UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended,March 31, 2008
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from_______________to_______________
Commission file number000-28305
Energy Quest Inc.
(Exact name of small business issuer as specified in its charter)
| Nevada | 91-1880015 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| 850 South Boulder Hwy., Suite 169 | |
| Henderson, Nevada | 89015 - 7564 |
| (Address of principal executive offices) | (Zip Code) |
(702) 568 4131
(Issuer's telephone number)
_______________
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YesxNo¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨Nox
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of May 9, 2008, the registrant’s outstanding common stock consisted of4,788,249shares.
PART I - FINANCIAL INFORMATION
Safe Harbor Statement
This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.
These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.
ITEM 1. Financial Statements.
Our unaudited interim consolidated financial statements are stated in US dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. All dollar amounts in this report refer to US dollars unless otherwise indicated. When we refer to Energy Quest, we, our or us, we are referring to Energy Quest Inc.
Energy Quest Inc.
(A Development Stage Company)
| March 31, 2008 | |
| | Index |
| Consolidated Balance Sheets (unaudited) | F-1 |
| Consolidated Statements of Operations and Other Comprehensive Loss (unaudited) | F-2 |
| Consolidated Statements of Cash Flows (unaudited) | F-3 |
| Notes to the Consolidated Financial Statements | F-4 |
3
| Energy Quest Inc. | | |
| (A Development Stage Company) | | |
| Consolidated Balance Sheets (unaudited) | | |
| |
| | March 31, 2008 | December 31, 2007 |
| | $ | $ |
| Assets | | |
| Current Assets | | |
| Cash and cash equivalents | 3,899 | 1,733 |
| Restricted cash | - | 80,000 |
| Prepaid expenses | 454 | 454 |
| Other current assets | 2,818 | 2,064 |
| Total Current Assets | 7,171 | 84,251 |
| Intangible Asset | 30,073 | 31,336 |
| Total Assets | 37,244 | 115,587 |
| Liabilities and Stockholders' Deficit | | |
| Current Liabilities | | |
| Accounts payable and accrued liabilities | 61,385 | 61,603 |
| Accounts payable - related parties | 331,770 | 249,505 |
| Stock payable | 254,583 | 161,583 |
| Note payable | 21,510 | 21,197 |
| Shareholder advances | 289,478 | 289,934 |
| Total Liabilities | 958,726 | 783,822 |
| Stockholders' Deficit | | |
| Preferred Stock | | |
| Authorized: 1,000,000 shares, with a $0.01 par value; none issued | – | – |
| Common Stock | | |
| Authorized: 200,000,000 shares, with a $0.001 par value;Issued: 2,565,549 shares | 2,566 | 2,566 |
| Additional Paid-in Capital | 3,976,922 | 3,976,922 |
| Accumulated Other Comprehensive Loss | (59) | (105) |
| Stock Subscriptions Receivable | (60,500) | (60,500) |
| Deficit Accumulated During the Development Stage | (4,840,411) | (4,587,118) |
| Total Stockholders’ Deficit | (921,482) | (668,235) |
| Total Liabilities and Stockholders’ Deficit | 37,244 | 115,587 |
The accompanying notes are an integral part of these consolidated financial statements.
F-1
| Energy Quest Inc. | | | |
| (A Development Stage Company) | | | |
| Consolidated Statements of Operations and Other Comprehensive Loss (unaudited) | |
| | | | |
| | For the Three Months Ended
March 31, 2008 | For the Three Months Ended
March 31, 2007 | Period from December 14, 2004 (Date of Inception) to March 31, 2008 |
| | $ | $ | $ |
| Revenue | – | – | 5,164 |
| Expenses | | | |
| Consulting and management fees | 94,725 | 1,278 | 3,878,261 |
| General and administrative | 14,021 | 6,855 | 293,242 |
| Professional fees | 54,782 | 18,083 | 320,615 |
| Research and development | 5,000 | – | 5,000 |
| | 168,528 | 26,216 | 4,497,118 |
| Loss before the following: | (168,528) | (26,216) | (4,491,954) |
| Interest income | 754 | – | 2,839 |
| Interest expense | (5,519) | – | (6,262) |
| Gain on write-off of debt | – | – | 5,826 |
| Loss on restricted cash | (80,000) | – | (80,000) |
| Loss on write-off of receivable | – | – | (193,922) |
| Net loss | (253,293) | (26,216) | (4,763,473) |
| Other comprehensive loss | | | |
| Foreign currency translation adjustment | 46 | (236) | (59) |
| Total Comprehensive Loss | (253,247) | (26,452) | (4,763,532) |
| Net Loss Per Share – Basic and Diluted | (0.10) | (0.01) | |
| Weighted Average Shares Outstanding | 2,565,549 | 1,923,000 | |
The accompanying notes are an integral part of these consolidated financial statements.
F-2
| Energy Quest Inc. | | | |
| (A Development Stage Company) | | | |
| Consolidated Statements of Cash Flows (unaudited) | | | |
| |
| | For the Three Months Ended
March 31, 2008
$ | For the Three Months Ended
March 31, 2007
$ | Accumulated from December 14, 2004
(Date of Inception) to March 31, 2008
$ |
| Cash Flows Used In Operating Activities | | | |
| Net loss | (253,293) | (26,216) | (4,763,473) |
| Adjustments to reconcile net loss to net cash | | | |
| used in operating activities: | | | |
| Stock-based compensation | – | – | 2,165,113 |
| Shares issued for expenses | – | – | 1,408,005 |
| Gain on write-off of debt | – | – | (5,826) |
| Write-off of restricted cash | 80,000 | – | 80,000 |
| Loss on write-off of loan receivable | – | – | 193,922 |
| Changes in operating assets and liabilities: | | | |
| Prepaid expenses and other current assets | (754) | – | (3,272) |
| Accounts payable and accrued liabilities | 49 | 23,751 | 32,909 |
| Due to related parties | 83,118 | – | 331,770 |
| Net Cash Used in Operating Activities | (90,880) | (2,465) | (560,852) |
| Investing Activities | | | |
| Loan receivable | – | – | (193,922) |
| 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 | – | – | (298,357) |
| Financing Activities | | | |
| Proceeds from issuance of common stock | – | – | 329,144 |
| Loans and stock payable | 93,000 | – | 534,023 |
| Net Cash Provided By Financing Activities | 93,000 | – | 863,167 |
| Effect of Exchange Rate Changes on Cash | 46 | (199) | (59) |
| Increase in Cash and Cash Equivalents | 2,166 | (2,664) | 3,899 |
| Cash and Cash Equivalents, beginning | 1,733 | 4,694 | – |
| Cash and Cash Equivalents, end | 3,899 | 2,030 | 3,899 |
| Supplemental Disclosures | | | |
| Cash paid for taxes | – | – | – |
| Cash paid for interest | – | – | – |
| Non-Cash Financing and Investing Activities | | | |
| Common stock issued for intangible asset | – | – | 204 |
| Common stock issued for subscription receivable | – | – | 60,500 |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
ENERGY QUEST INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 31, 2007 THROUGH MARCH 31, 2008 (UNAUDITED)
| 1. | Basis of Presentation |
| |
| | The accompanying unaudited interim financial statements of Energy Quest, Inc. (“Energy Quest”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Energy Quest’s Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal 2007 as reported in the Form 10-K have been om itted.. |
| |
| 2. | Going Concern |
| |
| | These financial statements have been prepared on the assumption that the company is a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate when a company is not expected to continue operations for the foreseeable future. The company’s continuation as a going concern is dependent upon its ability to attain profitable operations, and generate funds there-from, and/or raise equity capital or borrowings sufficient to meet current and future obligations. Management plans to raise equity financings of approximately $120,000,000 over the next twelve months to finance operations. There is no guarantee that the company will be able to complete any of these objectives. The company has incurred losses from operations since inception and at March 31, 2008 has a working capital deficiency and an accumulated defi cit that creates substantial doubt about the company’s ability to continue as a going concern. |
| |
| 3. | Related Party Transactions |
| |
| | a. | As at March 31, 2008, $20,317 (December 31, 2007 - $21,171) is owed to a company with a common director. This amount is unsecured, non-interest bearing and has no terms of repayment. |
| | b. | As at March 31, 2008, $46,672 (December 31, 2007 - $50,705) is owed to a related party consultant for expenses paid on behalf of the company. |
| | c. | During the three-month period ended March 31, 2008, the company recorded $37,500 (2007 - $851) for management services provided by the President of the company. At March 31, 2008, $117,267 (December 31, 2007 - $87,341) is included in due to related parties. |
| | d. | During the three-month period ended March 31, 2008, the company recorded $32,500 (2007 - $Nil) for management services provided by the Treasurer of the company. At March 31, 2008, $122,788 (December 31, 2007- $90,288) is included in due to related parties. |
| | e. | During the three-month period ended March 31, 2008, the company recorded $24,726 (2007 - $Nil) for management services provided by the CFO of the company. At March 31, 2008, $24,726 (December 31, 2007- $Nil) is included in due to related parties. |
| |
| 4. | Shareholder Advances |
| |
| | As at March 31, 2008, $289,478 (December 31, 2007 – $289,934) is owed to shareholders. This amount is unsecured, non-interest bearing and due on demand. |
| |
| 5. | Stock Compensation Plans |
| |
| | On January 22, 2008, the company adopted the 2008 Stock Compensation Plan (the “Stock Plan”) under which the company is authorized to issue up to 1,000,000 shares of common stock of the company to employees, executives and consultants. No options were issued under this plan for the three months ended March 31, 2008. |
| |
| | On January 22, 2008, the company adopted the 2008 Non-Qualified Stock Option Plan (the “Option Plan”) under which the company is authorized to issue up to 1,000,000 options to employees, executives and consultants to purchase shares of common stock of the company. No options were issued under this plan for the three months ended March 31, 2008. |
| 6. | Subsequent Events |
| |
| | During April 2008, Energy Quest sold 107,700 shares of common stock with warrants attached. The company received $1.50 per share of common stock for at total proceeds of $161,550. Each warrant has an exercise price of $2.00 and will expire in 1 year from the date of issuance of the warrant certificate. |
| |
| | During May 2008, Energy Quest issued 2,000,000 shares of unregistered restricted common stock for a one time payment for the purchase of two patents acquired under a purchase/assignment agreement entered into in February 2008. |
| |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ITEM 2. Management Discussion and Analysis of Financial Condition / Plan of Operations.
The following discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.
Overview
We were incorporated as a Nevada company on June 20, 1997. We are a development stage company in the development and production of hydrogen-enriched alternative fuels in an environmentally responsible manner. We plan to employ gasification technologies and catalytic conversion processes to produce clean fuels. We design, build, lease and in some cases operate the following gasification technologies with broad potential application within the energy field:
- Pyrolysis Steam Reformer (“PyStR™”), which utilizes for steam reformation of coal and other carbonaceous feedstocks, and separates hydrogen and carbon dioxide into separate streams;
- M2 Fluidized Bed Gas Generator (“M2”), an air blown fluid bed gasifier which converts waste solid fuel sources into gaseous form; and
- Modular Advanced Controlled Air Incinerator, which allows for incineration of waste, and is ideally suited to medical waste and moderately prepared municipal waste.
Our principal offices are located at 850 South Boulder Highway, Suite 169, Henderson, Nevada. Our fiscal year end is December 31. We changed our name from Syngas International Corp. to Energy Quest Inc. on May 31, 2007.
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.
Results of Operations
Limited Revenues
Since our inception on December 14, 2004 to March 31, 2008, we have earned limited revenue of $5,164. As of March 31, 2008, we have an accumulated deficit of $4,840,411. At this time, our ability to generate any significant revenues continues to be uncertain. Our financial statements contain an additional explanatory paragraph in Note 2, which identifies issues that raise 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.
4
Net Loss
We incurred net loss of $4,763,473 since December 14, 2004 (date of inception) to March 31, 2008. Our net loss increased by $227,077 and came to $253,293 for the three months ended March 31, 2008 from $26,216 for the same period in 2007.
For the three months ended March 31, 2008, our net loss per share was $0.10, compared to net loss of $0.01 per share for the same period in 2007.
Expenses
Our total expenses from December 14, 2004 (date of inception) to March 31, 2008 were $4,763,473 and consisted of $3,878,261 in consulting and management fees, $293,242 general and administrative fees, $320,615 in professional fees, and $5,000 in research and development expenses. Total expenses for the three months ended March 31, 2008 were $168,528, compared to total expenses of $26,216 for the same period in 2007. The rise in the total expenses is attributable primarily to the increase in the Company’s consulting and management fees.
Our consulting and management fees increased $93,447 to $94,725 for the three months ended March 31, 2008 from $1,278 for the same period in 2007. The increase is attributable to hiring of new officers and the funding of the debenture. Our consulting and management fees consisted mainly of amounts paid to our CEO and CFO and fees paid to our other officers and consultants.
Our general and administrative expenses increased by $7,166 or 105% from $6,855 for the three months ended March 31, 2007 to $14,021 for the same period ended March 31, 2008. Our general and administrative expenses consist of office supplies, travel expenses, rent, communication expenses (cellular, internet, fax, telephone), office maintenance, courier and postage costs and office equipment.
Our professional fees, consisting primarily of legal, accounting and auditing fees, increased by $36,699 or 203% to $54,782 for the three months ended March 31, 2008 from $18,083 for the same period in 2007, mainly due to more legal and auditing services provided in the three month periods ended March 31, 2008. The increase in professional fees was due to additional legal and auditing services provided relating to our increased day to day operating activities.
5
Liquidity and Capital Resources
We do not expect to generate any revenues over the next twelve months. As of March 31, 2008, our current assets totaled $7,171, which was comprised of $3,899 in cash and cash equivalents, $80,000 in restricted cash was written-off, $454 in prepaid expenses and deposits, and $2,818 in other current assets. As of March 31, 2008 we had a working capital deficit of $951,555.
We believe that we need approximately an additional $3,450,000 to meet our capital requirements over the next 12 months (beginning March, 2008) for the following estimated expenses.
| Description | Estimated Expense |
| Marketing our gasification technologies | $200,000 |
| Continued improvement of our PyStR™ and other technologies | $1,200,000 |
| Further commercializing our gasification technologies | $400,000 |
| Manufacturing of Modular Bio-energy units | $400,000 |
| Payment of accounts payable and accrued liabilities | $250,000 |
| General and administrative expenses | $500,000 |
| Professional fees | $100,000 |
| Consulting fees | $200,000 |
| Investor relations expenses | $100,000 |
| Patent application costs (including legal fees) | $100,000 |
| Total | $3,450,000 |
Our corporate strategy for the next 12 months includes the following:
- Produce, sell, lease and maintain energy generators that we have developed;
- License our integrated gasification technologies to third parties in North American, European and global markets;
- Continually improve our gasification technologies and commercializing our technologies;
- Expand our technology base by acquiring complementary technologies to our PyStR™ and other technologies through purchasing or licensing arrangements;
- Complete potential deals regarding join ventures for energy production facilities;
- File patents on several technologies, including the PyStR™ process, the M2 Fluidized Bed Gas Generator and seek accredited valuations for these intellectual properties in a variety of markets including the U.S., Germany and Canada; and
- Create additional service lines to complement current operations.
We believe that we need approximately $3,450,000 to meet our capital requirements over the next 12 months (beginning March 2008). Of the $3,450,000, we had $3,899 in cash and cash equivalents as of March 31, 2008. We intend to meet the balance of our cash requirements for the next 12 months through external sources: a combination of debt financing and equity financing through private placements.
Our net loss of $4,763,473 from December 14, 2004 (date of inception) to March 31, 2008 was mostly funded by our equity financing. We expect to incur substantial losses over the next two years. During the three months ended March 31, 2008 our cash position increased by $2,166, mainly due to the sale of our common stock for cash and loans received in this period.
During the three months ended March 31, 2008, we received net cash of $93,000 from financing activities compared to $0 for the same period in 2007. We used net cash of $90,880 in operating activities compared to $2,465 for the same period in 2007. We used net cash of $0 in investing activities, did not change from the same period in 2007. During the three months ended March 31, 2008 our monthly cash requirement was approximately $30,278. At the end of the period as at March 31, 2008, we had cash and cash equivalent of $3,899.
We are currently not in good short-term financial standing. We anticipate that we may not generate any revenues in the near future and we will not have enough positive internal operating cash flow until we can generate substantial revenues, which may take the next few years to fully realize. There is no assurance we will achieve profitable operations. We have historically financed our operations primarily by cash flows generated from the sale of our equity securities and through cash infusions from officers and outside investors in exchange for debt and/or common stock.
On September 4, 2007, we entered into a 0% convertible debenture due September 4, 2012 with Jain Vasant whereby Mr. Vasant agreed to loan us $120,000,000. At any time after September 4, 2012 and until September 4, 2017 Mr. Vasant has the right to convert all, or a portion of, the principal amount of the convertible debenture into our common shares at a conversion price of $50.00 per share. Pursuant to the convertible debenture the funds will be transferred to us within 10 business days after the convertible debenture documents are successfully posted on Euroclear. As of May 13, 2008, the transaction had not yet closed.
Once the $120,000,000 debenture transaction is closed, we will have enough capital to meet our cash requirements over the next twelve months. However, we cannot guarantee that the agreement will successfully be closed on a timely basis. If the agreement fails to be closed, we intend to raise the balance of our cash requirements (approximately $3,446,000) from private placements, loans, or possibly a registered public offering (either self-underwritten or through a broker-dealer) within the next few months. At this time we do not have any commitments from any broker-dealer to provide us with financing. There is no guarantee that we will be successful in raising any capital. There is no assurance that we will be able to obtain such additional funds on favorable terms, if at all. If we fail in raising capital, our business may fail and we may curtail or cease our operations.
6
Going Concern
Our operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technologies and products on a timely and cost-effective basis, respond to competitive developments and emerging industry standards, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
We are seeking equity financing to provide for the capital required to market and develop our technologies and fully carry out our business plan. We cannot guarantee we will be successful in our business operations. A critical component of our operating plan impacting our continued existence is our ability to obtain additional capital through additional equity and/or debt financing. Obtaining additional financing will be subject to a number of factors including market conditions, investor acceptance of our business plan and investor sentiment. These factors may make the timing, amount, terms and conditions of additional financing unattractive or unavailable to us. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. If we are unable to raise additional financing, we will have to significantly reduce our spending, delay or cancel planned activities or substantially change our current corporate structure. In such an event, we intend to implement expense reduction plans in a timely manner. However, these actions would have material adverse effects on our business, revenues, operating results, and prospects, resulting in a possible failure of our business. If we raise funds through equity or convertible securities, our existing stockholders may experience dilution and our stock price may decline.
These factors raise substantial doubt about our ability to continue as a going concern. Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain additional financing from outside sources and eventually produce enough revenues, we may be forced to sell our assets, curtail or cease our operations.
Off-Balance Sheet Arrangements
As of March 31, 2008, we had no off balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Research and Development
Since our inception to March 31, 2008, we have spent approximately $5,000 on research and development.
We anticipate that we will spend $1,200,000 on research and development over the next twelve months to upgrade our PyStR™ and other technologies. If we are successful in acquiring other technologies, we may increase our research and development budget.
7
ITEM 3. Quantitative and Qualitative Disclosure About Market Risks.
Not applicable.
ITEM 4. Control and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2008. Based on this evaluation, our management has concluded that our disclosure controls and procedures are not effective in adequately ensuring that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The evaluation did not identify any change in our internal control over financial reporting that occurred during the quarter ended March 31, 2008 that has materially affected or is reasonably likely to materially affect our internal control over such reporting.
The term "internal control over financial reporting" is defined as a process designed by, or under the supervision of, the registrant's principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| (1) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant; |
| (2) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and |
| (3) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant's assets that could have a material effect on the financial statements |
ITEM 4T. Controls and Procedures.
Changes in internal controls
We did not change our internal control over financial reporting during the fiscal quarter of March 31, 2008 in connection with the results of our Management’s report on internal controls, nor have we made any changes to our internal control over financial reporting as of March 31, 2008.
8
PART II – OTHER INFORMATION
ITEM 1. Legal Proceedings.
As of March 31, 2008, there are no any material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we or any of our subsidiaries are a party or of which any of our properties is the subject. Also, our management is not aware of any legal proceedings contemplated by any governmental authority against us.
ITEM 2. Unregistered Sales of Equity Securities.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
None
9
ITEM 6. Exhibits.
(1) Included as an exhibit on our Form 10-K filed April 1, 2008.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.
| | ENERGY QUEST INC. |
| | (REGISTRANT) |
| |
| Date: May 15, 2008 | By: /s/Wilf Ouellette |
| | Wilf Ouellette |
| | President, Chief Executive Officer, Director |
| | (Authorized Officer for Registrant) |
| |
| Date: May 15, 2008 | By: /s/Vasant K, Jain |
| | Vasant K, Jain |
| | Chief Financial Officer, Director |
11
