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Increase in authorized from 975 million to 2.5 billion effective Sept 5 2008! Looks like he is getting ready for some possible purchases of other coal reserves.


Principal Reasons for Increase in Authorized Common Stock

Currently, our articles of incorporation, as amended, authorize 975,000,000 shares of common stock. Authorizing an additional 1,525,000,000 shares of common stock would give our board of directors the express authority without further action of the stockholders to issue common stock from time to time as the board deems necessary. The board of directors believes it is necessary to have the ability to issue such additional shares of common stock to honor conversions of outstanding securities and for general corporate purposes. Potential uses of the additional authorized shares may include equity financings, issuance of options, acquisition transactions, stock dividends or distributions, without further action of the stockholders, unless such action were specifically required by applicable by or rules of any stock exchange or similar system on which our securities may then be listed. The board of directors chose such a large number of shares of authorized common stock because it wants maximum flexibility to issue common stock in the future without having to seek stockholder approval in the future.


As of July 25, 2008, we had 844,503,367 shares of common stock outstanding and as a result we had approximately 130,496,633 shares available for issuance. We have a substantial amount of convertible securities and as of the date hereof, we do not currently have enough authorized stock to satisfy full conversion of all of these securities. In addition, many of these securities have conversion prices based on market price. As such, if the price of our common stock decreases, we will require even more shares available to satisfy conversions. Our series A preferred stock is currently convertible into 40,792,857 million shares. However, the series A preferred converts at a discount to market price and can be converted into a maximum of 342,660,005 shares. Our series C preferred stock is currently convertible into 13,402,061 shares of common stock. However, the conversion price is based on the 5 day average of our market price prior to conversion and if our stock price decreases the amount of common stock required to honor conversions could increase to 260,000,000 shares. In addition, we have $1,119,114 in convertible promissory notes including accrued interest, which are currently convertible into 610,630,559 shares. The conversion price for some of these notes is based on our market price which could result in a maximum of 731,672,910 shares of common stock to satisfy conversions if the price of our common stock decreases. Failure to honor conversions could result in a default under the notes at which time, the noteholders could declare their notes immediately due and payable. We do not currently have sufficient funds to repay the notes in full. Accordingly, we believe it is important to have sufficient stock to honor conversions.

Within the limits imposed by applicable law, described below, shares of common stock could be issued in one or more transactions. Depending upon the nature and terms thereof, such a transaction or transactions could make a takeover of Quest more difficult and, therefore, less likely. An issuance of additional shares of common stock could have the effect of diluting the earnings per share and book value per share of existing shares of common stock and diluting the stock ownership of persons seeking to obtain control of Quest. The board of directors has no present plans, understandings, or agreements to issue the additional shares to be authorized.