SECURITIES AND EXCHANGE COMMISSION



Washington, D.C. 20549

______________________



FORM 10-KSB



Annual Report Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934



For the fiscal year ended

September 30, 2006



Commission file number

333-89628



QUEST GROUP INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)





Nevada
        87-0681500(State or other jurisdiction of incorporation)
        (IRS Employer Identification No.)967 West Center, Orem, Utah 84057
        (801) 765-1301(Address of principal executive offices)
        (Registrants telephone number, including area code)




Securities registered under Section 12(b) of the Exchange Act: None



Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.001



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B  contained herein, and will not 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. x



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ̈  No x



The issuers revenue for its most recent fiscal year were $2,422,691



The aggregate market value of the common stock held by non-affiliates (i.e.,does not include directors, executive officers or ten percent stockholders identified in Item 11 hereof) of the issuer as of December 1, 2006 was $557,400



As of December 1, 2006, the Company had 10,259,000 shares of common stock outstanding.

QUEST GROUP INTERNATIONAL, INC.



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TABLE OF CONTENTS TO ANNUAL REPORT

ON FORM 10-KSB

YEAR ENDED SEPTEMBER 30, 2006







PART IItem 1.
        Description of Business
        3Item 2.
        Description of Property
        9Item 3.
        Legal Proceedings
        10Item 4.
        Submission of Matters to a Vote of Security Holders
        10PART IIItem 5.
        Market for Common Equity and Related Stockholder Matters
        11Item 6.
        Managements Discussion and Analysis or Plan of Operation
        11Item 7.
        Financial Statements
        17Item 8.
        Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
        17Item 8A.
        Controls and Procedures
        18Item 8B.
        Other Information
        18PART IIIItem 9.
        Directors, Executive Officers, Promoters and Control Persons and Corporate Goverance; Compliance With Section 16(a) of the Exchange Act
        19Item 10.
        Executive Compensation
        20Item 11.
        Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
        21Item 12.
        Certain Relationships and Related Transactions, and Director Independence
        22Item 13.
        Exhibits
        23Item 14.
        Principal Accountant Fees and Services
        23








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Forward-Looking Statements



This annual report contains forward-looking statements within the meaning of the securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements other than statements of historical facts included in this annual report, including the statements under Description of Business, Management Discussion and Analysis or Plan of Operation and elsewhere in this annual report regarding our strategy, future operations, financial position, projected costs, projected revenues, prospects, plans and objectives of management, are forward-looking statements. When used in this annual report, in our press releases or other public or stockholder communications, or in oral statements made with the approval of our executive officers, the words or phrases would be, intends to,
will likely result, are expected to, is anticipated, estimate, project, or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.



We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made, are based on certain assumptions and expectations which may or may not be valid or actually occur, and which involve various risks and uncertainties. We disclose important factors that could cause our actual results to differ materially from our expectations under the caption Management Discussion and Analysis or Plan of OperationRisk Factors, including but not limited to our history of losses, working capital deficit, need for additional funds to execute our business plan, dependence on our distributors, and the risk of product demand, economic conditions, competitive products, changes in the regulation of our industry and other risks. As a result, our actual results for future periods could differ materially from those anticipated or projected.



Unless otherwise required by applicable law, we do not undertake, and specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.



PART I

Item 1. Description of Business

General



We were organized as a Nevada corporation on August 14, 2001 as Quest Group International, Inc. to sell nutritional products to independent distributors and customers. We sell our products to customers and independent distributors who use the products themselves or resell them to others.



During the fiscal year ended September 30, 2006, we generated $2,422,691 in revenues. We do not extend credit to our distributors. Payment for product is required prior to shipping. All sales are paid for in U.S. dollars through an InterCash account or other arrangements and we do not maintain offices outside the U.S.



Possible Reorganization



On or about November 3, 2006, we entered into a letter of intent (the LOI) with RxElite Holdings Inc. (RxElite). Under the terms of the LOI, the Company and RxElite agreed to negotiate in good faith a definitive agreement (the Agreement) pursuant to which we would acquire all of the issued and outstanding capital stock of RxElite (the Acquisition) and, in exchange, we would issue to the stockholders of RxElite an aggregate of approximately 62,000,000 shares, exact number of shares to be negotiated, of our common stock and warrants exercisable for 13,850,000 shares of common stock upon terms to be agreed. RxElite also intends to adopt a stock option plan whereby stock options could be granted that are exercisable for a number of shares of common stock equal to fifteen percent of our issued and outstanding common stock. The Board of Directors
(the Board) and officers of RxElite would



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become the Board and officers of the Company following the closing of the Acquisition. We would also be required to spin-out or distribute all of our assets relating to its current business. The closing is anticipated to occur on or before January 30, 2007.



Prior to the closing of the Acquisition, we would be required to increase its authorized common stock to 150,000,000 shares of common stock and 5,000,000 shares of preferred stock. In addition, we would be required to reduce the number of our outstanding shares of common stock to approximately 4,500,000 shares immediately prior to the closing.



RxElite has provided us with $60,000 to pay out-of-pocket expenses incurred in connection with the Acquisition. If the Acquisition does not occur on or before January 30, 2007 because we are unwilling to proceed, then we are required to refund the entire $60,000. If the closing does not occur for whatever reasons other than those described in the prior sentence, then we will pay RxElite an amount equal to $60,000 less the amount of out-of-pocket expenses that we have incurred relating to the Acquisition.



During a period commencing upon execution of the LOI and continuing until January 30, 2007, we have agreed not to solicit or engage in discussions or negotiations in connection with any other merger or similar transaction involving the Company.

The LOI is non-binding with respect to the Acquisition terms and there can be no assurance that the Acquisition will occur, or that if it occurs, that it will be on the terms and conditions described above.



Our Products



We develop and distribute a line of nutritional products that we call the NeoSource products. The NeoSource product line is comprised of six products. Five of these products are grouped into eight different combinations called Product Sets. An antioxidant and vitamin product, called NeoGuard Chewable, is not included in any of the product sets. Our approximate net sales breakdown for the fiscal year ended September 30, 2006 is as follows:




        63.2% of net sales are generated from sales of Product Sets.



        6.0% of net sales are generated from sales of individual products, excluding NeoGuard Chewable.



        10.7% of net sales are generated from sales of NeoGuard Chewable.



        .01% revenues from enrollment fees, which fees include payment for distributor kits.



        11.7% of our net sales are generated from shipping fees.



        The remaining 8.4% of our net sales are generated from miscellaneous sales.




Our NeoSource products are nutritional supplements. Our products are not intended to diagnose, treat, cure or prevent any disease. Our products have not been evaluated by the Food and Drug Administration. We have not conducted product testing to determine whether the products are effective for the intended use. Our individual product offerings are as follows:



NeoPak



NeoPak contains nutrients derived from quality ingredients, including vitamins, bioflavinoids, minerals, food based enzymes, fatty acids and phyto-nutrient rich fruits and vegetables, freshly harvested sea vegetables and other nutritious foods. Phyto-nutrients, also known as phyto-chemicals, are the natural components isolated in vegetables and fruits. NeoPak is intended to act as a general nutritional supplement. There can be no assurance that the NeoPak will prove effective as a general nutritional supplement.



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NeoGuard



NeoGuard contains a combination of antioxidant nutrients that are intended to help the human body to defend against free radicals, but there can be no assurance that it will prove effective in defending against free radicals.



NeoSpring



NeoSpring contains a blend of natural ingredients intended to help sustain the bodys energy-producing systems and replenish vital nutrients, but there can be no assurance that it will sustain the bodys energy-producing systems or replenish nutrients.



NeoBalance



NeoBalance is created from sea vegetables and herbs. NeoBalance is designed primarily as a nutritional supplement for women, but there can be no assurance that it will provide any nutritional benefit.



NeoSurge



NeoSurge is created from sea vegetables, vitamins and herbs. NeoSurge is designed primarily as a nutritional supplement for men, but there can be no assurance that it will prove effective as a nutritional supplement for men.



NeoGuard Chewable



NeoGuard Chewable is designed to provide essential nutrients and antioxidants to support good health and fight free radicals. NeoGuard Chewable is made with many of the same ingredients as NeoGuard in a dosage that is suitable for children and seniors, but there can be no assurance that it will prove effective as a nutritional supplement.



Miscellaneous Products



We also sell a variety U.S. manufactured supplements and skin care items otherwise unavailable to our customers in Japan on special request.



Foreign Operations



We had $2,422,691 in sales for the fiscal year ended September 30, 2006, of which $2,375,000 was generated from purchasers in Japan and $48,000 was generated from purchasers in the U.S. We use direct-selling efforts to sell our products in both markets. Products sold in Japan are shipped using Nippon Express from their El Segundo, California facility as the customs representative, air cargo and ground delivery carrier. We pay Nippon Express their standard rates to ship our products. The charges depend on the weight of the package and vary from $14 for a .5 kg package to $146.00 for a 14 kg package. On average, customers receive their orders in Japan within five business days of order payment confirmation.



We require payment for our products through bank wire transfer or credit card. We pay commissions to distributors residing in the U.S. by check and to distributors residing in Japan by bank wire transfer. We do not extend credit to our Japanese or other distributors. Payment for product being delivered in Japan or elsewhere is required prior to shipping. All sales are paid for in U.S. dollars.



Quest does not maintain offices outside the U.S. Quest does not have manufacturing facilities.



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Distribution and Marketing



Both Quest and our independent distributors market our products to consumers through direct-selling techniques. Our distributors sell NeoSource products on a part-time basis to friends or associates or use the products themselves. We incentivize our independent distributors through a combination of quality products, product support and financial benefits. The financial benefits include rebates and group development bonuses.



All product sales are packaged for delivery by our shipping agent, Nippon Express, in El Segundo, California. Products sold in Japan are shipped with Nippon Express as described above. Products sold domestically are sent via Federal Express from the same Nippon Express warehouse. Nippon Express maintains a secure storage facility for our products in El Segundo. On average, customers receive their orders in Japan or the U.S. within five business days of order payment confirmation.



As of December 1, 2006, we had 34 active distributors, 4 of these distributors were in the U.S. and 34 of the distributors were in Japan. On that date we also had 2,009 active members who buy product from us but who do not act as distributors. A distributor or member is considered active if their most recent purchase was made less than 12 months ago. Distributors buy product at wholesale prices mainly for resale. Our members are able to buy product at a discount from retail prices and the products purchased by members are not intended for resale. One may become a Quest distributor by applying to Quest under the sponsorship of someone who is already a distributor, paying an $50 enrollment fee, providing an email address and other contact information for communications purposes.



Compensation of Distributors



Our distributors are entitled to the following compensation:





        Group Development Bonus: Distributors receive a 5  13% Group Development Bonus based on the volume of products sold by their distributor group. A distributor group includes a distributor and his or her sponsored distributors who have not yet sold $6,000 in cumulative group volume (a Distributor Group). Sponsored distributors include a distributor who is first sponsored to become a distributor by the sponsoring distributor and all distributors who are down line from the sponsored distributor.




For example, if Jane was a distributor and she sponsored John who becomes a distributor and John sponsors Joe who becomes a distributor and Joe sponsors Sam who becomes a distributor, then Janes Distributor Group includes Jane, John, Joe and Sam. If Joe and the distributors down line from Joe subsequently sell $6,000 in cumulative group volume then Janes Distributor Group would no longer include Joe, Sam or any other distributors who are down line from Joe.




        Enroller Bonus: Distributors can also earn up to an additional 5% Enroller or affiliate bonus on the revenue generated by the customers and distributors directly referred to Quest.





        Leadership Override Bonus: Distributors become a Leader after their Distributor Group generates over $6,000 in cumulative group revenues and the Leader becomes eligible to earn Leadership Override Bonuses. Leadership Override Bonuses are not paid on the Leaders Distributor Group sales like the Group Development Bonus. Rather, Leadership Override Bonuses of 5% are paid only on the group volume of Leaders who are not more than six levels down line from a distributor who is also a Leader.




For example, if Jane was a Leader and she sponsored John who becomes a Leader and John sponsors Joe who becomes a Leader and Joe sponsors Sam who becomes a Leader and Sam sponsors Jill who becomes a Leader and Jill sponsors Mary who becomes a Leader and Mary



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sponsors Martha who becomes a Leader and Martha sponsors Cindy who becomes a Leader, then Jane would be entitled to a Leadership Override Bonus based on the group sales volume of John, Joe, Sam, Jill, Mary and Martha. Jane would not be entitled to a Leadership Override Bonus from sales of Cindy because Cindy is more than six levels down line from Jane. In addition to and unlike the Group Development Bonus, only sales of the Leaders (and not the Distributor Groups of the Leaders) are taken into consideration when calculating the Leadership Override Bonus.



Customer Loyalty Program



Beginning in March of 2004, the Company implemented a customer loyalty program which rewards customers with Shopping Points based on purchases of certain products. Shopping points may be redeemed for product. Certain limitations apply and shopping points expire after one year. The value of unredeemed shopping points expected to be redeemed are recorded on the balance sheet as deferred revenue.



Information Systems



We use Infotrax to assist us with our information systems, including order processing, commission payments, Web hosting and other back office data management. Infotrax markets itself as a company providing technology solutions to the direct marketing industry. Either party may terminate the relationship with no less than 90 day notice. While InfoTrax is the only service provider that we have used for assistance with our information systems, we have the option to use other service providers. We believe that there are many service providers with whom we could contract to provide back office support and otherwise assist us in managing our information systems.



Our Web Site



We maintain a Web site in English at www.questgrp.net and in Japanese at www.questgrp.jp. Our Web site is mainly for information purposes. Recently the Japan Web site has been enhanced to include ordering. Approximately 70% of orders are placed on the Web site by Members and Distributors. The remainder of orders are facilitated by phone and facsimile.



Manufacturing



NeoSource products are manufactured for Quest exclusively by Perfect Source. The time between Quest placing an order for NeoSource products and delivery of those products from Perfect Source has averaged between two and eight weeks. While Perfect Source is the only vendor that we have used for production of our NeoSource product, we have the option to use other manufacturers. We believe that there are many manufacturers with whom we could contract to produce NeoSource products.



Source and Availability of Raw Materials



Raw materials used in the manufacture of our NeoSoure products are available from a number of suppliers. To date, we have not experienced difficulty in obtaining adequate sources of supply. Although there can be no assurance we will be successful in locating raw materials in the future, we believe it is unlikely that we will have difficulty obtaining sufficient supply in the future.



Trademarks and Trade Names



We have registered trademarks from the U.S. Patent and Trademark Office for the NeoPack, NeoGuard, NeoSpring, NeoSlim, NeoBalance, NeoSource and NeoGuard Chewable names.



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Regulation



FDA regulations relating specifically to foods for human use are set forth in Title 21 of the Code of Federal Regulations. These regulations include basic food labeling requirements and Good Manufacturing Practices (GMPs) for foods. Detailed dietary supplement GMPs have been proposed; however, no regulations establishing such GMPs have been adopted that relate to the NeoSource products. Additional regulations to implement the specific DSHEA (defined below) requirements for dietary supplement labeling have also been proposed, and final regulations may be implemented over a period of time upon final publication.



While our NeoSource products are not presently required to be submitted to the Food and Drug Administration (FDA) or any other regulatory agency for approval, the manufacturing, packaging, labeling, advertising, distribution and sale of our NeoSource products is subject to regulation by the Food and Drug Administration (FDA) which regulates our products under the Federal Food, Drug and Cosmetic Act (FDCA) and regulations promulgated thereunder. The FDCA defines the terms food and dietary supplement and sets forth various conditions that unless complied with may constitute adulteration or misbranding of such products. The FDCA has been amended several times with respect to dietary supplements, most recently by the Nutrition Labeling and Education Act of 1990 (the NLEA) and the Dietary Supplement Health and Education Act
of 1994 (the DSHEA).



Compliance with manufacturing, packaging and labeling is done by our third-party manufacturer and packager. We are careful to have our product labels appropriately reviewed to help assure that the labels on our products comply with all applicable laws, rules and regulations. We do not inspect our product prior to shipment, however, the product is inspected and tested several times at different stages in the manufacturing process by our manufacturer, Perfect Source. In addition, Nippon Express inspects the product for damage upon receipt from Perfect Source and also inspects each box that is shipped to assure that they are packaged safely and the product is not damaged. As part of our review and quality control efforts, we have received written representations from our manufacturer, Perfect Source, that the products, including product labeling requirements, comply with all CFR, NLEA and
DSHEA regulations.



Our products are also regulated by the Federal Trade Commission (FTC), the Consumer Product Safety Commission (CPSC), the United States Department of Agriculture (USDA) and the Environmental Protection Agency (EPA). Our activities, including our multi-level distribution activities, are also regulated by various agencies of the states, localities and foreign countries in which our products are sold.



In the future, we may be subject to additional laws or regulations administered by the FDA or other federal, state, local or foreign regulatory authorities, the repeal or amendment of laws or regulations which we consider favorable and/or more stringent interpretations of current laws or regulations. We can neither predict the nature of such future laws, regulations, interpretations or applications, nor what effect additional governmental regulations or administrative orders, when and if promulgated, would have on its business. They could, however, require reformulation of certain products to meet new standards, recall or discontinuance of certain products not able to be reformulated, imposition of additional record-keeping requirements, expanded documentation of the properties of certain products, expanded or altered labeling and/or scientific substantiation. Any or all such requirements
could have a material adverse effect on our results of operations, liquidity and financial position.



We believe that we are in compliance with all laws and governmental regulations that are applicable to our company.



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Competition



We are engaged in a highly competitive business and are competing directly with companies that have longer operating histories, more experience, substantially greater financial resources, greater size, more substantial marketing organizations, and established distribution channels that are better situated in the market than us. We compete in the nutritional industry against companies which sell through retail stores as well as against other direct selling companies. For example, we compete against manufacturers and retailers of nutritional supplements which are distributed through supermarkets, drug stores, health food stores, discount stores, etc. In addition to competition from these manufacturers and retailers, we compete for product sales and independent distributors with many other direct sales companies, including Shaklee, NuSkin, Unicity, Amway and Natures Sunshine. We believe
that the principal methods of competition in the direct sales marketing of nutritional products are quality, price and brand name. In addition, the recruitment, training, travel and financial incentives for the independent sales force are important factors. We believe that our products compete strongly in quality and price, but that our brand name is not well recognized in the industry at this time. We also believe that our financial incentives for our independent sales force is competitive with the financial incentives offered by our competitors. No assurance can be given that we will be successful in competing in this industry.



Research and Development



To date, we have not conducted research and development activities for the NeoSource product line as understood using generally accepted accounting principles. Rather, we identified the types of products and ingredients that we would like to produce. Perfect Source, our manufacturer, then completed the development of the products to our specifications. We believe that there are many manufacturers with whom we could contract to produce our NeoSource products. We did not spend any funds on research and development activities during the past two fiscal years.



Dependence Upon Customers and Distributors



No single customer or distributor has been or is expected to be responsible for ten percent or more of our revenues in any given quarterly period. However, we believe that we have a core group of between twelve and fourteen distributors who significantly influence and motivate our other distributors. Our core distributors are not compensated any differently than our other distributors and participate in the same contractual arrangement with Quest as our other distributors. We do not offer distributorships for a fee and, to our knowledge, none of our distributors offer distributorships for a fee. In the future we may, however, modify our business strategy and have more than one compensation arrangements in place for our distributors. The loss of any of our core distributors would likely result in the loss of additional distributors and could have a material adverse affect on our revenues and
operations. We have no arrangements in place whereby our distributors are required to continue working with Quest.



Backlog



Orders for our products are typically shipped within one business day after receipt of an order. As a result, there is no significant backlog at any time.



Employees



As of December 1, 2006, we employedtwopeople who work for us on a full time basis. We believe that our relations with our employees are satisfactory.

Item 2. Description of Property

Our principal offices are located at 967 West Center, Orem, Utah 84057, under terms of a one year lease with an unaffiliated lessor that Is renewable on a month to month basis. We are paying approximately $1125 per month for approximately 1300 square feet of space. We believe that this office space will be



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adequate to meet the needs of current and expected growth during the next twelve months. If our lease was terminated, we believe that comparable office space is readily available at similar prices.

Item 3. Legal Proceedings

None

Item 4. Submission of Matters to a Vote of Security Holders

None




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



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PART II

Item 5.
        Market for Common Equity and Related Stockholder Matters.


Share Price History

Prior to November 2006, there was no public trading market for our securities. On November 10, 2006 our common stock began trading in the over-the-counter market in what is commonly referred to as the Electronic or OTC Bulletin Board or the OTCBB under the trading symbol QSTG.OB.



Dividends



To date, we have not paid dividends on our common stock. We have no outstanding preferred stock. The payment of dividends on the common stock in the future, if any, is within the discretion of the Board and will depend upon our earnings, capital requirements, financial condition and other factors the Board views are relevant. The Board does not intend to declare any dividends in the foreseeable future, but instead intends to retain all earnings, if any, for use in our operations.



Holders of Record



As of December 1, 2006, there were approximately 65 holders of record of our common stock.


Issuance of Securities

The Company did not sell securities during the period covered by this report.



Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers



Neither the issuer nor, to the knowledge of the issuer, any affiliated purchaser purchased any equity securities of the Company during the period covered by this report.



Item 6. Managements Discussion and Analysis or Plan of Operation



The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with the financial statements and notes thereto.



Overview



We develop and distribute a line of nutritional products that we call the NeoSource products. The NeoSource product line is comprised of six products. Five of these products are grouped into eight different combinations called Product Sets. An antioxidant and vitamin product, called NeoGuard Chewable, is not included in any of the product sets. Our approximate net sales for the fiscal year ended September 30, 2006 breakdown is as follows:




        63.2% of net sales are generated from sales of Product Sets.



        6.0% of net sales are generated from sales of individual products, excluding NeoGuard Chewable.



        10.7% of net sales are generated from sales of NeoGuard Chewable.



        .01% revenues from enrollment fees, which fees include payment for distributor kits.



        11.7% of our net sales are generated from shipping fees.



        The remaining 8.4% of our net sales are generated from miscellaneous sales..




Our products are nutritional supplements. Our products are not intended to diagnose, treat, cure or prevent any disease. Our products have not been evaluated by the Food and Drug Administration. We have not conducted product testing to determine whether the products are effective for the intended use.



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Financial Position



We had $228,558 in cash as of September 30, 2006, an increase of $4,767 from September 30, 2005. Working capital as of September 30, 2006 was $265,469, as compared to a working capital of $77,953 at September 30, 2005. These increases were primarily due to increased profits over the prior year.



Years Ended September 30, 2006 and 2005



During the fiscal year ended September 30, 2006 we had net sales of $2,422,691and our cost of goods sold was $759,481 compared to $1,943,721 in net sales and $560,150 cost of goods sold during the year ended September 30, 2005. Approximately 98% of our 2006 revenues and approximately 98% of our 2005 sales were generated from purchasers in Japan and the remaining revenues were generated from purchasers in the U.S. Our revenues were approximately comprised of the following components:



2006
        2005Sales of product sets
        1,531,099
        $1,212,881Sales of individual products
        145,411
        151,610Sales of NeoGuard Chewable
        260,295
        262,402Revenues from distributors enrollment fees, which includes kits
        250
        944Shipping and handling fees
        282,631
        211,865Miscellaneous
        203,005
        104,019




During the fiscal year ended September 30, 2006 our selling, general and administrative (SG&A) expenses were $1,411,659 compared to $1,152,742 for the prior fiscal year. Our SG&A expenses were approximately comprised of the following components:



2006
        2005Commissions
        612,174
        $591,671Salaries and Wages
        230,345
        187,672Contract Labor
        57,245
        24,838Fee Payment Expense
        75,000
        60,000Professional Fees
        121,406
        78,902Travel
        66,239
        52,530Rent
        16,025
        11,700Bank Service charges
        56,676
        39,924Payroll taxes and fees
        31,666
        26,335Misc.
        144,883
        79,170




During the two prior fiscal years we did not conduct research and development activities. Rather, we identified the types of products and ingredients that we would like to produce. Perfect Source, our manufacturer, then completed the development of the products to our specifications. We are charged for the product purchased, but are not charged for research and development fees incurred by Perfect Source for their work in creating products utilizing the specified ingredients. We believe that there are many manufacturers with whom we could contract to produce our NeoSource products. We expect this type of arrangement to continue in the future and do not expect to incur costs relating to research and development.



During the fiscal year ended September 30, 2006 our net other expense was $1,848 compared to an net other expense of $11,741 for the comparable period during the prior. Our net other expense decreased as a result in a reduction in our interest expense and increase in interest income.



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Liquidity and Capital Resources



We realized a net income of $192,703 during our fiscal year ended September 30, 2006. To date, we have financed our operations principally through product revenues, funds borrowed under revolving loan arrangements, and private placements of equity securities. Specifically, during the fiscal year ended September 30, 2006, we generated $181,390 in net cash from operating activities, ($13,157) in net cash from investing activities and ($173,000) in net cash flow from financing activities. As of September 30, 2006, we had $228,558 in cash, $382,550 in current assets, $117,081 in current liabilities and working capital of $265,469. At September 30, 2006, we had not committed to spend any material funds on capital expenditures.



We have $10,000 in related party fee payment payable. This amount relates to the Bateman Revolving Loan and Security Agreement (described below).



On or about April 6, 2005, the Company received $100,000 in funding under the terms of an unsecured promissory note. The funds were lent to the Company by a single accredited lender, Dassity, Inc. Ms. Brenda Hall, a former director of the Company, is the president and an owner of Dassity, Inc. This loan bears interest at the rate of four percent per annum and the note was payable on demand at any time after the twelve month anniversary date of the note. The note and accrued interestwere repaid in full on April 5, 2005.



In October 2001 and February 2002, the Company entered into a Revolving Loan and Security Agreements (the McKinley Revolving Loans) with McKinley Enterprises Inc. Profit Sharing Plan and Trust (McKinley). Under the terms of the agreements, McKinley agreed to make periodic loans to the Company in an aggregate principal amount at any one time outstanding not to exceed $103,000. The loan and accrued interest were repaid in full on July 8, 2006.



In September 2001, the Company entered into a Revolving Loan and Security Agreement (the Bateman Revolving Loan) with Bateman Dynasty, LC, a Utah limited liability company (Bateman) and a stockholder of the Company. Under the terms of the agreement, Bateman lent the Company approximately $50,000. This amount was subsequently repaid with interest at the rate of ten percent per annum. As additional consideration to lend the funds, Bateman (i) is entitled to quarterly payments equal to two percent of net sales in perpetuity during periods where the Company has pre-tax income in excess of $20,000 and the Company is not indebted under the McKinley Revolving Loans and (ii) is entitled to payments in perpetuity equal to (a) $5,000 per month which payment is due only when monthly net sales exceeds $100,000, (b) $10,000 per month in any month in which net sales exceed
$200,000, and (c) $20,000 per month in any month in which net sales exceed $1,000,000. The effect of this arrangement will be to increase our costs in perpetuity by the stated amounts. The Company entered into this type of arrangement because, at the time, these were the best terms that it was able to negotiate for such capital. When monthly net sales are less than $100,000, the $5,000 minimum payment accrues and is indicated on the balance sheet as Related party fee payment payable. During the year ended September 30, 2006, the Company paid $75,000 to Bateman under this arrangement.



The Companys working capital and other capital requirements for the foreseeable future will vary based upon a number of factors, including the amount we spend on our sales and marketing activities and the level of our sales. We believe that if sales continue at current levels we will be able to meet our financial obligations on current loans and accounts payable.



Off-Balance Sheet Arrangements



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 is material to investors.



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Critical Accounting Policies



The following is a discussion of our critical accounting policies and estimates that management believes are material to an understanding of our results of operations and which involve the exercise of judgment or estimates by management.



Revenue is recognized when products are shipped, which is when title passes to independent distributors and to consumers. A reserve for product returns is accrued based on historical experience. The Company generally requires cash or credit card payment at the point of sale.



The Company has determined that no allowance for doubtful accounts is necessary. Amounts received prior to shipment and title passage to distributors are recorded as deferred revenue.



Independent distributors are able to earn financial benefits  if certain monthly minimum sales qualifications are met. These financial benefits are recognized in the same period that the products are shipped to the independent distributors.



Enrollment fees paid by independent distributors are recognized as revenue when the fee is paid.



During 2004, the Company implemented a customer loyalty program which rewards customers with Shopping Points based on purchases of certain products. Shopping points may be redeemed for product. Certain limitations apply and shopping points expire after one year. The value of unredeemed shopping points expected to be redeemed are recorded on the balance sheet as deferred revenue.



Recent Accounting Pronouncements



In December 2004, the Financial Accounting Standards Board (FASB) issued Financial Accounting Standard (FAS) No. 123(R), Share-Based Payment, an amendment of FASB Statements No. 123 and 95. FAS No. 123(R) replaces FAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. This statement requires companies to recognize the fair value of stock options and other stock-based compensation to employees prospectively beginning with the first interim or annual period of the first fiscal year beginning after December 15, 2005 for small business issuers, as deferred by the Securities and Exchange Commission. This means that the Quest will be required to implement FAS No. 123(R) no later than the quarter beginning October 1, 2006. Quest currently measures stock-based compensation in accordance with APB
Opinion No. 25, as discussed above. Quest anticipates adopting the modified prospective method of FAS No. 123(R) on October 1, 2006. The impact on Quests financial condition or results of operations will depend on the number and terms of stock options outstanding on the date of change, as well as future options that may be granted. However, Quest believes the adoption of FAS No. 123(R) will not have a material effect on Quests financial position and results of operations.



The FASB has issued FAS Statement No. 154, Accounting Changes and Error Corrections. This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so.



Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a restatement.  The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. Quest adopted FAS No. 154 on October 1, 2005, and the adoption of this new accounting pronouncement did not result in a material impact on the Quests financial condition or results of operations.



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In June 2006, the FASB issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No.109(FIN 48), which clarifies the accounting for uncertainty in income tax positions. This Interpretation requires that the Company recognize in the consolidated financial statements the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The provisions of FIN 48 will be effective for the Company as of the beginning of the Companys 2008 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on the consolidated financial statements.



In September 2006, the FASB issued FASB Statement No. 158,Employers Accounting for Defined Benefit Pension and Other Postretirement Benefits(FAS 158). FAS 158 addresses the accounting for defined benefit pension plans and other postretirement benefit plans (plans). Specifically, FAS 158 requires companies to recognize an asset for a plans overfunded status or a liability for a plans underfunded status and to measure a plans assets and its obligations that determine its funded status as of the end of the companys fiscal year, the offset of which is recorded, net of tax, as a component of other comprehensive income in shareholders equity. FAS 158 will be effective for the Company as of September 30, 2007 and applied prospectively. The provisions of FAS 158 are not expected to have any impact on
the Companys financial statements.



In September 2006, the FASB issued FASB Statement No. 157,Fair Value Measurements(FAS 157). FAS 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and expands on required disclosures about fair value measurement. FAS 157 is effective for the Company on October 1, 2008 and will be applied prospectively. The provisions of FAS 157 are not expected to have a material impact on the Companys financial statements.



Inflation



We do not expect the impact of inflation on operations to be significant.




Possible Reorganization



On or about November 3, 2006, we entered into a letter of intent (the LOI) with RxElite Holdings Inc. (RxElite). Under the terms of the LOI, the Company and RxElite agreed to negotiate in good faith a definitive agreement (the Agreement) pursuant to which we would acquire all of the issued and outstanding capital stock of RxElite (the Acquisition) and, in exchange, we would issue to the stockholders of RxElite an aggregate of approximately 62,000,000 shares, exact number of shares to be negotiated, of its common stock and warrants exercisable for 13,850,000 shares of common stock upon terms to be agreed. RxElite also intends to adopt a stock option plan whereby stock options could be granted that are exercisable for a number of shares of common stock equal to fifteen percent of our issued and outstanding common stock. The Board of Directors
(the Board) and officers of RxElite would become the Board and officers of the Company following the closing of the Acquisition. We would also be required to spin-out or distribute all of our assets relating to its current business. The closing is anticipated to occur on or before January 30, 2007.



Prior to the closing of the Acquisition, we would be required to increase its authorized common stock to 150,000,000 shares of common stock and 5,000,000 shares of preferred stock. In addition, we would be required to reduce the number of our outstanding shares of common stock to approximately 4,500,000 shares immediately prior to the closing.



RxElite has provided us with $60,000 to pay out-of-pocket expenses incurred in connection with the Acquisition. If the Acquisition does not occur on or before January 30, 2007 because we are unwilling to proceed, then we are required to refund the entire $60,000. If the closing does not occur for whatever reasons other than those described in the prior sentence, then we will pay RxElite an amount equal to $60,000 less the amount of out-of-pocket expenses that we have incurred relating to the Acquisition.



15





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During a period commencing upon execution of the LOI and continuing until January 30, 2007, we have agreed not to solicit or engage in discussions or negotiations in connection with any other merger or similar transaction involving the Company.

The LOI is non-binding with respect to the Acquisition terms and there can be no assurance that the Acquisition will occur, or that if it occurs, that it will be on the terms and conditions described above.



Risk Factors



In addition to the risks set forth above, we are subject to certain other risk factors due to the industry in which we compete and the nature of our operations. These risk factors include the following:



Because we have not proven our ability to generate a regular profit, an investment in Quest is risky.We do not have a proven track record of generating profits so it will be difficult for you to evaluate an investment in our stock. Our operations are subject to all risks inherent in the creation of a business and the marketing of new products, including the absence of a history of proven products which have been produced and sold over a significant period of time. We are continuing to establish many functions which are necessary to conduct business, including, managerial and administrative structure, marketing activities, financial systems, computer systems, website development and personnel recruitment. For the fiscal year ended September 30, 2006, we had net sales of $2,422,691 and net income of $192,703.



If our marketing costs exceed our estimates, it may impact our ability to continue operations.We believe we have accurately estimated our needs for the next twelve months based on our projected revenues. There can be no assurance that we have accurately projected future revenues. It is possible that our marketing costs will exceed our estimates or that our other costs will be higher than estimated. If this happens, it may impact our ability to generate revenue and we would need to seek additional funding. We have no arrangements in place whereby we could obtain additional funding.



Our success is dependent on our ability to attract, maintain and motivate distributors.Our success depends in significant part upon our ability to attract, maintain, and motivate a large base of distributors who act as independent contractors. As of December 1, 2006, we had 38 distributors and 2,009 members who buy product from us but who do not act as distributors. No single distributor is responsible for ten percent or more of our revenues in any given quarterly period. However, we believe that we have a core group of between twelve and fourteen distributors who significantly influence and motivate our other distributors. The loss of any of our core distributors would likely result in the loss of additional distributors and could have a material adverse affect on our revenues and operations. In addition, our ability to attract distributors could be
negatively affected by adverse publicity relating to our industry, our products, our operations or competition with competing businesses who may recruit our distributors. Because of the number of factors that impact the recruiting and retention of distributors, we cannot predict when or to what extent such increases or decreases in the number of distributors will occur.



If we lose the services of Mr.Craig Davis, it is unlikely that our business could continue.We require the services of Mr. Davis to continue to operate the business. Mr. Davis was previously working for the Company as an executive officer and director. Mr. Davis is now working for the Company as an independent contractor. There is intense competition for management and marketing personnel in our business. If we lost the services of Mr. Davis, it is questionable whether we would be able to find a replacement and it is likely our business would fail. There is no assurance that Mr. Davis will continue to work for us as an independent contractor.



Our product formulas are not patented and could be misappropriated and used by competitors.We have no patented products that would preclude or inhibit competitors from selling products that are substantially similar to our products. We have filed trademark applications for the names we are using to market a number of our NeoSource products. However, our NeoSource product ingredients are listed on our product labels and could be replicated by our competitors. As a result, our competitors could



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manufacture and market products that are substantially similar to our NeoSource products under a different label. If this occurs, it is unlikely that we would have any legal recourse to prohibit such conduct.



We depend on Perfect Source to manufacture our products.Our products were developed and are manufactured for us by Perfect Source Natural Products, Inc. Perfect Source is located in Fullerton, California and is not affiliated with Quest. We have no written agreement with Perfect Source. We submit purchase orders to Perfect Source for product meeting our specifications and, upon acceptance of such purchase orders, Perfect Source manufactures our product. There are no arrangements whereby Perfect Source has agreed or is required to continue to accept our purchase orders or manufacture product for us. We believe that the ingredients to produce our NeoSource products are widely available, that our products could be produced through a number of other third parties and that there are a large number of companies with whom we could
contract to produce our product. However, any termination in our arrangement with Perfect Source might interrupt service to our customers and distributors and possibly impair our ability to market and sell products.



Our business could be adversely affected by currency fluctuation between the U.S. dollar and the Japanese yen.Over 90% of our sales are to purchasers in Japan. Payment for our products is required prior to shipping and all sales are paid for in U.S. dollars. If the U.S. dollar strengthens against the Japanese yen, our products will become more expensive to purchasers in Japan which could adversely impact our sales.



We have no independent directors serving on our Board of Directors.As a result, our Board may be influenced by the concerns, issues or objectives of management to a greater extent than would occur with independent board members. In addition, we do not have the benefit of having persons independent of management review, comment on and direct our corporate strategies and objectives.



We have an obligation to make payments to Bateman Dynasty, LC in perpetuity which will result in a reduction in our profits, if any.In September 2001, we entered into a Revolving Loan and Security Agreement with Bateman Dynasty, LC, a Utah limited liability company and a stockholder. Under the terms of the agreement, Bateman lent us approximately $50,000. This amount was subsequently repaid with interest at the rate of ten percent per annum. As additional consideration to lend the funds, Bateman (i) is entitled to quarterly payments equal to two percent of net sales in perpetuity during periods where Quest has pre-tax income in excess of $20,000 and (ii) is entitled to payments in perpetuity equal to (a) $5,000 per month which payment is due only when monthly net sales exceeds $100,000, (b) $10,000 per month in any month in which net sales exceed
$200,000, and (c) $20,000 per month in any month in which net sales exceed $1,000,000. The effect of this arrangement will be to increase our costs in perpetuity by the stated amounts. We entered into this type of arrangement because, at the time, these were the best terms that we were able to negotiate for capital.



We do not anticipate paying dividends in the foreseeable future.The Company does not currently intend to pay cash dividends on its common or preferred stock and does not anticipate paying such dividends at any time in the foreseeable future. At present, the Company will follow a policy of retaining all of its earnings, if any, to finance the development and expansion of its business.

Item 7. Financial Statements

See index to financial statements beginning on page F-1 hereof.


Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None






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Item 8A. Controls and Procedures



The Company has evaluated, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of the Companys disclosure controls and procedures as of September 30, 2006, pursuant to Exchange Act Rule 15d-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective. There have been no significant changes in internal controls or in other factors that could significantly effect internal controls subsequent to the date of our most recent evaluation.



Item 8B. Other Information



None






[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



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PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons and Corporate Governance; Compliance With Section 16(a) of the Exchange Act

Set forth below is certain information concerning our directors and executive officers as of December 1, 2006.



Name
        Age
        Position
        With theCompany SinceMatthew Evans
        34
        President,  Secretary  &  Treasurer
        2006




______________



Matthew W. Evans. Mr. Evans was appointed to be an officer of the Company in October, 2006 and he became the sole director of the Company in November, 2006. Mr. Evans works for the Company on a part time basis. Mr. Evans is employed as a City Planner with the city of Mapleton, Utah (September 2002 - Present). He was previously employed as a City Planner of Provo, Utah (April 1997 - September 2002) and Riverton, Utah (February 1995-April 1997). He received a Bachelor of Science Degree in Geography from Utah State University in Logan, Utah, with emphasis in Rural Planning and Urban Geography, and also received a certificate in Urban and Regional Planning from the University of Utah. Mr. Evans holds no other directorships in reporting companies.



Our executive officers are elected by the board of directors on an annual basis and serve at the discretion of the board.



There are no family relationships among our directors, executive officers or persons nominated or chosen to become directors or executive officers.



Our policy is to encourage, but not require, members of the Board of Directors to attend annual stockholder meetings. We did not have an annual stockholder meeting during the prior year.



Our Board of Directors does not have a standing, audit, nominating or compensation committees. Given our size, it is not practicable to staff these committees. The Board of Directors, which includes each member of the Board who is then serving, participates in the consideration of director nominees. The Board of Directors is in the process of formulating a policy with regard to the consideration of director candidates recommended by security holders and the minimum qualifications of such candidates. It anticipates having such a policy in place before our next annual stockholders meeting. The members of the board of directors are also officers of the Company and are not considered independent as defined by Rule 4200(a) of the NASDs Marketplace Rules. The Company believes that Ms. Hall, however, is independent under this rule.



The Board of Directors met on one occasion during the fiscal year ended September 30, 2005. It also acted by written consents of the Board during this period.



Security Holder Communication



Stockholders who would like to send communications to the Board of Directors may do so by submitting such communications to them at contactus@questgrp.net. The Board of Directors current policy is to disseminate emails received at this email address to all members of the Board of Directors. In the event that the number of emails (including spam) received at such email address becomes unmanageable, then the Board of Directors may change its policy and/or procedure with respect to security holder communication. The Board of Directors suggests, but does not require, that such submissions include the name and contact information of the security holder making the submission.





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Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934, as amended, and the regulations of the Securities and Exchange Commission promulgated there under, require our directors, executive officers and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission, and provide us with copies of such reports. Based solely on a review of the copies of the reports furnished to us, or written representations that no reports were required to be filed, we believe that during the fiscal year ended September 30, 2006 all Section 16(a) filing requirements applicable to our directors, officers, and greater than 10% beneficial owners were complied with.



Code of Ethics



We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions.

Item 10. Executive Compensation

The table below sets forth certain information concerning compensation we paid to our president (chief executive officer) and all other executive officers with annual compensation in excess of $100,000, determined for the year ended September 30, 2006 (the Named Executive Officers).



SUMMARY COMPENSATION TABLE



Annual Compensation
        Awards
        PayoutsName andPrincipal Position(1)
        Year
        Salary ($)
        Bonus ($)
        Other AnnualCompensation($)
        Restricted StockAwards ($)
        Stock Options/SAR(#)
        LTIPPayouts($)
        All Other Compensation($)Craig Davis,
        2004
        96,000
        
        
        
        
        
        President and Director
        2005
        96,000
        
        
        
        
        
        2006
        96,000
        
        
        
        
        
        




(1) Does not include Mr. Matthew Evans who was appointed as the sole officer and director of the Company in October, 2006, after the end of the last fiscal year as further described below.



Compensation of Directors



We paid no cash fees or other consideration to our directors for service as directors during the last three fiscal years. We have made no agreements regarding future compensation of directors. All directors are entitled to reimbursement for reasonable expenses incurred in the performance of their duties as members of the Board of Directors.



Employment Agreement



We terminated our employment agreement with Craig Davis in connection with his resignation as a director and officer of the Company and his retention as a consultant for the Company. We have executed an employment agreement with Mr. Evans which provides for employment for a six month term and a salary of $15,000 as payment for services during the six month period.



Indemnification for Securities Act Liabilities



Nevada law authorizes, and our Bylaws and Certificate of Incorporation provide for, indemnification of our directors and officers against claims, liabilities, amounts paid in settlement and expenses in a variety of circumstances. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted for directors, officers and controlling persons pursuant to the foregoing, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such



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indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.



Compensation Committee Interlocks and Insider Participation



None of our executive officers serve on our compensation committee (or in a like capacity) or on the compensation committees of any other entity.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Except as otherwise noted, the following table sets forth certain information with respect to the beneficial ownership of our common stock as of December 1, 2006, for: (i) each person who is known by us to beneficially own more than five percent of the our common stock, (ii) each of our directors, (iii) our Named Executive Officer, and (iv) all directors and executive officers as a group. As of December 1, 2006, we had 10,259,000 shares of common stock outstanding.



Name and  Address
of  Beneficial Owner(1)
        Shares  BeneficiallyOwned
        Percentage ofTotal
        PositionMatthew Evans (2)(3)
        1,000
        *
        President, Treasurer & SecretaryExecutive Officers and Directors as a Group (one persons)
        1,000
        *Craig A. Davis (2)
        1,025,000
        9.9%Teresa Fackrell (2)
        996,000
        9.7%Bateman Dynasty, LC (4)
1065 W. 1150 S.
Provo, Utah 84601
        5,373,000
        52.4%Sales Team Automation, LLC (5)
1335 West 1650 North, Suite C
Springville, Utah 84663
        1,005,000
        9.8%




* Less than 1%.

______________



(1) Except where otherwise indicated, the address of the beneficial owner is deemed to be the same address as our address.

(2) Ten days after the date this Form 14f-1 is mailed to stockholders and filed with the Securities and Exchange Commission (the Effective Date), Mr. Davis and Ms. Fackrells resignations as directors and Mr. Evans appointment as the sole director of the Company will become effective.

(3) These shares are owned by Mr. Evans spouse.

(4) These shares are owned by Bateman Dynasty, LC, a private limited liability company owned by the Bateman Dynasty Trust, of which Brenda M. Hall is the trustee and Mr. Lynn Batemans grandchildren are the beneficiaries. Mr. Bateman is the sole manager of the Bateman Dynasty, LC which is deemed to have sole voting and dispositive powers with respect to these shares.

(5) Of these shares, 1,000,000 are owned by Sales Team Automation, LLC and 5,000 of these shares are owned by an affiliate of Sales Team Automation, LLC.



Preferred Stock



We had outstanding 1,000,000 shares of Series A Convertible Preferred Stock. This stock was converted into common stock on a one-for-two basis in September, 2004.



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We had outstanding 259,000 shares of Series B Convertible Preferred Stock. Between August 4, 2004 and December 31, 2005, all of these shares were converted into common stock. We currently have no shares of Series B Convertible Preferred Stock outstanding.



Changes in Control



We are not aware of any arrangements which may, at a subsequent date, result in a change in control of our company.



Securities Authorized for Issuance Under Equity Compensation Plans



We have no securities authorized for issuance under equity compensation plans.


Item 12. Certain Relationships and Related Transactions

In October 2001 and February 2002, the Company entered into a Revolving Loan and Security Agreements (the McKinley Revolving Loans) with McKinley Enterprises Inc. Profit Sharing Plan and Trust (McKinley). Under the terms of the agreements, McKinley agreed to make periodic loans to the Company in an aggregate principal amount at any one time outstanding not to exceed $103,000. The loan and accrued interest were repaid in full on July 8, 2006.



In September 2001, the Company entered into a Revolving Loan and Security Agreement (the Bateman Revolving Loan) with Bateman Dynasty, LC, a Utah limited liability company (Bateman) and a stockholder of the Company. Under the terms of the agreement, Bateman lent the Company approximately $50,000. This amount was subsequently repaid with interest at the rate of ten percent per annum. As additional consideration to lend the funds, Bateman (i) is entitled to quarterly payments equal to two percent of net sales in perpetuity during periods where the Company has pre-tax income in excess of $20,000 and the Company is not indebted under the McKinley Revolving Loans and (ii) is entitled to payments in perpetuity equal to (a) $5,000 per month which payment is due only when monthly net sales exceeds $100,000, (b) $10,000 per month in any month in which net sales exceed
$200,000, and (c) $20,000 per month in any month in which net sales exceed $1,000,000. The effect of this arrangement will be to increase our costs in perpetuity by the stated amounts. The Company entered into this type of arrangement because, at the time, these were the best terms that it was able to negotiate for such capital. When monthly net sales are less than $100,000, the $5,000 minimum payment accrues and is indicated on the balance sheet as Related party fee payment payable. During the year ended September 30, 2006, the Company paid $75,000 to Bateman under this arrangement.



On or about April 6, 2005, the Company received $100,000 in funding under the terms of an unsecured promissory note. The funds were lent to the Company by a single accredited lender, Dassity, Inc. Ms. Brenda Hall, a former director of the Company, is the president and an owner of Dassity, Inc. This loan bears interest at the rate of four percent per annum and the note was payable on demand at any time after the twelve month anniversary date of the note. The note and accrued interestwere repaid in full on April 5, 2005.

Item 13. Exhibits

Exhibits

Listed on page 25 hereof.



Reports on Form 8-K



None



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Item 14. Principal Accountant Fees and Services



Audit Fees



The aggregate fees billed for professional services rendered by our principal accountant for the audit of our annual financial statements, review of financial statements included in our quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended September 30, 2006 and 2005 were $19,296 and $14,084, respectively.



Audit Related Fees



The aggregate fees billed for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements, other than those previously reported in this Item 14, for the fiscal years ended September 30, 2006 and 2005 were $0 and $0, respectively.



Tax Fees



The aggregate fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning for the fiscal years ended September 30, 2006 and 2005 were $2038 and $746, respectively.



All Other Fees



The aggregate fees billed for products and services provided by the principal accountant, other than those previously in this Item 14, for the fiscal years ended September 30, 2006 and 2005 were $0 and $0, respectively.



Audit Committee



The Companys Board of Directors functions as its audit committee. It is the policy of the Company for all work performed by our principal accountant to be approved in advance by the Board of Directors. All of the services described above in this Item 14 were approved in advance by our Board of Directors.



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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.



Date: December 8, 2006
        QUEST GROUP INTERNATIONAL, INC.
(Registrant)


By/s/ Matthew Evans
Matthew Evans
President and Director




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.





Signature
        Title
        Date/s/ Matthew EvansMatthew Evans
        President and Director (Principal Executive Officer and Principal Financial and Accounting Officer)
        December 8, 2006






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EXHIBIT INDEX



EXHIBIT NO.
        DESCRIPTION OF EXHIBIT3(i).1
        Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3(i).1 of the Companys Registration Statement on Form SB-2 filed June 3, 2002, File No. 333-89628).3(i).2
        Certificate of Designation (Incorporated by reference to Exhibit 3(i).2 of the Companys Registration Statement on Form SB-2 filed June 3, 2002, File No. 333-89628).3(i).3
        Certificate of Amendment to the Certificate of Designation (Incorporated by reference to Exhibit 3(i).3 of the Companys Registration Statement on Form SB-2 filed June 3, 2002, File No. 333-89628).3(ii).1
        Bylaws (Incorporated by reference to Exhibit 3(ii).1 of the Companys Registration Statement on Form SB-2 filed June 3, 2002, File No. 333-89628).10.1
        Revolving Loan and Security Agreement by and between the Company and Bateman Dynasty, LC, dated September 1, 2001 (Incorporated by reference to Exhibit 10.4 of the Companys Registration Statement on Form SB-2 filed June 3, 2002, File No. 333-89628).10.2
        Amendment No. 1 to the Revolving Loan and Security Agreement by and between the Company and Bateman Dynasty, LC, dated February 1, 2002 (Incorporated by reference to Exhibit 10.5 of the Companys Registration Statement on Form SB-2 filed June 3, 2002, File No. 333-89628).10.3
        Employment Agreement with Matthew Evans, effective October 23, 200610.4
        Consulting Agreement with Craig Davis, effective October 23, 200614.1
        Code of Ethics (Incorporated by reference to Exhibit 14.1 of the Companys Annual Report on Form 10-KSB for the period ended September 30, 2003).31.1
        Certification by Matthew Evans under Section 302 of the Sarbanes-Oxley Act of 2002.31.2
        Certification by Matthew Evans under Section 302 of the Sarbanes-Oxley Act of 2002.32.1
        Certification of Matthew Evans pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.






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QUEST GROUP INTERNATIONAL, INC.



INDEX



Page






Report of Independent Registered Public Accounting Firm
        F-2




Balance Sheets
        F-4




Statements of Income
        F-5




Statements of Stockholders Equity
        F-6




Statements of Cash Flows
        F-7


Notes to Financial Statements
        F-8








F-1







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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders and

Board of Directors of

Quest Group International, Inc.



We have audited the accompanying balance sheets of Quest Group International, Inc., as of September 30, 2006 and 2005, and the related statements of income, 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 standards established by the Public Company 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. 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 audits provide 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 Quest Group International, Inc., as of September 30, 2006 and 2005, 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.



JONES SIMKINS, P.C.

Logan, Utah

November 16, 2006



F-2







---





QUEST GROUP INTERNATIONAL, INC.BALANCE SHEETSSeptember 30, 2006 and 2005ASSETS
        
        2006
        
        2005Current assets:Cash
        $
        228,558
        
        233,325Accounts receivable
        
        34,312
        
        25,719Inventories
        
        105,180
        
        122,842Prepaid income taxes
        
        14,500
        
        Current portion of deferred tax asset
        
        
        
        10,000Total current assets
        
        382,550
        
        391,886Property and equipment, net
        
        18,035
        
        10,848Deposits
        
        1,150
        
        1,150Total assets
        $
        401,735
        
        403,884LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable
        $
        40,194
        
        19,806Accrued expenses
        
        64,538
        
        115,340Related party fee payment payable
        
        10,000
        
        5,000Notes payable
        
        
        
        173,000Deferred revenue
        
        2,349
        
        787Total current liabilities
        
        117,081
        
        313,933Deferred tax liability
        
        2,000
        
        Total liabilities
        
        119,081
        
        313,933Commitments and contingenciesStockholders' equity:Series A preferred stock, $.001 par value, 1,000,000shares designated, no shares issued and outstanding
        
        
        
        Series B preferred stock, $.001 par value, 500,000shares designated, 0 and 5,000 shares issued andoutstanding, respectively
        
        
        
        5Common stock, $.001 par value, 50,000,000 sharesauthorized, 10,259,000 and 10,254,000 shares issued


and outstanding, respectively
        
        10,259
        
        10,254Additional paid-in capital
        
        105,541
        
        105,541Retained earnings (deficit)
        
        166,854
        
        (25,849)Total stockholders' equity
        
        282,654
        
        89,951Total liabilities and stockholders' equity
        $
        401,735
        
        403,884




F-3









---





QUEST GROUP INTERNATIONAL, INC.STATEMENTS OF INCOMEYears Ended September 30, 2006 and 20052006
        
        2005Sales, net
        $
        2,422,691
        
        1,943,721Cost of goods sold
        
        759,481
        
        560,150Gross profit
        
        1,663,210
        
        1,383,571Selling, general and administrative expenses
        
        (1,411,659)
        
        (1,152,742)Income from operations
        
        251,551
        
        230,829Other income (expense):Interest income
        
        6,465
        
        373Interest expense
        
        (8,313)
        
        (12,114)Net other expense
        
        (1,848)
        
        (11,741)Income before income taxes
        
        249,703
        
        219,088Provision for income taxes
        
        57,000
        
        77,000Net income
        $
        192,703
        
        142,088Income per common share - basic and diluted
        $
        0.02
        
        0.01Weighted average common shares - basic and diluted
        
        10,257,000
        
        10,243,000




F-4







---





QUEST GROUP INTERNATIONAL, INC.STATEMENTS OF STOCKHOLDERS' EQUITYYears Ended September 30, 2006 and 2005Series A
        
        Series B
        
        
        
        
        
        Additional
        
        RetainedPreferred Stock
        
        Preferred Stock
        
        Common Stock
        
        Paid-In
        
        EarningsShares
        
        Amount
        
        Shares
        
        Amount
        
        Shares
        
        Amount
        
        Capital
        
        (Deficit)
        
        TotalBalance at October 1, 2004
        
        $
        
        
        62,000
        $
        62
        
        10,197,000
        $
        10,197
        $
        105,541
        $
        (167,937)
        $
        (52,137)Conversion of Series B preferredstock to common stock
        
        
        
        
        (57,000)
        
        (57)
        
        57,000
        
        57
        
        
        
        
        
        Net income
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        142,088
        
        142,088Balance at September 30, 2005
        
        
        
        
        5,000
        
        5
        
        10,254,000
        
        10,254
        
        105,541
        
        (25,849)
        
        89,951Conversion of Series B preferredstock to common stock
        
        
        
        
        (5,000)
        
        (5)
        
        5,000
        
        5
        
        
        
        
        
        Net income
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        192,703
        
        192,703Balance at September 30, 2006
        
        $
        
        
        
        $
        
        
        10,259,000
        $
        10,259
        $
        105,541
        $
        166,854
        $
        282,654






F-5







---





QUEST GROUP INTERNATIONAL, INC.STATEMENTS OF CASH FLOWSYears Ended September 30, 2006 and 20052006
        
        2005Cash flows from operating activities:Net income
        $
        192,703
        
        142,088Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation expense
        
        5,970
        
        3,704Deferred income taxes
        
        12,000
        
        77,000(Increase) decrease in:Accounts receivable
        
        (8,593)
        
        24,950Inventories
        
        17,662
        
        (51,218)Prepaid income taxes
        
        (14,500)
        
        Deposits
        
        
        
        196Increase (decrease) in:Accounts payable
        
        20,388
        
        (9,975)Accrued expenses
        
        (50,802)
        
        45,074Related party fee payment payable
        
        5,000
        
        (150,000)Deferred revenue
        
        1,562
        
        448Net cash provided by operating activities
        
        181,390
        
        82,267Cash flows from investing activities:Purchase of property and equipment
        
        (13,157)
        
        (5,579)Net cash used in investing activities
        
        (13,157)
        
        (5,579)Cash flows from financing activities:Proceeds from note payable
        
        
        
        100,000Principal payments on notes payable
        
        (173,000)
        
        (30,000)Net cash provided by (used in) financing activities
        
        (173,000)
        
        70,000Net increase (decrease) in cash
        
        (4,767)
        
        146,688Cash, beginning of year
        
        233,325
        
        86,637Cash, end of year
        $
        228,558
        
        233,325




F-6







---

QUEST GROUP
INTERNATIONAL, INC.NOTES TO FINANCIAL STATEMENTSSeptember 30, 2006
and 2005

Note 1 
Organization and Summary of Significant Accounting Policies

Organization

Quest Group International, Inc. (the Company)
was organized under the laws of the State of Nevada on August 14, 2001. The Companys
business activity involves the marketing and distribution of nutritional supplements. The
Company sells its products through independent distributors primarily in Japan and the
United States.

Use of Estimates in the
Preparation of Financial Statements

The preparation of financial
statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash
flows, the Company considers all highly liquid investments with a maturity of three months
or less to be cash equivalents.

Accounts Receivable

Accounts receivable are amounts due
for products delivered. Accounts receivable are carried at estimated collectible amounts.
Credit is generally extended on a short-term basis; thus accounts receivable do not bear
interest although a finance charge may be applied to such receivables that are more than
thirty days past due. Accounts receivable are periodically evaluated for collectibility
based on past credit history with customers. Provisions for losses on accounts receivable
are determined on the basis of loss experience, known and inherent risk in the account
balance and current economic conditions.

Inventories

Inventories consist primarily of
purchased finished goods and are valued at the lower of cost or market using the first-in
first-out (FIFO) method.



F-7







---

QUEST GROUP
INTERNATIONAL, INC.NOTES TO FINANCIAL STATEMENTSSeptember 30, 2006
and 2005

Note 1 
Organization and Summary of Significant Accounting Policies (continued)

Property and Equipment

Property and equipment are stated at cost
less accumulated depreciation. Depreciation is determined using the straight-line method
over the estimated useful lives of the assets (approximately 5 years). Expenditures for
maintenance and repairs are expensed when incurred and betterments are capitalized. Gains
and losses on sale of property and equipment are reflected in the statement of operations.

Property and equipment consists of
office equipment with a cost of $31,678 and $18,520 and accumulated depreciation of
$13,643 and $7,672 as of September 30, 2006 and 2005, respectively.

Deferred Revenue

The Company has a customer loyalty
program which rewards customers with Shopping Points based on purchases of
certain products. Shopping points may be redeemed for product. Certain limitations apply
and shopping points expire after one year. The value of unredeemed shopping points
expected to be redeemed are recorded on the balance sheet as deferred revenue.

Income Taxes

Deferred income taxes are provided in
amounts sufficient to give effect to temporary differences between financial and tax
reporting, principally related to accruals and depreciation of property and equipment.

Deferred income taxes arise from
temporary differences resulting from income and expense items reported for financial
accounting and tax purposes in different periods. Deferred taxes are classified as current
or noncurrent, depending on the classification of the assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are not related to an asset
or liability are classified as current or noncurrent depending on the periods in which the
temporary differences are expected to reverse.

Revenue Recognition

Revenue is recognized when products
are shipped, which is when title passes to independent distributors and to consumers. A
reserve for product returns is accrued based on historical experience. The Company
generally requires cash or credit card payment at the point of sale. Amounts received
prior to shipment and title passage to distributors are recorded as deferred revenue.



F-8







---

QUEST GROUP
INTERNATIONAL, INC.NOTES TO FINANCIAL STATEMENTSSeptember 30, 2006
and 2005

Note 1 
Organization and Summary of Significant Accounting Policies (continued)

Revenue Recognition
(continued)

Independent distributors are able to
earn financial benefits (retail commissions and group development bonuses) if certain
monthly minimum sales qualifications are met. These financial benefits are recognized in
the same period that the products are shipped to the independent distributors. Commissions
payable at September 30, 2006 and 2005 were approximately $50,000 and $62,000,
respectively, and are included in accrued expenses on the balance sheet.

Enrollment fees paid by independent
distributors are recognized as revenue when the fee is paid.

Shipping and Handling
Costs

The Company classifies shipping and
handling costs as selling expenses in the statement of income. Shipping and handling costs
totaled approximately $311,000 and $213,000 for 2006 and 2005, respectively.

Research and Development

Research and development costs are
expensed as incurred.

Advertising

Advertising costs are charged to
expense when they first take place. Advertising costs for 2006 and 2005 were approximately
$56,000 and $22,000, respectively.

Earnings Per Share

The computation of basic earnings per
common share is based on the weighted average number of shares outstanding during the
year.

The computation of diluted earnings
per common share is based on the weighted average number of shares outstanding during the
year plus the common stock equivalents which would arise from the exercise of stock
options and warrants outstanding using the treasury stock method and the average market
price per share during the year.

Common stock equivalents are not
included in the diluted earnings per share calculation when their effect is antidilutive.
The Company does not have any stock options or warrants outstanding at September 30, 2006
and 2005.



F-9







---

QUEST GROUP
INTERNATIONAL, INC.NOTES TO FINANCIAL STATEMENTSSeptember 30, 2006
and 2005

Note 1 
Organization and Summary of Significant Accounting Policies (continued)

Concentrations of Credit
Risk

Financial instruments, which
potentially subject the company to concentrations of credit risk, consist primarily of
receivables. In the normal course of business, the Company provides credit terms to its
customers. Accordingly, the Company performs ongoing credit evaluations of its customers.
and maintains allowances for possible losses which, when realized, have been within the
range of managements expectations.

The Company maintains its cash in
bank deposit accounts, which at times, may exceed federally insured limits. The Company
has not experienced any losses in such accounts and believes it is not exposed to any
significant credit risk on cash and cash equivalents.

Recent Accounting
Pronouncements

In June 2006, the FASB issued
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan
interpretation of FASB Statement No. 109(FIN 48), which clarifies
the accounting for uncertainty in income tax positions. This Interpretation requires that
the Company recognize in the consolidated financial statements the impact of a tax
position that is more likely than not to be sustained upon examination based on the
technical merits of the position. The provisions of FIN 48 will be effective for the
Company as of the beginning of the Companys 2008 fiscal year, with the cumulative
effect of the change in accounting principle recorded as an adjustment to opening retained
earnings. The Company is currently evaluating the impact of adopting FIN 48 on the
consolidated financial statements.

In September 2006, the FASB
issued FASB Statement No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Benefits(FAS 158). FAS 158 addresses the
accounting for defined benefit pension plans and other postretirement benefit plans
(plans). Specifically, FAS 158 requires companies to recognize an asset for a
plans overfunded status or a liability for a plans underfunded status and to
measure a plans assets and its obligations that determine its funded status as of
the end of the companys fiscal year, the offset of which is recorded, net of tax, as
a component of other comprehensive income in shareholders equity. FAS 158 will be
effective for the Company as of September 30, 2007 and applied prospectively. The
provisions of FAS 158 are not expected to have any impact on the Companys financial
statements.



F-10







---

QUEST GROUP
INTERNATIONAL, INC.NOTES TO FINANCIAL STATEMENTSSeptember 30, 2006
and 2005

Note 1 
Organization and Summary of Significant Accounting Policies(continued)

Recent Accounting
Pronouncements (continued)

In September 2006, the FASB
issued FASB Statement No. 157, Fair Value Measurements(FAS 157).
FAS 157 establishes a single authoritative definition of fair value, sets out a framework
for measuring fair value, and expands on required disclosures about fair value
measurement. FAS 157 is effective for the Company on October 1, 2008 and will be applied
prospectively. The provisions of FAS 157 are not expected to have a material impact on the
Companys financial statements.

Note 2  Related
Party Fee Payment Payable

The Company has an agreement with
Bateman Dynasty, LC (a major stockholder of the Company) which requires the Company to
make monthly and quarterly payments. The monthly payments (referred to as fee payments)
are $5,000 and increase to $10,000 in any month that net sales exceed $200,000 and
increase to $20,000 in any month that net sales exceed $1,000,000. The monthly fee
payments are due on the last day of the month following any month in which net sales
exceed $100,000. The quarterly payments (referred to as override bonus payments) are two
percent of net sales, when average pre-tax monthly income exceeds $20,000. The fee
payments and override bonus payments run in perpetuity.

Information related to the fee
payments and override bonus payments are as follows:

`2006               2005
                                             ----               ----
         Fee payments:
              Payable                    $     10,000            5,000
                                         ============       ==========
              Expense                    $     60,000           60,000
                                         ============       ==========

         Override bonus payments:
              Payable                    $          -                -
                                         ============       ==========
              Expense                    $          -                -
                                         ============       ==========`



F-11







---

QUEST GROUP
INTERNATIONAL, INC.NOTES TO FINANCIAL STATEMENTSSeptember 30, 2006
and 2005

Note 3  Notes
Payable

Notes payable at September 30, 2006
and 2005 consisted of:

`2006                    2005
                                                                                ----                    ----
         Notes payable to McKinley Enterprises, Inc.
          Profit Sharing Plan and Trust, principal and accrued
          interest was due and payable on April 18, 2006, with
          interest at 10%, secured by all Company assets.                  $          -                103,000

         Note payable to Dassity, Inc., principal and accrued
          interest was due and payable on or after April 6, 2006,
          with interest at 4%, unsecured.                                             -                 70,000
                                                                           ------------            -----------
                                                                           $          -                173,000
                                                                           ============            ===========`

Accrued interest at September 30,
2006 and 2005 was approximately $0 and $40,000, respectively, and is included in accrued
expenses on the balance sheets.

Note 4  Income Taxes

The provision for income taxes
differs from the amount computed at federal statutory rates as follows:

`2006                    2005
                                                                                ----                    ----

         Provision for income taxes at statutory rate                      $     50,000                 77,000
         State taxes, net of federal benefit                                      7,000                      -
                                                                           ------------            -----------
                                                                           $     57,000                 77,000
                                                                           ============            ===========`

The income tax provision consists of
the following:

`2006                    2005
                                                                                ----                    ----

         Current                                                           $     45,000                 77,000
         Deferred                                                                12,000                      -
                                                                           ------------            -----------
         Provision for income taxes                                        $     57,000                 77,000
                                                                           ============            ===========`



F-12







---

QUEST GROUP
INTERNATIONAL, INC.NOTES TO FINANCIAL STATEMENTSSeptember 30, 2006
and 2005

Note 4  Income
Taxes (continued)

Deferred tax assets (liabilities) are
comprised of the following:

`2006                    2005
                                                                                ----                    ----

         Net operating loss carryforwards                                  $          -                 11,000
         Related party fee payment payable                                        3,000                  2,000
         Property and equipment                                                  (5,000)                (3,000)
                                                                           ------------            -----------
                                                                                 (2,000)                10,000

         Valuation allowance                                                          -                      -
                                                                           ------------            -----------
                                                                           $     (2,000)                10,000
                                                                           ============            ===========`

As of September 30, 2006 and 2005,
the Company had net operating loss carryforwards of approximately $0 and $35,000. These
carryforwards begin to expire in 2021. If substantial changes in the Companys
ownership should occur there would be an annual limitation of the amount of net operating
loss carryforwards which could be utilized. Also, the ultimate realization of these
carryforwards is due, in part, on the tax law in effect at the time and future events that
cannot be determined.

Note 5 
Supplemental Cash Flow Information

Actual amounts paid for interest and
income taxes are approximately as follows:

`2006                    2005
                                                                                ----                    ----

         Interest                                                          $     48,000                      -
                                                                           ============            ===========
         Income taxes                                                      $     59,500                      -
                                                                           ============            ===========`

Shareholders of 5,000 and 57,000 shares
of Series B Preferred stock elected to convert their shares to common stock during the
years end September 30, 2006 and 2005, respectively.

Note 6  Preferred
Stock

The Company has authorized 5,000,000
shares of preferred stock with a par value of $.001, and established two series of
preferred shares designated as: Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock, consisting of 1,000,000 shares and 500,000 shares designated,
respectively.



F-13







---

QUEST GROUP
INTERNATIONAL, INC.NOTES TO FINANCIAL STATEMENTSSeptember 30, 2006
and 2005

Note 6  Preferred
Stock (continued)

The Convertible Preferred Stock has
the following rights and privileges:

Series A Convertible
Preferred Stock

| | o |  | The
holders of the shares are entitled to one hundred (100) votes for each share held.
| | - |  | --------------------------------------------------------------------------------------

| | o |  | Upon
the liquidation of the Company, the holders of the shares will rank equally with the
holders of common shares and          Series B shares.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | The
holders of the shares are not entitled to dividends.
| | - |  | --------------------------------------------------------

| | o |  | The
shares are convertible at the option of the holder at any time into common shares, at a
conversion rate of one share of          Series A Convertible Preferred Stock for two
shares of common stock.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Series B Convertible Preferred
Stock

| | o |  | The
holders of the shares are entitled to one (1) vote for each share held.
| | - |  | ---------------------------------------------------------------------------

| | o |  | Upon
the liquidation of the Company, the holders of the shares will rank equally with the
holders of common shares and          Series A shares.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | The
holders of the shares are not entitled to dividends.
| | - |  | --------------------------------------------------------

| | o |  | The
shares are convertible at the option of the holder at any time into common shares, at a
conversion rate of one share of          Series B Convertible Preferred Stock for one
share of common stock.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 7  Geographic
Sales Information

The Companys sales by
geographic area were approximately as follows:

`2006                    2005
                                                                                ----                    ----

         Japan                                                             $  2,375,000              1,900,000
         United States                                                           48,000                 43,000
                                                                           ------------            -----------
                                                                           $  2,423,000              1,943,000
                                                                           ============            ===========`

Note 8  Commitments

Employment Agreements

The Company has entered into an
annual employment agreement with Craig Davis, the Companys president. The agreement
is subject to automatic renewal for successive one year periods unless notice of
termination is given by either party within thirty days of the expiration of the then
current term. His employment agreement provides that he shall receive (i) an annual salary
of $96,000, (ii) increases in his annual salary if and when the Company reaches targeted
sales amounts, (iii) bonuses in an amount equal to 1.2% of monthly net sales, provided
that the Company has monthly pre-tax income in excess of $10,000 and the Company is not
indebted under its current loan arrangements, and (iv) may participate in other benefits
offered generally to employees. The employment agreement also provides for a six-month
non-compete time period.

The Company also has entered into an
annual employment agreement with Teresa Fackrell. The agreement is subject to automatic
renewal for successive one year periods unless notice of termination is given by either
party within thirty days of the expiration of the then current term. Her employment
agreement provides that she shall receive (i) an annual salary of $72,000, (ii) increases
in her annual salary if and when the Company reaches targeted sales amounts, (iii) bonuses
in an amount equal to .8% of monthly net sales, provided that the Company has monthly
pre-tax income in excess of $20,000 and the Company is not indebted under its current loan
arrangements, and (iv) may participate in other benefits offered generally to employees.
The employment agreement also provides for a six-month non-compete time period.

Subsequent to year-end, these
agreements were terminated and new agreements were signed (see Note 10).



F-14







---

QUEST GROUP
INTERNATIONAL, INC.NOTES TO FINANCIAL STATEMENTSSeptember 30, 2006
and 2005

Note 9  Fair Value
of Financial Instruments

The Companys financial
instruments consist of cash, accounts receivable, payables and notes payable. The carrying
amount of cash, receivables, and payables approximates fair value because of the
short-term nature of these items. The carrying amount of the notes payable approximates
fair value as the notes bear interest at market interest rates.

Note 10  Subsequent
Events

Changes in Management

On October 23, 2006, Craig Davis, the
Companys principal executive officer, president, principal financial and accounting
officer, and principal operating officer, and Teresa Fackrell, the Companys
secretary and treasurer, resigned from all positions of employment with the Company. In
addition, Mr. Davis and Ms. Fackrell, who are the only members of the Companys board
of directors, resigned from their positions as directors of the Company. These
resignations were not as a result of any disagreement relating to the Companys
operations, policies, or practices.

The Company appointed Mr. Mathew
Evans as its President, Secretary and Treasurer. Mr. Evans will also be appointed as the
Companys sole director effective immediately prior to the resignations of Mr. Davis
and Ms. Fackrell. In addition, the number of directors comprising the Companys board
of directors was fixed at one by board resolution. The Company has executed an employment
agreement with Mr. Evans. Under the employment agreement, Mr. Evans will be working for
the Company on a part-time basis, for a six month term, and will receive compensation in
the amount of $15,000 for services rendered during the term. In the event the Company
terminates the employment agreement prior to the expiration of the six month term, Mr.
Evans will be entitled to payment of the full $15,000.

Also, effective October 23, 2006, the
Company retained Mr. Davis and Ms. Fackrell as consultants. Under the arrangements, the
consultants will continue to do substantially all of the tasks related to managing the
ongoing operations of the Company. In consideration for these services, Mr. Davis will be
paid $11,300 per month for a minimum of six months and Ms. Fackrell will be paid $7,535
per month for a minimum of six months. The Company can terminate these consulting
arrangements at any time, subject to paying the consultants the above identified
consulting fees for a six month period. In connection with the consulting arrangements,
the Company and the consultants mutually released each other for all obligations under the
employment agreements to which the consultants were parties.

Letter of Intent

In November 2006, the Company entered
into a letter of intent (the LOI) with RxElite Holdings, Inc. (RxElite). Under the terms
of the LOI, the Company and RxElite agreed to negotiate a definitive agreement pursuant to
which the Company would acquire all of the issued and outstanding capital stock of RxElite
in exchange for approximately 62,000,000 shares of common stock and warrants exercisable
for approximately 13,850,000 shares of common stock. The Board of Directors and officers
of RxElite would become the Board of Directors and officers of the Company and all of the
assets of the Company would be distributed or spun-out. The closing is anticipated to
occur on or before January 30, 2007.



F-15







---