UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, ~~2010~~2011

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

For the transition period from ___________to___________

Commission file number 000-28305

ENERGY QUEST INC.

(Exact name of registrant as specified in its charter)

Nevada	~~91-1880015~~	91-1880015
(State or Other Jurisdiction of Incorporation of Organization)	~~(I.R.S. Employer Identification No.)~~	(I.R.S. Employer Identification No.)
850 South Boulder Hwy., Suite 169 Henderson, Nevada 89015-7564	(702) 568 4131
103 Firetower Road, Leesburg, Georgia 31763-3755		(229) 759 9176
(Address of principal executive offices) (ZIP Code)	~~(Registrant’s telephone number, including area code)~~	(Registrant’s telephone number, including area code)

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

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

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

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

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

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

Large accelerated filer o ¨ Accelerated filer o ¨ Non-accelerated filer o ¨ Smaller reporting company xþ

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

As of September 30, ~~2010~~2011, which was the last business day of the registrant’ s most recent third fiscal quarter, the aggregate market value of the registrant ’ s Common Stock held by non-affiliates of the registrant was $1558,~~466,189~~358.14 32 based on the closing sale price of $0.1303 per share on that date.

Number of common shares outstanding at March 2030, ~~2011~~2012: 17 40,~~085~~611,~~604~~ 944

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

Table of Contents

2TABLE OF CONTENTS



PART I		3
	Item 1. Description of Business	9
	Item 1A. Risk Factors	9
	Item 1B. Unresolved Staff Comments	9
	Item 2. Properties	9
	Item 3. Legal Proceedings	9
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Common Equity and Related Stockholder Matters	10
	Item 6. Selected Financial Data	11
	Item 7. Management's Discussion and Analysis or Results of Operations	11
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk	15
	Item 8. Financial Statements and Supplementary Data	16
	Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	17
	Item 9A. Controls and Procedures	17
	Item 9B. Other Info rmation	18
PART III
	Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act	19
	Item 11. Executive Comp ensation	22
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	23
	Item 13. Certain Relationships, Related Transactions and Director Independence	24
	Item 14. Principal Accountant Fees and Services	24
PART IV		24
	Item 15. Exhibits and Financial Statement Schedules	26

Table of Contents

PART I

Item 1. Description of Business

Forward-looking Statements

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

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

As used in this annual report, the terms "we", "us", "our", “the Company”, and "Energy Quest" mean Energy Quest Inc., unless otherwise indicated.

All dollar amounts refer to US dollars unless otherwise indicated.

Overview

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

·We plan to employ gasification technologies and catalytic conversion processes to produce clean fuels. In addition we have recently acquired technology for a High-Tech Portable Frac & Brine Water Emulsion Breaker System and a Water Purification System.

~~Pyrolysis~~Our ~~Steam~~principal ~~Reformer~~offices ~~(“PyStR™”~~are ),located ~~which~~at ~~utilizes~~103 ~~steam~~Firetower ~~for~~Road, ~~reforming~~Leesburg, ofGeorgia ~~coal~~31763 and ~~other~~recently ~~carbonaceous~~opened offices ~~feedstocks~~at the Frost Bank Tower, ~~and~~402 ~~separates~~Congress ~~hydrogen~~Avenue, ~~and~~Suite ~~carbon~~1540, ~~dioxide~~Austin, ~~into~~Texas ~~separate~~78701. Our ~~streams;~~fiscal year end is December 31.

·Development

M2On ~~Fluidized~~August ~~Bed~~3, ~~Gas~~2009, ~~Generator~~we ~~(“M2”)~~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, anCanada. The ~~air~~new ~~blown~~company ~~fluid~~will ~~bed~~focus ~~gasifier~~on ~~which~~the ~~converts~~business ~~waste~~of ~~solid~~oil ~~fuel~~remediation ~~sources~~consisting ~~into~~of ~~gaseous~~sand, ~~form;~~slop oil, sludge and tank cleaning. The agreement will continue for a period of 20 years and each party will contribute services on a 50:50 basis and share revenues accordingly. As of March 30, 2012, no transactions have taken place.

·3

~~Modular~~Table ~~Advanced Controlled Air Incinerator, which allows for incineration~~ of ~~waste, and is ideally suited to medical waste and moderately prepared municipal waste.~~Contents

Our ~~principal~~Products ~~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.Services

3High-Tech Portable Frac & Brine Water Emulsion Breaker System

~~Development~~Our system works as follows. First we heat the Frac water emulsion and or oil sludge to 80 to 90 degrees Centigrade, remove rocks, rags and debris via screens pot or shaker system. The next stage comprises of chemically treating the incoming emulsified mixture. An acid is injected into the emulsion and it is then homogeneously blended with the stream. Due to the action of the acid the emulsion starts breaking down. The blending process is achieved by way vigorous agitation with a centrifugal pump assisted by a rotating and static blender respectively.

OnThe ~~August~~next 3,step ~~2009,~~is wecomprised ~~signed~~of a ~~Joint~~three-phase ~~Venture~~separation ~~Agreement~~in ~~with~~a ~~Crude~~specially ~~Oil~~designed ~~Petroleum~~vessel ~~Services~~which ~~Corporation~~employs both gravity and centrifugal forces. The light phase migrates to ~~form~~the aupper ~~new~~part ~~company~~of ~~known~~the asvessel ~~EnviroTec~~whereas ~~Services~~the solids and water settle in the ~~Province~~lower ofportion ~~Alberta,~~where ~~Canada.~~they ~~The~~are ~~new~~further ~~company~~easily ~~will~~separated. Water ~~focus~~containing onrelatively ~~the~~small ~~business~~amounts of oil ~~remediation~~is ~~consisting~~then ofprocessed ~~sand,~~in ~~slop~~a polishing unit designed to lower the oil, ~~sludge~~content to less than 10 ppm THC. The polishing unit extracts the oil and delivers it to a storage tank ~~cleaning~~where a settling process occurs to render the oil drier. Pipeline ~~The~~spec ~~agreement~~oil ~~will~~can ~~continue~~then be reclaimed for avarious ~~period~~purposes. Clean ofwater 20exiting ~~years~~the ~~and~~polishing ~~each~~unit ~~party~~is ~~will~~then ~~contribute~~neutralized ~~services~~by onmeans of a ~~50:50~~hydroxide ~~basis~~ and ~~share~~can ~~revenues~~be ~~accordingly.~~easily Asrecycled or disposed of ~~March~~in ~~20,~~the ~~2011~~producer’s disposal wells, nowithout ~~transactions~~any ~~have~~issues ~~taken~~about ~~place~~the water quality for disposal.

~~Our~~An ~~Products~~additional set of modules can be easily added to produce potable water for crops and ~~Services~~agricultural usage and also to produce high quality drinking water. The system is fully automatic and portable being installed on a low boy trailer. The system only requires one operator per shift plus one helper for safety and will easily process 20 cubic meters per hour.

~~Pyrolysis~~Maintenance ~~Steam~~and ~~Reformer~~operating ~~(“PyStR~~cost ~~™”)~~are extremely low in comparison to any conventional methods to process slop oil’s and sludge’s such as heat exchange with centrifuges and or thermal processes.

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

WeOur ~~obtained~~unique ~~the~~WaterFier ~~exclusive rights to a new, innovative hydrogen generation technology referred to as the PyStR™~~ (PyWATER ~~rolitic~~puriFIER Stor ~~eam~~Water RePurification ~~forming~~Module) ~~process.~~is ~~This~~designed ~~process can directly produce high purity hydrogen from biomass~~ and ~~other~~made ~~carbonaceous~~on ~~feed-stocks~~the ~~such~~basis asof ~~oil sands~~Nano-technologies, ~~coal~~ and ~~petroleum~~has ~~coke.~~the ~~The~~highest ~~PyStR™~~productivity ~~technology~~in ~~involves~~ the ~~simultaneous~~World ~~pyrolysis~~(0.5 ~~and~~tons ~~steam reforming~~ of ~~virtually~~pure ~~any~~water ~~carbon-based~~per ~~material.~~hour ~~Its~~on ~~products~~1 ~~include~~kW ~~separate~~of ~~high~~applied ~~purity~~power) ~~streams~~and ofcontains ~~hydrogen,~~three ~~carbon~~main ~~dioxide~~modules ~~and~~(optional ~~nitrogen~~water ~~produced~~improvement inand amineralizing ~~relatively~~module ~~low~~can ~~cost~~be ~~stainless~~used ~~steel~~to ormake ~~refractory~~ideally ~~lined~~pure ~~vessel~~drinking water).

Our water purification module can operate together with a small Wind Turbine or a small diesel generator and or typical grid power. The ~~PyStR~~ideal ™system ~~technology~~of water purification is anthat ~~inexpensive~~purifies water, stores it and ~~simple~~gives ~~method~~it ofback ~~reforming~~when ~~hydrocarbons~~needed. It ~~(carbonaceous~~is ~~materials)~~also desirable that such module would have the autonomous energy supply system, operate without supervision and ~~calcining~~should ~~lime~~be torelatively ~~chemically~~inexpensive. Wind ~~separate~~Turbines ~~hydrogen~~(Wind Power Generators) of 3 and ~~carbon~~30 ~~dioxide~~kW ~~into~~power ~~two~~can ~~separate~~solve ~~streams.~~this Itproblem, ~~converts~~starting ~~common~~from ~~cheap~~pumping ~~ingredients~~the ~~(coal~~Frac water and or ~~wood,~~polluted ~~air,~~Brine water) into ~~near~~the input pipelines and finishing by pumping of pure ~~streams~~water into the output pipelines and storage tanks for distribution. The system generates pure high quality drinking water from totally unused sources. It provides itself with power with the help of ~~hydrogen~~Wind Turbine (~~H 2),~~together ~~carbon~~with ~~dioxide~~solar ~~(CO 2~~panels in some cases), and ~~nitrogen~~provides ~~(N 2).~~the Itpumping ~~produces~~and nopurification ~~flue~~of ~~gas~~water.

WeThe ~~have~~volume ~~agreed~~of tothe ~~begin~~tank ~~construction~~for onwater astorage ~~demonstration~~should ~~sized~~meet ~~installation~~the requirements of consumers and should be made in accordance with the ~~PyStR™~~power ~~technology~~of noenergy ~~later~~source ~~than~~and ~~February~~volume ~~14,~~of ~~2008~~water purification. Optional Weultra-violet ~~have~~or ~~met~~ultra-sound ~~this~~module ~~obligation~~can ~~and~~be weused ~~are~~for infurther improvement of the ~~process~~quality of ~~constructing~~water apurification. When ~~portable~~water ~~PyStR™~~flow ~~Hydrogen~~moves ~~unit~~in ~~for~~electromagnetic ~~demonstration.~~field Weof ~~plan~~specific intensity, the positively charged ions are being attracted to ~~complete~~one itside atof the ~~end~~flow, ofclosed ~~2008.~~to Wenegative ~~are~~electrode, ~~also~~the ~~obligated~~negative ions - to ~~sell~~the atother ~~least~~side, ~~one~~to ~~commercial~~positive ~~installation~~electrode. As ~~using~~the result the ~~PyStR™~~flow ~~technology~~of bypure water appears between these flows. Moving along the ~~end~~flat pipe of ~~2010~~specific cross-section, water clears itself of salts and other suspensions. For compactness the flat pipe is rolled into the “helix”.

~~Carbon dioxide sequestration technology~~4

OnTable ~~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.Contents

~~The~~Fluidized ~~PyStR™~~Bed ~~hydrogen~~Gas ~~production~~Generator 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.(Gasifier)

4In 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 air blown fluid bed gasifier, which converts waste solid fuel sources into a gaseous form. The gas produced can be used in most boilers, kilns and furnaces to offset the use of natural gas.

~~Butanol~~The 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.

WeThe ~~plan~~overall thermal efficiency of fluid bed gasifiers is typically in the range of 75% to ~~use~~over ~~our~~90%, ~~PyStR™~~depending on the ash and ~~catalytic~~moisture ~~process~~content toof ~~produce~~the ~~butanol~~fuel. Unlike ~~from~~some ~~carbon~~burners ~~based~~(such as suspension burners) or old style fixed bed gasifiers, the fluid bed gasifiers can operate satisfactorily with highly variable feed ~~stocks.~~materials ~~Butanol~~ranging isfrom acoal, 4shredded wood and bark to sawdust fines, or lump wood with particle sizes of less than 1 1/2 -~~carbon~~ ~~alcohol~~2 ~~that~~inches. In iscontrast, ~~presently~~other ~~made~~types ~~through~~of agasifiers ~~fermentation~~or ~~process~~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 ~~same~~high ~~manner~~temperature asregions ~~ethanol~~of ~~using~~the ~~mostly~~bed. Where ~~grains~~there are moving parts, heavy duty industrial components proven in lumber and ~~corn~~pulp mill operations are used. Reliability is thus high.

~~Advantages~~The size of ~~butanol~~energy ~~are~~conversion assystems ~~follows:~~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

~~Energy~~We ~~density~~have developed a Modular, Controlled Air, Factory Built and Packaged incinerator. The unit is ~~only~~a ~~10%~~Starved ~~below~~Ignition ~~gasoline;~~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.

~~Octane rating is 25% higher than gasoline;~~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.

~~Butanol~~We ~~does~~are ~~not~~focusing ~~eat~~our ~~away~~efforts atin ~~plastic~~getting orour ~~rubber~~High-Tech ~~engine~~Portable ~~parts~~Frac ~~(like~~& ~~ethanol/methanol);~~Brine Water Emulsion Breaker System and a Water Purification System to market.

·5

~~Butanol~~Table ~~can~~of ~~be pumped, stored, or transported in same equipment as gasoline;~~Contents

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

~~Any~~We ~~percentage~~entered ~~gas~~into ~~plus~~a ~~butanol~~licensing ~~(10~~agreement dated April 9, 2007, with Re-Gen International Corporation. Under the terms of the agreement, we agreed to ~~100~~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 ~~run~~be inadjusted ~~today's~~to ~~cars;~~$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.

NoOn ~~modifications~~October ~~are~~24, ~~required~~2007 ~~unlike~~we ~~ethanol~~entered ~~fuelled~~into ~~cars;~~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.

·Modular Bio-energy Units

~~Butanol~~On ~~does~~September ~~not~~13, ~~absorb~~2007 ~~water~~we ~~like~~completed ~~ethanol~~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 ~~methanol;~~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.

~~Butanol~~The ~~burns~~Gasification ~~cleaner~~and ~~than~~Energy ~~gasoline.~~Production Industry

M2The ~~Fluidized~~energy ~~Bed~~production ~~Gas~~industry ~~Generator~~is ~~(Gasifier)~~comprised ~~(“M2”)~~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.

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.Marketing

~~The~~We M2are ~~fluidized~~a ~~bed~~new ~~gasification~~company ~~process offers substantial benefits compared to simple burning processes,~~ and ~~other~~we ~~forms~~have oflittle ~~gasification.~~market ~~The~~presence ~~gasifier~~at ~~has~~this ~~been successfully used to convert biomass wastes (i~~time.~~e. wood wastes, bark, and agricultural wastes) into a clean fuel gas that can be used to fire various types of industrial equipment.~~

~~The~~We ~~overall~~plan ~~thermal~~to ~~efficiency~~market ofour ~~fluid~~gasification ~~bed~~unit ~~gasifiers~~by ismeans ~~typically~~of indemonstrating ~~the~~a ~~range~~portable ofmobile ~~75%~~gasification tounit ~~over~~which ~~90%,~~will ~~depending~~showcase on the ~~ash~~gasifier ~~and~~to ~~moisture~~generating ~~content~~power offrom ~~the~~a ~~fuel.~~variety ~~Unlike~~of ~~some~~feedstock ~~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~~waste, ~~or lump wood with particle sizes of less than 1 1/2~~ bio-mass, ~~2 inches. In contrast~~coal, ~~other~~petroleum ~~types of gasifiers or burners require either dry pellets~~coke, ~~nuggets~~lignite ofand ~~clean~~in ~~wood,~~addition ora ~~uniformly~~second ~~dry~~trailer ~~sander~~featuring ~~dust. Thus~~ the ~~various~~PyStR ~~types~~™ ofprocess ~~fuels~~combined ~~generally available around lumber mills can be used in fluid bed gasifiers~~ with ~~good~~the ~~results. The fluid bed~~ gasifier ~~does~~generating ~~not~~hydrogen ~~have~~and ~~moving~~oxygen ~~grates~~from orany ~~other~~available ~~moving~~carbon ~~parts~~source insuch ~~the~~as ~~high~~coal, ~~temperature~~wood ~~regions of the bed. Where there are moving parts~~waste, ~~heavy~~lignite ~~duty industrial components proven in lumber~~ and ~~pulp~~petroleum ~~mill operations are used~~coke. ~~Reliability is thus high.~~

~~The~~We ~~size~~plan ofon ~~energy~~hiring ~~conversion~~consultants ~~systems~~to iscontact ~~generally~~companies ~~dictated~~with bywaste ~~their~~facilities, ~~air~~such ~~flow.~~as ~~Because~~lumber ~~fluid~~waste ~~bed~~and ~~gasifiers~~municipal ~~use~~waste. We ~~comparatively~~believe ~~small~~that ~~amounts~~our ofPyStR ~~air,~~™ ~~the~~technology ~~equipment~~ is ~~comparatively~~suitable ~~small~~for ~~and~~companies ~~compact.~~in ~~This~~the ~~permits~~oil ~~systems to be completely shop fabricated~~ and ~~assembled~~gas onbusiness ~~skids thereby reducing purchase price~~ and ~~installed~~in ~~costs. Because~~ the ~~process~~ammonia ~~produces~~business. We aplan ~~fuel~~on ~~gas~~targeting ~~rather~~such ~~than~~companies ~~just~~through ~~quantities~~sales ofconsultants ~~heat,~~that itwe ~~can~~will behire. Our ~~easily~~marketing ~~applied~~plan toincludes aattending ~~variety~~several ofoil ~~industrial~~and ~~processes including boilers~~gas, ~~dry~~and ~~kilns,~~alternative ~~veneer~~energy ~~dryers,~~trade orshows ~~several~~during ~~pieces~~the ofnext ~~equipment~~year. We atalso ~~once.~~plan ~~Operation~~to ~~with~~attend ~~wood/bark~~several ~~fuels~~trade ~~results~~conferences in ~~very~~this ~~low emissions, including low NO2, carbon monoxide, and particulate emissions~~year. ~~No "tail end" exhaust cleanup devices are required.~~

~~Modular~~Table ~~Advanced~~of ~~Controlled Air Incinerator~~Contents

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.Competition

~~The~~Over ~~integrated~~the ~~design~~last century, several different methods of ~~the~~gasification ~~ignition~~have ~~chamber,~~been ~~flame~~developed. The ~~port~~most ~~and~~prominent ~~combustion~~gasification ~~chamber~~systems ~~allows~~used ~~proper~~today ~~and~~are ~~constant~~fluidized ~~gas~~bed ~~velocities~~gasification systems similar to ~~insure~~ours. There ~~proper~~are ~~air/fuel~~competitors (around the world who convert biomass to energy, primarily electricity or thermal, co-generating the energy to reduce waste) ~~ratios~~costs, ~~for~~and ~~optimum~~lower ~~combustion~~fuel ~~efficiency~~costs. The ~~units~~table ~~are~~below ~~ideally~~lists ~~suited~~some ~~for~~of ~~medical~~our ~~waste~~major competitors and ~~moderately~~the ~~prepared~~advantage ~~municipal~~we ~~waste~~see ~~disposal~~in our technology compared to the competition.

~~Commercialization~~Energy Products of Idaho, USA General Electric, USA · we are less expensive by half General Electric, USA · General Electric holds very large complex systems only FERCO (Battelle), U.S.A · Unlike FERCO, we offer our incinerator units for sale or lease. · We also enter into joint venture agreements for the use of our technology Lurgi, Germany · Unlike Lurgi ’ s, our units have a small footprint and can be skid mounted and portable Foster-Wheeler (Outokumpu), Finland · Our units are adaptable to downstream changing requirements

WeOur ~~plan~~competition toincludes ~~focus~~small ~~on developing~~ and ~~marketing~~mid-size ~~our~~independent ~~current~~contractors ~~technologies~~as ~~while~~well ~~researching~~as ~~new~~major ~~methods~~energy ofservices ~~clean~~companies ~~energy~~with ~~production.~~international operations. We ~~intend~~believe ~~to subcontract production to outside sources~~ that ~~have~~the aprincipal ~~proven track record of efficiency, reliability and~~ competitive ~~quality~~factors ~~and~~in ~~pricing.~~the ~~Our~~market ~~distribution~~areas ~~plan~~that iswe toserve ~~enter~~are ~~into~~price, ~~technology~~product ~~licensing arrangements with energy producers~~ and ~~energy~~service ~~production technology distributors~~quality, toefficiency ~~install our products~~ and ~~use~~availability ~~them~~of toequipment ~~create fuels produced with our technology, as well as to sell our technologies to other companies within exclusive geographic territories~~ and totechnical ~~set up joint ventures with other companies~~proficiency.

We ~~are~~differentiate ~~focusing~~ourselves from our ~~efforts~~major incompetition ~~getting~~by ~~the~~our ~~PyStR~~unique ™equipment. Our ~~and~~target M2market ~~technologies~~is toindependent ~~market~~energy production companies. Based Weon ~~completed~~the ~~prototypes~~experience of ~~the~~our ~~PyStR~~directors, ™these ~~hydrogen~~independents ~~production~~typically ~~process~~are relationship driven and ~~the~~make M2decisions ~~fluidized~~at ~~bed~~the ~~gasification~~local ~~process~~level. We Inbelieve ~~April~~this ~~2007~~business wemodel ~~began~~will enable us to ~~commercialize~~grow our business. However, we are a minor participant in the ~~PyStR~~industry ™and compete in the energy production industry with many other companies having far greater financial, technical and M2other ~~technologies~~resources.

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

WeOn ~~entered~~September ~~into a licensing agreement dated April 9~~13, 2007, ~~with~~we ~~Re-Gen~~completed ~~International~~the ~~Corporation.~~research ~~Under~~and ~~the~~development ~~terms~~ of ~~the agreement, we agreed to grant licensing rights for~~ our ~~gasification~~small ~~technology~~Modular inBio-energy ~~the~~units: ~~United~~Model ~~States~~FS324 ~~of America. The term of the agreement is 10 years~~ and ~~is renewable at expiration for a further period of 10 years. Re~~M2-~~Gen~~3 ~~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~~Gasifier. Since ~~After~~our ~~the first year~~inception, ~~the~~we ~~minimum~~have ~~will~~spent beapproximately ~~adjusted to~~ $60264,~~000~~994 ~~every~~on ~~three~~research ~~months. We have not received any amounts~~ and ~~have not recognized any revenue under this agreement to date~~development.

We ~~entered~~anticipate ~~into~~that awe ~~licensing~~will ~~agreement~~spend ~~dated April 24~~$2, ~~2007~~500,000 ~~with~~on ~~Beaufort~~research ~~Energy~~and ~~Solutions,~~development ~~Inc.~~over ~~Under~~ the ~~terms~~next oftwelve ~~the~~months ~~agreement, we agreed~~ to ~~grant~~develop ~~licensing~~and ~~rights~~market ~~for~~ our ~~gasification~~High-Tech ~~technology~~Portable inFrac ~~the~~& ~~Province~~Brine ofWater ~~British~~Emulsion ~~Columbia,~~Breaker ~~Canada.~~System ~~The term of the agreement is 20 years~~ and ~~is renewable at expiration for~~ a ~~further~~Water ~~period~~Purification ~~of 10 years~~System. If ~~Beaufort~~we ~~Energy~~are ~~must~~successful ~~pay~~in usacquiring aother ~~royalty of 10% of defined net income~~technologies, towe bemay ~~paid~~increase ~~within~~our 30research ~~days~~and ~~after~~development ~~the end of each quarterly accounting period~~budget.

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.7

6Table of Contents

~~Manufacturing~~Intellectual ~~Agreement with I-Coda~~Property

On ~~July~~December 24, ~~2007~~2004, we ~~entered~~purchased ~~into~~an aintegrated ~~manufacturing~~gasification ~~agreement~~production ~~with~~system ~~I-Coda~~from ~~Group,~~Wilfred ofJ. ~~Edmonton~~Ouellette, ~~Alberta, for the manufacture of units using~~ our ~~PyStR~~President, ™CEO and ~~M2 gasification technologies~~director. The ~~Pursuant~~technology tocombines ~~the~~modern ~~agreement,~~gasification ~~I-Coda~~with ~~has~~gas ~~agreed~~turbine technologies to ~~manufacture~~produce ~~and~~synthetic ~~package~~gas ~~both~~or ~~the~~electricity. By ~~PyStR~~December ™31, ~~and M2 gasification units~~2008, ~~for which~~ we ~~will~~have ~~pay~~completed ~~the~~an ~~cost~~initial payment of ~~manufacturing~~$25,000 ~~the~~and ~~units~~issued ~~plus~~the ~~15%~~10,000,000 ~~and~~(500,000 ~~all~~post ~~taxes.~~reverse ~~The~~stock-split) ~~parties~~common ~~have~~shares ~~agreed~~ to ~~jointly~~975110 ~~develop~~Alberta ~~commercial~~Ltd. ~~units~~in ~~using~~consideration ~~the PyStR ™ technology~~ for ~~use in emerging markets around~~ the ~~world.~~transfer ~~The~~of ~~agreement~~100% ~~prohibits~~of ~~I-Coda from manufacturing products that will compete with~~ the ~~gasification~~interest ~~units~~in ~~and allows us to retain~~ all ~~intellectual property relating to the design~~ of the ~~units.~~enhanced ~~Any~~gasification 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~~a besmall ~~renewed~~gasification ~~annually unless terminated by either party on two months notice~~unit. ~~I-Coda has ceased to be an operating company, therefore the company has terminated this agreement as at December 31, 2010.~~

~~Modular~~We ~~Bio-energy~~plan ~~Units~~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.

OnLegislation ~~September 13, 2007 we completed the research~~ and ~~development~~Government ~~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.~~Regulation

~~Our~~Energy ~~small~~production ~~Modular~~and ~~Bio-energy~~distribution ~~units~~is ~~will~~a behighly ~~deployed~~regulated industry in ~~remote~~North ~~areas~~America and worldwide. Each of the provinces in Canada, ~~United~~and ~~States~~each US State, ~~South~~has ~~Africa~~regulatory provisions relating to the production of electricity and ~~India~~the distribution of electricity over the transmission grid. Electricity ~~Our~~production ~~small~~and ~~Modular~~distribution ~~Bio-energy~~is ~~units~~subject ~~will~~to ~~give~~control ~~remote~~by ~~areas~~differing anregulatory ~~alternative~~agencies ~~energy~~in ~~source~~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 ~~These~~in ~~units~~permits and allowable rates per energy unit may have ~~state~~a substantial effect on our operations and the operations of our customers, which in turn could affect the ~~art~~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 ~~are~~environmental ~~user~~controls. Furthermore, ~~friendly~~operations may also be affected by energy trading regulations, import fees and restrictions.

~~The~~As ~~Gasification~~well, liquid fuels produced by our technologies are highly flammable and ~~Energy~~normally ~~Production~~regulated ~~Industry~~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.

~~The~~Environmental ~~energy~~Law 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.Compliance

~~Marketing~~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.

WeEach ~~are~~jurisdiction awhere ~~new~~we ~~company~~sell our product has an Energy and weUtilities ~~have~~Board, ~~little~~or ~~market~~similar ~~presence~~independent, atquasi-judicial ~~this~~agency ~~time. So~~of ~~far~~government which regulates the safe, weresponsible ~~have~~and ~~only~~efficient ~~three~~generation ~~customers~~and distribution of electricity and energy products. Since we plan to license our technologies to energy producer partners, ~~Poly-Pacific~~we ~~International,~~do ~~Re-Gen~~not ~~International~~anticipate ~~and~~that ~~Beaufort~~we ~~Energy~~will be directly subject to the authority of these regulatory bodies. WeHowever, ~~intend~~since our customers and partners are subject to ~~supplement~~these ~~this~~laws, ~~with~~the ~~attendance~~effect atof ~~several~~the ~~trade~~regulatory ~~shows~~bodies in ~~North~~various ~~America~~jurisdictions ~~each~~may ~~year~~have ~~and~~a ~~with~~substantial ~~advertisements~~affect inon ~~magazines~~our operations.

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.8

WeTable ~~plan~~of 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.Contents

7Employees and Consultants

~~Competition~~As of March 30, 2012, we have two full time employees, Ronald Foster, our President, CEO, CFO and Secretary and Michael Midagliotti our Vice President. On January 31, 2010 we entered into an executive employment agreement with Ronald Foster for the position of Chief Financial Officer, for a period of 60 months at a base salary of $150,000 per year. The agreement expires January 20, 2015.

~~Over~~In ~~the~~addition ~~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~~employees ~~who~~mentioned ~~convert biomass to energy~~above, ~~primarily~~we ~~electricity~~also orengage ~~thermal,~~people ~~co-generating~~as ~~the~~outside ~~energy~~contractors toand ~~reduce~~consultants ~~waste~~for ~~costs~~marketing, ~~and~~business ~~lower~~development, ~~fuel~~investor ~~costs. The~~relations, ~~table~~bookkeeping, ~~below~~legal, ~~lists~~accounting, ~~some~~website ofdevelopment ~~our major competitors~~ and ~~the~~audit ~~advantage we see in our technology compared to the competition~~functions.

~~Energy~~Any ~~Products~~increase ofin ~~Idaho,~~the ~~USA~~number ~~General~~of ~~Electric,~~employees ~~USA~~or ·consultants wemay ~~are~~significantly ~~less~~increase ~~expensive~~our bymonthly ~~half General Electric, USA · General Electric holds very large complex systems only FERCO (Battelle), U~~expenses.~~S.A~~ To ·facilitate ~~Unlike~~our ~~FERCO,~~growth we ~~offer~~anticipate ~~our~~hiring ~~incinerator~~more ~~units~~independent ~~for~~sales ~~sale~~and ormarketing ~~lease~~consultants. We ·currently Weengage ~~also~~people ~~enter~~as ~~into~~outside ~~joint~~contractors ~~venture~~and ~~agreements~~consultants for ~~the~~bookkeeping, ~~use~~legal, ~~of our technology Lurgi~~accounting, ~~Germany · Unlike Lurgi ’ s~~consulting, ~~our~~marketing ~~units have a small footprint~~ and ~~can~~audit ~~be skid mounted and portable Foster-Wheeler (Outokumpu), Finland · Our units are adaptable to downstream changing requirements~~functions.

~~Our~~Item ~~competition includes small and mid-size independent contractors as well as major energy services companies with international operations~~1A. WeRisk ~~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.~~Factors

WeNot ~~differentiate ourselves from our major competition by our unique equipment~~Applicable. 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~~Item ~~and~~1B. Unresolved ~~Development~~Staff Comments

~~On September 13, 2007 we completed the research and development of our small Modular Bio-energy units: Model FS324 and M2-3 Gasifier~~None. ~~Since our inception, we have spent approximately $266,494 on research and development.~~

WeItem ~~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.~~ Properties

~~Intellectual~~Our ~~Property~~principal executive offices are located at 103 Firetower Road, Leesburg, GA 31763-3755.

OnItem ~~December 24, 2004, we purchased an integrated gasification production system from Wilfred J~~3. Legal 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.Proceedings

WeAs ~~plan~~of toMarch ~~file~~26, ~~patents~~2012, onthere ~~several~~are ~~technologies~~no material pending legal proceedings, ~~including~~other ~~the~~than ~~PyStR~~ordinary ™routine ~~process~~litigation ~~and~~incidental ~~the~~to M2our ~~Fluidized~~business, ~~Bed~~to ~~Gas~~which ~~Generator~~we ~~over~~or ~~next~~any 12of ~~months~~our subsidiaries are a party or of which any of our properties is the subject. Also, ~~but~~our wemanagement ~~have~~is not ~~filed~~aware ~~for~~of any ~~protection~~legal ofproceedings ~~our~~contemplated ~~intellectual~~by ~~properties~~any governmental authority against us.

8Item 4. Submission of Matters to a Vote of Security Holders

~~Legislation and Government Regulation~~None.

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.9

AsTable ~~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.Contents

~~Environmental~~PART ~~Law Compliance~~II

~~Since~~Item 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 environment5. ~~However,~~Market ~~since~~for ~~our~~Common ~~customers~~Equity and ~~partners~~Related ~~will~~Stockholder ~~be subject to these laws, the effect of the regulatory scheme in various jurisdictions may have a substantial affect on our operations.~~Matters

~~Each~~Market 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.Information

~~Employees~~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 ~~Consultants~~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.

AsThe offollowing ~~March~~table ~~20,~~shows ~~2011,~~the wehigh ~~have three full time employees, in addition to employing Wilfred Ouellette, our President, CEO,~~ and ~~Ronald~~low ~~Foster~~closing ~~our~~prices ~~CFO,~~of ~~Secretary and Treasurer and David Doherty~~ our ~~President~~common ofshares ~~International~~on ~~Finance and Trade. We entered into an employment agreement with Mr. Ouellette dated April 17, 2007, for~~ the ~~position~~OTC ofBulletin ~~Chief~~Board ~~Executive Officer,~~ for aeach ~~period~~quarter ofwithin 60the ~~months~~two atmost arecent ~~base~~fiscal ~~salary of $150,000 per year~~years. The Onfollowing ~~July~~quotations 1,reflect ~~2008~~inter-dealer ~~we engaged Mr. Ronald Foster as Secretary and Treasurer for services to be invoiced to the company. On January 31~~prices, ~~2010~~without weretail ~~entered into an executive employment agreement with Ronald Foster for the position of Chief Financial Officer~~mark-up, ~~for~~mark-down aor ~~period~~commission ~~of 60 months at a base salary of $150,000 per year. The agreement expires January 20, 2015. We also entered an agreement with David Doherty to service as Vice President of International Finance~~ and ~~Trade.~~may ~~The~~not ~~Company~~necessarily ~~agreed~~represent toactual ~~pay Mr. Doherty $100,000 annual salary payable in common share at $0.20 per share. The agreement provides services for one year beginning August 1st, 2010.~~transactions:

Period	High		Low
October 1, 2011 – December 31, 2011	$	0.035	$	0.01
July 1, 2011 – September 30, 2011	$	0.035	$	0.015
April 1, 2011 – June 30, 2011	$	0.08	$	0.015
January 1, 2011 – March 31, 2011	$	0.10	$	0.04
October 1, 2010 – December 31, 2010	$	0.225	$	0.04
July 1, 2010 – September 30, 2010	$	0.30	$	0.11
April 1, 2010 – June 30, 2010	$	0.155	$	0.08
January 1, 2010 – March 31, 2010	$	0.24	$	0.087

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

~~Any~~As ~~increase in the number~~ of ~~employees~~March or30, ~~consultants~~2011, ~~may~~there ~~significantly~~were ~~increase~~approximately ~~our~~743 ~~monthly~~holders ~~expenses.~~of Torecord ~~facilitate~~of our ~~growth~~common ~~we anticipate hiring more independent sales and marketing consultants~~stock. ~~We currently engage people as outside contractors and consultants for bookkeeping, legal, accounting, consulting, marketing and audit functions.~~

~~Item 1A. Risk Factors~~Dividends

~~Not~~For ~~Applicable~~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.

~~Item 1B. Unresolved Staff Comments~~10

~~None.~~Table of Contents

~~Item~~Equity 2.Compensation ~~Properties~~Plans

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

Plan category

Number of securities

to be issued upon

exercise of

outstanding options,

warrants and rights

(a)

Weighted average

exercise price of

outstanding options,

warrants and rights

(b)

Number of securities

remaining available for

future issuance under

equity compensation

plans (excluding

securities reflected in

column (a))

(c)

Equity compensation plans approved by security holders

N/A

Equity compensation plans not approved by security holders

2,000,000

1,000,000

Total

2,000,000

N/A

1,000,000

WeAccording ~~also~~to ~~have~~the ~~offices~~2008 atStock ~~103~~Compensation ~~Firetower~~Plan, ~~Road~~we are authorized to issue up to 1,000,000 ~~Leesburg~~shares of our common stock to employees, ~~Georgia~~executives ~~31763~~and consultants. According to the 2008 Non-~~3755~~Qualified Stock Option Plan, we are authorized to issue up to 1,000,000 stock purchase options to employees, executives and consultants to purchase shares of our common stock. As of December 31, 2010, 1,000,000 shares were issued under the 2008 Stock Compensation Plan.

~~Item~~Recent 3.Sales ~~Legal~~of ~~Proceedings~~Unregistered Securities

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

Item 46. Selected ~~Submission~~Financial ~~of Matters to a Vote of Security Holders~~Data

~~None~~Not applicable.

~~PART~~Item II7. Management's Discussion and Analysis or Plan of Operation

~~Item~~The 5following discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this Form 10-K. The ~~Market~~discussions ~~for~~of ~~Common~~results, ~~Equity~~causes and ~~Related~~trends ~~Stockholder~~should ~~Matters~~not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

~~Market~~Results ~~Information~~of Operations

~~Our~~Limited 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.Revenues

~~The~~Since ~~following~~our ~~table~~inception ~~shows~~on December 14, 2004 to December 31, 2011, we had earned limited revenues of $5,164. During the ~~high~~fiscal ~~and~~year ~~low~~ended ~~closing~~December ~~prices~~31, 2011 we did not generate any revenues. As of ~~our~~December ~~common~~31, ~~shares~~2011, onwe ~~the~~had ~~OTC~~an ~~Bulletin~~accumulated ~~Board~~deficit ~~for~~of ~~each~~$10,320,886. At ~~quarter~~this ~~within~~time, ~~the~~our ~~two~~ability ~~most~~to ~~recent~~generate ~~fiscal~~any ~~years~~significant revenues continues to be uncertain. There ~~The~~is ~~following~~substantial ~~quotations~~doubt ~~reflect~~about ~~inter-dealer~~our ~~prices,~~ability ~~without~~to ~~retail~~continue ~~mark-up,~~as ~~mark-down~~a orgoing ~~commission~~concern. Our ~~and~~financial ~~may~~statements do not ~~necessarily~~include ~~represent~~any ~~actual~~adjustment ~~transactions:~~that might result from the outcome of this uncertainty.

1011

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

Table of Contents

~~Holders~~Net Loss

AsWe incurred net loss of ~~March~~$10,320,886 20since December 14, 2004 (date of inception) to December 31, 2011. Our net loss decreased from $3,409,831 ~~there~~for ~~were~~the ~~742~~fiscal ~~holders~~year ofended ~~record~~December 31, 2010 to $423,262 for the fiscal year ended December 31, 2011, a decrease of $2,986,569. For the fiscal year ended December 31, 2011, our ~~common~~net ~~stock~~loss per share was $0.02, compared to net loss of $0.27 per share for the same period in 2010.

~~Dividends~~Expenses

~~For~~Our ~~the~~total ~~two~~expenses ~~most~~from ~~recent~~December ~~fiscal~~14, ~~years~~2004 we(date ~~have~~of ~~not~~inception) ~~paid~~to ~~any~~December ~~cash~~31, ~~dividends~~2011 onwere ~~our~~$10,128,870 ~~common~~and ~~shares~~consisted of $5,616,394 in consulting and domanagement ~~not~~fees, ~~expect~~$607,768 toin ~~declare~~general orand ~~pay~~administrative ~~any~~fees, ~~cash~~$527,471 ~~dividends~~in onprofessional ~~our~~fees, ~~common~~$266,494 ~~shares~~in research and development, $398,077 in ~~the~~depreciation, ~~foreseeable~~$2,632,666 ~~future. Payment~~on impairment of ~~any~~intangible ~~dividends~~assets ~~will~~and ~~depend~~$80,000 ~~upon~~in ~~future~~other. Total ~~earnings~~expenses decreased $2,932,234 ifto ~~any~~$298,468 ~~our~~for ~~financial~~the ~~condition,~~fiscal ~~and~~year ~~other~~ended ~~factors~~December as31, ~~deemed~~2011 ~~relevant~~from by$3,230,702 ~~our~~for ~~Board~~the ofsame ~~Directors~~period in 2010.

~~Equity~~Our ~~Compensation~~consulting ~~Plans~~and management fees decreased $125,000 to $175,000 for the fiscal year ended December 31, 2011 from $300,000 for the same period in 2010 mostly due to a decrease in the amount of consulting services we required. Our consulting and management fees consisted mainly of amounts paid to our senior officers and fees paid to our other consultants.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	N/A	N/A	N/A
Equity compensation plans not approved by security holders	2,000,000		1,000,000
Total	2,000,000	N/A	1,000,000

Our general and administrative expenses decreased by $14,945 from $99,213 for the fiscal year ended December 31, 2010 to $84,268 for the same period ended December 31, 2011. The decrease in general and administrative expenses was mainly due to a slight decrease 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.

~~According~~Our toprofessional ~~the~~fees ~~2008~~decreased ~~Stock~~by ~~Compensation Plan~~$8,123, ~~we are authorized~~ to ~~issue up to 1~~$39,~~000,000~~200 ~~shares~~for ofthe ~~our~~fiscal ~~common~~year ~~stock~~ended toDecember ~~employees~~31, ~~executives~~2011 ~~and~~from ~~consultants.~~$47,323 ~~According~~for to the ~~2008~~same ~~Non-Qualified~~period ~~Stock~~in ~~Option~~2010. The ~~Plan,~~decrease wein ~~are~~professional ~~authorized~~fees towas ~~issue~~mostly updue to ~~1,000,000~~less ~~stock~~legal ~~purchase~~and ~~options~~auditing toservices ~~employees,~~provided ~~executives~~during ~~and~~the ~~consultants~~fiscal toyear ~~purchase~~just ~~shares~~ended ofas ~~our~~opposed ~~common~~to ~~stock.~~the Asfiscal ofyear ~~December~~ended ~~31,~~in 2010,. Our ~~1,000,000~~professional ~~shares~~fees ~~were~~consisted ~~issued~~primarily ~~under~~of ~~the~~legal, ~~2008~~accounting ~~Stock~~and ~~Compensation~~auditing ~~Plan~~fees.

~~Recent~~Liquidity ~~Sales~~and ofCapital ~~Unregistered Securities~~Resources

~~Not~~We ~~applicable~~expect that we only can generate limited revenues over the next twelve months. As of December 31, 2011, our current assets totaled $787, which was comprised of cash and deferred financing cost. As of December 31, 2011 we had a working capital deficit of $269,347.

~~Item~~Our 6net loss of $10,320,886 from December 14, 2004 (date of inception) to December 31, 2011 was mostly funded by our equity financing. We ~~Selected~~expect ~~Financial~~to ~~Data~~incur substantial losses over the next two years. During the fiscal year ended December 31, 2011 our cash position decreased by $7,989.

~~Not applicable.~~12

11Table of Contents

~~Item~~During 7the fiscal year ended December 31, 2011, we received net cash of $64,000 from financing activities compared to $244,500 for the same period in 2010. We ~~Management's~~used ~~Discussion~~net ~~and~~cash ~~Analysis~~of or$73,697 ~~Plan~~in operating activities compared to $222,386 for the same period in 2010. We received net cash of ~~Operation~~$2,000 in investing activities compared to $10,000 used for the same period in 2010.

~~The~~We ~~following~~are ~~discussion~~currently ~~should~~not bein ~~read~~good inshort-term ~~conjunction~~financial ~~with~~standing. We ~~our~~anticipate ~~consolidated~~that ~~financial~~we ~~statements,~~may ~~including~~only generate any limited revenues in the ~~notes~~near ~~thereto,~~future ~~appearing~~and ~~elsewhere~~we inwill ~~this~~not ~~Form~~have ~~10-K.~~enough ~~The~~positive ~~discussions~~internal ofoperating ~~results~~cash flow until we can generate substantial revenues, ~~causes~~which ~~and~~may ~~trends~~take ~~should~~the ~~not~~next befew ~~construed~~years to ~~imply~~fully ~~any~~realize. There ~~conclusion~~is ~~that~~no ~~these~~assurance ~~results~~we orwill ~~trends~~achieve ~~will~~profitable ~~necessarily~~operations. We ~~continue~~have ~~into~~historically financed our operations primarily by cash flows generated from the ~~future~~sale of our equity securities and through cash infusions from officers and outside investors in exchange for debt and/or common stock.

~~Results~~Our ofcorporate ~~Operations~~strategy for the next 12 months includes the following:

~~Limited Revenues~~·

~~Since our inception on December 14~~Produce, ~~2004 to December 31~~sell, ~~2010,~~lease weand ~~had~~maintain ~~earned~~energy ~~limited~~generators ~~revenues~~that ~~of $5,164. During the fiscal year ended December 31, 2010~~ we ~~did~~have not generate any revenues. As of December 31, 2010, we had an accumulated deficit of $9,897,624. At this time, our ability to generate any significant revenues continues to be uncertain. There is substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustment that might result from the outcome of this uncertainty.developed;

~~Net Loss~~·

WeLicense ~~incurred~~our ~~net~~integrated ~~loss~~gasification oftechnologies ~~$9,897,624 since December 14, 2004 (date of inception)~~ to ~~December~~third ~~31,~~parties ~~2010.~~in ~~Our~~North ~~net loss increased from $912~~American,~~751~~ ~~for~~European ~~the~~and ~~fiscal~~global year ended December 31, 2009 to $3,409,831 for the fiscal year ended December 31, 2010, an increase of $2,497,080. For the fiscal year ended December 31, 2010, our net loss per share was $0.27, compared to net loss of $0.08 per share for the same period in 2009.markets;

~~Expenses~~·

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

Our consulting and management fees decreased $386,497 to $300,000 for the fiscal year ended December 31, 2010 from $686,497 for the same period in 2009 mostly due to a decrease in the amount of consulting services we required. Our consulting and management fees consisted mainly of amounts paid to our senior officers and fees paid to our other consultants.·

~~Our~~Complete ~~general~~potential ~~and~~deals ~~administrative~~regarding ~~expenses~~joint ~~increased~~ventures ~~by $3,461 from $95,752~~ for ~~the~~energy ~~fiscal~~production year ended December 31, 2009 to $99,213 for the same period ended December 31, 2010. The increase in general and administrative expenses was mainly due to an increase in our day to day operating activities. Our general and administrative expenses consist of office supplies, travel expenses, rent, communication expenses (cellular, internet, fax, telephone), office maintenance, courier and postage costs and office equipment.facilities;

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

12File patents on several technologies, including the heavy oil upgrading technology process, and seek accredited valuations for these intellectual properties in a variety of markets including the U.S., Germany and Canada; and

~~Liquidity and Capital Resources~~·

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

~~Our~~We ~~net~~believe ~~loss~~that ofwe ~~$9,897,624~~need ~~from~~approximately ~~December~~an 14additional $13,750,000 ~~2004 (date of inception)~~ to ~~December~~meet ~~31, 2010 was mostly funded by~~ our ~~equity~~capital ~~financing.~~requirements ~~We expect to incur substantial losses~~ over the next ~~two~~12 ~~years.~~months ~~During~~(beginning ~~the~~April ~~fiscal~~2012) ~~year~~for ~~ended~~the ~~December~~following ~~31,~~estimated ~~2010 our cash position increased by $7,430.~~expenses:

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




Description	Estimated Expense
Marketing our gasification technologies	$	200,000
Further commercializing our gasification technologies	$	400,000
Manufacturing of Modular Bio-energy units	$	400,000
Payment of accounts payable and accrued liabilities	$	250,000
General and administrative expenses	$	500,000
Professional fees	$	100,000
Consulting fees	$	200,000
Investor relations expenses	$	100,000
Patent application costs (including legal fees)	$	100,000
Heavy Oil Upgrader Plant	$	6,500,000
Water Recycling Equipment	$	5,000,000
Total	$	13,750,000

WeOf ~~are~~the ~~currently~~$13,750,000, ~~not in good short-term financial standing. We anticipate that~~ we ~~may~~had ~~only~~$257 ~~generate any limited revenues~~ in ~~the~~cash ~~near future~~ and ~~we will not have enough positive internal operating~~ cash ~~flow~~equivalents ~~until~~as weof ~~can~~December ~~generate substantial revenues~~31, ~~which~~2011. We ~~may~~intend ~~take the next few years~~ to ~~fully~~meet ~~realize.~~the ~~There~~balance isof ~~no assurance we will achieve profitable operations. We have historically financed~~ our ~~operations primarily by~~ cash ~~flows~~requirements ~~generated~~for ~~from~~ the ~~sale~~next of12 ~~our~~months ~~equity~~from ~~securities~~external ~~and~~sources, through ~~cash~~a ~~infusions~~combination ~~from~~of ~~officers~~debt financing and ~~outside~~equity ~~investors~~financing inthrough ~~exchange~~private ~~for debt and/or common stock~~placements.

~~Our~~We ~~corporate~~are ~~strategy~~seeking equity financing to provide for the ~~next~~capital 12required ~~months~~to ~~includes~~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 ~~following:~~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.

·13

~~Produce,~~Table ~~sell,~~of ~~lease and maintain energy generators that we have developed;~~Contents

oWe 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.

~~License~~These factors raise substantial doubt about our ~~integrated~~ability ~~gasification~~to ~~technologies~~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 ~~third~~continue ~~parties~~our inbusiness. If ~~North~~we ~~American,~~are ~~European~~unable to obtain additional financing from outside sources and ~~global~~eventually ~~markets;~~produce enough revenues, we may be forced to sell our assets, curtail or cease our operations.

oKnown Material Trends and Uncertainties

~~Continually~~On ~~improve~~October ~~our~~15, ~~gasification~~2008, ~~technologies~~we entered into an agreement with CO.F.A.M.M. for the provision of assistance and ~~commercializing~~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 ~~technologies;~~prior approval.

oOn 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.

~~Expand~~Off-Balance ~~our~~Sheet ~~technology base by acquiring complementary technologies to our PyStR ™ and other technologies through purchasing or licensing arrangements;~~Arrangements

oAs of December 31, 2011, 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.

~~Complete~~Critical ~~potential~~Accounting ~~deals regarding joint ventures for energy production facilities;~~Policies

oThe 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.

~~File~~We ~~patents~~consider ~~on several technologies, including~~ the ~~PyStR~~following ™accounting ~~process,~~policies ~~the~~to M2be ~~Fluidized~~both ~~Bed~~those ~~Gas~~important ~~Generator~~to ~~and~~the ~~seek~~portrayal ~~accredited~~of ~~valuations~~our ~~for~~financial ~~these~~condition ~~intellectual~~and ~~properties~~that inrequire ~~a variety of markets including~~ the ~~U.S.,~~subjective ~~Germany and Canada; and~~judgment:

o14

~~Create~~Table ~~additional~~of ~~service lines to complement current operations.~~Contents

WeIntangible ~~believe that we need approximately an additional $26,585,000 to meet our capital requirements over the next 12 months (beginning April 2011) for the following estimated expenses:~~Asset

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

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.

13On 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. On September 20, 2011 this was returned to Mr. Ouellette for forgiveness of all debts due Mr. Ouellette.

OfStock-Based the $26,585,000, we had $8,246 in cash and cash equivalents as of December 31, 2010. We intend to meet the balance of our cash requirements for the next 12 months from external sources, through a combination of debt financing and equity financing through private placements.Compensation

We ~~are~~record ~~seeking~~stock-based ~~equity~~compensation ~~financing~~in toaccordance ~~provide~~with ~~for~~SFAS ~~the~~No. ~~capital~~123R ~~required~~“Share toBased ~~market~~Payments”, ~~and~~using ~~develop~~the ~~our~~fair ~~technologies~~value ~~and fully carry out our business plan~~method. All Wetransactions ~~cannot~~in ~~guarantee~~which wegoods ~~will~~or beservices ~~successful~~are inthe ~~our~~consideration ~~business~~received ~~operations.~~for Athe ~~critical~~issuance ~~component~~ of ~~our~~equity ~~operating~~instruments ~~plan~~are ~~impacting~~accounted ~~our~~for ~~continued~~based ~~existence~~on isthe ~~our~~fair ~~ability~~value toof ~~obtain~~the ~~additional capital through additional~~ equity ~~and/or~~instrument ~~debt financing~~issued. Equity ~~Obtaining~~instruments ~~additional~~issued ~~financing will be subject~~ to aemployees ~~number of factors including market conditions, investor acceptance of our business plan~~ and ~~investor sentiment. These factors may make~~ the ~~timing,~~cost ~~amount, terms and conditions~~ of ~~additional~~the ~~financing~~services ~~unattractive~~received oras ~~unavailable~~consideration ~~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~~measured toand ~~raise~~recognized ~~additional~~based 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~~the ~~business,~~fair ~~revenues,~~value ~~operating results, and prospects, resulting in a possible failure~~ of ~~our~~the ~~business. If we raise funds through~~ equity orinstruments ~~convertible securities, our existing stockholders may experience dilution and our stock price may decline~~issued.

WeOn ~~have~~January ~~generated~~22, ~~limited~~2008 ~~revenues~~our ~~and~~Board ~~have~~of ~~incurred~~Directors ~~significant~~approved ~~operating~~the ~~losses~~2008 ~~from~~Stock ~~operations.~~Compensation WePlan ~~may continue to experience net negative cash flows from operations~~ and ~~will~~the be2008 ~~required~~Non-Qualified toStock ~~obtain~~Option ~~additional~~Plan. According ~~financing~~ to ~~fund~~the ~~operations~~2008 ~~through~~Stock ~~equity~~Compensation ~~securities’~~Plan, ~~offerings~~we ~~and~~are ~~bank~~authorized ~~borrowings~~ to ~~the~~issue ~~extent~~up ~~necessary~~ to ~~provide~~1,000,000 ~~working~~shares ~~capital.~~of ~~Our~~our ~~continuation~~common asstock ato ~~going~~employees, ~~concern~~executives isand ~~dependent~~consultants. According ~~upon our ability~~ to ~~generate~~the ~~sufficient~~2008 ~~cash~~Non-Qualified ~~flow~~Stock ~~from~~Option ~~stockholders~~Plan, orwe ~~other~~are ~~outside~~authorized ~~sources~~ to ~~sustain~~issue ~~operations~~up ~~and~~to ~~meet~~1,000,000 ~~our~~stock ~~obligations~~purchase onoptions ato ~~timely~~employees, ~~basis~~executives and ~~ultimately~~consultants to ~~attain~~purchase ~~profitability.~~shares Weof ~~have limited capital with which to pursue~~ our ~~business~~common ~~plan~~stock. As ~~There~~of ~~can~~March be30, ~~no assurance that our future operations will be significant and profitable~~2011, orno ~~that~~securities wewere ~~will~~issued ~~have~~under ~~sufficient~~the ~~resources~~two ~~to meet our objectives~~plans.

~~These~~Item ~~factors raise substantial doubt about our ability to continue as a going concern~~7A. Quantitative ~~Our~~and ~~auditors~~Qualitative ~~have~~Disclosures 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~~Market 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.Risk

~~Known~~Not ~~Material Trends and Uncertainties~~Applicable.

~~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.

OnTable ~~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.Contents

~~Off-Balance~~Item ~~Sheet~~8. Financial ~~Arrangements~~Statements and Supplementary Data

AsEnergy ofQuest December 31, 2010, we had no off balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resourcesInc.

14(A Development Stage Company)

~~Critical~~ December ~~Accounting~~31, ~~Policies~~2011

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.




	Index
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-2
Consolidated Statements of Operations and Other Comprehensive Loss	F-3
Consolidated Statements of Cash Flows	F-4
Consolidated Statement of Changes in Stockholders Equity (Deficit)	F-5 to F-8
Notes to the Consolidated Financial Statements	F-9 to F-17

~~We consider the following accounting policies to be both those important to the portrayal of our financial condition and that require the subjective judgment:~~16

~~Intangible~~Table ~~Asset~~of Contents

InREPORT ~~May~~OF ofINDEPENDENT ~~2008,~~REGISTERED wePUBLIC ~~issued~~ACCOUNTING 2,000,000 shares of stock valued at $1.50 per share to a third party for the purchase of various technologies and patents with a total estimated fair market value of $3,000,000 based on the market price of the consideration given. The patents relate to an integrated gasification production system. This patent and technology combines modern gasification with gas turbine technologies to produce synthetic gas, hydrogen or electricity. Amortization has been estimated on the economic useful life or expected legal life of the patent estimated to be 20 years. At December 31, 2010, the carrying cost of $2,601,923 was recorded as an impairment of intangible asset as a result of delays in construction of the plant due to lack of funding.FIRM

OnTo 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~~Board ~~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~~Directors ~~common stock and a $25,000 payment. If by January 2006 the Company had not raised a minimum~~ of $1,000,000 by way of equity private placements, it has the option, until June 30, 2007, of canceling the 10,000,000 shares issued to 975110 Alberta Ltd. and subject to escrow, in consideration for the transfer to 975110 Alberta Ltd. of 100% of the interest in all of the enhanced gasification intellectual property and a small gasification unit. By December 31, 2008, the 500,000 common shares were released from escrow. At December 31, 2010, the carrying cost of $30,743 was recorded as an impairment of intangible asset as a result of delays in construction of the plant due to lack of funding and the fact that we have not sold any licenses during 2010.

~~Stock-Based~~Energy ~~Compensation~~Quest, Inc.

We(A ~~record~~Development ~~stock-based~~Stage 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.Company)

~~On January 22~~Henderson, 2008 our Board of Directors approved the 2008 Stock Compensation Plan and the 2008 Non-Qualified Stock Option Plan. According to the 2008 Stock Compensation Plan, we are authorized to issue up to 1,000,000 shares of our common stock to employees, executives and consultants. According to the 2008 Non-Qualified Stock Option Plan, we are authorized to issue up to 1,000,000 stock purchase options to employees, executives and consultants to purchase shares of our common stock. As of March 20, 2011, no securities were issued under the two plans.Nevada

~~Item~~We 7Ahave audited the accompanying balance sheets of Energy Quest, Inc. ~~Quantitative~~(a development stage company) (the “Company”) as of December 31, 2011 and ~~Qualitative~~2010, ~~Disclosures~~and ~~about~~the ~~Market~~related ~~Risk~~statements of operations, stockholders’ deficit and cash flows for each of the years then ended and for the period from December 14, 2004 (inception) through December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

15In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years then ended and for the period from December 14, 2004 (inception) through December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

~~Item~~The 8accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As ~~Financial~~discussed ~~Statements~~in Note 2 to the financial statements, the Company had no revenues in 2011 and ~~Supplementary~~has ~~Data~~a working capital deficit as of December 31, 2011. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~Energy~~/s/MALONE ~~Quest~~BAILEY, ~~Inc.~~LLP

~~(A Development Stage Company)~~www.malone-bailey.com

~~December 31~~Houston, ~~2010~~Texas

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

March 30, 2012

16F-1

~~REPORT~~Table OFof ~~INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~Contents

ToEnergy ~~the~~Quest ~~Board Directors~~Inc.

~~Energy~~(A ~~Quest,~~Development ~~Inc.~~Stage Company)

(ABalance ~~Development Stage Company)~~Sheets

Henderson, Nevada

	December 31, 2011			December 31, 2010
Assets

Current Assets

Cash	$	257		$	8,246
Deferred financing cost		530			2,593
Note receivable – related party		–			8,656

Total Assets		787			19,495


Liabilities and Stockholders' Deficit

Current Liabilities

Accounts payable and accrued liabilities		50,534			35,871
Amounts due to related parties		7,706			713,055
Notes payable		30,000			–
Notes payable – related parties		35,710			86,002
Convertible notes, net of discount of $7,428 and $43,223 respectively		51,572			10,777
Derivative liabilities		94,612			97,375

Total Liabilities		270,134			943,080

Stockholders' Deficit

Preferred Stock Authorized: 1,000,000 shares, with a $0.01 par value; none issued or outstanding		–			–

Common Stock Authorized: 200,000,000 shares, with a $0.001 par value; Issued: 40,611,944 shares and 17,135,604 shares respectively		40,612			17,136

Additional Paid-in Capital		10,010,927			8,956,903

Deficit Accumulated During the Development Stage		(10,320,886	)		(9,897,624	)

Total Stockholders’ Deficit		(269,347	)		(923,585	)

Total Liabilities and Stockholders’ Deficit	$	787		$	19,495

WeThe ~~have audited the~~ accompanying ~~balance~~notes ~~sheets~~are ofan ~~Energy~~integral ~~Quest~~part ~~Inc (A Development Stage Company) (the “Company”) as~~ of ~~December~~these ~~31,~~audited 2010 and 2009, and the related statements of operations, stockholders’ deficit and cash flows for the years then ended and for the period from December 14, 2004 (inception) through December 31, 2010. These financial statements ~~are the responsibility of the Company’s management~~. ~~Our responsibility is to express an opinion on these financial statements based on our audits.~~

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.F-2

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

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

~~/s/~~(A ~~MaloneBailey,~~Development ~~LLP~~Stage Company)

~~www.malonebailey.com~~Statements of Operations and Other Comprehensive Loss

Houston, Texas

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			Period from December 14, 2004 (Date of Inception) to December 31, 2011
Revenue	$	–		$	–		$	5,164

Expenses

Consulting and management fees		175,000			300,000			5,616,394
General and administrative		84,268			99,213			607,768
Professional fees		39,200			47,323			527,471
Research and development		–			1,500			266,494
Depreciation and depletion		–			150,000			398,077
Impairment of intangible assets		–			2,632,666			2,632,666
Loss on theft of cash		–			–			80,000

		298,468			3,230,702			10,128,870

Loss from operations:		(298,468	)		(3,230,702	)		(10,123,706	)

Interest expense		(86,264	)		(67,129	)		(162,731	)
Gain on settlement of former related party debt		–			–			310,003
Loss on derivative financial instruments		(25,754	)		(112,000	)		(137,754	)
Loss on shares issued for interest		(5,998	)		–			(5,998	)
Loss on write-off of loan receivable		(6,778	)		–			(200,700	)

Net loss		(423,262	)		(3,409,831	)		(10,320,886	)

Other comprehensive income

Foreign currency translation adjustment		–			(3,946	)		–

Total Comprehensive Loss	$	(423,262	)	$	(3,413,777	)	$	(10,320,886	)

Net Loss Per Share – Basic and Diluted	$	(0.02	)	$	(0.27	)

Weighted Average Shares Outstanding – Basic and Diluted		19,793,000			12,816,645

~~March~~The ~~23,~~accompanying ~~2011~~notes are an integral part of these audited financial statements.

F-13

~~Energy~~Table ~~Quest~~of ~~Inc.~~Contents

(AEnergy ~~Development~~Quest ~~Stage Company)~~Inc.

~~Consolidated~~(A ~~Balance~~Development ~~Sheets~~Stage Company)

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

Statements of Cash Flows

F-2

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			Accumulated from December 14, 2004 (Date of Inception) to December 31, 2011

Cash Flows Used In Operating Activities
Net loss	$	(423,262	)	$	(3,409,831	)	$	(10,320,886	)

Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of convertible debt discount		70,795			56,777			127,572
Shares issued for services		10,000			36,000			4,617,793
Loss on shares issued for interest		5,998			–			5,998
Loss on shares issued for amounts due related parties		38,345			–			54,321
Loss on theft of cash		–			–			80,000
Loss on write-off of loan receivable		6,778			–			200,700
Loss on derivative instruments		25,754			112,000			137,754
Impairment of intangible assets		–			2,632,666			2,632,666
Amortization of intangible assets		–			150,000			398,077
Gain on settlement of former related party debt		–			–			(310,003	)
Amortization of deferred financing cost		4,563			2,907			7,470

Changes in operating assets and liabilities:
Accounts payable and accrued liabilities		18,941			921			41,860
Due to related parties		168,391			196,174			1,195,866

Net Cash Used in Operating Activities		(73,697	)		(222,386	)		(1,130,812	)

Investing Activities
Loan receivable		2,000			(10,000	)		(201,922	)
Net cash acquired on business acquisition		–			–			565
Change in restricted cash		–			–			(80,000	)
Purchase of intangible assets		–			–			(25,000	)

Net Cash Provided by (Used In) Investing Activities		2,000			(10,000	)		(306,357	)

Financing Activities
Proceeds from issuance of common stock		–			100,000			744,307
Payment of deferred financing cost		(2,500	)		(5,500	)		(8,000	)
Proceeds from convertible note		35,000			100,000			135,000
Proceeds from notes payable		30,000			-			30,000
Proceeds from notes payable – related party		1,500			50,000			569,714
Re-payment of note payable		–			–			(28,005	)

Net Cash Provided By Financing Activities		64,000			244,500			1,443,016

Effect of Exchange Rate Changes on Cash		(292	)		(4,684	)		(5,590	)

(Decrease) Increase in Cash and Cash Equivalents		(7,989	)		7,430			257

Cash and Cash Equivalents, Beginning		8,246			816			–

Cash and Cash Equivalents, Ending	$	257		$	8,246		$	257

Supplemental Disclosures

Cash paid for taxes	$	–		$	–		$	–
Cash paid for interest		–			–			–

Non-Cash Activities

Common stock issued for intangible assets	$	–		$	–		$	3,000,204
Common stock issued for stock payable		–			–			161,550
Common stock issued for amounts due to related parties		361,654			–			722,608
Discount on convertible notes payable from derivative		35,000			100,000			135,000
Conversion of derivative liability		63,517			114,625			178,142
Conversion of interest		2,400			–			2,400
Related party debt settlement		563,586			–			563,586
Conversion of convertible notes to common stock		32,000			46,000			78,000

~~Energy~~The ~~Quest~~accompanying ~~Inc~~notes are an integral part of these audited financial statements.

~~(A Development Stage Company)~~F-4

~~Consolidated~~Table ~~Statements~~ of ~~Operations and Other Comprehensive Loss~~Contents

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

Energy Quest Inc.

~~F-3~~(A Development Stage Company)

~~Energy~~Consolidated ~~Quest~~Statement ~~Inc.~~of Stockholders’ Equity (Deficit)

(A Development Stage Company)

														Deficit
									Accumulated					Accumulated
							Additional		Other			Stock		During the
	Common						Paid-In		Comprehensive			Subscriptions		Development
	Stock			Amount			Capital		Income			Receivable		Stage			Total

Balance – December 14, 2004 (Date of Inception)		–		$	–		$	–	$	–		$	–	$	–		$	–

Issue of common stock for cash		1,000,000			407			–		–			–		–			407

Issue of common stock for intangible asset		500,000			204			–		–			–		–			204

Net loss for the period		–			–			–		–			–		(10,015	)		(10,015	)

Balance – December 31, 2004		1,500,000			611			–		–			–		(10,015	)		(9,404	)

Issue of common stock for cash		2,375			19,337			–		–			–		–			19,337

		1,502,375			19,948			–		–			–		(10,015	)		9,933

Adjustment to number of shares issued and outstanding as a result of the reverse takeover transaction:

– Add issued and outstanding stock of Energy Quest Inc. at time of reverse acquisition		321,128			321			6,102		–			–		(66,839	)		(60,416	)
– Deduct issued and outstanding stock of Energy Quest Inc.		(1,502,375	)		(19,948	)		–		–			–		19,948			–

Issue of common stock on acquisition of Energy Quest Inc.		1,502,375			1,502			28,545		–			–		(30,047	)		–

Issue of common stock for cash on exercise of stock options		13,000			13			77,987		–			–		–			78,000

Stock-based compensation		–			–			339,762		–			–		–			339,762

Issue of common stock for services		51,250			51			609,949		–			–		–			610,000

Foreign currency translation adjustment		–			–			–		(1,019	)		–		–			(1,019	)

Net loss for the year		–			–			–		–			–		(1,095,384	)		(1,095,384	)

Balance – December 31, 2005		1,887,753		$	1,887		$	1,062,345	$	(1,019	)	$	–	$	(1,182,337	)	$	(119,124	)

~~Consolidated~~The ~~Statements~~accompanying notes are an integral part of ~~Cash~~these ~~Flows~~audited financial statements.

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

F-5

~~F-4~~Table of Contents

Energy Quest Inc.

(A Development Stage Company)

Consolidated Statement of Stockholders’ Equity (Deficit)

~~Deficit~~

Deficit

~~Accumulated~~

Accumulated

~~Additional~~

~~Other~~

~~Stock~~

~~During the~~

Additional

Other

Stock

During the

~~Common~~

Common

~~Paid-In~~

~~Comprehensive~~

~~Subscriptions~~

~~Development~~

Paid-In

Comprehensive

Subscriptions

Development

~~Stock~~

~~Amount~~Stock

~~Capital~~

~~Income~~

~~Receivable~~

~~Stage~~Amount

~~Total~~

Capital

Income

Receivable

Stage

Total

Balance – December 14, 2004 (Date of Inception)

–

$ –

Issue of common stock for cash on exercise of stock options

28,767

201,371

–

201,400

Issue of common stock for cash

1,000,000

407

–

407

Stock-based compensation

–

654,801

–

654,801

Issue of common stock for intangible asset

500,000

204

–

204

Issue of common stock for services

75,998

685,428

–

685,504

Net loss for the period

–

(10,015)

Foreign currency translation adjustment

–

(78

)

–

(78

)

Balance – December 31, 2004

1,500,000

611

–

(10,015)

(9,404)

Net loss for the year

–

(1,695,703

)

(1,695,703

)

Issue of common stock for cash

2,375

19,337

–

19,337

Balance – December 31, 2006

1,992,518

1,992

2,603,945

(1,097

)

–

(2,878,040

)

(273,200

)

1,502,375

19,948

–

(10,015)

9,933

Issue of common stock for cash

15,000

29,985

–

30,000

Adjustment to number of shares issued and outstanding as a result of the reverse takeover transaction:

Issue of common stock for subscription receivable

57,500

60,442

–

(60,500

)

–

- Add issued and outstanding stock of Energy Quest Inc. at time of reverse acquisition

321,128

321

6,102

–

(66,839)

(60,416)

Issue of common stock for services

500,500

501

1,282,550

–

1,283,051

- Deduct issued and outstanding stock of Energy Quest Inc.

(1,502,375)

(19,948)

–

19,948

–

Issue of common stock to round-up fractional shares due to reverse stock-split

–

Issue of common stock on acquisition of Energy Quest Inc.

1,502,375

1,502

28,545

–

(30,047)

–

Foreign currency translation adjustment

–

992

–

992

Issue of common stock for cash on exercise of stock options

13,000

77,987

–

78,000

Net loss for the year

–

(1,709,078

)

(1,709,078

)

Stock-based compensation

–

339,762

–

339,762

Balance – December 31, 2007

2,565,549

2,566

3,976,922

(105

)

(60,500

)

(4,587,118

)

(668,235

)

Issue of common stock for services

51,250

609,949

–

610,000

Foreign currency translation adjustment

–

(1,019)

–

(1,019)

Net loss for the year

–

(1,095,384)

Balance – December 31, 2005

1,887,753

$ 1,887

$ 1,062,345

$ (1,019)

$ –

$ (1,182,337)

$ (119,124)

~~F-5~~The accompanying notes are an integral part of these audited financial statements.

~~Energy Quest Inc.~~F-6

(ATable ~~Development~~of ~~Stage Company)~~Contents

~~Consolidated~~Energy ~~Statement~~Quest ~~of Stockholders’ Equity (Deficit)~~Inc.

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

(A Development Stage Company)

~~F-6~~Consolidated Statement of Stockholders’ Equity (Deficit)

Energy Quest Inc.

													Deficit
									Accumulated				Accumulated
						Additional			Other		Stock		During the
	Common					Paid-In			Comprehensive		Subscriptions		Development
	Stock		Amount			Capital			Income		Receivable		Stage			Total

Issue of common stock for cash		125,000		125			124,875			–		–		–			125,000

Issue of common stock for stock payable		107,700		108			161,442			–		–		–			161,550

Issue of common stock for patents		2,000,000		2,000			2,998,000			–		–		–			3,000,000

Issue of share-based compensation		1,750,000		1,806			319,943			–		–		–			321,749

Issue of common stock for expenses		25,000		25			31,225			–		–		–			31,250

Fair value of consulting services		–		(57	)		(60,443	)		–		60,500		–			–

Foreign currency translation adjustment		–		–			–			227		–		–			227

Net loss for the year		–		–			–			–		–		(987,924	)		(987,924	)

Balance – December 31, 2008		6,573,249		6,573			7,551,964			122		–		(5,575,042	)		1,983,617

Issue of common stock for cash		2,063,024		2,063			204,566			–		–		–			206,629

Issue of common stock for debt		2,982,021		2,982			325,040			–		–		–			328,022

Issue of common stock for services		2,200,000		2,200			582,026			–		–		–			584,226

Foreign currency translation adjustment		–		–			–			3,824		–		–			3,824

Net loss for the year		–		–			–			–		–		(912,751	)		(912,751	)

Balance – December 31, 2009		13,818,294		13,818			8,663,596			3,946		–		(6,487,793	)		2,193,567

(AThe ~~Development~~accompanying ~~Stage~~notes ~~Company)~~are an integral part of these audited financial statements.

~~Consolidated Statement of Stockholders’ Equity (Deficit)~~F-7

						Deficit
				Accumulated		Accumulated
			Additional	Other	Stock	During the
	Common		Paid-In	Comprehensive	Subscriptions	Development
	Stock	Amount	Capital	Income	Receivable	Stage	Total
Balance – December 31, 2007	2,565,549	$ 2,566	$ 3,976,922	$ (105)	$ (60,500)	$ (4,587,118)	$ (668,235)
Issue of common stock for cash	125,000	125	124,875	–	–	–	125,000
Issue of common stock for stock payable	107,700	108	161,442	–	–	–	161,550
Issue of common stock for patents	2,000,000	2,000	2,998,000	–	–	–	3,000,000
Issue of share-based compensation	1,750,000	1,806	319,943	–	–	–	321,749
Issue of common stock for expenses	25,000	25	31,225	–	–	–	31,250
Fair value of consulting services	–	(57)	(60,443)	–	60,500	–	–
Foreign currency translation adjustment	–	–	–	227	–	–	227
Net loss for the year	–	–	–	–	–	(987,924)	(987,924)
Balance – December 31, 2008	6,573,249	6,573	7,551,964	122	–	(5,575,042)	1,983,617
Issue of common stock for cash	2,063,024	2,063	204,566	–	–	–	206,629
Issue of common stock for debt	2,982,021	2,982	325,040	–	–	–	328,022
Issue of common stock for services	2,200,000	2,200	582,026	–	–	–	584,226
Foreign currency translation adjustment	–	–	–	3,824	–	–	3,824
Net loss for the year	–	–	–	–	–	(912,751)	(912,751)
Balance – December 31, 2009	13,818,294	13,818	8,663,596	3,946	–	(6,487,793)	2,193,567
Issue of common stock for cash	2,000,000	2,000	98,000	–	–	–	100,000
Issue of common stock for services	500,000	500	35,500	–	–	–	36,000
Issue of common stock upon conversion of convertible note	817,310	818	45,182	–	–	–	46,000
Settlement of derivative liability through conversion	–	–	114,625	–	–	–	114,625
Foreign currency translation adjustment	–	–	–	(3,946)	–	–	(3,946)
Net loss for the year	–	–	–	–	–	(3,409,831)	(3,409,831)
Balance – December 31, 2010	17,135,604	$ 17,136	$ 8,956,903	$ –	$ –	$ (9,897,624)	$ (923,585)

Table of Contents

~~F-7~~Energy Quest Inc.

~~Energy~~(A ~~Quest~~Development ~~Inc.~~Stage Company)

(AConsolidated ~~Development~~Statement ~~Stage~~of ~~Company~~Stockholders’ Equity (Deficit)

Notes to the Consolidated Statements

												Deficit
							Accumulated					Accumulated
					Additional		Other			Stock		During the
	Common				Paid-In		Comprehensive			Subscriptions		Development
	Stock		Amount		Capital		Income			Receivable		Stage			Total

Issue of common stock for cash		2,000,000		2,000		98,000		–			–		–			100,000

Issue of common stock for services		500,000		500		35,500		–			–		–			36,000

Issue of common stock upon conversion of convertible note		817,310		818		45,182		–			–		–			46,000

Settlement of derivative liability through conversion		–		–		114,625		–			–		–			114,625

Foreign currency translation adjustment		–		–		–		(3,946	)		–		–			(3,946	)

Net loss for the year		–		–		–		–			–		(3,409,831	)		(3,409,831	)

Balance – December 31, 2010		17,135,604	$	17,136	$	8,956,903	$	–		$	–	$	(9,897,624	)	$	(923,585	)

Issue of common stock for debt		20,000,000		20,000		341,654		–			–		–			361,654
Loss on shares issued for settlement of related party debt		-		-		38,345										38,345

Issue of common stock for services		1,000,000		1,000		9,000		–			–		–			10,000

Issue of common stock upon conversion of interest		239,914		240		8,158		–			–		–			8,398

Issue of common stock upon conversion of convertible note		2,236,426		2,236		29,764		–			–		–			32,000

Settlement of derivative liability through conversion		–		–		63,517		–			–		–			63,517

Settlement of related party debt		–		–		563,586		–			–		–			563,586

Net loss for the year		–		–		–		–			–		(423,262	)		(423,262	)

Balance – December 31, 2011		40,611,944	$	40,612	$	10,010,927	$	–		$	–	$	(10,320,886	)	$	(269,347	)

1The accompanying notes are an integral part of these audited financial statements.

~~Nature of Operations~~F-8

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

2Energy Quest Inc.

~~Going~~(A ~~Concern~~Development Stage Company)

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

31. Nature of Operations

~~Summary~~Energy Quest’s principal business involved an integrated gasification production system technology that combined modern gasification with turbine technologies to produce synthetic gas, hydrogen or electricity. On September 20, 2011, the Company entered into an Agreement to return its wholly-owned subsidiary, Syngas Energy Corporation (“Syngas”) and its technology to the former President of ~~Significant~~the ~~Policies~~Company as full settlement of any debts owed or accrued to him. Upon the closing of this transaction, the Company has no subsidiary and the financial statements are no longer consolidated. Refer to Note 11. Energy Quest is in the development stage as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities.

The Company entered into an Agreement dated December 15, 2011, with a) Consultant to provide services to the Company and to identify potential business opportunities or potential business acquisitions in the broadcasting, production and music media business. Refer to Note 12.

~~Basis~~2. ofGoing ~~Presentation~~Concern

~~These~~The ~~consolidated~~Company has incurred losses from operations since December 14, 2004 (inception) to December 31, 2011, has a working capital deficiency and an accumulated deficit that creates substantial doubt about the Company’s ability to continue as a going concern. These financial statements ~~and~~have ~~related~~been ~~notes~~prepared ~~are~~on ~~presented~~the inassumption ~~accordance~~that ~~with~~the ~~accounting~~Company ~~principles~~is ~~generally~~a ~~accepted~~going concern, meaning it will continue in operation for the ~~United~~foreseeable ~~States,~~future and ~~are~~will ~~expressed~~be able to realize assets and discharge liabilities in USthe ~~dollars.~~ordinary ~~These~~course of operations. The financial statements do not include ~~accounts~~any ofadjustments that might result from the outcome of this uncertainty. The Company’s ~~and~~continuation as a going concern is dependent upon its ~~wholly-owned~~ability ~~subsidiary~~to attain profitable operations and generate funds there-from, ~~Syngas~~and/or ~~Energy~~raises ~~Corporation.~~equity ~~All~~capital ~~intercompany~~or ~~transactions~~borrowings sufficient to meet current and ~~balances~~future ~~have~~obligations. Management ~~been~~plans ~~eliminated~~to raise equity financings over the next twelve months to finance operations. There ~~The~~is no guarantee that the Company’s ~~fiscal~~will ~~year~~be ~~end~~able isto ~~December~~complete 31any of these objectives.

b)3. Summary of Significant Policies

~~Use~~a) Basis of ~~Estimates~~Presentation

~~The~~These ~~preparation of~~ financial statements inand ~~conformity~~related ~~with~~notes USare ~~generally~~presented ~~accepted~~in accordance with accounting principles ~~requires~~generally ~~management~~accepted toin ~~make estimates and assumptions that affect~~ the ~~reported~~United ~~amounts~~States, ~~of assets~~ and ~~liabilities~~are ~~and~~expressed ~~disclosure~~in ofUS ~~contingent~~dollars. Until ~~assets~~September ~~and~~20, ~~liabilities~~2011, at the ~~date of the~~ financial statements ~~and~~included the ~~reported~~accounts ~~amounts~~to ~~of revenues and expenses during~~ the ~~reporting period. The~~ Company ~~regularly evaluates estimates~~ and ~~assumptions~~its ~~related to valuation of long~~wholly-~~lived~~owned ~~assets~~subsidiary, ~~stock~~Syngas ~~based~~Energy ~~compensation~~Corp. ~~and~~(“Syngas”). On ~~deferred~~September ~~income~~20, ~~tax~~2011, ~~asset~~the ~~valuation allowances. The~~ Company ~~bases~~entered ~~its~~into ~~estimates~~an ~~and~~Agreement ~~assumptions~~to onreturn ~~current~~Syngas ~~facts, historical experience~~ and ~~various~~its ~~other~~technology ~~factors that it believes~~ to ~~be reasonable under~~ the ~~circumstances,~~former ~~the~~President ~~results~~ of ~~which form~~ the ~~basis~~Company ~~for~~as ~~making~~full ~~judgments~~settlement ~~about~~of ~~the~~any ~~carrying~~debts ~~values~~owed ofor ~~assets~~accrued ~~and~~to ~~liabilities~~him. Upon ~~and~~ the ~~accrual~~closing of ~~costs~~this ~~and~~transaction, ~~expenses that are not readily apparent from other sources. The actual results experienced by~~ the Company ~~may~~has ~~differ~~no ~~materially~~subsidiary and ~~adversely from~~ the ~~Company’s~~financial ~~estimates.~~statements ~~To the extent there~~ are ~~material~~no ~~differences~~longer ~~between~~consolidated. The ~~the~~Company’s ~~estimates~~fiscal ~~and~~year-end ~~the~~is ~~actual~~December ~~results, future results of operations will be affected~~31.

cb) Use of Estimates

~~Cash~~The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and ~~Cash~~assumptions ~~Equivalents~~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.

~~The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.~~F-9

d)Table of Contents

~~Intangible~~Energy ~~Assets~~Quest Inc.

~~Intangible~~(A ~~assets~~Development ~~consist~~Stage of patents related to integrated gasification production systems and techniques. This technology combines modern gasification with gas turbine technologies to produce synthetic gas, hydrogen or electricity. The Company intends to further develop the technology to make it commercially viable and intends to then sell or license the technology. The technology is amortized over the life of the patent using the straight-line method. Patents and other intangible assets are evaluated for impairment annually or when events or changes in circumstances indicate that there may be impairment. For the years ended December 31, 2010 and 2009, the Company recognized an impairment loss of $2,632,666 and nil, respectively.)

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

~~F-8~~c) Cash and Cash Equivalents

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

~~Long-lived~~d) Intangible Assets

InIntangible ~~accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived~~ assets orconsisted ~~asset~~of ~~groups~~patents ~~for~~related ~~recoverability~~to ~~when~~integrated ~~events~~gasification orproduction ~~changes~~systems inand ~~circumstances indicate that their carrying amount may not be recoverable~~techniques. This ~~Circumstances~~technology ~~which~~combines ~~could~~modern ~~trigger~~gasification awith ~~review~~gas ~~include,~~turbine ~~but~~technologies ~~are not limited~~ to: ~~significant~~produce ~~decreases~~synthetic ingas, ~~the~~hydrogen ~~market price of the asset; significant adverse changes in the business climate~~ or ~~legal~~electricity. The ~~factors;~~Company ~~accumulation~~intended ofto ~~costs~~further ~~significantly~~develop ~~in excess of~~ the ~~amount~~technology ~~originally~~to ~~expected~~make ~~for~~it ~~the~~commercially ~~acquisition~~viable ~~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~~to ~~expectation~~then ~~that~~sell ~~the asset will more likely than not be sold~~ or ~~disposed~~license ~~significantly before~~ the ~~end of its estimated useful life~~technology. The ~~Recoverability~~technology iswas ~~assessed~~amortized ~~based~~over on the ~~carrying~~life ~~amount~~ of the ~~asset~~patent ~~and~~using ~~its fair value which is generally determined based on~~ the ~~sum~~straight-line ofmethod. Patents ~~the undiscounted cash flows expected to result from the use~~ and ~~the~~other ~~eventual~~intangible ~~disposal~~assets ofare ~~the~~evaluated ~~asset,~~for ~~as well as specific appraisal in certain instances. An~~ impairment ~~loss~~annually isor ~~recognized~~ when ~~the~~events ~~carrying~~or ~~amount~~changes isin ~~not~~circumstances ~~recoverable~~indicate ~~and~~that ~~exceeds~~there ~~fair~~may ~~value.~~be impairment. For ~~each of~~ the years ended December 31, ~~2010~~2011 and ~~2009~~2010, the Company ~~did~~recognized ~~not recognize~~ an impairment loss of $Nil and $2,632,666, respectively.

f)An impairment change was recorded due to delays in construction of the plant that would have been using the Company’s gasification technologies and the fact that we did not sale any licenses during 2010. The delays are due to lack of funding. During the year ended December 31, 2011, the intangible assets were returned to the former President of the Company as full settlement of any debts owed or accrued to him.

~~Revenue~~e) ~~Recognition~~Basic and Diluted Net Income (Loss) Per Share

The Company ~~recognizes~~computes ~~revenue~~net ~~when~~earnings ~~persuasive~~(loss) ~~evidence~~per ofshare anin ~~arrangement~~accordance ~~exists~~with ASC 260, ~~services~~Earnings ~~have~~Per ~~been~~Share, ~~rendered~~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 ~~sales~~average stock price for the period is ~~fixed~~used in determining the number of shares assumed to be purchased from the exercise of stock options or ~~determinable,~~warrants. Diluted ~~and~~EPS ~~collectability~~excludes isall ~~reasonably~~dilutive ~~assured~~potential shares if their effect is anti-dilutive.

gf) Foreign Currency Translation

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

The ~~Company’s~~functional ~~accounting~~currency ~~policy~~of ~~regarding~~the ~~advertising~~previously iswholly-owned tosubsidiary ~~expense~~was ~~advertising~~the Canadian dollar. The financial statements of the subsidiary were translated to ~~general~~United ~~and~~States ~~administrative~~dollars ~~expense~~in asaccordance ~~incurred.~~with ~~Advertising~~ASC ~~expenses~~740 ~~were~~using ~~approximately~~period-end ~~$4,000~~rates of exchange for assets and ~~$16~~liabilities,~~000~~ and average rates of exchange for the ~~years~~year ~~ended~~for ~~December~~revenues ~~31,~~and ~~2010~~expenses. Translation gains (losses) were recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Foreign currency transaction gains and ~~2009,~~losses ~~respectively~~were included in current operations.

hg) Fair Value of Financial Instruments

~~Basic~~Our financial instruments consist principally of cash, note receivable, accounts payable, amounts due to related parties, notes payable, and ~~Diluted~~convertible ~~Net~~notes. Pursuant ~~Income~~to ~~(Loss)~~ASC ~~Per~~820, ~~Share~~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.

~~The Company computes net earnings (loss~~h) ~~per~~Comprehensive 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.Loss

i)ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. In 2010, the Company recorded an impairment of the intangible asset, and as a result, there were no further assets remaining in the subsidiary. Accordingly, the balance of accumulated other comprehensive income was charged to operations in 2010.

~~Foreign~~i) ~~Currency~~Stock-Based ~~Translation~~Compensation

~~The~~In ~~Company’s~~accordance ~~functional~~with ~~and reporting currency is the United States dollar. Occasional transactions may occur in Canadian dollars and management has adopted~~ ASC ~~740~~718, ~~Foreign~~Compensation ~~Currency~~– ~~Translation~~Stock ~~Matters.~~Based ~~Monetary~~Compensation, ~~assets~~the ~~and~~Company ~~liabilities~~accounts ~~denominated~~for inshare-based ~~foreign~~payments ~~currencies are translated~~ using the ~~exchange~~fair ~~rate~~value ~~prevailing at the balance sheet date~~method. Common ~~Non-monetary~~shares ~~assets~~issued ~~and~~to ~~liabilities~~third ~~denominated~~parties infor ~~foreign~~non-cash ~~currencies~~consideration are ~~translated~~valued atbased ~~rates~~on ofthe ~~exchange~~fair inmarket ~~effect~~value ~~at the date~~ of the ~~transaction.~~services ~~Average~~provided ~~monthly~~or ~~rates~~the ~~are~~fair ~~used~~market tovalue ~~translate~~of ~~revenues~~the ~~and~~common ~~expenses.~~stock ~~Gains and losses arising~~ on ~~translation or settlement of foreign currency denominated transactions or balances are included in~~ the ~~determination~~measurement ofdate, ~~income.~~whichever ~~The~~is ~~Company~~more ~~has~~readily ~~never entered into derivative instruments to offset the impact of foreign currency fluctuations~~determinable.

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 (lossesj) ~~are~~Recent ~~recorded~~Accounting ~~in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Foreign currency transaction gains and losses are included in current operations.~~Pronouncements

~~F-9~~The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

j)F-10

~~Fair~~Table ~~Value~~ of ~~Financial Instruments~~Contents

~~Our~~Energy ~~financial~~Quest ~~instruments consist principally of cash, note receivable, accounts payable, amounts due to related parties and convertible notes~~Inc. 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(A Development Stage Company)

~~Comprehensive~~Notes ~~Loss~~to the Financial Statements

~~ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the financial statements~~4. InIntangible 2009, the Company’s only component of comprehensive loss was foreign currency translation adjustments. At December 31, 2010, the Company recorded an impairment of the intangible asset, and as a result, there are no further assets remaining in the subsidiary. Accordingly, the balance of accumulated other comprehensive income was charged to operations.Assets

lOn 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 intended to further develop the technology to make it commercially viable and 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. During the year ended December 31, 2010, the remaining carrying cost of $30,743 was recorded as an impairment of intangible asset as a result of delays in construction of the plant due to lack of funding.

~~Stock~~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-~~Based~~time ~~Compensation~~payment for the purchase of two patents acquired under a purchase/assignment agreement entered into in March 2008. The shares were valued on the closing date of the agreement. Amortization was being recognized over the expected legal useful life of 20 years, and amortization expense for the years ended December 31, 2011 and 2010 was $Nil and $150,000, respectively. At December 31, 2010, the remaining carrying cost of $2,601,923 was recorded as an impairment of intangible asset as a result of delays in construction of the plant due to lack of funding.

~~In accordance with ASC 718, Compensation – Stock Based Compensation, the Company accounts for share-based payments using the fair value method~~5. ~~Common~~Related ~~shares~~Party issued to third parties for non-cash consideration are valued based on the fair market value of the services provided or the fair market value of the common stock on the measurement date, whichever is more readily determinable.Transactions

m)The following details note receivable from related parties at December 31, 2011:

~~Recent~~During ~~Accounting~~the ~~Pronouncements~~year ended December 31, 2010, the Company loaned a director $10,000 pursuant to a note receivable. The Note earns interest at 6% per annum and was due on September 15, 2010 or upon demand by the Company. This loan was in violation of applicable U.S. law prohibiting loans by public companies to their directors and executive officers. The director was terminated and the outstanding balance of the note and accrued interest totalling $6,778 was charged to expense during the year ended December 31, 2011. It is uncertain if fines will be imposed due to violation.

The ~~Company~~following ~~has~~details ~~implemented~~amounts ~~all~~due ~~new~~to ~~accounting~~related ~~pronouncements~~parties ~~that~~at ~~are~~December in31, effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.2011:

4a) During the year ended December 31, 2011, the Company recorded $87,500 (2010 - $150,000) for management services provided by the former President of the Company. At December 31, 2011, $Nil (December 31, 2010 - $478,231) is included in due to related parties. See Note 11.

~~Intangible~~b) ~~Assets~~During the year ended December 31, 2011, the Company recorded $87,500 (2010 - $150,000) for management services provided by the President of the Company. At December 31, 2011, $Nil (December 31, 2010 - $227,084) is included in due to related parties. See Note 7(d).

a)The following details Notes payable – related parties:

c) On ~~December~~March 2415, ~~2004~~2009, the Company ~~purchased~~received an$14,710 ~~integrated~~(CDN$ ~~gasification~~15,000) ~~production system~~ from ~~the~~a ~~CEO~~related ofparty ~~the~~consultant ~~Company.~~in ~~The~~exchange ~~technology~~for ~~combines~~a ~~modern~~promissory ~~gasification~~note ~~with gas turbine technologies to produce synthetic gas, hydrogen or electricity~~payable. The ~~Company~~note ~~intends~~bears tointerest ~~further~~at ~~develop~~6% ~~the~~per ~~technology~~annum ~~to make it commercially viable~~ and ~~intends~~is todue ~~then~~on ~~sell or license the technology~~demand. ~~The~~At ~~Company~~December ~~purchased the asset by issuing 10~~31,~~000,000~~ ~~(500~~2011,~~000~~ ~~post~~this ~~reverse~~amount ~~stock~~is ~~split)~~included ~~common~~in ~~shares~~notes ofpayable ~~the~~– ~~Company~~related ~~and a $25~~party,~~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~~related toaccrued ~~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~~$2,469 ~~2007, the 500,000 common shares were released from escrow. At~~ (December 31, 2010, ~~the~~- ~~carrying cost of~~ $301,~~743~~618) ~~was~~is ~~recorded~~included ~~as an impairment of intangible asset as a result of delays~~ in ~~construction~~amounts ~~of the plant~~ due to ~~lack~~related ~~of funding~~parties.

bd) On November 5, 2007, the Company received $21,000 from a director in exchange for a promissory note payable. The note bears interest at 6% per annum, calculated annually, and is due on demand. At December 31, 2011, accrued interest of $5,237 (December 31, 2010 - $3,977) is included in amounts due to related parties.

e) On ~~May~~April 514, ~~2008~~2010, the Company ~~issued~~received 2$50,000~~,000~~ ~~shares~~from ofthe ~~common~~President ~~stock~~of ~~with~~the aCompany ~~fair~~in ~~value~~exchange ~~of $3,000,000~~ for a ~~one-time~~promissory ~~payment~~note ~~for~~payable. ~~the~~The ~~purchase~~note ofbears ~~two~~interest ~~patents~~at ~~acquired~~6% ~~under~~per aannum ~~purchase/assignment~~and ~~agreement~~was ~~entered~~due ~~into~~on in March ~~2008~~31, 2011. ~~The~~During ~~shares~~the ~~were~~period ~~valued~~ended onDecember ~~the~~31, ~~closing~~2011, ~~date of~~ the ~~agreement.~~Company ~~Amortization~~paid ~~was being recognized over~~ the ~~expected~~note ~~legal~~by ~~useful~~issuing ~~life~~shares of 20common ~~years,~~stock. ~~and~~(See ~~amortization~~Note ~~expense~~7(d)). ~~for~~At ~~each of the years ended~~ December 31, ~~2010~~2011, ~~and~~accrued ~~2009~~interest ~~was~~of $~~150,000.~~Nil At (December 31, 2010, ~~the~~- ~~carrying cost of~~ $2,~~601,923~~145) ~~was~~is ~~recorded~~included ~~as an impairment of intangible asset as a result of delays~~ in ~~construction~~amounts ~~of the plant~~ due to ~~lack~~related ~~of funding~~parties.

~~F-10~~6. Convertible Debt

5a) On January 29, 2010, the Company borrowed $50,000 from a private investor and issued a callable convertible note with an 8% interest rate, 22% interest rate upon default and a maturity of nine months. The Company paid a finders’ fee of $2,500. The note is convertible into common shares at 55% of the average of the lowest three closing prices for the Company’s common shares during the ten trading day period ending one trading day prior to the date the conversion notice is sent by the investor to the borrower.

~~Related~~The ~~Party~~embedded ~~Transactions~~conversion option contains a reset provision that can cause an adjustment to the conversion price if the Company sells or issues an equity instrument at a price lower than the initial conversion price. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15. This fair value of the derivative liability at issuance of $81,995 resulted in a full discount to the note payable and a loss on the fair value of derivatives of $31,995. The carrying value of the convertible note was accreted over the term of the convertible note up to their value of $50,000. See Note 9.

~~The~~As ~~following~~at ~~details~~December ~~note~~31, ~~receivable~~2011, ~~from~~the ~~related~~total ~~party~~balance atof $50,000 plus $2,000 accrued interest (December 31, 2010: - $46,000), has been converted into 1,059,245 common shares in the years ended December 31, 2010 and 2011.

~~During the year ended December 31, 2010, the Company loaned a director $10,000 (2009~~ F- $Nil) pursuant to a note receivable. The note earns interest at 6% per annum and was due on September 15, 2010 or upon demand by the Company. The outstanding balance of the note, including accrued interest of $299, was $8,656 as of December 31, 2010.11

~~The~~Table ~~following~~of ~~details amounts due to related parties at December 31, 2010:~~Contents

a)Energy Quest Inc.

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

b)Notes to the Financial Statements

~~During~~The ~~the~~following ~~year~~table ~~ended~~summarize ~~December 31, 2010,~~ the ~~Company~~change ~~recorded~~in ~~$150,000~~convertible ~~(2009~~debt -as ~~$150,000) for management services provided by the Secretary~~ of ~~the Company. At~~ December 31, ~~2010, $227,084 (December 31, 2009 - $152,917) is included in due to related parties.~~2011:

The following details Notes payable – related parties:

	December 31, 2011			December 31, 2010

Proceeds from convertible debt	$	-		$	50,000
Discount		-			(50,000	)
Converted into 1,059,245 shares of common stock		(50,000	)		(46,000	)
Accretion of debt discount		50,000			50,000
Carrying value	$	–		$	4,000

c)As of December 31, 2011, the Company has recorded $50,000 as the accretion of interest expense on the convertible note and recorded the cost associated with obtaining the convertible note as deferred financing cost of $2,500 on February 8, 2010. As of December 31, 2011, the Company recorded $2,500 on amortization of the deferred financing cost.

~~During~~b) ~~the~~On ~~year~~November ~~ended December 31~~24, 2010, the Company ~~received~~borrowed an$50,000 ~~advance~~from ofa ~~$Nil~~private ~~(2009~~investor -and ~~$14~~issued a callable convertible note with an 8% interest rate,~~298)~~ ~~from~~22% interest rate upon default and a ~~related~~maturity ~~party~~of ~~consultant~~nine months. AtThe ~~December~~Company ~~31,~~paid ~~2010~~a finders’ fee of $3,000. ~~this~~The ~~amount~~note is ~~included~~convertible ininto ~~notes~~common ~~payable~~shares –at ~~related~~55% ~~parties,~~of ~~and~~the average of the ~~related~~lowest ~~accrued~~three ~~interest~~closing ofprices ~~$1,618~~for ~~(2009~~the -Company’s ~~$684)~~common shares during the ten trading day period ending one trading day prior to the date the conversion notice is ~~included~~sent inby ~~amounts~~the ~~due~~investor to ~~related~~the ~~parties~~borrower.

d)The embedded conversion option contains a reset provision that can cause an adjustment to the conversion price if the Company sells or issues an equity instrument at a price lower than the initial conversion price. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15. This fair value of the derivative liability at issuance of $71,911 resulted in a full discount to the note payable and a loss on the fair value of derivatives of $21,911. The carrying value of the convertible note is to be accreted over the term of the convertible note up to their value of $50,000. See Note 9.

OnDuring ~~November~~the 5,year ~~2007,~~ended ~~the~~December ~~Company~~31, ~~received~~2011, $2126,000 ~~from~~was aconverted ~~director~~into in1,994,491 ~~exchange~~shares ~~for~~of acommon ~~promissory note payable~~stock. As ~~The~~at ~~note~~December ~~bears~~31, ~~interest~~2011, atthe 6%carrying ~~per~~values ~~annum,~~of ~~calculated~~the ~~annually,~~convertible note and isaccrued ~~due~~convertible oninterest ~~demand.~~payable Atthereon were $24,000, (December 31, 2010, ~~accrued~~- ~~interest~~$6,777), ofand $3,~~977~~417, (~~2009~~December 31, 2010 - $~~2,717~~406), ~~is included in amounts due to related parties~~respectively.

e)The following table summarize the change in convertible debt as of December 31, 2011:

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

	December 31, 2011			December 31, 2010

Proceeds from convertible debt	$	-		$	50,000
Discount		-			(50,000	)
Converted into 1,994,491 shares of common stock		(26,000	)		–
Accretion of debt discount		50,000			6,777
Carrying value	$	24,000		$	6,777

During the year ended December 31, 2011, the Company recorded $43,223 (December 31, 210 - $6,777) as the accretion of interest expense on the convertible note and recorded the cost associated with obtaining the convertible note as deferred financing cost of $3,000 on November 24, 2010. During the year ended December 31, 2011, the Company recorded $2,407, (December 31, 2010 - $593) on amortization of deferred financing cost.

~~Advances from Former Shareholders~~F-12

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

7Energy Quest Inc.

~~Convertible~~(A ~~Debt~~Development Stage Company)

a)Notes to the Financial Statements

c) On ~~January~~May 2926, ~~2010~~2011, the Company borrowed $5035,000 from a private investor and issued a callable convertible note with an 8% interest rate, 22% interest rate upon default and a maturity of nine months. The Company paid a finders’ fee of $2,500. The note is convertible into common shares at 5550% of the average of the lowest three closing prices for the Company’s common shares during the ten trading day period ending one trading day prior to the date the conversion notice is sent by the investor to the borrower.

The embedded conversion option contains a reset provision that can cause an adjustment to the conversion price if the Company sells or issues an equity instrument at a price lower than the initial conversion price. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 ~~(See Note 10 below)~~. This fair value of the derivative liability at issuance of $8152,~~995~~570 resulted in a full discount to the note payable and a loss on the fair value of derivatives of $3117,~~995~~570. The carrying value of the convertible note is to be accreted over the term of the convertible note up to their value of $5035,000. See Note 9.

~~During~~As ~~the~~at ~~year ended~~ December 31, ~~2010~~2011, ~~$46,000 was converted into 817,310 common shares, and~~ the carrying values of the convertible note and accrued convertible interest payable thereon were $427,~~000~~572 and $31,~~001~~680, respectively. ~~The remaining balance of $4,000 was converted into 241,935 common shares on January 18, 2011.~~

~~F-11~~The following table summarize the change in convertible debt as of December 31, 2011:

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

	December 31, 2011			December 31, 2010

Proceeds from convertible debt	$	35,000		$	–
Discount		(35,000	)		–
Accretion of debt discount		27,572			–
Carrying value	$	27,572		$	–

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

During the year ended December 31, 2011, the Company recorded $27,572 as the accretion of interest expense on the convertible note and recorded the cost associated with obtaining the convertible note as deferred financing cost of $2,500 on May 26, 2011. During the year ended December 31, 2011, the Company recorded $1,970 on amortization of deferred financing cost.

For the year ended December 31, 2010, the Company recorded $50,000 as the accretion of interest expense on the convertible note and recorded the cost associated with obtaining the convertible note as deferred financing cost of $2,500 on February 8, 20107. ~~As of December 31, 2010, the Company recorded $2,500 on amortization of the deferred financing cost.~~Equity

ba) Effective September 20, 2011, the Company settled $563,586 of outstanding management fees and advances due to the former President of the Company by returning Syngas Energy Corporation, a wholly-owned subsidiary of the Company, and its technology to him. All amounts owed from Syngas to the Company were also forgiven. The Company recognized $563,586 as a contribution of capital. See Note 11.

Onb) ~~November~~During ~~24, 2010,~~ the ~~Company~~year ~~borrowed~~ended ~~$50~~December 31,~~000~~ ~~from~~2010 ~~a private investor~~ and ~~issued a callable convertible note with an 8% interest rate~~2011, ~~22%~~the ~~interest rate upon default and a maturity of nine months. The~~ Company ~~paid~~issued ~~a finders’ fee of $3~~2,~~000.~~236,426 ~~The note is convertible into common~~ shares ~~at 55%~~ of ~~the average of the lowest three closing prices for the Company’s~~ common ~~shares~~stock ~~during~~upon the ~~ten~~partial ~~trading day period ending one trading day prior to the date the~~ conversion ~~notice~~of ~~is sent by~~ the ~~investor~~Notes referred to ~~the~~in ~~borrower~~Note 6.

~~The~~c) ~~embedded~~On ~~conversion~~December ~~option~~15, ~~contains~~2011, ~~a reset provision that can cause an adjustment to~~ the ~~conversion price if the~~ Company ~~sells~~issued ~~or issues an equity instrument at a price lower than the initial conversion price. Due to this provision~~1,000,000 ~~the~~shares ~~embedded conversion option qualifies for derivative accounting under ASC 815-15 (See Note 10 below). This fair value~~ of ~~the~~common ~~derivative~~stock ~~liability~~with ~~at issuance of $71,911 resulted in~~ a ~~full discount to the note payable and a loss on the~~ fair value of ~~derivatives of~~ $2110,~~911.~~000 ~~The~~for ~~carrying~~services ~~value~~received ofpursuant ~~the convertible note is~~ to ~~be accreted over~~ the ~~term~~agreement ofreferred ~~the convertible note up~~ to ~~their~~in ~~value~~Note ~~of $50,000~~12.

Asd) atOn December 316, ~~2010~~2011, the ~~carrying~~Company ~~values~~issued 20,000,000 shares of ~~the~~common ~~convertible~~stock ~~note~~with ~~and~~a ~~accrued~~fair ~~convertible~~value ~~interest~~of ~~payable~~$400,000 ~~thereon~~for ~~were~~settlement of $6361,~~777~~654 ~~and~~due a related party. Since the fair value of the shares issued was more than the amounts due to related party, the Company recognized as stock compensation of $~~406~~38,346 ~~respectively~~as the debt was due to a related party.

~~The~~e) ~~following~~On ~~table~~August ~~summarize~~10, 2011, the ~~change~~Company inissued ~~convertible~~239,914 ~~debt~~shares of common stock for interest of the ~~year~~notes ~~ended~~payable ~~December~~referred ~~31,~~to ~~2010:~~in Note 10.

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

f)	During the year ended December 31, 2010, the Company issued 817,310 shares of common stock upon the partial conversion of the Notes referred to in Note 6.

~~For~~g) ~~the~~On ~~year~~September ~~ended December 31~~1, 2010, the Company ~~recorded~~issued $6500,~~777~~000 asshares ~~the accretion~~ of ~~interest~~common ~~expense~~stock ~~on the convertible note and recorded the cost associated~~ with ~~obtaining~~a ~~the~~fair ~~convertible~~value ~~note as deferred financing cost~~ of $336,000 onfor ~~November~~services ~~24, 2010~~received. ~~As of December 31, 2010, the Company recorded $593 on amortization of deferred financing cost.~~

8h) On June 5, 2010, the Company issued 2,000,000 shares of common stock pursuant to a private placement at $0.05 per share for cash proceeds of $100,000.

~~Equity~~F-13

a)Table of Contents

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

b(A Development Stage Company)

OnNotes ~~September~~to ~~1, 2010,~~ the ~~Company~~Financial ~~issued 500,000 shares of common stock with a fair value of $36,000 for services received.~~Statements

c)8. Fair Value Measurements

OnASC ~~June~~825 5,defines ~~2010,~~fair value as the ~~Company~~price ~~issued~~that ~~2,000,000~~would ~~shares~~be ofreceived ~~common~~from ~~stock~~selling ~~pursuant~~an asset or paid to transfer a ~~private~~liability ~~placement~~in an orderly transaction between market participants at $0the measurement date.05 In ~~per~~determining ~~share~~fair value for ~~cash~~assets ~~proceeds~~and ofliabilities ~~$100~~required or permitted to be recorded at fair value,~~000~~ the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

d)Fair Value Hierarchy

OnASC ~~November~~825 ~~10,~~establishes ~~2009,~~a fair value hierarchy that requires an entity to maximize the ~~Company~~use ~~issued~~of ~~1,000,000~~observable ~~shares~~inputs and minimize the use of ~~common~~unobservable ~~stock~~inputs ~~with~~when ameasuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of ~~$200,000~~input ~~for~~that ~~services~~is ~~received~~significant to the fair value measurement. ASC 825 establishes three levels of inputs that may be used to measure fair value.

e)Level 1 applies to assets and liabilities for which there are quoted prices in active markets for identical assets or liabilities. Valuations are based on quoted prices that are readily and regularly available in an active market and do not entail a significant degree of judgment.

OnLevel ~~August~~2 14applies to assets and liabilities for which there are other than Level 1 observable inputs such as quoted prices for similar assets or liabilities in active markets, ~~2009~~quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets), ~~the~~or ~~Company~~model-derived ~~issued~~valuations 1in which significant inputs are observable or can be derived principally from,~~000~~ or corroborated by,~~000~~ ~~shares~~observable ofmarket ~~common~~data. Level ~~stock~~2 ~~with~~instruments arequire ~~fair~~more ~~value~~management judgment and subjectivity as compared to Level 1 instruments. For instance: determining which instruments are most similar to the instrument being priced requires management to identify a sample of ~~$200~~similar securities based on the coupon rates,~~000~~ ~~for~~maturity, ~~services~~issuer, ~~received~~credit rating and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar to the security being priced; and determining whether a market is considered active requires management judgment.

f)Level 3 applies to assets and liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The determination of fair value for Level 3 instruments requires the most management judgment and subjectivity.

OnPursuant ~~July~~to ~~10,~~ASC ~~2009~~825, the ~~Company~~fair ~~issued~~value ~~100~~of the cash equivalent is determined based on “Level 1” inputs,~~000~~ ~~shares~~which consists of ~~common~~quoted ~~stock~~prices ~~pursuant~~in toactive amarkets ~~private~~for ~~placement~~identical assets. Convertible notes payable are valued based on “Level 2” inputs, consisting of quoted prices in less active markets. The Company ~~received~~believes ~~$0.10~~that ~~per~~the ~~share~~recorded values of ~~common~~all ~~stock~~of ~~for~~the ~~total~~other ~~proceeds~~financial instruments approximate their current fair values because of ~~$10,000~~their nature and respective relatively short maturity dates or durations.

g)Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s balance sheet as at December 31, 2011 as follows:

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

	Fair Value Measurements Using
	Quoted prices in active markets for identical instruments (Level 1) $		Significant other observable Inputs (Level 2) $		Significant Unobservable inputs (Level 3) $			Balance, December 31, 2011 $			Balance, December 31, 2010 $

Derivative liabilities		–		–		(94,612	)		(94,612	)		(97,375	)

		–		–		(94,612	)		(94,612	)		(97,375	)

h)The fair values of other financial instruments, which include accounts payable and accrued liabilities, amounts due to related parties, notes payable, notes payable – related parties, convertible notes and derivative liabilities, approximate their carrying values due to the relatively short-term maturity of these instruments.

On June 11, 2009, the Company issued 163,024 shares of common stock with a fair value of $32,605 for settlement of amounts due a related party. Since the fair value of the shares issued was more than the amounts due to related party, the Company recognized a loss on the shares issued for amounts due a related party for $15,976.F-14

i)Table of Contents

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

j(A Development Stage Company)

OnNotes ~~May~~to ~~4, 2009,~~ the ~~Company~~Financial ~~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.~~Statements

k)9. Derivative Liability

OnASC ~~January~~815-15 ~~26,~~lays ~~2009,~~out ~~the Company issued 2,982,021 shares of common stock with~~ a ~~fair~~procedure ~~value~~to ofdetermine ~~$328,022~~if ~~for settlement of amounts due a related party pursuant to~~ an ~~agreement~~equity-linked ~~with~~financial ~~the~~instrument ~~related~~(or ~~party~~embedded tofeature) ~~issue~~is ~~shares~~indexed ~~in exchange for $241,120 debt owed by the Company due~~ to ~~the~~its ~~debt~~own ~~assignment~~common ~~agreement and an aggregate of $86,902 that the Company owed to related party~~stock.

l)Convertible Debt - The embedded conversion option in the Company’s notes described in Note 5 contain a reset provision that can cause an adjustment to the conversion price if the Company sells or issues an equity instrument at a price lower than the initial conversion price. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in our statement of operations as a gain or loss on derivative financial instruments.

~~During~~The ~~the~~following ~~year~~table ~~ended~~summarizes ~~December~~the ~~31,~~change ~~2009,~~in ~~the~~derivative ~~company~~liabilities ~~recognized~~as ~~$120,750~~ of ~~expenses~~December ~~related to services provided through June 30~~31, ~~2009 under a share-based compensation arrangement.~~ 2011:

F-12

Derivative Liabilities at December 31, 2010	$	97,375
Addition of new derivative liabilities		52,570
Conversion of derivative liability		(63,517	)
Change in fair value of embedded conversion option		8,184
Derivative Liabilities at December 31, 2011	$	94,612

9.The following table summarizes the loss on derivatives as of December 31, 2011:

Fair Value Measurements

Fair value of derivative liabilities in excess of note proceeds received		17,570
Change in fair value of derivative liabilities at December 31, 2011		8,184
Loss on derivative liabilities – December 31, 2011	$	25,754

~~ASC~~The ~~825~~Company ~~defines~~used ~~fair value as~~ the ~~price~~Black-Scholes ~~that~~option ~~would~~pricing bemodel ~~received from selling an asset or paid~~ to ~~transfer~~value athe ~~liability~~embedded inconversion anfeature ~~orderly~~using ~~transaction between market participants at~~ the ~~measurement~~following ~~date.~~assumptions: Innumber ~~determining~~of ~~fair~~options ~~value~~as ~~for~~set ~~assets~~forth ~~and~~in ~~liabilities~~the ~~required~~convertible ornotes ~~permitted~~agreements; tono beexpected ~~recorded~~dividend atyield; ~~fair~~expected ~~value,~~volatility ~~the~~ranging ~~Company~~from ~~considers~~212% ~~the~~- ~~principal~~534%; orrisk-free ~~most~~interest ~~advantageous~~rates ~~market~~ranging infrom ~~which~~0.01% it- ~~would~~0.28% ~~transact~~ and itexpected ~~considers~~terms ~~assumptions~~based ~~that~~on ~~market participants would use when pricing~~ the ~~asset~~contractual ~~or liability~~term.

~~Fair~~10. ~~Value~~Notes ~~Hierarchy~~Payable

~~ASC~~On ~~825~~August ~~establishes~~10, a2011, ~~fair~~the ~~value~~Company ~~hierarchy~~received ~~that~~$30,000 ~~requires~~from antwo ~~entity~~lenders toin ~~maximize~~exchange ~~the~~for ~~use~~two ofpromissory ~~observable~~notes ~~inputs~~payable. The ~~and~~notes ~~minimize~~bear ~~the~~interest ~~use~~at of8% ~~unobservable~~per ~~inputs~~annum ~~when~~and ~~measuring~~are ~~fair~~due ~~value~~on demand. On AAugust ~~financial~~10, ~~instrument’s~~2011, ~~categorization~~the ~~within~~Company ~~the~~issued ~~fair~~239,914 ~~value~~shares ~~hierarchy~~of iscommon ~~based~~stock ~~upon~~at ~~the~~a ~~lowest~~fair ~~level~~value of ~~input~~$8,397 ~~that~~for isthe ~~significant~~$2,399 tointerest on the ~~fair value measurement~~notes. This ~~ASC~~resulted ~~825~~in ~~establishes~~a ~~three~~loss ~~levels~~ of ~~inputs~~$5,998. As ~~that~~of ~~may~~December be31, ~~used~~2011, toboth ~~measure~~notes ~~fair~~are ~~value~~in default.

~~Level 1 applies to assets and liabilities for which there are quoted prices in active markets for identical assets or liabilities~~11. ~~Valuations~~Sale ~~are based on quoted prices that are readily and regularly available in an active market and do not entail a significant degree~~ of ~~judgment.~~Subsidiary

~~Level~~The 2Company ~~applies~~entered tointo ~~assets~~an ~~and~~Agreement ~~liabilities~~dated ~~for~~September ~~which~~20, ~~there~~2011 ~~are~~to ~~other~~return ~~than~~its ~~Level~~wholly-owned 1subsidiary, ~~observable~~Syngas ~~inputs~~Energy ~~such~~Corporation as(“Syngas”) ~~quoted~~and ~~prices~~its ~~for~~technology ~~similar~~to ~~assets~~the orformer ~~liabilities~~President inof ~~active~~the ~~markets,~~Company ~~quoted~~as ~~prices~~full ~~for~~settlement ~~identical~~of ~~assets~~any ordebts ~~liabilities~~owed inor ~~markets~~accrued ~~with~~to ~~insufficient~~him. Upon ~~volume~~the orclosing ~~infrequent~~of ~~transactions~~the ~~(less~~transaction, ~~active~~the ~~markets),~~Company orhas ~~model-derived~~no ~~valuations~~subsidiaries inand ~~which~~the ~~significant~~financial ~~inputs~~statements are ~~observable~~no orlonger ~~can~~consolidated. Upon bethe ~~derived~~return ~~principally~~of ~~from~~Syngas, orthe ~~corroborated~~former ~~by,~~President ~~observable~~forever ~~market~~discharges ~~data.~~and ~~Level~~releases 2the ~~instruments~~Company ~~require~~from ~~more~~any ~~management judgment~~ and ~~subjectivity~~all asclaims, ~~compared~~damages, toactions, ~~Level~~etc. 1which ~~instruments.~~the ~~For~~former ~~instance:~~President ~~determining~~had ~~which~~or ~~instruments~~may ~~are~~have ~~most~~arising ~~similar~~out toof the ~~instrument~~Debt ~~being~~Amount. As ~~priced~~a ~~requires~~term ~~management~~of tothe ~~identify~~Agreement, athe ~~sample~~intercompany ofdebt ~~similar~~between ~~securities~~Syngas ~~based~~and on the ~~coupon~~Company ~~rates,~~is ~~maturity,~~extinguished. The ~~issuer,~~sole ~~credit~~asset ~~rating~~ and ~~instrument~~liability ~~type,~~of ~~and~~Syngas ~~subjectively~~at ~~select~~the antime ~~individual~~of ~~security~~the ortransaction ~~multiple~~consisted ~~securities~~of ~~that~~the ~~are~~intercompany ~~deemed~~debt ~~most~~of ~~similar~~$61,457. The toCompany recognized the ~~security~~settlement ~~being~~of ~~priced;~~debt ~~and~~of ~~determining~~the ~~whether~~former President of $563,586 as a ~~market~~charge isto ~~considered~~additional ~~active~~paid-in ~~requires~~capital ~~management~~as ~~judgment~~it was a related party transaction.

~~Level 3 applies to assets and liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities~~12. ~~The determination of fair value for Level 3 instruments requires the most management judgment and subjectivity.~~Commitments

~~Pursuant~~In ~~to ASC 825,~~ the ~~fair~~normal ~~value~~course of ~~the~~business, ~~cash~~we ~~equivalent~~may isbecome ~~determined~~subject ~~based~~to onlawsuits ~~“Level~~and 1”other ~~inputs,~~claims ~~which~~and ~~consists~~proceedings. Such ofmatters ~~quoted~~are ~~prices~~subject into ~~active~~uncertainty ~~markets~~and ~~for~~outcomes ~~identical assets. Convertible notes payable~~ are ~~valued~~not ~~based~~predictable onwith ~~“Level~~assurance. Management 2”is ~~inputs,~~not ~~consisting~~aware of ~~quoted~~any ~~prices~~pending inor ~~less~~threatened ~~active~~lawsuits ~~markets.~~or ~~The~~proceedings ~~Company~~which ~~believes~~would ~~that~~have ~~the~~a ~~recorded~~material ~~values~~effect ofon ~~all of~~ the ~~other~~Company’s financial ~~instruments~~position, ~~approximate~~liquidity, ~~their~~or ~~current~~results ~~fair values because~~ of ~~their nature and respective relatively short maturity dates or durations~~operations.

~~F-13~~a) On December 15, 2011, the Company entered into an Agreement with a Consultant to provide services to the Company and to identify potential business opportunities or potential business acquisitions in the broadcasting, production and music media business. The term is for a period of one year. On December 20, 2011, the Consultant was issued 1,000,000 shares of common stock with a fair value of $10,000.

~~Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s balance sheet as at December 31, 2010 as follows:~~F-15

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

Table of Contents

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

~~10.~~(A Development Stage Company)

~~Derivative~~Notes ~~Liability~~to the Financial Statements

~~ASC~~13. ~~815-15~~Income ~~lays out a procedure to determine if an equity-linked financial instrument (or embedded feature) is indexed to its own common stock.~~Taxes

~~Convertible~~A ~~Debt~~reconciliation -of ~~The embedded conversion option in~~ the ~~Company’s~~expected ~~two~~income ~~$50,000~~tax ~~notes~~recovery ~~described~~computed inby ~~Note~~applying ~~7 contain a reset provision that can cause an adjustment to~~ the ~~conversion~~statutory ~~price~~United ifStates ~~the~~federal ~~Company~~income ~~sells~~tax orrate ~~issues an equity instrument at a price lower than the initial conversion price. The fair value~~ of ~~these~~35% ~~liabilities~~to ~~will~~income ~~be re-measured at the end of every reporting period and the change in fair value will be reported in our consolidated statement of operations as a gain or~~ (loss) onbefore ~~derivative~~taxes ~~financial instruments.~~follows:

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

	For the year ended December 31, 2011			For the year ended December 31, 2010

Income tax recovery at statutory rate	$	148,142		$	1,193,441

Non-deductible stock-based compensation		(16,921	)		(12,600	)

Non-deductible amortization		–			(52,500	)

Non-deductible impairment		–			(921,433	)

Valuation allowance change		(131,221	)		(206,908	)

Provision for income taxes	$	–		$	–

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

The components of the net deferred tax asset at December 31, 2011 and 2010 consist of:

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

	December 31, 2010			December 31, 2010

Net operating loss carry-forward	$	2,260,000		$	2,100,000

Valuation allowance		(2,260,000	)		(2,100,000	)

Net deferred income tax asset	$	–		$	–

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

Potential benefits of income taxes are not recognized in the accounts until realization is more likely than not. At December 31, 2011, the Company has a net operating loss carry-forward of $6,449,300 that expire through fiscal 2031. 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.

~~The~~Current ~~Company~~United ~~used~~States ~~the~~income ~~Black-Scholes~~tax ~~option~~laws ~~pricing~~limit ~~model to value~~ the ~~embedded~~amount ~~conversion feature using the following assumptions: number~~ of ~~options~~loss asavailable ~~set~~to ~~forth~~be inoffset ~~the~~against ~~convertible~~future ~~notes~~taxable ~~agreements;~~income nowhen ~~expected~~a ~~dividend~~substantial ~~yield;~~change ~~expected~~in ~~volatility~~ownership ~~ranging~~occurs. Therefore, ~~from~~the ~~212%~~amount -available ~~534%;~~to ~~risk-free~~offset ~~interest~~future ~~rates~~taxable ~~ranging~~income ~~from~~may ~~0.15%~~be -limited ~~0.24%~~under ~~and~~IRC ~~expected terms based on the contractual term~~382.

F-14. Subsequent Events

11On March 10, 2012, the Company entered into a promissory note agreement with its president for $26,000 with 5% interest. The note is due on October 10, 2012 or upon demand of the president.

~~Income Taxes~~F-16

ATable ~~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:~~Contents

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

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

~~The~~Since ~~components~~inception, ofwe ~~the~~have ~~net~~had ~~deferred~~no ~~tax~~changes ~~asset~~in ator disagreements with our accountants. Our audited financial statements for the fiscal years ended December 31, ~~2010~~2011 and ~~2009~~2010 ~~consist~~have ~~of:~~been included in this annual report in reliance upon Malone & Bailey PC, Independent Registered Public Accounting Firm, as experts in accounting and auditing.

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

Item 9A. Controls and Procedures

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

~~Current~~Disclosure ~~United~~controls ~~States~~and ~~income~~procedures ~~tax~~are ~~laws~~designed ~~limit~~to ~~the~~ensure ~~amount~~that ofinformation ~~loss~~required ~~available~~ to be ~~offset~~disclosed ~~against~~in ~~future~~the ~~taxable~~reports ~~income~~filed ~~when~~or asubmitted ~~substantial~~under ~~change~~the Exchange Act is recorded, processed, summarized and reported, within the time period specified in ~~ownership~~the ~~occurs~~SEC's rules and forms. Disclosure ~~Therefore~~controls and procedures include, ~~the~~without ~~amount~~limitation, ~~available~~controls and procedures designed to ~~offset~~ensure ~~future~~that ~~taxable~~information ~~income~~required ~~may~~to be ~~limited~~disclosed in the reports filed under ~~IRC~~the ~~382~~Exchange Act is accumulated and communicated to management, including the Chief Executive Officer covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2011 (the “Evaluation Date”). Based upon the evaluation of our disclosure controls and procedures as of the Evaluation Date, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures.

~~F-15~~Management’s Report on Internal Control over Financial Reporting

~~Item~~Our 9management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). Our ~~Changes~~internal Incontrol over financial reporting is a process designed to provide reasonable assurance to our management and ~~Disagreements~~board ~~with~~of ~~Accountants~~directors onregarding ~~Accounting~~the reliability of financial reporting and ~~Financial~~the ~~Disclosure~~preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

~~Since~~Our ~~inception,~~internal wecontrol ~~have~~over ~~had~~financial noreporting ~~changes~~includes those policies and procedures that (i) pertain to the maintenance of records that, in orreasonable ~~disagreements~~detail, ~~with~~accurately and fairly reflect the transactions and dispositions of our ~~accountants. Our~~assets; ~~audited~~(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements ~~for~~in ~~the~~accordance ~~fiscal~~with ~~years~~accounting ~~ended~~principles ~~December~~generally 31accepted in the United States of America, ~~2010~~and our receipts and ~~2009~~expenditures ~~have~~of ~~been~~are ~~included~~being made only in ~~this~~accordance ~~annual~~with ~~report~~authorizations inof ~~reliance~~our ~~upon~~management ~~Malone~~and &directors; ~~Bailey~~and ~~PC,~~(iii) ~~Independent~~provide ~~Registered~~reasonable ~~Public~~assurance ~~Accounting~~regarding ~~Firm~~prevention or timely detection of unauthorized acquisition, asuse, ~~experts~~or indisposition ~~accounting~~of ~~and~~our ~~auditing~~assets that could have a material effect on the financial statements.

~~Item 9A. Controls and Procedures~~17

~~Evaluation~~Table of ~~Disclosure Controls and Procedures~~ Contents

~~Disclosure~~Our ~~controls~~management ~~and~~assessed ~~procedures~~the ~~are~~effectiveness ~~designed~~of toour ~~ensure~~internal ~~that~~control ~~information~~over ~~required~~financial toreporting beas ~~disclosed~~of inDecember ~~the~~31, ~~reports~~2010. In ~~filed~~making orthis ~~submitted~~assessment, ~~under~~it used the ~~Exchange~~criteria ~~Act~~set isforth ~~recorded,~~by ~~processed,~~the ~~summarized~~Committee ~~and~~of ~~reported,~~Sponsoring ~~within~~Organizations of the ~~time~~Treadway ~~period~~Commission ~~specified~~(COSO) in ~~the~~Internal ~~SEC's~~Control-Integrated ~~rules and forms~~Framework. ~~Disclosure~~Based ~~controls~~on ~~and~~its ~~procedures include~~evaluation, ~~without~~our ~~limitation,~~management ~~controls~~concluded ~~and procedures designed to ensure~~ that ~~information~~there ~~required~~is toa bematerial ~~disclosed~~weakness in ~~the~~our ~~reports~~internal ~~filed~~control ~~under~~over ~~the~~financial ~~Exchange~~reporting ~~Act is accumulated~~ and ~~communicated~~Management tohas ~~management,~~concluded ~~including~~that the ~~Chief~~Company’s ~~Executive~~internal ~~Officer~~controls ~~covered~~over byfinancial ~~this~~reporting ~~report,~~are wenot ~~carried~~effective ~~out~~as anof ~~evaluation~~December 31, ~~under~~2010 ~~the~~due ~~supervision~~to ~~and~~a ~~with~~lack ~~the participation~~ of ~~our~~qualified ~~management,~~accounting ~~including~~personnel ~~our Chief Executive Officer~~ and ~~Chief~~an ~~Financial~~overreliance ~~Officer,~~on ofconsultants ~~the~~in ~~effectiveness of~~ the ~~design~~accounting and ~~operation~~financial ofstatement ~~our~~close ~~disclosure~~process. A ~~controls~~material ~~and~~weakness ~~procedures~~is asa ~~of December 31~~deficiency, ~~2010~~or ~~(the~~a ~~“Evaluation~~combination ~~Date”). Based upon the evaluation~~ of ~~our~~control ~~disclosure controls and procedures as of the Evaluation Date~~deficiencies, ~~the~~in ~~Chief~~internal ~~Executive~~control ~~Officer~~over ~~and~~financial ~~Chief~~reporting ~~Financial~~such ~~Officer concluded~~ that ~~our~~there ~~disclosure~~is ~~controls~~a ~~and~~reasonable ~~procedures~~possibility ~~were~~that ~~not effective because of the identification of~~ a material ~~weakness~~misstatement inof our ~~internal~~annual ~~control~~or ~~over~~interim financial ~~reporting~~statements ~~which~~will isnot ~~identified~~be ~~below,~~prevented ~~which~~or wedetected ~~view~~on asa antimely ~~integral part of our disclosure controls and procedures~~basis.

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

~~Our~~This ~~management~~annual isreport ~~responsible~~does ~~for~~not ~~establishing~~include ~~and~~an ~~maintaining~~attestation ~~adequate~~report ~~internal~~of ~~control~~our ~~over~~registered ~~financial~~public ~~reporting,~~accounting asfirm ~~such~~regarding ~~term is defined in Exchange Rule 13a-15(f). Our~~ internal control over financial reporting. Management’s isreport awas ~~process~~not ~~designed~~subject to ~~provide~~attestation ~~reasonable~~by ~~assurance to~~ our ~~management~~registered ~~and~~public ~~board~~accounting offirm ~~directors~~pursuant ~~regarding~~to ~~the~~temporary ~~reliability~~rules of ~~financial~~the ~~reporting~~Securities and ~~the~~Exchange ~~preparation~~Commission ofthat ~~the~~permit ~~financial~~us ~~statements~~to ~~for~~provide ~~external~~only ~~purposes~~management’s inreport ~~accordance with accounting principles generally accepted~~ in ~~the~~this ~~United~~annual ~~States of America~~report.

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

~~Our~~There ~~management~~were ~~assessed~~no ~~the~~changes ~~effectiveness~~in of our internal control over financial reporting asduring ~~of December 31, 2010. In making this assessment, it used~~ the ~~criteria~~fourth ~~set~~quarter ~~forth by the Committee~~ of ~~Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its evaluation,~~ our ~~management~~fiscal ~~concluded~~year ~~that~~ended ~~there is a material weakness in our internal control over financial reporting and Management has concluded that the Company’s internal controls over financial reporting are not effective as of~~ December 31, ~~2010~~2011 ~~due~~that tohave amaterially ~~lack of qualified accounting personnel and an overreliance on consultants in the accounting and financial statement close process. A material weakness is a deficiency~~affected, or aare ~~combination~~reasonably oflikely ~~control~~to ~~deficiencies~~materially affect, inour internal control over financial reporting ~~such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis~~.

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

~~This~~Our ~~annual~~management, ~~report~~including our Chief Executive Officer and Chief Financial Officer, does not ~~include~~expect anthat ~~attestation~~our ~~report~~Disclosure ofControls ~~our~~and ~~registered~~internal ~~public~~controls ~~accounting~~will ~~firm~~prevent ~~regarding~~all ~~internal~~errors and all fraud. A control ~~over~~system, ~~financial~~no ~~reporting~~matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. ~~Management’s~~Further, ~~report~~the ~~was~~design ~~not~~of ~~subject~~a tocontrol ~~attestation~~system bymust ~~our~~reflect ~~registered~~the ~~public~~fact ~~accounting~~that ~~firm~~there ~~pursuant~~are resource constraints, and the benefits of controls must be considered relative to ~~temporary~~their ~~rules~~costs. Because of the ~~Securities~~inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and ~~Exchange~~instances ~~Commission~~of fraud, if any, within the Company have been detected. These inherent limitations include the realities that ~~permit~~judgments usin todecision-making ~~provide~~can ~~only~~be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s ~~report~~or inboard ~~this~~override ~~annual~~of ~~report~~the control.

17The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~Changes~~Item in9B. Other ~~Internal Control over Financial Reporting~~Information

There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting None.

~~Limitations on the Effectiveness of Controls~~18

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

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

Item 9B10. Directors, ~~Other~~Executive ~~Information~~Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.

~~None~~The following table sets forth the name, age, and position of our executive officers and directors as of March 26, 2012.

PART III



			Other Public
			Company
	Position(s) Held in		Directorships
Name and Age	Energy Quest Inc.	Tenure	Held by Director
Wilfred J. Ouellette, 68	Director	From July 1, 2005 to August 1, 2011	n/a
	President, and Chief Executive Officer	From May 5, 2006 to August 1, 2011
Ronald Foster, 70	President and Chief Executive Officer	From August 1, 2011 to present	n/a

Filing Compare · ENERGY QUEST, INC.