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

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

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

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

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  þ  No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes  ¨  No  þ

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

Large accelerated filer  ¨     Accelerated filer  ¨   Non-accelerated filer  ¨     Smaller reporting company  þ  

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

As of June 30, 2009, which was the last business day of the registrant’s most recent second fiscal quarter, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was $2,272,213.60 based on the closing sale price of $0.20 per share on that date.

Number of common shares outstanding at April 9, 2010:  13,768,294

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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 April 9, 2010, no transactions had 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 ^TM 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 R eforming) process.  This process can directly produce high purity hydrogen from biomass and other carbonaceous feed-stocks such as oil sands, coal and petroleum coke.  The PyStR™ technology involves the simultaneous pyrolysis and steam reforming of virtually any carbon-based material.  Its products include separate high purity streams of hydrogen, carbon dioxide and nitrogen produced in a relatively low cost stainless steel or refractory lined vessel.

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

We have agreed to begin construction on a demonstration sized installation of the PyStR™ technology no later than February 14, 2008.  We have met this obligation and we are in the process of constructing a portable PyStR ^TM 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.

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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.

Butanol

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

Advantages of butanol are as follows:

·

Energy density is only 10% below gasoline;

·

Octane rating is 25% higher than gasoline;

·

Butanol does not eat away at plastic or rubber engine parts (like ethanol/methanol);

·

Butanol can be pumped, stored, or transported in same equipment as gasoline;

·

Any percentage gas plus butanol (10 to 100%) will run in today's cars;

·

No modifications are required unlike ethanol fuelled cars;

·

Butanol does not absorb water like ethanol or methanol; and

·

Butanol burns cleaner than gasoline.

M2 Fluidized Bed Gas Generator (Gasifier) (“M2”)

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

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

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

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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.

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.

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

Manufacturing Agreement with I-Coda

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

Modular Bio-energy Units

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

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

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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 ½ 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 four customers and partners, Poly-Pacific International, I-Coda, 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.

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.

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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 $264,994 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 April 9, 2010, we have three full time employees.  In addition to employing Wilfred Ouellette, our President, CEO, and Vasant K. Jain our CFO, we have engaged Ronald Foster as Secretary and Treasurer.  We entered into an employment agreement with Mr. Ouellette dated April 17, 2007, for the position of Chief Executive Officer, for a period of 60 months at a base salary of $150,000 per year.  On July 1, 2008 we engaged Mr. Ronald Foster as Secretary and Treasurer for services to be invoiced to the company.  On January 3, 2008 we entered into an executive employment agreement with Vasant K. Jain for the position of Chief Financial Officer, for a period of 60 months at a base salary of $125,000 per year.  The agreement expires January 20, 2013.

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We also engage people as outside contractors and consultants for marketing, business development, investor relations, bookkeeping, legal, accounting, website development and audit functions.  During the three months ended December 31, 2008 we did not engage any consultants.

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 April 9, 2010, there are no any material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we or any of our subsidiaries are a party or of which any of our properties is the subject.  Also, our management is not aware of any legal proceedings contemplated by any governmental authority against us.

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

None.

PART II

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.

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

Holders

As of April 9, 2010, there were 746 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

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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, 2009, 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.

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, 2009, we had earned limited revenues of $5,164.  During the fiscal year ended December 31, 2009 we did not generate any revenues.  As of December 31, 2009, we had an accumulated deficit of $6,487,793.  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 $6,487,793 since December 14, 2004 (date of inception) to December 31, 2009.  Our net loss increased slightly, from $987,924 for the fiscal year ended December 31, 2008 to $912,751 for the fiscal year ended December 31, 2009, a decrease of $75,173.  For the fiscal year ended December 31, 2009, our net loss per share was $0.08, compared to net loss of $0.21 per share for the same period in 2008.

Expenses

Our total expenses from December 14, 2004 (date of inception) to December 31, 2009 were $6,599,700 and consisted of $5,141,394 in consulting and management fees, $424,287 in general and administrative fees, $440,948 in professional fees, $264,994 in research and development, $248,077 in depreciation and $80,000 in other.  Total expenses increased $234,182 to $1,214,177 for the fiscal year ended December 31, 2009 from $979,995 for the same period in 2008.

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Our consulting and management fees increased $92,072 to $686,497 for the fiscal year ended December 31, 2009 from $594,425 for the same period in 2008 mostly due to a slight increase 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 $46,440 from $49,312 for the fiscal year ended December 31, 2008 to $95,752 for the same period ended December 31, 2009.  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 $49,025, to $63,045 for the fiscal year ended December 31, 2009 from $112,070 for the same period in 2008.  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 2008.  Our professional fees consisted primarily of legal, accounting and auditing fees.

Liquidity and Capital Resources

We expect that we only can generate limited revenues over the next twelve months.  As of December 31, 2009, our current assets totaled $816, which was comprised entirely of cash and cash equivalents.  As of December 31, 2009, we had $2,781,224 in intangible assets, net of accumulated amortization.  As of December 31, 2009 we had a working capital deficit of $587,657.

Our net loss of $6,487,793 from December 14, 2004 (date of inception) to December 31, 2009 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, 2009 our cash position slightly increased by $24.

During the fiscal year ended December 31, 2009, we received net cash of $196,249 from financing activities compared to $168,099 for the same period in 2008.  We used net cash of $196,591 in operating activities compared to $168,165 for the same period in 2008.  We used net cash of $nil in investing activities compared to $nil for the same period in 2008.

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

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

·

Produce, sell, lease and maintain energy generators that we have developed;

·

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

·

Continually improve our gasification technologies and commercializing our technologies;

·

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

·

Complete potential deals regarding joint ventures for energy production facilities;

·

File patents on several technologies, including the PyStR™ process, the M2 Fluidized Bed Gas Generator and seek accredited valuations for these intellectual properties in a variety of markets including the U.S., Germany and Canada; and

·

Create additional service lines to complement current operations.

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We believe that we need approximately an additional $26,585,000 to meet our capital requirements over the next 12 months (beginning April 2010) for the following estimated expenses:

We believe that we need approximately $3,450,000 to meet our capital requirements over the next 12 months (beginning April 2010).  Of the $3,450,000, we had $816 in cash and cash equivalents as of December 31, 2009. 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.

15

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, 2009, we had no off balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

16

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.  

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.

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.

17

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

Item 8.  Financial Statements and Supplementary Data

Energy Quest Inc.

(A Development Stage Company)

December 31, 2009

18

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 consolidated balance sheets of Energy Quest, Inc. (“Energy Quest”) as of December 31, 2009 and 2008 and the related consolidated statements of operations and other comprehensive loss, cash flows, and changes in stockholders’ equity(deficit) for the years then ended.  These consolidated financial statements are the responsibility of Energy Quest's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  Energy Quest is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our 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 Energy Quest’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Energy Quest as of December 31, 2009 and 2008 and the consolidated results of operations and cash flows for the for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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

/s/ Malone Bailey, LLP

www.malonebailey.com

Houston, TX

F-1

Energy Quest Inc.

(A Development Stage Company)

Consolidated Balance Sheets

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

F-2

Energy Quest Inc.

(A Development Stage Company)

Consolidated Statements of Operations and Other Comprehensive Loss

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

F-3

Energy Quest Inc.

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

F-4

Energy Quest Inc.

(A Development Stage Company)

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

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

F-5

Energy Quest Inc.

(A Development Stage Company)

Consolidated Statement of Stockholders’ Equity (Deficit)

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

F-6

Energy Quest Inc.

(A Development Stage Company)

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

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

F-7

Energy Quest Inc.

(A Development Stage company)

Notes to the Unaudited Consolidated Financial Statements

1.          Nature of Operations and Going Concern Consideration

Energy Quest’s principal business involves an integrated gasification production system technology that combines modern gasification with turbine technologies to produce synthetic gas, hydrogen or electricity. Energy Quest intends to further develop the technology to make it commercially viable and intends to then sell or license the technology. Energy Quest is in the development stage as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities.

Going Concern

The Company has incurred losses from operations since inception and at December 31, 2009, and has a working capital deficiency and an accumulated deficit that creates substantial doubt about the Company’s ability to continue as a going concern.

As of December 31, 2009, the Company had not reached a level of operations which would finance day-to-day activities. These financial statements have been prepared on the assumption that the Company is a going concern, meaning it will continue in operation for the foreseeable futureand will be able to realize assets and discharge liabilities in the ordinary course of operations.The Company’s continuation as a going concern is dependent upon its ability to attain profitable operations and generate funds there-from, and/or raise equity capital, or borrowings sufficient to meet current and future obligations. Management plans to raise equity financings over the next twelve months to finance operations. There is no guarantee that the Company will be able to complete any of these objectives.

Reclassifications

Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.

2.        Summary of Significant Accounting 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 an impairment. At December 31, 2009, the Company did not recognize an impairment loss.

F-8

Energy Quest Inc.

(A Development Stage company)

Notes to the Unaudited Consolidated Financial Statements

2.

Summary of Significant Accounting Policies (continued)

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. At December 31, 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 collectibility is reasonably assured.

g)

Advertising Costs

The Company’s policy regarding advertising is to expense advertising to general and administrative as incurred. Advertising expenses were approximately $16,000 and $5,000 for the years ended December 31, 2009 and 2008, 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 not, to the date of these financial statements, 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

Energy Quest Inc.

(A Development Stage company)

Notes to the Unaudited Consolidated Financial Statements

2.

Summary of Significant Accounting Policies (continued)

j)

Fair Value of Financial Instruments

Our financial instruments consist principally of cash, accounts payable and amounts due to related parties. 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)

Concentration of Risk

The Company maintains its cash account in primarily three commercial financial institutions. The Company's cash accounts are uninsured business checking accounts maintained in U.S. and Canadian dollars, which totalled $816 on December 31, 2009 (2008 - $792). At December 31, 2009, the Company has not engaged in any transactions that would be considered derivative instruments on hedging activities. To date, the Company has not incurred a loss relating to this concentration of credit risk.

l)

Comprehensive Loss

ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2009 and 2008, the Company’s only component of comprehensive loss was foreign currency translation adjustments.

m)

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 good or services provided or the fair market value of the common stock on the measurement date, whichever is more readily determinable.

n)

Recent Accounting Pronouncements

In July 2009, the FASB issued new guidance relating to the “FASB Accounting Standards Codification” at ASC 105, as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The codification is effective for interim periods ending after September 15, 2009. All existing accounting standards are superseded as described in ASC 105. All other accounting literature not included in the Codification is non-authoritative. The adoption of ASC 105 did not impact the Company’s results of operations, financial position or cash flows.

In May 2009, FASB issued ASC 855, Subsequent Events, which establishes general standards for the evaluation, recognition and disclosure of events and transactions that occur after the balance sheet date. Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards. The standard is effective for interim or annual periods ending after June 15, 2009. The adoption of ASC 855 did not have a material effect on the Company’s financial statements. Refer to Note 10.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that the new accounting pronouncements will have a material impact on the financial position or results of operations.

3.

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, 2009, the total cost of $29,301 is recorded as an intangible asset.

F-10

Energy Quest Inc.

(A Development Stage company)

Notes to the Unaudited Consolidated Financial Statements

3.

Intangible Assets (continued)

b.

On May 5, 2008, the Company issued 2,000,000 shares of common stock with a fair value of $3,000,000 for a one-time payment for the purchase of two patents acquired under a purchase/assignment agreement entered into in March 2008. The shares were valued on the closing date of the agreement. At December 31, 2009, the total cost of $3,000,000 is recorded as an intangible asset, net of accumulated amortization of $248,077. Amortization expense for the years ended December 31, 2009 and 2008 was $150,000 and $98,077, respectively. Amortization is calculated based on the expected legal useful life of 20 years.

4.

Related Party Transactions

The following details amounts due to related parties at December 31, 2009:

a.

As at December 31, 2009, $Nil (2008 - $16,994) is owed to a Company with a common director. This amount is unsecured, non-interest bearing and has no terms of repayment.

b.

During the year ended December 31, 2009, the Company recorded $150,000 (2008 - $100,000) for management services provided by the Secretary of the Company. At December 31, 2009, $152,916 (2008 - $5,213) is included in due to related parties.

c.

During the year ended December 31, 2009, the Company recorded $150,000 (2008 - $150,000) for management services provided by the President of the Company. At December 31, 2009, $363,964 (2008 - $222,281) is included in due to related parties.

d.

On June 11, 2009 the Company issued 163,024 shares of common stock, of which, $16,629 reduced amounts due to related parties and a loss was recognized.  See Note 8 Equity for further details.

e.

During the year ended December 31, 2009, the Company recorded $200,000 (2008 - $130,000) for management services provided by the former Treasurer of the Company.

The following details Notes payable – related parties:

f.

During the year ended December 31, 2009, the Company received an advance of $14,298 from a related party consultant. At December 31, 2009, this amount is included in note payable – related party, and the related accrued interest of $684 is included in accrued liabilities. There were no such proceeds received during the year ended December 31, 2008.

g.

On November 5, 2007, the Company received $21,000 in exchange for a promissory note payable. The note bears interest at 6% per annum, calculated annually, and is due on demand. At December 31, 2009, accrued interest of $2,717 (2008 - $1,457) is included in accrued liabilities.

5.

Note Payable

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

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 $288,858of debt. Under the agreement, the former shareholder agreed to release the debt in return for a certain license agreement. This amount has been recorded as gain on debt settlement.At December 31, 2008  the company owed $287,702to these former shareholders.

7.      Loss on theft of cash

        During 2007, $80,000 was wired to an employee and agent of the company for the purpose of setting up a depository account in a European bank. Shortly after the funds were wired, management learned that the funds were not deposited as instructed. After numerous attempts to contact the employee, management determined thatit was unlikely to recover the funds. Upon this determination, the Company recorded a loss on theft of cash of $80,000.

8.

Joint Venture

On August 3, 2009, the Company signed a Joint Venture Agreement (“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 capital contribution will be on a 50:50 basis. As of December 31, 2009, no transactions had taken place.

F-11

Energy Quest Inc.

(A Development Stage company)

Notes to the Unaudited Consolidated Financial Statements

Equity

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

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

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.

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

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 additional compensation expense in the amount of $15,976.

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

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.

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

As of December 31, 2008, there were 107,700 warrants outstanding with an average weighted exercise price of $2.00. In April 2009, the warrants expired. There were no warrants granted during year ended December 31, 2009, leaving zero warrants outstanding as of December 31, 2009.

On December 31, 2008, the Company signed an agreement with a consultant for consulting services for a period of six months ending December 31, 2008. The Company paid the consultant $65,000, which is the fair value of the 650,000 shares issuable to the consultant. During the year ended December 31, 2008, $65,000 was charged to consulting fees. The Company had not issued the shares as of December 31, 2008. However, due to the fact that legal obligation exists as of December 31, 2008, the Company treated the shares as issued for the year ending December 31, 2008. The shares were subsequently issued on February 16, 2009.

On December 31, 2008, the Company signed an agreement with a consultant for consulting services for a period of six months ending December 31, 2008. The Company will pay the consultant $100,000, which is the fair value of the 1,000,000 shares issuable to the consultant. During the year ended December 31, 2008, $100,000 was charged to consulting fees. The Company had not issued the shares as of December 31, 2008. However, due to the fact that a legal obligation existed as of December 31, 2008, the Company treated the shares as issued for the year ending December 31, 2008. The shares were subsequently issued on January 26, 2009.

On October 27, 2008, the Company entered into an agreement with a related party consultant to issue shares in exchange for $241,120 debt owed by the Company due to the debt assignment agreement and an aggregate of $86,901 that the Company owed to related party consultant. The Company had not issued the shares as of December 31, 2008. However, since the legal obligation existed, the Company treated the shares as issued for 2,982,021 shares at fair value of $0.11/share on October 27, 2008. The Company subsequently issued the shares on January 26, 2009.

On August 29, 2008, the Company issued 100,000 shares of common stock with a fair value of $36,000 for services received.

On June 11, 2008, the Company issued 10,000 shares of common stock pursuant to a private placement. The Company received $1.00 per share of common stock for total proceeds of $10,000.

On June 3, 2008, the Company issued 25,000 shares of common with a fair value of $31,250 for services received.

On May 5, 2008, the Company issued 2,000,000 shares at $1.50 per share, the fair value of the stock on the date the agreement was consummated, of unregistered restricted common stock for a one time payment for the purchase of two patents acquired under a purchase/assignment agreement entered into in March 2008. At December 31, 2008, the total cost of $3,000,000 was recorded as an intangible asset.

On April 30, 2008, the Company issued 115,000 shares of common stock pursuant to a private placement. The Company received $1.00 per share of common stock for total proceeds of $115,000.

F-12

Energy Quest Inc.

(A Development Stage company)

Notes to the Unaudited Consolidated Financial Statements

Equity (continued)

On April 30, 2008, the Company issued 107,700 shares of common stock with warrants attached, pursuant to a private placement. The Company received $1.50 per share of common stock for total proceeds of $161,550. The Company allocated $95,807 of the proceeds to the common stock and $65,743 to the warrants based on the relative fair market value of each. The relative fair market value of each component was determined by (i) using Black Scholes to estimate the fair market value of the warrants which was approximately $95,000. Each warrant has an exercise price of $2.00 and will expire in one year from the date of issuance of the warrant certificate; and (ii) the closing price of the common stock was $1.28 on April 30, 2008. The Company evaluated the terms of the attached warrants and concluded that the terms did not result in derivative accounting.

On April 26, 2007, the Company issued 57,500 shares of common stock in consideration for a promissory note (stock subscription receivable) in the amount of $60,500. On July 1, 2008, the Company agreed to issue an additional 50,000 common shares of the Company and signed a consulting agreement with the issuer of the promissory note to receive consulting services in lieu of cash. The consulting agreement covers services to be performed from July 1, 2008 until June 30, 2009. The promissory note was later cancelled and the 57,500 shares issued in connection therewith were deemed vested and were recorded at their fair market value on the date of grant as share-based compensation. In addition, The fair value of the 50,000 shares granted on July 1, 2008 were recorded at their fair value on the date of grant and recorded over the requisite service period, which ended June 30, 2009.

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:

The components of the net deferred tax asset at December 31, 2009 and 2008 consist of:

Potential benefits of income taxes are not recognized in the accounts until realization is more likely than not. At December 31, 2009, the Company has a net operating loss carry-forward of $6,229,700 which expire through fiscal 2029. 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-13

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

Since inception, we have had no changes in or disagreements with our accountants.  Our audited financial statements for the fiscal years ended December 31, 2009 and 2008 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

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act.  Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined under Exchange Act Rules 13a-15(f).  Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance with U.S. GAAP.  Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with U.S. GAAP; providing reasonable assurance that our receipts and expenditures are made in accordance with authorizations of our management and directors; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.  Furthermore, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud.  Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met.  Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

19

An evaluation was performed, under the supervision and with the participation of Company management, including the CEO and the CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act).  Based on that evaluation, management, including the CEO and CFO, has concluded that, as of December 31, 2009, the Company’s disclosure controls and procedures were adequate to ensure that information required to be disclosed in reports that the Company files or submits under the Exchange Act has been recorded, processed, summarized and reported in accordance with the rules and forms of the SEC.

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

Changes in Internal Controls

We have also evaluated our internal controls for financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.

Item 9B.  Other Information

None.

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PART III

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

The following table sets forth the name, age, and position of our executive officers and directors as of April 9, 2010.

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

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

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

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

Vasant K. Jain, Director and Chief Financial Officer

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

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

Ronald Foster, Director, Secretary and Treasurer

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

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Jim Clark, Director

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

Peter J. Stephen, Director

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

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.

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

Audit Committee

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

Significant Employees

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

Family Relationships

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

No Legal Proceedings

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

any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

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Section 16(a) Beneficial Ownership Compliance Reporting

Section 16(a) of the Securities Exchange Act of 1934 requires a company’s directors and officers, and persons who own more than ten-percent (10%) of the company’s common stock, to file with the Securities and Exchange Commission reports of ownership on Form 3 and reports of change in ownership on Forms 4 and 5.  Such officers, directors and ten-percent stockholders are also required to furnish the company with copies of all Section 16(a) reports they file.  Based solely on our review of the copies of such forms received by us and on written representations from certain reporting persons, we believe that all Section 16(a) reports applicable to our officers, directors and ten-percent stockholders with respect to the fiscal year ended December 31, 2009 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, 2009, 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.

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.

Mr. Foster has been a director and our Secretary and Treasurer since July 1, 2008.

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, 2008 and recognized $150,000 for the twelve-months period ended December 31, 2009

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.

Option Grants

We did not grant any options or stock appreciation rights to our named executive officers or directors in the fiscal 2009.  As of April 9, 2010, none of our executive officers or directors owned any of our derivative securities.

Pension, Retirement or Similar Benefit Plans

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

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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, 2009.

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, 2009.  We have no standard arrangement pursuant to which our directors are compensated for their services in their capacity as directors except for the granting from time to time of incentive stock options.  The Board of Directors may award special remuneration to any director undertaking any special services on behalf of our Company other than services ordinarily required of a director.  Other than indicated below, no director received and/or accrued any compensation for his services as a director, including committee participation and/or special assignments.

Change of Control

As of April 9, 2010 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 April 9, 2010 by: (i) each of our directors; (ii) each of our named executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our outstanding shares of common stock.  Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares they own.

As of April 9, 2010, there were 13,768,294 common shares issued and outstanding.

(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 13,768,294 issued and outstanding shares of common stock as of April 9, 2010.

(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)

Vasant K. Jain is a director and our Chief Financial Officer.

(6)

Ronald Foster is our director, secretary and treasurer.

(7)

Jim Clark 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.

Item 13.  Certain Relationships, Related Transactions and Director Independence

During the year ended December 31, 2009, we recorded $150,000 for management services provided by our Secretary of the company.

During the year ended December 31, 2009, we recorded $150,000 for management services provided by our President.

During the year ended December 31, 2009, we recorded $200,000 for management services provided by our former Treasurer.

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.

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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.

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.

(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.

(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.

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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.

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.