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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

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

For the fiscal year ended December 31, 2008

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF TH E
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 000-28305

ENERGY QUEST INC.(Exact
name of registrant as specified in its charter)

|Nevada                                                               | 91-1880015                                                
|-------------------------------------------------------------------- | ----------------------------------------------------------
|(State or Other Jurisdiction of Incorporation of
      Organization) | (I.R.S. Employer Identification No.)                      
|                                                                     |                                                           
|850 South Boulder Hwy., Suite 169 Henderson, Nevada
      89015-7564 | (702) 568 4131                                            
|(Address of principal executive offices) (ZIP Code)                  | (Registrants telephone number, including
      area code)

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

Securities registered pursuant to Section 12(g) of the Act:
Common Stock

Indicate by check mark whether the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [   ] No[
x ]

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes [   ] No[ x
]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for shorter period that the
registrant as required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes[ x ] No [   ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not 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-K or any amendment to this Form 10-K. Yes
[  ] No[ x ]

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

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

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

As of June 30, 2008, which was the last business day of the
registrants most recent second fiscal quarter, the aggregate market value of
the registrants Common Stock held by non-affiliates of the registrant was
$4,971,433.02based on the closing sale price of $1.03 per share on that
date.

Number of common shares outstanding at April 10, 2009:
9,555,270

---



TABLE OF CONTENTS

|PART I   | 3                                                                                                                             
|-------- | ------------------------------------------------------------------------------------------------------------------------------
|         | Item 1. Description of Business                                                                                               
|         | Item 1A. Risk Factors                                                                                                         
|         | Item 1B. Unresolved Staff Comments                                                                                            
|         | Item 2. Properties                                                                                                            
|         | Item 3. Legal Proceedings                                                                                                     
|         | Item 4. Submission of Matters to a Vote of Security Holders                                                                   
|PART II  | 9                                                                                                                             
|         | Item 5. Market for Common Equity and Related Stockholder
      Matters                                                        
|         | Item 6. Selected Financial Data                                                                                               
|         | Item 7. Management's Discussion and Analysis or Results
      of Operations                                                   
|         | Item 7A. Quantitative and Qualitative Disclosures about
      Market Risk                                                     
|         | Item 8. Financial Statements and Supplementary Data                                                                           
|         | Item 9. Changes In and Disagreements with Accountants on
      Accounting and Financial Disclosure                            
|         | Item 9A. Controls and Procedures                                                                                              
|         | Item 9A(T). Controls and Procedures                                                                                           
|         | Item 9B. Other Information                                                                                                    
|PART III | 17                                                                                                                            
|         | Item 10. Directors, Executive Officers, Promoters and Control
      Persons; Compliance with Section 16(a) of the Exchange Act
|         | Item 11. Executive Compensation                                                                                               
|         | Item 12. Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder Matters                 
|         | Item 13. Certain Relationships, Related Transactions and
      Director Independence                                          
|         | Item 14. Principal Accountant Fees and Services                                                                               
|PART IV  | 23                                                                                                                            
|         | Item 15. Exhibits and Financial Statement Schedules                                                                           

2

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PART I

Item 1. Description of Business

Forward-looking Statements

This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors that may cause our or our
industry's actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable laws, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements so as to conform these
statements to actual results.

As used in this annual report, the terms "we", "us", "our",
the Company, and "Mantra" mean Mantra Venture Group Ltd., unless otherwise
indicated.

All dollar amounts refer to US dollars unless otherwise
indicated.

Overview

We were incorporated as a Nevada company on June 20, 1997. We
changed our corporate name to Energy Quest Inc. on May 31, 2007. We are a
development stage company in the development and production of hydrogen-enriched
alternative fuels in an environmentally responsible manner. We plan to employ
gasification technologies and catalytic conversion processes to produce clean
fuels. We design, build, lease and in some cases operate the following
gasification technologies with broad potential application within the energy
field:

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

Our principal offices are located at 850 South Boulder Highway,
Suite 169, Henderson, Nevada. Our fiscal year end is December 31. We have one
wholly-owned subsidiary, Syngas Energy Corp., and its principal business
involves an integrated gasification production system technology that combines
modern gasification with turbine technologies to produce synthetic gas, hydrogen
or electricity. Syngas Energy was incorporated as a British Columbia company on
December 14, 2004.

Development

On July 1, 2008, Steve Eilers, a Director and our Secretary and
Treasurer, submitted his resignation notice to us, effective immediately. Also,
on July 1, 2008, we appointed Mr. Ron Foster as a Director and to serve as our
Secretary and Treasurer.

On April 21, 2008, we appointed Mr. Peter J. Stephens as a
director and to serve on the Board of Directors of the Company.

In March 2008 we entered into a non binding letter of intent
  with Etanol del Pacifico Sur S.A. (EPSSA). The letter sets forth the basic terms
  and conditions under which we expect to enter into a joint venture with EPSSA
  for the construction of an 82,000 liter per day waste biomass gasification synthetic
  diesel plant in Las Cabras, Chile. Currently, we are still in negotiations with
  EPSSA for a definitive and binding agreement.

3

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In March 2008 our Board of Directors approved the construction
of a portable PyStR TMHydrogen unit for demonstration to the
petroleum industry in Alberta.

On February 8, 2008 we engaged Malone & Bailey PC as our
new independent registered public accounting firm, because Morgan & Company,
Chartered Accountants, submitted its resignation and ceased services as the
independent registered public accounting firm for us.

On February 5, 2008 Gilles H. Imbeault, a member of our Board
of Directors, notified us of his decision to resign his positions as a director
and our Vice President of Finance and concurrently, we accepted the resignation
letter of Gilles H. Imbeault as a director and the Vice President of
Finance.

On January 2, 2008 we appointed Mr. Jain as our Chief Financial
Officer and director.

On September 4, 2007, we entered into a 0% convertible
debenture due September 4, 2012 with Vasant Jain whereby Mr. Jain agreed to loan
$120,000,000 to us. Pursuant to the convertible debenture the funds will be
transferred to us within 10 business days after the convertible debenture
documents are successfully posted on Euroclear. As of April 2, 2009 all
approvals for transference of funds have been completed and the closing date is
anticipated to occur shortly.

Our Products and Services

Pyrolysis Steam Reformer (PyStR)

In 2005, through our wholly owned subsidiary Syngas Energy, we
acquired world-wide exclusive licenses to develop, produce and market PyStR, a
low cost proprietary hydrogen production technology. On June 7, 2007, we
completed carbon dioxide sequestration technology, a component of our PyStR
technology. In March 2008 our Board of Directors approved the construction of a
portable PyStR TMHydrogen unit for demonstration to the petroleum
industry in Alberta.

We obtained the exclusive rights to a new, innovative hydrogen
generation technology referred to as the PyStR ( Pyrolitic
Steam Reforming) process. This process can
directly produce high purity hydrogen from biomass and other carbonaceous
feed-stocks such as oil sands, coal and petroleum coke. The PyStR technology
involves the simultaneous pyrolysis and steam reforming of virtually any
carbon-based material. Its products include separate high purity streams of
hydrogen, carbon dioxide and nitrogen produced in a relatively low cost
stainless steel or refractory lined vessel.

The PyStR technology is an inexpensive and simple method of
reforming hydrocarbons (carbonaceous materials) and calcining lime to chemically
separate hydrogen and carbon dioxide into two separate streams. It converts
common cheap ingredients (coal or wood, air, water) into near pure streams of
hydrogen (H 2), carbon dioxide (CO 2) and nitrogen (N
2). It produces no flue gas.

We have agreed to begin construction on a demonstration sized
installation of the PyStR technology no later than February 14, 2008. We have
met this obligation and we are in the process of constructing a portable PyStR
TMHydrogen unit for demonstration. We plan to complete it at the end
of 2008. We are also obligated to sell at least one commercial installation
using the PyStR technology by the end of 2008.

Carbon dioxide sequestration technology

On June 7, 2007 we completed carbon dioxide sequestration
technology, a component of the PyStR technology. Traditional gasification
technology lets carbon dioxide escape into the air, but the PyStR technology
captures carbon dioxide that is commonly accepted to be responsible for global
warming. This captured carbon dioxide emission reduction creates an opportunity
for us to pursue carbon credits by capturing produced carbon dioxide gases from
our gasification process and injecting carbon dioxide into oil-bearing
formations for geologic storage and enhanced oil recovery and is called carbon
neutral.

The PyStR hydrogen production process is used in wells
  that have already passed through primary production, where natural pressure
  in the well pushes out the oil, and in wells that have passed secondary production
  using water or natural gas flooding. In primary and secondary production, well
  pressure eventually falls to levels where output is so thin it's not profitable.
  Use of carbon dioxide allows an opportunity to take a third run at the reservoir
  to tap a potentially large amount of remaining oil. The biggest problem has
  been a reliable supply of carbon dioxide. We,

4

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through our PyStR hydrogen production process, can capture
carbon dioxide that is produced either as a primary or bi-product.

Butanol

We plan to use our PyStR and catalytic process to produce
butanol from carbon based feedstocks. Butanol is a 4-carbon alcohol that is
presently made through a fermentation process in the same manner as ethanol
using mostly grains and corn.

Advantages of butanol are as follows:

- Energy density is only 10% below gasoline;
- Octane rating is 25% higher than gasoline;
- Butanol does not eat away at plastic or rubber engine parts (like
  ethanol/methanol);
- Butanol can be pumped, stored, or transported in same equipment as
  gasoline;
- Any percentage gas plus butanol (10 to 100%) will run in today's cars;
- No modifications are required unlike ethanol fuelled cars;
- Butanol does not absorb water like ethanol or methanol; and
- Butanol burns cleaner than gasoline.

M2 Fluidized Bed Gas Generator (Gasifier)
(M2)

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

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

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

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

Modular Advanced Controlled Air Incinerator

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

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

5

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Commercialization

We plan to focus on developing and marketing our current
technologies while researching new methods of clean energy production. We intend
to subcontract production to outside sources that have a proven track record of
efficiency, reliability and competitive quality and pricing. Our distribution
plan is to enter into technology licensing arrangements with energy producers
and energy production technology distributors, to install our products and use
them to create fuels produced with our technology, as well as to sell our
technologies to other companies within exclusive geographic territories and to
set up joint ventures with other companies.

We are focusing our efforts in getting the PyStR and M2
technologies to market. We completed prototypes of the PyStR hydrogen
production process and the M2 fluidized bed gasification process. In April 2007
we began to commercialize the PyStR and M2 technologies.

Licensing Agreements with Re-Gen International, Beaufort
Energy and Poly-Pacific International

We entered into a licensing agreement dated April 9, 2007, with
Re-Gen International Corporation. Under the terms of the agreement, we agreed to
grant licensing rights for our gasification technology in the United States of
America. The term of the agreement is 10 years and is renewable at expiration
for a further period of 10 years. Re-Gen International must pay us a royalty of
12% of defined profit, to be calculated each month, or a minimum of $30,000
every three months for the first year, whichever is greater. After the first
year, the minimum will be adjusted to $60,000 every three months. We have not
received any amounts and have not recognized any revenue under this agreement to
date. On, October 31, 2008 this agreement was mutually canceled by both
parties

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

On October 24, 2007 we entered into a licensing agreement with
Poly-Pacific International Inc. According to the agreement, we agreed to grant
licensing rights for our gasification technology in the territory of Ontario,
Canada. The term of the agreement is 10 years. Poly-Pacific International must
pay us a royalty of 10% of defined profit, to be calculated each month,
approximately $5,000 upon signing the agreement (paid) and a further
approximately $5,000 upon the completion of a working commercial demo unit.

Manufacturing Agreement with I-Coda

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

Modular Bio-energy Units

On September 13, 2007 we completed the research and development
of our small Modular Bio-energy units: Model FS324 and M2-3 Gasifier. By using
our PyStR and M2 gasification technologies, these units can convert waste
biomass or coal to electricity and heat.

Our small Modular Bio-energy units will be deployed in remote
areas of Canada, United States, South Africa and India. Our small Modular
Bio-energy units will give remote areas an alternative energy source. These
units have state of the art controls and are user friendly.

Potential Deals

6

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In November 2007 we entered into a non binding letter of intent
with Vimala Enterprise of Mumbai, India for the construction of two electrical
power generation plants in India. One of the plants is a 500MW clean coal power
project (Coal gasification) 1st phase and a second 700 MW 2nd phase for a total
of 1200 MW for the two plants. We will be providing proven gasification
technologies, procurement, commissioning and management of the project.
Currently, we are still in negotiations with Vimala Enterprise of Mumbai, India
for a definitive and binding agreement.

In December 2007 we entered into a non binding letter of intent
with Willow Industries Inc. The letter sets forth the basic terms and conditions
under which we expect to enter into a joint venture with Willow Industries for
the construction of a 6 mega watt electrical power generation and gasification
plant in the Edmonton, Alberta area. Currently, we are still in negotiations
with Willow Industries for a definitive and binding agreement.

In March 2008 we entered into a non binding letter of intent
with Etanol del Pacifico Sur S.A. (EPSSA). The letter sets forth the basic terms
and conditions under which we expect to enter into a joint venture with EPSSA
for the construction of an 82,000 liter per day waste biomass gasification
synthetic diesel plant in Las Cabras, Chile. Currently, we are still in
negotiations with EPSSA for a definitive and binding agreement.

The Gasification and Energy Production
Industry

The energy production industry is comprised of major industrial
players with large-scale production facilities, and low cost per energy unit.
Gasification technology is a niche market within the larger energy production
industry. Gasification is a mature, moderate growth business, with reasonable
margins. We are concentrating our business focus on the production and
distribution of low-cost 1⁄2 to 10 megawatt waste to electrical power units or
liquid fuels. This is a niche market which is not presently being aggressively
pursued by the major industrial players.

Marketing

We are a new company and we have little market presence at this
time. So far, we have only three customers and partners, Poly-Pacific
International, I-Coda, Northerrn Alberta Oil Ltd. and Beaufort Energy. We intend
to supplement this with attendance at several trade shows in North America each
year and with advertisements in magazines.

We plan to market our gasification unit by means of
demonstrating a portable mobile gasification unit which will showcase the
gasifier to generating power from a variety of feedstock such as wood waste,
bio-mass, coal, petroleum coke, lignite and in addition a second trailer
featuring the PyStR process combined with the gasifier generating hydrogen and
oxygen from any available carbon source such as coal, wood waste, lignite and
petroleum coke.

We plan on hiring consultants to contact companies with waste
facilities, such as lumber waste and municipal waste. We believe that our PyStR
technology is suitable for companies in the oil and gas business and in the
ammonia business. We plan on targeting such companies through sales consultants
that we will hire. Our marketing plan includes attending several oil and gas,
and alternative energy trade shows during the next year. We have engaged several
consultants to market our technologies. We also plan to attend several trade
conferences in this year.

Competition

Over the last century, several different methods of
gasification have been developed. The most prominent gasification systems used
today are fluidized bed gasification systems similar to ours. There are
competitors around the world who convert biomass to energy, primarily
electricity or thermal, co-generating the energy to reduce waste costs, and
lower fuel costs. The table below lists some of our major competitors and the
advantage we see in our technology compared to the competition.

|Energy Products of Idaho, USA General Electric, -
      we are less expensive by half
|-------------------------------------------------------------------------------------
|USA                                                                                  
|General Electric, USA                                                                
|FERCO (Battelle), U.S.A                                                              
|                                                                                     

7

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|Lurgi, Germany                      | -                                                                   | Unlike Lurgis, our units have
      a small footprint and can be skid
|----------------------------------- | ------------------------------------------------------------------- | ----------------------------------------------------------------------
|                                    | -                                                                   | mounted and portable                                                  
|Foster-Wheeler (Outokumpu), Finland | - Our units are adaptable to downstream changing
      requirements

Our competition includes small and mid-size independent
contractors as well as major energy services companies with international
operations. We believe that the principal competitive factors in the market
areas that we serve are price, product and service quality, efficiency and
availability of equipment and technical proficiency.

We differentiate ourselves from our major competition by our
unique equipment. Our target market is independent energy production companies.
Based on the experience of our directors, these independents typically are
relationship driven and make decisions at the local level. We believe this
business model will enable us to grow our business. However, we are a minor
participant in the industry and compete in the energy production industry with
many other companies having far greater financial, technical and other
resources.

Research and Development

On September 13, 2007 we completed the research and development
of our small Modular Bio-energy units: Model FS324 and M2-3 Gasifier. Since our
inception, we have spent approximately $300,000 on research and development.

We anticipate that we will spend $2,200,000 on research and
development over the next twelve months to upgrade our PyStR and Fluid Bed
gasification technology, including upgrading a prototype. If we are successful
in acquiring other technologies, we may increase our research and development
budget.

Intellectual Property

On December 24, 2004, we purchased an integrated gasification
production system from Wilfred J. Ouellette, our President, CEO and director.
The technology combines modern gasification with gas turbine technologies to
produce synthetic gas or electricity. By December 31, 2007, we have completed an
initial payment of $25,000 and issued the 10,000,000 (500,000 post reverse
stock-split) common shares to 975110 Alberta Ltd. in consideration for the
transfer of 100% of the interest in all of the enhanced gasification
intellectual property and a small gasification unit.

We plan to file patents on several technologies, including the
PyStR process and the M2 Fluidized Bed Gas Generator over next 12 months. We
presently have patents on our diluent recovery and gas mixing technology
properties.

Legislation and Government Regulation

Energy production and distribution is a highly regulated
industry in North America and worldwide. Each of the provinces in Canada, and
each US State, has regulatory provisions relating to the production of
electricity and the distribution of electricity over the transmission grid.
Electricity production and distribution is subject to control by differing
regulatory agencies in each jurisdiction that may refuse to allow production and
sale of electricity into the grid under their auspices, or periodically assign
allowable rates of production. Changes in permits and allowable rates per energy
unit may have a substantial effect on our operations and the operations of our
customers, which in turn could affect the demand for our products and services
and have a substantial effect on our operations. In addition to the forgoing, in
the future our Canadian, US and global operations may be affected by political
developments by Federal, provincial, state and local laws and regulations
including but not limited to restrictions on emissions of greenhouse gases,
price controls, tax increases, expropriation of property, modification or
cancellation of contract rights, and environmental controls. Furthermore,
operations may also be affected by energy trading regulations, import fees and
restrictions.

As well, liquid fuels produced by our technologies are highly
  flammable and normally regulated under hazardous materials regulations in North
  America and worldwide. We are also subject to safety policies of jurisdictional-specific
  Workers Compensation Boards and like agencies regulating the health and safety
  of workers. Since our business strategy is to license our technology to energy
  producers, who will then face the legislative burden, we do not anticipate any
  significant compliance expense on our own behalf. However, the potential compliance
  expense for our customers may affect our operations.

8

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Environmental Law Compliance

Since our business plan involves offering energy production
equipment for license and lease to energy producers or users, we do not expect
that we will be governed by the comprehensive federal, provincial, state and
local laws that regulate discharge of materials into the environment or
otherwise relate to health and safety or the protection of the environment.
However, since our customers and partners will be subject to these laws, the
effect of the regulatory scheme in various jurisdictions may have a substantial
affect on our operations.

Each jurisdiction where we sell our product has an Energy and
Utilities Board, or similar independent, quasi-judicial agency of government
which regulates the safe, responsible and efficient generation and distribution
of electricity and energy products. Since we plan to license our technologies to
energy producer partners, we do not anticipate that we will be directly subject
to the authority of these regulatory bodies. However, since our customers and
partners are subject to these laws, the effect of the regulatory bodies in
various jurisdictions may have a substantial affect on our operations.

Employees

As of April 2, 2009, we have three full time employees. In
addition to employing Wilfred Ouellette, our President, CEO, and Vasant K. Jain
our CFO, we have engaged Ronald Foster as Secretary and Treasurer. We entered
into an employment agreement with Mr. Ouellette dated April 17, 2007, for the
position of Chief Executive Officer, for a period of 60 months at a base salary
of $150,000 per year. On April 17, 2007 we entered into an employment agreement
with Steve Eilers, for the position of Secretary and Treasurer, for a period of
60 months at a base salary of $130,000 per year. On June 30, 2008 Mr. Eilers
resigned and on July 1, 2008 we engaged Mr. Ronald Foster as Secretary and
Treasurer to replace Mr. Eilers for indefinitely period of time for services to
be invoiced to the company. On January 3, 2008 we entered into an executive
employment agreement with Vasant K. Jain for the position of Chief Financial
Officer, for a period of sixty months at a base salary of $125,000 per year. The
agreement expires January 20, 2013.

Item 1A. Risk Factors

Not Applicable.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our principal executive offices are located at Suite 169, 850
South Boulder Highway, Henderson, Nevada, 89015 -7564.

We also have offices at 6403 75th Street, Edmonton,
Alberta T6E 0T3

Item 3. Legal Proceedings

As of April 2, 2009, there are no any material pending legal
proceedings, other than ordinary routine litigation incidental to our business,
to which we or any of our subsidiaries are a party or of which any of our
properties is the subject. Also, our management is not aware of any legal
proceedings contemplated by any governmental authority against us.

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

None.

PART II

9

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Item 5. Market for Common Equity and Related Stockholder
Matters

Market Information

Our common stock is not traded on any exchange. Our common
stock is quoted on the OTC Bulletin Board, under the trading symbol EQST.OB.
The market for our stock is highly volatile. We cannot assure you that there
will be a market in the future for our common stock. The OTC Bulletin Board
securities are not listed and traded on the floor of an organized national or
regional stock exchange. Instead, OTC Bulletin Board securities transactions are
conducted through a telephone and computer network connecting dealers in stocks.
OTC Bulletin Board stocks are traditionally smaller companies that do not meet
the financial and other listing requirements of a regional or national stock
exchange.

The following table shows the high and low prices of our common
shares on the OTC Bulletin Board for each quarter within the two most recent
fiscal years. On May 31, 2007 we effected a reverse stock split in a ratio of
one new share for every twenty existing common shares of our outstanding stock.
The following quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions:

|Period                                  |   | High |  |   | Low  | 
|--------------------------------------- | - | ---- |  | - | ---- | 
|October 1, 2008  December 31, 2008     | $ | 0.51 |  | $ | 0.08 | 
|July 1, 2008 
      September 30, 2008 | $ | 0.90 |  | $ | 0.70 | 
|April 1, 2008  June 30, 2008           | $ | 2.00 |  | $ | 0.65 | 
|January 1, 2008 
      March 31, 2008  | $ | 2.00 |  | $ | 0.75 | 
|October 1, 2007  December 31, 2007     | $ | 3.00 |  | $ | 1.04 | 
|July 1, 2007 
      September 30, 2007 | $ | 3.50 |  | $ | 1.25 | 
|April 1, 2007  June 30, 2007           | $ | 7.00 |  | $ | 2.75 | 
|January 1, 2007 
      March 31, 2007  | $ | 8.40 |  | $ | 3.00 | 

Holders

As of April 2, 2009, there were 669 holders of record of our
common stock.

Dividends

For the two most recent fiscal years we have not paid any cash
dividends on our common shares and do not expect to declare or pay any cash
dividends on our common shares in the foreseeable future. Payment of any
dividends will depend upon future earnings, if any, our financial condition, and
other factors as deemed relevant by our Board of Directors.

Equity Compensation Plans

|Plan category                                                         |  | Number of securities to
      be issued upon exercise of outstanding options,
      warrants and rights (a) |  |  | Weighted average
      exercise price of outstanding options,
      warrants and rights (b) |  |  | Number of securities remaining
      available for future issuance under equity
      compensation plans (excluding securities reflected
      in column (a)) (c) | 
|--------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------------------- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                                      |  |                                                                                                             |  |  |                                                                                             |  |  |                                                                                                                                                                   | 
|Equity compensation plans approved by
      security holders          |  | N/A                                                                                                         |  |  | N/A                                                                                         |  |  | N/A                                                                                                                                                               | 
|                                                                      |  |                                                                                                             |  |  |                                                                                             |  |  |                                                                                                                                                                   | 
|Equity compensation plans 
      not approved
    by security holders |  | 2,000,000                                                                                                   |  |  |                                                                                             |  |  | 2,000,000                                                                                                                                                         | 
|                                                                      |  |                                                                                                             |  |  |                                                                                             |  |  |                                                                                                                                                                   | 
|Total                                                                 |  | 2,000,000                                                                                                   |  |  | N/A                                                                                         |  |  | 2,000,000                                                                                                                                                         | 

10

---

According to the 2008 Stock Compensation Plan, we are
authorized to issue up to 1,000,000 shares of our common stock to employees,
executives and consultants. According to the 2008 Non-Qualified Stock Option
Plan, we are authorized to issue up to 1,000,000 stock purchase options to
employees, executives and consultants to purchase shares of our common stock. As
of December 31, 2008, no securities were issued under two plans.

Recent Sales of Unregistered Securities

From September 30, 2008 to December 31, 2008, we made no sales
of unregistered securities:

Item 6. Selected Financial Data

Not applicable.

Item 7. Management's Discussion and Analysis or Plan of
Operation

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

Results of Operations

Limited Revenues

Since our inception on December 14, 2004 to December 31, 2008,
we had earned limited revenues of $5,164. During the fiscal year ended December
31, 2008 we did not generate any revenues. As of December 31, 2008, we had an
accumulated deficit of $5,575,042. At this time, our ability to generate any
significant revenues continues to be uncertain. There is substantial doubt about
our ability to continue as a going concern. Our financial statements do not
include any adjustment that might result from the outcome of this
uncertainty.

Net Loss

We incurred net loss of $5,498,106 since December 14, 2004
(date of inception) to December 31, 2008. Our net loss decreased significantly,
from $1,709,078 for the fiscal year ended December 31, 2007 to $987,924 for the
fiscal year ended December 31, 2008, a decrease of $721,154. For the fiscal year
ended December 31, 2008, our net loss per share was $0.21, compared to net loss
of $0.78 per share for the same period in 2007.

Expenses

Our total expenses from December 14, 2004 (date of inception)
to December 31, 2008 were $5,385,523 and consisted of $4,454,897 in consulting
and management fees, $328,535 in general and administrative fees, and $377,903
in professional fees. Total expenses decreased $735,589 or 43% to $979,995 for
the fiscal year ended December 31, 2008 from $1,715,584 for the same period in
2007, mostly due to a substantial decrease in our expenses.

Our consulting and management fees decreased $808,798 or 58% to
$594,425 for the fiscal year ended December 31, 2008 from $1,403,223 for the
same period in 2007 mostly due to a substantial decrease in the amount we paid
for consulting fees. During the fiscal year ended December 31, 2008, our
consulting fees decreased as a result of using less external consultants. Our
consulting and management fees consisted mainly of amounts paid to our senior
officers and fees paid to our other consultants.

Our general and administrative expenses decreased by $121,203
or 71% from $170,515 for the fiscal year ended December 31, 2007 to $49,312 for
the same period ended December 31, 2008. The decrease in general and
administrative expenses was mainly due to the more efficient operation of our
day to day operating activities. Our general and administrative expenses consist
of office supplies, travel expenses, rent, communication expenses (cellular,
internet, fax, telephone), office maintenance, courier and postage costs and
office equipment.

Our professional fees decreased by $29,776, to $112,070 for the
  fiscal year ended December 31, 2008 from $141,846 for the same period in 2007.
  The 21% decrease in professional fees was mostly due to less legal and

11

---

auditing services provided during the fiscal year just ended as
opposed to the fiscal year ended in 2007. Our professional fees consisted
primarily of legal, accounting and auditing fees.

Liquidity and Capital Resources

We expect that we only can generate limited revenues over the
next twelve months. As of December 31, 2008, our current assets totaled
$3,048,620 , which was comprised of $792 in cash and cash equivalents, $0 in
prepaid expenses, and $2,927,078 in intangible assets, net of accumulated
amortization. As of December 31, 2008 we had a working capital deficit of
$615,439.

Our net loss of $5,575,042 from December 14, 2004 (date of
inception) to December 31, 2008 was mostly funded by our equity financing. We
expect to incur substantial losses over the next two years. During the fiscal
year ended December 31, 2008 our cash position slightly decreased by $941, not
including our restricted cash assets of $80,000.

During the fiscal year ended December 31, 2008, we received net
cash of $168,099 from financing activities compared to $231,901 for the same
period in 2007. We used net cash of $168,165 in operating activities compared to
$155,854 for the same period in 2007. We used net cash of $nil in investing
activities compared to $80,000 for the same period in 2007.

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

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

- Produce, sell, lease and maintain energy generators that we have
  developed;
- License our integrated gasification technologies to third parties in North
  American, European and global markets;
- Continually improve our gasification technologies and commercializing our
  technologies;
- Expand our technology base by acquiring complementary technologies to our
  PyStR and other technologies through purchasing or licensing arrangements;
- Complete potential deals regarding joint ventures for energy production
  facilities;
- File patents on several technologies, including the PyStR process, the M2
  Fluidized Bed Gas Generator and seek accredited valuations for these
  intellectual properties in a variety of markets including the U.S., Germany
  and Canada; and
- Create additional service lines to complement current operations.

We believe that we need approximately an additional $26,585,000
to meet our capital requirements over the next 12 months (beginning April 2009)
for the following estimated expenses:

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

12

---

|Heavy Oil Upgrader Plant (Northern Alberta Oil) | $ | 23,135,000 | 
|----------------------------------------------- | - | ---------- | 
|Total                                           | $ | 26,585,000 | 

We believe that we need approximately $26,585,000 to meet our
capital requirements over the next 12 months (beginning April 2009). Of the
$26,585,000, we had $792 in cash and cash equivalents as of December 31, 2008.
We intend to meet the balance of our cash requirements for the next 12 months
from external sources, through a combination of debt financing and equity
financing through private placements.

On September 4, 2007, we entered into a 0% convertible
debenture due September 4, 2012 with Vasant Jain whereby Mr. Jain agreed to loan
us $120,000,000. At any time after September 4, 2012 and until September 4, 2017
Mr. Jain has the right to convert all, or a portion of, the principal amount of
the convertible debenture into our common shares at a conversion price of $50.00
per share. Pursuant to the convertible debenture the funds will be transferred
to us within 10 business days after the convertible debenture documents are
successfully posted on Euroclear. As of April 2, 2009 the agreement had not
closed. We anticipate closing the agreement shortly.

Once the agreement is closed, we will have enough capital to
meet our cash requirements over the next twelve months. However, we cannot
guarantee that the agreement will successfully be closed on a timely basis. If
the agreement fails to be closed, we intend to raise the balance of our cash
requirements (approximately $3,449,000) from private placements, loans, or
possibly a registered public offering (either self-underwritten or through a
broker-dealer) within the next few months. At this time we do not have any
commitments from any broker-dealer to provide us with financing. There is no
guarantee that we will be successful in raising any capital. There is no
assurance that we will be able to obtain such additional funds on favorable
terms, if at all. If we fail in raising capital, our business may fail and we
may curtail or cease our operations.

We are seeking equity financing to provide for the capital
required to market and develop our technologies and fully carry out our business
plan. We cannot guarantee we will be successful in our business operations. A
critical component of our operating plan impacting our continued existence is
our ability to obtain additional capital through additional equity and/or debt
financing. Obtaining additional financing will be subject to a number of factors
including market conditions, investor acceptance of our business plan and
investor sentiment. These factors may make the timing, amount, terms and
conditions of additional financing unattractive or unavailable to us. If
financing is not available on satisfactory terms, we may be unable to continue,
develop or expand our operations. If we are unable to raise additional
financing, we will have to significantly reduce our spending, delay or cancel
planned activities or substantially change our current corporate structure. In
such an event, we intend to implement expense reduction plans in a timely
manner. However, these actions would have material adverse effects on our
business, revenues, operating results, and prospects, resulting in a possible
failure of our business. If we raise funds through equity or convertible
securities, our existing stockholders may experience dilution and our stock
price may decline.

We have generated limited revenues and have incurred
significant operating losses from operations. We may continue to experience net
negative cash flows from operations and will be required to obtain additional
financing to fund operations through equity securities offerings and bank
borrowings to the extent necessary to provide working capital. Our continuation
as a going concern is dependent upon our ability to generate sufficient cash
flow from stockholders or other outside sources to sustain operations and meet
our obligations on a timely basis and ultimately to attain profitability. We
have limited capital with which to pursue our business plan. There can be no
assurance that our future operations will be significant and profitable, or that
we will have sufficient resources to meet our objectives.

These factors raise substantial doubt about our ability to
continue as a going concern. Our auditors have issued a going concern opinion.
This means that there is substantial doubt that we can continue as an on-going
business for the next twelve months. The financial statements do not include any
adjustments that might result from the uncertainty about our ability to continue
our business. If we are unable to obtain additional financing from outside
sources and eventually produce enough revenues, we may be forced to sell our
assets, curtail or cease our operations.

Known Material Trends and Uncertainties

On October 15, 2008, we entered into an agreement with CO.F.A.M.M.
  for the provision of assistance and advice to us on acquiring contracts in Italy,
  Romania, Greece, Morocco, the Middle East and Hungary. The agreement is for
  a period of three years and can be renewed annually thereafter, unless terminated
  by either party by written notice.

13

---

Pursuant to the agreement, we will pay the cost of marketing or
any other costs incurred by COFAMM, with our prior approval.

On September 19, 2008, we entered into an agreement with Access
Energy Technologies for the provision of assistance and advice to us on
acquiring contracts in Korea. The agreement is for a period of three years and
can be renewed annually thereafter, unless terminated by either party by written
notice. Pursuant to the agreement, we will pay the cost of marketing or any
other costs incurred by Access with our prior approval.

Off-Balance Sheet Arrangements

As of December 31, 2008, we had no off balance sheet
transactions that have or are reasonably likely to have a current or future
effect on our financial condition, changes in our financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital
resources.

Critical Accounting Policies

The discussion and analysis of our financial condition and
results of operations are based upon our financial statements, which have been
prepared in accordance with accounting principles generally accepted in the US.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. We
evaluate these estimates on an on-going basis, including those related to
customer programs and incentives, bad debts, inventories, investments,
intangible assets, income taxes, warranty obligations, impairment or disposal of
long-lived assets, contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We consider the following accounting policies to be both those
important to the portrayal of our financial condition and that require the
subjective judgment:

Intangible Asset

In May of 2008, we issued 2,000,000 shares of stock valued at
$1.50 per share to a third party for the purchase of various technologies and
patents with a total estimated fair market value of $3,000,000 based on the
market price of the consideration given . The patents are to be used with the
PyStR hydrogen generator to enhance the mixing of hydrogen with heavy oil for
upgrading purposes and to recover diluent used in the same process. Amortization
has been estimated on the economic useful life or expected legal life of the
patent estimated to be 20 years.

On December 24, 2004, we purchased an integrated gasification
production system from our CEO. The technology combines modern gasification with
gas turbine technologies to produce synthetic gas, hydrogen or electricity. We
intend to further develop the technology to make it commercially viable and
intend to then sell or license the technology. We purchased the asset by issuing
10,000,000 (500,000 post reverse stock-split) shares of our common stock and a
$25,000 payment. If by January 2006 the Company had not raised a minimum of
$1,000,000 by way of equity private placements, it has the option, until June
30, 2007, of canceling the 10,000,000 shares issued to 975110 Alberta Ltd. and
subject to escrow, in consideration for the transfer to 975110 Alberta Ltd. of
100% of the interest in all of the enhanced gasification intellectual property
and a small gasification unit. By December 31, 2007, the 500,000 common shares
were released from escrow.

Stock-Based Compensation

We record stock-based compensation in accordance with SFAS No.
123R Share Based Payments, using the fair value method. All transactions in
which goods or services are the consideration received for the issuance of
equity instruments are accounted for based on the fair value of the equity
instrument issued. Equity instruments issued to employees and the cost of the
services received as consideration are measured and recognized based on the fair
value of the equity instruments issued.

On January 22, 2008 our Board of Directors approved the 2008
  Stock Compensation Plan and the 2008 Non-Qualified Stock Option Plan. We plan
  to file a Form S-8 to register two plans. According to the 2008 Stock Compensation
  Plan, we are authorized to issue up to 1,000,000 shares of our common stock
  to employees, executives and consultants. According to the 2008 Non-Qualified
  Stock Option Plan, we are authorized to issue up

14

---

to 1,000,000 stock purchase options to employees, executives
and consultants to purchase shares of our common stock. As of April 2, 2009, no
securities were issued under the two plans.

Item 7A. Quantitative and Qualitative Disclosures about
Market Risk

Not Applicable.

Item 8. Financial Statements and Supplementary Data

Energy Quest Inc.(A Development Stage Company)

December 31, 2008

|                                                                         | Index      
|------------------------------------------------------------------------ | -----------
|Report of Independent Registered
      Public Accounting Firm            | F-1        
|Consolidated Balance Sheets                                              | F-2        
|Consolidated Statements
      of Operations and Other Comprehensive Loss | F-3        
|Consolidated Statements of Cash Flows                                    | F-4        
|Consolidated Statement
      of Changes in Stockholders Equity (Deficit) | F-5 to F-7 
|Notes to the Consolidated Financial Statements                           | F-8 to F-13

15

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board Directors Energy Quest, Inc.(Formerly
Syngas International Corp.) (A Development Stage Company) Henderson,
Nevada

We have audited the accompanying consolidated balance sheets of
Energy Quest, Inc. (Energy Quest) as of December 31, 2008 and 2007 and the
related consolidated statements of operations and other comprehensive loss, cash
flows, and changes in stockholders equity(deficit) for the years ended December
31, 2008 and 2007. These consolidated financial statements are the
responsibility of Energy Quest's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.
Energy Quest is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of Energy Quests
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements, 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 consolidated financial
position of Energy Quest as of December 31, 2008 and 2007 and the consolidated
results of operations and cash flows for the for the year ended December 31,
2008 and 2007 , in conformity with accounting principles generally accepted in
the United States of America.

The accompanying financial statements have been prepared
assuming that Energy Quest will continue as a going concern. As discussed in
Note 1 to the financial statements, Energy Quest suffered recurring losses from
operations, which raises substantial doubt about its ability to continue as a
going concern. Managements plans regarding those matters also are described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ Malone & Bailey, P.C.

www.malone-bailey.com
  Houston, TX 
  April 7, 2009

F-1

---

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

|                                                                        |  | December 31, |   |  | December 31, |  
|----------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                        |  | 2008         |   |  | 2007         |  
|                                                                        |  | $            |   |  | $            |  
|Assets                                                                  |  |              |   |  |              |  
|Current Assets                                                          |  |              |   |  |              |  
|Cash and cash equivalents                                               |  | 792          |   |  | 1,733        |  
|Restricted cash                                                         |  |             |   |  | 80,000       |  
|Prepaid expenses                                                        |  |             |   |  | 454          |  
|Other
      current assets                                              |  |             |   |  | 2,064        |  
|Total Current Assets                                                    |  | 792          |   |  | 84,251       |  
|Intangible Assets,
      net (Note 3)                                   |  | 2,927,078    |   |  | 31,336       |  
|Total Assets                                                            |  | 2,927,870    |   |  | 115,587      |  
|                                                                        |  |              |   |  |              |  
|Liabilities and Stockholders' Equity
      (Deficit)                    |  |              |   |  |              |  
|Current Liabilities                                                     |  |              |   |  |              |  
|Accounts payable and accrued
      liabilities                          |  | 54,829       |   |  | 61,603       |  
|Amounts due to related parties (Note 3)                                 |  | 244,488      |   |  | 249,505      |  
|Stock payable                                                           |  |             |   |  | 161,583      |  
|Note payable (Note 4)                                                   |  | 29,212       |   |  | 21,197       |  
|Advances from former Shareholders (Note 5)                              |  | 287,702      |   |  | 289,934      |  
|Total Liabilities                                                       |  | 616,231      |   |  | 783,822      |  
|Stockholders' Equity (Deficit)                                          |  |              |   |  |              |  
|Preferred Stock                                                         |  |              |   |  |              |  
|Authorized: 1,000,000 shares,
      with a $0.01 par value; none issued |  |             |   |  |             |  
|Common Stock                                                            |  |              |   |  |              |  
|Authorized: 200,000,000
      shares, with a $0.001 par value;          |  |              |   |  |              |  
|Issued: 9,555,270 shares (December 31, 2007 -
      2,565,549 shares)   |  | 9,555        |   |  | 2,566        |  
|Additional Paid-in Capital                                              |  | 7,877,004    |   |  | 3,976,922    |  
|Accumulated Other Comprehensive Income (Loss)                           |  | 122          |   |  | (105         | )
|Stock Subscription Receivable                                           |  |             |   |  | (60,500      | )
|Deficit
      Accumulated During the Development Stage                  |  | (5,575,042   | ) |  | (4,587,118   | )
|Total Stockholders Equity (Deficit)                                    |  | 2,311,639    |   |  | (668,235     | )
|Total Liabilities
      and Stockholders Equity (Deficit)              |  | 2,927,870    |   |  | 115,587      |  

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

F-2

---

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

|                                             |  |              |   |  |              |   |  | Period from            |  
|-------------------------------------------- |  | ------------ | - |  | ------------ | - |  | ---------------------- | -
|                                             |  | For the Year |   |  | For the Year |   |  | December 14, 2004      |  
|                                             |  | Ended        |   |  | Ended        |   |  | (Date of Inception) to |  
|                                             |  | December 31, |   |  | December 31, |   |  | December 31, 2008      |  
|                                             |  | 2008         |   |  | 2007         |   |  | (Unaudited)            |  
|                                             |  | $            |   |  | $            |   |  | $                      |  
|Revenue                                      |  |             |   |  | 5,164        |   |  | 5,164                  |  
|                                             |  |              |   |  |              |   |  |                        |  
|Expenses                                     |  |              |   |  |              |   |  |                        |  
|Consulting and management fees               |  | 594,425      |   |  | 1,403,223    |   |  | 4,454,897              |  
|General and administrative                   |  | 49,312       |   |  | 170,515      |   |  | 328,535                |  
|Professional fees                            |  | 112,070      |   |  | 141,846      |   |  | 377,903                |  
|Research and development                     |  | 46,111       |   |  |             |   |  | 46,111                 |  
|Depreciation, depletion, and impairment      |  | 98,077       |   |  |             |   |  | 98,077                 |  
|Other                                        |  | 80,000       |   |  |             |   |  | 80,000                 |  
|                                             |  | 979,995      |   |  | 1,715,584    |   |  | 5,385,523              |  
|Loss before the following:                   |  | (979,995     | ) |  | (1,710,420   | ) |  | (5,380,359             | )
|                                             |  |              |   |  |              |   |  |                        |  
|Interest income                              |  |             |   |  | 2,085        |   |  | 2,085                  |  
|Interest expense                             |  | (7,929       | ) |  | (743         | ) |  | (8,672                 | )
|Gain on write-off of debt                    |  |             |   |  |             |   |  | 5,826                  |  
|Loss on write-off
      of loan receivable   |  |             |   |  |             |   |  | (193,922               | )
|                                             |  |              |   |  |              |   |  |                        |  
|Net loss                                     |  | (987,924     | ) |  | (1,709,078   | ) |  | (5,575,042             | )
|Other comprehensive income                   |  |              |   |  |              |   |  |                        |  
|Foreign currency translation adjustment      |  | 227          |   |  | 992          |   |  | 122                    |  
|Total Comprehensive Loss                     |  | (987,697     | ) |  | (1,708,086   | ) |  | (5,574,920             | )
|Net Loss Per Share
       Basic and Diluted |  | (0.21        | ) |  | (0.78        | ) |  |                        |  
|Weighted Average Shares Outstanding         |  |              |   |  |              |   |  |                        |  
|Basic and Diluted                            |  | 4,614,000    |   |  | 2,190,000    |   |  |                        |  

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

F-3

---

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

|                                                         |  |              |   |  |              |   |  | Accumulated from       |  
|-------------------------------------------------------- |  | ------------ | - |  | ------------ | - |  | ---------------------- | -
|                                                         |  | For the Year |   |  | For the Year |   |  | December 14, 2004      |  
|                                                         |  | Ended        |   |  | Ended        |   |  | (Date of Inception) to |  
|                                                         |  | December 31, |   |  | December 31, |   |  | December 31, 2008      |  
|                                                         |  | 2008         |   |  | 2007         |   |  | (unaudited)            |  
|                                                         |  | $            |   |  | $            |   |  | $                      |  
|                                                         |  |              |   |  |              |   |  |                        |  
|Cash Flows Used In Operating Activities                  |  |              |   |  |              |   |  |                        |  
|Net loss                                                 |  | (987,924     | ) |  | (1,709,078   | ) |  | (5,575,042             | )
|                                                         |  |              |   |  |              |   |  |                        |  
|Adjustments to reconcile net loss to net cash
      used |  |              |   |  |              |   |  |                        |  
|in operating
      activities:                           |  |              |   |  |              |   |  |                        |  
|Stock-based compensation                                 |  | 321,750      |   |  | 1,170,550    |   |  | 2,486,863              |  
|Shares issued
      for expenses                         |  | 31,250       |   |  | 112,501      |   |  | 1,516,193              |  
|Write-off on restricted cash                             |  | 80,000       |   |  |             |   |  | 80,000                 |  
|Loss on
      write-off of loan receivable               |  |             |   |  |             |   |  | 193,922                |  
|Amortization of intangible
      assets                  |  | 98,077       |   |  |             |   |  | 98,077                 |  
|Gain on write
      off of debt                          |  |             |   |  |             |   |  | (5,826                 | )
|                                                         |  |              |   |  |              |   |  |                        |  
|Changes in operating assets and
      liabilities:       |  |              |   |  |              |   |  |                        |  
|Prepaid expenses and other
      current assets          |  | 2,518        |   |  | 6,136        |   |  |                       |  
|Accounts payable
      and accrued liabilities           |  | (6,774       | ) |  | 32,353       |   |  | 25,232                 |  
|Due to related parties                                   |  | 292,938      |   |  | 231,684      |   |  | (542,443               | )
|                                                         |  |              |   |  |              |   |  |                        |  
|Net Cash Used in
      Operating Activities              |  | (168,165     | ) |  | (155,854     | ) |  | (638,138               | )
|                                                         |  |              |   |  |              |   |  |                        |  
|Investing Activities                                     |  |              |   |  |              |   |  |                        |  
|Loan receivable                                          |  |             |   |  |             |   |  | (193,922               | )
|Net cash acquired on business
      acquisition          |  |             |   |  |             |   |  | 565                    |  
|Change in
      restricted cash                          |  |             |   |  | (80,000      | ) |  | (80,000                | )
|Purchase of intangible assets                            |  |             |   |  |             |   |  | (25,000                | )
|                                                         |  |              |   |  |              |   |  |                        |  
|Net Cash Used In
      Investing Activities              |  |             |   |  | (80,000      | ) |  | (298,357               | )
|                                                         |  |              |   |  |              |   |  |                        |  
|Financing Activities                                     |  |              |   |  |              |   |  |                        |  
|Proceeds from
      issuance of common stock             |  | 125,000      |   |  | 30,000       |   |  | 454,144                |  
|Proceeds from notes payable                              |  | 64,296       |   |  | 201,901      |   |  | 505,320                |  
|Re-payment of note payable                               |  | (21,197      | ) |  | -            |   |  | (21,197                | )
|                                                         |  |              |   |  |              |   |  |                        |  
|Net Cash Provided By Financing Activities                |  | 168,099      |   |  | 231,901      |   |  | 938,267                |  
|                                                         |  |              |   |  |              |   |  |                        |  
|Effect of Exchange Rate Changes on Cash                  |  | (875         | ) |  | 992          |   |  | (980                   | )
|                                                         |  |              |   |  |              |   |  |                        |  
|Increase (decrease) in Cash and Cash
      Equivalents   |  | (941         | ) |  | (2,961       | ) |  | 792                    |  
|                                                         |  |              |   |  |              |   |  |                        |  
|Cash and Cash Equivalents, beginning                     |  | 1,733        |   |  | 4,694        |   |  |                        |  
|                                                         |  |              |   |  |              |   |  |                        |  
|Cash and Cash Equivalents, end                           |  | 792          |   |  | 1,733        |   |  | 792                    |  
|                                                         |  |              |   |  |              |   |  |                        |  
|                                                         |  |              |   |  |              |   |  |                        |  
|Supplemental Disclosures                                 |  |              |   |  |              |   |  |                        |  
|                                                         |  |              |   |  |              |   |  |                        |  
|Cash paid for taxes                                      |  |             |   |  |              |   |  |                       |  
|Cash paid for interest                                   |  |             |   |  |              |   |  |                       |  
|                                                         |  |              |   |  |              |   |  |                        |  
|Non-Cash Financing and Investing Activities              |  |              |   |  |              |   |  |                        |  
|                                                         |  |              |   |  |              |   |  |                        |  
|Common stock issued for
      intangible assets          |  | 3,000,000    |   |  |             |   |  | 3,000,204              |  
|Common stock issued for stock payable                    |  | 161,550      |   |  |             |   |  | 161,550                |  
|Common stock issued for
      amounts due to related     |  |              |   |  |              |   |  |                        |  
|parties                                                  |  | 328,022      |   |  |             |   |  | 328,022                |  
|Common stock issued for subscription
      receivable    |  | 120,750      |   |  |             |   |  | 120,750                |  

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

F-4

---

|Energy Quest Inc.                                                        
|-------------------------------------------------------------------------
|(A Development Stage Company)                                            
|Consolidated Statement of Changes in Stockholders Equity
      (Deficit)

|                                                                  |  |            |   |  |         |   |  |            |  |  |               |   |  |               |  |  | Deficit     |   |  |            |  
|----------------------------------------------------------------- |  | ---------- | - |  | ------- | - |  | ---------- |  |  | ------------- | - |  | ------------- |  |  | ----------- | - |  | ---------- | -
|                                                                  |  |            |   |  |         |   |  |            |  |  | Accumulated   |   |  |               |  |  | Accumulated |   |  |            |  
|                                                                  |  |            |   |  |         |   |  | Additional |  |  | Other         |   |  | Stock         |  |  | During the  |   |  |            |  
|                                                                  |  | Common     |   |  |         |   |  | Paid-In    |  |  | Comprehensive |   |  | Subscriptions |  |  | Development |   |  |            |  
|                                                                  |  | Stock      |   |  | Amount  |   |  | Capital    |  |  | Income        |   |  | Receivable    |  |  | Stage       |   |  | Total      |  
|                                                                  |  | #          |   |  | $       |   |  | $          |  |  | $             |   |  | $             |  |  | $           |   |  | $          |  
|BalanceDecember 14, 2004 (Date of
      Inception)               |  |            |   |  |         |   |  |            |  |  |               |   |  |               |  |  |             |   |  |            |  
|(Unaudited)                                                       |  |           |   |  |        |   |  |           |  |  |              |   |  |              |  |  |            |   |  |           |  
|Issue of common stock for cash                                    |  | 1,000,000  |   |  | 407     |   |  |           |  |  |              |   |  | -             |  |  |            |   |  | 407        |  
|Issue of common stock for intangible asset                        |  | 500,000    |   |  | 204     |   |  |           |  |  |              |   |  |              |  |  |            |   |  | 204        |  
|Net loss for the period                                           |  |           |   |  |        |   |  |           |  |  |              |   |  |              |  |  | (10,015     | ) |  | (10,015    | )
|Balance  December 31, 2004 (Unaudited)                           |  | 1,500,000  |   |  | 611     |   |  |           |  |  |              |   |  |              |  |  | (10,015     | ) |  | (9,404     | )
|Issue of common stock for cash                                    |  | 2,375      |   |  | 19,337  |   |  |           |  |  |              |   |  |              |  |  |            |   |  | 19,337     |  
|                                                                  |  | 1,502,375  |   |  | 19,948  |   |  |           |  |  |              |   |  |              |  |  | (10,015     | ) |  | 9,933      |  
|Adjustment to number of shares issued and
      outstanding as a  |  |            |   |  |         |   |  |            |  |  |               |   |  |               |  |  |             |   |  |            |  
|result of the reverse takeover transaction:                       |  |            |   |  |         |   |  |            |  |  |               |   |  |               |  |  |             |   |  |            |  
|- Add issued and outstanding stock of
      Energy Quest Inc at   |  |            |   |  |         |   |  |            |  |  |               |   |  |               |  |  |             |   |  |            |  
|time of reverse acquisition                                       |  | 321,128    |   |  | 321     |   |  | 6,102      |  |  |              |   |  |              |  |  | (66,839     | ) |  | (60,416    | )
|- Deduct issued and outstanding stock of
      Energy Quest Inc.  |  | (1,502,375 | ) |  | (19,948 | ) |  |           |  |  |              |   |  |              |  |  | 19,948      |   |  |           |  
|Issue of common stock on acquisition of Energy Quest Inc.         |  | 1,502,375  |   |  | 1,502   |   |  | 28,545     |  |  |              |   |  |              |  |  | (30,047     | ) |  |           |  
|Issue of common stock for cash on exercise
      of stock options |  | 13,000     |   |  | 13      |   |  | 77,987     |  |  |              |   |  |              |  |  |            |   |  | 78,000     |  
|Stock-based compensation                                          |  |           |   |  |        |   |  | 339,762    |  |  |              |   |  |              |  |  |            |   |  | 339,762    |  
|Issue of common stock for services                                |  | 51,250     |   |  | 51      |   |  | 609,949    |  |  |              |   |  |              |  |  |            |   |  | 610,000    |  
|Foreign currency translation adjustment                           |  |           |   |  |        |   |  |           |  |  | (1,019        | ) |  |              |  |  |            |   |  | (1,019     | )
|Net loss for the year                                             |  |           |   |  |        |   |  |           |  |  |              |   |  |              |  |  | (1,095,384  | ) |  | (1,095,384 | )
|Balance  December
      31, 2005 (Unaudited)                     |  | 1,887,753  |   |  | 1,887   |   |  | 1,062,345  |  |  | (1,019        | ) |  |              |  |  | (1,182,337  | ) |  | (119,124   | )

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

F-5

---

|Energy Quest Inc.                                       
|--------------------------------------------------------
|(A Development Stage Company)                           
|Consolidated Statement of Stockholders Equity (Deficit)

|                                                                 |  |           |  |  |        |  |  |            |  |  |               |   |  |               |   |  | Deficit     |   |  |            |  
|---------------------------------------------------------------- |  | --------- |  |  | ------ |  |  | ---------- |  |  | ------------- | - |  | ------------- | - |  | ----------- | - |  | ---------- | -
|                                                                 |  |           |  |  |        |  |  |            |  |  | Accumulated   |   |  |               |   |  | Accumulated |   |  |            |  
|                                                                 |  |           |  |  |        |  |  | Additional |  |  | Other         |   |  | Stock         |   |  | During the  |   |  |            |  
|                                                                 |  | Common    |  |  |        |  |  | Paid-In    |  |  | Comprehensive |   |  | Subscriptions |   |  | Development |   |  |            |  
|                                                                 |  | Stock     |  |  | Amount |  |  | Capital    |  |  | Income        |   |  | Receivable    |   |  | Stage       |   |  | Total      |  
|                                                                 |  | #         |  |  | $      |  |  | $          |  |  | $             |   |  | $             |   |  | $           |   |  | $          |  
|Balance  December 31, 2005 (Unaudited)                          |  | 1,887,753 |  |  | 1,887  |  |  | 1,062,345  |  |  | (1,019        | ) |  |              |   |  | (1,182,337  | ) |  | (119,124   | )
|Issue of common stock for cash on exercise of stock options      |  | 28,767    |  |  | 29     |  |  | 201,371    |  |  |              |   |  |              |   |  |            |   |  | 201,400    |  
|Stock-based compensation                                         |  |          |  |  |       |  |  | 654,801    |  |  |              |   |  |              |   |  |            |   |  | 654,801    |  
|Issue of common stock for services                               |  | 75,998    |  |  | 76     |  |  | 685,428    |  |  |              |   |  |              |   |  |            |   |  | 685,504    |  
|Foreign currency translation adjustment                          |  |          |  |  |       |  |  |           |  |  | (78           | ) |  |              |   |  |            |   |  | (78        | )
|Net loss for the
      year                                      |  |          |  |  |       |  |  |           |  |  |              |   |  |               |   |  | (1,695,703  | ) |  | (1,695,703 | )
|Balance  December 31, 2006 (Unaudited)                          |  | 1,992,518 |  |  | 1,992  |  |  | 2,603,945  |  |  | (1,097        | ) |  |              |   |  | (2,878,040  | ) |  | (273,200   | )
|Issue of common stock for cash                                   |  | 15,000    |  |  | 15     |  |  | 29,985     |  |  |              |   |  |              |   |  |            |   |  | 30,000     |  
|Issue of common stock for subscription
      receivable          |  | 57,500    |  |  | 58     |  |  | 60,442     |  |  |              |   |  | (60,500       | ) |  |            |   |  |           |  
|Issue of common stock for services                               |  | 500,500   |  |  | 501    |  |  | 1,282,550  |  |  |              |   |  |              |   |  |            |   |  | 1,283,051  |  
|Issue of common stock to round-up
      fractional shares due to |  |           |  |  |        |  |  |            |  |  |               |   |  |               |   |  |             |   |  |            |  
|reverse stock-split                                              |  | 31        |  |  |       |  |  |           |  |  |              |   |  |              |   |  |            |   |  |           |  
|Foreign currency translation adjustment                          |  |          |  |  |       |  |  |           |  |  | 992           |   |  |              |   |  |            |   |  | 992        |  
|Net loss for the
      year                                      |  |          |  |  |       |  |  |           |  |  |              |   |  |              |   |  | (1,709,078  | ) |  | (1,709,078 | )
|Balance  December 31, 2007                                      |  | 2,565,549 |  |  | 2,566  |  |  | 3,976,922  |  |  | (105          | ) |  | (60,500       | ) |  | (4,587,118  | ) |  | (668,235   | )

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

F-6

---

|Energy Quest Inc.                                                        
|-------------------------------------------------------------------------
|(A Development Stage Company)                                            
|Consolidated Statement of Changes in Stockholders Equity
      (Deficit)

|                                                    |  |           |  |  |        |   |  |            |   |  |               |   |  |              |   |  | Deficit     |   |  |            |  
|--------------------------------------------------- |  | --------- |  |  | ------ | - |  | ---------- | - |  | ------------- | - |  | ------------ | - |  | ----------- | - |  | ---------- | -
|                                                    |  |           |  |  |        |   |  |            |   |  | Accumulated   |   |  |              |   |  | Accumulated |   |  |            |  
|                                                    |  |           |  |  |        |   |  | Additional |   |  | Other         |   |  | Stock        |   |  | During the  |   |  |            |  
|                                                    |  | Common    |  |  |        |   |  | Paid-In    |   |  | Comprehensive |   |  | Subscription |   |  | Development |   |  |            |  
|                                                    |  | Stock     |  |  | Amount |   |  | Capital    |   |  | Income        |   |  | Receivable   |   |  | Stage       |   |  | Total      |  
|                                                    |  | #         |  |  | $      |   |  | $          |   |  | $             |   |  | $            |   |  | $           |   |  | $          |  
|Balance  December 31, 2007                         |  | 2,565,549 |  |  | 2,566  |   |  | 3,976,922  |   |  | (105          | ) |  | (60,500      | ) |  | (4,587,118  | ) |  | (668,235   | )
|Issue of common stock for cash                      |  | 125,000   |  |  | 125    |   |  | 124,875    |   |  |              |   |  |             |   |  |            |   |  | 125,000    |  
|Issue of common stock for stock payable             |  | 107,700   |  |  | 108    |   |  | 161,442    |   |  |              |   |  |             |   |  |            |   |  | 161,550    |  
|Issue of common stock for patents                   |  | 2,000,000 |  |  | 2,000  |   |  | 2,998,000  |   |  |              |   |  |             |   |  |            |   |  | 3,000,000  |  
|Issue of share-based compensation                   |  | 1,750,000 |  |  | 1,807  |   |  | 319,943    |   |  |              |   |  |             |   |  |            |   |  | 321,750    |  
|Issue of common stock for expenses                  |  | 25,000    |  |  | 25     |   |  | 31,225     |   |  |              |   |  |             |   |  |            |   |  | 31,250     |  
|Fair value of consulting services (Note
      8(e)) |  |          |  |  | (57    | ) |  | (60,443    | ) |  |              |   |  | 60,500       |   |  |            |   |  | -          |  
|Issue of common stock for debt                      |  | 2,982,021 |  |  | 2,982  |   |  | 325,040    |   |  |              |   |  |             |   |  |            |   |  | 328,022    |  
|Foreign currency translation adjustment             |  |          |  |  |       |   |  |           |   |  | 227           |   |  |             |   |  |            |   |  | 227        |  
|Net loss for the
      year                         |  |          |  |  |       |   |  |           |   |  |              |   |  |             |   |  | (987,924    |   |  | (987,924   | )
|Balance  December 31, 2008                         |  | 9,555,270 |  |  | 9,555  |   |  | 7,877,004  |   |  | 122           |   |  |             |   |  | (5,575,042  | ) |  | (2,311,640 | )

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

F-7

---

|1. | Nature of Operations and Going Concern
    Considerations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On January 28, 2005, Syngas International Corp. entered
      into two Share Exchange Agreements to acquire all of the shares of Syngas
      Energy Corp. Syngas Energy was incorporated in the Province of British
      Columbia, Canada, on December 14, 2004. Effective June 30, 2005, the
      acquisition of Syngas Energy by Syngas International was completed through
      the issuance of one share of Syngas International common stock for each
      share of Syngas Energy outstanding. Syngas International issued 30,047,500
      (1,502,375 post reverse stock split) shares of common stock to the
      shareholders of Syngas Energy, and as a result, the former Syngas Energy
      shareholders owned approximately 82% of the outstanding common stock of
      Syngas International. The acquisition of Syngas Energy by Syngas
      International was considered a reverse acquisition and accounted for under
      the purchase method of accounting. Under reverse acquisition accounting,
      Syngas Energy was considered the acquirer for accounting and financial
      reporting purposes, and acquired the assets and assumed the liabilities of
      Syngas International. Assets acquired and liabilities assumed are reported
      at their historical amounts. On May 31, 2007, Syngas International changed
      its name to Energy Quest Inc.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Energy Quests principal business involves an integrated
      gasification production system technology that combines modern
      gasification with turbine technologies to produce synthetic gas, hydrogen
      or electricity. Energy Quest intends to further develop the technology to
      make it commercially viable and intends to then sell or license the
      technology. Energy Quest is in the development stage as defined under
      Statement of Financial Accounting Standards (SFAS) No. 7 Accounting
      and Reporting by Development Stage Enterprises.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | As of December 31, 2008, the company had not reached a
      level of operations which would finance day-to-day activities. These
      financial statements have been prepared on the assumption that the company
      is a going concern, meaning it will continue in operation for the
      foreseeable future and will be able to realize assets and discharge
      liabilities in the ordinary course of operations. Different bases of
      measurement may be appropriate when a company is not expected to continue
      operations for the foreseeable future. The companys continuation as a
      going concern, is dependent upon its ability to attain profitable
      operations and generate funds there-from, and/or raise equity capital or
      borrowings sufficient to meet current and future obligations. Management
      plans to raise equity financings over the next twelve months to finance
      operations. There is no guarantee that the company will be able to
      complete any of these objectives. The company has incurred losses from
      operations since inception and at December 31, 2008, has a working capital
      deficiency and an accumulated deficit that creates substantial doubt about
      the companys ability to continue as a going concern.                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-8

---

|2. | Summary of Significant Accounting Policies
    (continued)
|-- | ----------------------------------------------------------
|   |                                                           
|   | d)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | e)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | f)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | g)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | h)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | i)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   | j)                                                        
|   |                                                           
|   |                                                           

F-9

---

|2. | Summary of Significant Accounting Policies
    (continued)
|-- | ----------------------------------------------------------
|   |                                                           
|   | k)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | l)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | m)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   | n)                                                        
|   |                                                           
|   |                                                           

| | o) | Intangible Assets
| | -- | -----------------

| | a) | On December 24, 2004, the company purchased an integrated
      gasification production system from the CEO of the company. The technology
      combines modern gasification with gas turbine technologies to produce
      synthetic gas, hydrogen or electricity. The company intends to further
      develop the technology to make it commercially viable and intends to then
      sell or license the technology. The company purchased the asset by issuing
      10,000,000 (500,000 post reverse stock split) common shares of the company
      and a $25,000 payment. If by January 2006 the company had not raised a
      minimum of $1,000,000 by way of equity private placements, it had the
      option, until June 30, 2007, of cancelling the 500,000 shares issued and
      subject to escrow, in consideration for the transfer to 975110 Alberta
      Ltd. of 100% of the interest in all of the enhanced gasification
      intellectual property and a small gasification unit. During the year ended
      December 31, 2007, the 500,000 common shares were released from escrow. At
      December 31, 2008, the total cost of $25,155 is recorded as an intangible
      asset.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | b) | On May 5, 2008, the company issued 2,000,000 shares of
      common stock with a fair value of $3,000,000 for a one time payment for
      the purchase of two patents acquired under a purchase/assignment agreement
      entered into in March 2008. The shares were valued on the closing date of
      the agreement. At December 31, 2008, the total cost of $3,000,000 is
      recorded as an intangible asset, net of accumulated amortization of
      $98,077. Amortization is calculated based on the expected legal useful
      life of 20 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|3. | Related Party Transactions
|-- | --------------------------
|   |                           
|   | a)                        
|   |                           
|   | b)                        
|   |                           
|   | c)                        
|   |                           
|   | d)                        
|   |                           
|   | e)                        

F-10

---

| | f) | During the year ended December 31, 2008, the company
      recorded $85,832 (2007 - $Nil) for management services provided by the CFO
      of the company. On October 27, 2008, the companys CFO entered an
      agreement to assign the debt to related party consultant in the amount of
      $85,832. At December 31, 2008, $Nil (2007 - $Nil) is included in due to
      related parties. (See note 3(f) and 7(c)).                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | g) | On October 27, 2008, a related party consultant entered
      to a debt assignment agreement with the companys CFO and former
      Treasurer. The companys CFO and former treasurer assigned the companys
      debt to the related party consultant in the amount of $85,832 and
      $155,279, respectively. Subsequently, on October 27, 2008, the company
      entered into agreement with the related party consultant to issue
      2,982,021 shares in exchange for $241,120 debt owed by the company due to
      the debt assignment agreement and an aggregate of $86,903 that the company
      owed to related party consultant. The company had not issued the shares as
      of December 31, 2008. However, since the legal obligation existed, the
      company treated the shares as issued during the year of 2008. (See note
      3(d), 3((e), and 7(c)).

|4. | Note Payable
|-- | ------------
|   |             
|   | a)          

|5. | On November 5, 2007, the company received $21,000 in
      exchange for a promissory note payable. The note bears interest at 6% per
      annum, calculated annually, and is due on demand. As at December 31, 2008,
      accrued interest of $1,457 (2007 - $197) is recorded. The company paid the
      amount in full during the year of 2008.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                     
|6. | Advances From Former Shareholders                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | As at December 31, 2008, $287,702 (2007  $289,934) is
      owed to former shareholders.                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                     
|7. | Commitments                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | a)                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | b)                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | c)                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | d)                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                     
|8. | Common Stock                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | a)                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | b)                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | c)                                                                                                                                                                                                                                                                                                                                                  

F-11

---

| | d) | On April 26, 2007, the company issued 57,500 shares of
      common stock in consideration for a promissory note (stock subscription
      receivable) in the amount of $60,500. On July 1, 2008, the company agreed
      to issue an additional 50,000 common shares of the company and signed a
      consulting agreement with the issuer of the promissory note to receive
      consulting services in lieu of cash. The consulting agreement covers
      services to be performed between July 1, 2008 until June 30, 2009. Upon
      the cancellation of the promissory note, the company adjusted its common
      stock, additional paid in capital and stock subscriptions receivable by
      $60,500. As of December 31, 2008, the company treated 28,750 shares as
      vested and issued and the other 28,750 shares as unvested and has not been
      issued. (See Note 6(c)).                                                              
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | e) | On April 30, 2008, the company issued 107,700 shares of
      common stock with warrants attached, pursuant to a private placement. The
      company received $1.50 per share of common stock for total proceeds of
      $161,550. The Company allocated $95,807 of the proceeds to the common
      stock and $65,743 to the warrants based on the relative fair market value
      of each. The relative fair market value of each component was determined
      by (i) using Black Scholes to estimate the fair market value of the
      warrants which was approximately $95,000. Each warrant has an exercise
      price of $2.00 and will expire in one year from the date of issuance of
      the warrant certificate.; and (ii) the closing price of the common stock
      was $1.28 on April 30, 2008. The Company evaluated the terms of the
      attached warrants and concluded that the terms did not result in
      derivative accounting
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | f) | On April 30, 2008, the company issued 115,000 shares of
      common stock pursuant to a private placement. The company received $1.00
      per share of common stock for total proceeds of $115,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | g) | On May 5, 2008, the company issued 2,000,000 shares at
      $1.50 per share, the fair value of the stock on the date the agreement was
      consummated, of unregistered restricted common stock for a one time
      payment for the purchase of two patents acquired under a
      purchase/assignment agreement entered into in March 2008. At December 31,
      2008, the total cost of $3,000,000 is recorded as an intangible
    asset.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | h) | On June 3, 2008, the company issued 25,000 shares of
      common with a fair value of $31,250 for services received.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | i) | On June 11, 2008, the company issued 10,000 shares of
      common stock pursuant to a private placement. The company received $1.00
      per share of common stock for total proceeds of $10,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | j) | On August 29, 2008, the company issued 100,000 shares of
      common stock with a fair value of $36,000 for services received. (See Note
      8(f)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | k) | During 2007, the company issued 500,500 shares of common
      stock with a fair value of $1,283,051 for the provision of consulting
      services and advertising expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | l) | On April 26, 2007, the company completed a private
      placement and issued 15,000 post reverse stock split shares of common
      stock for proceeds of $30,000 and received a subscription receivable for
      $60,500 for 57,500 shares of common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | m) | On May 31, 2007, the company effected a reverse stock
      split of its common stock in a ratio of one (1) new share for every twenty
      (20) existing shares of common stock. As a result, the issued and
      outstanding share capital decreased from 43,300,364 shares of common stock
      to 2,565,549 shares of common stock. The company also increased its
      authorized capital from 100,000,000 shares of common stock with a par
      value of $0.001 to 200,000,000 shares of common stock with a par value of
      $0.001. All share amounts were retroactively adjusted for all periods
      presented.                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | n) | Stock Compensation Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | On January 22, 2008, the company adopted the 2008 Stock
      Compensation Plan (the Stock Plan) under which the company is authorized
      to issue up to 1,000,000 shares of common stock of the company to
      employees, executives and consultants. No options were issued under the
      Stock Plan for the year ended December 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | On January 22, 2008, the company adopted the 2008
      Non-Qualified Stock Option Plan (the Option Plan) under which the
      company is authorized to issue up to 1,000,000 options to employees,
      executives and consultants to purchase shares of common stock of the
      company. No options were issued under the Option Plan for the year ended
      December 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|9. | Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The company issued 107,700 warrants during the year ended
      December 31, 2008. The fair value of the warrants issued was estimated at
      the date of issue using the Black-Scholes option pricing model and the
      weighted average fair value of the warrants issued during the year ended
      December 31, 2008 was $0.88 (2007 - $Nil). The company recorded the fair
      value of $65,743 (2007 - $Nil) as additional paid-in capital. As at
      December 31, 2008 and 2007, the warrants have no intrinsic
value.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The weighted average assumptions used are as
    follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |                                 |  | December 31, 2008 |  |  | December 31, 2007 | 
| | ------------------------------- |  | ----------------- |  |  | ----------------- | 
| |                                 |  |                   |  |  |                   | 
| | Expected dividend yield         |  | 0%                |  |  | N/A               | 
| | Risk-free interest rate         |  | 2.10%             |  |  | N/A               | 
| | Expected volatility             |  | 227%              |  |  | N/A               | 
| | Expected option life (in years) |  | 1.00              |  |  | N/A               | 

F-12

---

Option pricing models require the input
of highly subjective assumptions including the expected price volatility. The
subjective input assumptions can materially affect the fair value estimate.

A summary of the changes in the
companys share purchase warrants is presented below:

| |                            |  | December 31, 2008 |  |   | December 31, 2007 | 
| | -------------------------- |  | ----------------- |  | - | ----------------- | 
| |                            |  |                   |  |   | Weighted          | 
| |                            |  |                   |  |   | Average           | 
| |                            |  | Number            |  |   | Exercise Price    | 
| |                            |  |                   |  |   |                   | 
| | Balance, beginning of year |  |                  |  |   |                  | 
| | Issued                     |  | 107,700           |  | $ | 2.00              | 
| | Exercised                  |  |                  |  |   |                  | 
| | Forfeited / Expired        |  |                  |  |   |                  | 
| |                            |  |                   |  |   |                   | 
| | Balance, end of year       |  | 107,700           |  | $ | 2.00              | 

The following share purchase warrants
are outstanding:

| |                |   | Exercise |  |  | December 31, | 
| | -------------- | - | -------- |  |  | ------------ | 
| | Expiry Date    |   | Price    |  |  | 2008         | 
| | April 28, 2009 | $ | 2.00     |  |  | 107,700      | 
| |                |   |          |  |  | 107,700      | 

|10. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The company follows the provisions of SFAS 109,
      Accounting for Income Taxes.Pursuant to SFAS 109 the company is
      required to compute tax asset benefits for net operating losses carried
      forward. The potential benefit of net operating losses has not been
      recognized in the financial statements because the company cannot be
      assured that it is more likely than not that it will utilize the net
      operating losses carried forward in future years. The company has
      approximately $5,467,000 of net operating loss carry-forwards available to
      offset taxable income in future years which expire through fiscal 2028. At
      December 31, 2008 and 2007, the valuation allowance established against
      the deferred tax assets was approximately $1,910,000 and $1,600,000
      respectively.

F-13

---

Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure

Since inception, we have had no changes in or disagreements
with our accountants. Our audited financial statements for the fiscal years
ended December 31, 2008 and 2007 have been included in this annual report in
reliance upon Malone & Bailey PC, Independent Registered Public Accounting
Firm, as experts in accounting and auditing.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and
Procedures

Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures as of December 31, 2008. Based on this
evaluation, our management has concluded that our disclosure controls and
procedures adequately do not ensure that information required to be disclosed in
our reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms due to the material weaknesses in our internal control over financial
reporting as reported below. The term "internal control over financial
reporting" is defined as a process designed by, or under the supervision of, the
registrant's principal executive and principal financial officers, or persons
performing similar functions, and effected by the registrant's Board of
Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures that:

|(1) | Pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      the assets of the registrant;                                                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                
|(2) | Provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that
      receipts and expenditures of the registrant are being made only in
      accordance with authorizations of management and directors of the
      registrant; and
|    |                                                                                                                                                                                                                                                                                                                                                                                
|(3) | Provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of the
      registrant's assets that could have a material effect on the financial
      statements.                                                                                                                                              

Item 9A(T). Controls and Procedures

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Exchange Act
Rule 13a-15(f)). Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.

Because of our inherent limitations, our internal control over
financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.

Our Chief Executive Officer and Chief Financial Officer
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2008. In making this assessment, our management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control  Integrated Framework.

Management conducted a walkthrough of the procedures and
controls documented in this memo or relied on personal knowledge where no walk
through was possible in order to test the effectiveness of the Companys
internal control over financial reporting.

A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the Companys annual or
interim financial statements will not be prevented or detected on a timely
basis. In its assessment of the effectiveness of internal control over financial
reporting as of December 31, 2008, the Company determined that there were
control deficiencies that constituted material weaknesses, as described
below.

|1. | There is lack of segregation of duties and therefore the
      Company is susceptible to fraud and misappropriation of assets.                 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                
|2. | There are no preventative and detective IT systems in
      place to prevent and/or detect fraud other than password protection. There
      no

16

---

|   | software based accounting controls in place to prevent
      double entries, monitor performance, etc.                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                      
|3. | There is a lack of entity wide controls establishing a
      tone at the top, including no audit committee, no policy on fraud and no
      code of ethics. A whistleblower policy is not necessary given the small
      size of the organization.

The Company is working on the following remediation efforts:
:

|1. | The Company has hired an external accountant to record
      transactions and prepare the financial statements. The information should
      be sent to the accountant by someone who is not in control of the bank
      account.    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                       
|2. | Obtain quotes for prevention and detection software in
      order to protect against fraud.                                                                                                                                          
|   |                                                                                                                                                                                                                                       
|3. | Once we obtain funding, we will purchase basic accounting
      software to record accounting transactions and print checks.                                                                                                          
|   |                                                                                                                                                                                                                                       
|4. | Adopt a corporate records and document retention policy
      to ensure that all significant records are kept for the appropriate amount
      of time as required by law.                                                            
|   |                                                                                                                                                                                                                                       
|5. | Appoint a minimum of two independent directors to the
      board of directors and then implement an audit committee to review all
      financial statements and SEC filings and oversee the development of
      corporate policies.

Accordingly, the Company concluded that these control
deficiencies resulted in a reasonable possibility that a material misstatement
of the annual or interim financial statements will not be prevented or detected
on a timely basis by the companys internal controls.

As a result of the material weaknesses described above,
management has concluded that the Company did not maintain effective internal
control over financial reporting as of December 31, 2008 based on criteria
established in Internal ControlIntegrated Framework issued by COSO.

This annual report does not include an attestation report of
the company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management's report in this annual report.

We did not change our internal control over financial reporting
during our last fiscal quarter of 2008 in connection with the results of
Managements report, nor have we made any changes to our internal control over
financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act.

The following table sets forth the name, age, and position of
our executive officers and directors as of April 2, 2009.

|Name and Age             | Position(s) Held in            | Tenure                             | Other Public    
|------------------------ | ------------------------------ | ---------------------------------- | ----------------
|                         | Energy Quest Inc.              |                                    | Company         
|                         |                                |                                    | Directorships   
|                         |                                |                                    | Held by Director
|Wilfred J. Ouellette, 66 | Director                       | From
      July 1, 2005 to present | n/a             
|                         | President, and Chief Executive |                                    |                 
|                         | Officer                        | From
      May 5, 2006 to present  |                 

17

---

|Vasant K. Jain, 47   | Director, Chief Financial Officer | From January 2, 2008 to present | n/a
|-------------------- | --------------------------------- | ------------------------------- | ---
|                     | Director, Secretary, and          |                                 |    
|Ronald Foster, 67    | Treasurer                         | From July 1, 2008 to present    | n/a
|Jim Clark, 54        | Director                          | From June 8, 2007 to present    | n/a
|Peter J. Stephen, 41 | Director                          | From April 21, 2008 to present  |    

The directors shall be elected at an annual meeting of the
stockholders and except as otherwise provided within our Bylaws, as pertaining
to vacancies, shall hold office until a successor is elected and qualified.
There any arrangements or understanding between any of our directors or officers
or any other person pursuant to which any officer or director was or is to be
selected as an officer or director.

Wilfred J. Ouellette, Director, President, and Chief
Executive Officer

Mr. Ouellette has been a director since July 1, 2005 and our
President, Chief Executive Officer since May 5, 2006. Mr. Ouellette has been a
director and the Chief Executive Officer of Syngas Energy Corp., our wholly
owned subsidiary, since February 2005. Mr. Ouellette has over 25 years
experience in process combustion. From 2001 to the present he is worked as a
consultant through his own company, Aclade Energy Corp., offering consulting
services in the waste to energy industry, developing new projects in the energy
sector and marketing the fluidized bed gasifier.

Mr. Ouellette has been principally active in the fields of
heating, ventilating, air conditioning and process combustion systems since
1965. He also has extensive experience in the development and integration of
alternate energy systems. Mr. Ouellettes technical experience encompasses the
following areas: instrumentation and control systems design and applications,
heating and ventilation equipment systems applications, burner management and
flame safe guard systems, combustion processes, burner design and applications,
waste gasification processes and air pollution engineering. Previously Mr.
Ouellette was a Fighter Control Operator and Pilot in the Royal Canadian Air
Force.

Vasant K. Jain, Director and Chief Financial Officer

Mr. Jain has been our director and Chief Financial Officer
since January 2, 2008. From 1972 to present, Mr. Jain has overseen the
management of a 150 year old currency and bullion trading business, India
Trading Company, owned by Mr. Jains family and based in Mumbai, India. That
company also has branches in Dubai (U.A.E) and Mali (West Africa).

Concurrently, Mr. Jain oversaw several India based businesses
owned by his family engaged in the manufacture and export of garments, yarn and
textiles with annual revenues. From 1978 to present, Mr. Jain has overseen the
management of several family owned generic and surgical pharmaceutical
operations. Mr. Jain holds a Diploma in Civil Engineering and a Diploma in
Business Management obtained in 1979 and 1980, respectively, from Mumbai
University.

Ronald Foster, Director, Secretary and Treasurer

Ronald Foster serves as the company Secretary and Treasurer.
His primary responsibilities include finance, compliance and business
development. In his career, Mr. Foster has held a number of senior-level
executive positions with several publicly traded companies, including, ValCom
Inc., SBI Communications, Inc., EL-Phills Inc., Golden American Network and ROPA
Communications Inc. He created and produced Stock Outlook 86, 87, 88, 89, a
video presentation of public companies through Financial News Network, (FNN) a
national cable network. Mr. Foster has a tremendous amount of experience with
mergers & acquisitions, restructuring and the operations of publicly traded
companies. Mr. Foster developed a strong operational focus through his past
operations, management and consulting positions in the marketing, entertainment
and financial business in the different companies that he has been affiliated
with.

Jim Clark, Director

Jim Clark was appointed as a director on June 8, 2007. Mr.
Clark is the founder of Luxcor Corporation, and has been the President and
director of Luxcor Corporation since 2002. From 1997 to 2002, Mr. Clark was the
president of Chancellor Industrial Construction Ltd. From 1993 through 1997, Mr.
Clark was a partner with Canwest Group International Inc. Mr. Clark has
significant depth of expertise in construction, project management tracking and
cost controls. He will be invaluable to us in our diversification of our
customer base and development of the company into a fully integrated energy
services company.

Peter J. Stephen, Director

Mr. Stephen was appointed as director on April 21, 2008. Mr.
Stephens has expertise assisting small businesses to become large and profitable
corporations. He has experience in planning, implementing and managing service
oriented companies and managing programs, policies and procedures in companies
with interstate operations and offices. Mr. Stephens has developed a track
record of utilizing available resources to improve operational efficiency which
concurrently reducing costs. Mr. Stephens brings 18 years of business experience
and creativity to the

18

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Company. He is currently the President of Alliance Overhead
Door dba Garage Door Service Company, a position which he has held since 1996.
During his tenure with Alliance Overhead Door, the company has grown to include
13 locations in 8 states with an average of $25 million in annual sales revenue.
Prior to joining Alliance Overhead Door, Mr. Stephens was employed for two years
as a salesman for Direct TV. His responsibilities included developing a detailed
marketing plan for sales of Direct TVs satellite product to consumers. Prior to
that, Mr. Stephens worked for two years as a broker, preceded by two years spent
as a realtor of residential and commercial property. Mr. Stephens completed his
post-secondary education in sciences in 1990.

Director Nominees

We do not have a nominating committee. The Board of Directors,
sitting as a Board, selects individuals to stand for election as members of the
Board. Since the Board of Directors does not include a majority of independent
directors, the decision of the Board as to director nominees is made by persons
who have an interest in the outcome of the determination. The Board will
consider candidates for directors proposed by security holders, although no
formal procedures for submitting candidates have been adopted. Unless otherwise
determined, not less than 90 days prior to the next annual Board of Directors'
meeting at which the slate of Board nominees is adopted, the Board will accept
written submissions of proposed nominees that include the name, address and
telephone number of the proposed nominee; a brief statement of the nominees
qualifications to serve as a director; and a statement as to why the shareholder
submitting the proposed nominee believes that the nomination would be in the
best interests of shareholders. If the proposed nominee is not the same person
as the shareholder submitting the name of the nominee, a letter from the nominee
agreeing to the submission of his or her name for consideration should be
provided at the time of submission. The letter should be accompanied by a résumé
supporting the nominee's qualifications to serve on the Board of Directors, as
well as a list of references.

The Board identifies director nominees through a combination of
referrals from different people, including management, existing Board members
and security holders. Once a candidate has been identified, the Board reviews
the individual's experience and background and may discuss the proposed nominee
with the source of the recommendation. If the Board believes it to be
appropriate, Board members may meet with the proposed nominee before making a
final determination whether to include the proposed nominee as a member of
management's slate of director nominees submitted to shareholders for election
to the Board.

Among the factors that the Board considers when evaluating
proposed nominees are their knowledge of, and experience in business matters,
finance, capital markets and mergers and acquisitions. The Board may request
additional information from the candidate prior to reaching a determination. The
Board is under no obligation to formally respond to all recommendations,
although as a matter of practice, it will endeavor to do so.

Audit Committee

The functions of the Audit Committee are currently carried out
by our Board of Directors. Our Board of Directors has determined that we do not
have an audit committee financial expert on our Board of Directors carrying out
the duties of the Audit Committee. The Board of Directors has determined that
the cost of hiring a financial expert to act as a director of us and to be a
member of the Audit Committee or otherwise perform Audit Committee functions
outweighs the benefits of having a financial expert on the Audit Committee.

Significant Employees

Other than the senior officers described above, we do not
expect any other individuals to make a significant contribution to our
business.

Family Relationships

There are no family relationships among our officers, directors
or persons nominated for such positions.

No Legal Proceedings

None of our directors, executive officers, promoters or control
persons have been involved in any of the following events during the past five
years:

- any bankruptcy petition filed by or against any business of which such
  person was a general partner or executive officer either at the time of the
  bankruptcy or within two years prior to that time;
- any conviction in a criminal proceeding or being subject to a pending
  criminal proceeding (excluding traffic violations and other minor offenses);
- being subject to any order, judgment, or decree, not subsequently
  reversed, suspended or vacated, of any court of competent jurisdiction,
  permanently or temporarily enjoining, barring, suspending or otherwise
  limiting his involvement in any type of business, securities or banking
  activities; or
- being found by a court of competent jurisdiction (in a civil action), the
  SEC or the Commodity Futures Trading Commission to have violated a federal or
  state securities or commodities law, and the judgment has not been reversed,
  suspended, or vacated.

19

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Section 16(a) Beneficial Ownership Compliance
Reporting

Section 16(a) of the Securities Exchange Act of 1934 requires a
companys directors and officers, and persons who own more than ten-percent
(10%) of the companys common stock, to file with the Securities and Exchange
Commission reports of ownership on Form 3 and reports of change in ownership on
Forms 4 and 5. Such officers, directors and ten-percent stockholders are also
required to furnish the company with copies of all Section 16(a) reports they
file. Based solely on our review of the copies of such forms received by us and
on written representations from certain reporting persons, we believe that all
Section 16(a) reports applicable to our officers, directors and ten-percent
stockholders with respect to the fiscal year ended December 31, 2008 were
filed.

Code of Ethics

On February 11, 2008, we adopted an ethics policy and a human
rights policy statement that apply to our directors, officers (including our
principal executive officer, principal financial officer, principal accounting
officer, controller, or persons performing similar functions) and employees.. We
have filed our ethics policy and human rights policy statement an exhibits to
annual report on Form 10-K for the year ended December 31, 2007.

Item 11. Executive Compensation

The following table sets forth, as of December 31, 2008,
compensation awarded to our Chief Executive Officer (CEO), and to other persons
serving as executive officers whose salary and bonus for such year exceeded
$100,000 (collectively, the Named Executive Officers) for the last two
completed fiscal years.

|SUMMARY COMPENSATION TABLE        | 
|--------------------------------- | 
|Name and
      Principal Position | 
|Wilfred J.                        | 
|Ouellette                         | 
|President,                        | 
|CEO, and                          | 
|Director (1)                      | 
|                                  | 

|(1) | Mr. Ouellette has been a director since July 1, 2005 and
      our President, Chief Executive Officer since May 5, 2006. He was our Chief
      Financial Officer from May 5, 2006 to January 2, 2008. Vasant K. Jain was
      appointed as Chief Financial Officer on January 2,
2008.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Employment Agreements

On April 17, 2007 we entered into an executive employment
agreement with Wilfred J. Ouellette for the position of Chief Executive Officer,
for a period of sixty months at a base salary of $150,000 per year. The
agreement expires March 31, 2012. We recognized $113,351 of management fees for
the twelve-month period ended December 31, 2007 and recognized $ 150,000 for the
twelve-months period ended December 31, 2008

On April 17, 2007 we entered into an executive employment
agreement with Steve Eilers for the position of Secretary and Treasurer, for a
period of sixty months at a base salary of $130,000 per year. The agreement
expires April 20, 2012. We recognized $90,288 of management fees for the
twelve-month period ended December 31, 2007 and recognized $ 65,000 for the
twelve-months period ended December 31, 2008.

On January 3, 2008 we entered into an executive employment
agreement with Vasant Jain whereby Mr. Jain will provide his services as Chief
Financial Officer beginning January 20, 2008, for a period of 60 months ending
on January 20, 2013, unless earlier terminated by either party. Mr. Jain may
terminate the agreement at any time with or without cause by giving 60 days
written notice. We may terminate the agreement

20

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without cause by giving 60 days written notice or with cause
immediately upon suitable delivery of notice. Mr. Jain will receive a pro-rated
annual base salary of $125,000 per year during the term of the agreement. Mr.
Jain will also be eligible to receive performance based incentives at our
discretion, and to participate in any performance based compensation incentive
programs established by us from time to time for any members of our senior
management.

Option Grants

We did not grant any options or stock appreciation rights to
our named executive officers or directors in the fiscal 2008. As of April 2,
2009, none of our executive officers or directors owned any of our derivative
securities.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the Board of Directors or
a committee thereof.

Compensation Committee

We currently do not have a compensation committee of the Board
of Directors. The Board of Directors as a whole determines executive
compensation.

Compensation of Directors

We reimburse our directors for expenses incurred in connection
with attending Board meetings. We did not pay director's fees or other cash
compensation for services rendered as a director for the year ended December 31,
2008.

No cash compensation was paid to any of our directors for the
director's services as a director during the fiscal year ended December 31,
2008. We have no standard arrangement pursuant to which our directors are
compensated for their services in their capacity as directors except for the
granting from time to time of incentive stock options. The Board of Directors
may award special remuneration to any director undertaking any special services
on behalf of our Company other than services ordinarily required of a director.
Other than indicated below, no director received and/or accrued any compensation
for his services as a director, including committee participation and/or special
assignments.

Change of Control

As of April 2, 2009 we had no pension plans or compensatory
plans or other arrangements which provide compensation on the event of
termination of employment or change in control of us.

Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters

The following table sets forth certain information concerning
the number of shares of our common stock owned beneficially as of April 2, 2009
by: (i) each of our directors; (ii) each of our named executive officers; and
(iii) each person or group known by us to beneficially own more than 5% of our
outstanding shares of common stock. Unless otherwise indicated, the shareholders
listed below possess sole voting and investment power with respect to the shares
they own.

As of April 2, 2009, there were 9,555,270 common shares issued
and outstanding.

|Name and Address of                                                                               | Title of Class | Amount and    | Percent of
|------------------------------------------------------------------------------------------------- | -------------- | ------------- | ----------
|Beneficial Owner                                                                                  |                | Nature of     | Class (2) 
|                                                                                                  |                | Beneficial    | (%)       
|                                                                                                  |                | Ownership (1) |           
|                                                                                                  |                | (#)           |           
|Wilfred J. Ouellette (3) 78 Belleville Ave Spruce
      Grove, AB T7X 1H8                         | Common Shares  | 500,000 (4)   | 5.2       
|Vasant K. Jain (5)
      102 Darshan Tower Seth Motisha Road, Mazagaon Mumbai 400 010
      India | Common Shares  | 0 (6)         | 0         
|Ronald Foster (7)       520, 52477 Hwy 21 
    Edmonton, AB T8A 6K2                               | Common Shares  | 350,350       | 3.7       

21

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|Gilles H. Imbeault
      (8) Imbeault, Levesque & Associates C/O Casaluci
      Rodtmattstrasse 92 CH-3014 Bern, Switzerland | Common Shares | 0         | 0   
|---------------------------------------------------------------------------------------------------------------------------- | ------------- | --------- | ----
|Jim Clark (9) 5215-126 Street Edmonton, Alberta
      Canada T6H 3W5                                                         | Common Shares | 0         | 0   
|Peter J. Stephen,
      41 4525 South Dean Martin Dr. Las Vegas, NV 89103                                                    | Common Shares | 0         | 0   
|All Officers and Directors as a Group                                                                                        | Common Shares | 850,350   | 8.9 
|Carolyn Foster
      (10) 103 Firetower Road Leesburg, Georgia 31763                                                         | Common Shares | 1,878,286 | 19.7
|Energy Quest Ltd. (11) 15 Lillian Court Lucaya,
      Freeport Grand Bahama                                                  | Common Share  | 2,000,000 | 20.9

(1) The number and percentage of shares beneficially owned is
determined under rules of the SEC and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the individual has sole or
shared voting power or investment power and also any shares which the individual
has the right to acquire within 60 days through the exercise of any stock option
or other right. The persons named in the table have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned by
them, subject to community property laws where applicable and the information
contained in the footnotes to this table.

(2) Based on 9,555,270 issued and outstanding shares of common
stock as of April 2, 2009.

(3) Wilfred J. Ouellette is our director, President and Chief
Executive Officer.

(4) Includes 500,000 shares owned by 975110 Alberta Ltd., a
company over which Wilfred J. Ouellette has the voting and investment
control.

(5) Vasant K. Jain was appointed as our Chief Financial Officer
and director on January 2, 2008.

(6) On September 4, 2007, we entered into a 0% Convertible
Debenture due September 4, 2012 (the Debenture) with Vasant K. Jain whereby
Mr. Jain agreed to loan $120,000,000 to us. We agreed to pay Mr. Jain the
balance of the Principal on September 4, 2012. At any time after September 4,
2012 and until September 4, 2017, Mr. Jain has the right to convert all, or a
portion of, the Principal amount of the Debenture into our common shares at a
conversion price of $50 per share. As at April 2, 2009, the agreement had not
closed. We expect to close the agreement shortly.

(7) Ronald Foster is our director, secretary and treasurer.

(8) Gilles H. Imbeault is our Vice President of Finance and
director.

(9) Jim Clark is our director.

(10) Carolyn Foster is the wife of Ronald Foster, who is our
director, secretary and treasurer.

(11) Tara Dorsette has voting and investment control over
shares held by Energy Quest Ltd.

22

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Item 13. Certain Relationships, Related Transactions and
Director Independence

As at December 31, 2008, $16,994 is owed to a company with a
common director. This amount is unsecured, non-interest bearing and has no terms
of repayment.

As at December 31, 2008, $192,116 is owed to a related party
consultant for expenses paid on behalf of the company.

During the year ended December 31, 2008, the company recorded
$150,000 for management services provided by the President of the company.

During the year ended December 31, 2008, the company recorded
$130,000 for management services provided by the former Treasurer of the
company.

During the year ended December 31, 2008, the company recorded
$85,832 for management services provided by the CFO of the company

Other than as described above, we have not entered into any
transactions with our officers, directors, persons nominated for these
positions, beneficial owners of 5% or more of our common stock, or family
members of these persons wherein the amount involved in the transaction or a
series of similar transactions exceeded the lesser of $120,000 or 1% of the
average of our total assets for the last three fiscal years.

Item 14. Principal Accountant Fees and Services.

Audit and Non-Audit Fees

The following table represents fees for the professional audit
services and fees billed for other services rendered by our former auditors,
Morgan & Company, and our current auditors, Malone & Bailey PC, for the
audit of our annual financial statements respectively for the years ended
December 31, 2007 and 2008 and any other fees billed for other services rendered
by Morgan & Company and Malone & Bailey PC during these periods. All
fees are paid by US dollars.

|                   |   | Year Ended December 31, |     |   | Year Ended December 31, | 
|------------------ | - | ----------------------- | --- | - | ----------------------- | 
|                   |   | 2007                    |     |   | 2008                    | 
|Audit fees         | $ | 26,700                  | (1) | $ | 36,804                  | 
|Audit-related fees |   | -                       |     |   | -                       | 
|Tax fees           |   | -                       |     |   | -                       | 
|All other fees     |   | -                       |     |   | -                       | 
|Total              | $ | 26,700                  |     | $ | 36,804                  | 

(1) Audit fees for 2007 were approximately $20,000 for services
rendered by Malone & Bailey and approximately $6,700 for services rendered
by Morgan & Company.

Since our inception, our Board of Directors, performing the
duties of the Audit Committee, reviews all audit and non-audit related fees at
least annually. The Board of Directors as the Audit Committee pre-approved all
audit related services in the fiscal 2008.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) (1) Financial Statements

See Index to Financial Statements set forth on page F-1.

(a) (2) Financial Statement Schedules

None. The financial statement schedules are omitted because
they are inapplicable or the requested information is shown in our financial
statements or related notes thereto.

23

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|Exhibit | Exhibit Description                                                                                                                                                     
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                         
|3.1     | Articles of Incorporation (1)                                                                                                                                           
|3.2     | Certificate of Amendment dated January 27, 2005
      (2)                                                                                                               
|3.3     | Certificate of Amendment dated
      December 29, 2005                                                                                                                  
|3.4     | Certificate of Amendment dated May 10, 2007 (3)                                                                                                                         
|3.5     | Bylaws (1)                                                                                                                                                              
|10.1    | Executive employment agreement with Wilfred J.
      Ouellette dated April 17, 2007 (3)                                                                                 
|10.2    | Executive employment agreement
      with Steve Eilers dated April 17, 2007 (3)                                                                                         
|10.3    | Executive employment agreement with Vasant K. Jain
      dated January 3, 2008 (4)                                                                                      
|10.4    | Licensing agreement with Poly-Pacific
      International Inc. dated October 24, 2007                                                                                   
|10.5    | 0% convertible debenture with Vasant Jain dated
      September 4, 2007 (5)                                                                                             
|10.6    | Manufacturing agreement with I-Coda
      Group dated July 24, 2007 (6)                                                                                                 
|10.7    | Licensing agreement with Beaufort Energy Solutions,
      Inc. dated April 24, 2007 (3)                                                                                 
|10.8    | Licensing agreement with Re-Gen
      International Corporation dated April 19, 2007 (3)                                                                                
|10.9    | Consulting agreement with Ronald Foster dated April
      26, 2007 (3)                                                                                                  
|10.10   | Ethics Policy (7)                                                                                                                                                       
|10.11   | Human Rights Policy Statement (7)                                                                                                                                       
|21      | Subsidiaries                                                                                                                                                            
|        | Syngas Energy Corp., which was incorporated under
      the laws of British Columbia on December 14, 2004.                                                              
|31.1    | Certification
      of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the
      Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|31.2    | Certification of the
      Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange
      Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|32.1    | Certification
      of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002        
|32.2    | Certification of the
      Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002        

|(1) | Included as exhibits to our Form 10-SB filed on November
      30, 1999. 
|--- | -------------------------------------------------------------------------
|    |                                                                          
|(2) | Included as an exhibit to our Form 8- K filed on February
      24, 2005.
|    |                                                                          
|(3) | Included as exhibits to our Form SB-2 filed on July 17,
      2007.      
|    |                                                                          
|(4) | Included as an exhibit to our Form 8- K filed on January
      8, 2008.  
|    |                                                                          
|(5) | Included as an exhibit on our Form 10QSB filed November
      19, 2007.  
|    |                                                                          
|(6) | Included as an exhibit on our Form 10QSB filed August 15,
      2007.    
|    |                                                                          
|(7) | Included as an exhibit on our Form 10-K filed April 1,
      2008.       

24

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.

|                     | Energy Quest Inc.                          
|-------------------- | -------------------------------------------
|                     |                                            
|                     | By:/s/ Wilfred J.
      Ouellette          
|Date: April 13, 2009 | Wilfred J. Ouellette                       
|                     | President, Chief Executive Officer Director

Pursuant to the requirements of the Exchange Act this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

|Signature                 | Title                      | D
      ate   
|------------------------- | -------------------------- | --------------
|                          |                            |               
|/ s/ Wilfred J. Ouellette | President, Chief Executive | April 13 2009 
|Wilfred J. Ouellette      | Officer, Director          |               
|                          |                            |               
|/s/ Vasant K. Jain        | Chief Financial Officer    | April 13, 2009
|Vasant K. Jain            | Director                   |               
|                          |                            |               
|/s/ Ronald Foster         | Secretary, Treasurer       | April 13, 2009
|Ronald Foster             | Director                   |               

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