UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)




x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For
the Quarterly Period Ended September 30, 2008




o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For
the Transition Period from _________ to _________





Commission
file number:  333-149260







WELLQUEST
MEDICAL & WELLNESS CORPORATION


(Exact
name of registrant as specified in its charter)





Oklahoma
            20-1842879(State
      or other jurisdiction of
              incorporation
      or organization)
            (IRS
      Employer
              Identification
      No.)





3400 SE
Macy Rd, #18


Bentonville,
Arkansas 72712


(Address
of Principal Executive Offices)





(479)
845-0880


(Registrant’s
telephone number, including area code)





(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant:  (1) has 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 o No
x





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting
company.  See definitions of “large accelerated filer,” “accelerated
filed,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):




Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o
            Smaller
      reporting company x(Do
      not check if a smaller reporting company)





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





As of
December 3, 2008, there were 23,716,361 shares of registrant’s common stock
outstanding.








WELLQUEST
MEDICAL & WELLNESS CORPORATION




INDEX








PART
      I.
            FINANCIAL
      INFORMATIONITEM
      1.
            Financial
      Statements
            3Consolidated
      balance sheets at September 30, 2008 (unaudited) and December 31,
      2007
            3Consolidated
      statements of operations for the three and nine months ended September 30,
      2008 and 2007 (unaudited)
            4Consolidated
      statements of cash flows for the three and nine months ended September 30,
      2008 and 2007 (unaudited)
            5Notes
      to unaudited consolidated financial statements
            6 –
      12ITEM
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            13-20ITEM
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            20ITEM
      4T.
            Controls
      and Procedures
            20PART
      II.
            OTHER
      INFORMATIONITEM
      1
            Legal
      proceedings
            21ITEM
      1A
            Risk
      factors
            21ITEM
      2
            Unregistered
      sales of equity securities and use of proceeds
            21ITEM
      3
            Defaults
      upon senior securities
            21ITEM
      4
            Submission
      of matters to a vote of security holders
            21ITEM
      5
            Other
      information
            21ITEM
      6
            Exhibits
            21SIGNATURES
            22







WELLQUEST
MEDICAL & WELLNESS CORPORATION


(formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)




PART
I. FINANCIAL INFORMATION


ITEM
1.   Financial Statements





Consolidated
Balance Sheets





September
      30
              2008
            
            
            December
      31
              2007(Unaudited)AssetsCurrent
      assets:Cash
            
            $
            32,788
            
            
            $
            91,711Accounts
      receivable, less allowance of $202,111 and $184,585 at September 30, 2008
      and December 31, 2007, respectively
            
            
            223,046
            
            
            
            329,117Certificate
      of deposit, restricted
            
            
            -
            
            
            
            250,000Other
      current assets
            
            
            94,817
            
            
            
            65,729Total
      current assets
            
            
            350,651
            
            
            
            736,557Property
      and equipment, net
            
            
            419,361
            
            
            
            495,327Total
      assets
            
            $
            770,012
            
            
            $
            1,231,884Liabilities
      and Stockholders' DeficitCurrent
      liabilities:Line
      of credit
            
            $
            206,557
            
            
            $
            193,765Accounts
      payable
            
            
            257,692
            
            
            
            285,641Accrued
      liabilities
            
            
            174,633
            
            
            
            185,139Due
      to physicians and related parties
            
            
            457,787
            
            
            
            375,335Note
      payable to related party
            
            
            337,986
            
            
            
            -Current
      maturities of long-term debt
            
            
            93,983
            
            
            
            352,585Current
      obligations under capital leases
            
            
            22,943
            
            
            
            20,291Current
      maturities of subordinated debentures payable to stockholders, net of
      unamortized discount of $40,399 and $0 at September 30, 2008 and December
      31, 2007, respectively
            
            
            500,103
            
            
            
            125,005Total
      current liabilities
            
            
            2,051,684
            
            
            
            1,537,761Long-term
      debt, less current maturities
            
            
            446,559
            
            
            
            517,804Long-term
      obligations under capital leases, less current portion
            
            
            124,994
            
            
            
            142,548Subordinated
      debentures payable to stockholders, less current maturities, net of
      unamortized discount of $112,000 at December 31, 2007
            
            
            -
            
            
            
            328,497Total
      liabilities
            
            
            2,623,237
            
            
            
            2,526,610Stockholders'
      deficit:Preferred
      stock - $.01 par value; authorized 2,500,000 shares
              75,000
      designated as Series A convertible preferred stock; 37,440 shares issued
      and outstanding
            
            
            374
            
            
            
            374Common
      stock - $.001 par value; authorized 150,000,000 shares; 23,716,361 and
      22,975,250 shares issued and outstanding at September 30, 2008 and
      December 31, 2007, respectively
            
            
            23,716
            
            
            
            22,975Additional
      paid-in capital
            
            
            1,261,167
            
            
            
            1,184,304Warrants
      outstanding
            
            
            177,000
            
            
            
            177,000Accumulated
      deficit
            
            
            (3,315,482
            )
            
            
            (2,679,379
            )(1,853,225
            )
            
            
            (1,294,726
            )Total
      liabilities and stockholders' deficit
            
            $
            770,012
            
            
            $
            1,231,884





3


WELLQUEST
MEDICAL & WELLNESS CORPORATION


(formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)




Consolidated
Statements of Operations





For
the periods ended September 30, 2008 and 2007


(Unaudited)





Three
      Months Ended
              September
      30,
            
            
            Nine
      Months Ended
              September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      revenue
            
            $
            775,991
            
            
            $
            609,107
            
            
            $
            2,407,197
            
            
            $
            1,665,731Operating
      expenses:Salaries,
      wages and benefits
            
            
            320,632
            
            
            
            272,851
            
            
            
            973,676
            
            
            
            794,259Rents
      and facility expenses
            
            
            60,367
            
            
            
            62,715
            
            
            
            214,553
            
            
            
            193,723Clinic
      direct expenses, excluding salaries, wages and benefits
            
            
            263,896
            
            
            
            185,287
            
            
            
            804,221
            
            
            
            516,933Spa
      direct expenses, excluding salaries, wages and benefits
            
            
            93,944
            
            
            
            58,624
            
            
            
            229,409
            
            
            
            151,415General
      corporate expenses
            
            
            87,736
            
            
            
            62,336
            
            
            
            523,863
            
            
            
            155,785Depreciation
      and amortization
            
            
            27,157
            
            
            
            27,055
            
            
            
            81,454
            
            
            
            72,560Total
      operating expenses
            
            
            853,732
            
            
            
            668,868
            
            
            
            2,827,176
            
            
            
            1,884,675Operating
      loss
            
            
            (77,741
            )
            
            
            (59,761
            )
            
            
            (419,979
            )
            
            
            (218,944
            )Interest
      income (expense):Interest
      income
            
            
            -
            
            
            
            3,183
            
            
            
            3,232
            
            
            
            9,723Interest
      expense
            
            
            (79,903
            )
            
            
            (37,593
            )
            
            
            (219,356
            )
            
            
            (182,319
            )Net
      interest expense
            
            
            (79,903
            )
            
            
            (34,410
            )
            
            
            (216,124
            )
            
            
            (172,596
            )Net
      loss applicable to common stock
            
            $
            (157,644
            )
            
            $
            (94,171
            )
            
            $
            (636,103
            )
            
            $
            (391,540
            )Loss
      per common share:Basic
      and diluted
            
            $
            (0.007
            )
            
            $
            (0.005
            )
            
            $
            (0.027
            )
            
            $
            (0.021
            )Weighted
      average number of common shares outstanding:Basic
      and diluted
            
            
            23,698,245
            
            
            
            18,875,000
            
            
            
            23,538,653
            
            
            
            18,875,000





4


WELLQUEST
MEDICAL & WELLNESS CORPORATION


(formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)




Consolidated
Statements of Cash Flows





For
the nine months ended September 30, 2008 and 2007


(Unaudited)




2008
            
            
            2007Cash
      Flows from Operating ActivitiesNet
      loss
            
            $
            (636,103
            )
            
            $
            (391,540
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
            
            
            81,454
            
            
            
            72,560Amortization
      of debt discount
            
            
            71,602
            
            
            
            43,000Stock
      based compensation
            
            
            11,604
            
            
            
            -Change
      in assets and liabilities:Accounts
      receivable, net
            
            
            106,071
            
            
            
            (46,010
            )Other
      current assets
            
            
            (29,088
            )
            
            
            (26,576
            )Accounts
      payable and accrued liabilities
            
            
            (38,455
            )
            
            
            68,965Due
      to physicians and related parties
            
            
            82,452
            
            
            
            58,845Net
      cash used in operating activities
            
            
            (350,463
            )
            
            
            (220,756
            )Cash
      Flows from Investing ActivitiesPurchases
      of property and equipment
            
            
            (5,488
            )
            
            
            (10,772
            )Cash
      Flows from Financing ActivitiesRepayment
      of long-term borrowings and obligations under capital
    leases
            
            
            (94,750
            )
            
            
            (79,658
            )Repayment
      of subordinated debentures payable to stockholders
            
            
            (25,000
            )
            
            
            -Proceeds
      from issuance of subordinated notes to stockholders
            
            
            -
            
            
            
            226,833Proceeds
      from issuance of note payable from a related party
            
            
            337,986
            
            
            
            -Net
      borrowings on line of credit
            
            
            12,792
            
            
            
            44,777Proceeds
      from issuance of common stock
            
            
            66,000
            
            
            
            25,000Net
      cash provided by financing activities
            
            
            297,028
            
            
            
            216,952Net
      decrease in cash
            
            
            (58,923
            )
            
            
            (14,576
            )Cash,
      beginning of period
            
            
            91,711
            
            
            
            21,287Cash,
      end of period
            
            $
            32,788
            
            
            $
            6,711Non-cash
      Investing and Financing ActivitiesRestricted
      certificate of deposit applied to long-term borrowings
            
            $
            250,000
            
            
            $
            -Property
      acquired under capital lease
            
            
            -
            
            
            
            173,177$
            250,000
            
            
            $
            173,177Supplemental
      Disclosures of Cash Flow InformationCash
      paid for interest
            
            $
            203,121
            
            
            $
            204,164





5




WELLQUEST
MEDICAL & WELLNESS CORPORATION
 (formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)
  Notes
to Consolidated Financial Statements September 30, 2008
 (Unaudited)


1.Organization and
Business Description and Management’s Plans





HQHealthQuest
Medical & Wellness Centers, LTD (“HQHealthQuest”) was incorporated in the
state of Oklahoma in November 2004.  Its wholly-owned subsidiary,
WellQuest of Arkansas, Inc. (“WellQuest of Arkansas”), was incorporated in the
state of Arkansas in May 2005.  We changed our name to WellQuest
Medical & Wellness Corporation (“WellQuest”) on April 24, 2008.





WellQuest
delivers an integrated model of primary medical care, preventive/wellness
services and medical esthetics in upscale facilities located in high-traffic
retail corridors.  The delivery site is titled “WellQuest Medical
Clinic and Spa”, a trademarked business name.  The WellQuest concept
combines a customer-service oriented medical treatment facility for
interventional care with programmed preventive services and products that lead
clients in the quest for wellness.  The facility also houses an
advanced medical spa for skincare services and products. WellQuest currently
operates one facility in Bentonville, Arkansas.





Principles
of Consolidation





The
accompanying consolidated financial statements include the accounts of
WellQuest, its wholly owned subsidiary, WellQuest of Arkansas, and Northwest
Arkansas Primary Care Physicians, P.A. (collectively, the
“Company”).  In December 2003, the Financial Accounting Standards
Board (FASB) issued FASB Interpretation 46R (FIN 46R), Consolidation of Variable Interest
Entities.  FIN 46R clarifies the application of Accounting
Research Bulletin No. 51, Consolidated Financial
Statements, which addressed the consolidation by business enterprises of
variable interest entities (VIEs).  FIN 46R provides guidance in
determining when VIEs should be consolidated in the financial statements of the
primary beneficiary.





WellQuest
of Arkansas entered into a Management and Medical Services Agreement with
Northwest Arkansas Primary Care Physicians, P.A pursuant to which Northwest
Arkansas Primary Care Physicians was granted exclusive rights to operate medical
practices in the current center and all future sites that WellQuest of Arkansas
might open in Northwest Arkansas.  As a result, Northwest Arkansas
Primary Care Physicians is responsible for hiring all physicians and nurse
practitioners who operate in the medical clinic. The proceeds from the practice
are assigned to WellQuest of Arkansas.  From those proceeds, WellQuest
of Arkansas pays the compensation of the employees of Northwest Arkansas Primary
Care Physicians and all expenses associated from the conduct of the
practice.  WellQuest of Arkansas receives a monthly management fee of
7.5% of the practice’s net revenues, and after all practice loans and interest
are repaid in full, receives a performance bonus as a share of any practice
operating profits after physician compensation and all practice operating
expenses are paid.  As a result of WellQuest’s evaluation of the
effect that the adoption of FIN 46R would have on WellQuest's results of
operations and financial condition, WellQuest determined that Northwest Arkansas
Primary Care Physicians, P.A. qualifies for consolidation based on the criteria
set forth in FIN 46R, as WellQuest is a primary beneficiary of the net
operations of the clinic after physician compensation.  As a result,
the operations of the clinic, primarily clinic revenues and expenses, were
consolidated into WellQuest for financial statement reporting purposes in
accordance with the provisions of FIN 46R.  All significant
intercompany accounts and transactions have been eliminated.





Management’s
Plans





The
financial statements of the Company have been prepared on the basis of
accounting principles applicable to a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. At September 30, 2008, the Company had a working capital deficit of
approximately $1,701,000 and had incurred net losses of approximately $636,000
for the nine months ended September 30, 2008.  The Company also has an
accumulated deficit of approximately $3,315,000.  The Company has, in large
part, been supported by the proceeds from the SBA guaranteed debt and certain
major stockholders.  There is no commitment for such stockholders to
continue providing financial support to the Company.





These
factors, among others, raise substantial doubt concerning the ability of the
Company to continue as a going concern.  The financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going
concern.  The ability of the Company to continue as a going concern is
dependent upon the ongoing support of its stockholders, investors, customers and
creditors, and its ability to successfully establish and operate additional
clinics and spas throughout selected geographical markets.  As
discussed in the following paragraph, the Company will require additional
financial resources in order to fund obligations as they become
due.




6


WELLQUEST
MEDICAL & WELLNESS CORPORATION
 (formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)
  Notes
to Consolidated Financial Statements September 30, 2008
 (Unaudited)


WellQuest
is seeking to identify potential equity participants in the public equity market
in an attempt to generate sufficient additional investment capital to meet
working capital needs for expansion and development.  Management and
major stockholders are currently marketing the Company based on management's
plans which include: expanding the model, which will enable WellQuest to spread
its management costs over several centers; fund expansion to a major
metropolitan area in the United States; and complete development of the business
model.  This funding will further allow WellQuest to reduce debt
service requirements.





Completion
of management's plans will require the Company to obtain additional debt or
equity financing beyond those resources currently available to the
Company.  There is no assurance the Company will be successful in
securing resources to fund current obligations as they become due in the
remainder of 2008 or 2009 or to support the Company until such time, if ever,
that the Company is able to consistently generate income from
operations.





2.Basis of
Presentation





The
accompanying unaudited interim consolidated financial statements of the Company
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information in footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to these rules and
regulations.  The accompanying unaudited interim consolidated
financial statements reflect all adjustments which the Company considers
necessary for a fair presentation of the results of operations for the interim
periods covered and for the financial condition of the Company at the date of
the interim balance sheet. All such adjustments (except as otherwise disclosed
herein) are of a normal recurring nature.





The
results of operations for the nine months ended September 30, 2008 are not
necessarily indicative of the results to be expected for the full year. It is
suggested that the December 31, 2007 financial information be read in
conjunction with the financial statements and notes thereto.





3.Summary of Significant Accounting
Policies





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.





Revenue
Recognition





The
Company recognizes revenue in accordance with Securities and Exchange Commission
(SEC) Staff Accounting Bulletin No. 104, Revenue Recognition in Financial
Statements (SAB 104). Under SAB 104, revenue is recognized when the title
and risk of loss have passed to the customer, there is persuasive evidence of an
arrangement, delivery has occurred or services have been rendered, the sales
price is determinable and collectability is reasonably assured.





Net
revenue of the Company is comprised of net clinic revenue and revenue derived
from the sales of spa services and related products. Net clinic revenue is
recorded at established rates reduced by provisions for doubtful accounts and
contractual adjustments. Contractual adjustments arise as a result of the terms
of certain reimbursement and managed care contracts. Such adjustments represent
the difference between charges at established rates and estimated recoverable
amounts and are recognized in the period the services are rendered. Any
differences between estimated contractual adjustments and actual final
settlements under reimbursement contracts are recognized as contractual
adjustments in the year final settlements are determined.





Spa
revenues are recognized at the time of sale, as this is when the services have
been provided or, in the case of product revenues, delivery has occurred, and
the spa receives the customer’s payment. Revenues from pre-paid purchases are
also recorded when the customer takes possession of the merchandise or receives
the service. Pre-paid purchases are defined as either gift cards or series
sales.  Series sales are the purchase of a series of services to be
received over a period of time.  Pre-paid purchases are recorded as a
liability (deferred revenue) until they are redeemed. Gift cards expire two
years from the date of the customer’s purchase.  Series sales do not
carry an expiration date.




7


WELLQUEST
MEDICAL & WELLNESS CORPORATION
 (formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)
  Notes
to Consolidated Financial Statements September 30, 2008
 (Unaudited)


Earnings
Per Share





The
Company calculates and discloses earnings per share (EPS) in accordance with
SFAS No. 128, Earnings Per
Share (SFAS 128). SFAS 128 requires dual presentation of Basic and
Diluted EPS on the face of the statements of operations and requires a
reconciliation of the numerator and denominator of the Basic EPS computation to
the numerator and denominator of the Diluted EPS computation. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
Company.





In
computing Diluted EPS, only potential common shares that are dilutive — those
that reduce earnings per share or increase loss per share — are included.
Exercise of options and warrants or conversion of convertible securities is not
assumed if the result would be antidilutive, such as when a loss from continuing
operations is reported. The “control number” for determining whether including
potential common shares in the Diluted EPS computation would be antidilutive is
income from continuing operations. As a result, if there is a loss from
continuing operations, Diluted EPS would be computed in the same manner as Basic
EPS, even if an entity has net income after adjusting for discontinued
operations, an extraordinary item or the cumulative effect of an accounting
change.  The Company incurred losses from continuing operations for
the three and nine month periods ended September 30, 2008 and 2007. Therefore,
basic EPS and diluted EPS are computed in the same manner for those periods. The
number of antidilutive warrants outstanding was 2,202,750 at September 30, 2008
and 2007.





Share-Based
Payment





In
December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No 123R, Share-Based Payment (SFAS
123R).  SFAS 123R is a revision of SFAS 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and its related implementation guidance.  Under
paragraph 7 of SFAS 123R, if the fair value of goods or services received in a
share-based payment transaction with nonemployees is more reliably measurable
than the fair value of the equity instruments issued, the fair value of the
goods or services received shall be used to measure the transaction. In
contrast, if the fair value of the equity instruments issued in a share-based
payment transaction with nonemployees is more reliably measurable than the fair
value of the consideration received, the transaction shall be measured based on
the fair value of the equity instruments issued.  The Company utilized
the fair value of the equity instruments issued to nonemployees to value the
shares issued.




4.Business
Segments





SFAS No.
131 Disclosures About Segments
of an Enterprise and Related Information (SFAS 131) establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. SFAS 131 requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. Reportable operating segments are defined as a component of
an enterprise:





·
            That
      engages in business activities from which it may earn revenues and
      expenses,


·
            Whose
      operating results are regularly reviewed by the enterprise’s chief
      operating decision maker,


·
            For
      which discrete financial information is
  available.





Corporate
assets detailed below are primarily comprised of property and equipment,
corporate cash, accounts receivable and other corporate assets. Summarized
financial information concerning the Company’s reportable operating segments is
shown in the following tables as of September 30, 2008 and 2007:




8


WELLQUEST
MEDICAL & WELLNESS CORPORATION
 (formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)
  Notes
to Consolidated Financial Statements September 30, 2008
 (Unaudited)




For
      the Nine Months Ended September 30, 2008Medical
              Clinic
            
            
            Medical
              Spa
            
            
            Unallocated
      Corporate
            
            
            ConsolidatedNet
      revenue
            
            $
            1,879,439
            
            
            $
            527,758
            
            
            $
            -
            
            
            $
            2,407,197Operating
      expenses
            
            
            1,508,311
            
            
            
            734,753
            
            
            
            584,112
            
            
            
            2,827,176Income
      (loss) from operations
            
            
            371,128
            
            
            
            (206,995
            )
            
            
            (584,112
            )
            
            
            (419,979
            )Interest
      income
            
            
            -
            
            
            
            -
            
            
            
            3,232
            
            
            
            3,232Interest
      expense
            
            
            -
            
            
            
            -
            
            
            
            219,356
            
            
            
            219,356Net
      income (loss)
            
            $
            371,128
            
            
            $
            (206,995
            )
            
            $
            (800,236
            )
            
            $
            (636,103
            )Total
      assets
            
            $
            407,587
            
            
            $
            260,308
            
            
            $
            102,117
            
            
            $
            770,012





For
      the Nine Months Ended September 30, 2007Medical
              Clinic
            
            
            Medical
              Spa
            
            
            Unallocated
      Corporate
            
            
            ConsolidatedNet
      revenue
            
            $
            1,269,845
            
            
            $
            395,886
            
            
            $
            -
            
            
            $
            1,665,731Operating
      expenses
            
            
            1,128,440
            
            
            
            576,051
            
            
            
            180,184
            
            
            
            1,884,675Income
      (loss) from operations
            
            
            141,405
            
            
            
            (180,165
            )
            
            
            (180,184
            )
            
            
            (218,944
            )Interest
      income
            
            
            -
            
            
            
            -
            
            
            
            9,723
            
            
            
            9,723Interest
      expense
            
            
            -
            
            
            
            -
            
            
            
            182,319
            
            
            
            182,319Net
      income (loss)
            
            $
            141,405
            
            
            $
            (180,165
            )
            
            $
            (352,780
            )
            
            $
            (391,540
            )Total
      assets
            
            $
            465,788
            
            
            $
            344,926
            
            
            $
            286,994
            
            
            $
            1,097,708





The
financial information for the Medical Clinic presented above represents the
revenue and direct operating expenses of NWAPCP after elimination of
intercompany expenses charged to NWAPCP by WellQuest of
Arkansas.  Intercompany expenses that have been eliminated include the
following: a management fee paid by NWAPCP to WellQuest of Arkansas ($140,720
and $98,171 for the nine month period ended September 30, 2008 and 2007,
respectively), lease expense paid by NWAPCP to WellQuest of Arkansas ($40,667
and $44,822 for the nine month period ended September 30, 2008 and 2007,
respectively), and interest expense paid by NWAPCP to WellQuest of Arkansas
($31,941 and $46,528 for the nine month period ended September 30, 2008 and
2007, respectively).





For
      the Three Months Ended September 30, 2008Medical
              Clinic
            
            
            Medical
              Spa
            
            
            Unallocated
      Corporate
            
            
            ConsolidatedNet
      revenue
            
            $
            599,673
            
            
            $
            176,318
            
            
            $
            -
            
            
            $
            775,991Operating
      expenses
            
            
            488,820
            
            
            
            252,782
            
            
            
            112,130
            
            
            
            853,732Income
      (loss) from operations
            
            
            110,853
            
            
            
            (76,464
            )
            
            
            (112,130
            )
            
            
            (77,741
            )Interest
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Interest
      expense
            
            
            -
            
            
            
            -
            
            
            
            79,903
            
            
            
            79,903Net
      income (loss)
            
            $
            110,853
            
            
            $
            (76,464
            )
            
            $
            (192,033
            )
            
            $
            (157,644
            )Total
      assets
            
            $
            407,587
            
            
            $
            260,308
            
            
            $
            102,117
            
            
            $
            770,012





For
      the Three Months Ended September 30, 2007Medical
              Clinic
            
            
            Medical
              Spa
            
            
            Unallocated
      Corporate
            
            
            ConsolidatedNet
      revenue
            
            $
            480,620
            
            
            $
            128,487
            
            
            $
            -
            
            
            $
            609,107Operating
      expenses
            
            
            407,869
            
            
            
            201,844
            
            
            
            59,155
            
            
            
            668,868Income
      (loss) from operations
            
            
            72,751
            
            
            
            (73,357
            )
            
            
            (59,155
            )
            
            
            (59,761
            )Interest
      income
            
            
            -
            
            
            
            -
            
            
            
            3,183
            
            
            
            3,183Interest
      expense
            
            
            -
            
            
            
            -
            
            
            
            37,593
            
            
            
            37,593Net
      income (loss)
            
            $
            72,751
            
            
            $
            (73,357
            )
            
            $
            (93,565
            )
            
            $
            (94,171
            )Total
      assets
            
            $
            465,788
            
            
            $
            344,926
            
            
            $
            286,994
            
            
            $
            1,097,708




9


WELLQUEST
MEDICAL & WELLNESS CORPORATION
 (formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)
  Notes
to Consolidated Financial Statements September 30, 2008
 (Unaudited)


The
financial information for the Medical Clinic presented above represents the
revenue and direct operating expenses of NWAPCP after elimination of
intercompany expenses charged to NWAPCP by WellQuest of
Arkansas.  Intercompany expenses that have been eliminated include the
following: a management fee paid by NWAPCP to WellQuest of Arkansas ($44,978 and
$36,817 for the three month period ended September 30, 2008 and 2007,
respectively), lease expense paid by NWAPCP to WellQuest of Arkansas ($13,556
and $14,941 for the three month period ended September 30, 2008 and 2007,
respectively), and interest expense paid by NWAPCP to WellQuest of Arkansas
($8,390 and $15,796 for the three month period ended September 30, 2008 and
2007, respectively).





5.Common and Preferred
Stock





Between
January 2008 and February 2008, the Company sold an aggregate of 630,000 shares
of our common stock to four investors for aggregate gross proceeds of
$56,000.  These shares were issued in reliance on the exemption
provided by Section 4(2) of the Securities Act of 1933, as amended.





In July
2008, the Company sold an aggregate of 111,111 shares of our common stock to an
investor for aggregate gross proceeds of $10,000.  These shares were
issued in reliance on the exemption provided by Section 4(2) of the Securities
Act of 1933, as amended.





On April
24, 2008, the Company amended its certificate of incorporation with the State of
Oklahoma to adjust the par value of common stock to $0.001 per
share.  The Company also amended the number of authorized shares of
common and preferred stock to 150,000,000 and 2,500,000,
respectively.  The par value of preferred stock remains unchanged at
$0.01 per share.  The financial statements and other disclosures for
all periods presented have been retroactively restated to reflect these
changes.





6.Income Taxes





The
Company had no current income tax provision for the quarter ended September 30,
2008 due to approximately $3.3 million in net operating loss carryforwards
incurred since inception.  The effective income tax rate for the
quarter ended September 30, 2008 differs from the U.S. federal statutory rate of
34% due to the change in the valuation allowance.





Based
upon a review of its income tax filing positions, the Company believes that its
positions would be sustained upon an audit and does not anticipate any
adjustments that would result in a material change to its financial position.
Therefore, no reserves for uncertain income tax positions have been recorded.
The Company recognizes interest related to income taxes as interest expense and
penalties as operating expenses.





7.Incentive Stock
Plan





On April
4, 2008, the shareholders of the Company adopted the WellQuest Medical and
Wellness Corporation 2008 Incentive Stock Plan (the 2008 Plan).





The
purpose of the 2008 Plan is to further the growth and development of the Company
by providing, through ownership of stock of the Company, an incentive to
officers and other key personnel who are in a position to contribute materially
to the prosperity of the Company including, but not limited to, all salaried
personnel of the Company, to increase such persons’ interests in the Company’s
welfare, to encourage them to continue their services to the Company, and to
attract individuals of outstanding ability to enter the employment of the
Company.





The 2008
Plan authorizes the issuance of 5,000,000 shares of the Company’s common
stock.  On August 4, 2008, the Company granted Dr. Wade Fox stock
options for 500,000 shares of stock at an exercise price of $0.08888 per
share.  The options are subject to a vesting schedule as
follows:  166,667 options on August 4, 2008; 166,667 options on August
4, 2009; and 166,666 options on August 4, 2010.  The options have a
termination date of August 3, 2018.  The Company recorded compensation
expense of approximately $9,000 at the time of the issuance of the stock
options.  The options were valued using the Black Scholes
method.  In the calculation, the Company used a discount rate of 4.5%
and assumed no dividends would be issued. One of the components of the Black
Scholes calculation is a measure of volatility.  Because the Company
does not yet have a trading history, we calculated an estimated volatility rate
of 180% based on three years of trading activity of six
companies.  Option expense was calculated at $29,000, which will be
recognized over the vesting period.




10


WELLQUEST
MEDICAL & WELLNESS CORPORATION
 (formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)
  Notes
to Consolidated Financial Statements September 30, 2008
 (Unaudited)


8.Commitments and
Contingencies




The
Company has committed to purchase an agreed upon amount of nutritional
supplements for its private label product line.  The Company will
purchase these supplements as needed during the commitment period expiring
February 2010.  As of September 30, 2008, the Company has committed to
purchase approximately $39,000 in nutritional supplements under this
agreement.





9.Recent Accounting
Pronouncements





In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 157, Fair Value Measurements(SFAS
157). SFAS 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. The issuance of this standard is
meant to increase consistency and comparability in fair value measurements. In
February 2008, the FASB issued FASB Staff Position 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13(FSP 157-1) and FASB Staff Position 157-2,
Effective Date of FASB
Statement No. 157(FSP 157-2). FSP 157-1 amends SFAS 157 to remove
certain leasing transactions from its scope. FSP 157-2 delays until
January 1, 2009 the effective date of SFAS 157 for all non-financial assets
and liabilities, except for items that are recognized or disclosed at fair value
in the financial statements on a recurring basis. We adopted SFAS 157 as of
January 1, 2008. The adoption of SFAS 157 did not have a material impact on
our financial statements and related disclosures.





In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial
Assets and Financial Liabilities(SFAS 159). SFAS 159 permits entities to
choose to measure many financial instruments and certain other items at fair
value, and establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities. SFAS 159 is effective
for fiscal years beginning after November 15, 2007. We have not elected to
measure any financial instruments or any other items at fair value.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements (SFAS 160). SFAS 160 was issued to
establish accounting and reporting standards for the noncontrolling interest in
a subsidiary (formerly called minority interests) and for the deconsolidation of
a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. SFAS No. 160 is effective for us in
our fiscal year beginning after December 15, 2008.  We do not expect
the adoption of SFAS 160 to have a material effect on our consolidated financial
statements and related disclosures.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations(SFAS
141R). SFAS 141R was issued to improve the relevance, representational
faithfulness, and comparability of the information that a reporting entity
provides in its financial reports about a business combination and its
effects.  This Statement is effective prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  We do not expect the adoption of SFAS 141R to have a material
effect on our consolidated financial statements and related
disclosures.





In
March 2008, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities — an amendment of FASB Statement No. 133(SFAS 161). SFAS 161 requires enhanced disclosures about an entity’s
derivative and hedging activities, including qualitative disclosures about
objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative
agreements. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008.





11




WELLQUEST
MEDICAL & WELLNESS CORPORATION
 (formerly HQHealthQuest Medical &
Wellness Centers, Ltd.)
  Notes
to Consolidated Financial Statements September 30, 2008
 (Unaudited)
 10.  Note
Payable to Related Party





In order
to fund the Company’s SEC registration, the Company issued an uncollateralized
note payable to a related party due on demand.  The Company makes
funding requests as needed to pay for legal, accounting, and other expenses
related to the registration.  The outstanding balance at September 30,
2008 is $337,986.  Interest is accrued on the outstanding balance at a
rate of 10%.




11. 
Subsequent Events
  In
December 2008, the Company entered into a one year agreement with a consulting
company for public and investor relations services.  Pursuant to that
agreement, the Company will pay the consultant $6,000 per month ($72,000 per
year) and issue 348,600 shares of common stock.




12




ITEM
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





This
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements that reflect
Management's current views with respect to future events and financial
performance. You can identify these statements by forward-looking words such as
“may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or
similar words.  Those statements include statements regarding the
intent, belief or current expectations of us and members of our management team
as well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risk and uncertainties, and that
actual results may differ materially from those contemplated by such
forward-looking statements.





Readers
are urged to carefully review and consider the various disclosures made by us in
this report and in our other reports filed with the Securities and Exchange
Commission. The following Management’s Discussion and Analysis of Financial
Condition and Results of Operations of the Company should be read in conjunction
with the Consolidated Financial Statements and notes related thereto included in
this Quarterly Report on Form 10-Q.
Important  factors  currently  known  to
Management  could  cause  actual  results  to
differ  materially  from  those in
forward-looking  statements.  We undertake no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes in the future operating results
over time. We believe that our assumptions are based upon reasonable data
derived from and known about our business and operations.  No
assurances are made that actual results of operations or the results of our
future activities will not differ materially from our
assumptions.  Factors that could cause differences include, but are
not limited to, expected market demand for our services and products,
fluctuations in pricing for materials, and competition.





Overview





We were
incorporated in the State of Oklahoma on November 8, 2004 as HQHealthQuest
Medical & Wellness Centers, Ltd.  We incorporated a wholly-owned
subsidiary in the State of Arkansas on May 5, 2005 as WellQuest Medical &
Wellness Centers of Arkansas, Inc., which subsequently changed its name to
WellQuest of Arkansas, Inc.  We opened our first medical center in
Bentonville, Arkansas on September 12, 2005.  We changed our name to
WellQuest Medical & Wellness Corporation on April 24, 2008.





We
provide an integrated medical delivery site with family physician healthcare
services, preventive/wellness services and medical skin-care
services.  The integration of these services embraces the clinical
synergy of medical treatments for illness, preventive/wellness services and
products for health maintenance and medically supervised skin-care treatments
for aesthetic enhancement.





Results
of Operations





The
following discussion of the financial condition and results of operations should
be read in conjunction with the financial statements included herewith. This
discussion should not be construed to imply that the results discussed herein
will necessarily continue into the future, or that any conclusion reached herein
will necessarily be indicative of actual operating results in the
future.





Three
months ended September 30, 2008 compared to the three months ended September 30,
2007





Net
Revenues. We had
net revenues for the three months ended September 30, 2008 of $775,991 compared
to the three months ended September 30, 2007, which was $609,107. This increase
of $166,884 is primarily the result of the increase in medical service revenues
of $119,053 due to continued success in attracting new medical clients (23% of
visits during three months ended September 30, 2008) and keeping established
clients (77% of visits during three months ended September 30, 2008) and the
addition of a part-time Advanced Practice Nurse in July 2008.  Total
client visits for the three months ended September 30, 2008 were up 19% over the
three months ended September 30, 2007.  Improved utilization of
ancillary laboratory and x-ray testing also contributed to the increase in
revenues.  In addition, Medical Spa revenues were up 37% ($47,831) for
the three months ended September 30, 2008 compared to the three months ended
September 30, 2007.  Improved marketing and the expanded laser
services were significant contributors to the increase.





Net
Operating Expenses. Operating expenses for the
three months ended September 30, 2008 were $853,732 compared to the three months
ended September 30, 2007, which were $668,868. This increase of $184,864 was the
result of an increase of $80,951 in medical clinic operating expenses and
$50,938 in medical spa operating expenses related to increased service
revenues.  Increased corporate expenses accounted for the remaining
$52,975 increase, due to costs associated with our registration statement filed
with the SEC.




13




Medical
clinic operating expenses increased to support higher service
revenues.  Medical staff payroll increased $22,593 for the three
months ended September 30, 2008 compared to the three months ended September 30,
2007.  Supplies expense ($24,526) and laboratory service expenses
($18,302) also increased in response to our higher medical clinic revenue during
the same reporting period.





Increased
marketing expenditures in the medical spa resulted in higher revenue for the
three months ended September 30, 2008 compared to the three months ended
September 30, 2007.  Marketing costs increased
$15,959.  Increased medical spa revenue required increased payroll
costs ($6,775) and increased supplies and product cost ($19,559) for the
period.





Increased
corporate expense accounted for $52,975 of the total increase in net operating
expenses, primarily due to accounting and legal fees associated with our
registration statement filed with the SEC.  We began incurring costs
for the registration statement in the fourth quarter of 2007 and thus did not
incur any costs for the three months ended September 30, 2007 related to the
filing.  Total accounting and legal costs associated with the
registration were $31,451 for the three months ended September 30,
2008.  We also incurred $11,605 in compensation expense related to
stock options issued during the three months ended September 30,
2008.  There was no compensation expense for stock options issued
during the three months ended September 30, 2007.





Operating
Loss.  The operating losses for the three months ended
September 30, 2008 and 2007 were $77,741 and $59,761,
respectively.  This increase of $17,980 was primarily the result of
the combined impact of increased operating expenses due to issues addressed
above.





Net
Interest Expense. Our net interest expense
for the three months ended September 30, 2008 was $79,903 compared to $34,410
for the three months ended September 30, 2007.  This increase of
$45,493 was primarily the result of: increased interest expense related to
subordinated debentures that were issued throughout 2007 and interest expense
accrued on short-term debt incurred to finance our SEC registration
statement.  These increases were offset by reduced interest expense
due to a decrease in our Small Business Administration loan in April
2008.  The bank holding our Small Business Administration loan
released the restriction on a $250,000 certificate of deposit, which we used to
reduce the principal of the loan.  This reduced the monthly debt
service of the note, thereby reducing interest expense.





Net Loss
Applicable to Common Stock.Net loss for the three
months ended September 30, 2008 was $157,644 compared to $94,171 for the three
months ended September 30, 2007.  This increase of $63,473 is
primarily the result of the items discussed above.





Nine
months ended September 30, 2008 compared to the nine months ended September 30,
2007





Net
Revenues. We had
net revenues for the nine months ended September 30, 2008 of $2,407,197 compared
to the nine months ended September 30, 2007, which was $1,665,731. This increase
of $741,466 is primarily the result of the increase in medical service revenues
of $609,594 due to continued success in attracting new medical clients (24% of
visits during nine months ended September 30, 2008) and keeping established
clients (76% of visits during nine months ended September 30, 2008), the
addition of Advanced Practice Nurses (one after first quarter of 2007 and one
part time in July 2008) as well as additional physician staffing during the
three months ended March 31, 2008 provided increased capacity to achieve the
added volume while maintaining service levels.  Allergy services were
available during the nine months ended September 30, 2008, but were not
available until June 1, 2007. Total client visits for the nine months ended
September 30, 2008 were up 49% over the nine months ended September 30,
2007.  Improved utilization of ancillary laboratory and x-ray testing
also contributed to the increase in revenues.  In addition, Medical
Spa revenues were up 33% ($131,872) for the nine months ended September 30, 2008
compared to the nine months ended September 30, 2007.  Improved
marketing and the expanded laser services were significant contributors to the
increase.





Net
Operating Expenses. Operating expenses for the
nine months ended September 30, 2008 were $2,827,176 compared to the nine months
ended September 30, 2007, which were $1,884,675. This increase of $942,501 was
the result of an increase of $379,871 in medical clinic operating expenses
related to increased service revenues.  Medical spa operating expenses
increased $158,702 due in part to increased service revenues and also due to
increased marketing costs.  Increased corporate expenses accounted for
the remaining $403,928 increase, due to costs associated with our registration
statement filed with the SEC and various consulting costs.




14




Medical
clinic operating expenses increased to support higher service
revenues.  Physician compensation increased $144,578 and medical staff
payroll increased $88,889 for the nine months ended September 30, 2008 compared
to the nine months ended September 30, 2007.  Supplies expense
($50,080) and laboratory service expenses ($38,688) and medical collection
expense ($21,875) also increased in response to our higher medical clinic
revenue during the same reporting period.





Medical
spa operating expenses increased to support higher revenues,
including:  increased payroll costs ($39,887) and increased supplies
and product cost ($65,710) for the nine months ended September 30, 2008 compared
to the nine months ended September 30, 2007.  Increased marketing
expenditures ($29,706) for the period included consulting fees of $12,000 paid
to a firm to provide short-term assistance in the execution of our medical spa
marketing efforts.





Increased
corporate expense accounted for $403,928 of the total increase in net operating
expenses, primarily due to accounting and legal fees associated with our
registration statement filed with the SEC..  As a result, accounting
and legal expenses for the nine months ended September 30, 2008 were $250,569
compared to $31,228 for the nine months ended September 30, 2007.  We
also incurred $11,605 in compensation expense related to stock options issued
during the nine months ended September 30, 2008.  There was no
compensation expense for stock options issued during the nine months ended
September 30, 2007.  In addition, we also incurred increased
consulting expenses during the period related to an evaluation of a market for
the location of our second center as well as fees paid to a firm to conduct a
full evaluation of our medical spa operations.  Corporate consulting
costs for the nine months ended September 30, 2008 were $108,409.  We
incurred no corporate consulting costs during the nine months ended September
30, 2007.





Operating
Loss.  The operating losses for the nine months ended September
30, 2008 and 2007 were $419,979 and $218,944, respectively.  This
increase of $201,035 was primarily the result of the combined impact of
increased operating expenses due primarily to costs associated with our
registration statement filing and other issues addressed above, offset by a
substantial (45%) increase in net revenues for the nine months ended September
30, 2008.





Net
Interest Expense. Our net interest expense
for the nine months ended September 30, 2008 was $216,124 compared to $172,596
for the nine months ended September 30, 2007.  This increase of
$43,528 was the result of several factors.  Interest expense related
to subordinated debentures that were issued throughout 2007 increased
approximately $51,000.  Interest expense accrued on short-term debt
incurred to finance our SEC registration statement increased approximately
$16,000.  These increases were offset by reduced interest expense due
to a decrease in our Small Business Administration loan in April
2008.  The bank holding our Small Business Administration loan
released the restriction on a $250,000 certificate of deposit, which we used to
reduce the principal of the loan.  This reduced the monthly debt
service of the note, thereby reducing interest expense.




Net Loss
Applicable to Common Stock.Net loss for the nine
months ended September 30, 2008 was $636,103 compared to $391,540 for the nine
months ended September 30, 2007.  This increase of $244,563 is
primarily the result of the items discussed above.





Liquidity
and Capital Resources





As of
September 30, 2008, we had a working capital deficit of $1,701,033, resulting
from current liabilities of $2,051,684. For the nine months ended September 30,
2008, we generated a net cash flow deficit from operating activities of
$350,463. Cash used in investing activities totaled $5,488.  Cash
provided by financing activities totaled $297,028; $119,750 in debt reductions,
which were offset by $66,000 from the sale of common stock and additional
borrowings of $350,778.    Non-cash activities included the
release of a $250,000 restricted certificate of deposit with a bank that was
used to pay down debt.





Our days
in medical accounts receivables were 40 days, 48 days and 51 days as of
September 30, 2008, December 31, 2007 and December 31, 2006,
respectively.  All medical spa services and product sales are paid at
the point of service by credit cards, debit cards, checks or
cash.  Accounts receivable related to medical spa services are not
material and are not included in this analysis.  Medical clinic
services provided by Northwest Arkansas Primary Care Physicians are generally
submitted for billing to third-party insurance companies or Medicare within 48
hours of the time of service.  We have engaged a professional medical
billing company to submit the claims to insurers.  Most claims are
submitted electronically to the insurance companies and
Medicare.  These claims become accounts receivable at the time they
are submitted to the insurance company.  The aging of accounts
receivable begins at the date of the billing submission. Insurance companies
then review the electronic billing and either ask for more/corrected
information, deny the particular service or part of a service or pay it
(electronically to a bank lock box) or by check mailed.  In addition,
each insurance company adjusts the billing amount for each specific service to
the “insurance allowable rate” as specified in that insurance company’s contract
with Northwest Arkansas Primary Care Physicians.  The insurance
company will also identify any portions of the billing that are to be paid by
the insured patient (patient responsible).  These reviews and
adjustments are communicated along with payments to us in an Explanation of
Benefits.




15




We
calculate days sales outstanding using average daily sales over the previous
three months to arrive at an average daily charge amount.  Medical
clinic accounts receivable as of the end of the period is divided by the average
daily charge amount to arrive at days sales outstanding.  Below is a
calculation of the days sales outstanding as reported above:





Three
      Months Ended
            
            
            Three
      Months
              Ended
            
            
            Three
      Months
              EndedSeptember
      30, 2008
            
            
            December
      31, 2007
            
            
            December
      31, 2006Gross
      Medical Clinic Revenue (1)
            
            $
            922,951
            
            
            $
            949,346
            
            
            $
            547,422Expense
      recorded for Contractual adjustment/Bad Debt Allowance
            
            
            (323,278
            )
            
            
            (356,132
            )
            
            
            (176,046
            )Net
      Medical Clinic Revenue
            
            $
            599,673
            
            
            $
            593,214
            
            
            $
            371,376#
      of Days in period (2)
            
            
            92
            
            
            
            92
            
            
            
            92Average
      Daily Charge (3) = (1) / (2)
            
            $
            10,032
            
            
            $
            10,319
            
            
            $
            5,950Medical
      Clinic Accounts Receivable (4)
            
            $
            405,109
            
            
            $
            492,400
            
            
            $
            304,144Other
      Accounts Receivable
            
            $
            20,048
            
            
            $
            21,302
            
            
            $
            9,263$
            425,157
            
            
            $
            513,702
            
            
            $
            313,407Days
      in medical accounts receivable = (4) / (3)
            
            
            40
            
            
            
            48
            
            
            
            51





We make
every effort to collect any anticipated “patient responsible” portions of a
service bill (such as a co-pay or deductible) at the time of service. Payments
by the insurance companies are posted to each clients account at the time it is
received.  Patient payments are also posted as
received.  Accounts receivable are then reduced by the amounts of
insurance contractual adjustments, insurance payments and client payments. At
the time any amounts are determined to be owed by the patient, printed bills are
sent to the responsible party of the patient. During all of these collection
processes from the time of the initial billing date to the insurance companies,
the accounts are individually and collectively aged.  Due to the
complexities of medical insurance policies, employer specific policies, and
coverage qualifications, some appeals and interactions with insurance companies
can result in three to six months of claim reconciliation. If the patient does
not respond after three mailed billings, then the account is turned over to a
collection company that pursues collection from the patient.  When an
account is turned over for collection, it is removed from the accounts
receivable and maintained in a bad debt recovery account and fully reserved. If
the collection company fails in locating the patient or in collecting the
account due, then the balance of the account is written off against the
allowance. Any amounts due under $5.00 are immediately written off due to the
cost of collection exceeding the expected collection recovery.





We expect
significant capital expenditures during the next 12 months, contingent upon
raising capital.  These anticipated expenditures are for opening an
additional office, property and equipment, overhead and working capital
purposes. We have sufficient funds to conduct our operations for a few months,
but not for 12 months or more.  We anticipate that we will need an
additional $1,500,000 to fund our anticipated operations for the next 12 months,
depending on revenues from operations.  We have no contracts or
commitments for additional funds and there can be no assurance that financing
will be available in amounts or on terms acceptable to us, if at
all.





By
adjusting our operations and development to the level of capitalization, we
believe we have sufficient capital resources to meet projected cash flow
deficits.  However, if during that period or thereafter, we are not
successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations, liquidity and
financial condition.





We
presently do not have any available credit, bank financing or other external
sources of liquidity. Due to our brief history and historical operating losses,
our operations have not been a source of liquidity. We will need to obtain
additional capital in order to expand operations and become profitable. In order
to obtain capital, we may need to sell additional shares of our common stock or
borrow funds from private lenders. There can be no assurance that we will be
successful in obtaining additional funding.




16




To the
extent that we raise additional capital through the sale of equity or
convertible debt securities, the issuance of such securities may result in
dilution to existing stockholders. If additional funds are raised through the
issuance of debt securities, these securities may have rights, preferences and
privileges senior to holders of common stock and the terms of such debt could
impose restrictions on our operations. Regardless of whether our cash assets
prove to be inadequate to meet our operational needs, we may seek to compensate
providers of services by issuance of stock in lieu of cash, which may also
result in dilution to existing shareholders. Even if we are able to raise the
funds required, it is possible that we could incur unexpected costs and
expenses, fail to collect significant amounts owed to us, or experience
unexpected cash requirements that would force us to seek alternative
financing.





Whereas
we have been successful in the past in raising capital, no assurance can be
given that these sources of financing will continue to be available to us and/or
that demand for our equity/debt instruments will be sufficient to meet our
capital needs, or that financing will be available on terms favorable to us. If
funding is insufficient at any time in the future, we may not be able to take
advantage of business opportunities or respond to competitive pressures, or may
be required to reduce the scope of our planned service development and marketing
efforts, any of which could have a negative impact on our business and operating
results. In addition, insufficient funding may have a material adverse effect on
our financial condition, which could require us to:





·
            curtail
      operations significantly;·
            sell
      significant assets;·
            seek
      arrangements with strategic partners or other parties that may require us
      to relinquish significant rights to products, technologies or markets;
      or·
            explore
      other strategic alternatives including a merger or sale of our
      company.





Between
January 2008 and February 2008, we sold an aggregate of 630,000 shares of our
common stock to four investors for aggregate gross proceeds of
$56,000.  These shares were issued in reliance on the exemption
provided by Section 4(2) of the Securities Act of 1933, as
amended.  Pursuant to the terms of sale, we granted the investors
piggyback registration rights for their shares.





In July
2008, we sold an aggregate of 111,111 shares of our common stock to an investor
for aggregate gross proceeds of $10,000.  These shares were issued in
reliance on the exemption provided by Section 4(2) of the Securities Act of
1933, as amended.





Critical
Accounting Policies





Accounts
Receivable





Accounts
receivable principally represent receivables from customers and third-party
payors for medical services provided by clinic physicians, less an allowance for
contractual adjustments and doubtful accounts. We utilize a third party billing
organization that estimates the collectability of receivables based on industry
standards and our collection history.  We recorded contractual
adjustments and bad debt expense of approximately $1,005,000 and $1,143,000 for
the nine months ended September 30, 2008 and the twelve months ended December
31, 2007, respectively. We recorded contractual adjustments of approximately
$858,000 and $954,000 for the nine months ended September 30, 2008 and the
twelve months ended December 31, 2007, respectively.  We recorded bad debt
expense of approximately $147,000 and $189,000 for the nine months ended
September 30, 2008 and the twelve months ended December 31, 2007,
respectively.





Our
revenues and receivables are reported at their estimated net realizable amounts
and are subject to audit and adjustment. Provisions for estimated third-party
payor settlements are provided in the period the related services are rendered
and are adjusted in the period of settlement.  Actual settlements
could have an adverse material effect on our financial position and
operations





Our accounts receivable include amounts
that are pending approval from third party payors.  Claims for insured
patients are first filed with insurance, at which time the net realizable amount
is unknown.  The insurance company processes the claim and calculates
the payment made to us.  The following factors are among those
considered by the insurance company:  adjustments based on contracted
amounts for specific procedures, outstanding deductible for the patient, and
co-insurance percentages.  Our billing system does not separately
track claims that are pending approval.  Our billing system also does
not track claims that are denied by a third party payor and ultimately paid by
the patient.  Thus, the amount of claims classified as insurance
receivables that are reclassified to self-pay is not quantifiable.  We
calculate allowances for contractual adjustment and bad debts based on total
accounts receivable outstanding.




17




As
      of September 30, 200860
      days or less
            
            
            61
      – 120 days
            
            
            Greater
      than 120 days
            
            
            TotalMedicare
            
            $
            9,404
            
            
            $
            1,551
            
            
            $
            3,540
            
            
            $
            14,495Third
      party insurance (1)
            
            
            179,809
            
            
            
            19,835
            
            
            
            36,461
            
            
            
            236,105Self
      pay (2)
            
            
            25,316
            
            
            
            25,274
            
            
            
            103,919
            
            
            
            154,509Other
            
            
            9,501
            
            
            
            (11
            )
            
            
            10,558
            
            
            
            20,048Total
      Accounts Receivable
            
            $
            224,030
            
            
            $
            46,649
            
            
            $
            154,478
            
            
            $
            425,157




As
      of December 31, 200760
      days or less
            
            
            61
      – 120 days
            
            
            Greater
      than 120 days
            
            
            TotalMedicare
            
            $
            20,372
            
            
            $
            1,891
            
            
            $
            5,475
            
            
            $
            27,738Third
      party insurance (1)
            
            
            250,780
            
            
            
            41,359
            
            
            
            29,285
            
            
            
            321,424Self
      pay (2)
            
            
            26,965
            
            
            
            52,462
            
            
            
            63,811
            
            
            
            143,238Other
            
            
            9,095
            
            
            
            484
            
            
            
            11,723
            
            
            
            21,302Total
      Accounts Receivable
            
            $
            307,212
            
            
            $
            96,196
            
            
            $
            110,294
            
            
            $
            513,702





(1)
            Third
      party insurance represents claims made to insurance companies not
      classified as Medicare, Medicaid, or other government-backed
      program.


(2)
            Self
      pay receivables are defined as all amounts due from
      individuals.  The amounts can include amounts due from uninsured
      patients and co-payments or
deductibles.





Revenue
Recognition





We
recognize revenue in accordance with Securities and Exchange Commission (SEC)
Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements
(SAB 104). Under SAB 104, revenue is recognized when the title and risk of loss
have passed to the customer, there is persuasive evidence of an arrangement,
delivery has occurred or services have been rendered, the sales price is
determinable and collectability is reasonably assured.





Our net
revenue is comprised of net clinic revenue and revenue derived from the sales of
spa services and related products. Net clinic revenue is recorded at established
rates reduced by provisions for doubtful accounts and contractual adjustments.
Contractual adjustments arise as a result of the terms of certain reimbursement
and managed care contracts. Such adjustments represent the difference between
charges at established rates and estimated recoverable amounts and are
recognized in the period the services are rendered. Any differences between
estimated contractual adjustments and actual final settlements under
reimbursement contracts are recognized in the year they are
determined.





Spa
revenues are recognized at the time of sale, as this is when the services have
been provided or, in the case of product revenues, delivery has occurred, and
the spa receives the customer’s payment. Revenues from pre-paid purchases are
also recorded when the customer takes possession of the merchandise or receives
the service. Pre-paid purchases are defined as either gift cards or series
sales.  Series sales are the purchase of a series of services to be
received over a period of time.  Pre-paid purchases are recorded as a
liability (deferred revenue) until they are redeemed. Gift cards expire two
years from the date of the customer’s purchase.  Series sales do not
carry an expiration date.





Earnings
Per Share





We
calculate and disclose earnings per share (EPS) in accordance with SFAS No. 128,
Earnings Per Share (SFAS 128). SFAS 128 requires dual presentation of Basic and
Diluted EPS on the face of the statements of operations and requires a
reconciliation of the numerator and denominator of the Basic EPS computation to
the numerator and denominator of the Diluted EPS computation. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in our
earnings.




18




In
computing Diluted EPS, only potential common shares that are dilutive — those
that reduce earnings per share or increase loss per share — are included.
Exercise of options and warrants or conversion of convertible securities is not
assumed if the result would be antidilutive, such as when a loss from continuing
operations is reported. The “control number” for determining whether including
potential common shares in the Diluted EPS computation would be antidilutive is
income from continuing operations. As a result, if there is a loss from
continuing operations, Diluted EPS would be computed in the same manner as Basic
EPS is computed, even if an entity has net income after adjusting for
discontinued operations, an extraordinary item or the cumulative effect of an
accounting change. Therefore, basic and diluted EPS are calculated in the same
manner for the nine months ended September 30, 2008 and the twelve months ended
December 31, 2007, as there were losses from continuing operations for those
periods.





Share-Based
Payment





In
December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No 123R, Share-Based Payment (SFAS
123R).  SFAS 123R is a revision of SFAS 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and its related implementation guidance.  Under
paragraph 7 of SFAS 123R, if the fair value of goods or services received in a
share-based payment transaction with nonemployees is more reliably measurable
than the fair value of the equity instruments issued, the fair value of the
goods or services received shall be used to measure the transaction. In
contrast, if the fair value of the equity instruments issued in a share-based
payment transaction with nonemployees is more reliably measurable than the fair
value of the consideration received, the transaction shall be measured based on
the fair value of the equity instruments issued.  We utilized the fair
value of the equity instruments issued to nonemployees to value the shares
issued.





Recent
Accounting Pronouncements





In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 157, Fair Value Measurements(SFAS
157). SFAS 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. The issuance of this standard is
meant to increase consistency and comparability in fair value measurements. In
February 2008, the FASB issued FASB Staff Position 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13(FSP 157-1) and FASB Staff Position 157-2,
Effective Date of FASB
Statement No. 157(FSP 157-2). FSP 157-1 amends SFAS 157 to remove
certain leasing transactions from its scope. FSP 157-2 delays until
January 1, 2009 the effective date of SFAS 157 for all non-financial assets
and liabilities, except for items that are recognized or disclosed at fair value
in the financial statements on a recurring basis. We adopted SFAS 157 as of
January 1, 2008. The adoption of SFAS 157 did not have a material impact on
our financial statements and related disclosures.





In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial
Assets and Financial Liabilities(SFAS 159). SFAS 159 permits entities to
choose to measure many financial instruments and certain other items at fair
value, and establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities. SFAS 159 is effective
for fiscal years beginning after November 15, 2007. We have not elected to
measure any financial instruments or any other items at fair value.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements (SFAS 160). SFAS 160 was issued to
establish accounting and reporting standards for the noncontrolling interest in
a subsidiary (formerly called minority interests) and for the deconsolidation of
a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. SFAS No. 160 is effective for us in
our fiscal year beginning after December 15, 2008.  We do not expect
the adoption of SFAS 160 to have a material effect on our consolidated financial
statements and related disclosures.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations(SFAS
141R). SFAS 141R was issued to improve the relevance, representational
faithfulness, and comparability of the information that a reporting entity
provides in its financial reports about a business combination and its
effects.  This Statement is effective prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  We do not expect the adoption of SFAS 141R to have a material
effect on our consolidated financial statements and related
disclosures.




In
March 2008, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities — an amendment of FASB Statement No. 133(SFAS 161). SFAS 161 requires enhanced disclosures about an entity’s
derivative and hedging activities, including qualitative disclosures about
objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative
agreements. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008.




19


ITEM
3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not
required under Regulation S-K for “smaller reporting companies.”





ITEM
4T - CONTROLS AND PROCEDURES





(a)
Evaluation of disclosure controls and procedures.





Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures pursuant to Rule 15d – 15(e) under the Securities Exchange Act of
1934 as of September 30, 2008. In designing and evaluating the disclosure
controls and procedures, management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives. In addition, the design of
disclosure controls and procedures must reflect the fact that there are resource
constraints and that management is required to apply its judgment in evaluating
the benefits of possible controls and procedures relative to their
costs.





Based
on our evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are designed at a
reasonable assurance level and are effective to provide reasonable assurance
that information we are required to disclose in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required
disclosure.





(b)
Changes in internal control over financial reporting.





We regularly
review our system of internal control over financial reporting and make changes
to our processes and systems to improve controls and increase efficiency, while
ensuring that we maintain an effective internal control environment. Changes may
include such activities as implementing new, more efficient systems,
consolidating activities, and migrating processes.





There
were no changes in our internal control over financial reporting that occurred
during the period covered by this Quarterly Report on Form 10-Q that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.





20




PART
II - OTHER INFORMATION





Item
1. Legal Proceedings.





From time
to time, we may become involved in various lawsuits and legal proceedings which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. We are currently not aware
of any such legal proceedings or claims that we believe will have, individually
or in the aggregate, a material adverse affect on our business, financial
condition or operating results.





Item
1A. Risk Factors.





Not
required under Regulation S-K for “smaller reporting companies.”





Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.





In July
2008, we sold 111,111 shares of our common stock to one accredited investor for
a total of $10,000. These shares were issued in reliance on the exemption
provided by Regulation D promulgated under the Securities Act of 1933, as
amended. The securities were issued in a private placement transaction pursuant
to Section 4(2) under the Securities Act of 1933.





Item
3. Defaults Upon Senior Securities.





None.





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





None.





Item
5. Other Information.





None.





Item
6. Exhibits





31.1
            Certification
      of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended





31.2
            Certification
      of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended





32.1
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Chief Executive
  Officer)





32.2
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Chief Financial
  Officer)





21




SIGNATURES







In
accordance with requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.






WELLQUEST
      MEDICAL & WELLNESSCORPORATIONDate: December
      5, 2008
            By:/s/ STEVE SWIFTSteve
      SwiftChief
      Executive Officer (Principal Executive Officer)Date: December
      5, 2008
            By:/s/ GREG PRIMMGreg
      PrimmChief
      Financial Officer (Principal Financial Officer and Principal Accounting
      Officer)










22