UNITED STATESSECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-KSB  Annual report under section 13 or 15(d) of the Securities
Exchange Act of 1934  For
the fiscal year ended: May 31, 2008  Commission file number: 333-61801  LIFEQUEST WORLD CORPORATION(Exact name of registrant as specified in its
charter)
(Name of small
business issuer in its charter)Minnesota(State or other
jurisdiction of incorporationor organization)
88-0407679(I.R.S. Employer Identification
No.)1181 Grier Drive, Suite C, Las Vegas, Nevada
89119-3746(Address of principal executive offices)(702) 914-9688(Issuers telephone
number)Securities registered pursuant to Section12(b) of the
Act:
Name of each exchange on
whichregistered:NoneSecurities
registered pursuant to Section 12(g) of the Act:Common Stock, $0.001 par value(Title of Class)  Check whether the issuer (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 required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [  ] Check here if there is no disclosure of delinquent filers in
response to item 405 of Regulation S-B contained in this Form, and no disclosure
will 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-KSB
or any amendment to this Form 10-KSB [    ] State issuer's revenues for its most recent fiscal year ended May
31, 2008: $977,469   State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at which
the common equity was sold, or the average bid and asked prices of such common
equity: As of August 8, 2008, the aggregate market value of the issuers common
stock was $13,965,196, based on the average bid and ask price on that date of
$0.34. State
the number of shares outstanding of each of the issuers classes of common
equity, as of the most practicable date: Class
Outstanding
as of August 8, 2008Common
Stock, $0.001 par value
40,478,830  Documents Incorporated By Reference If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB into which the document
is incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) of the Securities Act of 1933 Securities Act). The listed documents should
be clearly described for identification purposes. None. Transitional
Small Business Disclosure Format (Check one): Yes [   ] No [X]                        LIFEQUEST WORLD CORPORATION    Form
10-KSB  Item
1.
Description of Business.
5Item
2.
Description of Property.
21Item
3.
Legal
Proceedings.
21Item
4.
Submission of Matters to a
Vote of Security Holders.
21Item
5.
Market for Registrants Common Equity and Related Stockholder Matters.
23Item
6.
Managements Discussion and Analysis of Financial Condition and Results  of Operations.
25Item
7.
Financial Statements.
33Item
8.
Changes
In and Disagreements With Accountants
on Accounting and Financial Disclosure.
48Item
8A.
Controls and Procedures.
48Item
8B.
Other Information.
50Item
9.
Directors,
Executive Officers, Promoters and Control
Persons; Compliance With
Section 16(a) of the Exchange Act.
51Item
10.
Executive
Compensation.
53Item
11.
Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder
Matters.
55Item
12.
Certain Relationships and Related Transactions.
55Item
13.
Exhibits.
56Item
14.
Principal Accountant Fees and Services.
56    NOTE
REGARDING FORWARD LOOKING STATEMENTS This Annual Report includes or is based upon estimates,
projections or other "forward looking statements". Such forward-looking
statements include any projections or estimates made by us and our management in
connection with our business operations. Such forward-looking statements are
based on the beliefs of LifeQuest World Corporation. When used in this Annual
Report, the words "anticipate," "believe," "estimate," "expect," "intends" and
similar expressions, as they relate to us, are intended to identify
forward-looking statements, which include statements relating to, among other
things, the ability of our company to continue to successfully compete in the
herbal supplement markets. While these forward looking statements, and any
assumptions upon which they are based, are made in good faith and reflect our
current information and judgment regarding the direction of our business, actual
results will almost always vary, sometimes materially, from any estimates,
predictions, projections, assumptions or other future performance suggested
herein. Such estimates, projections, or other "forward looking statements"
involve various risks and uncertainties. We caution the reader that important
factors in some cases have affected, and in the future could materially affect
actual results and cause actual results to differ materially from the results
expressed in any such estimates, projections, or other "forward-looking
statements". Available Information LifeQuest World Corporation files annual, quarterly and current
reports and other information with the Securities and Exchange Commission (the
Commission). You may read and copy documents referred to in this Annual Report
that has been filed with the Commission at the Commissions Public Reference
Room, 100 F Street, NE, Washington, D.C. You may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330.  You can also obtain copies of our Commission filings by
going to the Commissions website at http://www.sec.gov. The Company maintains a
website at www.phytolabsinc.com. Our annual reports on Form 10-KSB, our
quarterly reports on Form 10-QSB and our periodic reports on Form 8-K (and any
amendments to these reports) are available free of charge by linking from our
website to the Securities & Exchange Commission website.                     PART I    ITEM 1. DESCRIPTION OF BUSINESS.  BUSINESS HISTORY AND DEVELOPMENT  Company Name Change  Effective August 20, 2007, the Company changed its name to
LifeQuest World Corporation (formerly, Phytolabs, Inc. and Jurak Corporation
World Wide, Inc.) in order to embrace to a greater degree the fundamental
principal of what a direct sales organization must have in place to succeed:
motivation; training; self-development; enthusiasm; and a LIFE-changing
sense of purpose for its distributors; along with a QUESTfor a quality
of life which includes better health and a gain in wealth for its family of
distributors throughout the WORLD.The shares of the Company trade on the
Over the Counter Bulletin Board under the symbol, LQWC.  LifeQuest World Corporation was incorporated under the laws of the
State of Minnesota on November 1, 1997. In this Annual Report, the terms
Company, us, we, our and its are used as references to LifeQuest World
Corporation. We develop and distribute dietary supplements.  LifeQuest World Corporation is a company that was created to
provide the opportunity for positive changes in the health and overall well
being of people worldwide. LifeQuests founder, Anthony Carl Jurak, is a well
recognized visionary in the nutritional industry and is a pioneer in ushering in
the new, flourishing category of functional foods that today is quickly becoming
one of the largest segments in the nutritional industry. Anthonys inspiration
comes from his father Carl Jurak, who in 1922 developed a first in nutritional
functional foods in the form of a whole body tonic herb liquid supplement. By
1943, Carl started one of the first direct sales organizations in America for
the distribution of his functional nutritional product. Due to its personal
appeal and many health benefits, it is still being used, distributed and sold by
LifeQuest today. Since the early 1980s, Anthonys companies have sold over
seven hundred million dollars of functional nutritional products and with the
formation of LifeQuest he is once again following his quest to provide an
opportunity for health, wealth and happiness to those who desire to join these
efforts.   BUSINESS OPERATIONS  General LifeQuest World Corporation is a Life Science company that is
dedicated to significantly improving the lives of its family members, associates
and distributor organization. We strive daily through our own research and
development laboratories, as well as our professional association with one of
the worlds leading botanical research centers, to provide human beings with
solutions to many of lifes unanswered health challenges. Infusing proprietary
science under   the scrutiny of Good Manufacturing Practices (GMP), and adhering
to the efficacy of pharmaceutical protocols, LifeQuests products are effective,
safe and superior within the marketplace for nutritional supplements and
consumables. But our commitment does not end there. The worlds demand for
health and well-being only begins with proper nutrition. LifeQuest strives to
present a whole-minded approach for our distributers to better living by putting
equal emphasis on an improved life style, freedom through financial reward and
the enhancement of the Human Spirit. We provide extensive product education and personal development
through sophisticated training programs for our distributers. We offer
substantial earning potential available through a generous compensation plan. To
promote optimum health, we have invested millions of dollars to create superior
nutritional supplements and advanced personal care products. It is with great
pride that LifeQuest World Corporation hopes continue to inspire thousands to
change an average existence, into a life of celebration. LifeQuest World Corporation has recently acquired the worldwide
rights to a new, patented Immune-Stimulatory extract from marine sourced
Spirulina developed by leading research scientists at the National Center for
Natural Product Research (NCNPR) at the University of Mississippi. 
LifeQuest had a limited introduction through its distributors its initial launch
of ImmunXT in February 2008. The product named ImmunXT, was
researched and developed over a ten year period with exhaustive clinical and
scientific testing with benchmark criteria that it had to be 100% natural and
certified vegetarian.  Per the studies done by NCNPR, ImmunXT is a powerful
Immune-Stimulatory extract discovered to date, specifically with respect to
macrophage activation within the innate immune system.  Recent research has
shown that the innate immune system, primarily in the digestive tract, is the
bodys first line of defense and its main function is to guard the body against
disease and invasion by harmful pathogens. Along with this scientific team, LifeQuests own group has decades
of practical research, development and manufacturing experience in nutritional
products and maintain a professional awareness of any new life changing products
available from major product development centers. To be considered for
acquisition, products must have either good reputable academic pedigrees, backed
with very thorough scientific data, or meet product criteria as LifeQuests
Youth Solution that have very long substantiated consumer use with
extremely credible personal, subjective and objective results.  LifeQuest
has made a substantial financial investment along with years of developmental
work in the acquisition of ImmunXT. LifeQuest products also must meet the requirements of strong
functionality and be results based because we design product research on the
principle that functional, beneficial nutritional products are desired by
consumers today. The consumer understands that good nutritional practices may
reduce the risk of disease. LifeQuests products have been developed to
enhance immune competence, detoxification, functionality at the cellular level
and promote digestive health. LifeQuest believes that an optimal immune system,
positive cellular function and digestive health are vital and beneficial for
overall, better physical health.      Industry Overview  Nutritional Supplements  The nutrition industry includes many various sized companies that
manufacturer and distribute products generally intended to maintain the bodys
health and general well being. The four major product categories within the
nutrition industry are: (i) nutritional supplements, which are products such as
vitamins and minerals, dietary supplements, herbs and botanicals, and compounds
derived from these substances; (ii) natural and organic foods; (iii) functional
foods; and (iv) personal care products.  One of our products, The Youth Solution, is a blend of 18
bi-directional tonic herbs with added minerals. Daniel B. Mowrey, Ph.D., in his
book, Herbal Tonic Therapies, states, The definition of a tonic clearly
excludes the notion of making stronger by pushing the body in one direction
only. Tonics are bi-directional, capable of both increasing and decreasing the
activity of body processes. Herbs whose action is bi-directional are called
tonics. Tonic herbs have the ability to exert balancing action on both systems
and biochemical processes of the body. Their power lies in both their
therapeutic benefits and ease of application.  Mowrey continues, The concept of a tonic may sound strange to
modern ears. We simply have not made room in our medical or nutritional agendas
for a concept of a substance that restores balance. We believe that this will
change as the medical community begins to realize that many modern plagues may
be prevented and even treated by maintaining optimum health in all body systems.
Such a re-orientation of thought demands that much less emphasis be placed on
finding and killing germs, and much more on increasing the body systems
natural defenses and restorative powers.  LifeQuests most exciting development in the past year centers on
the introduction of ImmunXT.  ImmunXT is a patented nutritional extract
developed by leading research scientists at the National Center for Natural Products Research
(NCNPR). The NCNPR is located at the Research Institute of
Pharmaceutical Sciences, School of Pharmacy at the University of Mississippi and
is one of the country's leading botanical research organizations. ImmunXT is a
100% vegetarian, bioactive micro-algae that was specifically researched and
developed to support, enhance and boost the bodys naturalimmune system. ImmunXT is a
concentrated nutritional, botanical complex from Arthrospira Platensis
(Spirulina) that has been extracted through a patented, proprietary
manufacturing process. Scientific investigation shows, ImmunXT to be a powerful,
natural immune-stimulatory dietary extract Scientific research has shown that a healthy immune system is the
primary answer for optimum health as a healthy immune system quickly recognizes
and reacts to foreign invaders and pathogens and helps the body in defense of
itself. Not only does ImmunXT stimulate the natural immune system or early
warning system but it also primes the secondary (adaptive) immune system to
determine an appropriate type of response to foreign invaders. ImmunXT patented micro-algae complex was discovered by scientists
at the National Center for Natural Products
Research (NCNPR) after research and development over a ten year
period. NCNPR is a part of the Research Institute of Pharmaceutical Sciences,
School of Pharmacy at the University of Mississippi and is one of the country's
leading botanical research organizations. It is one of the nation's leading
university research center devoted to improving human health   through the discovery, development and commercialization of
pharmaceuticals and dietary supplements derived from plants, fresh-water
organisms and other natural products. The NCNPR researches and locates
botanicals and plants from around the globe for new drug discovery
investigations. The NCNPR receives funding from a variety of government agencies
including the U.S. Food and Drug Administration (FDA), the U.S. Army, the
National Institutes of Health and the U.S. Department of Agriculture (USDA). Due to the quality and professionalism necessary for the NCNPR to
conduct meaningful botanical and natural product research, they developed an
extremely unique bioassay testing method that produces data reflecting the
activity levels of extracts from botanicals, plants and other natural
ingredients. The bioassay yields results that are comparable to data that
biologic pharmaceuticals use to standardize their products. The process is
patent pending and is  sophisticated allowing the scientists at the NCNPR
to be able to validate the activity of any given botanical for macrophage
activation. When the immune enhancement project commenced, the NCNPR began
conducting research on a large number of known natural immune stimulatory
ingredients. By utilizing their bioassay method for validation of activity, the
NCNPR could ascertain if any of the extracts and products tested was powerful
enough to be considered for practical use. The center tested over 50 extracts
and products that were traditionally used to enhance immune function, with
primary emphasis on macrophage activation. The researcher found that extracts
from micro-algae Spirulina were over 1,000 times more active than all others
tested using an assay that measures NF-kappa B activation in human THP-1
monocytes . Utilizing the NCNPR's proprietary extraction procedure and by
optimizing the source of the Spirulina, ImmunXT was developed. The active
component within ImmunXT is present at levels greater than found in other immune
enhancing extracts or herbs. After ten years of exhaustive research, clinical
studies and hundreds of case studies, this very concentrated extract and
powerful tool for enhancing the innate immune function, has aptly been called
"the most powerful natural immune-stimulatory dietary supplement discovered to
date", said co-inventor Dr. David Pasco, Assistant Director at NCNPR. ImmunXT
stands alone in the immune enhancement category of new dietary supplements.  Material Agreements  Intellectual Property License Agreement  On approximately January 1, 1999, we entered into an intellectual
property license agreement (the License Agreement) with Jurak Holdings Limited
(JHL), a corporation organized under the laws of the Province of Alberta and
an affiliate of our Chief Executive Officer and one of our directors.
 Pursuant to the terms and provisions of the License Agreement, we are
required to pay the greater of $500,000 for fiscal year 2003, and each calendar
year thereafter, during the first ten years of the License Agreement (the
Minimum Royalty Fee), or eight percent of the net sales of all license
products sold under the License Agreement (the Continuing Royalty Fee).
 After fiscal 2013, we are required to make payments in the amount of the
Continuing Royalty Fee.    The accrued payments due and owing to JHL under the License
Agreement for the Minimum Royalty Fee and the Continuing Royalty Fee including
interest was $1,087,598 and $631,856 at May 31, 2008 and 2007, respectively.  Immune Booster License Agreement  During the year ended May 31, 2007, the Company initiated the
purchase of licensing fees associated with an exclusive license and distribution
agreement to acquire the worldwide marketing rights to ImmunXT. These rights
have been acquired from Nordic Immotech Trading APS (Nordic Immotech), a leading
life science company with a successful history of producing unique, patented
products that are distributed on a global scale. On December 1, 2006, the
Company finalized the closing of this exclusive global license and distribution
agreement with respect to this natural immune booster product. LifeQuest World
Corporation has begun to market and sell these products in February 2008. The Company paid installments totaling $2,500,000 per the terms of
the agreement. The Company has imputed interest on these installments at a rate
of 10% because the note was non-interest bearing. The discounted value of the
licensed asset totals $2,390,721. As part of the license agreement noted above, Nordic Immotech
shall pay a royalty of ten percent (10%) of net sales of products sold by Nordic
and or affiliates to independent third parties outside of the U.S. In a separate agreement, the Company was granted an option to
purchase all the shares in Nordic Immotech (the supplier). Subject to the terms
and conditions of the separate agreement, the Company has the option to purchase
all of the shares of Nordic Immotech (170,000 shares) at a fixed price of $76.47
per share for a total of $13,000,000. The Company may exercise the option
anytime before December 1, 2008.  Intellectual Property  Patents and other proprietary rights are vital to our business
operations. We protect our technology through a trademark that Jurak Holdings
Limited (JHL) owns and can license. JHLs policy is to seek appropriate
protection both in the United States and abroad for The Youth Solution and other
products. We have acquired trademark protection as follows.  JC Tonic  On January 15, 2002, the United States Patent and Trademark Office
issued a certificate of registration, registration no. 2,530,329, to JHL for
protection of our exclusive use of the trademark JC Tonic. The certificate of
registration for JC Tonic was issued under Class 6, 18, 44, 46, 51 and 52 for
herbal, mineral and vitamin supplements, and shall remain in force and effect
for ten years from the date of issuance.       The Youth Solution  On May 3, 2005, the United States Patent and Trademark Office
issued an application serial no. 78/618,318, registration no. 2625515, to JHL
for protection of our exclusive use of the trademark The Youth Solution. The
certificate of registration for The Youth Solution was issued under Class 3
for body lotions, and shall remain in force and effect for ten years from the
date of issuance.  On September 24, 2002, the United States Patent and Trademark
Office issued a certificate of registration, serial no. 75/703,055, registration
no. 2,625,515, to JHL for protection of our exclusive use of the trademark The
Youth Solution. The certificate of registration for The Youth Solution was
issued under Class 5 and 32 for herbal supplements, and shall remain in force
and effect for ten years from the date of issuance.  Helena  On November 29, 2004, the United States Patent and Trademark
Office accepted JHLs application for registration under serial no. 78/523,794,
for protection of our exclusive use of the trademark Helena. The application
was filed for Helena under Class 3 for non-medicated skin care preparation.
Once final approval is obtained by the United States Patent and Trademark
Office, the trademark shall remain in force and effect for ten years from the
date of issuance.  Vimirex  On January 18, 2005, the United States Patent and Trademark Office
accepted JHLs application for registration under serial no. 78/549,525, for
protection of our exclusive use of the trademark Vimirex. The application was
filed for Vimirex under Class 5 for vitamins and minerals.  Once final
approval is obtained by the United States Patent and Trademark Office, the
trademark shall remain in force and effect for ten years from the date of
issuance.  JC Junior  On June 28, 2005, the United States Patent and Trademark Office
accepted JHLs application for registration under serial no. 78/659,837, for
protection of our exclusive use of the trademark JC Junior. The application
was filed for JC Junior under Class 5 and 32 for herbal supplements.
 Once final approval is obtained by the United States Patent and Trademark
Office, the trademark shall remain in force and effect for ten years from the
date of issuance.  Take An Ounce and Feel the Bounce  On June 13, 2000, the United States Patent and Trademark Office
issued a certificate of registration, serial no. 76/069,199, registration no.
2,490,428, to us for protection of our exclusive use of the trademark Take An
Ounce and Feel the Bounce. The certificate of registration for Take An Ounce
and Feel the Bounce was issued under Class 32 for herbal supplements, and shall
remain in force and effect for ten years from the date of issuance.     Ambassador of Health  On May 5, 1999, the United States Patent and Trademark Office
issued a certificate of registration, serial no. 75/702,892, registration no.
2,613,042, to us for protection of our exclusive use of the trademark
Ambassador of Health. The certificate of registration for Ambassador of
Health was issued under Class 16 and 35 for magazines and newsletters on health
and nutrition and for personnel recruitment and business consultation, and shall
remain in force and effect for ten years from the date of issuance.  We may consider filing additional patent applications with respect
to our technologies and any novel aspects of our technology to protect our
intellectual property. Future patents, if issued, may be challenged, invalidated
or circumvented. Thus, any patent that we own or license from third parties may
not provide adequate protection against competitors. The patent applications
that we may file in the future may not result in issued patents. Also, patents
may not provide us with adequate proprietary protection or advantages against
competitors with similar or competing technologies. As a result of potential
conflicts with the proprietary rights of others, we may in the future have to
prove that we are not infringing the patent rights of others or be required to
obtain a license to the patent. We do not know whether such a license would be
available on commercially reasonable terms, or at all.  We also rely on trade secrets and unpatentable know-how that we
seek to protect, in part, by confidentiality agreements. However, it is possible
that parties may breach those agreements, and we may not have adequate remedies
for any breach. It is also possible that our trade secrets or unpatentable
know-how will otherwise become known or be independently developed by
competitors. There can be no assurance that third parties will not assert
infringement or other claims against us with respect to any existing or future
products, or that licenses would be available if our technology were
successfully challenged by a third party, or if it became desirable to use any
third-party technology to enhance our products. Litigation to protect our
proprietary information or to determine the validity of any third-party claims
could result in significant expense to us and divert the efforts of our
technical and management personnel, whether or not we are successful in such
litigation.  While we have no knowledge that we are infringing the proprietary
rights of any third party, there can be no assurance that such claims will not
be asserted in the future with respect to our existing or future products. Any
such assertion by a third party could require us to pay royalties, to
participate in costly litigation and defend licensees in any such suit pursuant
to indemnification agreements, or to refrain from selling an alleged infringing
product or service.  COMPETITION  The business of developing and distributing nutritional and
personal care products such as our products is highly competitive. Numerous
manufacturers, distributors and retailers compete for consumers and, in the case
of other network marketing companies, for distributors. We compete directly with
other entities that develop, manufacture, market and distribute dietary
supplements. We compete with these entities by emphasizing the underlying
science, value and   high quality of our products, as well as the convenience and
financial benefits afforded by our network marketing system and compensation
plan. However, many of our competitors may be substantially larger and have
greater financial resources and broader name recognition. Our markets are highly
sensitive to the introduction of new products that may rapidly capture a
significant share of those markets.  The nutritional supplement market is characterized by: (i) large
selection of essentially similar products that may be difficult to
differentiate; (ii) retail consumer emphasis on value pricing; (iii) constantly
changing formulations based on evolving scientific research; (iv) low entry
barriers resulting from low brand loyalty, rapid change, widely available
manufacturing, low regulatory requirements, and ready access to large
distribution channels; and (v) a lack of uniform standards regarding product
ingredient sources, potency, purity, absorption rate, and form.  There can be no assurance that we will be able to effectively
compete in this intensely competitive environment. Nutritional and personal care
products can be purchased in a wide variety of distribution channels, including
retail stores and the fact that our product offering line is relatively limited
compared to the wide variety of products offered by many of our competitors, and
are often premium priced. Our ability to remain competitive depends in part upon
the successful marketing of our premium priced products.  We also compete with other network marketing organizations for
time, attention and commitment of new and current distributors. Our ability to
remain competitive depends, in significant part, on our success in recruiting
and retaining distributors. We believe that we offer a rewarding and unique
compensation plan and attractive benefits and services. To the extent
practicable, our compensation plan is designed to be seamless, permitting
international expansion without re-entry requirements. There can be no assurance
that our program for recruiting and retaining distributors will be successful.
The pool of individuals interested in the business opportunities presented by
network marketing tends to be limited in certain markets, and is reduced to the
extent other network marketing companies successfully recruit these individuals
into their businesses. Although we believe that we offer an attractive
opportunity for our distributors, there can be no assurance that other network
marketing companies will not be able to recruit our existing distributors or
deplete the pool of potential distributors in a given market.  RISK
FACTORS  An investment in our common stock involves a number of very
significant risks. You should carefully consider the following risks and
uncertainties in addition to other information in evaluating our company and its
business before purchasing shares of our common stock. Our business, operating
results and financial condition could be seriously harmed due to any of the
following risks. The risks described below are all of the material risks that we
are currently aware of that are facing our company. Additional risks not
presently known to us may also impair our business operations. You could lose
all or part of your investment due to any of these risks.    Risks
Related to Our Business  We Have a History of Operating Losses and There Can Be No
Assurance We Will Be Profitable in the Future; Need to Raise Capital to Continue
Our Growth.  We have a history of operating losses, expect to continue to incur
losses, and may never be profitable.  We do not expect positive cash flow
from operations in the near term.  Further, we have been dependent on sales
of our equity securities and debt financing to meet our cash requirements.
 We incurred a net loss of $1,457,068 for the fiscal year ended May 31,
2008, and have an aggregate net loss of $7,468,302 as of May 31, 2008.
  As of May 31, 2008, we had a working capital deficit of $1,269,406.
 There is no assurance that actual cash requirements will not exceed our
estimates.  In particular, additional capital may be required in the event
that we encounter greater costs associated with general and administrative
expenses and costs of offering equity securities or debt financing.   We May Need to Raise Capital to Continue Our Growth.  Based upon our historical losses from operations, we will require
additional funding in the future. If we cannot obtain capital through financings
or otherwise, our ability to execute our development plans and achieve
profitable operational levels will be greatly limited. Historically, we have
funded our operations through the issuance of equity and short-term debt
financing arrangements. We may not be able to obtain additional financing on
favorable terms, if at all. Our future cash flows and the availability of
financing will be subject to a number of variables, including potential
production and the market prices of our products. Further, debt financing could
lead to a diversion of cash flow to satisfy debt-servicing obligations and
create restrictions on business operations. If we are unable to raise additional
funds, it would have a materially adverse effect upon our operations.   Our Success Depends on the Ability of Our Suppliers With Whom
We Have Business Arrangements.  We depend on a number of suppliers that produce our products.
Failure to maintain continuous access to these suppliers may have a materially
adverse affect our business. Such suppliers may experience equipment failures
and service interruptions, of which we have no control, which could adversely
affect customer confidence, our business operations and our reputation. If we
experience a significant increase in demand, we may have to expand our third
party suppliers. We cannot be assured that additional suppliers will be
available to us, or that if available it will be available on terms that are
acceptable to us. If we cannot produce a sufficient quantity of our products to
meet demand or delivery schedules, our customers might reduce demand, reduce the
purchase price they are willing to pay for our product, or replace our product
with the product of a competitor, any of which could have a materially adverse
effect on our financial condition and operations.     We Rely on the Network Marketing System.  We have relied on the network marketing system to distribute,
market and sell our products. We have no long-term contractual relationship with
these distributors. While we believe that the distributors will continue to
provide their services, there can be no assurance that the distributors will be
available in the future, and if available, will be available on terms deemed
acceptable to us. We had approximately 1,600 distributors and 900 retail
customers at May 31, 2008. Our Continued Operations Depend on the Successful Marketing
of our Products Our business plan is based on the marketing and distribution of
primarily three products, The Youth Solution, ImmunXT, and Helena Whole Body
Anti-Aging Skin Rejuvenator. There is no assurance that we will be successful in
implementing our marketing strategies or that our marketing strategies, even if
implemented, will lead to the successful achievement of our objectives. If we
are not able to successfully implement our marketing strategies, our business
operations and financial performance may be adversely affected. The novelty and
the design of our products is important to our success and competitive position,
and if we are unable to continue to develop and offer such a unique product to
our customers, our business could suffer.  Our Growth Could Harm Our Future Business Results. As we proceed with the production, marketing and sale of our
existing and anticipated products, we expect to experience significant and rapid
growth of our business. We may need to add staff to manage operations, handle
marketing efforts and perform finance and accounting functions. We may be
required to hire a broad range of additional personnel in order to successfully
advance our operations. This growth is likely to place a strain on our
management and operational resources. The failure to develop and implement
effective operational and financial systems, or to hire and retain sufficient
personnel for the performance of all of the functions necessary to effectively
service and manage our potential business, or the failure to manage growth
effectively, could have a materially adverse affect on our business and
financial condition. Our Success is Dependent Upon the Acceptance of Our Products
and Our Business. Our success depends upon our achieving significant market
acceptance of our products. We cannot guarantee that consumers will purchase our
product. Acceptance of herbal supplemental products will depend on the success
of our advertising, promotional and marketing efforts. In the last quarter of
2006, we updated our packaging; engaged a publicity agent; enhanced the flavor
of our consumable products; reintroduced our unit dose packaging for our liquid
herbal supplements; reduced the number of other sizes available to only one
bottle size; released our new online service for distributors referred to as a
Back Office; developed personal replicated websites for our distributor force;
and concluded an agreement with Nordic Immotech Trading giving us the worldwide
rights to market their immune-stimulatory product.     Failure
to maintain effective internal controls  A failure to maintain effective internal controls could adversely
affect our business. The Company has begun the process of documenting and
testing its internal controls as required by the Sarbanes-Oxley Act of 2002. The
Company expects to incur significant costs in complying with these requirements,
including increased staffing costs, increased accounting, auditing and
consulting fees. In addition, the requirements of Sarbanes-Oxley may limit the
ability of the Company to make any future acquisitions. Failure by the Company
to adequately meet the internal control requirements would be reported in the
Companys filings to the Securities and Exchange Commission  which could
negatively impact the Companys reputation and its stock price. Loss of Key Management Personnel. The Company  has a relatively small staff and depends on
three key management people. The loss of any of our key management personnel
could have an adverse impact on our future development and could impair our
ability to succeed. Our performance is substantially dependent our ability to
continue to hire and retain such personnel. The loss of any of our other key
management personnel could have a materially adverse effect on our business,
development, financial condition, and operating results. We do not maintain "key
person" life insurance on any of our directors or senior executive officers. Many of Our Competitors Are Larger and Have Greater Financial
and Other Resources Than We Do. The dietary supplement industry, in general, is intensely
competitive. Our products compete with other dietary supplemental based
products. Such based products are currently marketed by well-established,
successful companies that possess greater financial, marketing, distribution,
personnel and other resources than us. Using these resources, these companies
can implement extensive advertising and promotional campaigns, both generally
and in response to specific marketing efforts by competitors, to enter into new
markets rapidly and to introduce new products. Competitors with greater
financial resources also may be able to enter the market in direct competition
with us, offering attractive marketing tools to encourage the sale of products
that compete with our products or present cost features which consumers may find
attractive. Government Regulation. Any changes in regulation by the Federal Trade Commission (FTC)
and/or the U.S. Food and Drug Administration (FDA) with respect to labeling
and advertising of our products could have an adverse affect on our business. A
change in these requirements could add additional cost to the production of our
products. However, these government regulatory agencies generally allow
companies to make changes when new materials are to be printed and so the
financial effects would be minimal.      RISKS RELATED TO OUR COMMON STOCK  Sale of Restricted Common Stock.  As of May 31, 2008, there are 40,478,830 outstanding shares of our
common stock, of which 30,962,114 are restricted securities as that term is
defined in Rule 144 under the Securities Act of 1933, as amended (the
Securities Act). Although the Securities Act and Rule 144 place certain
prohibitions on the sale of restricted securities, restricted securities may be
sold into the public market under certain conditions.  Any significant downward pressure on the price of our common stock
as certain stockholders sell their shares of our common stock may encourage
short sales. Any such short sales could place further downward pressure on the
price of our common stock.  The Trading Price of Our Common Stock on the OTC Bulletin Board
Has Been and May Continue to Fluctuate Significantly and Stockholders May Have
Difficulty Reselling Their Shares.  Our common stock has traded as low as $0.42 and as high as $5.97
for the years ended May 31, 2008 and 2007, respectively. In addition to
volatility associated with Bulletin Board securities in general, the value of
your investment could decline due to the impact of any of the following factors
upon the market price of our common stock: (i) changes in the demand for our
products; (ii) disappointing results from our marketing and sales efforts; (iii)
failure to meet our revenue or profit goals or operating budget; (iv) decline in
demand for our common stock; (v) downward revisions in securities analysts'
estimates or changes in general market conditions; (vi) lack of funding
generated for operations; (vii) investor perception of our industry or our
business prospects; and (viii) general economic trends.  In addition, stock markets have experienced extreme price and
volume fluctuations and the market prices of securities have been highly
volatile. These fluctuations are often unrelated to operating performance and
may adversely affect the market price of our common stock. As a result,
investors may be unable to sell their shares at a fair price and you may lose
all or part of your investment.  Additional Issuances of Equity Securities May Result in
Dilution to Our Existing Shareholders.  Our Articles of Incorporation authorize the issuance of
150,000,000 shares of common stock and 50,000,000 shares of preferred stock. The
Board of Directors has the authority to issue additional shares of our capital
stock to provide additional financing in the future and the issuance of any such
shares may result in a reduction of the book value or market price of the
outstanding shares of our common stock. If we do issue any such additional
shares, such issuance also will cause a reduction in the proportionate ownership
and voting power of all other stockholders. As a result of such dilution, if you
acquire shares of our common stock, your   proportionate ownership interest and voting power could be
decreased. Further, any such issuances could result in a change of control.  We are authorized to issue shares of preferred stock. Our board of
directors, without shareholder approval, may issue shares of preferred stock
with rights superior to the rights of the holders of shares of common stock. As
a result, shares of preferred stock could be issued quickly and easily,
adversely affecting the rights of holders of shares of common stock and could be
issued with terms calculated to delay or prevent a change in control or make
removal of management more difficult. Although we have no present plans to issue
shares of preferred stock, the issuance of preferred stock in the future could
adversely affect the rights of the holders of common stock and reduce the value
of the common stock.  Our Common Stock is Classified as a Penny Stock under SEC
Rules Which Limits the Market for Our Common Stock.  Because our stock is not traded on a stock exchange or on the
NASDAQ National Market or the NASDAQ Small Cap Market, and because the market
price of the common stock is less than $5 per share, the common stock is
classified as a "penny stock." Our stock has not traded above $5 per share. SEC
Rule 15g-9 under the Exchange Act imposes additional sales practice requirements
on broker-dealers that recommend the purchase or sale of penny stocks to persons
other than those who qualify as an "established customer" or an "accredited
investor." This includes the requirement that a broker-dealer must make a
determination that investments in penny stocks are suitable for the customer and
must make special disclosures to the customers concerning the risk of penny
stocks. Many broker-dealers decline to participate in penny stock transactions
because of the extra requirements imposed on penny stock transactions.
Application of the penny stock rules to our common stock reduces the market
liquidity of our shares, which in turn affects the ability of holders of our
common stock to resell the shares they purchase, and they may not be able to
resell at prices at or above the prices they paid.  A Decline in the Price of Our Common Stock Could Affect Our
Ability to Raise Further Working Capital and Adversely Impact Our
Operations.  A decline in the price of our common stock could result in a
reduction in the liquidity of our common stock and a reduction in our ability to
raise additional capital for our operations. Because our operations to date have
been principally financed through the sale of equity securities, a decline in
the price of our common stock could have an adverse effect upon our liquidity
and our continued operations. A reduction in our ability to raise equity capital
in the future would have a materially adverse effect upon our business plan and
operations, including our ability to continue our current operations. If our
stock price declines, we may not be able to raise additional capital or generate
funds from operations sufficient to meet our obligations.  GOVERNMENT REGULATION  In the United States, where we primarily sell our products, we are
subject to laws, regulations, administrative determinations, court decisions and
similar restrictions at the federal, state and local levels, collectively known
as regulations. These regulations include and pertain   to, among other things: (i) the formulation, manufacturing,
packaging, labeling, advertising, distribution, sale and storage of our product;
(ii) our product claims and advertising, including label claims, direct claims,
as well as claims and advertising by our distributor, for which we may be held
responsible; and (iii) our network marketing organization and activities.  Products  The formulation, manufacturing, packaging, labeling, advertising,
distribution, and sale and storage of our products is subject to regulation by a
number of governmental agencies. The federal agencies include the Food and Drug
Administration (FDA), the Consumer Product Safety Commission, the United
States Department of Agriculture, and others. Our activities are also regulated
by various codes and agencies of the states and localities in which our product
is or may be manufactured, distributed or sold. The FDA, in particular,
regulates the formulation, manufacturing and labeling of dietary and herbal
supplements, which includes our product.  The Dietary Supplement Health and Education Act of 1994 (DSHEA),
revised the provisions of the Federal Food, Drug and Cosmetic Act (FFDCA),
concerning the composition and labeling of dietary supplements, which we believe
is generally favorable to the dietary supplement industry. DSHEA created a new
statutory category of products or dietary supplements. This new category
includes vitamins, minerals, herbs, amino acids, and other dietary substances
for human use to supplement the diet. However, DSHEA grandfathered, with certain
limitations, dietary ingredients that were on the market before October 15,
1994. A dietary supplement containing a new dietary ingredient (NDI), and
placed on the market on or after October 15, 1994, must have a history of use or
other evidence establishing a basis for expected safety. Manufacturers of
dietary supplements using a structure-function statement or other claim must
have scientific substantiation that the statement is true, accurate, and not
misleading. Our product, JC Tonic, The Youth Solution, is classified as a
dietary supplement under the FFDCA and DSHEA.  The labeling requirements for dietary supplements with respect to
labels affixed to containers have been set forth in final regulations effective
March 23, 1999. These regulations include the serving size, dietary ingredient
information, and the proper detail and format required for the Supplement
Facts box. Our product labels are in compliance with those regulations. Many
states have also recently become active in the regulation of dietary supplement
products. These states may require modification of labeling of our product sold
in those states, e.g., Texas, New York and California.  On January 6, 2000, the FDA published a final rule on permissible
structure/function statements to be placed on labels and in brochures.
Structure/function statements are claims of the benefit or positive effect of a
product or an ingredient on the bodys structure or function. This regulation
does not significantly change the way the FDA interprets structure/function
statements. We have not made any substantial label revisions based on this
regulation regarding any of our structure/function product statements.
Subsequently, the FDA published a final rule that the level of science needed to
support a structure/function claim would be raised close to the current Federal
Trade Commission (FTC) standard, which is competent and reliable scientific
evidence. We believe that we have adequate substantiation for all label claims
used.    FDA Final Rule  Safe Use of Dietary Supplements On June 22, 2007, FDA announced a final rule establishing current
good manufacturing practice requirements (CGMPs) for dietary supplements. In
addition, by the end of the year, the industry will be required to report all
serious dietary supplement adverse events to FDA. Ensuring
Quality  Under the final rule,
manufacturers are required to evaluate the identity, purity, quality, strength
and composition of dietary supplements. These regulations are intended to
provide more accountability in the manufacturing process so that consumers can
be confident that the products they purchase contain what is on the
label. The
final rule aims to ensure that dietary supplements do not have: * wrong ingredients * too much or too little of a dietary ingredient * improper packaging * improper labeling * contamination problems due to natural toxins,
bacteria, pesticides, glass, lead, or other substances  All of
these guidelines have been followed by LifeQuest World Corporation since
beginning the marketing of our products.  Product Claims, Advertising and Website  The FDA considers website promotional content to constitute
labeling, and thus our website must not contain disease claims or drug claims,
but only permissible structure/function claims. The Federal Trade Commission
(FTC) governs the advertising of dietary supplements in any medium or vehicle
- print ads, radio spots, infomercials, internet ads, and websites. The
fundamental FTC rule is that all material advertising claims, whether express or
implied, must be substantiated by reliable and competent scientific evidence.
Because our website must comply with both FDA and FTC regulations, we routinely
review our web site and our scientific substantiation for particular claims to
determine if it is sufficient to ensure that there are no disease claims
present. We also require our distributors replicated websites to be in
compliance with FDA and FTC regulations. As such, and to ensure Internet
compliance, distributors may only use their replicated website. Any independent
websites are unauthorized and their creators are solely liable for defending any
regulatory enforcement actions. Violations of this policy may result in the
termination of the distributors relationship with the Company.  The FTC
issued a guidance document to assist companies in understanding and complying
with the substantiation requirement for advertising claims for supplements. We
have organized the   documentation supporting and substantiating our advertising and
promotional practices in compliance with these guidelines. We have not been
notified that we have been or are the subject of any enforcement action by the
FTC. However, any such action in the future by the FTC could materially
adversely affect our ability to successfully market our product. Therefore, we
pay careful attention to new guidelines and recent investigations launched,
complaints filed, and fines imposed by the FTC.  We attempt to remain in full compliance with all applicable laws
and regulations governing the manufacture, labeling, sale, distribution and
advertising of our product.  Network Marketing System  Laws and regulations prevent the use of deceptive or fraudulent
practices that have sometimes been inappropriately associated with legitimate
direct selling and network marketing activities. These laws include
anti-pyramiding, securities, lottery, referral selling, anti-fraud and business
opportunity statutes, regulations and court cases. Illegal schemes, typically
referred to as pyramid, chain distribution, or endless chain schemes,
compensate participants primarily and solely for the introduction or enrollment
of additional participants into the scheme. Often these schemes are
characterized by large up-front entry or sign-up fees, over-priced products of
low value, little or no emphasis on the sale or use of products, high-pressure
recruiting tactics, and claims of huge and quick financial rewards requiring
little or no effort. Generally, these laws are directed at ensuring that product
sales ultimately are made to consumers and that advancement within sales
organization is based on sales of the enterprises products, rather than
investments in the organization or other non-retail sales related criteria or
activity. We ensure through counsel that our network marketing system is in
regulatory compliance.  We currently have distributors in all fifty states. In addition to
federal regulation, each state has enacted its own little FTC Act to regulate
sales and advertising. We may receive requests to supply information regarding
our network marketing plan to regulatory agencies. We believe that our network
marketing program is in compliance with laws and regulations relating to network
marketing activities in our current markets.  We cannot predict the nature of any future law, regulation,
interpretation, or application, nor can we predict what effect additional
governmental legislation or regulations, judicial decisions or administrative
orders, when and if promulgated, would have on our business in the future. It is
possible that future developments may require that we revise our network
marketing program or our product manufacturing and labeling.  EMPLOYEES  We currently employ five (5) employees, all of whom are full-time
employees. In addition to our current staff, we also have approximately 1,600
distributors nationwide. None of the Companys
employees are represented under collective bargaining agreements. The Company
considers its employee relations to be good.    REPORTS
TO STOCKHOLDERS  We are currently a reporting issuer in the U.S. and are subject to
reporting requirements under section 13 or 15(d) of the U.S. Securities
Exchange Act of 1934, as amended.  We are required to file the
following with the U.S. Securities and Exchange Commission (the SEC): (i)
quarterly reports on Form 10-QSB; (ii) an annual report on Form 10-KSB; (iii) a
Form 8-K to report the occurrence of certain reportable events; (iv) Forms 3, 4
and 5 to report insider sales and acquisition of our securities; and (v) proxy
statements. We are required to deliver an annual report to our stockholders
prior to or with the distribution of proxy materials relating to annual
stockholder meetings.     ITEM 2. DESCRIPTION OF PROPERTY  We lease our principal office space located at Hughes Airport
Center, 1181 Grier Drive, Suite C, Las Vegas, Nevada 89119. We currently utilize
office space and warehouse. We intend to lease this space pursuant to the terms
and provisions of our lease at approximately $7,000 per month.  The lease
agreement expires June 30, 2009.We believe
these facilities will be adequate to accommodate our administrative and
distribution needs for the foreseeable future.  ITEM 3. LEGAL
PROCEEDINGS  On December 13, 2006, a civil suit was filed in the District Court
of Clark County in and for the State of Nevada by LifeQuest World Corporation
(plaintiffs) and one former employee and her spouse (defendants). The suit
entails that the former employee processed credit refunds to a debit/credit card
held at their banking institution. In addition, the former employee embezzled
funds by setting up a merchant processing system and diverting the charging of
our distributors' credit cards from our merchant processor to their processor.
All is evidenced by information located on the computer used by the former
employee at the Company as well as through other reporting mechanisms and
processing systems. The Company is seeking relief for damages in excess of
$60,000; special damages according to proof; for attorneys' fees and costs of
suit; and for other and further relief as the Court may deem just and proper as
compensation for monies embezzled by the former employee and her spouse. No
answer has been received from the defendant and the Company is seeking a default
judgment granting all of the relief sought.  Management is not aware of any other legal proceedings
contemplated by any governmental authority or any other party involving us or
our properties. As of the date of this Annual Report, no director, officer or
affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an
adverse interest to us in any legal proceedings. Management is not aware of any
other legal proceedings pending or that have been threatened against us or our
properties.  ITEM 4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS  During fiscal year ended May 31, 2008, we submitted to our
stockholders for approval the election of members of the Board of Directors,
approval of our external auditors for the coming year and the 2008 Stock
Incentive Plan for Employees and Consultants. The Board of   Directors and management are currently drafting the 2008 Stock
Incentive Plan for Employees and Consultants based on the terms approved by
Proxy. The Plan will be effective at that time.                                                  Part II ITEM 5. MARKET FOR
REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS  MARKET
FOR COMMON EQUITY  Shares of our common stock have been traded on the NASD OTC
Bulletin Board under the symbol PYTL.  On August 20, 2007, our trading
symbol was changed to LQWC. Effective July
30, 2007, the Company changed its name to LifeQuest World Corporation. (formerly
Phytolabs, Inc.)  The shares of the Company trade on the Over the Counter
Bulletin Board under the symbol, LQWC  The market for our common stock is limited, volatile and sporadic.
The following table sets forth the high and low sales prices relating to our
common stock on a quarterly basis for the last two fiscal years as quoted by the
NASDAQ. These quotations reflect inter-dealer prices without retail mark-up,
markdown or commissions, and may not represent actual transactions.  Quarter
Ended
High
Bid
Low
BidMay 31, 2008
$0.60
$0.30February 28,
2008
$0.65
$0.50November 30,
2007
$0.70
$0.45August 31,
2007
$1.45
$0.27May 31,
2007
$2.61
$1.20February 28,
2007
$4.29
$2.25November 30,
2006
$4.95
$1.92August 31, 2006
$5.58
$0.42  As of May 31, 2008, there were approximately 357 shareholders of
record of our common shares as reported by our transfer agent, Signature Stock
Transfer, Inc., which does not include shareholders who shares are held in
street or nominee names. We believe that there are approximately 200 beneficial
owners of our common stock. There are no other classes of shares issued or
outstanding.  DIVIDEND
POLICY  No dividends have been declared by the Board of Directors on our
common stock. Our losses do not currently indicate the ability to pay any cash
dividends, and we do not have any intention of paying cash dividends on our
common stock in the foreseeable future. We are trying to build up inventory
levels and expand our business; therefore, it is unlikely that we would use
profits for the purpose of paying dividends for the foreseeable future.    SECURITIES
AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS  As of the date of this Annual Report, we do not have an equity
compensation plan under which equity securities are authorized for issuance to
employees, officers, or directors.  As of the date of this Annual Report,
we do not have any options issued or outstanding under any equity compensation
plan.  The
Company is offering 3,000,000 of its common shares to its distributors under a
plan where the distributors earn certificates based on sales and bonus points.
 Each certificate is redeemable for one share of the Companys common stock
three years after the certificate has been earned.  The number of
certificates outstanding at May 31, 2008 was 88,160. A corresponding liability
for the certificates earned has previously been recorded and the outstanding
balance is $111,695 at May 31, 2008 and is included in Accrued compensation and
benefits.  During the years ended May 31, 2008 and 2007, respectively, no
shares were issued to various distributors under this plan.  Effective June
1, 2007 this plan has been discontinued and all distributers holding
certificates at that time became fully vested. The Company has not set a date
for issuing these common shares as of the date of this filing.   Equity Compensation Plan InformationPlan 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/AEquity
compensation plans not approved by security holders
Ambassador
Program
88,160
N/A
None  RECENT SALES OF UNREGISTERED SECURITIES  Private Placements  During fiscal year ended May 31, 2008, we executed private
placements totaling 6,400,000 shares (1,400,000 at $0.50 per share, 2,500,000 at
$0.20 per share and 2,500,000 at   $0.42 per share) of our restricted common stock, for which we
received cash in amounts of $2,249,965.  During fiscal year ended May 31, 2007, we executed private
placements totaling 4,033,333 shares (reflects 1 for 3 reverse stock split as
noted below) of our restricted common stock, for which we received cash in
amounts of $2,149,950.  Reverse Stock Split  On July 27, 2007, the Board of Directors approved a one-for-three
consolidation (reverse split) of our common stock, effective for shareholders of
record on August 20, 2007.  In the consolidation, each three shares of our common stock issued
and outstanding was converted to one share of common stock.  The number of
outstanding shares of common stock was reduced from 102,731,791 shares to
34,245,499 shares.  The number of authorized shares of common stock was not
reduced by this consolidation.  Fractional shares of stock were rounded up
to the next whole share.  Stock Compensation  During fiscal year ended May 31, 2007, the Company issued 500,000
shares of restricted common stock to two employees at $0.70 per share in lieu of
compensation. During the fiscal year ended May 31, 2008, the employees have
elected to cancel these 166,669 shares (split adjusted from the original 500,000
shares) for nothing in return. The employees forfeited the shares due to
personal tax ramifications and the Company does not intend to replace this form
of compensation.    ITEM 6.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS  LifeQuest World Corporation, a Minnesota corporation incorporated
on November 1, 1997, currently trades on the Over-the-Counter Bulletin Board
under the symbol "LQWC". We are a product-focused company specializing in the
herbal supplement industry and market. The following discussion and analysis of our results of operations
and financial position should be read in conjunction with our audited financial
statements and the notes thereto, included elsewhere in this Annual Report. Our
financial statements are prepared in accordance with U.S. GAAP. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS  In this report and from time to time, in reports filed with the
Securities and Exchange Commission, in press releases, and in other
communications to shareholders or the investing public, there may be forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The Company may make forward-looking statements concerning
possible or anticipated future financial performance, business activities,
plans, pending claims, investigations or litigation which are typically preceded
by the words believes, expects,   anticipates, intends or similar expressions. For such
forward-looking statements, the Company claims the protection of the safe harbor
for forward-looking statements contained in federal securities laws.
Shareholders and the investing public should understand that such forward
looking statements are subject to risks and uncertainties which could cause
actual performance, activities, anticipated results, outcomes or plans to differ
significantly from those indicated in the forward-looking statements. Such risks
and uncertainties include, but are not limited to: lower sales to customers; the
introduction of competitive products and technologies; our ability to
successfully reduce operating expenses; delays in new product introductions;
higher than expected expense related to new sales and marketing initiatives;
availability of adequate supplies of raw materials; and other factors discussed
from time to time in the Companys filings with the Securities and Exchange
Commission. Our actual results could differ materially from the results
discussed in the forward-looking statements.  The following discussion is intended to provide an analysis of our
financial condition and should be read in conjunction with our audited financial
statements and the notes thereto.  The matters discussed in this section
which is not historical or current facts deal with potential future
circumstances and developments.  Such forward-looking statements include,
but are not limited to, the development plans for our growth, trends in the
results of our development, anticipated development plans, operating expenses
and our anticipated capital requirements and capital resources.  Our actual
results could differ materially from the results discussed in the
forward-looking statements.  The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern.
 However, the Company has sustained substantial losses and its liabilities
exceed its assets which has created a substantial doubt about the Companys
ability to continue as a going concern.  The Company intends to generate
positive cash flows from operations through increased sales utilizing the
network of distributors in place with existing products and the new natural
immune booster products, issuing additional stock, and obtaining necessary
capital through additional advances from the Companysprincipal stockholder or through private
placements.  To
continue operations, the Company must raise additional capital beyond the
additional stock sold in a private placements by the Company during the year
ended May 31, 2008 totaling $2,249,965.However, there can be no assurance the
Company will be able to obtain additional capital from private placements in the
future.  The proceeds of the private placements are being used for regular
corporate needs as well as funding the product launch of our recently acquired
rights to the worlds most powerful, natural immune booster product. One group of
investors has invested funds to date.  With the formal completion and payment of the exclusive global
license and distribution agreement relative to the ImmunXT product, the Company
accelerated work on the packaging and branding of this new product to make it
available to North American markets in February 2008.    Critical Accounting Policies  Inventory Valuation: The Companys inventories are valued at the
lower of cost or market using the first-in, first-out method (FIFO). Reserves
for overstock and obsolescence are estimated and recorded to reduce the carrying
value to estimated net realizable value. The amount of the reserve is determined
based on projected sales information, plans for discontinued products and other
factors. Though management considers these reserves adequate and proper, changes
in sales volumes due to unexpected economic or competitive conditions are among
the factors that could materially affect the adequacy of this reserve.  Intangible Asset: Intangible asset, entirely comprised of the
ImmunXT license, is recorded at cost and is presented net of amortization.
Amortization is computed over the estimated sales volume that is anticipated
over the remaining term of the licensed agreement to properly match revenue and
expenses.  Income Taxes: We account for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes as clarified by FIN 48. In the preparation of the
Companys consolidated financial statements, management calculates income taxes.
This includes estimating the Companys current tax liability as well as
assessing temporary differences resulting from different treatment of items for
tax and book accounting purposes. These differences result in deferred tax
assets and liabilities, which are recorded on the balance sheet. These assets
and liabilities are analyzed regularly and management assesses the likelihood
that deferred tax assets will be realized from future taxable income. The
valuation allowance for deferred income tax benefits is determined based upon
the expectation of whether the benefits are more likely than not to be realized.
The Company has recorded a full valuation
allowance for all deferred tax assets due to the significance of its continued
operating losses.  FIN
No. 48 requires the recognition of a financial statement benefit of a tax
position only after determining that the relevant tax authority would more
likely than not sustain the position following an audit. For tax positions
meeting the more-likely-than-not threshold, the amount recognized in the
financial statements is the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate settlement with the relevant
tax authority. See Note 6 to the Financial Statements for additional information
regarding income taxes.   Revenue Recognition: The Company recognizes revenue when the
earnings process is complete, evidenced by persuasive evidence of an agreement,
delivery has occurred or services have been rendered, the price is fixed or
determinable, and collectability is reasonably assured.  The earning
process completion is evidenced through the shipment of goods, as the sales
terms of our products are FOB shipping point, the risk of loss is transferred
upon shipment and there are no significant obligations subsequent to that point.
There are no significant estimates related to revenue recognition.         RESULTS OF OPERATIONS  Years ended May 31,2008
2007
% ChangeRevenue
$
   977,469
$
 1,046,299
(7%)Gross Profit
$
   767,566
$
    788,120
(3%)Net Loss
$(1,457,068)
$
(1,375,970)
(6%)Basic and Diluted Net Loss per Share
$
      (0.04)
$      (0.04)(1) (1)  Restated to reflect the 1 for 3
reverse stock split on August 20, 2007  Year Ended May 31, 2008 Compared to Year Ended May 31, 2007  Overview  Total revenue for the year ended May 31, 2008, was $977,469
compared to $1,046,299 in 2007.  Gross profit declined to $767,566 for the
year ended May 31, 2008 compared to $788,120 in 2007, as further discussed
below. The net loss for the year ended May 31, 2008, was ($1,457,068) compared
to ($1,375,970) in 2007.  Revenue and Gross Margins  Revenues for the year ended May 31, 2008 decreased by 7% to
$977,469 compared to $1,046,299 in 2007.  Product sales were $909,381 and
$1,046,299 for the years ended May 31, 2008 and 2007, respectively. Product
sales included sales for the ImmunXT product line which were $53,190 and $0 for
the years ended May 31, 2008 and 2007, respectively. The Company began selling
the ImmunXT product in the North America market in February 2008. The 2008
revenue amount also includes $68,088 of royalty income received from Nordic
Immotech for their sales of our ImmunXT product in Europe which is compared to
no royalty revenue for the comparable period as the agreement started late in
the fiscal year ended May 31, 2007. The Company has continued to experience
weaker demand for its existing products compared to last year and is actively
developing new product offerings such as the ImmunXT product.  Gross profit in the year ended May 31, 2008 decreased to $767,566
compared to $788,120 in the same period ended in 2007 due primarily to the
decline in product sales. Gross profit as a percentage of revenue increased to
78% in the year ended May 31, 2008 compared to 75% in the same period ended in
2007. This was due to royalty income earned in 2008 which has no direct costs
aside from the ImmunXT license amortization which was minimal in 2008.  Royalty
Expense-Related Party    The minimum royalty expense-related party accrued to Jurak
Holdings Limited (related party) remained consistent for both years at $500,000
($125,000 per quarter).  Distribution, Selling, and Administrative Expenses  Total distribution, selling and administrative expenses for the
year ended May 31, 2008, were $1,541,999 compared with $1,703,552 for the year
ended in 2007. The decrease is primarily related to a stock compensation award
valued at $350,000 to two employees made in April 2007 which was not repeated in
2008. Without that increased expense in 2007, selling and administrative
expenses increased by approximately $188,000 in 2008. This increase is primarily
related to the investment in launching the ImmunXT product line in 2008 which
increased consulting and marketing costs. Other Income and Expense  Other income of $133,382 for the year ended May 31, 2007, consists
of the Companys prorata share of a cash distribution in exchange for their
membership interest in EIG Mutual Holding Company.  EIG successfully
converted from a mutual holding company to a publicly traded stock company in
February 2007. The Company received their funds in March 2007. There was no such
gain in 2008.  Interest expense for the year ended May 31, 2008, was $182,635
compared with $93,920 for the year ended in 2007. Current year interest costs
increased over prior year due to increased interest expense on the royalty
agreement with a related party for which the Company is in arrears on payments
made. LIQUIDITY AND CAPITAL RESOURCES  We have historically had more expenses and cost of sales than
revenue in each year of our operations. The accumulated deficit as of May 31,
2008, was $7,468,302 compared to $6,011,234 as of May 31, 2007.  Generally,
we have financed operations to date through the proceeds of the private
placement of equity and debt securities and revenue. In connection with our
business plan, management anticipates that there may be additional increases in
operating expenses and capital expenditures relating to ImmunXT. We intend to
finance these expenses with further issuance of our securities and revenues from
operations. Therefore, we expect the  need to raise additional capital and
increase our revenues to meet long-term operating requirements.  We currently are analyzing the opportunity for a private placement
offering. We have not finalized the terms of a placement, if one were to occur.
The proceeds of any new private placement would be used for regular corporate
needs as well as funding the product launch of our recently acquired rights to
the worlds most powerful, natural immune booster product.    At May 31, 2008, the Company had $16,336 of unrestricted cash
compared to $197,338 of unrestricted cash at May 31, 2007.  The Company had
current assets of $316,781 and current liabilities of $1,586,187 at May 31,
2008, compared to current assets of $282,824 and current liabilities of
$2,377,809 at May 31, 2007.  Net cash used in operating activities was $943,919 during the year
ended May 31, 2008, compared to net cash used in operating activities of
$647,726 in the year ended May 31, 2007. The decrease was due primarily to the
increased operating loss and investment in ImmunXT inventory for the year ended
May 31, 2008, compared to the operating loss which included a $350,000 non-cash
stock compensation expense for the prior year.  Net cash used in investing activities was $6,220 in the year ended
May 31, 2008, compared to $1,041,497 in the year ended in 2007. The change was
caused primarily by the final purchase of the ImmunXT license in 2007. The
Company expended $1,067,531 for licensing fees associated with the acquisition
of the worldwide exclusive marketing rights to the world's most powerful,
natural immune booster discovered to date, as stated by the scientific research
team that developed the product. These rights have been acquired from a leading
life science company with a successful history of producing unique, patented
products that are distributed on a global scale.  Net cash provided by financing activities was $769,137 in the year
ended May 31, 2008, compared to net cash provided by financing activities in the
year ended in 2007 of $1,842,488. The Company raised a significant amount of
additional capital in 2007 compared to 2008 in order to complete the purchase of
the ImmunXT license.  PLAN OF OPERATION  We have been, since our inception, reliant on external investment
to finance ongoing operations as we are not yet operating profitably.
 While we expect that we anticipate achieving profitable operations in the
future, there can be no assurance that our revenue, margins, and profitability
will increase or be sufficient to support our operations in the long term. We
expect we will need to raise additional capital to meet short and long-term
operating requirements. We believe that private placements of equity capital and
debt financing may be adequate to fund our long-term operating requirements. We
may also encounter business endeavors that require significant cash commitments
or unanticipated problems or expenses that could result in a requirement for
additional cash. If we raise additional funds through the issuance of equity or
convertible debt securities other than to current shareholders, the percentage
ownership of our current shareholders would be reduced, and such securities
might have rights, preferences or privileges senior to our common stock.
Additional financing may not be available upon acceptable terms, or at all. If
adequate funds are not available or are not available on acceptable terms, we
may not be able to take advantage of prospective business endeavors or
opportunities, which could significantly and materially restrict our business
operations. We are continuing to pursue external financing alternatives to
improve our working capital position and to grow our business to the greatest
possible extent.    On December 1, 2006, LifeQuest World Corporation, entered into an
agreement with Nordic Immotech Trading whereby LifeQuest World Corporation
acquired the worldwide rights to its powerful immune-stimulatory extract.
 The agreement in principal requires that LifeQuest World pay a $2.5
million license fee which has been paid in full.  On the same date, LifeQuest World Corporation, entered into an
agreement with Nordic Immotech Trading appointing them as a sub-licensee to
handle the sales and distribution of its immune-stimulatory product in several
European countries and to a lesser extent, other parts of the world.  Of late, the immune system in general is receiving a great deal of
attention from traditional medicine as well as alternative medicine inasmuch as
it is the basis for a strong support system and in particular for avoiding
various strains of flu and other viruses.  The Company therefore believes
that it will be well positioned in the industry and in the immune system product
market given this extracts potency supported by clinical proof of efficacy.  The Company researched thoroughly as to the best method of
marketing and has decided on continuing with the direct selling business it is
already in. The product made with the extract in question has been test-marketed
in Denmark and Finland and with a North American product launch that began in
February 2008. MATERIAL
COMMITMENTS A significant commitment for fiscal year ending May 31, 2008,
relates to the License Agreement with Jurak Holdings Limited (related party). As
of fiscal year ended May 31, 2008, an aggregate amount of $1,087,598 is due and
owing to Jurak Holdings Limited for Accrued Minimum Royalty fees and accrued
interest due to lack of timely payment. See Note 8 in financial statements for
additional information.  On December 1, 2006, the Company finalized the closing of the
exclusive global license and distribution agreement with Nordic Immotech Trading
and has begun to market or sell the ImmunXT product, in February 2008.  As
part of the closing for this agreement, the Company has a calendar year minimum
raw product purchase commitment as follows: 1,000 kg for 2007, 2,000 kg for 2008
(amended), 9,000 kg for 2009, 15,000 kg for 2010 and 20,000 kg each year
thereafter. The license agreement can be terminated by Nordic Immotech Trading
if the minimum purchase commitment is not met. The raw product commitment
includes raw product that are sold in a sub license agreement with Nordic
Immotech Trading for Europe. The Company anticipates meeting these
requirements.  As part of the license agreement noted above, Nordic Immotech
Trading shall pay a royalty of ten percent (10%) of net sales of products sold
by Nordic and affiliates to independent third parties in Europe.  In a separate agreement, the Company was granted an option to
purchase all the shares in Nordic Immotech Trading (the sole supplier of the raw
material ingredient for our ImmunXT product). Subject to the terms and
conditions of the separate agreement the Company has the   option to purchase all of the shares of Nordic (170,000 shares) at
a fixed price of $76.47 per share for a total of $13,000,000. The Company may
exercise the option anytime before December 1, 2008. OFF-BALANCE
SHEET ARRANGEMENTS As of the date of this Annual Report, we do not have any
off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources, that are material to our investors. The term
off-balance sheet arrangement generally means any transaction, agreement or
other contractual arrangement to which an entity unconsolidated with us is a
party, under which we have: (i) any obligation arising under a guarantee
contract, derivative instrument or variable interest; or (ii) a retained or
contingent interest in assets transferred to such entity or similar arrangement
that serves as credit, liquidity, or market risk support for such assets.  FUTURE OUTLOOK  The demand for our product is largely dependent upon the level of
acceptance and understanding of herbal dietary supplements in the North American
distributor and consumer sectors. Market size for herbal dietary supplement
products and our relative share of this market will be affected by a number of
factors, which include general understanding and awareness, continuing growth in
homeopathic awareness, government regulations and general economic conditions.
We are attempting to mitigate some of these risks through education and
employing well-known persons to endorse our products.  As we continue to expand our operations internationally we must be
aware of any inherent business risks associated with doing so. We have attempted
to mitigate these risks by establishing a network marketing system utilizing
persons who are familiar with the industry.                      ITEM 7. FINANCIAL
STATEMENTS  LifeQuest World
Corporation (formerly Phytolabs, Inc. and Jurak Corporation World Wide,
Inc.) Audited Financial
Statements As of and for the
year ended May 31, 2008 Index Report of Independent
Registered Public Accounting Firm Balance Sheets Statements of
Operations Statements of Cash
Flows Notes to Financial
Statements                              REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors and Stockholders LifeQuest World Corporation  We have audited the accompanying consolidated balance sheets of
LifeQuest World Corporation as of May 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. 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 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 misstatement. 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 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 audit provides a
reasonable basis for our opinion.  In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of LifeQuest World
Corporation as of May 31, 2008 and 2007, and the results of its operations and
its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.  The accompanying financial statements have been prepared assuming
the Company will continue as a going concern.  As discussed in Note 2 to
the financial statements, the Company has suffered recurring losses from
operations and its current liabilities exceed its current assets.  These
factors raise substantial doubt about its ability to continue as a going
concern.  Managements plans in regard to these matters are also described
in Note 2.  The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.   /s/ Carver Moquist & O'Connor, LLC   Minneapolis,
Minnesota September
12, 2008


LIFEQUEST WORLD CORPORATIONCONSOLIDATED BALANCE SHEETSMAY 31, 2008 AND 2007May 31

May 31Assets:
2008

2007____________

____________Current
assets:Cash
and cash equivalents
$
          16,336

$
        197,338Accounts
receivable
11,646

7,622Inventories,
net
277,879

64,010Prepaid
expenses and advances
10,920

13,854____________

____________Total
current assets
316,781

282,824____________

____________Office
furnishings and equipment, net
6,024

5,152____________

____________Other
assets:Deposits
6,745

38,598Intangible
assets, net
2,388,699

2,390,721____________

____________Total
other assets
2,395,444

2,429,319____________

____________Total
assets
$      2,718,249

$      2,717,295____________

________________________

____________Liabilities and Stockholders' Equity:Current
liabilities:Current
portion of capital lease obligation
$
               321

$
               932Accounts
payable
163,358

70,922Accounts
payable-related party
96,912

54,826Installment
payable-Nordic Immotech
-

1,384,513Accrued
interest - installment payable
-

23,075Accrued
compensation and benefits
215,018

158,809Accrued
royalties and interest-related party
1,087,598

631,856Payable
to stockholder/officers
22,980

52,876____________

____________Total
current liabilities
1,586,187

2,377,809Capital lease
obligations, net of current portion
-

321____________

____________Total
liabilities
1,586,187

2,378,130____________

____________Stockholders'
equity:Common
stock, par value $.001 per share, 150,000,000 sharesauthorized,
 40,478,830 and 34,245,499 shares issued andoutstanding
at May 31, 2008 and 2007, respectively
40,479

34,246Additional
paid-in capital
8,559,885

6,316,153Accumulated
deficit
(7,468,302)

(6,011,234)____________

____________Total
stockholders' equity
1,132,062

339,165____________

____________Total
liabilities and stockholders' equity
$      2,718,249

$      2,717,295____________

________________________

____________See
accompanying notes to consolidated financial statements.     LIFEQUEST WORLD CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED MAY 31, 2008 AND 2007Year ended May 312008


2007Revenue:Sales-product
$
909,381


$
1,046,299Royalty
income-immune product

68,088



-Total
revenue

977,469



1,046,299Cost
of sales

209,903



258,179Gross
profit

767,566



788,120Royalty
expense-related party

500,000



500,000Distribution,
selling and administration expenses

1,541,999



1,703,552Loss
from operations

(1,274,433)



(1,415,432)Other
income and (expenses):Gain
received in exchange for insurance membershipinterest
in mutual holding company

-



133,382Interest
expense

(182,635)



(93,920)Total
other income and (expense), net

(182,635)



39,462Net
loss before income taxes

(1,457,068)



(1,375,970)Income
tax expense

-



-Net
loss
$
(1,457,068)


$
(1,375,970)Basic
and diluted net loss per common share
$
(0.04)


$
(0.04)Weighted
average outstanding common shares-

38,125,837



33,5656,837basic
and dilutedSee accompanying notes to consolidated financial
statements.    LIFEQUEST WORLD CORPORATIONCONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITYFOR THE YEARS ENDED MAY 31, 2008 AND 2007AdditionalCommon Stock





Paid-In


AccumulatedShares

Amount


Capital


Deficit

TOTALBalance
- May 31, 2006
30,212,164

$
30,212

$
4,170,237

$
(4,635,264)

$      (434,815)Issuance
of common stock at$0.06
per share in Private Placementduring
June 2006
3,333,333


3,334


196,666




200,000Issuance
of common stock at$3.00
per share in Private Placementduring
December 2006
200,000


200


599,800




600,000Issuance
of common stock at$3.00
per share in Private Placementduring
April 2007
300,000


300


900,465




900,765Issuance
of common stock at$3.00
per share in Private Placementduring
April 2007
33,333


34


99,151




99,185Issuance
of common stock forcompensation
in April 2007valued
at $2.10 per share
166,669


166


349,834




350,000Net
loss









(1,375,970)

(1,375,970)Balance
- May 31, 2007
34,245,499


34,246


6,316,153


(6,011,234)

339,165Issuance
of common stock at$0.50
per share in Private Placementduring
July 2007
1,400,000


1,400


698,600




700,000Issuance
of common stock at$0.20
per share in Private Placementduring
September 2007
2,500,000


2,500


497,500




500,000Cancellation
of common stock issued forcompensation
in April 2007, originally valuedat
$2.10 per share, in February 2008
(166,669)


(166)


166




-Issuance
of common stock at$0.42
per share in Private Placementduring
November 2007
1,190,476


1,190


498,775




499,965Issuance
of common stock at$0.42
per share in Private Placementduring
December 2007
595,238


595


249,405




250,000Issuance
of common stock at$0.42
per share in Private Placementduring
February 2008
714,286


714


299,286




300,000Net
loss









(1,457,068)

(1,457,068)Balance
- May 31, 2008
40,478,830


$     40,479


$        8,559,885


$  (7,468,302)

$      1,132,062See accompanying notes to consolidated financial
statements.    LIFEQUEST
WORLD CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE
YEARS ENDED MAY 31, 2008 AND 2007___________________________2008
2007____________
____________CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
$   (1,457,068)
$
  (1,375,970)Adjustments to reconcile net lossto net cash used in operating
activities:Depreciation and
amortization
7,370
9,632Stock compensation
expense
-
350,000Non-cash interest
expense
42,412
61,323Changes in operating assets
and liabilities:Accounts
receivable
(4,024)
(7,622)Inventories
(213,869)
(5,856)Prepaid
expenses and advances
2,934
(5,240)Deposits
31,853
(19,233)Accounts
payable
134,522
(82,895)Accrued
expenses
511,951
428,135____________
____________Net
cash used in operating activities
(943,919)
(647,726)____________
____________CASH FLOWS FROM INVESTING ACTIVITIES:Restricted cash
-
26,034Purchase of office furnishings and equipment
(6,220)
-Investment in intangible asset - immune
license
-
(1,067,531)____________
____________Net cash used
in investing activities
(6,220)
(1,041,497)____________
____________CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of common stock, net of
issuance costs
2,249,965
1,799,950Payments on installment payable-Nordic
Immotech
(1,450,000)
-Payments on capital lease obligations
(932)
(5,345)Advances from (repayment to)
stockholder/officer
(29,896)
47,883____________
____________Net cash
provided by financing activities
769,137
1,842,488____________
____________NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
(181,002)
153,265CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD
197,338
44,073____________
____________CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
         16,336
$
       197,338____________
________________________
____________Supplemental
 disclosures of cash flow information:Interest
paid
$
       140,223
$
           9,422Income tax
payments
$
                -
$
                -Debt incurred
with purchase of immune license
$
                -
$
    1,384,513See accompanying notes to consolidated
financial statements.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS May 31, 2008 and 2007 Note
1 - Nature of Business and Summary of Significant Accounting
Policies: Nature
of business: LifeQuest World Corporation (formerly Phytolabs, Inc. and Jurak
Corporation World Wide, Inc.) was incorporated under the laws of the State of
Minnesota on November 1, 1997. The Company is located in Las Vegas, Nevada and
develops and distributes dietary herbal supplement products. Effective August 20, 2007, the Company changed its name to
Lifequest World Corporation (formerly Phytolabs, Inc. and Jurak Corporation
World Wide Inc.) to more reflect the business the Company is involved in -- that
of products designed to positively affect the lives of people worldwide. The
shares of the Company trade on the Over the Counter Bulletin Board under the
symbol, "LQWC." A summary of the Company's significant accounting policies is as
follows: Principles
of Consolidation: The consolidated financial statements include the accounts of
LifeQuest World Corporation and its wholly owned subsidiary. All significant
inter-company accounts and transactions have been eliminated in
consolidation. Revenue
recognition: The Company recognizes revenue when persuasive evidence of an
arrangement exists, title and risk of ownership passes, the sales price is fixed
or determinable, and collectability is probable. Generally, these criteria are
met at the time product is shipped to our distributors or directly to a retail
customer. Use
of estimates: The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the financial statement date and revenues and expenses during
the reporting period. Actual results could differ from Company estimates. Cash: The Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash equivalents. The Company
maintains its cash in a high quality financial institution. The balance at times
may exceed the federally insured limits.   Accounts
Receivable: The Company collects payments from its customers almost entirely
from credit cards. Primarily, any accounts receivable balance at the end of the
reporting period is due to a two or three day lag in receiving the funds from
the credit card processors. It also includes royalty payments due from Nordic
Immotech for product sales made in Europe through May 31, 2008. Balances still
outstanding after management has used reasonable collection efforts are written
off through a charge to the allowance for doubtful accounts and a credit to
accounts receivable. Historically, the Company has not experienced significant
losses related to receivables from individual customers. At May 31, 2008
and 2007, the Company considers its accounts receivable to be fully collectible
and therefore have not recorded an allowance for doubtful
accounts.    Inventories: Inventories are valued at the lower of cost or market, using the
first-in, first-out method (FIFO).  The Company reviews inventory on a
regular basis and provides for slow-moving, obsolete or unusable inventories by
reducing inventory to its estimated useful or scrap value. Inventories are
report at their net amounts, and consist of the following:  May 312008

2007Raw
materials
$ 170,286

$ 26,571Finished
goods and supplies
117,593

56,050Allowance
for obsolescence
(10,000)

(18,611)$ 277,879

$ 64,010  Office
furnishings and equipment: Office furnishings and equipment are recorded at cost and
depreciated on a straight-line basis over their estimated useful life of three
to seven years. Maintenance and minor renewals are expensed when incurred. Depreciation expense for
the years ended May 31, 2008 and 2007 was $5,348 and $9,632, respectively. Intangible
Asset-Immune Booster License: Intangible asset, entirely comprised of the immune booster
license, is recorded at cost and is presented net of amortization. Amortization
is being computed over the estimated sales volume that is anticipated over the
remaining term of the licensed agreement to properly match revenue and expenses.
There was $2,022 and $0 of amortization expense for the years ended May 31, 2008
and 2007, respectively. The estimated amortization for future years is as
follows: $275,000 in 2009, $575,000 in 2010, $850,000 in 2011 and $688,699 in
2012.  Long-lived
assets: Long-lived assets, such as property and equipment and intangible
assets are reviewed for impairment whenever changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by comparison of the carrying amount of
an asset to estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized in the amount by which the carrying
amount of the assets exceeds the fair value of the asset. Income
taxes: Income taxes are accounted for in accordance with SFAS
No. 109, as clarified by FIN No. 48, which requires an asset and
liability approach to financial accounting and reporting for income taxes.
Accordingly, deferred tax assets and liabilities arise from the difference
between the tax basis of an asset or liability and its reported amount in the
financial statements. Deferred tax amounts are determined using the tax rates
expected to be in effect when the taxes will actually be paid or refunds
received, as provided under currently enacted tax law. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change in deferred tax assets and
liabilities during the period.    FIN No. 48 requires the recognition of a financial statement
benefit of a tax position only after determining that the relevant tax authority
would more likely than not sustain the position following an audit. For tax
positions meeting the more-likely-than-not threshold, the amount recognized in
the financial statements is the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate settlement with the relevant
tax authority. See Note 6 to the Financial Statements for additional information
regarding income taxes. Advertising: The Company expenses advertising costs as they are incurred.
Advertising costs were $8,810 and $58,758 for the years ended May 31, 2008 and
2007, respectively. Shipping
and handling costs: Shipping and handling costs charged to customers have been
included in sales. Inbound and outbound freight and handling costs incurred by
the Company have been included in cost of sales. Research
and development costs: Research and development costs consist of on-going product
development and enhancement efforts. Total expenses amounted to $16,914 and
$20,723 for the years ended May 31, 2008 and 2007, respectively. Fair
value of financial instruments: The carrying value of the Company's financial instruments
approximates fair value at May 31, 2008 and 2007. The carrying amounts for cash,
accounts receivable, accounts payable, accrued liabilities and notes payable
approximate fair value due to the short maturity of these instruments. Segment
Reporting: The
Company operates as one reporting segment. Loss
per common share: Loss per share is computed based on the weighted-average number of
common shares outstanding. There were 88,160 certificates for shares of stock
related to the distributer stock bonus plan  Note 8 at May 31, 2008, that
would be considered anti-dilutive and therefore are not included.There were 88,160
certificates for shares of stock and 533,333 warrants outstanding at May 31,
2007, that would be considered anti-dilutive and therefore are not included. Reclassifications: Certain prior year amounts have been reclassified to conform to
current year presentation. Recent
accounting pronouncements: In March 2008, the FASB issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities  an amendment to FASB Statement
No. 133. SFAS No. 161 is intended to improve financial standards for derivative
instruments and hedging activities by requiring enhanced disclosures to enable
investors to better understand their effects on an entity's financial position,
financial performance, and cash flows. Entities are required to provide enhanced
disclosures about: (a) how and why an entity uses derivative instruments; (b)
how derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations; and (c) how derivative
instruments and related hedged items affect an entitys financial position,
financial performance, and cash flows. It is effective for financial statements
issued for fiscal years beginning after November 15, 2008, with early adoption
encouraged. The Company is currently evaluating the impact of SFAS No. 161 on
its financial statements, and the adoption of this statement is not expected to
have a material effect on the Companys financial statements.   In December 2007, the FASB issued SFAS No. 141 (R), Business
Combinations. SFAS No. 141 (R) establishes principles and requirements for how
the acquirer of a business recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. The statement also provides guidance
for recognizing and measuring the goodwill acquired in the business combination
and determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. SFAS No. 141 (R) applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. The adoption of this
statement is not expected to have a material effect on the Company's future
reported financial position or results of operations. In December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements-an amendment of ARB No. 51. SFAS
No. 160 establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No.
160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. The adoption of this statement
is not expected to have a material effect on the Company's future reported
financial position or results of operations. In April 2008, the FASB issued FASB Staff Position
(FSP) No. FAS 142-3, Determination of the Useful Life of Intangible
Assets. This guidance addresses the determination of the useful life of
intangible assets which have legal, regulatory or contractual provisions that
potentially limit a companys use of an asset. Under the new guidance, a company
should consider its own historical experience in renewing or extending similar
arrangements. We are required to apply the new guidance to intangible assets
acquired after December 31, 2008. In June 2008, the FASB issued
FSP No. EITF 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities. This guidance
states that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents are participating securities and
should be included in the computation of earnings per share using the two-class
method outlined in SFAS No. 128, Earnings per Share. The two-class
method is an earnings allocation formula that determines earnings per share for
each class of common stock and participating security according to dividends
declared and participation rights in undistributed earnings. The terms of our
restricted stock unit and restricted stock awards do provide a nonforfeitable
right to receive dividend equivalent payments on unvested awards. As such, these
awards are considered participating securities under the new guidance. Effective
January 1, 2009, we will begin reporting earnings per share under the
two-class method and will restate all historical earnings per share data. We are
currently evaluating the impact of this new guidance on our reported earnings
per share. Note
2 - Company's Continued Existence: The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the Company as a
going concern. However, the Company has sustained substantial losses and has a
significant working capital deficit. The Company intends to generate positive
cash flows from operations through increased sales utilizing the network of
distributors in place, from financing activities such as issuing additional
stock through private placement, and obtaining necessary capital through
additional advances from the Company's principal stockholder. However, there can
be no assurance the Company will be able to obtain additional capital from
private placements or advances from stockholders in the future. The Company has
no other committed sources or arrangements for additional financing. The financial statements do not include any adjustment relating to
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue to exist. Note
3 - Intangible Asset: On December 1, 2006, the Company purchased, through an exclusive
license and distribution agreement, the worldwide marketing rights to the most
powerful, natural immune booster discovered to date, as stated by the scientific
research team that developed the product. These rights are being acquired from
Nordic Immotech   Trading APS, a leading life science company with a successful
history of producing unique, patented products that are distributed on a global
scale. The license was purchased through installment payments totaling
$2,500,000 per the terms of the agreement which are paid in full as of May 31,
2008. The agreement has an initial term of five years. The agreement
automatically renews an additional five years if minimum purchase commitments
are met. See Note 8 for additional information. The Company has imputed interest on these installments at a rate
of 10% because the payment schedule was non-interest bearing. The discounted
value of the licensed asset totals $2,373,190. Additional costs for legal
services were also incurred for $17,531. The total cost of the license is
$2,390,721. The Company began marketing the product domestically in February
2008. The Company began amortizing the license at this time. The accumulated
amortization for the years ended May 31, 2008 and 2007, was $2,022 and $0,
respectively. In a separate agreement, the Company was granted an option to
purchase all the shares in Nordic Immotech (the sole supplier of the raw
material ingredient for our ImmunXT product). Subject to the terms and
conditions of the separate agreement, the Company has the option to purchase all
of the shares of Nordic Immotech (170,000 shares) at a fixed price of $76.47 per
share for a total of $13,000,000. The Company may exercise the option anytime
before December 1, 2008. Note
4 -Capital Lease
Obligations: The Company has one remaining capital lease for new computer
equipment, expiring through October 2008. The lease bears interest at 5%. The
obligation is collateralized by the equipment under lease. Total cost and
accumulated amortization of the lease equipment was $20,406 and $20,406 at May
31, 2008 and 2007, respectively. Amortization expense on the leased assets is
included with depreciation expense.  Future minimum lease payments under
capital leases and the net present value of the future minimum lease payments
are as follows for the years ending May 31:  2009
$  325Total
Future Minimum Lease Payments
325Less
Amount Representing Interest
(4)Present
value of Future Minimum Lease Payments
321Less
Current Portion
( 321)Long-Term
Capital Lease Obligations
$
    0  Note
5 - Stockholders Equity: In
July 2007, the Company had a single private placement and issued
1,400,000 shares of our restricted commons stock at $0.50 per share for
$700,000. No warrants were issued with this issuance.  In
September 2007, we subsequently authorized a private placement of up to
12,000,000 shares of our common stock without warrants on a best efforts
basis.   The Company sold 2,500,000 shares at $0.20 per share for
$500,000 in September 2007. From November 2007 to February 2008, the
Company sold 2,500,000 shares at $0.42 per share for total net
proceeds of $1,049,965.  In
April 2007, we issued 83,334 shares of our restricted common stock to an
officer/employee and 83,335 shares of restricted stock to an employee as
compensation for services provided. The shares were valued at their fair value
of $2.10 per share for a total compensation charge of $350,000.  During the
year ended May 31, 2008, the employees voluntarily forfeited the shares issued
due to personal tax ramifications and the Company does not intend to replace
this form of compensation.  No reversal of the original compensation
expense was done as the compensation was given and earned during the prior
year.    In December 2006, we initiated a private placement offering of
3,000,000 shares of our common stock and for each share purchased a warrant (one
year term) to purchase one share of our common stock at an exercise price of
$3.75. The unit was sold at $3.00. As of May 31, 2007 we had sold 533,333
shares and received $1,599,950 in proceeds, net of transaction costs.  As
of May 31, 2008, all of the 533,333 warrants have expired unexercised. In June 2006, we executed a private placement of 3,333,333
shares of our restricted common stock at $0.06 per share, for which we received
cash of $200,000. Stock Splits: On July 27, 2007, the Board of Directors approved a reverse split
of its common stock on a 1 new share for each 3 old shares. Shareholders of
record as of the effective date of August 20, 2007, will receive 1 new share for
three old shares outstanding. Only the EPS calculation in the statement of
operations has been adjusted for this reverse stock split. Note
6 - Income Taxes: The provision for income taxes differs from the amount computed by
applying the U.S. federal income tax rate to loss before income taxes as
follows:  May 312008

2007Expected
(benefit) at statutory rate
34%

34%State
taxes
-

-Increase
in valuation allowance
(34% )

(34%)Effective
tax rate
0%

0%    The income tax provision consists of the following for the years
ended May 31: 2008

2007Current
tax provision
$           
-

$           
-Deferred
tax (benefit)
(487,000)

(346,000)Change
in valuation allowance
487,000

346,000Total
income tax provision
$           
-

$           
-  The following is a summary of the significant components of the
Company's deferred tax, assets and liabilities: May 312008

2007Deferred
tax assets:Net
operating loss
$   1,975,000

$    1,644,000Related
party accruals
408,000

252,000Valuation
allowance
(2,383,000)

(1,896,000)    Net
deferred tax assets
$
                -

$
                 -  Tax law provides for limitation on the use of future net operating
loss carryovers should significant ownership changes occur. The Company has net
operating loss carry forwards of approximately $5,804,000 that begin to expire
in 2018 and continue to expire through the year 2027. Note
7 - Related Party Transactions: The Company has a payable due to the majority stockholder totaling
$22,980 and $52,876 as of May 31, 2008 and 2007, respectively. These liabilities
are for reimbursement of business expenses due the stockholder and for working
capital advances. No interest is being charged on these balances. The Company has included in accounts payable  related party
balances due to an entity owned by the majority stockholder totaling $96,912 and
$54,826 as of May 31, 2008 and 2007, respectively. These liabilities are for
consulting services and reimbursement of business expenses due the entity. No
interest is being charged on these balances. The total expenses incurred from
this related party were $45,677 and $22,775 for the year ended May 31, 2008 and
2007, respectively. The minimum royalty expense-related party accrued to Jurak
Holdings Limited (related party owned by our majority stockholder) for licenses
on the JC Tonic product line remained consistent for both years at
$500,000.The royalty agreement requires
interest to be accrued on fee payments in arrears as defined in the agreement.
The Company recorded interest on the royalty agreement for payments due in
arrears of $129,494 and $0 for the year ended May 31, 2008 and 2007,
respectively. See Note 8 for additional information. Note
8  Commitments: Operating
Lease The Company rents office and warehouse space in Las Vegas, Nevada
under terms of an operating lease which calls for an initial base monthly rental
of approximately $6,700, increasing annually, plus common area operating
expenses, through June 2009. Rent expense plus common area operating expenses
under this agreement for the years ended May 31, 2008 and 2007, was $115,083 and
$106,091, respectively. Minimum lease payments are as follows for the years ending May
31: 2009
$ 87,6582010
7,305Total
Future Minimum Lease Payments
$ 94,963  Distributor
Stock Bonus Plan Prior to June 1, 2007, the Company offered to its distributors a
plan whereby the distributors could earn a stock bonus based on sales and "bonus
points." Distributors earned certificates redeemable for one share of the
Company's common stock three years after the certificate has been earned. The
number of certificates outstanding at May 31, 2008 was 88,160. The liability
recorded by the Company for these bonus points was $111,695 at May 31, 2008 and
2007, respectively, which was recorded by the Company at the fair market value
of the common stock  on the date that they were earned. During the years
ended May 31, 2008 and 2007, respectively, no shares were issued to various
distributors under this plan. Effective June 1, 2007, this plan was discontinued
and all distributers who had earned certificates under the plan became fully
vested. As of September 12, 2008, all 88,160 certificates remain outstanding. License
Agreement-Related Party:   The Company has entered into an intellectual property license
agreement with an entity owned by the majority stockholder. Pursuant to the
terms and provisions of the License Agreement, we are required to pay the
greater of $500,000 for fiscal year 2003 and each calendar year thereafter,
during the first ten years of the License Agreement (the "Minimum Royalty Fee"),
or eight percent of the net sales price of all license products sold under the
License Agreement (the "Continuing Royalty Fee"). After fiscal 2013, we are
required to make payments in the amount of the Continuing Royalty Fee. The
agreement also requires interest payments of prime plus one percent if the
royalty fees are in arrears at the end of a calendar year. The Company is
currently in arrears on royalty fees. Accrued royalties and related interest
charges due under this license agreement are $1,087,598 and $631,856 at May 31,
2008 and 2007, respectively. Other
Asset  Immune Booster License Agreement: The Company has entered into a license agreement with Nordic
Immotech to purchase raw product to distribute. See Note 3 for additional
information. As defined in the agreement, the Company has a minimum purchase
commitment of raw product. The supplier has the right to terminate the license
agreement, without recourse, if the purchase commitment is not met. The
commitment is based on the calendar year as follows: 1,000 kg ($490,000) in
2007, 2,000 kg ($980,000) in 2008 (as amended), 9,000 kg ($4,410,000) in 2009,
15,000 kg ($7,350,000) in 2010 and 20,000 kg ($9,800,000) in 2011. The value of
these commitments was determined with pricing as of May 31, 2008.  The supplier has entered into a sublicense agreement with the
Company to distribute the product in defined markets, primarily Europe. The
Company will receive a royalty of ten percent of sales. The Company has earned
$68,088 and $0 in royalties for the years ended May 31, 2008 and 2007,
respectively.  The agreement permits the Company to include 100% of raw product
sold by the supplier, during calendar year 2007 and 2008, and 50% of raw product
sold by the supplier, during subsequent calendar years, along with the Companys
own purchases, in the determination of meeting the minimum commitment as defined
in the agreement. The Company has met the minimum purchase commitment for
calendar year 2007.  Endorsement
and Consulting Agreement: The Company has entered into an endorsement and consulting
agreement with a film and television actor to promote the immune booster product
line. The one year agreement was effective May 1, 2008, with a Company option to
extend two years. The Company has a minimum commitment of $42,000 during the
first year. There are escalator clauses based on sales milestones, as defined in
the agreement, which could cause the commitment to increase. The Company has
expensed $2,000 and $0 for the year ended May 31, 2008, relating to this
agreement.    ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE  None.  ITEM 8A. CONTROLS AND PROCEDURES  The
Company maintains disclosure controls and procedures designed to provide
reasonable assurance that information required to be disclosed in its reports
filed pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), are recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms. Such
information is accumulated and communicated to management, including our Chief
Executive Officer / Chief Financial Officer as appropriate, to allow timely
decisions regarding required disclosure. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance the
objectives of the control system are met. As of May 31, 2008, our management, with the
participation of our Chief Executive Officer / Chief Financial Officer, carried
out an evaluation of the effectiveness of our disclosure controls and procedures
as such term is defined in Rule 13a-15(e) under the Exchange Act. Based on this
evaluation, the Chief Executive Officer / Chief Financial Officer concluded that
the Company's disclosure controls and procedures were not effective as
of May 31, 2008, because of the identification of the material
weaknesses in internal control over financial reporting described below.
Notwithstanding the material weaknesses that existed as of May
31, 2008, our Chief Executive Officer / Chief Financial Officer has
concluded that the financial statements included in this Annual Report on Form
10-KSB present fairly, in all material respects, the financial position, results
of operations and cash flows of the Company in conformity with accounting
principles generally accepted in the United States of America
("GAAP").  Report of Management on LifeQuest World Corporations Internal
Control Over Financial Reporting  Our principal executive officer (chief executive officer and chief
accounting officer), and other members of management of LifeQuest World
Corporation, are responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f) or 15d-15(f). Internal control over financial reporting is a process
designed 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. Internal control over
financial reporting 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 our assets; (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 our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and (3) 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. Because of its inherent limitations, our internal
controls and procedures may not prevent or detect misstatements. 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.
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, have been detected. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate. The following material
weaknesses have been identified by members of our management and reported to the
audit committee:  o Currently, the sole Board Member acts in the capacity of the Audit
Committee. This individual lacks independence and is not considered a financial
expert. It is managements view that such a committee,   including financial expertise and independent membership, is an
utmost important entity level control over the Companys financial
statement. o We did not maintain proper segregation of duties for the
preparation of our financial statements. As of May 31, 2008, the majority of the
preparation of the financial statements was carried out by an independent
contractor. The independent contractor prepared routine and non-routine journal
entries, processed certain transactions, prepared certain account
reconciliations, selected accounting principles, and prepared interim and annual
financial statements (including report combinations, consolidation entries and
footnote disclosures) in accordance with generally accepted accounting
principles without review and approval by someone with financial expertise for
overseeing such duties. o The Company had insufficient resources to adequately review and
approve certain account reconciliations and journal entries prepared by
personnel without technical accounting and reporting expertise. o We have a history of entering into legal arrangements or
agreements with significant financial statement implications without timely and
complete supporting documentation, such as private equity placements. This has
potential for improper application of accounting principles and related
financial reporting of such transactions. o The Company has not adopted a Code of Ethics and Code of Conduct
to provide guidance for our directors, officers and employees.  As of
May 31, 2008, our management, with the participation of our chief executive
officer and chief financial officer, documented our control environment,
however, management did not assess our internal control over financial reporting
based on criteria for effective internal control over financial reporting as
described in Internal Control  Integrated Framework issued by the Committee
of Sponsoring Organizations (COSO) of the Treadway Commission. As a result of
this review, material weaknesses were identified, as described above, and,
management has concluded that our internal controls over financial reporting
were not effective as of May 31, 2008. Carver, Moquist & OConnor, an
independent registered public accounting firm, was not required to and has not
issued a report concerning the effectiveness of our internal control over
financial reporting as of May 31, 2008.  (c) Changes in Internal Control Over Financial Reporting.
There have not been any changes in the Companys internal control over financial
reporting during the most recent fiscal quarter ended May 31, 2008, that
materially affected, or are reasonably likely to materially effect, the
Companys internal control over financial reporting.  The Company is continuing its efforts to address deficiencies in
internal control over financial reporting. Management and the Board of Directors
believe, as the Company receives further funding through private placements and
growth in operations, it will be able to invest in remediating the identified
weaknesses.   ITEM
8B. OTHER INFORMATION  None.              Part III    ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT  IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS  All of our directors hold office until the next annual general
meeting of the shareholders or until their successors are elected and qualified.
Our officers are appointed by our Board of Directors and hold office until their
earlier death, retirement, resignation or removal.  As of the date of this Annual Report, our directors and executive
officers, their ages and positions held are as follows:   NAME
AGE
OFFICES HELDAnthony
C. Jurak
70
Director,
Chairman of the Board and Chief Executive Officer, President and SecretaryRoger
Theriault
62
Director,
President (through May 31, 2008)Maria
J. Guedes
39
Vice
President of Operations/Assistant
Secretary  BIOGRAPHIES  The backgrounds of our directors and executive officers are as
follows:  Anthony C. Jurak.Mr. Jurak is the founder of our company,
and a director and Chairman of the Board and our Chief Executive
Officer/Secretary. Mr. Jurak was also a co-chairman and secretary/treasurer for
more than the five years of Matol Partners Corporation, terminating his position
in February 1997, and since has worked primarily for us. While with Matol
Partners Corporation, Mr. Jurak was in charge of finances and then committed his
time to marketing and sales. Mr. Jurak has broad marketing and financial
experience, including wholesale and retail companies.  Roger Theriault.Mr. Theriault was our President and a
director through May 31, 2008 at which time he resigned form his executive
positions. Mr. Theriault was also the director of national sales for Shaklee
Canada from 1979 to 1984. During that time, he was primarily involved in
marketing and sales and responsible for three regional sales managers and more
than 100,000 distributors. Mr. Theriault was the founder of Nova Sante Pacific
International where he worked from 1989 to 1994. Since 1995, he has been a
consultant to Triple Gold (Ecuador), Radical Advance Technologies and CiDem
(France). Maria J. Guedes.Ms. Guedes is our Vice-President of
Operations, Assistant Secretary since 1997. Ms. Guedes is a graduate of Notre
Dame College (Canada) with a degree in business. Ms. Guedes provides human
resource management, maintains and oversees the development of our customized
computer databases, oversees inventory control systems, reviews accounting
practices and acts as the office manager/administrator.  FAMILY RELATIONSHIPS    There are no family relationships among our directors or
officers.  INVOLVEMENT IN
CERTAIN LEGAL PROCEEDINGS  During the past five years, none of our directors, executive
officers or persons that may be deemed promoters is or have been involved in any
legal proceeding concerning (i) any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time; (ii) any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses); (iii) being
subject to any order, judgment or decree, not subsequently reversed, suspended,
or vacated, of any court of competent jurisdiction permanently or temporarily
enjoining, barring, suspending or otherwise limiting involvement in any type of
business, securities or banking activity; or (iv) being found by a court, the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law (and the
judgment has not been reversed, suspended or vacated).  COMMITTEES OF THE BOARD OF DIRECTORS  Audit Committee  The audit committee operates under a written charter adopted by
the Board of Directors during June 2004.  As of the date of this Annual
Report, Anthony Jurak has been appointed to our audit committee.  Mr. Jurak
is not independent within the meaning of Rule 10A-3 under the Exchange Act.
 The Board of Directors has determined that there is not a financial expert
serving on the audit committee.  We are currently involved in appointing a
financial expert to the audit committee, but havent finalized such appointment
as of the date of this Annual Report.  The audit committee's primary function is to provide advice with
respect to our financial matters and to assist the Board of Directors in
fulfilling its oversight responsibilities regarding finance, accounting, and
legal compliance. The audit committee's primary duties and responsibilities will
be to: (i) serve as an independent and objective party to monitor our financial
reporting process and internal control system; (ii) review and appraise the
audit efforts of our independent accountants; (iii) evaluate our quarterly
financial performance as well as our compliance with laws and regulations; (iv)
oversee management's establishment and enforcement of financial policies and
business practices; and (v) provide an open avenue of communication among the
independent accountants, management, and the Board of Directors.  COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT   Section 16(a) of the Exchange Act requires directors and officers,
and the persons who beneficially own more than 10% of common stock of certain
companies, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. We are not required to file reports under
Section 16 of the Exchange Act.    ITEM 10. EXECUTIVE
COMPENSATION  During fiscal years ended May 31, 2008 and 2007, certain officers
were compensated for their role as executive officers. As of the date of this
Annual Report, we do not have any stock option, pension, annuity, insurance,
profit sharing or similar benefit plans. Executive compensation is subject to
change concurrent with our requirements. We do not have employment agreements
with any of our officers.  Generally, our directors do not receive salaries or fees for
serving as directors nor do they receive any compensation for attending meetings
of the Board of Directors. However, we may adopt a director compensation policy
in the future. We do not currently have any standard arrangement pursuant to
which our directors are   compensated for services provided as a director or for committee
participation or special assignments. Directors are, however, entitled to
reimbursement of expenses incurred in attending meetings.  SUMMARY COMPENSATION TABLE  Compensation  We do not currently have a compensation committee. Compensation
decisions are made from time-to-time by our Board of Directors with no
established policies or formulas. The following table sets forth the
compensation received by officers.                   Long Term CompensationAnnual Compensation
Awards
PayoutsName and PrincipalPosition
Year
Salary($)
Bonus($)
OtherAnnualCompen-sation($)
RestrictedStockAward(s)($)
SecuritiesUnderlyingOptions/SARs(#)
LTIPPayouts($)
All OtherCompen-sation($)Anthony Jurak Chief Executive
Officer/  Secretary, Chairman of the Board, Director,
President
2008
2007
$66,000
$66,000
Nil
Nil
Nil
Nil
None
None
Nil
Nil
None
None
$27,651
$23,661Roger Theriault
Former President and Director
2008
2007
$33,821
$50,248
Nil
Nil
Nil
Nil
None
None
Nil
Nil
None
None
$18,958
$15,678Maria J. Guedes, V.P. Operations,
Assistant-Secretary
2008
2007
$65,000
$75,000
Nil
Nil
Nil
Nil
None
$175,000 (1)
Nil
Nil
None
None
$14,012
$10,961  (1)
In November 2007, these shares were cancelled and returned to treasury.  Stock
Options/SAR Grants In Fiscal Year Ended May 31, 2008    As of the date of this Annual Report, we do not have a stock
option plan in effect. The following reflects the information for fiscal year
ended May 31, 2008, regarding stock options. No stock options were granted in
any previous fiscal years.  Name
Number
ofSecuritiesUnderOptions/SARsGranted
% of
TotalOptions/SARsGranted toEmployees inFinancial
Year
Exercise
orBase Price($/Security)
Expiration
DateNot
Applicable
Nil
Nil
Nil
Not applicable  Long Term
Incentive Plan (LTIP) Awards Table  We have no long-term incentive plans in place and therefore there
were no awards made under any long-term incentive plan to any of the above
executive officers during fiscal year ended May 31, 2008.     EMPLOYMENT AGREEMENTS  As of the date of this Annual Report, we do not have any
employment agreements with our executive officers, but we intend to enter into
such agreements with our senior executive officers in the future.      ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  As of the date of this Annual Report, the following table sets
forth certain information with respect to the beneficial ownership of our common
stock by each stockholder known by us to be the beneficial owner of more than 5%
of our common stock and by each of our current directors and executive officers.
Each person has sole voting and investment power with respect to the shares of
common stock, except as otherwise indicated. Beneficial ownership consists of a
direct interest in the shares of common stock, except as otherwise indicated. As
of May 31, 2008, there are 40,478,830 shares of common stock issued and
outstanding.  Title of Class
Name and
Address of BeneficialOwner
Amount
and Nature ofBeneficial Ownership
Percentageof ClassCommon
Anthony C. Jurak (1) (2)
Chief Executive Officer/
Secretary, Chairman of the Board, Director
16,564,769
40.92%Common
Roger Theriault (1) (3) (4)
President, Director
2,365,401
5.84%Common
Executive Officers/Directors as a group
18,930,170
46.76% (1) The address for all
management is 1181 Grier Drive, Suite C, Las Vegas, Nevada 89119. (2) 9,837,284 shares held by
Jurak Holdings Limited, 4478 97th Street, Edmonton, Alberta, Canada T6E 5R9, of
which Anthony Jurak is the sole beneficiary. (3) 1,153,532 shares held in
trust by Ameritrade Inc FBO Bentley Group of Nevada LLC, c/o 1181 Grier Drive,
Suite C, Las Vegas, Nevada 89119, of which Roger Theriault is the sole
beneficiary. (4) 1,195,202 shares held in
trust by Ameritrade Inc FBO Seabreeze Group LLC, c/o 1181 Grier Drive, Suite C,
Las Vegas, Nevada 89119, of which Roger Theriault is the sole beneficiary.    CHANGES IN
CONTROL    Our Board of Directors is unaware of any arrangement or
understanding among the individuals listed in the beneficial ownership table
with respect to election of our directors or other matters. We are unaware of
any contract or other arrangement of which may at a subsequent date result in a
change in control of our company.    ITEM 12. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.  On approximately January 1, 1999, we entered into an intellectual
property license agreement (the License Agreement) with Jurak Holdings
Limited, a corporation organized under the laws of the Province of Alberta and
an affiliate of our Chief Executive Office and one of our directors, Anthony
Jurak.  Pursuant to the terms and provisions of the License Agreement,
beginning with fiscal year 2003, for a term of ten (10) years, we are required
to pay annually the greater of $500,000 (Minimum Royalty Fee) or eight percent
(8%) of the net sales revenue (Continuing Royalty Fee) of all licensed
products sold under the license agreement.  After fiscal 2013, we are
required to make payments in the amount of the Continuing Royalty Fee.  As
of May 31, 2008, the amount of the Accrued Minimum Royalty Fee due and owing is
$1,087,598.    ITEM 13. EXHIBITS  (a) Exhibit
List  31.1     Certificate
pursuant to Rule 13a-14(a)  31.2     Certification
pursuant to Rule 13a-14(a)  32.1     Certificate
pursuant to 18 U.S.C. Subsection 1350  32.2     Certificate
pursuant to 18 U.S.C. Subsection 1350   ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES  AUDIT
AND NON-AUDIT FEES The following table presents fees for audit and other services
provided by Carver Moquist & O'Connor, LLC for the years ended May 31, 2008
and 2007:  Year EndedMay 31,

May 31,2008

2007Audit
fees (1)

$
36,260

$
34,708Audit-related
fees (2)

8,999

10,049Tax
fees (3)

5,620

7,154All
other fees (4)

--

--    Total
Fees

$
50,879

$
51,911 (1)     
Audit fees consist of fees for services provided in connection with the audit of
our financial statements and reviews of our quarterly financial statements. (2)     
Audit-related fees consist of assurance and related services that include, but
are not limited to, consultation concerning financial accounting and reporting
standards and regulatory filing reviews. (3)     
Tax fees consist of the aggregate fees billed for professional services rendered
by Carver Moquist & O'Connor, LLC for tax compliance, tax advice, and tax
planning. (4)
All Other Fees relate to services rendered that do not meet the above category
descriptions.  We did not engage the services of Carver Moquist &
O'Connor, LLC to render other professional services.                                  SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.   LifeQuest
World Corporation (Registrant)  By /s/
Anthony Jurak Anthony
Jurak Chairman, Chief Executive Officer, Director and President Date September
 15, 2008  In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated. By /s/
Anthony Jurak Anthony
Jurak Chairman, Chief Executive Officer, Director and President Date September
15, 2008