UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)


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





For
the Quarterly Period Ended September 30, 2009





oTRANSITION 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 x No






Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).   □
Yes  □ No





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
November 12, 2009, there were 29,010,167 shares of registrant’s common stock
outstanding.





WELLQUEST
MEDICAL & WELLNESS CORPORATION








INDEXPART
      I.
            FINANCIAL
      INFORMATIONITEM
      1.
            Financial
      StatementsConsolidated
      balance sheets at September 30, 2009 (unaudited) and December 31,
      2008
            3Consolidated
      statements of operations for the three and nine months ended September 30,
      2009 and 2008 (unaudited)
            4Consolidated
      statements of cash flows for the nine months ended September 30, 2009 and
      2008 (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
            21ITEM
      4T.
            Controls
      and Procedures
            21PART
      II.
            OTHER
      INFORMATIONITEM
      1
            Legal
      proceedings
            22ITEM
      1A
            Risk
      factors
            22ITEM
      2
            Unregistered
      sales of equity securities and use of proceeds
            22ITEM
      3
            Defaults
      upon senior securities
            22ITEM
      4
            Submission
      of matters to a vote of security holders
            22ITEM
      5
            Other
      information
            22ITEM
      6
            Exhibits
            22SIGNATURES
            23











WELLQUEST
MEDICAL & WELLNESS CORPORATION





PART I.
FINANCIAL INFORMATION


ITEM
1.   Financial Statements





Consolidated
Balance Sheets


September
      30
              2009
            
            
            December
      31
              2008(Unaudited)AssetsCurrent
      assets:Cash
            
            $
            51,289
            
            
            $
            103,265Accounts receivable, less allowance of $196,868 and $235,348 at September
      30, 2009 and December 31, 2008, respectively
            
            
            262,535
            
            
            
            293,363Other
      current assets
            
            
            48,650
            
            
            
            50,737Total
      current assets
            
            
            362,474
            
            
            
            447,365Property
      and equipment, net
            
            
            307,085
            
            
            
            387,125Deferred
      financing costs, net of accumulated amortization of $18,517 and $0 at
      September 30, 2009 and December 31, 2008, respectively
            
            
            92,583
            
            
            
            -Total
      assets
            
            $
            762,142
            
            
            $
            834,490Liabilities
      and Stockholders' DeficitCurrent
      liabilities:Line
      of credit
            
            $
            167,500
            
            
            $
            202,494Accounts
      payable
            
            
            224,568
            
            
            
            293,312Accrued
      liabilities
            
            
            192,165
            
            
            
            207,329Due
      to physicians and related parties
            
            
            565,195
            
            
            
            545,823Note
      payable to related party
            
            
            40,000
            
            
            
            349,608Current
      maturities of long-term debt
            
            
            436,457
            
            
            
            517,324Current
      obligations under capital leases
            
            
            27,026
            
            
            
            23,902Current
      maturities of subordinated debentures payable to stockholders, net of
      unamortized discount of $0 and $17,093 at September 30, 2009 and December
      31, 2008, respectively
            
            
            490,497
            
            
            
            523,409Total
      current liabilities
            
            
            2,143,408
            
            
            
            2,663,201Long-term
      subordinated convertible debenture to a stockholder, less current
      maturities
            
            
            443,123
            
            
            
            -Long-term
      obligations under capital leases, less current portion
            
            
            97,968
            
            
            
            118,646Total
      liabilities
            
            
            2,684,499
            
            
            
            2,781,847Stockholders'
      deficit:Preferred
      stock - $.01 par value; authorized 2,500,000 shares
              75,000
      designated as Series A convertible preferred stock; 25,515 and 37,440
      shares issued and outstanding at September 30, 2009 and December 31, 2008,
      respectively
            
            
            255
            
            
            
            374Common
      stock - $.001 par value; authorized 150,000,000 shares; 29,010,167 and
      23,716,361 shares issued and outstanding at September 30, 2009 and
      December 31, 2008, respectively
            
            
            29,010
            
            
            
            23,716Additional
      paid-in capital
            
            
            1,480,530
            
            
            
            1,263,030Warrants
      outstanding
            
            
            177,000
            
            
            
            177,000Accumulated
      deficit
            
            
            (3,609,152
            )
            
            
            (3,411,477
            )Total
      stockholders’ deficit
            
            
            (1,922,357
            )
            
            
            (1,947,357
            )Total
      liabilities and stockholders' deficit
            
            $
            762,142
            
            
            $
            834,490












WELLQUEST
MEDICAL & WELLNESS CORPORATION





Consolidated
Statements of Operations





For
the three and nine months ended September 30, 2009 and 2008


(Unaudited)





Three
      Months Ended
              September
      30,
            
            
            Nine
      Months Ended
              September
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      revenue
            
            $
            944,123
            
            
            $
            775,991
            
            
            $
            2,814,580
            
            
            $
            2,407,197Operating
      expenses:Salaries, wages and benefits
            
            
            315,990
            
            
            
            320,632
            
            
            
            931,799
            
            
            
            973,676Rents and facility expenses
            
            
            71,806
            
            
            
            60,367
            
            
            
            215,529
            
            
            
            214,553Clinic direct expenses, excluding salaries, wages and
      benefits
            
            
            366,344
            
            
            
            263,896
            
            
            
            1,084,177
            
            
            
            804,221Spa direct expenses, excluding salaries, wages and
benefits
            
            
            70,753
            
            
            
            93,944
            
            
            
            227,106
            
            
            
            229,409General corporate expenses
            
            
            84,082
            
            
            
            87,736
            
            
            
            295,578
            
            
            
            523,863Depreciation and amortization
            
            
            28,777
            
            
            
            27,157
            
            
            
            86,515
            
            
            
            81,454Total
      operating expenses
            
            
            937,752
            
            
            
            853,732
            
            
            
            2,840,704
            
            
            
            2,827,176Operating
      income (loss)
            
            
            6,371
            
            
            
            (77,741
            )
            
            
            (26,124
            )
            
            
            (419,979
            )Interest
      income (expense):Interest income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,232Interest expense
            
            
            (53,694
            )
            
            
            (79,903
            )
            
            
            (171,551
            )
            
            
            (219,356
            )Net
      interest expense
            
            
            (53,694
            )
            
            
            (79,903
            )
            
            
            (171,551
            )
            
            
            (216,124
            )Net
      loss applicable to common stock
            
            $
            (47,323
            )
            
            $
            (157,644
            )
            
            $
            (197,675
            )
            
            $
            (636,103
            )Loss
      per common share:Basic and diluted
            
            $
            (0.002
            )
            
            $
            (0.007
            )
            
            $
            (0.008
            )
            
            $
            (0.027
            )Weighted
      average number of common shares outstanding:Basic
      and diluted
            
            
            29,010,167
            
            
            
            23,698,245
            
            
            
            26,126,007
            
            
            
            23,538,653
















WELLQUEST
MEDICAL & WELLNESS CORPORATION





Consolidated
Statements of Cash Flows





For
the nine months ended September 30, 2009 and 2008


(Unaudited)








2009
            
            
            2008Cash
      Flows from Operating ActivitiesNet
      loss
            
            $
            (197,675
            )
            
            $
            (636,103
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
            
            
            86,515
            
            
            
            81,454Amortization
      of debt discount
            
            
            17,093
            
            
            
            71,602Amortization
      of deferred financing costs
            
            
            18,517
            
            
            
            -Stock
      based compensation
            
            
            11,571
            
            
            
            11,604Change
      in assets and liabilities:Accounts
      receivable, net
            
            
            30,828
            
            
            
            106,071Other
      current assets
            
            
            2,087
            
            
            
            (29,088
            )Accounts
      payable and accrued liabilities
            
            
            (83,908
            )
            
            
            (38,455
            )Due
      to physicians and related parties
            
            
            19,372
            
            
            
            82,452Net
      cash used in operating activities
            
            
            (95,600
            )
            
            
            (350,463
            )Cash
      Flows from Investing ActivitiesPurchases
      of property and equipment
            
            
            (6,476
            )
            
            
            (5,488
            )Cash
      Flows from Financing ActivitiesRepayment
      of long-term borrowings and obligations under capital
    leases
            
            
            (98,421
            )
            
            
            (94,750
            )Repayment
      of subordinated debentures payable to stockholders
            
            
            -
            
            
            
            (25,000
            )Net
      borrowings (repayments) on line of credit
            
            
            (34,994
            )
            
            
            12,792Borrowings
      on subordinated convertible debenture from a stockholder
            
            
            50,000
            
            
            
            -Borrowings
      on note payable from a related party
            
            
            133,515
            
            
            
            337,986Proceeds
      from issuance of common stock
            
            
            -
            
            
            
            66,000Net
      cash provided by financing activities
            
            
            50,100
            
            
            
            297,028Net
      decrease in cash
            
            
            (51,976
            )
            
            
            (58,923
            )Cash,
      beginning of period
            
            
            103,265
            
            
            
            91,711Cash,
      end of period
            
            $
            51,289
            
            
            $
            32,788Non-cash
      Investing and Financing ActivitiesRestricted
      certificate of deposit applied to long-term borrowings
            
            $
            -
            
            
            $
            250,000Exchange
      of current note payable to related party for long-term subordinated
      convertible debenture and common stock
            
            
            443,123
            
            
            
            -Stock
      issued to related party in connection with a subordinated convertible
      debenture
            
            
            111,100
            
            
            
            -Conversion
      of subordinated debentures held by stockholders
            
            
            100,005
            
            
            
            -$
            654,228
            
            
            $
            250,000Supplemental
      Disclosures of Cash Flow InformationCash
      paid for interest
            
            $
            111,544
            
            
            $
            203,121







WELLQUEST
MEDICAL & WELLNESS CORPORATION
 
 Notes
to Consolidated Financial Statements September 30, 2009
 (Unaudited)


1.  Organization and
Business Description and Management’s Plans





WellQuest
Medical & Wellness Corporation (“WellQuest”) was incorporated in the state
of Oklahoma in November 2004 under the name HQHealthQuest Medical & Wellness
Centers, Ltd.  WellQuest’s wholly-owned subsidiary, WellQuest of
Arkansas, Inc. (“WellQuest of Arkansas”), was incorporated in the state of
Arkansas in May 2005.  WellQuest changed its name to WellQuest Medical
& Wellness Corporation 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”).





WellQuest
of Arkansas entered into a Management and Medical Services Agreement with
Northwest Arkansas Primary Care Physicians, P.A (“NWAPCP”) pursuant to which
NWAPCP 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, NWAPCP 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 NWAPCP 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.  Any remaining profits are paid to
NWAPCP.  Because NWAPCP currently has outstanding loans due to
WellQuest of Arkansas, 80% of any remaining profits are used to reduce the
debt.  The remaining 20% of any remaining profits are paid or payable
to the owners of NWAPCP.  Once the debt has been repaid in full,
remaining profits will be paid or payable to NWAPCP.





Because
the accounts of NWAPCP are consolidated with ours, loans to fund NWAPCP’s
operating losses are eliminated and reported as expenses in the consolidated
financial statements.  Operating profits of NWAPCP used to reduce its
debt to WellQuest are eliminated and reported as operating profits in the
consolidated financial statements.  For each period presented,
NWAPCP’s profits paid or payable to its owners are reported as physician
compensation in clinic direct expenses.





WellQuest
determined that NWAPCP qualifies for consolidation, as WellQuest is the primary
beneficiary of the operations of the clinic after physician compensation
pursuant to the terms of the management agreement.  As a result, the
operations of the clinic, primarily clinic revenues and expenses, were
consolidated into WellQuest for financial statement reporting
purposes.  All significant intercompany accounts and transactions have
been eliminated upon consolidation.





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, 2009, the Company had a working capital deficit of
approximately $1,781,000 and had incurred net losses of approximately $198,000
for the nine months ended September 30, 2009.  The Company also has an
accumulated deficit of approximately $3,600,000.  The Company has, in large
part, been supported by the proceeds from long-term 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











WELLQUEST
MEDICAL & WELLNESS CORPORATION
 
 Notes
to Consolidated Financial Statements September 30, 2009
 (Unaudited)





geographical
markets.  As discussed in the following paragraph, the Company will
require additional financial resources in order to fund obligations as they
become due.





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 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 (SEC). Certain information in footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America 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 three and nine months ended September 30, 2009 are
not necessarily indicative of the results to be expected for the full year. It
is suggested that the December 31, 2008 financial information contained in the
Company’s Form 10-K 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 when 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
recognized at the time of service and 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-






WELLQUEST
MEDICAL & WELLNESS CORPORATION
 
 Notes
to Consolidated Financial Statements September 30, 2009
 (Unaudited)












Deferred
Financing Costs





Deferred
financing costs were incurred in association with the issuance of debt to a
related party and stockholder.  As part of the issuance of a $443,123
subordinated debenture (Note 9), the Company issued 1,250,000 shares of common
stock to the holder of the debenture.  The shares were issued during
the second quarter of 2009 and were valued at $111,100.  These costs
are being amortized over the life of the debt utilizing the effective interest
method.  Amortization expense of $18,517 and $0 was recorded during
the nine months ended September 30, 2009 and 2008, respectively, and was
recorded in interest expense.





Earnings
Per Share





The
Company calculates and discloses Basic and Diluted EPS on the face of the
statements of operations and provides 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 a loss from continuing operations for
the three and nine month periods ended September 30, 2009 and 2008. Therefore,
Basic EPS and Diluted EPS are computed in the same manner for that
period.   Antidilutive and/or non-exercisable warrants and
convertible preferred stock and convertible subordinated debentures represent
approximately 17,700,000 and 16,000,000 common shares at September 30, 2009 and
2008, respectively, which may become dilutive in future calculations of
EPS.





Share-Based
Payment





In
calculating the value of shares issued for goods or services received in a
share-based payment transaction with nonemployees, the Company considers whether
the fair value of the goods or services is more reliably measurable than the
fair value of the equity instruments issued.  If the fair value of the
goods or services is more reliably measurable than the equity instruments
issued, then 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.  We recognize the fair
value of stock-based compensation awards to employees in general corporate
expense in the consolidated statements of operations on a straight-line basis
over the vesting period.





In
January 2009, the Company entered into a one year agreement with a consulting
company for public and investor relations services.  Pursuant to the
original agreement, the Company agreed to pay the consultant $6,000 per month
($72,000 per year) and issue 348,600 shares of common stock.  In July
2009, the Company exercised the termination clause in the contract and the
consultant agreed to reduce the number of shares of stock to
261,450.  As of September 30, 2009, the Company has not issued the
shares.  The shares have been valued at $0.08888 and $23,238 has been
recorded as an accrued liability on the Company’s balance sheet and as general
corporate expense on the Company’s income statement for the anticipated issuance
of the shares.







WELLQUEST
MEDICAL & WELLNESS CORPORATION
 
 Notes
to Consolidated Financial Statements September 30, 2009
 (Unaudited)





Reclassifications





Certain
reclassifications have been made to prior period’s financial statements to
conform to the current year presentation. These reclassifications had no effect
on the Company’s net loss.





4.  Business
Segments





The
Company reports results for its identifiable business segments in annual
financial statements and reports selected information about operating segments
in interim financial reports. The Company reports 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 for the three and nine months ended September 30,
2009 and 2008:





For
      the Nine Months Ended September 30, 2009Medical
              Clinic
            
            
            Medical
              Spa
            
            
            Unallocated
      Corporate
            
            
            ConsolidatedNet
      revenue
            
            $
            2,314,485
            
            
            $
            497,595
            
            
            $
            2,500
            
            
            $
            2,814,580Operating
      expenses
            
            
            1,821,379
            
            
            
            584,739
            
            
            
            434,586
            
            
            
            2,840,704Income
      (loss) from operations
            
            
            493,106
            
            
            
            (87,144
            )
            
            
            (432,086
            )
            
            
            (26,124
            )Interest
      expense
            
            
            -
            
            
            
            -
            
            
            
            171,551
            
            
            
            171,551Net
      income (loss)
            
            $
            493,106
            
            
            $
            (87,144
            )
            
            $
            (603,637
            )
            
            $
            (197,675
            )Total
      assets
            
            $
            414,328
            
            
            $
            162,920
            
            
            $
            184,894
            
            
            $
            762,142





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





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 ($173,586
and $140,720 for the nine-month period ended September 30, 2009 and 2008,
respectively), lease expense paid by NWAPCP to WellQuest of Arkansas ($30,749
and $40,667 for the nine-month period ended September 30, 2009 and 2008,
respectively), and interest expense paid by NWAPCP to WellQuest of Arkansas
($8,215 and $31,941 for the nine-month period ended September 30, 2009 and 2008,
respectively).





For
      the Three Months Ended September 30, 2009Medical
              Clinic
            
            
            Medical
              Spa
            
            
            Unallocated
      Corporate
            
            
            ConsolidatedNet
      revenue
            
            $
            792,400
            
            
            $
            151,723
            
            
            $
            -
            
            
            $
            944,123Operating
      expenses
            
            
            616,912
            
            
            
            188,799
            
            
            
            132,041
            
            
            
            937,752Income
      (loss) from operations
            
            
            175,488
            
            
            
            (37,076
            )
            
            
            (132,041
            )
            
            
            6,371Interest
      expense
            
            
            -
            
            
            
            -
            
            
            
            53,694
            
            
            
            53,694Net
      income (loss)
            
            $
            175,488
            
            
            $
            (37,076
            )
            
            $
            (185,735
            )
            
            $
            (47,323
            )Total
      assets
            
            $
            414,328
            
            
            $
            162,920
            
            
            $
            184,894
            
            
            $
            762,142










WELLQUEST
MEDICAL & WELLNESS CORPORATION
 
 Notes
to Consolidated Financial Statements September 30, 2009
 (Unaudited)


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





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 ($59,430 and
$44,978 for the three-month period ended September 30, 2009 and 2008,
respectively), lease expense paid by NWAPCP to WellQuest of Arkansas ($10,250
and $13,556 for the three-month period ended September 30, 2009 and 2008,
respectively), and interest expense paid by NWAPCP to WellQuest of Arkansas
($1,357 and $8,390 for the three-month period ended September 30, 2009 and 2008,
respectively).





5.  Common and Preferred
Stock





Between
January 2008 and February 2008, the Company sold an aggregate of 630,000 shares
of 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 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.





Between
April 2009 and September 2009, four holders of 11,925 shares of the Company’s
preferred stock elected to convert the shares to 2,981,250 shares of the
Company’s common stock.





Between
May 2009 and September 2009, three holders of $100,000 of convertible
subordinated debentures elected to convert the debt to 1,062,556 shares of
common stock according to the terms of the debenture agreements.





6.  Income Taxes





The
Company had no current income tax provision for the quarter ended September 30,
2009 due to approximately $3.1 million in net operating loss carryforwards
incurred since inception.  The effective income tax rate for the
quarter ended September 30, 2009 differs from the U.S. federal statutory rate of
34% due to the change in the valuation allowance.






WELLQUEST
MEDICAL & WELLNESS CORPORATION
 
 Notes
to Consolidated Financial Statements September 30, 2009
 (Unaudited)





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 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.   Compensation expense was calculated at approximately
$29,000, which will be recognized over the vesting period.  The amount
expensed for the nine months ended September 30, 2009 related to these options
was approximately $7,000.  The Company has reserved 500,000 shares of
common stock for the exercise of these options.





On
December 9, 2008, the Company granted stock options for 300,000 shares of stock
at an exercise price of $0.08888 per share.  The options are subject
to a vesting schedule as follows:  100,000 options on April 14, 2011;
100,000 options on April 14, 2012; and 100,000 options on April 14,
2013.  The options have a termination date of April 14,
2015.  Compensation expense was calculated at approximately $23,000,
which will be recognized over the vesting period.  The amount expensed
for the nine months ended September 30, 2009 related to these options was
approximately $4,400.  The Company has reserved 300,000 shares of
common stock for the exercise of these options.





8.  Recent Accounting
Pronouncements





In
June 2009, the Financial Accounting Standards Board (“FASB”)
issued an amendment to previously issued accounting guidance on the
consolidation of variable interest entitiesThis amendment requires an entity to
perform a qualitative analysis to determine whether the entity’s variable
interest or interests give it a controlling financial interest in a variable
interest entity (VIE). This analysis identifies the primary beneficiary of a VIE
as the entity that has both the power to direct the activities that most
significantly impact the VIE’s economic performance and the obligation to absorb
losses or the right to receive benefits of the VIE. The amendment replaces the
quantitative-based risks and rewards approach previously required for
determining the primary beneficiary of a VIE. The amendment is effective as of
the beginning of an entity’s first annual reporting period that begins after
November 15, 2009 and for interim periods within that first annual
reporting period. Earlier application is prohibited. We will assess the
application of this Statement on our Consolidated Financial
Statements.





In June
2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally
Accepted Accounting Principles” (ASC Topic 105) which establishes the FASB
Accounting Standards Codification (“the Codification” or “ASC”) as the official
single source of authoritative U.S. generally accepted accounting principles
(“GAAP”). All existing accounting standards are superseded. All other accounting
guidance not included in the Codification will be considered non-authoritative.
The Codification also includes all relevant SEC guidance organized using the
same topical structure in separate sections within the
Codification.




Following
the Codification, the Board will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts.
Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to
update the Codification, provide background information about the guidance and
provide the basis for conclusions on the changes to the
Codification.








WELLQUEST
MEDICAL & WELLNESS CORPORATION
 
 Notes
to Consolidated Financial Statements September 30, 2009
 (Unaudited)




The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented. The Codification is effective for our third-quarter
2009 consolidated financial statements and the principal impact on our
consolidated financial statements is limited to disclosures as all future
references to authoritative accounting literature will be referenced in
accordance with the Codification.





9.  Subordinated Convertible Debentures
Payable to Stockholders





In 2006
and 2007, the Company issued convertible debentures with detachable warrants to
certain stockholders. These debentures bear interest at the fixed rate of 10%
per annum, and shall be paid in arrears on a quarterly basis. One of the
debentures matured on September 30, 2009, at which time the unpaid principal
balance was due and payable. Subsequent to September 30, 2009, the holder of
this debenture extended the maturity date to December 31, 2009.  The
remaining debentures have a maturity date of December 31, 2009.  The
rights of the holders under these debentures to collect the amounts due are
subordinated to the rights of the banks owed as identified under Long-Term Debt.
The holders of $440,497 of these debentures may convert the debt into shares of
the Company’s series A convertible preferred stock at the option of the holder
at any time after the date of issuance. No partial conversions of the debentures
are allowed. The conversion price is $22.22 per share, subject to adjustment
pursuant to the terms of the debenture agreement.  The holders of
$50,000 of these debentures may convert the debt into shares of the Company’s
common stock at the option of the holder at any time after the date of issuance.
No partial conversions of the debentures are allowed. The conversion price is
$22.22 per share, subject to adjustment pursuant to the terms of the debenture
agreement.  Between May 2009 and June 2009, three holders of $100,000
of these convertible subordinated debentures elected to convert the debt to
1,062,556 shares of common stock according to the terms of the debenture
agreements.





During
the second quarter of 2009, the Company entered into an agreement with a
stockholder and related party whereby the related party agreed to exchange
$443,123 of outstanding debt owed by the Company to the related party for a
convertible debenture in the principal face amount of the outstanding debt. The
outstanding debt was bridge financing provided to the Company from time to time
that was payable on demand. In connection with the Agreement, the Company issued
1,250,000 shares of common stock to the related party. The Agreement was made
effective as of April 1, 2009.  The Debenture will be due and payable
April 1, 2012, and accrues interest at the rate of 10% per annum. The Debenture
will be convertible into shares of common stock of the Company at a conversion
price of $0.08888 per share.  The shares have been valued at $0.08888
per share and the cost has been recorded as deferred financing costs and will be
amortized over the life of the associated debenture.





10.  Fair Value of Financial
Instruments





The
Company considers the following to be financial instruments: cash, accounts
receivable, accounts payable, debt and subordinated debentures. The estimated
fair value of such instruments at September 30, 2009 approximates their
carrying value as reported on the Company’s consolidated balance
sheet.  In considering the fair value of subordinated debentures, the
Company calculated fair value using a three-year maturity date of April 1, 2012
and a discount rate of 12%.





11.  Commitment





On
September 2, 2009, the Company signed an agreement with a placement agent in
connection with a proposed offering of equity and/or debt
securities.  The terms of the agreement are for the placement agent to
receive a non-refundable fee of $30,000, plus an expense allowance of 3% of the
gross proceeds, plus a fee of 7% of the gross proceeds.  In addition,
the placement agent will receive common stock warrants equivalent to 10% of the
total number of the Company’s shares of common stock issued in the
offering.  These warrants will exercise at a price that is 110% of the
purchase price paid by investors in the offering.





12.  Subsequent
Events





Management
has evaluated events subsequent to the balance sheet date (September 30, 2009)
through November 13, 2009, the date the financial statements were
issued.













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 consolidated 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, 2009 compared to the three months ended September 30,
2008





Net
Revenues. We had
net revenues for the three months ended September 30, 2009 of $944,123 compared
to the three months ended September 30, 2008 of $775,991. This increase of
$168,132 is primarily the result of the increase in medical service revenues of
$192,727 due to continued increases in medical client visits. Medical client
visits increased from 6,495 for the three months ended September 30, 2008, to
8,655 for the three months ended September 30, 2009, an increase of 33%. The
increase in medical clinic visits is attributed to continued success in
attracting new medical clients and keeping established clients. Established
client visits were 7,015 for the three months ended September 30, 2009, compared
to 5,018 for the three months ended September 30, 2008, an increase of 40%. New
client visits accounted for 1,640 visits for the three months ended September
30, 2009, compared to 1,477 visits for the three months ended September 30,
2008, an increase of 11%. In addition, medical spa revenues were down 14%
($24,595) from $151,723 for the three months ended September 30, 2009, compared
to $176,318 for the three months ended September 30, 2008.  The
decrease in medical spa revenues was primarily due to lower revenue ($11,524)
from injectables such as Botox, Juvederm, Radiesse, and Sculptra.  In
addition, the medical spa saw slightly










Net
Operating Expenses. Operating expenses for the
three months ended September 30, 2009, were $937,752 compared to the three
months ended September 30, 2008, which were $853,732. This increase of $84,020
was the result of increased medical clinic expenses (discussed below) and an
increase of $19,911 in corporate expenses related to increased legal,
accounting, and consulting costs.





Medical
spa expenses decreased $63,983 as a result of a decrease in administrative
staffing as well as the transition of several full-time service provider
positions to part-time.  These decreases were offset by an increase of
$128,092 in medical clinic operating expenses related to increased service
revenues.  Corporate expenses increased $19,911, primarily due to an
increase of $17,730 in accounting, legal, and consulting fees associated with
our efforts to raise funds for future growth.





Medical
spa expenses decreased as a result of a reduction in administrative staffing as
well as the transition of several full-time service provider positions to
part-time status.  Staffing costs for the medical spa decreased
$15,818 from $80,648 for the three months ended September 30, 2008 to $64,830
for the three months ended September 30, 2009.  Expenses related to
products decreased $9,987 from $54,359 for the three months ended September 30,
2008 to $44,372 for the three months ended September 30, 2009 in response to
lower sales.  Consulting costs decreased $12,000 from $12,000 for the
three months ended September 30, 2008 to $0 for the three months ended September
30, 2009. Marketing costs for the medical spa decreased $11,528 from $20,557 for
the three months ended September 30, 2008 to $9,029 for the three months ended
September 30, 2009.  Other operating costs also decreased in response
to cost cutting measures and a reduction in sales.





Medical
clinic operating expenses increased to support higher service
revenues.  Medical provider labor costs increased $105,037 as a result
of adding a full-time physician in March 2009 and several part time physician’s
assistants and advance nurse practitioners throughout the fourth quarter of 2008
and first quarter of 2009.  Non-physician labor increased $24,089 from
$146,288 for the three months ended September 30, 2008 to $170,377 for the three
months ended September 30, 2009 in response to higher demand for
services.





This
increase was partially offset by a $10,440 reduction in marketing costs, $10,000
reduction in physician recruitment costs, as well as$10,709 reduction in administrative
staffing.





Operating
Income (Loss).  Operating income
for the three months ended September 30, 2009 was $6,371 compared to an
operating loss of $77,741 for the three months ended September 30,
2008.  This increase of $84,112 was primarily the result of the
combined impact of increased revenue and decreased operating expenses discussed
above.





Net
Interest Expense. Our net interest expense
for the three months ended September 30, 2009 was $53,694 compared to $79,903
for the three months ended September 30, 2008.  The reduction of
$26,209 was due primarily to the elimination of amortization expense in July
2009 related to the debt discount recorded for the subordinated convertible
debentures. The decrease in amortization of debt discount was $23,306, from
$23,306 for the three months ended September 30, 2008 compared to $0 for the
three months ended September 30, 2009.





Interest
expense also decreased $3,750 due to the conversion of subordinated debentures
to common stock during the second quarter 2009.  Interest expense also
decreased $3,931 from $10,454 for the three months ended September 30, 2008 to
$6,523 for the three months ended September 30, 2009, as a result of reduced
debt on our SBA loan and operating line of credit.  These decreases in
interest expense were partially offset by an increase of $11,076 in amortization
of debt issuance costs related to a subordinated debenture issued to a
stockholder during the second quarter 2009.





Net Loss
Applicable to Common Stock.Net loss for the three
months ended September 30, 2009 was $47,323 compared to a net loss of $157,644
for the three months ended September 30, 2008.  This decrease of
$110,321 is primarily the result of the items discussed above.





Nine
months ended September 30, 2009 compared to the nine months ended September 30,
2008





Net
Revenues. We had
net revenues for the nine months ended September 30, 2009 of $2,814,580 compared
to the nine months ended September 30, 2008, which was $2,407,197. This increase
of $407,383 is primarily the result of the increase in medical service revenues
of $435,046 due to continued increases in medical client visits. Medical client
visits increased from 20,371 for the nine months ended September 30, 2008, to
25,205 for the nine months ended September 30, 2009, an increase of 24%. The
increase in medical clinic visits is attributed to continued success in
attracting new medical clients and keeping
















Net
Operating Expenses. Operating expenses for the
nine months ended September 30, 2009 were $2,840,704 compared to the nine months
ended September 30, 2008, which were $2,827,176. This increase of $13,528 was
the result of an increase of $313,068 in medical clinic operating expenses
related to increased service revenues and staffing costs to improve client
service offset by a decrease of $150.014 in medical spa operating expenses due
to decreases in administrative staffing as well as the transition of several
full-time service provider positions to part-time status and a decrease of
$149,526 in corporate expenses due to reduced costs from our registration
statement filed with the SEC in 2008 and a reduction in various consulting
costs.





Medical
clinic operating expenses increased to support higher service revenues and
staffing costs to improve client service.  Physician compensation
increased $216,687 and medical staff payroll increased $63,366 for the nine
months ended September 30, 2009, compared to the nine months ended September 30,
2008.





Medical
spa expenses decreased as a result of a reduction in administrative staffing as
well as the transition of several full-time service provider positions to
part-time status.  Staffing costs for the medical spa decreased
$57,672 from $258,700 for the nine months ended September 30, 2008 to $201,028
for the nine months ended September 30, 2009.  Expenses related to spa
products decreased $42,045 from $184,150 for the nine months ended September 30,
2008 to $142,105 for the nine months ended September 30, 2009 in response to
lower sales of several product lines.  Consulting costs decreased
$12,000 from $12,000 for the nine months ended September 30, 2008 to $0 for the
nine months ended September 30, 2009.  Other operating costs also
decreased in response to cost cutting measures and a reduction in
sales.





Corporate
expenses decreased $149,526, primarily due to a decrease of $54,296 in
accounting, legal, and consulting fees associated with our registration
statement filed with the SEC and a decrease of $107,009 in corporate consulting
costs.  The majority of the accounting and legal expense for the SEC
registration was recognized during the nine months ended September 30,
2008.  Corporate consulting costs for the nine months ended September
30, 2008 were $108,408 and related to the medical spa and an exploration of
expansion possibilities.  We incurred only $1,400 in corporate
consulting costs for the nine months ended September 30, 2009.





Operating
Loss.  The operating
losses for the nine months ended September 30, 2009 and 2008 were $26,124 and
$419,979, respectively.  This decrease of $393,855 was primarily the
result of the combined impact of increased revenue and decreased operating
expenses discussed above.





Net
Interest Expense. Our net interest expense
for the nine months ended September 30, 2009 was $171,551 compared to $216,124
for the nine months ended September 30, 2008.  This decrease of $44,573
was primarily the result of reduced amortization of the debt discount recorded
for the subordinated convertible debentures. The decrease in amortization of
debt discount was $54,508, from $71,601 for the nine months ended September 30,
2008 to $17,093 for the nine months ended September 30, 2009.  These
decreases were partially offset by increased interest expense recognized on a
note payable to a related party. The funds were utilized primarily to pay for
expenses related to our SEC registration statement.





Net Loss
Applicable to Common Stock.Net loss for the nine
months ended September 30, 2009 was $197,675 compared to $636,103 for the nine
months ended September 30, 2008.  This decrease of $438,428 is
primarily the result of the items discussed above.





Liquidity
and Capital Resources





As of
September 30, 2009, we had a working capital deficit of $1,780,934, resulting
from current liabilities of $2,143,408 compared to $362,474 of current assets.
For the nine months ended September 30, 2009, net cash flow used in operating
activities totaled $95,600. Cash used in investing activities totaled
$6,476.  Cash provided by financing activities totaled $50,100;
including $133,415 in debt reductions, which were offset by $183,515 in
borrowings from stockholders.





Our days
in medical accounts receivables were 33 days and 39 days as of September 30,
2009 and December 31, 2008, 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.  Most claims are submitted
electronically to the insurance














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
              EndedSeptember
      30,
              2009
            
            
            December
      31,
              2008Gross
      Medical Clinic Revenue (1)
            
            $
            1,218,541
            
            
            $
            1,174,388Expense
      recorded for Contractual adjustment/Bad Debt Allowance
            
            
            (426,141
            )
            
            
            (408,955
            )Net
      Medical Clinic Revenue
            
            $
            792,400
            
            
            $
            765,433#
      of Days in period (2)
            
            
            92
            
            
            
            92Average
      Daily Charge (3) = (1) / (2)
            
            $
            13,245
            
            
            $
            12,765Medical
      Clinic Accounts Receivable (4)
            
            $
            441,410
            
            
            $
            497,303Other
      Accounts Receivable
            
            $
            17,993
            
            
            $
            31,408$
            459,403
            
            
            $
            528,711Days
      in medical accounts receivable = (4) / (3)
            
            
            33
            
            
            
            39





We make
every effort to collect any anticipated “client 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 client’s account at the time it is
received.  Client 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 client; printed bills are
sent to the responsible party of the client. 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 nine months of claim reconciliation. If the client does
not respond after three mailed billings, then the account is turned over to a
collection company that pursues collection from the client.  When an
account is turned over for collection, it is removed from the accounts
receivable and maintained in a bad debt recovery account and reserved at its
estimated realizable value. If the collection company fails in locating the
client 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.  While we are exploring the
possibility of raising capital through of an offering of equity and/or debt
securities, 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 for the remainder of 2009.  However, if during that period or
thereafter, we are
















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.





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 stockholders. 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.





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 estimate the collectability of
receivables based on industry standards and our collection
history.  We recorded contractual adjustments and bad debt expense of
approximately $1,228,000 and $1,005,000 for the nine months ended September 30,
2009 and 2008, respectively.  We recorded contractual adjustments and
bad debt expense of approximately $426,000 and $323,000 for the three months
ended September 30, 2009 and 2008, 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 clients 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 client, 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
client.  Thus, the amount of claims classified as insurance
receivables that are reclassified to self-pay is not quantifiable.  We
calculate allowances for contractual adjustments and bad debts based on total
accounts receivable outstanding.
















As
      of September 30, 200960
      days or less
            
            
            61
      – 120 days
            
            
            Greater
      than 120 days
            
            
            TotalMedicare/Medicaid
            
            $
            11,647
            
            
            $
            3,793
            
            
            $
            9,448
            
            
            $
            24,888Third
      party insurance (1)
            
            
            229,338
            
            
            
            22,619
            
            
            
            30,856
            
            
            
            282,813Self
      pay (2)
            
            
            16,650
            
            
            
            10,340
            
            
            
            106,719
            
            
            
            133,709Other
            
            
            7,579
            
            
            
            175
            
            
            
            10,239
            
            
            
            17,993Total
      Accounts Receivable
            
            $
            265,214
            
            
            $
            36,927
            
            
            $
            157,262
            
            
            $
            459,403





As
      of December 31, 200860
      days or less
            
            
            61
      – 120 days
            
            
            Greater
      than 120 days
            
            
            TotalMedicare/Medicaid
            
            $
            19,173
            
            
            $
            1,966
            
            
            $
            2,691
            
            
            $
            23,830Third
      party insurance (1)
            
            
            224,900
            
            
            
            40,113
            
            
            
            48,859
            
            
            
            313,872Self
      pay (2)
            
            
            31,883
            
            
            
            28,891
            
            
            
            98,827
            
            
            
            159,601Other
            
            
            15,873
            
            
            
            5,173
            
            
            
            10,362
            
            
            
            31,408Total
      Accounts Receivable
            
            $
            291,829
            
            
            $
            76,143
            
            
            $
            160,739
            
            
            $
            528,711





(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
      clients and co-payments or
deductibles.





Revenue
Recognition





We
recognize revenue 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 recognized at the time
of service and 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 basic and diluted earnings per share (“EPS”) on the face
of the statements of operations and provide 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.





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












Share-Based
Payment





In
calculating the value of shares issued for goods or services received in a
share-based payment transaction with nonemployees, we consider whether the fair
value of the goods or services is more reliably measurable than the fair value
of the equity instruments issued.  If the fair value of the goods or
services is more reliably measurable than the fair value of the equity
instruments issued, then, 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.  We recognize the fair
value of stock-based compensation awards in general corporate expense in the
consolidated statements of operations on a straight-line basis over the vesting
period.





In
January 2009, we entered into a one year agreement with a consulting company for
public and investor relations services.  Pursuant to the original
agreement, we agreed to pay the consultant $6,000 per month ($72,000 per year)
and issue 348,600 shares of common stock.  In July 2009, we exercised
the termination clause in the contract and the consultant agreed to reduce the
number of shares of stock to 261,450.  As of September 30, 2009, we
have not issued the shares.  The shares have been valued at $0.08888
and $23,238 has been recorded as an accrued liability on our balance sheet and
as general corporate expense on our statement of operations for the anticipated
issuance of the shares.





In April
2009, we agreed to issue 1,250,000 shares of common stock to a related party and
stockholder as part of the issuance of a $443,123 subordinated convertible
debenture.  The shares have been valued at $0.08888 per share and the
cost has been recorded as deferred debt financing costs and will be amortized
over the life of the associated debenture.





Recent
Accounting Pronouncements





In
June 2009, the Financial Accounting Standards Board (“FASB”)
issued an amendment to previously issued accounting guidance on the
consolidation of variable interest entities. This amendment requires an entity
to perform a qualitative analysis to determine whether the entity’s variable
interest or interests give it a controlling financial interest in a variable
interest entity (VIE). This analysis identifies the primary beneficiary of a VIE
as the entity that has both the power to direct the activities that most
significantly impact the VIE’s economic performance and the obligation to absorb
losses or the right to receive benefits of the VIE. The amendment replaces the
quantitative-based risks and rewards approach previously required for
determining the primary beneficiary of a VIE. The amendment is effective as of
the beginning of an entity’s first annual reporting period that begins after
November 15, 2009 and for interim periods within that first annual
reporting period. Earlier application is prohibited. We will assess the
application of this Statement on our Consolidated Financial
Statements.





In June
2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally
Accepted Accounting Principles” (ASC Topic 105) which establishes the FASB
Accounting Standards Codification (“the Codification” or “ASC”) as the official
single source of authoritative U.S. generally accepted accounting principles
(“GAAP”). All existing accounting standards are superseded. All other accounting
guidance not included in the Codification will be considered non-authoritative.
The Codification also includes all relevant Securities and Exchange Commission
(“SEC”) guidance organized using the same topical structure in separate sections
within the Codification.




Following
the Codification, the Board will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts.
Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to
update the Codification, provide background information about the guidance and
provide the basis for conclusions on the changes to the
Codification.




The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented. The Codification is effective for our third-quarter
2009 financial statements and the principal impact on our financial statements
is












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 13a – 15(e) and 15d – 15(e) under the Securities
Exchange Act of 1934 as of September 30, 2009. 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.













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.





None.





Item
3. Defaults Upon Senior Securities.





None.





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





Pursuant
to a written consent of a majority of stockholders dated July 23, 2009, in lieu
of a special meeting of the stockholders, we took the following
actions:





1.
            Elected
      Stephen Swift, Curtis Rice, Lawrence Field, John O’Connor and Robert Zasa
      to our Board of Directors, to hold office until their successors are
      elected and qualified or until their earlier resignation or
      removal.  Messrs. Swift, Rice, Field, O’Connor and Zasa are our
      current directors; and


2.
            Appointed
      the firm of HoganTaylor LLP as the independent registered public
      accounting firm of the Company for the year ending December 31,
      2009.  HoganTaylor LLP is our current independent registered
      public accounting firm.





Item
5. Other Information.





None.





Item
6. Exhibits





31.01
            Certification
      of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002





31.02
            Certification
      of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002





32.01
            Certifications
      of Chief Executive Officer and Chief Financial Officer pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002















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 &
      WELLNESS CORPORATION






Date:  November
      13, 2009
            By:/s/ STEVE SWIFTSteve
      SwiftChief
      Executive Officer (Principal Executive Officer)Date:  November
      13, 2009
            By:/s/ GREG PRIMMGreg
      PrimmChief
      Financial Officer (Principal Financial Officer and
              Principal
      Accounting
Officer)