UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, 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, 2010

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   o    Nox

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   o 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 o

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  o   **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  o     Accelerated filer   o    Non-accelerated filer   o 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   o   **No**x

As of September 30, 2010, which was the last business day of the registrant s most recent third fiscal quarter, the aggregate market value of the registrants Common Stock held by non-affiliates of the registrant was $1,466,189.14 based on the closing sale price of $0.13 per share on that date.

Number of common shares outstanding at March 20, 2011:  17,085,604



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|TABLE OF CONTENTS
|                  |                                                                                                                         
|PART I            |                                                                                                                          | 3 
|                  | Item 1. Description of Business                                                                                          | 3 
|                  | Item 1A. Risk Factors                                                                                                    | 10
|                  | Item 1B. Unresolved Staff Comments                                                                                       | 10
|                  | Item 2. Properties                                                                                                       | 10
|                  | Item 3. Legal Proceedings                                                                                                | 10
|                  | Item 4. Submission of Matters to a Vote of Security Holders                                                              | 10
|PART II           |                                                                                                                          | 10
|                  | Item 5. Market for Common Equity and Related Stockholder Matters                                                         | 10
|                  | Item 6. Selected Financial Data                                                                                          | 11
|                  | Item 7. Management's Discussion and Analysis or Results of Operations                                                    | 12
|                  | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                                      | 15
|                  | Item 8. Financial Statements and Supplementary Data                                                                      | 16
|                  | Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure                             | 17
|                  | Item 9A. Controls and Procedures                                                                                         | 17
|                  | Item 9B. Other Information                                                                                               | 18
|PART III          |                                                                                                                          | 18
|                  | Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act | 18
|                  | Item 11. Executive Compensation                                                                                          | 21
|                  | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                  | 23
|                  | Item 13. Certain Relationships, Related Transactions and Director Independence                                           | 25
|                  | Item 14. Principal Accountant Fees and Services                                                                          | 25
|PART IV           |                                                                                                                          | 25
|                  | Item 15. Exhibits and Financial Statement Schedules                                                                      | 25





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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 "Energy Quest" mean Energy Quest Inc., 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.



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Development



On August 3, 2009, we signed a Joint Venture Agreement with Crude Oil Petroleum Services Corporation to form a new company known as EnviroTec Services in the Province of Alberta, Canada. The new company will focus on the business of oil remediation consisting of sand, slop oil, sludge and tank cleaning. The agreement will continue for a period of 20 years and each party will contribute services on a 50:50 basis and share revenues accordingly. As of March 20, 2011, no transactions have taken place.



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 Hydrogen 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 (Py rolitic St eam Re forming) 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 (H2), carbon dioxide (CO2) and nitrogen (N2). 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 Hydrogen 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 2010.



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





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Butanol



We plan to use our PyStR and catalytic process to produce butanol from carbon based feed stocks. 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 NO2, carbon monoxide, and particulate emissions. No "tail end" exhaust cleanup devices are required.



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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.



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.



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.



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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. I-Coda has ceased to be an operating company, therefore the company has terminated this agreement as at December 31, 2010.



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.



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, Re-Gen International 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 also plan to attend several trade conferences in this year.



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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, USA | · we are less expensive by half                                                                                                              
|General Electric, USA                               | · General Electric holds very large complex systems only                                                                                     
|FERCO (Battelle), U.S.A                             | · Unlike FERCO, we offer our incinerator units for sale or lease. · We also enter into joint venture agreements for the use of our technology
|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 $266,494 on research and development.



We anticipate that we will spend $2,500,000 on research and development over the next twelve months to upgrade our PyStR  technology, including upgrading a prototype. If we are successful in acquiring other technologies, we may increase our research and development budget.



Intellectual Property



On December 24, 2004, we purchased an integrated gasification production system from 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, 2008, 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, but we have not filed for any protection of our intellectual properties.



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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.



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 and Consultants



As of March 20, 2011, we have three full time employees, in addition to employing Wilfred Ouellette, our President, CEO, and Ronald Foster our CFO, Secretary and Treasurer and David Doherty our President of International Finance and Trade. 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 July 1, 2008 we engaged Mr. Ronald Foster as Secretary and Treasurer for services to be invoiced to the company. On January 31, 2010 we entered into an executive employment agreement with Ronald Foster for the position of Chief Financial Officer, for a period of 60 months at a base salary of $150,000 per year. The agreement expires January 20, 2015. We also entered an agreement with David Doherty to service as Vice President of International Finance and Trade. The Company agreed to pay Mr. Doherty $100,000 annual salary payable in common share at $0.20 per share. The agreement provides services for one year beginning August 1st, 2010.



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In addition to the employees mentioned above, we also engage people as outside contractors and consultants for marketing, business development, investor relations, bookkeeping, legal, accounting, website development and audit functions.



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



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 103 Firetower Road, Leesburg, Georgia 31763-3755



Item 3. Legal Proceedings



As of March 20, 2011, there are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we or any of our subsidiaries are a party or of which any of our properties is the subject. Also, our management is not aware of any legal proceedings contemplated by any governmental authority against us.



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



None.



PART II



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 closing prices of our common shares on the OTC Bulletin Board for each quarter within the two most recent fiscal years. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:



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|                                    |        |       
|----------------------------------- | ------ | ------
|                                    |        |       
|Period                              | High   | Low   
|October 1, 2010  December 31, 2010 | $0.225 | $0.04 
|July 1, 2010  September 30, 2010   | $0.30  | $0.11 
|April 1, 2010  June 30, 2010       | $0.155 | $0.08 
|January 1, 2010  March 31, 2010    | $0.24  | $0.087
|October 1, 2009  December 31, 2009 | $0.25  | $0.09 
|July 1, 2009  September 30, 2009   | $0.51  | $0.08 
|April 1, 2009  June 30, 2009       | $0.60  | $0.15 
|January 1, 2009  March 31, 2009    | $0.25  | $0.08 



Holders



As of March 20, 2011, there were 742 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                                                                                       |                                                                                 | 1,000,000                                                                                                                                      
|                                                           |                                                                                                 |                                                                                 |                                                                                                                                                
|Total                                                      | 2,000,000                                                                                       | N/A                                                                             | 1,000,000                                                                                                                                      





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, 2010, 1,000,000 shares were issued under the 2008 Stock Compensation Plan.



Recent Sales of Unregistered Securities



Not applicable.



Item 6. Selected Financial Data



Not applicable.



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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, 2010, we had earned limited revenues of $5,164. During the fiscal year ended December 31, 2010 we did not generate any revenues. As of December 31, 2010, we had an accumulated deficit of $9,897,624. 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 $9,897,624 since December 14, 2004 (date of inception) to December 31, 2010. Our net loss increased from $912,751 for the fiscal year ended December 31, 2009 to $3,409,831 for the fiscal year ended December 31, 2010, an increase of $2,497,080. For the fiscal year ended December 31, 2010, our net loss per share was $0.27, compared to net loss of $0.08 per share for the same period in 2009.



Expenses



Our total expenses from December 14, 2004 (date of inception) to December 31, 2010 were $9,830,402 and consisted of $5,441,394 in consulting and management fees, $523,500 in general and administrative fees, $488,271 in professional fees, $266,494 in research and development, $398,077 in depreciation, $2,632,666 on impairment of intangible assets and $80,000 in other. Total expenses increased $2,016,525 to $3,230,702 for the fiscal year ended December 31, 2010 from $1,214,177 for the same period in 2009.



Our consulting and management fees decreased $386,497 to $300,000 for the fiscal year ended December 31, 2010 from $686,497 for the same period in 2009 mostly due to a decrease in the amount of consulting services we required. 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 increased by $3,461 from $95,752 for the fiscal year ended December 31, 2009 to $99,213 for the same period ended December 31, 2010. The increase in general and administrative expenses was mainly due to an increase in our day to day operating activities. Our general and administrative expenses consist of office supplies, travel expenses, rent, communication expenses (cellular, internet, fax, telephone), office maintenance, courier and postage costs and office equipment.



Our professional fees decreased by $15,722, to $47,323 for the fiscal year ended December 31, 2010 from $63,045 for the same period in 2009. The decrease in professional fees was mostly due to less legal and auditing services provided during the fiscal year just ended as opposed to the fiscal year ended in 2009. Our professional fees consisted primarily of legal, accounting and auditing fees.



12

---

Liquidity and Capital Resources



We expect that we only can generate limited revenues over the next twelve months. As of December 31, 2010, our current assets totaled $19,495, which was comprised of cash, deferred financing cost and a note receivable. As of December 31, 2010 we had a working capital deficit of $923,585.



Our net loss of $9,897,624 from December 14, 2004 (date of inception) to December 31, 2010 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, 2010 our cash position increased by $7,430.



During the fiscal year ended December 31, 2010, we received net cash of $244,500 from financing activities compared to $196,249 for the same period in 2009. We used net cash of $222,386 in operating activities compared to $196,591 for the same period in 2009. We used net cash of $10,000 in investing activities compared to $nil for the same period in 2009.



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;

o

License our integrated gasification technologies to third parties in North American, European and global markets;

o

Continually improve our gasification technologies and commercializing our technologies;

o

Expand our technology base by acquiring complementary technologies to our PyStR  and other technologies through purchasing or licensing arrangements;

o

Complete potential deals regarding joint ventures for energy production facilities;

o

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

o

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 2011) 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         
|Heavy Oil Upgrader Plant                                    | $23,135,000      
|Total                                                       | $26,585,000      



13

---

Of the $26,585,000, we had $8,246 in cash and cash equivalents as of December 31, 2010. 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.



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. 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, 2010, 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.



14

---



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 relate to an integrated gasification production system. This patent and technology combines modern gasification with gas turbine technologies to produce synthetic gas, hydrogen or electricity. Amortization has been estimated on the economic useful life or expected legal life of the patent estimated to be 20 years. At December 31, 2010, the carrying cost of $2,601,923 was recorded as an impairment of intangible asset as a result of delays in construction of the plant due to lack of funding.



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, 2008, the 500,000 common shares were released from escrow. At December 31, 2010, the carrying cost of $30,743 was recorded as an impairment of intangible asset as a result of delays in construction of the plant due to lack of funding and the fact that we have not sold any licenses during 2010.



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. 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 March 20, 2011, no securities were issued under the two plans.



Item 7A. Quantitative and Qualitative Disclosures about Market Risk



Not Applicable.

15

---

Item 8. Financial Statements and Supplementary Data



Energy Quest Inc.

(A Development Stage Company)





December 31, 2010

|                                                                   |      
|------------------------------------------------------------------ | -----
|                                                                   |      
|                                                                   |      
|                                                                   | 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  
|Notes to the Consolidated Financial Statements                     | F-8  





16

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM









To the Board Directors

Energy Quest, Inc.

(A Development Stage Company)

Henderson, Nevada



We have audited the accompanying balance sheets of Energy Quest Inc (A Development Stage Company) (the Company) as of December 31, 2010 and 2009, and the related statements of operations, stockholders deficit and cash flows for the years then ended and for the period from December 14, 2004 (inception) through December 31, 2010. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our 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 financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended and for the period from December 14, 2004 (inception) through December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not generated significant revenue and has a working capital deficit. These conditions raise significant doubt about the Companys ability to continue as a going concern. Managements plans in this regard are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

March 23, 2011





F-1

---

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



|                                                                                                                |                      |                  
|--------------------------------------------------------------------------------------------------------------- | -------------------- | -----------------
|                                                                                                                | December 31, 2010    | December 31, 2009
|Assets                                                                                                          |                      |                  
|                                                                                                                |                      |                  
|Current Assets                                                                                                  |                      |                  
|                                                                                                                |                      |                  
|Cash                                                                                                            | $              8,246 | $             816
|Deferred financing cost                                                                                         | 2,593                |                 
|Note receivable  related party                                                                                 | 8,656                |                 
|                                                                                                                |                      |                  
|Total Current Assets                                                                                            | 19,495               | 816              
|                                                                                                                |                      |                  
|Intangible Assets, net                                                                                          |                     | 2,781,224        
|                                                                                                                |                      |                  
|Total Assets                                                                                                    | 19,495               | 2,782,040        
|                                                                                                                |                      |                  
|                                                                                                                |                      |                  
|Liabilities and Stockholders' Equity (Deficit)                                                                  |                      |                  
|                                                                                                                |                      |                  
|Current Liabilities                                                                                             |                      |                  
|                                                                                                                |                      |                  
|Accounts payable and accrued liabilities                                                                        | 35,871               | 36,294           
|Amounts due to related parties                                                                                  | 713,055              | 516,881          
|Notes payable  related parties                                                                                 | 86,002               | 35,298           
|Convertible notes, net of discount of $43,223                                                                   | 10,777               |                 
|Derivative liabilities                                                                                          | 97,375               |                 
|                                                                                                                |                      |                  
|Total Liabilities                                                                                               | 943,080              | 588,473          
|                                                                                                                |                      |                  
|Stockholders' Equity (Deficit)                                                                                  |                      |                  
|                                                                                                                |                      |                  
|Preferred Stock                                                                                                 |                      |                  
|Authorized: 1,000,000 shares, with a $0.01 par value; none issued or outstanding                                |                     |                 
|                                                                                                                |                      |                  
|Common Stock                                                                                                    |                      |                  
|Authorized:  200,000,000 shares, with a $0.001 par value; Issued:  17,135,604 shares (2009  13,818,294 shares) | 17,136               | 13,818           
|                                                                                                                |                      |                  
|Additional Paid-in Capital                                                                                      | 8,956,903            | 8,663,596        
|                                                                                                                |                      |                  
|Accumulated Other Comprehensive Income                                                                          |                     | 3,946            
|                                                                                                                |                      |                  
|Deficit Accumulated During the Development Stage                                                                | (9,897,624)          | (6,487,793)      
|                                                                                                                |                      |                  
|Total Stockholders Equity (Deficit)                                                                            | (923,585)            | 2,193,567        
|                                                                                                                |                      |                  
|Total Liabilities and Stockholders Equity (Deficit)                                                            | $          19,495    | $    2,782,040   
|                                                                                                                |                      |                  





F-2

---

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

|                                                        |                                      |                                      |                                                                       
|------------------------------------------------------- | ------------------------------------ | ------------------------------------ | ----------------------------------------------------------------------
|                                                        | For the Year Ended December 31, 2010 | For the Year Ended December 31, 2009 | Period from December 14, 2004 (Date of Inception) to December 31, 2010
|Revenue                                                 | $                                   | $                                   | $             5,164                                                   
|                                                        |                                      |                                      |                                                                       
|Expenses                                                |                                      |                                      |                                                                       
|                                                        |                                      |                                      |                                                                       
|Consulting and management fees                          | 300,000                              | 686,497                              | 5,441,394                                                             
|General and administrative                              | 99,213                               | 95,752                               | 523,500                                                               
|Professional fees                                       | 47,323                               | 63,045                               | 488,271                                                               
|Research and development                                | 1,500                                | 218,883                              | 266,494                                                               
|Depreciation and depletion                              | 150,000                              | 150,000                              | 398,077                                                               
|Impairment of intangible assets                         | 2,632,666                            |                                     | 2,632,666                                                             
|Loss on theft of cash                                   |                                     |                                     | 80,000                                                                
|                                                        |                                      |                                      |                                                                       
|                                                        | 3,230,702                            | 1,214,177                            | 9,830,402                                                             
|                                                        |                                      |                                      |                                                                       
|Loss from operations:                                   | (3230,702)                           | (1,214,177)                          | (9,825,238)                                                           
|                                                        |                                      |                                      |                                                                       
|Interest expense                                        | (67,129)                             | (2,751)                              | (76,467)                                                              
|Gain on settlement of former shareholder advances       |                                     | 304,177                              | 310,003                                                               
|Loss on derivative financial instruments                | (112,000)                            |                                     | (112,000)                                                             
|Loss on write-off of loan receivable                    |                                     |                                     | (193,922)                                                             
|                                                        |                                      |                                      |                                                                       
|Net loss                                                | (3,409,831)                          | (912,751)                            | (9,897,624)                                                           
|                                                        |                                      |                                      |                                                                       
|Other comprehensive income                              |                                      |                                      |                                                                       
|                                                        |                                      |                                      |                                                                       
|Foreign currency translation adjustment                 | (3,946)                              | 3,824                                |                                                                      
|                                                        |                                      |                                      |                                                                       
|Total Comprehensive Loss                                | $  (3,413,777)                       | $   (908,927)                        | $   (9,897,624)                                                       
|                                                        |                                      |                                      |                                                                       
|Net Loss Per Share  Basic and Diluted                  | $           (0.27)                   | $         (0.08)                     |                                                                       
|                                                        |                                      |                                      |                                                                       
|Weighted Average Shares Outstanding  Basic and Diluted | 12,816,645                           | 11,305,000                           |                                                                       
|                                                        |                                      |                                      |                                                                       





F-3

---

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

|                                                                            |                                      |                                      |                                                                            
|--------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------ | ---------------------------------------------------------------------------
|                                                                            | For the Year Ended December 31, 2010 | For the Year Ended December 31, 2009 | Accumulated from December 14, 2004 (Date of Inception) to December 31, 2010
|                                                                            |                                      |                                      |                                                                            
|Cash Flows Used In Operating Activities                                     |                                      |                                      |                                                                            
|Net loss                                                                    | $       (3,409,831)                  | $    (912,751)                       | $ (9,897,624)                                                              
|                                                                            |                                      |                                      |                                                                            
|Adjustments to reconcile net loss to net cash used in operating activities: |                                      |                                      |                                                                            
|Accretion of convertible debt discount                                      | 56,777                               |                                     | 56,777                                                                     
|Shares issued for services                                                  | 36,000                               | 568,250                              | 4,607,306                                                                  
|Loss on shares issued for amounts due related parties                       |                                     | 15,976                               | 15,976                                                                     
|Loss on theft of cash                                                       |                                     |                                     | 80,000                                                                     
|Loss on write-off of loan receivable                                        |                                     |                                     | 193,922                                                                    
|Loss on derivative instruments                                              | 112,000                              |                                     | 112,000                                                                    
|Impairment of intangible assets                                             | 2,632,666                            |                                     | 2,632,666                                                                  
|Amortization of intangible assets                                           | 150,000                              | 150,000                              | 398,077                                                                    
|Gain on settlement of former shareholder advances                           |                                     | (304,177)                            | (310,003)                                                                  
|Amortization of deferred financing cost                                     | 2,907                                |                                     | 2,907                                                                      
|                                                                            |                                      |                                      |                                                                            
|Changes in operating assets and liabilities:                                |                                      |                                      |                                                                            
|Accounts payable and accrued liabilities                                    | 921                                  | (2,747)                              | 23,406                                                                     
|Due to related parties                                                      | 196,174                              | 288,858                              | 1,027,475                                                                  
|                                                                            |                                      |                                      |                                                                            
|Net Cash Used in Operating Activities                                       | (222,386)                            | (196,591)                            | (1,057,115)                                                                
|                                                                            |                                      |                                      |                                                                            
|Investing Activities                                                        |                                      |                                      |                                                                            
|Payment of note receivable  related party                                  | (10,000)                             |                                     | (203,922)                                                                  
|Net cash acquired on business acquisition                                   |                                     |                                     | 565                                                                        
|Change in restricted cash                                                   |                                     |                                     | (80,000)                                                                   
|Purchase of intangible assets                                               |                                     |                                     | (25,000)                                                                   
|                                                                            |                                      |                                      |                                                                            
|Net Cash Used In Investing Activities                                       | (10,000)                             |                                     | (308,357)                                                                  
|                                                                            |                                      |                                      |                                                                            
|Financing Activities                                                        |                                      |                                      |                                                                            
|Proceeds from issuance of common stock                                      | 100,000                              | 190,163                              | 744,307                                                                    
|Payment of deferred financing cost                                          | (5,500)                              |                                     | (5,500)                                                                    
|Proceeds from convertible note                                              | 100,000                              |                                     | 100,000                                                                    
|Proceeds from notes payable                                                 | 50,000                               | 12,894                               | 568,214                                                                    
|Re-payment of note payable                                                  |                                     | (6,808)                              | (28,005)                                                                   
|                                                                            |                                      |                                      |                                                                            
|Net Cash Provided By Financing Activities                                   | 244,500                              | 196,249                              | 1,379,016                                                                  
|                                                                            |                                      |                                      |                                                                            
|Effect of Exchange Rate Changes on Cash                                     | (4,684)                              | 366                                  | (5,298)                                                                    
|                                                                            |                                      |                                      |                                                                            
|Increase in Cash and Cash Equivalents                                       | 7,430                                | 24                                   | 8,246                                                                      
|                                                                            |                                      |                                      |                                                                            
|Cash and Cash Equivalents, beginning                                        | 816                                  | 792                                  |                                                                           
|                                                                            |                                      |                                      |                                                                            
|Cash and Cash Equivalents, end                                              | $              8,246                 | $      816                           | $          8,246                                                           
|                                                                            |                                      |                                      |                                                                            
|                                                                            |                                      |                                      |                                                                            
|Supplemental Disclosures                                                    |                                      |                                      |                                                                            
|                                                                            |                                      |                                      |                                                                            
|Cash paid for taxes                                                         | $                                   | $                                   | $                                                                         
|Cash paid for interest                                                      |                                     |                                     |                                                                           
|                                                                            |                                      |                                      |                                                                            
|Non-Cash Activities                                                         |                                      |                                      |                                                                            
|                                                                            |                                      |                                      |                                                                            
|Common stock issued for intangible assets                                   | $                                   | $                                   | $   3,000,204                                                              
|Common stock issued for stock payable                                       |                                     |                                     | 161,550                                                                    
|Common stock issued for amounts due to related parties                      |                                     | 344,488                              | 360,954                                                                    





F-4

---

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 14, 2004 (Date of Inception)                                                        |            | $          | $            | $                  | $                  | $                 | $           
|                                                                                                       |             |             |               |                     |                     |                    |              
|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                                                                            | 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                                                                            | 1,887,753   | $   1,887   | $ 1,062,345   | $        (1,019)    | $                  | $   (1,182,337)    | $ (119,124)  
|                                                                                                       |             |             |               |                     |                     |                    |              





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                                                    | 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                                                    | 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)
|                                                                               |           |            |             |                |                 |               |            





F-6

---

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, 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  | 1,806      | 319,943     |                 |                   |                | 321,749    
|                                                          |            |            |             |                  |                    |                 |            
|Issue of common stock for expenses                        | 25,000     | 25         | 31,225      |                 |                   |                | 31,250     
|                                                          |            |            |             |                  |                    |                 |            
|Fair value of consulting services                         |           | (57)       | (60,443)    |                 | 60,500             |                |           
|                                                          |            |            |             |                  |                    |                 |            
|Foreign currency translation adjustment                   |           |           |            | 227              |                   |                | 227        
|                                                          |            |            |             |                  |                    |                 |            
|Net loss for the year                                     |           |           |            |                 |                   | (987,924)       | (987,924)  
|                                                          |            |            |             |                  |                    |                 |            
|Balance  December 31, 2008                               | 6,573,249  | 6,573      | 7,551,964   | 122              |                   | (5,575,042)     | 1,983,617  
|                                                          |            |            |             |                  |                    |                 |            
|Issue of common stock for cash                            | 2,063,024  | 2,063      | 204,566     |                 |                   |                | 206,629    
|                                                          |            |            |             |                  |                    |                 |            
|Issue of common stock for debt                            | 2,982,021  | 2,982      | 325,040     |                 |                   |                | 328,022    
|                                                          |            |            |             |                  |                    |                 |            
|Issue of common stock for services                        | 2,200,000  | 2,200      | 582,026     |                 |                   |                | 584,226    
|                                                          |            |            |             |                  |                    |                 |            
|Foreign currency translation adjustment                   |           |           |            | 3,824            |                   |                | 3,824      
|                                                          |            |            |             |                  |                    |                 |            
|Net loss for the year                                     |           |           |            |                 |                   | (912,751)       | (912,751)  
|                                                          |            |            |             |                  |                    |                 |            
|Balance  December 31, 2009                               | 13,818,294 | 13,818     | 8,663,596   | 3,946            |                   | (6,487,793)     | 2,193,567  
|                                                          |            |            |             |                  |                    |                 |            
|Issue of common stock for cash                            | 2,000,000  | 2,000      | 98,000      |                 |                   |                | 100,000    
|                                                          |            |            |             |                  |                    |                 |            
|Issue of common stock for services                        | 500,000    | 500        | 35,500      |                 |                   |                | 36,000     
|                                                          |            |            |             |                  |                    |                 |            
|Issue of common stock upon conversion of convertible note | 817,310    | 818        | 45,182      |                 |                   |                | 46,000     
|                                                          |            |            |             |                  |                    |                 |            
|Settlement of derivative liability through conversion     |           |           | 114,625     |                 |                   |                | 114,625    
|                                                          |            |            |             |                  |                    |                 |            
|Foreign currency translation adjustment                   |           |           |            | (3,946)          |                   |                | (3,946)    
|                                                          |            |            |             |                  |                    |                 |            
|Net loss for the year                                     |           |           |            |                 |                   | (3,409,831)     | (3,409,831)
|                                                          |            |            |             |                  |                    |                 |            
|Balance  December 31, 2010                               | 17,135,604 | $  17,136  | $ 8,956,903 | $               | $                 | $  (9,897,624)  | $ (923,585)



F-7

---

> Energy Quest Inc. (A Development Stage Company) Notes to the Consolidated Statements





1.



Nature of Operations

Energy Quest, Inc. (the Company) is principally in a business involving 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 by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915, Development Stage Entities.



2.

Going Concern

The Company has incurred losses from operations since December 14, 2004 (inception) to December 31, 2010, has a working capital deficiency and an accumulated deficit that creates substantial doubt about the Companys ability to continue as a going concern. These consolidated financial statements have been prepared on the assumption that the Company is a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Companys continuation as a going concern is dependent upon its ability to attain profitable operations and generate funds there-from, and/or raises equity capital or borrowings sufficient to meet current and future obligations. Management plans to raise equity financings over the next twelve months to finance operations. There is no guarantee that the Company will be able to complete any of these objectives.



3.

Summary of Significant Policies





a)



Basis of Presentation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. These financial statements include accounts of the Company and its wholly-owned subsidiary, Syngas Energy Corporation. All intercompany transactions and balances have been eliminated. The Companys fiscal year end is December 31.





b)



Use of Estimates

The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to valuation of long-lived assets, stock based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.





c)



Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.





d)



Intangible Assets

Intangible assets consist of patents related to integrated gasification production systems and techniques. This 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 technology is amortized over the life of the patent using the straight-line method. Patents and other intangible assets are evaluated for impairment annually or when events or changes in circumstances indicate that there may be impairment. For the years ended December 31, 2010 and 2009, the Company recognized an impairment loss of $2,632,666 and nil, respectively.

An impairment change was recorded due to delays in construction of the plant that will be using the Companys gasification technologies and the fact that we have not sold any licenses during 2010. The delays are due to lack of funding.



F-8

---





e)

Long-lived Assets

In accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. For each of the years ended December 31, 2010 and 2009, the Company did not recognize an impairment loss.



f)

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.



g)

Advertising Costs

The Companys accounting policy regarding advertising is to expense advertising to general and administrative expense as incurred. Advertising expenses were approximately $4,000 and $16,000 for the years ended December 31, 2010 and 2009, respectively.



h)

Basic and Diluted Net Income (Loss) Per Share

The Company computes net earnings (loss) per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.



i)

Foreign Currency Translation

The Companys functional and reporting currency is the United States dollar. Occasional transactions may occur in Canadian dollars and management has adopted ASC 740 Foreign Currency Translation Matters. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has never entered into derivative instruments to offset the impact of foreign currency fluctuations.

The functional currency of the wholly-owned subsidiary is the Canadian dollar. The financial statements of the subsidiary are translated to United States dollars in accordance with ASC 740 using period-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders equity. Foreign currency transaction gains and losses are included in current operations.





F-9

---





j)

Fair Value of Financial Instruments

Our financial instruments consist principally of cash, note receivable, accounts payable, amounts due to related parties and convertible notes. Pursuant to ASC 820, Fair Value Measurements and Disclosures, and ASC 825, Financial Instruments the fair value of our cash equivalents is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.



k)

Comprehensive Loss

ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. In 2009, the Companys only component of comprehensive loss was foreign currency translation adjustments. At December 31, 2010, the Company recorded an impairment of the intangible asset, and as a result, there are no further assets remaining in the subsidiary. Accordingly, the balance of accumulated other comprehensive income was charged to operations.



l)

Stock-Based Compensation

In accordance with ASC 718, Compensation  Stock Based Compensation, the Company accounts for share-based payments using the fair value method. Common shares issued to third parties for non-cash consideration are valued based on the fair market value of the services provided or the fair market value of the common stock on the measurement date, whichever is more readily determinable.



m)

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.



4.

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, 2010, the carrying cost of $30,743 was recorded as an impairment of intangible asset as a result of delays in construction of the plant due to lack of funding.



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. Amortization was being recognized over the expected legal useful life of 20 years, and amortization expense for each of the years ended December 31, 2010 and 2009 was $150,000. At December 31, 2010, the carrying cost of $2,601,923 was recorded as an impairment of intangible asset as a result of delays in construction of the plant due to lack of funding.





F-10

---



5.

Related Party Transactions

The following details note receivable from related party at December 31, 2010:

During the year ended December 31, 2010, the Company loaned a director $10,000 (2009 - $Nil) pursuant to a note receivable. The note earns interest at 6% per annum and was due on September 15, 2010 or upon demand by the Company. The outstanding balance of the note, including accrued interest of $299, was $8,656 as of December 31, 2010.

The following details amounts due to related parties at December 31, 2010:



a)

During the year ended December 31, 2010, the Company recorded $150,000 (2009 - $150,000) for management services provided by the President of the Company. At December 31, 2010, $478,231 (December 31, 2009 - $363,964) is included in due to related parties.



b)

During the year ended December 31, 2010, the Company recorded $150,000 (2009 - $150,000) for management services provided by the Secretary of the Company. At December 31, 2010, $227,084 (December 31, 2009 - $152,917) is included in due to related parties.

The following details Notes payable  related parties:



c)

During the year ended December 31, 2010, the Company received an advance of $Nil (2009 - $14,298) from a related party consultant. At December 31, 2010, this amount is included in notes payable  related parties, and the related accrued interest of $1,618 (2009 - $684) is included in amounts due to related parties.



d)

On November 5, 2007, the Company received $21,000 from a director in exchange for a promissory note payable. The note bears interest at 6% per annum, calculated annually, and is due on demand. At December 31, 2010, accrued interest of $3,977 (2009 - $2,717) is included in amounts due to related parties.



e)

On April 14, 2010, the Company received $50,000 from the Secretary of the Company in exchange for a promissory note payable. The note bears interest at 6% per annum and is due on March 31, 2011. The Company has secured the note with 1,000,000 shares of common stock to be issued upon default. At December 31, 2010, accrued interest of $2,145 (2009 - $Nil) is included in amounts due to related parties.



6.

Advances from Former Shareholders

On November 10, 2009, the President of the Company entered into a debt settlement agreement with a certain former shareholder of the Company to settle $288,858 of debt. Under the agreement, the former shareholder agreed to release the debt in return for a certain licence agreement. This amount has been recorded as gain on debt settlement.



7.

Convertible Debt



a)

On January 29, 2010, the Company borrowed $50,000 from a private investor and issued a callable convertible note with an 8% interest rate, 22% interest rate upon default and a maturity of nine months. The Company paid a finders fee of $2,500. The note is convertible into common shares at 55% of the average of the lowest three closing prices for the Companys common shares during the ten trading day period ending one trading day prior to the date the conversion notice is sent by the investor to the borrower.

The embedded conversion option contains a reset provision that can cause an adjustment to the conversion price if the Company sells or issues an equity instrument at a price lower than the initial conversion price. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 (See Note 10 below). This fair value of the derivative liability at issuance of $81,995 resulted in a full discount to the note payable and a loss on the fair value of derivatives of $31,995. The carrying value of the convertible note is to be accreted over the term of the convertible note up to their value of $50,000.

During the year ended December 31, 2010, $46,000 was converted into 817,310 common shares, and the carrying values of the convertible note and accrued convertible interest payable thereon were $4,000 and $3,001, respectively. The remaining balance of $4,000 was converted into 241,935 common shares on January 18, 2011.

F-11

---



The following table summarize the change in convertible debt for the year ended December 31, 2010:

|                                                          |                  
|--------------------------------------------------------- | -----------------
|Proceeds from convertible debt                            | $          50,000
|Discount                                                  | (50,000)         
|Converted into 817,310 shares of common stock during year | (46,000)         
|Accretion of debt discount                                | 50,000           
|Carrying value at December 31, 2010                       | $           4,000

For the year ended December 31, 2010, the Company recorded $50,000 as the accretion of interest expense on the convertible note and recorded the cost associated with obtaining the convertible note as deferred financing cost of $2,500 on February 8, 2010. As of December 31, 2010, the Company recorded $2,500 on amortization of the deferred financing cost.



b)

On November 24, 2010, the Company borrowed $50,000 from a private investor and issued a callable convertible note with an 8% interest rate, 22% interest rate upon default and a maturity of nine months. The Company paid a finders fee of $3,000. The note is convertible into common shares at 55% of the average of the lowest three closing prices for the Companys common shares during the ten trading day period ending one trading day prior to the date the conversion notice is sent by the investor to the borrower.

The embedded conversion option contains a reset provision that can cause an adjustment to the conversion price if the Company sells or issues an equity instrument at a price lower than the initial conversion price. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 (See Note 10 below). This fair value of the derivative liability at issuance of $71,911 resulted in a full discount to the note payable and a loss on the fair value of derivatives of $21,911. The carrying value of the convertible note is to be accreted over the term of the convertible note up to their value of $50,000.

As at December 31, 2010, the carrying values of the convertible note and accrued convertible interest payable thereon were $6,777 and $406, respectively.

The following table summarize the change in convertible debt for the year ended December 31, 2010:

|                                    |                  
|----------------------------------- | -----------------
|Proceeds from convertible debt      | $          50,000
|Discount                            | (50,000)         
|Accretion of debt discount          | 6,777            
|Carrying value at December 31, 2010 | $           6,777

For the year ended December 31, 2010, the Company recorded $6,777 as the accretion of interest expense on the convertible note and recorded the cost associated with obtaining the convertible note as deferred financing cost of $3,000 on November 24, 2010. As of December 31, 2010, the Company recorded $593 on amortization of deferred financing cost.



8.

Equity



a)

During the year ended December 31, 2010, the Company issued 817,310 shares of common stock upon the partial conversion of the Note referred to in Note 7 (a).



b)

On September 1, 2010, the Company issued 500,000 shares of common stock with a fair value of $36,000 for services received.



c)

On June 5, 2010, the Company issued 2,000,000 shares of common stock pursuant to a private placement at $0.05 per share for cash proceeds of $100,000.



d)

On November 10, 2009, the Company issued 1,000,000 shares of common stock with a fair value of $200,000 for services received.



e)

On August 14, 2009, the Company issued 1,000,000 shares of common stock with a fair value of $200,000 for services received.



f)

On July 10, 2009, the Company issued 100,000 shares of common stock pursuant to a private placement. The Company received $0.10 per share of common stock for total proceeds of $10,000.



g)

On June 30, 2009, the Company issued 50,000 shares of common stock with a fair value of $10,000 for services received.



h)

On June 11, 2009, the Company issued 163,024 shares of common stock with a fair value of $32,605 for settlement of amounts due a related party. Since the fair value of the shares issued was more than the amounts due to related party, the Company recognized a loss on the shares issued for amounts due a related party for $15,976.



i)

On May 28, 2009, the Company issued 150,000 shares of common stock with a fair value of $37,500 for services received.



j)

On May 4, 2009, the Company issued 1,800,000 shares of common stock pursuant to a private placement. The Company received $0.10 per share of common stock for total proceeds of $180,000.



k)

On January 26, 2009, the Company issued 2,982,021 shares of common stock with a fair value of $328,022 for settlement of amounts due a related party pursuant to an agreement with the related party to issue shares in exchange for $241,120 debt owed by the Company due to the debt assignment agreement and an aggregate of $86,902 that the Company owed to related party.



l)

During the year ended December 31, 2009, the company recognized $120,750 of expenses related to services provided through June 30, 2009 under a share-based compensation arrangement.

F-12

---



9.

Fair Value Measurements

> ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. Fair Value Hierarchy ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 825 establishes three levels of inputs that may be used to measure fair value. Level 1 applies to assets and liabilities for which there are quoted prices in active markets for identical assets or liabilities. Valuations are based on quoted prices that are readily and regularly available in an active market and do not entail a significant degree of judgment. Level 2 applies to assets and liabilities for which there are other than Level 1 observable inputs such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 2 instruments require more management judgment and subjectivity as compared to Level 1 instruments. For instance: determining which instruments are most similar to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer, credit rating and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar to the security being priced; and determining whether a market is considered active requires management judgment.Level 3 applies to assets and liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The determination of fair value for Level 3 instruments requires the most management judgment and subjectivity. Pursuant to ASC 825, the fair value of the cash equivalent is determined based on Level 1 inputs, which consists of quoted prices in active markets for identical assets. Convertible notes payable are valued based on Level 2 inputs, consisting of quoted prices in less active markets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

F-13

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Assets and liabilities measured at fair value on a recurring basis were presented on the Companys balance sheet as at December 31, 2010 as follows:

|                          |                                                                       |                                                 |                                             |                             
|------------------------- | --------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------------- | ----------------------------
|                          | Fair Value Measurements Using                                         |                                                
|                          | Quoted prices in active markets for identical instruments (Level 1) $ | Significant other observable Inputs (Level 2) $ | Significant Unobservable inputs (Level 3) $ | Balance, December 31, 2010 $
|                          |                                                                       |                                                 |                                             |                             
|Cash and cash equivalents | 8,246                                                                 |                                                |                                            | 8,246                       
|Derivative liabilities    |                                                                      |                                                | (97,375)                                    | (97,375)                    
|                          |                                                                       |                                                 |                                             |                             
|                          | 8,248                                                                 |                                                | (97,375)                                    | (89,129)                    

The fair values of other financial instruments, which include amounts receivable, accounts payable, and accrued liabilities approximate their carrying values due to the relatively short-term maturity of these instruments.



10.

Derivative Liability

ASC 815-15 lays out a procedure to determine if an equity-linked financial instrument (or embedded feature) is indexed to its own common stock.

Convertible Debt - The embedded conversion option in the Companys two $50,000 notes described in Note 7 contain a reset provision that can cause an adjustment to the conversion price if the Company sells or issues an equity instrument at a price lower than the initial conversion price. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in our consolidated statement of operations as a gain or loss on derivative financial instruments.

The following table summarizes the change in derivative liabilities for the year ended December 31, 2010:

|                                                   |                      
|-------------------------------------------------- | ---------------------
|Derivative Liabilities at December 31, 2009        | $                   
|Addition of new derivative liabilities             | 153,906              
|Change in fair value of embedded conversion option | (56,531)             
|Derivative Liabilities at December 31, 2010        | $          97,375    

The following table summarizes the loss on derivatives for the year ended December 31, 2010:

|                                                                         |                  
|------------------------------------------------------------------------ | -----------------
|Fair value of derivative liabilities in excess of note proceeds received | $          53,906
|Change in fair value of derivative liabilities at December 31, 2010      | 58,094           
|Loss on derivative liabilities                                           | $        112,000 

The Company used the Black-Scholes option pricing model to value the embedded conversion feature using the following assumptions: number of options as set forth in the convertible notes agreements; no expected dividend yield; expected volatility ranging from 212% - 534%; risk-free interest rates ranging from 0.15% - 0.24% and expected terms based on the contractual term.





F-14

---





11.

Income Taxes

A reconciliation of the expected income tax recovery computed by applying the statutory United States federal income tax rate of 35% to income (loss) before taxes follows:

|                                        |                                      |                                     
|--------------------------------------- | ------------------------------------ | ------------------------------------
|                                        | For the year ended December 31, 2010 | For the year ended December 31, 2009
|                                        |                                      |                                     
|Income tax recovery at statutory rate   | $       1,193,441                    | $    319,966                        
|                                        |                                      |                                     
|Non-deductible stock-based compensation | (12,600)                             | (204,480)                           
|                                        |                                      |                                     
|Non-deductible amortization             | (52,500)                             | (52,500)                            
|                                        |                                      |                                     
|Non-deductible impairment               | (921,433)                            |                                    
|                                        |                                      |                                     
|Valuation allowance change              | (206,908)                            | (62,986)                            
|                                        |                                      |                                     
|Provision for income taxes              | $                                   | $                                  

The components of the net deferred tax asset at December 31, 2010 and 2009 consist of:

|                                 |   |                   |   |                  
|-------------------------------- | - | ----------------- | - | -----------------
|                                 |   | December 31, 2010 |   | December 31, 2009
|                                 |   |                   |   |                  
|Net operating loss carry-forward | $ | 2,100,000         | $ | 1,890,000        
|                                 |   |                   |   |                  
|Valuation allowance              |   | (2,100,000)       |   | (1,890,000)      
|                                 |   |                   |   |                  
|Net deferred income tax asset    | $ |                  | $ |                 

Potential benefits of income taxes are not recognized in the accounts until realization is more likely than not. At December 31, 2010, the Company has a net operating loss carry-forward of $5,997,700 that expire through fiscal 2030. Pursuant to ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

Current United States income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited under IRC 382.

F-15

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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, 2010 and 2009 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



Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010 (the Evaluation Date). Based upon the evaluation of our disclosure controls and procedures as of the Evaluation Date, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures.



Managements Report on Internal Control over Financial Reporting



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



Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.



Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010.  In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.  Based on its evaluation, our management concluded that there is a material weakness in our internal control over financial reporting and Management has concluded that the Companys internal controls over financial reporting are not effective as of December 31, 2010 due to a lack of qualified accounting personnel and an overreliance on consultants in the accounting and financial statement close process.  A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness relates to the lack of segregation of duties in our financial reporting process and we utilize outside third party consultants.  We do not have a separately designated audit committee.  This weakness is due to our lack of excess working capital to hire additional staff.  To remedy this material weakness, we intend to engage an internal accountant to assist with financial reporting as soon as our finances will allow.



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

17

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Changes in Internal Control over Financial Reporting



There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



Limitations on the Effectiveness of Controls



Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.



The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



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 March 20, 2011.



|                                   |                                                |                                  |                 
|---------------------------------- | ---------------------------------------------- | -------------------------------- | ----------------
|                                   |                                                |                                  |                 
|                                   |                                                |                                  | Other Public    
|                                   |                                                |                                  | Company         
|                                   | Position(s) Held in                            |                                  | Directorships   
|Name and Age                       | Energy Quest Inc.                              | Tenure                           | Held by Director
|Wilfred J. Ouellette, 67           | Director                                       | From July 1, 2005 to present     | n/a             
|                                   | President, and Chief Executive Officer         | From May 5, 2006 to present      |                 
|Ronald Foster, 69                  | Director, Chief Financial Officer              | From January 31, 2010 to present | n/a             
|Director, Secretary, and Treasurer | From July 1, 2008 to present                   | n/a                             
|David Doherty, 38                  | Vice President of International Finance &Trade | From 2010 to present             | n/a             
|Michael Midagliotti, 57            | Director                                       | From April 1, 2010 to present    | n/a             
|Peter J. Stephen, 42               | Director                                       | From April 21, 2008 to present   | n/a             



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.



18

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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.



Ronald Foster, Director, Chief Financial Officer, Secretary and Treasurer



Ronald Foster serves as our Secretary, Treasurer, Chief Financial Officer and as a Director.  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.



Michael Midagliotti, Director



Mr. Midagliotti is President & Owner of Friar Enterprises Inc., a residential general contractor from 1976 to present in the Northern Ohio area.  Mr. Midagliotti directs a diverse organization that provides home remodeling and consrtuction, directing and overseeing the companys financial, business, and administrative services which are fundamental to both the companys operations and the achievement of its operational and financial objectives.  Mr. Midagliotti graduated from Miami University and holds a Bachelor of Science in Finance.  Since 1976 to the present, Mr. Midagliotti has operated as a general contractor in the northern Ohio area.  In 1984, Mr. Midagliotti entered the political arena and was unsuccessful for his bid for state representative in Ohio.  Mr. Midagliotti is a Certified Remodeler and is a current member of the National Association of the Remodeling Industry.  From 1995-97 he served as president and chairman of the board of the local Cleveland, Ohio chapter.



Peter J. Stephen, Director



Mr. Stephen was appointed as director on April 21, 2008. Mr. Stephens has experience 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 Company.  He is currently the President of Alliance Overhead Door d.b.a. 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.



19

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Abdulsalam Al Hamri, Director



Mr. Al Hamri was appointed as director on June 14, 2010.  Mr. Al Hamri has a great deal of experience in corporate debt restructuring and negotiation, corporate management, business ownership and operation.  He has international experience in project preparation, financing, finance and financial engineering, commodity trading (especially in the oil and gas sector), secondary market for sovereign and commercial debts.  Mr. Al Hamri has lectured on macroeconomics, banking, privatization, economics of transition and transition economies.  As well, Mr. Al Hamri has provided services and time to the National Administration, central bank-research, credits, foreign exchange, credit department, development projects, co-financing multilateral conditional lending.  From 2005 until present, Mr. Al Hamri serves as Al Hamri Enterprises S.L. chairman of the board of directors.  His primary responsibilities include finance, compliance and business development.  From 1999 until 2005, he served as the President & CEO FTC / Qatar Royal Family.

David Doherty, Vice President of International Finance and Trade

Mr. Doherty is a senior business executive with 15 years of extensive commercial experience in financial management, asset management and derivatives trading.  He has worked on project developments from site appraisal to liaising with management team, architects, consultant engineers etc with on site infrastructure to full planning and completion of projects.  He was an investor in private development projects in Industrial, residential and leisure companies in Ireland and United Kingdom.  Mr. Doherty has invested in numerous companies and was a board director for several companies where personal funds were placed for start up.  He was also a financial advisor to clients investing in Bank securities and fund raising for projects in China and South East Asia.  He currently manages a portfolio of individuals and companies with funds for investment from $100 million USD to $5 billion USD.





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.





20

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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.

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, 2010 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, 2008.



Item 11.  Executive Compensation



The following table sets forth, as of December 31, 2010, 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.



21

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|                                                      |      |            |           |                  |                   |                                            |                                                 |                            |           |  |  | 
|----------------------------------------------------- | ---- | ---------- | --------- | ---------------- | ----------------- | ------------------------------------------ | ----------------------------------------------- | -------------------------- | --------- |  |  | 
|                                                      |      |            |           |                  |                   |                                            |                                                 |                            |           |  |  | 
|SUMMARY COMPENSATION TABLE                            |     
|Name and Principal Position                           | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | 
|Wilfred J. Ouellette President, CEO, and Director (1) | 2010 | 150,000    | 0         | 0                | 0                 | 0                                          | 0                                               | 0                          | 150,000   | 
|                                                      | 2009 | 150,000    | 0         | 0                | 0                 | 0                                          | 0                                               | 0                          | 150,000   |  | 
|Ronald Foster, Treasurer Secretary and Director (2)   | 2010 | 150,000    | 0         | 0                | 0                 | 0                                          | 0                                               | 0                          | 150,000   |  | 
|                                                      | 2009 | 150,000    | 0         | 0                | 0                 | 0                                          | 0                                               | 0                          | 100,000   |  |  | 
|Steve Eilers, former Treasurer and Secretary (3)      | 2009 | $200,000   | 0         | 0                | 0                 | 0                                          | 0                                               | 0                          | $200,000  |  |  | 
|                                                      | 2008 | $130,000   | 0         | 0                | 0                 | 0                                          | 0                                               | 0                          | $130,000  |  |  | 



(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 and resigned on January 31, 2010.



(2)

Mr. Foster has been a director and our Chief Financial Officer since January 31, 2010, Secretary and Treasurer since July 1, 2008.



(3)

Mr. Eilers resigned as a director and our Secretary and Treasurer on July 1, 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 $150,000 of management fees for the twelve-month period ended December 31, 2009 and recognized $150,000 for the twelve-months period ended December 31, 2010



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.  Mr. Eilers resigned on July 1, 2008.  We recognized $130,000 of management fees for the twelve-month period ended December 31, 2008 and recognized $200,000 for the twelve-months period ended December 31, 2009.



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 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.  Mr. Jain resigned January 31, 2010.



Option Grants



We did not grant any options or stock appreciation rights to our named executive officers or directors in the fiscal 2010.  As of March 20,2011, none of our executive officers or directors owned any of our derivative securities.



22

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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, 2010.



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, 2010.  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 March 20, 2011 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 the Companys common stock owned beneficially as of March 20, 2011 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 March 20, 2011, there were 17,085,604 common shares issued and outstanding.

23

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|                                                                                                                                                      |                |                                                   |                         
|----------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ------------------------------------------------- | ------------------------
|                                                                                                                                                      |                |                                                   |                         
|Name and Address of Beneficial Owner                                                                                                                  | Title of Class | Amount and Nature of Beneficial Ownership (1) (#) | Percent of Class (2) (%)
|Wilfred J. Ouellette (3) 78 Belleville Ave Spruce Grove, AB T7X 1H8                                                                                   | Common Shares  | 528,940 (4)                                       | 3.1                     
|Abdulsalam Al Hamri (5) Barcelona Spain                                                                                                               | Common Shares  | 2,000,000                                         | 11.7                    
|Ronald Foster (6) 103 Firetower Road Leesburg, Georgia 31763-3755                                                                                     | Common Shares  | 0                                                 | 0                       
|Michael Midagliotti(7) 3435 Brook Park Road Parma, Ohio 44134                                                                                         | Common Shares  | 0                                                 | 0                       
|Peter J. Stephen (8) 4525 South Dean Martin Dr. Las Vegas, NV 89103  David Doherty  (10) Easton, Lower Branch Road, Tramore County Waterford, Ireland | Common Shares  | 500,000                                           | 2.9                     
|All Officers and Directors as a Group                                                                                                                 | Common Shares  | 3,028,940                                         | 17.7                    
|Carolyn Foster (9) 103 Firetower Road Leesburg, Georgia 31763                                                                                         | Common Shares  | 1,878,286                                         | 11.0                    
|Kyoung Hwa Lee 6403 75 th Street NW Edmonton, AB T6E 0T3                                                                                              | Common Shares  | 900,000                                           | 5.3                     
|Marlene Stephens 10975 San Diego Mission Drive San Diego, CA 92108                                                                                    | Common Shares  | 1,000,000                                         | 5.8                     



(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 17,085,604 issued and outstanding shares of common stock as of March 20, 2011.

(3)

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

(4)

Includes 422,524 shares owned by 975110 Alberta Ltd., a company over which Wilfred J. Ouellette has the voting and investment control and 106,416 shares Mr. Ouellette owns in his own name.

(5)

Abdulsalam Al Hamri is a director.

(6)

Ronald Foster is our director and our Chief Financial Officer, Secretary and Treasurer.

(7)

Michael Midagliotti is our director.

(8)

Peter Stephens is our director.

(9)

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

(10)       David Doherty is our President of International Finance & Trade





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Item 13.  Certain Relationships, Related Transactions and Director Independence



During the year ended December 31, 2010, we recorded $150,000 for management services provided by our Chief Financial Officer and Secretary of the company.



During the year ended December 31, 2010, we recorded $150,000 for management services provided by our President.



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, 2009 and 2008 and any other fees billed for other services Malone & Bailey PC during these periods.  All fees are paid by US dollars.

|                   |                         |                        
|------------------ | ----------------------- | -----------------------
|                   |                         |                        
|                   | Year Ended December 31, | Year Ended December 31,
|                   | 2009                    | 2010                   
|Audit fees         | $15,000                 | $16,750                
|Audit-related fees | $19,845                 | $19,155                
|Tax fees           |                        |                       
|All other fees     |                        |                       
|Total              | $34,845                 | $35,905                



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 2009.



PART IV



Item 15.  Exhibits and Financial Statement Schedules



(a) (1) Financial Statements



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

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(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.



|               |                                                                                                                                                             
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                             
|               |                                                                                                                                                             
|Exhibit Number | Exhibit Description                                                                                                                                         
|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.

(8) Included as an exhibit on our Form 8-K filed May 12, 2010

(9) Included as an exhibit on our Form 8-K filed June 1, 2010

(10) Included as an exhibit on our Form 8-K filed June 15, 2010

(11) Included as an exhibit on our Form 10-K/A filed July 16, 2010

(12) Included as an exhibit on our Form 10 Q filed May 24, 2010

(13) Included as an exhibit on our Form 10 Q filed August 16, 2010

(14) Included as an exhibit on our Form 10 Q/A file November 18, 2010





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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.

|                     |  |                                                                                                               
|-------------------- |  | --------------------------------------------------------------------------------------------------------------
|                     |  |                                                                                                               
|                     |  |                                                                                                               
|Date: March 30, 2011 |  | Energy Quest Inc. By: /s/Wilfred J. Ouellette 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                                        | Date          
|                                             
|/s/ Wilfred J. Ouellette                      | President, Chief Executive                   | March 30, 2011
|Wilfred J. Ouellette                          | Officer, Director                            |               
|                                             
|/s/ Ronald Foster                             | Chief Financial Officer Secretary, Treasurer | March 30, 2011
|Ronald Foster   /s/ Michael Midagliotti       | Director                                     | March 30, 2011
|Michael Midagliotti                           |                                              |               
|                                              |                                              |               
|*/s/ Peter Stephens*Peter Stephens            | Director                                     | March 30, 2011
|                                              |                                              |               
|*/s/ Abdulsalam Al Hamri* Abdulsalam Al Hamri | Director                                     | March 30, 2011



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