrant. The Placement Agent Series C warrants are exercisable for a period
      of
      seven (7) years.





We
      issued
      to the Placement Agent, Placement Agent “Series D” warrants which entitle the
      Placement Agent to acquire an aggregate of 2,500,000 shares of our common stock
      at an exercise price of $0.40 per share with a “cashless exercise” provision
      which may be utilized by the holder without restriction. The Placement Agent
      Series D warrants are exercisable for a period of five (5) years.





Assuming
      the total principal amount of each senior secured note and each zero coupon
      note
      held by each of the selling securityholders is converted into common stock
      at a
      conversion price of $0.40 and all the converted shares are sold in this
      offering, the outstanding shares will be increased by 20,400,000. Assuming
      all
      warrants held by the selling securityholders are exercised and all shares
      underlying the warrants are sold in this offering, the outstanding shares will
      be increased by an additional 57,500,000.





Our
      expectations are based on certain assumptions concerning the anticipated costs
      associated with any new projects.  These assumptions concern future events
      and circumstances that our officers believe to be significant to our operations
      and upon which our working capital requirements will depend.  Some
      assumptions will invariably not materialize and some unanticipated events and
      circumstances occurring subsequent to the date of this prospectus.





As
      of
      March 31, 2006, we, including our wholly owned subsidiary, Quest Canada Corp,
      have approximately $1,558,146 cash on hand. From operations, we estimate that
      we
      will net approximately $20,000 per month depending on production levels of
      our
      operating wells.  Given our current commitments and working capital, we
      believe that we can support our operations for the next 12 months and expand
      our
      business at a modest rate. We have received approval to drill 7 wells in Texas.
      Assuming we are able to successfully drill and bring the additional wells into
      operation, our anticipated revenues from our combined operations will
      increase.





Although
      we believe that we are able to operate without additional financing, in order
      to
      expand operations, we may continue to seek additional capital over the next
      12
      months from the additional sale of our securities. The amount and timing of
      our
      future capital requirements will depend upon many factors, including the level
      of funding received by us, anticipated private placements of our common stock,
      the level of funding obtained through other financing sources, and the timing
      of
      such funding. In the event we are unable to raise additional capital, we will
      be
      unable to expand operations as desired.





We
      intend
      to retain any future earnings to retire any existing debt, finance the expansion
      of our business and any necessary capital expenditures, and for general
      corporate purposes.





We
      are
      required to make monthly principal and interest payments under the terms of
      our
      Senior Secured Convertible Promissory Notes. If a Registration Statement
      registering the shares underlying the notes is not effective, we are required
      to
      make the monthly payments in cash instead of registered shares of our common
      stock. Because a Registration Statement is not effective, we have been required
      to make the first three payments is cash. The first three payments under the
      terms of the notes were as follows: $505,000, $364,875 and $362,250. However,
      due to our current cash position, we do not intend to make any additional
      principal and interest payments in cash to the investors. Making the payments
      in
      cash would impair our ability to operate on a day-to-day basis. Should a
      Registration Statement become effective, we will be able to make any delinquent
      and future principal and interest payments under the terms of the notes to
      the
      investors in the form of registered shares of our common stock. The fact that
      we
      will not make the June 2006 principal and interest payments to our investors
      in
      cash will mean that we will be in default under the terms of the notes. Such
      a
      default may provide the basis for the investors to force the liquidation of
      our
      assets. In the case of the liquidation of our assets, our common shareholders
      will likely lose all of their investment in our common stock.





**Equipment**





Equipment
      is recorded at historical cost.  The straight line method with a half year
      convention is used for depreciation. Asset life in years is a
      follows:





Computer
                equipment
            
            5
                yearsFurniture
                and equipment
            
            7
                yearsWell
                service equipment
            
            7
                yearsVehicles
            
            5
                years





**Foreign
      Currency Transactions**





Monetary
      assets and liabilities are translated at balance sheet date exchange rates;
      other assets and liabilities have been translated at the rates prevailing at
      the
      date of the transaction.  Revenue and expense items, except for
      amortization, are translated at the average rate of exchange for the year.
       Amortization is converted using rates prevailing at dates of acquisition.
 Gains and losses from foreign currency translation are included in the
      statement of operations.  All figures presented are in US dollars.





**Critical
      Accounting Policies - Oil and Gas Activities**





We
      follow
      the full cost method of accounting for our oil and gas activities; accordingly,
      all costs associated with the acquisition, exploration, and development of
      oil
      and gas properties are capitalized within the appropriate cost center.  Any
      internal costs that are capitalized are limited to those costs that can be
      directly identified with acquisition, exploration, and development activities
      undertaken by us for our own account, and do not include any costs related
      to
      production, general corporate overhead, or similar activities.





All
      capitalized costs within a cost center are depleted on the units-of-production
      method based on estimated proved reserves attributable to the oil and gas
      properties we own.





For
      each
      cost center, capitalized costs less accumulated depletion and related deferred
      income taxes, may not exceed the cost center ceiling. The cost center ceiling
      is
      equal to the sum of:  (a) the present value of estimated future net
      revenues from proved oil and gas reserves, less estimated future expenditures
      to
      be incurred in developing the proved reserves computed using a 10 percent
      discount factor; (b) the cost of properties not being amortized; (c) the lower
      of cost or fair market value of unproven properties included in the costs being
      amortized; and (d) income tax effects related to the differences between the
      book and tax basis of the properties.  Any excess is charged to expense
      during the period in which the excess occurs.





Sales
      of
      oil and gas properties, whether or not being amortized currently, are accounted
      for as adjustments of capitalized costs, with no gain or loss recognized, unless
      such adjustments would significantly alter the relationship between capitalized
      costs and proved reserves of oil and gas attributable to a cost center.
      Abandonments of oil and gas properties are accounted for as adjustments of
      capitalized costs, and are amortized and subject to the cost center ceiling
      limitation.





Future
      site restoration and abandonment costs of our petroleum and natural gas
      properties are provided for when a reasonable estimate can be made.  The
      estimated provision is reduced by expected equipment salvage values at the
      time
      of the abandonment. The resulting net estimated provision, if any, is charged
      against earnings over the remaining life our proved reserves on a unit-of
      production basis.  Actual expenditures are applied against the accumulated
      provision account.





On
      April
      24, 2006, our board of directors authorized our President and Chief Executive
      Officer, James B. Panther, II, in connection with our March 31, 2006, Annual
      Report on Form 10-KSB, to engage firms to provide us with new independent
      reserve report for all of our properties.





**Additional
      Accounting Disclosures**





On
      April
      24, 2006, our board of directors authorized our President and Chief Executive
      Officer, James B. Panther, II, in connection with our March 31, 2006, Annual
      Report on Form 10-KSB, to engage an independent forensic accounting firm to
      provide us with a forensic accounting of all of the company’s cash flows for the
      12 months preceding March 31, 2006. As of the date of this Report, we have
      no
      information that would lead us to believe that there was a misappropriation
      of
      any company monies. The board of directors order of the forensic accounting
      is
      precautionary given the recent changes in management and to our board of
      directors.





**Stock
      Based Compensation**





The
      Company has elected to value stock based compensation granted at the fair value
      as determined using the Black-Scholes option valuation model.





**Employees**





We
      currently have seven employees among the parent and all subsidiary companies.
      We
      intend to hire additional personnel and our employees will be entitled to paid
      vacation, paid sick days, and personal days off depending on job classification,
      length of service, and other factors.  Our policy will be to recognize the
      cost of compensated absences when actually paid to employees.





We
      have
      not entered into a collective bargaining agreement with any union.  We have
      not experienced any work stoppages and consider the relations with the
      individuals working for us to be good.





**I** **tem
      7. Financial Statements**





Our
      financial statements and related explanatory notes can be found on the “F” Pages
      at the end of this Report.





**Item
      8. Changes In and Disagreements With Accountants on Accounting and Financial
      Disclosure.**





On
      or
      before June 30, 2006, MacKay, LLP declined to stand for reelection as our
      Certifying Accountant. MacKay, LLP’s prior audit reports on our financial
      statements included an explanatory paragraph expressing substantial doubt about
      our ability to continue as a going concern.





On
      June
      30, 2006, our board of directors approved the hiring of Malone & Bailey, PC
      to audit our financial statements for the year ended March 31, 2006. At no
      time
      prior to our retention of Malone & Bailey, PC, did we, or anyone on our
      behalf, consult with Malone & Bailey, PC regarding the application of
      accounting principles to a specific completed or contemplated transaction,
      or
      the type of audit opinion that might be rendered on our financial
      statements.





The
      reports of our prior certifying accountant, MacKay, LLP, on our financial
      statements as of and for the years ended March 31, 2005 and 2004 did not contain
      an adverse opinion or a disclaimer of opinion and were not qualified or modified
      as to uncertainty, audit scope, or accounting principles. In connection with
      the
      audits of our most recent two years ended March 31, 2005 and 2004 and the
      subsequent interim periods, there were no disagreements between MacKay, LLP
      and
      us on any matter of accounting principles or practices, financial statement
      disclosure, or auditing scope and procedures, that, if not resolved to the
      satisfaction of MacKay, LLP would have caused MacKay, LLP to make reference
      to
      the subject matter of the disagreement in connection with its reports on our
      financial statements for such years.





**Item
      8A. Controls and Procedures.**





We
      carried out an evaluation, under the supervision and with the participation
      of
      our Chief Executive Officer and Chief Financial Officer, of the effectiveness
      of
      the design and operation of our disclosure controls and procedures, as defined
      in Exchange Act Rule 13a-14(c) as of the end of the period covered by this
      Annual Report on Form 10-KSB. Based on that evaluation, they concluded that
      our
      disclosure controls and procedures are not effective to ensure that information
      required to be disclosed in our Exchange Act reports is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission’s rules and forms, and that such information is accumulated
      and communicated to them to allow timely decisions regarding required
      disclosure. The disclosure controls and procedures were not effective due to
      late filing and significant adjustments proposed by our auditors that were
      recorded related to non-cash debt and equity transactions. We are in the process
      of implementing procedures to properly account for and disclose the non-cash
      transactions.





There
      has
      been no change in our internal control over financial reporting that occurred
      during our last fiscal quarter that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial reporting.





**Item
      8B. Other Information.**





None.











**PART
      III**





**Item
                9.**
            **Directors,
                Executive Officers, Promoters And Control Persons; Compliance With
                Section
                16(A) Of The Exchange Act**





**Executive
      Officer and Directors**





In
      accordance with Section 3 of our Bylaws, our directors are elected at each
      annual meeting of our shareholders. However, if an annual meeting is not held,
      or if directors are not elected at the annual meeting, the directors may be
      elected at any special meeting of our shareholders. Vacancies in the board
      of
      directors may be filled by a majority of the remaining directors or by a sole
      remaining director. Our officers are appointed by our board of
      directors.





On
      March
      31, 2006, pursuant to Section 4 of our Bylaws, one of our directors, Mr. Joseph
      Wallen nominated, and our board appointed by unanimous decision, Mr. Panther,
      II
      as a director of the company. On April 2, 2006, our board appointed Mr. Panther,
      II as our President and Chief Executive Officer. No other candidates were
      presented to the board at the time of Mr. Panther, II’s appointment.





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





**Name**
            
            **Age**
            
            **Position**James
                B. Panther, II
            
            33
            
            Director
                and President and Chief Executive OfficerJoseph
                F. Wallen
            
            49
            
            Chief
                Financial Officer and DirectorChris
                Phillips, C.P.A.
            
            34
            
            DirectorJames
                Douglas Brown
            
            54
            
            DirectorMark
                L. Baum, Esq.
            
            33
            
            General
                Counsel





**James
      B. Panther, II**


**Director,
      President and Chief Executive Officer**





Mr.
      Panther, II is our President, Chief Executive Officer and one of our directors.
      Mr. Panther, II is not a full time employee and has other outside commitments.
      His career has focused on managing fund raising, financing, M & A, and
      advisory services in a merchant banking environment. In addition to acting
      as
      our President, Chief Executive Officer, and director, Mr. Panther, II heads,
      and
      is a principal of, Business Consulting Group Unlimited, Inc.’s Capital Markets
      Group where he brings a combination of corporate finance, operational, and
      strategic experience to the firm since joining in 2001. BCGU currently owns
      375,000 shares of our common stock. Prior to BCGU, Mr. Panther, II was Managing
      Director of Brighton Capital Partners, LLC, a merchant banking firm, from 1998
      to 2001. Prior to joining Brighton Capital Partners, LLC, Mr. Panther, II
      was Managing Partner of Bristol Partners from 1994 to 1998 where he was
      responsible for portfolio investments. Mr. Panther, II holds B.A. in Finance
      from Boston College and a General Course Degree in Economics from the University
      of Granada, Granada, Spain.  He is fluent in English and
      Spanish.





**Joseph
      F. Wallen**


**Director
      and Chief Financial Officer**





Mr.
      Wallen is our Chief Financial Officer.  Mr. Wallen is a Graduate
      of the University of Texas at San Antonio Business School and has spent the
      last 26 years performing operations and administrative functions for numerous
      mid-tier oil and gas companies.  Although his main focus has been in the
      Texas oil and gas industry, Mr. Wallen has worked in the prolific
      Altamont-Bluebell Field in the Uintah Basin of Utah.  He handled the
      financial and field operations for Roadrunner Oil Inc, an independent
      operator.  His duties included the monthly government filings, maintaining
      daily communications with field personnel, internal accounting and lease
      operation.  Mr. Wallen is well placed to understand the intricacies of oil
      and gas accounting and field operations. Mr. Wallen co-founded Tauren
      Exploration (Texas) in February 1992 and through 1997 where he was responsible
      for all accounting functions of the company, including the field operations,
      communications and scheduling of field personnel and the drilling and production
      of the oil/gas leases, all monthly government filings. In June 1997, Mr. Wallen
      joined Road Runner Oil Inc (Utah) where he was responsible for all
      administrative operations of the oil field in the Uintah County, Utah through
      August 2002 after the sale of the Road Runner properties, Mr. Wallen consulted
      for several oil and gas companies in operations and financial functions from
      August 2002 until March 2004. In March 2004 Mr. Wallen started his own company
      known as Wallstin Petroleum which was acquired by Quest Oil Corporation in
      August 2005 at which time Mr. Wallen began working for Quest Oil Corporation
      as
      its Chief Financial Officer.





**Chris
      Phillips, C.P.A.**


**Director**





Mr.
      Phillips is one of our directors. Since 2004, Mr. Phillips has been the
      President and CEO of Apogee Financial Investments, Inc. a merchant bank which
      owns 100% of Midtown Partners & Co., LLC, a NASD licensed broker-dealer.
      From 2000 he has been the managing member of TotalCFO, LLC which provides
      consulting and CFO services to a number of companies and high wealth
      individuals. Presently, he is a Board Member of Telzuit Medical Technologies,
      Inc. (TZMT) and an advisory board member for a number of other public and
      private companies.  Mr. Phillips holds a Bachelors of Science Degree in
      Accounting and Finance and a Masters of Accountancy with a concentration in
      Tax
      from the University of Florida. Mr. Phillips is a Florida licensed Certified
      Public Accountant and Real Estate Salesperson. Mr. Phillips is also a principal
      of Midtown Partners & Co., LLC, the Broker Dealer which acted as the
      placement agent for the convertible note financing transaction.





**James
      Douglas Brown**


**Director**





Mr.
      Brown
      is one of our Directors.  He is a graduate of the University of Edinburgh.
      From 1998 until the present, Mr. Brown serves as a director of LIM Asia
      Arbitrage fund, one of the oldest hedge funds in Asia. During this same time
      frame, Mr. Brown also became a director with Eastern Grasmere Limited, a Russian
      equity fund and Inyx Inc, a medium sized specialty pharmaceutical company.
      From
      2003 until the present date, Mr. Brown sits on the board of directors for Inyx,
      Inc. and LIM Asia. In 2005, Mr. Brown became a director of Quest Oil
      Corporation. On April 24, 2006, Mr. Brown was nominated and approved to serve
      a
      one year term as the Chairman of our Compensation Committee.





**Mark
      L. Baum, Esq.**


**General
      Counsel**





Mr.
      Baum
      is our General Counsel. He is not a full time employee and has other outside
      commitments. In 2002, Mr. Baum founded Business Consulting Group Unlimited,
      Inc., a Southern California-based merchant banking firm. Mr. Baum is a licensed
      attorney in the State of California and the principal attorney for The Baum
      Law
      Firm, PC a firm which he founded in 1998 and has been operating on an ongoing
      basis. Mr. Baum has more than 11 years experience in creating, financing and
      growing development stage enterprises in a variety of industries. Mr. Baum
      has
      participated in numerous public spin-offs, venture fundings, private-to-public
      mergers, corporate restructurings, asset acquisitions and asset divestitures.
      Mr. Baum’s law practice focuses on securities laws and related issues for
      small-cap and micro-cap publicly reporting companies. Mr. Baum is also a
      director of PNG Ventures, Inc. a publicly traded company.





**Information
      about our Board and its Committees.**





**Audit
      Committee**





On
      April
      24, 2006, our Board of Directors approved the creation of an Audit Committee.
      Mr. Chris Phillips, CPA is the current Chairman of the Committee, serving a
      one
      year term until the end of 2006.





**Compensation
      Committee**





On
      April
      24, 2006, our Board of Directors approved the creation of a Compensation
      Committee. Mr. James Douglas Brown is the current Chairman of the Committee,
      serving a one year term until the end of 2006.





**Advisory
      Board**





On
      April
      24, 2006, our Board of Directors approved the creation of an Advisory Board.
      As
      of the date of this Report, there are no members of the Advisory
      Board.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section 16(a)
      of the Securities Exchange Act of 1934, as amended, requires our directors,
      executive officers, and stockholders holding more than 10% of our outstanding
      common stock, to file with the Securities and Exchange Commission initial
      reports of ownership and reports of changes in beneficial ownership of our
      common stock. Executive officers, directors and greater-than-10% stockholders
      are required by SEC regulations to furnish us with copies of all
      Section 16(a) reports they file. To our knowledge, based solely on review
      of the copies of such reports furnished to us for the period ended December
      31,
      2005, the Section 16(a) reports required to be filed by our executive
      officers, directors and greater-than-10% stockholders were not filed on a timely
      basis.





**Code
      of Ethics**





Effective
      May 18, 2005, our board of directors adopted the Quest Oil Corporation Code
      of
      Business Conduct and Ethics. The board of directors believes that our Code
      of
      Business Conduct and Ethics provides standards that are reasonably designed
      to
      deter wrongdoing and to promote the following: (1)
      honest and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional relationships; (2)
      full,
      fair, accurate, timely, and understandable disclosure in reports and documents
      that we file with, or submits to, the Securities and Exchange
      Commission ;
      (3)
      compliance with applicable governmental laws, rules and regulations; the
      prompt internal reporting of violations of the Code of Business Conduct and
      Ethics to an appropriate person or persons; and (4)
      accountability for adherence to the Code of Business Conduct and Ethics. We
      will
      provide a copy of our Code of Business Conduct and Ethics by mail to any person
      without charge upon written request to us at: 2038 Corte Del Nogal, Suite 110,
      Carlsbad, CA 92011.





**Item
      10. Executive Compensation**





The
      following table sets forth the cash compensation paid to the Chief Executive
      Officer and to all other executive officers for services rendered, and to be
      rendered, through the fiscal years ending March 31, 2006 and 2005.





**Annual
                Compensation**
            
            **Long-Term
                Compensation****Common****Shares****Underlying**
            
            **All****Restricted**
            
            **Options**
            
            **Other****Other
                Annual**
            
            **Stock**
            
            **Granted**
            
            **Compen****Name
                and Position**
            
            **Year**
            
            **Salary**
            
            **Bonus**
            
            **Compensation**
            
            **Awards
                ($)**
            
            **(#
                Shares)**
            
            **-sation**Roderick
                Bartlett (1)
            
            2006
            
            $22,500
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-*Former
                Director,*
            
            2005
            
            90,000
            
            -0-
            
            -0-
            
            $150,000(3)
            
            ------
            
            -0-*President
                and**Chief
                Executive Officer*Cameron
                King (2)
            
            2006
            
            $90,000
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-*Former
                President,*
            
            2005
            
            90,000
            
            -0-
            
            $12,500(5)
            
            $100,000(4)
            
            ------
            
            -0-*Chief
                Executive Officer**and
                Director*Joseph
                F. Wallen
            
            2006
            
            $60,000
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-*Chief
                Financial Officer*
            
            2005
            
            $-0-
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-*and
                Director*William
                H. Stinson
            
            2006
            
            $120,000
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-*Former
                President, Chief Executive Officer Chief Operating Officer and
                Director*
            
            2005
            
            -0-
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-Douglas
                Blackman
            
            2006
            
            $42,000
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-*Former
                Secretary and Director*
            
            2005
            
            -0-
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0--0-James
                B. Panther, II
            
            2006
            
            $126,000(6)
            
            -0-
            
            -0-
            
            -0-
            
            4,000,000
                (7)(6)
            
            -0-*President,
                Chief Executive Officer and Director*
            
            2005
            
            -0-
            
            -0-
            
            -0-
            
            -0-
            
            ------Chris
                Phillips, CPA
            
            2006
            
            $0
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-*Director*
            
            2005
            
            -0-
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-Mark
                L. Baum, Esq.
            
            2006
            
            $126,000(6)
            
            -0-
            
            -0-
            
            -0-
            
            4,000,000
                (7)(6)
            
            -0-*General
                Counsel*
            
            2005
            
            -0-
            
            -0-
            
            -0-
            
            -0-
            
            ------
            
            -0-








(1)
            
            Pursuant
                to the Chairman, President and CEO Compensation Agreement dated February
                1, 2004 by and between the company, Mr. Bartlett and BPYA 966 Holdings,
                Ltd., Mr. Bartlett directed 100% of his compensation earned from
                the
                company to be paid to BPYA 966 Holding, Ltd. Mr. Bartlett is the
                sole
                owner of BPYA 966 Holdings, Ltd.(2)
            
            Pursuant
                to the Chief Financial Officer Compensation Agreement dated February
                1,
                2004 by and between the company, Mr. King and King Capital Corporation,
                Mr. King directed 100% of his compensation earned from the company
                to be
                paid to King Capital Corporation. Mr. King is the sole owner of King
                Capital Corporation.(3)
            
            Awarded
                3,000,000 shares with a fair market value of $0.05 per
                share.(4)
            
            Awarded
                2,000,000 shares with a fair market value of $0.05 per
                share.(5)
            
            Awarded
                250,000 shares with a fair market value of $0.05 per
                share.(6)
            
            Received
                pursuant to an employment agreement dated April 24,
                2006.(7)
            
            Granted
                warrants to purchase 4,000,000 shares of our common stock pursuant
                to an
                employment agreement dated April 24,
                2006.





**Option
      Grants and Exercises**





There
      were no option grants or exercises by any of the executive officers named in
      the
      Summary Compensation Table above.





**Employment
      and Consultant Agreements**





As
      of the
      year ended March 31, 2005, we had entered into management agreements with Mr.
      Roderick Bartlett, our former President and Chief Executive Officer, and Mr.
      Cameron King our former President and Chief Executive Officer. On June 30,
      2005,
      Mr. Bartlett resigned from his position as President and Chief Executive Officer
      and terminated his management agreement with us. On February 24, 2006, Mr.
      King
      resigned from his positions as Director, President and Chief Executive Officer
      and terminated his management agreement with us.





On
      April
      2, 2006, our Board of Directors authorized, on a month to month basis, a $100
      per day payment to our President and Chief Executive Officer, James B. Panther,
      II.





On
      April
      24, 2006, our board of directors authorized a 2 year employment agreement with
      Mr. James B. Panther, II to serve as our President and Chief Executive Officer.
      Under the terms of the agreement Mr. Panther, II will receive: (i) an annual
      salary of $126,000; (ii) warrants to purchase up to 4,000,000 shares of our
      common stock; and (iii) a five percent (5%) carried working interest, net of
      any
      taxes and royalties, on a going forward basis, in any production that is brought
      online during his employment. The carried working interest continues for the
      life of the well.





On
      April
      24, 2006, our board of directors authorized a 2 year employment agreement with
      Mr. Mark L. Baum, Esq. to serve as our General Counsel. Under the terms of
      the
      agreement Mr. Baum will receive: (i) an annual salary of $126,000 per year;
      (ii)
      warrants to purchase up to 4,000,000 shares of our common stock; and (iii)
      a
      five percent (5%) carried working interest, net of any taxes and royalties,
      on a
      going forward basis, in any production that is brought online during his
      employment. The carried working interest continues for the life of the
      well.





On
      April
      24, 2006, our board of directors authorized a 1 year employment agreement with
      Mr. Joseph F. Wallen to serve as our Chief Financial Officer. Under the terms
      of
      the agreement, Mr. Wallen will receive: (i) an annual salary of $60,000; (ii)
      warrants to purchase up to 1,000,000 shares of our common stock; and (iii)
      a two
      and one half percent (2.5%) carried working interest, net of any taxes and
      royalties, on a going forward basis, in any production that is brought online
      during his employment. The carried working interest continues for the life
      of
      the well.





On
      April
      24, 2006, our board of directors authorized a 2 year operating agreement with
      Business Consulting Group Unlimited, Inc. to provide controlling, bookkeeping,
      administrative support and general executive support services. Under the terms
      of the agreement, BCGU will receive $14,000 per month as
      compensation.





On
      April
      24, 2006, our board of directors authorized a 6 month consulting agreement
      with
      Luis Leung to provide computer and systems support to us. Under the terms of
      the
      agreement, Mr. Leung will receive: (i) 250,000 shares of our common stock
      registered on Form S-8; and (ii) “cashless” Common stock purchase warrants to
      purchase 250,000 shares of the Company’s common stock at an exercise price equal
      to 110% of the closing market price of our common stock as of April 24, 2006.
      The warrants shall have a term of 5 years.





On
      April
      24, 2006, our board of directors authorized a 6 month consulting agreement
      with
      Jerry Pence to provide us with acquisition assistance. Under the terms of the
      agreement, Mr. Pence will receive: (i) 150,000 shares of our common stock
      registered on Form S-8; and (ii) “cashless” Common stock purchase warrants to
      purchase 150,000 shares of the Company’s common stock at an exercise price equal
      to 110% of the closing market price of our common stock as of April 24, 2006.
      The warrants shall have a term of 5 years.





**Compensation
      of Directors**





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





**Item
      11. Security Ownership of Certain Beneficial Owners and
      Management.**





The
      following table sets forth certain information regarding the beneficial
      ownership of the 72,921,266 issued and outstanding shares of our common stock
      as
      of August 15, 2006 by the following persons:





(1)
            
            each
                person who is known to be the beneficial owner of more than five
                percent
                (5%) of our issued and outstanding shares of common
                stock;(2)
            
            each
                of our directors and executive officers; and(3)
            
            all
                of our directors and executive officers as a
                group.








**Name
                And Address**
            **Number**
              **Of
                Shares**
              **Beneficially**
              **Owned**
            **Percentage**
              **Owned**Joseph
                F. Wallen (1)
            650,750
            .00947James
                B. Panther, II (1) (3)
            (2)
                375,000
            .00546Chris
                Phillips (1)(6)
            2,200
            .00003Mark
                L. Baum, Esq.(1)(4)
            (5)
                375,000
            .00546James
                Douglas Brown (1)
            0
            .00000All
                directors and officers as a group
            1,402,950
            .02042







(1)
            
            The
                address is 2038 Corte Del Nogal, Suite 110, Carlsbad, CA
                92011.(2)
            
            James
                B. Panther, II is a principal of Business Consulting Group Unlimited,
                Inc.
                which owns 375,000 shares of our common stock.(3)
            
            Pursuant
                to Mr. Panther, II’s employment agreement with us, he will receive
                compensation of 4,000,000 “cashless” common stock purchase warrants. The
                warrants are exercisable for a term of 5 years at an exercise price
                equal
                to 110% of the closing market price as of April 24, 2006 and shall
                vest at
                a rate of 2,000,000 upon execution of the agreement and 500,000 every
                90
                days thereafter. As of the date of this Report, these securities,
                although
                due and payable, have not been issued.(4)
            
            Mark
                L. Baum, Esq. is a principal of Business Consulting Group Unlimited,
                Inc.
                which owns 375,000 shares of our common stock.(5)
            
            Pursuant
                to Mr. Baum’s employment agreement with us, he will receive compensation
                of 4,000,000 “cashless” common stock purchase warrants. The warrants are
                exercisable for a term of 5 years at an exercise price equal to 110%
                of
                the closing market price as of April 24, 2006 and shall vest at a
                rate of
                2,000,000 upon execution of the agreement and 500,000 every 90 days
                thereafter. As of the date of this Report, these securities, although
                due
                and payable, have not been issued.(6)
            
            Mr.
                Phillips resigned as one of our directors on July 14,
                2006.





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





**Item
      12. Certain Relationships and Related Transactions.**





**Certain
      Relationships and Related Transactions.**





**Formation
      of Quest Canada Corp., a Canadian subsidiary.** In
      November, 2004, we formed Quest Canada Corp., our wholly owned subsidiary,
      for
      the purpose of holding our Canadian oil and gas projects. Quest Canada Corp.
      is
      the contracting entity for the Acadia North Project in Alberta.





**Acquisition
      of Wallstin Petroleum, LLC** .
      On
      August 5, 2005, we entered into a Membership Interest Exchange Agreement with
      all the members of Wallstin Petroleum LLC, a Texas limited liability company.
      Pursuant to the terms of the agreement, the members agreed to exchange 100%
      of
      their membership interest in Wallstin Petroleum LLC for a total of 1,502,000
      restricted shares of common stock. The shares were issued under Rule 144.





**Our
      Subsidiaries** .
      We
      currently own the following wholly
      owned subsidiaries: Quest Canada Corporation; Wallstin Petroleum LLC; and
      Petrostar Oil Services Inc. Quest Canada Corporation was created for the purpose
      of holding Alberta oil and gas property acquisitions.  Wallstin Petroleum
      LLC was acquired for their management abilities and contacts in Texas.
 Petrostar Oil Services Inc. was created for the purpose of servicing the
      oil and gas properties in Texas.





**Transactions
      with Promoters**





None.





**Item
      13. Exhibits.**





Exhibit
                No.
            
            Description3(i).1
            
            Articles
                of Incorporation. (Attached as an exhibit to our General Form For
                Registration of Securities on Form 10-SB filed with the SEC on July
                7,
                1999 and incorporated herein by reference).3(i).2
            
            Certificate
                of Amendment to the Articles of Incorporation (Attached as an exhibit
                to
                our Current Report on Form 8-K filed with the SEC on October 29,
                2004 and
                incorporated herein by reference).3(ii)
            
            Bylaws.
                (Attached as an exhibit to our General Form For Registration of Securities
                on Form 10-SB filed with the SEC on July 7, 1999 and incorporated
                herein
                by reference.).4.1
            
            2004
                Stock Incentive Plan (Attached as an exhibit to our Registration
                Statement
                on Form S-8 filed on August 5, 2004 and incorporated herein by
                reference).10.1
            
            Participation
                Agreement dated January 28, 2005, by and between Quest Canada Corp.
                and
                Vega Resources, LTD. (Attached as an exhibit to our Annual Report
                on Form
                10 KSB filed on July 1, 2005 and incorporated herein by
                reference.).10.2
            
            Chief
                Financial Officer Compensation Agreement dated February 1, 2004,
                by and
                between the company, Cameron Scott King and King Capital Corporation.
                (Attached as an exhibit to our Annual Report on Form 10-KSB filed
                on July
                1, 2005 and incorporated herein by reference.).10.3
            
            Chairman,
                President and CEO Compensation Agreement dated February 1, 2004,
                by and
                between the company, Roderick C. Bartlett and BPYA 966 Holdings,
                Ltd.
                (Attached as an exhibit to our Annual Report on Form 10-KSB filed
                on July
                1, 2005 and incorporated herein by reference.).10.4
            
            April
                24, 2006 Employment Agreement between Quest Oil Corporation and James
                B.
                Panther II (Attached as an exhibit to our Current Report on Form
                8-K filed
                with the SEC on May 4, 2006 and incorporated herein by
                reference).10.5
            
            April
                24, 2006 Employment Agreement between Quest Oil Corporation and Mark
                L.
                Baum, Esq. (Attached as an exhibit to our Current Report on Form
                8-K filed
                with the SEC on May 4, 2006 and incorporated herein by
                reference).10.6
            
            April
                24, 2006 Employment Agreement between Quest Oil Corporation and Joseph
                Wallen. (Attached as an exhibit to our Current Report on Form 8-K
                filed
                with the SEC on May 4, 2006 and incorporated herein by
                reference).10.6
            
            2006
                Directors Annual Compensation Program. (Attached as an exhibit to
                our
                Current Report on Form 8-K filed with the SEC on May 4, 2006 and
                incorporated herein by reference).10.7
            
            April
                24, 2006 Consulting Agreement between Quest Oil Corporation and Business
                Consulting Group Unlimited, Inc. (Attached as an exhibit to our Current
                Report on Form 8-K filed with the SEC on May 4, 2006 and incorporated
                herein by reference).10.8
            
            April
                24, 2006 Office Space Sublease between Quest Oil Corporation and
                Business
                Consulting Group Unlimited, Inc. (Attached as an exhibit to our Current
                Report on Form 8-K filed with the SEC on May 4, 2006 and incorporated
                herein by reference).10.9
            
            April
                24, 2006 Settlement Agreement between Darren Hayes and Quest Oil
                Corporation. (Attached as an exhibit to our Current Report on Form
                8-K
                filed with the SEC on May 4, 2006 and incorporated herein by
                reference).10.10
            
            April
                24, 2006 Consulting Agreement between Luis Leung and Quest Oil
                Corporation. (Attached as an exhibit to our Current Report on Form
                8-K
                filed with the SEC on May 4, 2006 and incorporated herein by
                reference).10.11
            
            April
                24, 2006 Consulting Agreement between Jerry Pence and Quest Oil
                Corporation. (Attached as an exhibit to our Current Report on Form
                8-K
                filed with the SEC on May 4, 2006 and incorporated herein by
                reference).10.12
            
            April
                24, 2006 Consulting Agreement between Cameron King and Quest Oil
                Corporation. (Attached as an exhibit to our Current Report on Form
                8-K
                filed with the SEC on May 4, 2006 and incorporated herein by
                reference).10.13
            
            February
                6, 2006 Participation Agreement between Gaither Asset Management
                and Quest
                Oil Corporation (Attached as an exhibit to our Current Report on
                Form 8-K
                filed with the SEC on February 15, 2006 and incorporated herein by
                reference).10.14
            
            September
                6, 2006 Promissory Note made by Quest Oil Corporation to Coach Capital,
                LLC (Attached as an exhibit to our Current Report on Form 8-K filed
                with
                the SEC on October 7, 2005 and incorporated herein by
                reference).10.15
            
            September
                7, 2005 Loan Agreement between John Chan and Quest Oil Corporation
                (Attached as an exhibit to our Current Report on Form 8-K filed with
                the
                SEC on October 7, 2005 and incorporated herein by
                reference).10.16
            
            January
                21, 2005 Vega Resources, Ltd. Farmout and Option Agreement (Attached
                as an
                exhibit to our Current Report on Form 8-K filed with the SEC on August
                25,
                2005 and incorporated herein by reference).10.17
            
            August
                13, 2005 Participation Agreement between Vega Resources, Ltd. and
                Quest
                Oil Corporation (Attached as an exhibit to our Current Report on
                Form 8-K
                filed with the SEC on August 25, 2005 and incorporated herein by
                reference).10.18
            
            August
                12, 2005 Operator Agreement between Quest Oil Corporation and Transaction
                Oil & Gas Ventures, Inc. (Attached as an exhibit to our Current Report
                on Form 8-K filed with the SEC on August 25, 2005 and incorporated
                herein
                by reference).10.19
            
            August
                5, 2005 Membership Interest Exchange Agreement between Joe Wallen,
                James
                Templer, William H. Stinson and Quest Oil Corporation (Attached as
                an
                exhibit to our Current Report on Form 8-K filed with the SEC on August
                5,
                2005 and incorporated herein by reference).14.1
            
            Code
                of Business Conduct and Ethics. (Attached as an exhibit to our Current
                Report on Form 8-K filed with the SEC on May 4, 2006 and incorporated
                herein by reference).16.1
            
            July
                10, 2006 letter from MacKay, LLP (Attached as an exhibit to our Amended
                Current Report on From 8-K filed with the SEC upon July 11, 2006
                and
                incorporated herein by reference).31.1
            
            Certification
                of James B. Panther, II pursuant to Rule 13a-14(a).31.2
            
            Certification
                of Joseph F. Wallen pursuant to Rule 13a-14(a).32.1
            
            Certification
                of James B. Panther, II 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 Joseph F. Wallen pursuant to 18 U.S.C Section 1350, as adopted
                pursuant
                to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
            
            Evaluation
                of Gas Reserves Owned by Quest Canada Corp.. in the Arneson Area
                in the
                Province of Alberta Effective April 1, 2006.99.2
            
            Reserve
                Estimation prepared for Quest Oil Corporation as of March 31, 2006
                - Hawk
                Eye & Midkiff Fields, Eastland County Texas & Nettie Gardner
                Lease, McCullough County Texas.




**Item
      14. Principal Accountant Fees and Services.**





**Appointment
      of Auditors**




Our
      Board
      of Directors selected Malone & Bailey, PC as our auditors for the year ended
      March 31, 2006.





**Audit
      Fees**





Malone
      & Bailey, PC billed us $30,000 in fees for our annual audit for the year
      ended March 31, 2006.





MacKay,
      LLP, our previous auditor, billed us CDN$20,000 in fees for the review of
      our quarterly financial statements and various registration statements during
      the year ended March 31, 2006.





**Audit-Related
      Fees**




W e
      did not
      pay any fees to Malone & Bailey, PC or to MacKay, LLP for assurance and
      related services that are not reported under Audit Fees above, during our fiscal
      years ending March 31, 2006 and March 31, 2005.





**Tax
      and All Other Fees**




We
      did
      not pay any fees to Malone & Bailey, PC or to MacKay, LLP for tax
      compliance, tax advice, tax planning or other work during our fiscal years
      ending March 31, 2006 and March 31, 2005.





**Pre-Approval
      Policies and Procedures**





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





With
      respect to the audit of our financial statements as of March 31, 2006, and
      for
      the year then ended, none of the hours expended on Malone & Bailey, PC’s
      engagement to audit those financial statements were attributed to work by
      persons other than Malone & Bailey’s full-time, permanent
      employees.














**SIGNATURES**





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








**QUEST
                OIL CORPORATION**
              
              /s/Joseph
                F. Wallen
              By:
                Joseph F. Wallen
              Its:
                Chief Financial Officer







In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant on the capacities and on the
      dates
      indicated.








**Signatures**
            
            **Title**
            
            **Date**/s/
                James B. Panther, II
              James
                B. Panther, II
            
            Director,
                President and Chief Executive Officer
            
            August
                15 , 2006/s/
                Joseph F. Wallen
              Joseph
                F. Wallen
            
            Chief
                Financial Officer and Director
            
            August
                15, 2006/s/
                James Douglas Brown
              James
                Douglas Brown
            
            Director
            
            August
                15, 2006




















**QUEST
      OIL CORPORATION**





**(An
      Exploration Stage Company)**





**CONSOLIDATED
      FINANCIAL STATEMENTS**





**AS
      AT MARCH 31, 2006 AND 2005**


























**------INDEX------**










**Auditors’
      Report**





**Consolidated
      Balance Sheets**





**Consolidated
      Statements of Operations**





**Consolidated
      Statements of Stockholders’ Deficit**





**Consolidated
      Cash Flow Statements**











**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





Board
      of
      Directors and Stockholders


Quest
      Oil
      Corporation


Carlsbad,
      California





We
      have
      audited the accompanying consolidated balance sheet of Quest Oil Corporation
      as
      of March 31, 2006, and the related statements of operations, stockholders’
equity, and cash flows for the year then ended. These financial statements
      are
      the responsibility of Quest Oil ’s
      management. Our responsibility is to express an opinion on these financial
      statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audit provides a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Quest Oil Corporation as
      of
      March 31, 2006, and the results of its operations and its cash flows
      for the year then ended in conformity with accounting principles generally
      accepted in the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      Quest Oil Corporation will continue as a going concern. As discussed in note
      2
      to the consolidated financial statements, Quest Oil has incurred a significant
      loss for the last fiscal year which raises substantial doubt about Quest Oil’s
      ability to continue as a going concern. Management’s plans in regards to these
      matters are also described in note 2. The financial statements do not include
      any adjustments relating to the recoverability and classification of recorded
      asset amounts or to the amounts and classification of liabilities that might
      be
      necessary should Quest Oil be unable to continue as a going
      concern.





Malone
      & Bailey, PC


Houston,
      Texas


August
      11, 2006














**QUEST
                OIL CORPORATION****CONSOLIDATED
                BALANCE SHEET****March
                31, 2006**March
                31,ASSETS
            
            2006Current
                assetsCash
            $
            1,558,146Accounts
                receivable
            
            21,501Prepaids
                and other current assets
            
            53,293Total
                current assets
            
            1,632,940Oil
                and gas properties, using the full cost method of
                accountingProved
                properties
            
            2,468,449Unproved
                properties
            
            898,315Accumulated
                depreciation, depletion, amortization and impairment
            
            (1,683,654)Net
                oil and gas properties
            
            1,683,110Deferred
                financing costs
            
            3,459,713Property
                and equipment, net of accumulated depreciation of $16,293
            
            188,205TOTAL
                ASSETS
            $
            6,963,968LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilitiesAccounts
                payable
            $
            85,298Accrued
                liabilities
            
            452,504Total
                current assets
            
            537,802Notes
                Payable
            
            182,305Asset
                retirement obligation
            
            21,000TOTAL
                LIABILITIES
            
            741,107STOCKHOLDERS'
                EQUITYPreferred
                stock, 50,000,000 shares authorized, $0.001 par valuenone
                issued and outstanding
            
            —Common
                stock, 450,000,000 shares authorized, $0.001 par value67,673,099
                shares issued and outstanding
            
            67,673Additional
                paid-in capital
            
            17,886,202Retained
                deficit
            
            (11,668,361)Other
                comprehensive income
            
            (62,653)TOTAL
                STOCKHOLDERS' EQUITY
            
            6,222,861TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
            $
            6,963,968See
                notes to the financial statements














**QUEST
                OIL CORPORATION****CONSOLIDATED
                STATEMENTS OF OPERATIONS****Years
                Ended March 31, 2006 and 2005**March
                31,
            
            March
                31,2006
            
            2005RevenuesOil
                and gas sales
            $
            1,722,981
            $
            —Total
                revenues
            
            1,722,981
            
            —ExpensesProduction
            
            967,616
            
            —General
                and administrative
            
            1,723,480
            
            212,357Consulting
            
            1,501,988
            
            384,736Salaries
            
            777,901
            
            467,500Depreciation,
                depletion, and amortization
            
            1,213,817
            
            —Impairment
            
            484,130
            
            —Total
                operating expenses
            
            6,668,932
            
            1,064,593Loss
                from operations
            
            (4,945,951)
            
            (1,064,593)Other
                income (expense)Interest
                income
            
            110
            
            941Interest
                expense
            
            (4,329,489)
            
            —Forgiveness
                of Debt
            
            17,158
            
            66,036Total
                other income (expense)
            
            (4,312,221)
            
            66,977NET
                LOSS
            $
            (9,258,172)
            $
            (997,616)Basic
                and diluted loss per common share
            $
            (0.17)
            $
            (0.05)Weighted
                average common shares outstanding
            
            53,511,900
            
            21,634,516See
                notes to the financial statements


























**QUEST
                OIL CORPORATION****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)****Years
                ended March 31, 2005 and 2006**Common
                Stock
            
            Additional
            
            
            
            Other
            
            TotalPar
            
            Paid-in
            
            Accumulated
            
            Comprehensive
            
            Stockholders'Shares
            
            Value
            
            Capital
            
            Deficit
            
            Income
            
            Equity
                (Deficit)Balance
                at March 31, 2004
            16,461,920
            $
            16,462
            $
            826,093
            $
            (1,412,573)
            $
            —
            $
            (570,018)Issuance
                of common shares inexchange
                for debt at $0.25 per share
            40,000
            
            40
            
            9,960
            
            —
            
            —
            
            10,000Issuance
                of common shares in exchange forlegal,
                management and consulting fees
            11,161,540
            
            11,161
            
            585,552
            
            —
            
            —
            
            596,713Issuance
                of common shares for cash
            192,300
            
            192
            
            49,808
            
            —
            
            —
            
            50,000Net
                Loss for the year endedMarch
                31, 2005
            —
            
            —
            
            —
            
            (997,616)
            
            —
            
            (997,616)Balance
                at March 31, 2005
            27,855,760
            
            27,856
            
            1,471,413
            
            (2,410,189)
            
            —
            
            (910,920)Issuance
                of common shares in exchangefor
                stock based compensation
            6,513,724
            
            6,514
            
            3,240,910
            
            —
            
            —
            
            3,247,424Issuance
                of common shares on conversionof
                convertible notes with interest
            21,949,239
            
            21,949
            
            1,332,211
            
            —
            
            —
            
            1,354,160Issuance
                of common shares for acquisition ofWallstin
                Petroleum LLC
            1,502,000
            
            1,502
            
            61,772
            
            —
            
            —
            
            63,274Issuance
                of common shares in exchange forwarrants
                exercised
            9,852,376
            
            9,852
            
            1,614,295
            
            —
            
            —
            
            1,624,147Discount
                of notes payable
            —
            
            —
            
            6,787,500
            
            —
            
            —
            
            6,787,500Issuance
                of warrants for debt fees
            —
            
            —
            
            3,378,101
            
            —
            
            —
            
            3,378,101Loss
                due to currency translation
            —
            
            —
            
            —
            
            —
            
            (62,653)
            
            (62,653)Net
                Loss for the year endedMarch
                31, 2006
            —
            
            —
            
            —
            
            (9,258,172)
            
            
            
            (9,258,172)Balance
                at March 31, 2006
            67,673,099
            $
            67,673
            $
            17,886,202
            $
            (11,668,361)
            $
            (62,653)
            $
            6,222,861See
                notes to the financial statements

















**QUEST
                OIL CORPORATION****Consolidated
                Statements of Cash Flows****Twelve
                Months Ended March 31, 2006 and 2005**March
                31,
            
            March
                31,2006
            
            2005CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                Loss
            
            $
            (9,258,172)
            $
            (997,616)Adjustments
                to reconcile net loss to netcash
                used in operating activities:Stock
                based compensation
            
            
            3,247,424
            
            596,714Impairment
            
            
            484,130Depreciation,
                depletion and amortization
            
            
            3,515,475
            
            3,000Imputed
                Interest
            
            
            —
            
            27,965Forgiveness
                of debt
            
            
            (17,158)
            
            (66,036)Accounts
                receivable
            
            
            64,231
            
            (5,000)Prepaid
                assets and other
            
            
            (51,893)
            
            (150)Accounts
                payable and accrued expenses
            
            
            259,216
            
            241,736Accrued
                Interest
            
            
            7,647
            
            —NET
                CASH USED IN OPERATING ACTIVITIES
            
            
            (1,749,100)
            
            (199,387)CASH
                FLOWS FROM INVESTING ACTIVITIESPurchase
                of Wallstin
            
            
            4,581
            
            —Purchase
                of equipment
            
            
            (199,379)
            
            —Capital
                expenditures for oil and gasproperties
            
            
            (3,323,493)
            
            (23,271)NET
                CASH USED IN INVESTING ACTIVITIES
            
            
            (3,518,291)
            
            (23,271)CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                from notes payable
            
            
            6,926,346
            
            —Payments
                on notes payable
            
            
            (1,665,500)
            
            —Proceeds
                from warrants exercised -cash portion
            
            
            1,624,147
            
            —Proceeds
                from sale of common stock
            
            
            —
            
            50,000Loans
                advanced
            
            
            —
            
            176,168Bank
                overdraft
            
            
            —
            
            (313)NET
                CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            6,884,993
            
            225,855LOSS
                DUE TO CURRENCY TRANSLATION
            
            
            (62,653)
            
            —NET
                CHANGE IN CASH
            
            
            1,554,949
            
            —CASH
                BALANCESBeginning
                of period
            
            
            3,197
            
            —End
                of period
            
            $
            1,558,146
            $
            3,197SUPPLEMENTAL
                DISCLOSURE:Interest
                paid
            
            $
            237,500
            $
            —Income
                taxes paid
            
            
            —
            
            —NON-CASH
                ACTIVITIES:Debt
                converted to common stock
            
            $
            1,354,160
            $
            10,000Deferred
                financing costs
            
            
            3,378,101
            
            —Asset
                retirement obligation
            
            
            20,000
            
            —Debt
                discount
            
            
            6,787,500
            
            —Advances
                from shareholders converted to loans payable
            
            —
            
            342,336See
                notes to the financial statements














**QUEST
      OIL CORPORATION**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





1.  ORGANIZATION
      AND DESCRIPTION OF THE BUSINESS





Quest
      Oil
      Corporation (“Quest Oil”) is in the business of acquiring and participating in
      development stage oil and gas properties around the globe. Quest Oil was
      incorporated on January 19, 1999 under the laws of the State of Nevada, and
      its
      principal executive offices are presently headquartered in Carlsbad,
      California.





2.  GOING
      CONCERN





The
      accompanying consolidated financial statements have been prepared assuming
      that
      Quest Oil will continue as a going concern. As shown in the accompanying
      consolidated financial statements, Quest Oil in curred
      a
      net loss of $9,258,172 for the period ended March 31, 2006. These consolidated
      financial statements do not include any adjustments relating to the
      recoverability and classification of recorded assets, or the amounts and
      classification of liabilities that might be necessary in the event Quest Oil
      cannot continue in existence.





Management
      intends to finance anticipated ongoing expenses and capital requirements with
      funds generated from cash provided by operating activities; available cash
      and
      cash investments; and capital raised through debt and equity
      offerings.





3.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Significant
      accounting policies which affect Quest Oil are summarized below:





Principles
      of Consolidation





These
      consolidated financial statements include all activity of Quest Oil and its wholly
      owned subsidiaries: Quest Canada Corporation; Wallstin Petroleum LLC; and
      Petrostar Oil Services Inc. Quest Canada Corporation was created for the purpose
      of holding Alberta oil and gas property acquisitions. Wallstin Petroleum LLC
      was
      acquired for their management capabilities and contacts in Texas. Petrostar
      Oil
      Services Inc. was created for the purpose of servicing the oil and gas
      properties in Texas. All significant inter-company accounts and transactions
      are
      eliminated in consolidation.





Revenue
      Recognition





Quest
      Oil
      records oil and gas revenues following the entitlement method of accounting
      for
      production, in which any excess amount received above Quest Oil’s share is
      treated as a liability. If less than Quest Oil’s share is received, the
      underproduction is recorded as an asset. Quest Oil did not have an imbalance
      position in terms of volumes or values at March 31, 2006.





Oil
      and
      Gas Activities





Quest
      Oil
      follows the full cost method of accounting for its oil and gas activities;
      accordingly, all costs associated with the acquisition, exploration, and
      development of oil and gas properties are capitalized within the appropriate
      cost center. Any internal costs that are capitalized are limited to those costs
      that can be directly identified with acquisition, exploration, and development
      activities undertaken by Quest Oil for its own account, and do not include
      any
      costs related to production, general corporate overhead, or similar
      activities.





All
      capitalized costs within a cost center are depleted on the units-of-production
      method based on estimated proved reserves attributable to the oil and gas
      properties owned by Quest Oil.





For
      each
      cost center, capitalized costs less accumulated depletion and related deferred
      income taxes may not exceed the cost center ceiling. The cost center ceiling
      is
      equal to the sum of: (a) the present value of estimated future net revenues
      from
      proved oil and gas reserves, less estimated future expenditures to be incurred
      in developing the proved reserves computed using a 10 percent discount factor;
      (b) the cost of properties not being amortized; (c) the lower of cost or fair
      market value of unproven properties included in the costs being amortized;
      and
      (d) income tax effects related to the differences between the book and tax
      basis
      of the properties. Any excess is charged to expense during the period in which
      the excess occurs.





Sales
      of
      oil and gas properties, whether or not being amortized currently, are accounted
      for as adjustments of capitalized costs, with no gain or loss recognized, unless
      such adjustments would significantly alter the relationship between capitalized
      costs and proved reserves of oil and gas attributable to a cost center.
      Abandonments of oil and gas properties are accounted for as adjustments of
      capitalized costs, and are amortized and subject to the cost center ceiling
      limitation.





Future
      site restoration and abandonment costs of Quest Oil’s petroleum and natural gas
      properties are provided for when a reasonable estimate can be made. The
      estimated provision is reduced by expected equipment salvage values at the
      time
      of the abandonment. The resulting net estimated provision, if any, is charged
      against earnings over the remaining life of Quest Oil’s reserves on a unit-of
      production basis. Actual expenditures are applied against the accumulated
      provision account.





Equipment





Equipment
      is recorded at historical cost. The straight line method with a half year
      convention is used for depreciation. Asset life in years is as
      follows:





Computer
                equipment
            
            5
                yearsFurniture
            
            7
                yearsWell
                service equipment
            
            7
                yearsVehicles
            
            5
                years





Long-lived
      assets





Long-lived
      assets to be held and used or disposed of other than by sale are reviewed for
      impairment whenever events or changes in circumstances indicate that the
      carrying amount may not be recoverable. When required, impairment losses on
      assets to be held and used or disposed of other than by sale are recognized
      based on the fair value of the asset. Long-lived assets to be disposed of by
      sale are reported at the lower of the asset’s carrying amount or fair value less
      cost to sell.





Cash
      and
      Cash Equivalents





Quest
      Oil
      considers all highly liquid investments with maturity of three months or less
      at
      the date of acquisition to be cash equivalents.





Compensated
      Absences





Employees
      will be entitled to paid vacation, paid sick days, and personal days off
      depending on job classification, length of service, and other factors. Quest
      Oil’s policy will be to recognize the cost of compensated absences when actually
      paid to employees.





Financial
      Instruments





All
      significant financial assets, financial liabilities, and equity instruments
      of
      Quest Oil are either recognized or disclosed in these consolidated financial
      statements together with other information relevant for making a reasonable
      assessment of future cash flows, interest rate risk, and credit risk. Where
      practicable, the fair value of financial assets and financial liabilities have
      been determined and disclosed; otherwise, only available information pertinent
      to the fair value has been disclosed.





Deferred
      Financing Costs





Deferred
      financing costs are amortized over the length of the underlying
      debt.





Stock
      Based Compensation





Quest
      Oil
      has elected to value stock based compensation granted at the fair value as
      determined using the Black-Scholes option valuation model.





Provision
      for Taxes





Income
      taxes are provided for using the liability method of accounting in accordance
      with Statement of Accounting Standards No. 109, “Accounting for Income Taxes”. A
      deferred tax assets or liability is recorded for all temporary differences
      between financial and tax reporting. Deferred tax expense/(benefit) results
      from
      the net change during the year of deferred tax assets and
      liabilities.





Use
      of
      Estimates





The
      process of preparing consolidated financial statements requires the use of
      estimates and assumptions regarding certain types of assets, liabilities,
      revenues, and expenses. Such estimates primarily relate to unsettled
      transactions and events as of the date of the consolidated financial statements;
      accordingly, upon settlement, actual results may differ from estimated
      amounts.





Foreign
      Currency Transactions





Assets
      and liabilities in foreign currencies are translated at year-end exchange rates.
      Revenue and expense items are translated at the average rate of exchange for
      the
      year. Gains and losses from foreign currency translation are included in other
      comprehensive income as part of stockholders’ equity on the balance sheet. All
      figures presented are in U.S. dollars.





Derivative
      Instruments





At
      March
      31, 2006, Quest Oil had not engaged in any transactions that would be considered
      derivative instruments or hedging activities.





Loss
      Per
      Share





Basic
      loss per share was computed by dividing the net loss by the weighted average
      number of shares outstanding during the period. The weighted average number
      of
      shares was calculated by taking the number of shares outstanding and weighting
      them by the amount of time that they were outstanding. Diluted loss per share
      is
      the same as basic loss per share, as the inclusion of common stock equivalents
      would be anti-dilutive.





New
      accounting standards





In
      December 2004, the FASB issued SFAS No. 123R, “Share-Based Compensation.” SFAS
      No. 123R establishes standards for the accounting for transactions in which
      an
      entity exchanges its equity instruments for goods or services. This Statement
      focuses primarily on accounting for transactions in which an entity obtains
      employee services in share-based payment transactions. SFAS No. 123R requires
      that the fair value of such equity instruments be recognized as expense in
      the
      historical financial statements as services are performed. Prior to SFAS No.
      123R, only certain pro forma disclosures of fair value were required. SFAS
      No.
      123R shall be effective for Quest Oil as April 1, 2006. The adoption of
      this new accounting pronouncement is not currently expected to have a material
      impact on the financial statements.





Quest
      Oil
      does not expect the adoption of any other recently issued accounting
      pronouncements to have a significant impact on its results of operations,
      financial position or cash flows.





4.  BUSINESS
      COMBINATION





On
      August
      5, 2005, Quest Oil purchased Wallstin Petroleum LLC (“Wallstin”), a Texas
      limited liability company. The members of Wallstin agreed to exchange 100%
      of
      their membership interest for a total of 1,502,000 restricted shares of Quest
      Oil common stock with a value of $727,104.





The
      consolidated statement of operations includes the results of operations of
      Wallstin Petroleum LLC for the period from August 5, 2005 to March 31, 2006.





The
      net
      assets acquired at fair value are summarized as follows:





Cash
            $
            4,581Accounts
                receivable
            
            80,732Equipment
            
            4,881Debt
            
            (17,158)Net
                assets acquired
            $
            63,274





The
      excess value of the shares issued was recorded as compensation
      expense.





5.  EQUIPMENT





Equipment
      consists of the following as of March 31, 2006:





Cost
            
            Accumulated
              Depreciation
            
            Net
                Book ValueComputer
                equipment
            $
            23,049
            $
            2,346
            $
            20,703Furniture
                and equipment
            
            102,092
            
            5,795
            
            96,297Well
                service equipment
            
            65,000
            
            4,643
            
            60,357Vehicles
            
            35,641
            
            3,564
            
            32,077$
            225,782
            $
            16,348
            $
            209,434





6.  LOANS
      PAYABLE





Quest
      Oil
      has a loan payable for $25,931 as of March 31, 2006. The amount is a consumer
      loan with interest at 10% per annum and is due on February 24, 2011. The net
      proceeds of this loan were used to purchase a used Ford F250 pick up
      truck.





A
      loan
      facility of $100,000 has been provided with $95,590 advanced to Quest Oil as
      of
      March 31, 2006 with a total of $113,189 owing including interest. The loan
      is
      due in three years from the date of the first advance being September 11, 2006
      with interest only payable quarterly at 8% per annum, simple interest. To date
      no interest has been paid on the loan. The principal and interest is convertible
      into common shares of Quest Oil at $0.05 per share at the option of the lender.





7.  SENIOR
      SECURED CONVERTIBLE NOTES PAYABLE





On
      October 6, 2005, Quest Oil closed a $8,000,000 financing with 25 accredited
      investors with the notes released in two tranches with $6,000,000 received
      on
      closing and the balance of $2,000,000 to be received upon the successful
      effectiveness of the registration statement filed with the Securities and
      Exchange Commission. The investors also have the option to invest up to an
      additional $2,000,000 and receive a zero coupon note equal to 5% of the total
      amount invested by each investor.





The
      senior secured convertible notes bear interest, in arrears, at a rate of 10%
      per
      annum, payable annually on October 1 of each year commencing October 1, 2006
      at
      Quest Oil’s option in cash, additional senior secured convertible promissory
      notes, or registered shares of Quest Oil’s common stock. Commencing on the fifth
      month following the issuance of the senior secured convertible notes and
      continuing thereafter on the first business day of each month, Quest Oil is
      required to pay an amount equal to 1/20 th of the
      original principal amount of the senior secured convertible notes plus accrued
      but unpaid interest. Payment may be made at Quest Oil’s option in cash or
      registered shares of Quest Oil’s common stock. If Quest Oil elects to make
      payment in registered shares of Quest Oil’s common stock, the number of shares
      issued to the note holder shall be discounted to 87.5% of the average of the
      closing bid price of the common stock for the ten trading days immediately
      preceding the payment date. Payment may be made in registered shares of Quest
      Oil’s common stock only if: (a) the registration statement providing for the
      resale of the shares of common stock issuable upon conversion of the senior
      secured convertible notes is effective and has been effective without lapse
      or
      suspension of any kind for a period of twenty consecutive calendar days, (b)
      trading in Quest Oil’s common stock has not been suspended by the Securities and
      Exchange Commission or the OTC Bulletin Board (or other exchange or market
      on
      which Quest Oil’s common stock is trading), (c) Quest Oil is in material
      compliance with the terms and conditions of the senior secured convertible
      notes
      and other financing documents, and (d) the issuance of the shares to each note
      holder does not violate the note holder’s 4.9% or 9.9% ownership cap
      restrictions.





The
      senior secured convertible notes are convertible at any time at the option
      of
      the note holder into such number of fully paid and non-assessable shares of
      Quest Oil’s common stock as is determined by dividing that portion of the
      outstanding principal balance plus any accrued but unpaid interest at the date
      the note holder elects to convert, by the conversion price of $0.40, which
      is
      subject to adjustment.





Quest
      Oil
      may cause the conversion of the senior secured convertible notes if, at any
      time
      following the effective date of the registration statement which registers
      the
      shares underlying the notes, the closing bid prices exceeds $0.80 for a period
      of ten consecutive trading days and the average daily trading volume for such
      ten consecutive trading day period exceeds 250,000 shares of common subject
      to
      certain conditions. Upon mandatory conversion, the principal amount of the
      senior secured convertible notes plus all accrued and unpaid interest shall
      convert into a number of fully paid and nonassessable shares of common stock
      equal to the quotient of the principal amount of the notes plus all accrued
      and
      unpaid interest outstanding on the mandatory conversion date, divided by the
      conversion price in effect on the mandatory conversion date.





So
      long
      as the registration statement is effective, in the event that the closing bid
      price of the common stock is greater than $0.40 and less than $1.25, the maximum
      number of shares of common stock that may be issued upon conversion of the
      notes
      shall not exceed the greater of 25% of the aggregate trading volume for the
      prior fifteen days or 20% of the original principal amount of the
      notes.





Prepayment
      of the senior secured convertible notes may be required at the option of the
      note holder subject to certain conditions. In addition, so long as 10% of the
      original principal amount of the notes are outstanding, Quest Oil can require
      prepayment of the notes by paying in cash, all or portion of the outstanding
      principal amount of the notes together with all accrued and unpaid interest
      thereon with thirty days prior written notice to the note holder at a price
      equal to 125 %
      of the
      aggregate principal amount of the notes plus any accrued but unpaid
      interest.





The
      senior secured convertible notes are secured by a security agreement that grants
      the investors a secured interest in all of the collateral, as defined in the
      agreement, of Quest Oil and its subsidiaries until such time as our obligations
      under the senior secured convertible notes have been meet. In addition to the
      security agreement, Quest Canada Corp., our wholly owned Canadian subsidiary
      has
      entered into a guarantee and indemnity agreement with the investors, whereby
      Quest Canada Corp. has guaranteed payment of the notes and agreed to indemnify
      the investors against losses arising from our failure to meet the obligations
      of
      the notes. Quest Canada Corp. has also entered into a pledge and debenture
      agreement with the investors whereby Quest Canada Corp. has pledged $15 million
      in favor of the investors as a continuing collateral security for the payment
      and fulfillment of the notes. In addition, Quest Oil and our wholly owned
      subsidiary, Wallstin Petroleum, LLC have entered into a deed of trust, security
      agreement, financing statement and assignment of rents and leases with the
      investors whereby our Texas property, rents, royalties and proceeds have been
      conveyed to the trustee as collateral security for the notes.





The
      zero
      coupon convertible notes, when issued, are also due on October 6, 2007 and
      have
      terms which are substantially similar to the senior secured convertible notes;
      however, the zero coupon convertible notes do not bear interest.





Also
      in
      connection with the transaction, Quest Oil issued to each of the note holders,
      and to the Placement Agent, four types of warrants to acquire shares of our
      common stock, which are classified as “Series A,” “Series B,” “Series C” and
“Placement Agent Series A,” “Placement Agent Series B,” “Placement Agent Series
      C,” and “Placement Agent Series D” Warrants. As discussed below, all warrants
      have substantially similar terms and conditions except for the exercise prices,
      the expiration dates and the absence of a call provision.





Quest
      Oil
      issued to each of the note holders and to the Placement Agent, “Series A”
warrants entitling the investors and the Placement Agent to acquire an aggregate
      of 27,500,000 shares of common stock at an exercise price of $0.80 per share
      with a “cashless exercise” provision. Subject to certain conditions, including
      the effectiveness of a registration statement providing for the resale of the
      common stock underlying the warrants, Quest Oil may call the Series A warrants
      at any time so long as the value of the common stock is greater than $1.60
      for a
      period of 10 consecutive days immediately prior to the call notice and the
      average daily trading volume during the 10 day call notice period exceeds
      250,000 shares of common stock. The Series A warrants issued to the note holders
      are exercisable for a period of 3 years. The Placement Agent Series A warrants
      are exercisable for a period of 5 years.





Quest
      Oil
      issued to each of the note holders and to the Placement Agent, “Series B”
warrants entitling the investors and the Placement Agent to acquire an aggregate
      of 13,750,000 shares of common stock at an exercise price of $0.46 per share
      with a “cashless exercise” provision. Subject to certain conditions, including
      the effectiveness of a registration statement providing for the resale of the
      common stock underlying the warrants, Quest Oil may call the Series B warrants
      at any time so long as the value of the common stock is greater than $0.56
      for a
      period of 10 consecutive days immediately prior to the call notice and the
      average daily trading volume during the 10 day call notice period exceeds
      250,000 shares of common stock. The Series B warrants issued to the note holders
      are exercisable for a period of 2 years following the effective date of the
      registration statement providing for the resale of the shares of common stock
      underlying the warrants and the shares of common stock issuable upon conversion
      of the notes. The Placement Agent Series B warrants are exercisable for a period
      of 5 years.





Quest
      Oil
      issued to each of the note holders and to the Placement Agent, “Series C”
warrants which entitle the investors and the Placement Agent to acquire an
      aggregate of 13,750,000 shares of common stock at an exercise price of $0.56
      per
      share with a “cashless exercise” provision. The Series C warrants issued to the
      note holders are exercisable for a period of seven 7 years. There is no call
      provision in the Series C warrants; however, the Series C warrants are only
      exercisable for the number of shares of common stock that has been issued to
      the
      warrant holder pursuant to the warrant holder’s exercise of its Series B
      Warrant. The Placement Agent Series C warrants are exercisable for a period
      of 7
      years.





Quest
      Oil
      issued to the Placement Agent, Placement Agent “Series D” warrants which entitle
      the Placement Agent to acquire an aggregate of 2,500,000 shares of common stock
      at an exercise price of $0.40 per share with a “cashless exercise” provision.
      The Placement Agent Series D warrants are exercisable for a period of 5 years.





Assuming
      the total principal amount of each senior secured note and each zero coupon
      note
      held by each of the selling security holders is converted into common stock
      at a
      conversion price of $0.40 and all the converted shares are sold in the offering,
      the outstanding shares will be increased by 20,400,000. Assuming all warrants
      held by the selling security holders are exercised and all shares underlying
      the
      warrants are sold in the offering, the outstanding shares will be increased
      by
      an additional 57,500,000.





Quest
      Oil
      has valued the warrants granted at $6,000,000 using the Black-Scholes model;
      accordingly, the beneficial conversion feature was valued at $6,000,000. These
      costs have been presented as contra-debt accounts. The value of the warrants
      is
      being amortized to interest expense over the life of the notes, being 24 months.
      Amortization expense for the twelve months ended March 31, 2006 was $643,184.
      The outstanding principal of the loan payable as of March 31, 2006 was
      $5,400,000.





8.  ASSET
      RETIREMENT OBLIGATIONS





Quest
      Oil
      recognizes the fair value of an asset retirement obligation in the period in
      which it is incurred if a reasonable estimate of fair value can be made. The
      present value of the estimated asset retirement costs is capitalized as part
      of
      the carrying amount of the long-lived asset. For Quest Oil, asset retirement
      obligations relate to the abandonment of oil and gas producing facilities.
      The
      amounts recognized are based upon numerous estimates and assumptions, including
      future retirement costs, future recoverable quantities of oil and gas, future
      inflation rates and the credit-adjusted risk-free interest rate.





Quest
      Oil
      records depreciation of the capitalized asset retirement cost and accretion
      of
      the asset retirement obligation over time. The depreciation will generally
      be
      determined on a straight line basis, while the accretion to be recognized will
      escalate over the life of the producing assets, typically as production
      declines. The following table indicates the changes to Quest Oil’s asset
      retirement obligations for the year ended March 31, 2006:





Balance
                at March 31, 2005
            $
            -Liabilities
                incurred
            
            20,000Accretion
                expense
            
            1,000Balance
                at March 31, 2006
            $
            21,000





9.  PREFERRED
      SHARES





Quest
      Oil
      is authorized to issue up to 50,000,000 preferred shares with a par value of
      $0.001 per share. The preferred shares do not carry any pre-emptive or
      preferential rights to subscribe to any unissued stock or any other securities
      which Quest Oil may be authorized to issue and does not carry voting rights.
      No
      preferred shares were issued as of March 31, 2006.





10.  COMMON
      SHARES





Quest
      Oil
      is authorized to issue up to 450,000,000 common shares with a par value of
      $0.001 per share.





On
      July
      16, 2004, the holders of the two convertible promissory notes totalling $10,000
      converted the notes and accrued interest into 40,000 common shares of Quest
      Oil.





On
      December 1, 2004, Quest Oil issued 5,000,000 shares to the President and the
      Chief Financial Officer under their employment agreements, for which $250,000
      has been recorded as stock based compensation. Pursuant to these agreements,
      an
      additional 500,000 shares were to have been issued in February 2005, and the
      cost of $12,500 is included in accrued liabilities at March 31, 2006.





On
      March
      1, 2005, Quest Oil issued 192,300 shares for cash proceeds of
      $50,000.




During
      the year ended March 31, 2005, Quest Oil issued a total of 6,161,540 shares
      to
      consultants for services totalling $346,714. Quest Oil has committed to the
      issuance of an additional 150,000 shares to consultants, and the cost of $7,500
      is included in accrued liabilities at March 31, 2006.





During
      the year ended March 31, 2006, Quest Oil issued common shares as
      follows:





a.
            
            4,846,057
                common shares with a value of $2,067,675 as payment for consulting
                services.b.
            
            21,949,239
                common shares with a value of $1,354,160 for the conversion of outstanding
                debt.c.
            
            1,502,000
                common shares with a value of $727,105 for the acquisition of Wallstin
                Petroleum, LLC.d.
            
            9,852,376
                common shares upon the exercise of warrants for
                $1,624,147.e.
            
            1,667,667
                common shares with a value of $515,918 as compensation under employment
                agreements.





11.  WARRANTS
      AND OPTIONS





No
      options were issued and outstanding at March 31, 2006.





The
      following warrants were issued and outstanding at March 31, 2006 in connection
      with the convertible notes issued on May 23, 2005 and which have been paid
      in
      full:





Placement
                Agent
              Warrants
            Class
                A
              Warrants
            Class
                B
              Warrants
            Class
                C
              WarrantsIssued
            602,663
            6,629,293
            6,629,293
            6,629,293Exercised
            (602,663)
            (3,961,540)
            (5,821,733)
            -Outstanding
            -
            2,667,753
            807,560
            6,629,293





Class
      A
      warrants allow the holders to purchase up to 6,026,630 common shares for a
      period of 15 months at a price of $0.25 per share and in the case of the
      placement agent Class A warrants to purchase up to 602,663 common shares for
      a
      period of 2 years at $0.25 with a “cashless exercise” provision. At March 31,
      2006, all the Class A placement agent warrants were exercised.





Class
      B
      warrants allow the holders to purchase up to 6,026,630 common shares for a
      period of 60 months at a price of $0.1503 per share and in the case of the
      placement agent Class B warrants to purchase up to 602,663 common shares for
      a
      period of 2 years at $0.1503 with a “cashless exercise” provision. At March 31,
      2006, all the Class B placement agent warrants were exercised.





Class
      C
      warrants allow the holders to purchase up to 6,026,630 common shares for a
      period of 60 months at a price of $0.6533 per share and in the case of the
      placement agent Class C warrants to purchase up to 602,663 common shares for
      a
      period of 2 years at $0.6533 with a “cashless exercise” provision.





Placement
      agent warrants allow the placement agent to purchase up to 602,663 common shares
      for a period of 12 months at price of $0.30 per share with a “cashless exercise”
provision. At March 31, 2006, all the placement agent warrants were
      exercised.





The
      following warrants were issued and outstanding at March 31, 2006 in connection
      with the senior secured convertible notes issued on October 7,
      2005:





Series
                A
              Warrants
            Series
                B
              Warrants
            Series
                C
              Warrants
            Series
                D
              WarrantsIssued
            27,500,000
            13,750,000
            13,750,000
            2,500,000Exercised
            -
            -
            -
            -Outstanding
            27,500,000
            13,750,000
            13,750,000
            2,500,000





Series
      A
      warrants allow the note holders and the Placement Agent to purchase up to
      27,500,000 shares of common stock at an exercise price of $0.80 per share with
      a
“cashless exercise” provision. Subject to certain conditions, including the
      effectiveness of a registration statement providing for the resale of the common
      stock underlying the warrants, Quest Oil may call the Series A warrants at
      any
      time so long as the value of the common stock is greater than $1.60 for a period
      of 10 consecutive days immediately prior to the call notice and the average
      daily trading volume during the 10 day call notice period exceeds 250,000 shares
      of common stock. The Series A warrants issued to the note holders are
      exercisable for a period of 3 years. The Placement Agent Series A warrants
      are
      exercisable for a period of 5 years.





Series
      B
      warrants allow the note holders and the Placement Agent to purchase up to
      13,750,000 shares of common stock at an exercise price of $0.46 per share with
      a
“cashless exercise” provision. Subject to certain conditions, including the
      effectiveness of a registration statement providing for the resale of the common
      stock underlying the warrants, Quest Oil may call the Series B warrants at
      any
      time so long as the value of the common stock is greater than $0.56 for a period
      of 10 consecutive days immediately prior to the call notice and the average
      daily trading volume during the 10 day call notice period exceeds 250,000 shares
      of common stock. The Series B warrants issued to the note holders are
      exercisable for a period of 2 years following the effective date of the
      registration statement providing for the resale of the shares of common stock
      underlying the warrants and the shares of common stock issuable upon conversion
      of the notes. The Placement Agent Series B warrants are exercisable for a period
      of five years.





Series
      C
      warrants allow the note holders and the Placement Agent to purchase up to
      13,750,000 shares of common stock at an exercise price of $0.56 per share with
      a
“cashless exercise” provision. The Series C warrants issued to the note holders
      are exercisable for a period of seven years. There is no call provision in
      the
      Series C warrants; however, the Series C warrants are only exercisable for
      the
      number of shares of common stock that has been issued to the warrant holder
      pursuant to the warrant holder’s exercise of its Series B Warrant. The Placement
      Agent Series C warrants are exercisable for a period of seven
      years.





Series
      D
      warrants allow the Placement Agent to purchase up to 2,500,000 shares of common
      stock at an exercise price of $0.40 per share with a “cashless exercise”
provision. The Placement Agent Series D warrants are exercisable for a period
      of
      5 years.





12.  SEGMENT
      INFORMATION





During
      the year ended March 31, 2006, Quest Oil’s operating activity was performed in
      the United States and Canada. Geographical segments are presented as
      follows:





U.S.
            
            Canada
            
            TotalNet
                Revenue
            $
            20,836
            $
            (672,015)
            $
            (651,179)Administrative
                expenses
            
            (7,959,006)
            
            (647,987)
            
            (8,606,993)Income/(loss)
                for the period
            
            (7,938,170)
            
            (1,320,002)
            
            (9,258,172)Identifiable
                assets
            $
            2,076,221
            $
            1,559,668
            $
            3,635,889





13.  INCOME
      TAXES





At
      March
      31, 2006, Quest Oil had cumulative net operating losses of approximately
      $9,258,172 that may be offset against operating income in future years. No
      provision for taxes or tax benefits has been reported in these consolidated
      financial statements as there is not a measurable means of assessing future
      profits or losses.





14.  COMMITMENTS





Quest
      Oil
      has signed compensation agreements with companies related to the Chief Executive
      Officer, Chief Financial Officer and the General Counsel. The compensation
      agreement with a company related to the former Chief Executive Officer was
      terminated on February 24, 2006 upon the resignation as the Chief Executive
      Officer.





Under
      the
      agreements with the Chief Executive Officer and General Counsel, Quest Oil
      is
      obligated to:





a.
            Pay
                annual fees of $126,000 to be accrued and paid in cash;b.
            Issue4,000,000
                “cashless” common stock purchase warrants. The warrants shall be
                exercisable for a term of 5 years at an exercise price equal to 110%
                of
                the closing market price as of April 24, 2006 and shall vest at a
                rate of
                2,000,000 upon execution of this Agreement and 500,000 shares every
                90
                days thereafter;c.
            Pay
                a Profit from Operations Bonus (“POB”), payable quarterly, equal to a 5%
                carried working interest (“CWI”) from all oil and gas well owned and/or
                operated by Quest Oil. The POB shall be derived from (i) new CWI
                revenues
                from new production, and (ii) increased CWI revenues from existing
                production, based on the trailing three months CWI revenues from
                the date
                of the execution of this Agreement. The CWI revenue calculation shall
                be
                based on the difference derived when subtracting (i) taxes, and (ii)
                royalties from a gross revenue amount. So long as this Agreement
                provides
                for a POB, the POB shall be paid for the life of a particular
                well.





Under
      the
      agreement with the Chief Financial Officer, Quest Oil is obligated
      to:





a.
            Pay
                annual fees of $60,000 to be accrued and paid in cash;b.
            Issue
                1,000,000“cashless”
                common stock purchase warrants. The warrants shall be exercisable
                for a
                term of 5 years at an exercise price equal to 110% of the closing
                market
                price as of April 24, 2006 and shall vest at a rate of 500,000 warrants
                every 90 days;c.
            Pay
                a Profit from Operations Bonus (“POB”), payable quarterly, equal to a 2.5%
                carried working interest (“CWI”) from all oil and gas well owned and/or
                operated by Quest Oil. The POB shall be derived from (i) new CWI
                revenues
                from new production, and (ii) increased CWI revenues from existing
                production, based on the trailing three months CWI revenues from
                the date
                of the execution of this Agreement. The CWI revenue calculation shall
                be
                based on the difference derived when subtracting (i) taxes, and (ii)
                royalties from a gross revenue amount. So long as this Agreement
                provides
                for a POB, the POB shall be paid for the life of a particular
                well.





Quest
      Oil
      has also signed consulting agreements with a number of parties. Under these
      agreements Quest Oil is obligated to issue 700,000 restricted common shares
      of
      which none were issued as at March 31, 2006.





15.  SUBSEQUENT
      EVENTS





On
      April
      24, 2006, our board of directors authorized the issuance of 150,000 of our
      common stock registered under our 2005 Stock Incentive Plan to the Baum Law
      Firm for past and present services.





On
      April
      24, 2006, our board of directors authorized the issuance of
      525,000 restricted shares of our common stock as compensation to our past
      directors as follows:





Joseph
                F. Wallen
            
            200,000
                sharesJames
                Irwin
            
            100,000
                sharesDouglas
                Brown
            
            200,000
                sharesDouglas
                Blackman
            
            25,000
                shares





On
      April
      24, 2006, our board of directors authorized the issuance of 1,000,000 “cashless”
common stock purchase warrants to each of our current directors. The warrants
      are exercisable for a term of 5 years at an exercise price equal to 110% of
      the
      closing market price as of April 24, 2006 and shall vest at a rate of 250,000
      warrants every 90 days.





On
      April
      24, 2006, Kruse Consulting Corporation converted an outstanding note owed by
      us
      in the amount of $113,818. The note was converted into 2,276,351 restricted
      shares of our common stock.





On
      April
      24, 2006, we entered into an employment agreement with Mr. Joseph Wallen.
      Pursuant to the terms of the agreement, we issued to Mr. Wallen 1,000,000
“cashless” common stock purchase warrants to each of our current directors. The
      warrants are exercisable for a term of 5 years at an exercise price equal to
      110% of the closing market price as of April 24, 2006 and shall vest at a rate
      of 250,000 warrants every 90 days.





On
      April
      24, 2006 we entered into an Operating Agreement with Business Consulting Group
      Unlimited, Inc. Pursuant to the terms of the agreement we agreed to issue to
      BCGU 8,000,000 “cashless” common stock purchase warrants to each of our current
      directors. The warrants are exercisable for a term of 10 years at an exercise
      price equal to 110% of the closing market price as of April 24, 2006 and shall
      vest at a rate of 2,000,000 warrants every 90 days.





On
      April
      24, 2006, we entered into a Settlement Agreement with Mr. Darren Hayes
      concerning his past consulting arrangement with us. Pursuant to the terms of
      the
      agreement, we are required to pay Mr. Hayes a total of 225,000 shares of our
      common stock registered on Form S-8 as follows: 75,000 shares on May 1, 2006,
      75,000 shares on June 1, 2006, and 75,000 shares on July 1, 2006.





On
      April
      24, 2006, we entered into a 6 month Consulting Agreement with Luis Leung.
      Pursuant to the terms of the agreement, we agreed to pay Mr. Leung 250,000
      shares of our common stock registered on Form S-8 and cashless common stock
      purchase warrant to purchase 250,000 shares of our common stock. The warrants
      are exercisable for a term of 5 years at an exercise price equal to 110% of
      the
      closing market price as of April 24, 2006.





On
      April
      24, 2006, we entered into a 6 month Consulting Agreement with Jerry Pence.
      Pursuant to the terms of the agreement, we agreed to pay Mr. Pence 150,000
      shares of our common stock registered on Form S-8 and cashless common stock
      purchase warrant to purchase 250,000 shares of our common stock. The warrants
      are exercisable for a term of 5 years at an exercise price equal to 110% of
      the
      closing market price as of April 24, 2006.





On
      April
      24, 2006, we entered into a 6 month Consulting Agreement with Cameron King
      our
      former CEO and President. Pursuant to the terms of the agreement, we agreed
      to
      pay Mr. King 30,000 restricted shares of our common stock payable at a rate
      of
      5,000 per month and profits from our Canadian operations.





On
      April
      24, 2006, King Capital Corporation agreed to assume financial responsibility
      for
      our former office space located in Vancouver, Canada.





On
      April
      24, 2006, our board of directors authorized our interim President, Mr. James
      B.
      Panther, II with authority to issued up to 100,000 shares of our restricted
      common stock to certain persons that provided services to the company during
      the
      past 30 days without compensation.





16.  SUPPLEMENTAL
      OIL AND GAS INFORMATION (UNAUDITED)





Capitalized
      Costs





Capitalized
      costs incurred in property acquisition, exploration, and development activities
      as of March 31, 2006 are as follows:





Total
                Capitalized
            $
            3,366,764Less:
                Accumulated DD&A
            
            1,683,654Net
                Capitalized
            $
            1,683,110





Costs
      incurred for property acquisition, exploration, and development activities
      for
      the year ended March 31, 2006 are as follows:





Acquisition
                of PropertiesProved
            $
            2,396,194Unproved
            
            898,315Exploration
                Costs & Development Costs
            
            28,984Asset
                Retirement Obligation
            
            20,000Total
                Costs incurred for property acquisition, exploration and development
                activities
            
            3,343,493




Results
      of operations for oil and gas producing activities for the year ended March
      31,
      2006 are as follows:





Oil
                & gas sales
            $
            1,722,981Production
                costs and exploration expenses
            
            (967,616)Depreciation,
                depletion, amortization and impairment
            
            (1,683,654)(928,289)Income
                tax expense
            
            -Results
                of operations for oil and gas producing activities (excluding corporate
                overhead and financing costs)
            $
            (928,289)





Reserve
      information





The
      following estimates of proved and proved developed reserve quantities and
      related standardized measure of discounted net cash flow are estimates only,
      and
      do not purport to reflect realizable values or fair market values of Quest
      Oil's
      reserves. Quest Oil emphasizes that reserve estimates are inherently imprecise
      and that estimates of new discoveries are more imprecise than those of producing
      oil and gas properties. Accordingly, these estimates are expected to change
      as
      future information becomes available. All of Quest Oil's reserves are located
      in
      the United States and Canada.





Proved
      reserves are estimated reserves of crude oil (including condensate and natural
      gas liquids) and natural gas that geological and engineering data demonstrate
      with reasonable certainty to be recoverable in future years from known
      reservoirs under existing economic and operating conditions. Proved developed
      reserves are those expected to be recovered through existing wells, equipment,
      and operating methods.





The
      standardized measure of discounted future net cash flows is computed by applying
      year-end prices of oil and gas (with consideration of price changes only to
      the
      extent provided by contractual arrangements) to the estimated future production
      of proved oil and gas reserves, less estimated future expenditures (based on
      year-end costs) to be incurred in developing and producing the proved reserves,
      less estimated future income tax expenses (based on year-end statutory tax
      rates, with consideration of future tax rates already legislated) to be incurred
      on pretax net cash flows less tax basis of the properties and available credits,
      and assuming continuation of existing economic conditions. The estimated future
      net cash flows are then discounted using a rate of 10 percent a year to reflect
      the estimated timing of the future cash flows.





2006Oil
            Gas(Bbls)
            (Mcf)Proved
                Developed ReservesBeginning
                of Year
            
            -
            -Purchases
                of Minerals in Place
            
            40,093
            25,101Production
            
            (670)
            (5,642)End
                of the Year
            
            39,423
            19,459







Standardized
                Measure of Discounted FutureNet
                Cash Flows at March 31, 2006Future
                Cash Inflows
            $
            3,185,395Future
                Production Costs
            
            (1,510,797)Future
                Development Costs
            
            (83,600)Future
                Gross Cash Flows
            
            1,590,998Less:
                10% annual discount for estimated timing of cash flows
            
            (499,257)Standardized
                measure of discounted future net cash flows relating to proved oil
                and gas
                reserves
            $
            1,091,741




The
      following reconciles the change in the standardized measure of discounted future
      net cash flow during the year ended March 31, 2006.




Beginning
                of Year
            $
            -Purchases
                of minerals
            
            3,343,493Sales
                of oil and gas produced, net of production costs
            
            (755,365)Net
                changes in prices and production costs
            
            (1,496,387)End
                of year
            $
            1,091,741