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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
For the fiscal year ended December 31, 2007
As of April 8, 2008, 213,367,219 shares of our common stock were issued and outstanding.
Fiscal 2007 and First Quarter 2008 Developments
Logan & Kanawha Purchase Order. In April 2008, our wholly owned subsidiary, Gwenco, Inc., received a purchase order for up to $8 million of coal through December 2008 from Logan & Kanawha Co., LLC, a West Virginia company
Rehabilitation and Reopening of Pond Creek Mine. In January 2007, Gwenco received a permit from the Kentucky Department of Natural Resources to conduct coal mining at its Pond Creed mine. In February 2007, Gwenco's engineering firm, Alchemy Engineering of Prestonburg, Kentucky, completed one and five year mine plan and maps required by the Kentucky Department of Mines and Minerals in connection with the permit to conduct coal mining at Pond Creek. Gwenco had retained General Mining, LLC of Wallins, Kentucky to rehabilitate the Pond Creek mine in February 2007 and further retained General Mining to conduct mining operations at Pond Creek in March 2007. The company completed its initial rehabilitation of the Pond Creek mine, recommenced mining operations, and began shipping commercial coal for sale in May 2007. The company completed all rehabilitation the week of July 30, 2007. In January 2008, we retained White Star Mining to conduct all mining operations at Pond Creek. White Star retained all necessary permits to being mining operations in February 2008, and we expect to resume mining operations in the second fiscal quarter of 2008.
March 2008 Financing. On March 11, 2008, we signed a 15% per annum promissory note with a third party lender for $75,000 due on March 10, 2009. The note is convertible at the option of the holder at a conversion price of 50% of the average of the three lowest per share market values during the ten (10) trading days immediately preceding a conversion date. The holder may not convert any outstanding principal amount of this note or accrued and unpaid interest
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thereon to the extent such conversion would result in the holder beneficially owning in excess of 4.999% of the then issued and outstanding common shares of the Company.
Letter of Intent with McCoy Heirs. In January 2008, we entered into a letter of intent on a joint venture with the McCoy Heirs, owners of coal property in southern Kentucky. The project was intended to encompass 1,000,000 tons of recoverable coal reserves from the Elkhorn # 3 coal seam structured through a lease agreement to mine property held by the McCoy Heirs. This letter of intent has since been abandoned.
Gwenco, Inc. Chapter 11 Reorganization. On March 2, 2007, Quest's wholly owned subsidiary, Gwenco, Inc., filed a voluntary petition for reorganization under Chapter 11 of .the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Eastern District of Kentucky. Management felt this was a necessary step to further the company's financial restructuring initiative and to protect Gwenco's assets from claims, debts, judgments, foreclosures, and forfeitures of those creditors and stakeholders with whom both Quest and Gwenco were unable to negotiate restructured agreements. The company is currently overseeing Gwenco's operations as a debtor in possession, subject to court approval of matters outside the ordinary course of business. Gwenco is currently seeking court approval for debtor in possession financing from holders of Gwenco's existing debt obligations in order to fund operating expenses. The company intends to continue its mining operations at Pond Creek mine at Slater's Branch while this matter is completed. Under Chapter 11, claims against Gwenco in existence prior to the filing of the petitions for reorganization relief under the federal bankruptcy laws are stayed while Gwenco is in bankruptcy. On August 3, 2007, the Bankruptcy Court approved Gwenco's request for debtor-in-possession financing in an amount of up to $2,000,000. In February 2008, Gwenco submitted a preliminary plan of reorganization to the court for approval.
Letter of Intent with Parsons Branch. On July 21, 2006, Quest signed a non-binding letter of intent with Parsons Branch Development to acquire a permit to mine the Elkhorn #2 seam on Parsons Branch located in Mud Creek, Kentucky. Parsons Branch Development has approximately 450,000 tons of clean coal under lease at this location. Upon completion of the transfer of the permit to Quest, it will retain all revenues from coal sales after payment of a royalty to Parsons Branch of $1.50 per clean ton mined and expenses of mine operations, which are expected to be carried out by a contract miner. Management determined not to pursue this transaction during fiscal 2007.
FORM 10-KSB
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