QUEST OIL CORP

QUEST OIL CORP suspended its duty to file periodic reports with the SEC.

listing compliance notice

Quest says it stopped filing reports after August 17, 2007 for lack of money to pay professionals, and will file a Form 15 to end its SEC reporting. It also recounts the 2006 Stinson dispute and the management change, says it has been in default on the senior secured convertible notes since it stopped making cash payments (as of June 6, 2006), and states the Secured Noteholders forced liquidation of and foreclosed on the assets held by Quest Canada. The filing warns investors could lose their entire investment. The text provided is truncated, so other items (the Kansas, Texas and other items listed in the form header) are not covered here. Resolves the open Stinson dispute and the unpaid-notes thread, and signals that the Canadian assets were lost to the noteholders.

bankruptcy or receivership

Quest says its auditor Malone & Bailey withdrew its August 11, 2006 audit report on the year to March 31, 2006, because the company had not amended that annual report for the restatement of the May 2005 financing's derivatives. Interim statements for the quarters from June 2005 through June 2006 are also not to be relied on. The company says it lacks the resources to do the restatements until it gets more financing. Financial statements for the period are therefore currently unreliable.

financial restatement

Three developments. First, a December 1, 2006 letter of intent with Endeavor Energy: Endeavor would pay US$250,000 to license seismic data over the Acadia North project in Canada, take over as operator, and commit to drill one gas well and spend at least US$1,000,000, subject to successful interpretation; it is only a letter of intent. Second, W.A. Walker's counsel claimed in January 2007 that Quest defaulted on the Shinkle lease and asked for it to be reassigned; Quest denies default and hired Dallas lawyers. Third, Joseph Wallen resigned effective January 15, 2007, and Quest says he plans to move certain Texas leases to B&B Oil Company, which Quest believes he controls; Quest calls this wrongful interference and has hired counsel. The Shinkle lease bought in September is now disputed.

material agreement

Quest missed the deadline for its September 30, 2006 quarterly report, and did not expect to meet the NASD grace period ending December 21, 2006. On December 20 it requested an NASD hearing to appeal the delinquency determination and says it is working to file before the hearing. Stated reason: the company and its auditors needed more time. This continues the reporting problems that began with the late annual report in June.

listing compliance notice

Quest took an assignment from W.A. Walker of a 100% working interest and 87.5% net royalty interest in the Shinkle lease (five zones, 1,082 acres per the press release) in the Kansas Cherokee Basin, dated September 12, 2006. Walker was also retained as a consultant for 12 months. This is a new Kansas asset alongside the Alberta and Texas holdings; the filing states no price, and the press release says consulting cost is built into the purchase price. The press release also says Joe Wallen is now Operations Director and Phil Scott is the new CFO, and that management faces 'significant challenges' in the restructuring.

material agreement

Quest ended its memorandum with L-TEXX Petroleum, L-TEXX Management and Longleaf Production on May 24, 2006, so the planned US$6.5 million acquisition from February will not go ahead. It also issued a press release titled 'Quest Sets 90 Day Production Goal for Texas Properties'; the release text is not in the filing.

material agreement termination

A complete change of management and support arrangements signed on one day: new employment agreements for James Panther and Mark Baum, four consulting agreements, an operating agreement, a settlement and release, and an office sublease from Business Consulting Group Unlimited. The people involved were paid largely in paper - million-share warrant blocks vesting 250,000 at a time every 90 days, plus Series D warrants struck at 22 cents - and one contract carried a 2.5% carried working interest in production. Control and economics changed hands without any cash being raised.

capital raising announcement

This amended filing (changing one consulting term from 12 to 6 months) sets out a complete management reset effective April 24, 2006: James Panther II as President and CEO and Mark Baum as General Counsel on 24-month contracts, Joseph Wallen on a 12-month contract, director pay in stock, and support services and an office sublease from Panther and Baum's firm BCGU at $14,000 and $5,000 a month. 13,500,000 Series D warrants (5-year, struck at 110% of the April 24 close) were authorised, which could dilute existing holders. It also reports the 10-22 Canadian well flowing again at about 0.65 MMCF/day (company believes over 50% of its reserve is recovered), that the Longleaf deal had not closed and was extended with $50,000 of the deposit to be returned, and a May 1, 2006 payment to senior secured investors.

capital raising announcement

Quest signed a non-binding-style acquisition memorandum on February 23, 2006 to buy 100% of L-TEXX Petroleum, L-TEXX Management and Longleaf Production at a deemed price of US$6.5 million (US$100,000 deposit, 2 million restricted shares, US$1.2 million cash at closing), subject to a 45-day due diligence period and a formal agreement. If the stock is below $1.50 two years after closing, the sellers would get US$5 million in cash and return the shares.

material agreement

On February 6, 2006 Quest joined a joint venture for an interest in the Odom (Martin) Ranch No. 1H horizontal well in the Barnett Shale in Parker County, Texas, operated by Sauder Management with Carrizo and others as participants; the well spudded February 5, 2006. The company says this is its entry into the Barnett Shale and it plans to look at other opportunities there; the filing gives no cost or interest size.

material agreement

Quest gave public notice of a proposed private offering of up to $8,000,000 of 8% Series B Convertible Debentures maturing in 24 months, with three series of warrants attached and repayments that can be made in stock at a 10% discount to the recent price. For shareholders, the structure allows new shares to be issued through conversion, warrant exercise and stock-paid repayments; the filing describes only a proposal, not completed funding. It also reports a move of the head office to Houston, Texas.

capital raising announcement

Quest's wholly owned subsidiary Quest Canada Corp. signed an agreement with Vega Resources on August 13, 2005 giving it the right to earn a 100% working interest in the Empress Project (4 sections of Crown petroleum and natural gas rights, 160 miles east of Calgary, Alberta). Vega keeps a 3% overriding royalty, the original landowners keep a 15% overriding royalty, and TransAction Oil & Gas Ventures will operate and received a 5% carried working interest.

material agreement

Now operating as Quest Oil, the company signed a farm-in agreement on November 22, 2004 with Premium Petroleum under which the other party is to drill one test well by January 31, 2005, with Quest providing a total of CDN$296,000 for drilling and completion. This is Quest's first oil and gas drilling commitment in the record; the filing gives no result of the well.

material agreement

The company, then named GameState Entertainment (formerly Lanwerx Entertainment), agreed on September 23, 2003 to buy the assets, goodwill and website name of Netopia Internet Café, a computer game cafe, for US$200,000 paid in 800,000 shares at a deemed $0.25 each (about 4.88% of the company). It also changed its name effective September 24, 2003, said it was completing a $100,000 private placement of 200,000 shares at $0.50, and reported that directors Hofstad and Shaw resigned and Cameron King and Gordon McDougall were appointed effective April 20, 2003.

asset acquisition disposition