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 March 31, 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. YesxNoo



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). YesoNoo



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 filero
        Accelerated fileroNon-accelerated filero
        Smaller reporting companyx(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).YesoNox



As of May 11, 2009, there were 25,853,917 shares of registrants common stock outstanding.



---

WELLQUEST MEDICAL & WELLNESS CORPORATION





INDEXPART I.
        FINANCIAL INFORMATIONITEM 1.
        Financial Statements
        3Consolidated balance sheets at March 31, 2009 (unaudited) and December 31, 2008
        3Consolidated statements of operations for the three months ended March 31, 2009 and 2008 (unaudited)
        4Consolidated statements of cash flows for the three months ended March 31, 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

(formerly HQHealthQuest Medical & Wellness Centers, Ltd.)



PART I. FINANCIAL INFORMATION

ITEM 1.   Financial Statements



Consolidated Balance Sheets



March 31 2009
        
        December 31
2008(Unaudited)AssetsCurrent assets:Cash
        
        $      99,680
        
        $      103,265Accounts receivable, less allowance of $204,941 and $235,348 at March 31, 2009 and December 31, 2008, respectively
        
        263,177
        
        293,363Other current assets
        
        69,660
        
        50,737Total current assets
        
        432,517
        
        447,365Property and equipment, net
        
        361,229
        
        387,125Total assets
        
        $    793,746
        
        $     834,490Liabilities and Stockholders' DeficitCurrent liabilities:Line of credit
        
        $    202,494
        
        $     202,494Accounts payable
        
        235,033
        
        293,312Accrued liabilities
        
        240,914
        
        207,329Due to physicians and related parties
        
        556,842
        
        545,823Note payable to related party
        
        -
        
        349,608Current maturities of long-term debt
        
        490,163
        
        517,324Current obligations under capital leases
        
        24,901
        
        23,902Current maturities of subordinated debentures payable to stockholders, net of unamortized discount of $8,547 and $17,093 at March 31, 2009 and December 31, 2008, respectively
        
        531,955
        
        523,409Total current liabilities
        
        2,282,302
        
        2,663,201Long-term debt to related party
        
        443,123
        
        -Long-term obligations under capital leases, less current portion
        
        112,034
        
        118,646Total liabilities
        
        2,837,459
        
        2,781,847Stockholders' deficit:Preferred stock - $.01 par value; authorized 2,500,000 shares
75,000 designated as Series A convertible preferred stock; 37,440 shares issued and outstanding
        
        374
        
        374Common stock - $.001 par value; authorized 150,000,000 shares; 23,716,361 shares issued and outstanding
        
        23,716
        
        23,716Additional paid-in capital
        
        1,267,178
        
        1,263,030Warrants outstanding
        
        177,000
        
        177,000Accumulated deficit
        
        (3,511,981)
        
        (3,411,477)(2,043,713)
        
        (1,947,357)Total liabilities and stockholders' deficit
        
        $    793,746
        
        $     834,490






The accompanying notes are an integral part of these consolidated financial statements.



3   WELLQUEST MEDICAL & WELLNESS CORPORATION

(formerly HQHealthQuest Medical & Wellness Centers, Ltd.)



Consolidated Statements of Operations



For the three months ended March 31, 2009 and 2008

(Unaudited)




2009
        
        2008Net revenue
        $             930,336
        
        $             851,546Operating expenses:Salaries, wages and benefits
        305,360
        
        294,944Rents and facility expenses
        72,581
        
        74,852Clinic direct expenses, excluding salaries, wages and benefits
        351,067
        
        239,140Spa direct expenses, excluding salaries, wages and benefits
        77,437
        
        57,850General corporate expenses
        141,876
        
        52,628Depreciation and amortization
        28,595
        
        27,055Total operating expenses
        976,916
        
        746,469Operating income (loss)
        (46,580)
        
        105,077Interest income (expense):Interest income
        -
        
        2,702Interest expense
        (53,924)
        
        (72,279)Net interest expense
        (53,924)
        
        (69,577)Net income (loss) applicable to common stock
        $             (100,504)
        
        $             35,500Income (loss) per common share:Basic
        $                 (0.004)
        
        $               0.002Diluted
        $                 (0.004)
        
        $               0.001Weighted average number of common shares outstanding:Basic
        23,716,361
        
        23,082,250Diluted
        23,716,361
        
        25,285,000




The accompanying notes are an integral part of these consolidated financial statements.



4



WELLQUEST MEDICAL & WELLNESS CORPORATION

(formerly HQHealthQuest Medical & Wellness Centers, Ltd.)



Consolidated Statements of Cash Flows



For the three months ended March 31, 2009 and 2008

(Unaudited)



2009
        
        2008Cash Flows from Operating ActivitiesNet income (loss)
        
        $     (100,504)
        
        $     35,500Adjustments to reconcile net income (loss) to net cash used in operating activities:Depreciation and amortization
        
        28,595
        
        27,055Amortization of debt discount
        
        8,546
        
        23,000Stock based compensation
        
        4,148
        
        -Change in assets and liabilities:Accounts receivable, net
        
        30,186
        
        (26,803)Other current assets
        
        (18,923)
        
        (9,953)Accounts payable and accrued liabilities
        
        (24,694)
        
        (99,004)Due to physicians and related parties
        
        11,019
        
        (13,700)Net cash used in operating activities
        
        (61,627)
        
        (63,905)Cash Flows from Investing ActivitiesPurchases of property and equipment
        
        (2,699)
        
        (1,761)Cash Flows from Financing ActivitiesRepayment of long-term borrowings and obligations under capital leases
        
        (32,774)
        
        (34,594)Borrowings on long-term debt to related party
        
        93,515
        
        -Proceeds from issuance of common stock
        
        -
        
        56,000Net cash provided by financing activities
        
        60,741
        
        21,406Net decrease in cash
        
        (3,585)
        
        (44,260)Cash, beginning of period
        
        103,265
        
        91,711Cash, end of period
        
        $         99,680
        
        $         47,451Supplemental Disclosures of Cash Flow InformationCash paid for interest
        
        $         24,817
        
        $         69,768






The accompanying notes are an integral part of these consolidated financial statements.


5



WELLQUEST MEDICAL & WELLNESS CORPORATION

(formerly HQHealthQuest Medical & Wellness Centers, Ltd.)



Notes to Consolidated Financial Statements March 31, 2009

(Unaudited)

1.Organization and Business Description and Managements Plans



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



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



Principles of Consolidation



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



WellQuest of Arkansas entered into a Management and Medical Services Agreement with Northwest Arkansas Primary Care Physicians, P.A (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.



As a result of WellQuests evaluation of the effect that the adoption of FIN 46R would have on WellQuest's results of operations and financial condition, WellQuest determined that 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 in accordance with the provisions of FIN 46R.  All significant intercompany accounts and transactions have been eliminated.



Managements Plans





The financial statements of the Company have been prepared on the basis of accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. At March 31, 2009, the Company had a working capital deficit of approximately $1,800,000 and had incurred net losses of approximately $101,000 for the three months ended March 31, 2009.  The Company also has an accumulated deficit of approximately $3,500,000.  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.




6



WELLQUEST MEDICAL & WELLNESS CORPORATION

(formerly HQHealthQuest Medical & Wellness Centers, Ltd.)



Notes to Consolidated Financial Statements March 31, 2009

(Unaudited)



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



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



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



2.Basis of Presentation



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



The results of operations for the three months ended March 31, 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 be read in conjunction with the financial statements and notes thereto.



3.Summary of Significant Accounting Policies



Use of Estimates



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



Revenue Recognition



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



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



7



WELLQUEST MEDICAL & WELLNESS CORPORATION

(formerly HQHealthQuest Medical & Wellness Centers, Ltd.)



Notes to Consolidated Financial Statements March 31, 2009

(Unaudited)

in the period the services are rendered. Any differences between estimated contractual adjustments and actual final settlements under reimbursement contracts are recognized as contractual adjustments in the year final settlements are determined.



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



Earnings Per Share



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



In computing Diluted EPS, only potential common shares that are dilutive  those that reduce earnings per share or increase loss per share  are included. Exercise of options and warrants or conversion of convertible securities is not assumed if the result would be antidilutive, such as when a loss from continuing operations is reported. The control number for determining whether including potential common shares in the Diluted EPS computation would be antidilutive is income from continuing operations. As a result, if there is a loss from continuing operations, Diluted EPS would be computed in the same manner as Basic EPS, even if an entity has net income after adjusting for discontinued operations, an extraordinary item or the cumulative effect of an accounting change.  The Company incurred a loss from continuing operations for the three month period ended March 31, 2009.
Therefore, basic EPS and diluted EPS are computed in the same manner for that period.   Anti dilutive and/or non-exercisable warrants and convertible preferred stock and convertible subordinated debentures represent approximately 16,200,000 and 15,400,000 common shares at March 31, 2009 and 2008, respectively which may become dilutive in future calculations of EPS.



Share-Based Payment



In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R,Share-Based Payment(SFAS 123R).  SFAS 123R is a revision of SFAS 123,Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees, and its related implementation guidance.  Under paragraph 7 of SFAS 123R, if the fair value of goods or services received in a share-based payment transaction with nonemployees is more reliably measurable than the fair value of the equity instruments issued, the fair value of the goods or services received shall be used to measure the transaction. In contrast, if the fair value of the equity instruments issued in a share-based payment transaction with nonemployees
is more reliably measurable than the fair value of the consideration received, the transaction shall be measured based on the fair value of the equity instruments issued.  We utilized the fair value of the equity instruments issued to nonemployees to value the shares issued.  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, the Company entered into a one year agreement with a consulting company for public and investor relations services.  Pursuant to that agreement, the Company will pay the consultant $6,000 per month ($72,000 per year) and issue 348,600 shares of common stock.  As of March 31, 2009, the Company has not issued the shares.  The shares have been valued at $0.08888 per share and $30,984 has been recorded as an accrued liability on the Companys balance sheet and as general corporate expense on the Companys income statement.



8




WELLQUEST MEDICAL & WELLNESS CORPORATION

(formerly HQHealthQuest Medical & Wellness Centers, Ltd.)



Notes to Consolidated Financial Statements March 31, 2009

(Unaudited)



Reclassifications



Certain reclassifications have been made to prior years financial statements to conform to the current year presentation. These reclassifications had no effect on the Companys net income.



4.Business Segments



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




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




        Whose operating results are regularly reviewed by the enterprises chief operating decision maker,




        For which discrete financial information is available.




Corporate assets detailed below are primarily comprised of property and equipment, corporate cash, accounts receivable and other corporate assets. Summarized financial information concerning the Companys reportable operating segments is shown in the following tables as of March 31, 2009 and 2008:




For the Three Months Ended March 31, 2009Medical
Clinic
        Medical
Spa
        Unallocated Corporate
        ConsolidatedNet revenue
        $      751,648
        $      176,188
        $               2,500
        $          930,336Operating expenses
        590,127
        199,110
        187,679
        976,916Income (loss) from operations
        161,521
        (22,922)
        (185,179)
        (46,580)Interest income
        -
        -
        -
        -Interest expense
        -
        -
        53,924
        53,924Net income (loss)
        $      161,521
        $     (22,922)
        $        (239,103)
        $       (100,504)Total assets
        $      420,650
        $      220,242
        $           152,854
        $         793,746




For the Three Months Ended March 31, 2008Medical
Clinic
        Medical
Spa
        Unallocated Corporate
        ConsolidatedNet revenue
        $        693,547
        $       157,999
        $                    -
        $        851,546Operating expenses
        457,614
        219,735
        69,120
        746,469Income (loss) from operations
        235,933
        (61,736)
        (69,120)
        105,077Interest income
        -
        -
        2,702
        2,702Interest expense
        -
        -
        72,279
        72,279Net income (loss)
        $        235,933
        $      (61,736)
        $     (138,697)
        $         35,500Total assets
        $        540,503
        $       294,887
        $        363,695
        $    1,199,085



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 ($56,374 and $52,012 for the three month period ended March 31, 2009 and 2008, respectively), lease expense paid by NWAPCP to WellQuest of Arkansas ($10,250 and $14,479 for the three month period ended March 31, 2009 and 2008, respectively), and interest expense paid by NWAPCP to WellQuest of Arkansas ($4,449 and $14,760 for the three month period ended March 31, 2009 and 2008, respectively).



9



WELLQUEST MEDICAL & WELLNESS CORPORATION

(formerly HQHealthQuest Medical & Wellness Centers, Ltd.)



Notes to Consolidated Financial Statements March 31, 2009

(Unaudited)



5.Common and Preferred Stock



During January 2008 and February 2008, the Company sold an aggregate of 630,000 shares of its 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 its common stock to an investor for aggregate gross proceeds of $10,000.  These shares were issued in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended.



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



6.Income Taxes



The Company had no current income tax provision for the quarter ended March 31, 2009 due to approximately $3.0 million in net operating loss carryforwards incurred since inception.  The effective income tax rate for the quarter ended March 31, 2009 differs from the U.S. federal statutory rate of 34% due to the change in the valuation allowance.



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



7.  Incentive Stock Plan



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



The purpose of the 2008 Plan is to further the growth and development of the Company by providing, through ownership of stock of the Company, an incentive to officers and other key personnel who are in a position to contribute materially to the prosperity of the Company including, but not limited to, all salaried personnel of the Company, to increase such persons interests in the Companys welfare, to encourage them to continue their services to the Company, and to attract individuals of outstanding ability to enter the employment of the Company.  The 2008 Plan authorizes the issuance of 5,000,000 shares of the Companys common stock.



On August 4, 2008, the Company granted 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 three months ended March 31, 2009 related to these options was approximately $2,400.  The Company has reserved 500,000 shares of common stock for the exercise of these options.



On December 9, 2008, we 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 three months ended March 31, 2009 related to these options was approximately $1,700.  The Company has reserved 300,000 shares of common stock for the exercise of these options.



8.  Commitments and Contingencies



10



WELLQUEST MEDICAL & WELLNESS CORPORATION

(formerly HQHealthQuest Medical & Wellness Centers, Ltd.)



Notes to Consolidated Financial Statements March 31, 2009

(Unaudited)

In January 2009, the Company entered into a one year agreement with a consulting company for public and investor relations services.  Pursuant to that agreement, the Company will pay the consultant $6,000 per month ($72,000 per year) and issue 348,600 shares of common stock.  As of March 31, 2009, the Company has not issued the shares.  An expense of $30,984 has been recorded as an accrued liability on the balance sheet for the issuance of the shares.



9.  Recent Accounting Pronouncements



In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161,Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB Statement No.133(SFAS 161). SFAS 161 requires enhanced disclosures about an entitys derivative and hedging activities, including qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008.  The Company adopted SFAS 161 as of January 1, 2009. The adoption of SFAS 161 did not have a
material effect on its financial statements and related disclosures.



In April 2009, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 107-1 and APB 28-1,Interim Disclosure about Fair Value of Financial Instruments(FSP 107-1). FSP 107-1 amends FASB Statement No. 107,Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP 107-1 also amends APB Opinion No. 28,Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP 107-1 is effective for interim reporting periods ending after June 15, 2009. The Company does not expect the adoption of FSP 107-1 to have a material effect on
its financial statements and related disclosures.



10.  Note Payable to Related Party



The Company has a note payable due to a related party and stockholder in the amount of $408,608 as of March 31, 2009.  The proceeds from the note were primarily used to pay for costs incurred in the Companys initial SEC registration process and ongoing fees associated with the Companys public filing status.  The note is due on demand and carries an interest rate of 10%.








11.  Subsequent Events



Subsequent to March 31, 2009, the Company borrowed $50,000 from the Companys CEO and Chairman.  The Company issued a convertible debenture in the principal face amount of $50,000. The debenture is convertible at a price equal to the last sale price of the Companys common stock on the trading day preceding the conversion date.  The Debenture matures on April 15, 2010 and bears interest at the annual rate of 10%.



Subsequent to March 31, 2009, three holders of 6,300 of the Companys preferred stock elected to convert the shares to 1,575,000 of the Companys common stock.



Subsequent to March 31, 2009, two holders of $50,000 of convertible subordinated debentures elected to convert the debt to 562,556 shares of common stock according to the terms of the debenture agreements.





Effective April 1, 2009, the Company amended its note payable to a related party, creating a convertible long-term note payable with a three year maturity date.  The note payable bears interest at 10% per year.  The note is convertible into the Companys common stock at the option of the holder at a conversion price of $0.08888 per share. As part of the agreement, the Company agreed to issue 1,250,000 shares of common stock to the related party.  The shares are valued at $111,100 and the cost will be amortized over the term of the note.




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



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



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



Overview



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



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



Results of Operations



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



Three months ended March 31, 2009 compared to the three months ended March 31, 2008



Net Revenues.We had net revenues for the three months ended March 31, 2009 of $930,336 compared to $851,546 for the three months ended March 31, 2008. This increase of $78,790 is primarily the result of the increase in medical service revenues of $58,101 due to continued increases in medical client visits.  Medical client visits increased from 7,441 for the three months ended March 31, 2008 to 8,166 for the three months ended March 31, 2009, an increase of 10%.  The increase in medical clinic visits is attributed to continued success in attracting new medical clients and keeping established clients. Established client visits increased from 5,328 for the three months ended March 31, 2008 to 6,444 for the three months ended March 31, 2009, an increase of 21%.  New client visits accounted for 2,083 visits for the three months
ended March 31, 2008 compared to 1,722 visits for the three months ended March 31, 2009, a decrease of 17%.  In addition, Medical Spa revenues were up 12% ($18,189) from $157,999 for the three months ended March 31, 2009 compared to $176,188 for the three months ended March 31, 2008.  Improved marketing and the addition of a medically supervised weight loss program were significant contributors to the increase.



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Net Operating Expenses.Operating expenses for the three months ended March 31, 2009 were $976,916 compared to $746,469 for the three months ended March 31, 2008. This increase of $230,447 was the result of an increase of $132,513 in medical clinic operating expenses related to increased service revenues and staffing costs to improve client service.  Increased corporate expenses accounted for an $118,559 increase, due to costs associated with our registration statement filed with the SEC as well as the addition of a chief financial officer in April 2008.  These increases were offset by a decrease of $20,625 in operating expenses for the medical spa related to a decrease in administrative staffing.



Medical clinic operating expenses increased to support higher service revenues and improve client service.  Medical provider labor costs increased $63,009 as a result of adding a full time physicians assistant in July 2008, a full time physician in March 2009, and several part time physicians assistants and advanced practice nurses throughout the fourthquarter 2008 and first quarter 2009.   Medical staff payroll increased $27,764 for the three months ended March 31, 2009 compared to the three months ended March 31, 2008.  Supplies expense ($15,266) and laboratory service expenses ($17,564) also increased in response to our higher medical clinic revenue during the same reporting period.



Medical spa operating 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.  Staffing costs for the medical spa decreased $15,773 from $86,291 for the three months ended March 31, 2009 compared to $70,518 for the three months ended March 31, 2008.  Expenses related to spa products decreased $12,033 in response to lower sales of several product lines.  These expense decreases were offset by increased marketing costs of $10,836.



Increased corporate expense accounted for $118,559 of the total increase in net operating expenses, primarily due to an increase of $105,956 in accounting, legal, and consulting fees associated with our registration statement filed with the SEC.  We also incurred $4,148 in compensation expense related to stock options issued during the three months ended March 31, 2009.  There was no compensation expense for stock options issued during the three months ended March 31, 2008.



Operating Loss.Operating loss for the three months ended March 31, 2009 was $46,580 compared to operating income of $105,077 for the three months ended March 31, 2008.  This decrease of $151,657 was primarily the result of the combined impact of increased operating expenses discussed above.



Net Interest Expense.Our net interest expense for the three months ended March 31, 2009 was $53,924 compared to $69,577 for the three months ended March 31, 2008.  This decrease of $15,653 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 $14,453, from $8,547 for the three months ended March 31, 2009 compared to $23,000 for the three months ended March 31, 2008.  We also saw reduced interest expense due to a decrease in our Small Business Administration loan in April 2008.  The bank holding our Small Business Administration loan released the restriction on a $250,000 certificate of deposit, which we used to reduce the principal of the loan.  This reduced the monthly debt service of the note,
thereby reducing interest expense.  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.



Net Loss Applicable to Common Stock.Our net loss for the three months ended March 31, 2009 was $100,504 compared to net income of $35,500 for the three months ended March 31, 2008.  This decrease of $136,004 is primarily the result of the items discussed above.



Liquidity and Capital Resources




As of March 31, 2009, we had a working capital deficit of $1,849,785, resulting from current liabilities of $2,282,302. For the three months ended March 31, 2009, net cash flow used in operating activities totaled $61,627. Cash used in investing activities totaled $2,699.  Cash provided by financing activities totaled $60,741, including $32,774 in debt reductions, which were offset by $93,515 in borrowings from a related party.




Our days in medical accounts receivables were 35 days and 39 days as of March 31, 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.  We have engaged a professional medical billing company to submit the claims to insurers.  Most claims are submitted electronically to the insurance companies and Medicare.  These claims become accounts receivable at the time they are submitted to the insurance company.  The aging of accounts receivable begins at the date of the billing
submission. Insurance companies then review the electronic billing and either ask for more/corrected



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information, deny the particular service or part of a service or pay it (electronically to a bank lock box) or by check mailed.  In addition, each insurance company adjusts the billing amount for each specific service to the insurance allowable rate as specified in that insurance companys contract with Northwest Arkansas Primary Care Physicians.  The insurance company will also identify any portions of the billing that are to be paid by the insured client (client responsible).  These reviews and adjustments are communicated along with payments to us in an Explanation of Benefits.



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 EndedMarch 31, 2009
        
        Three Months EndedDecember 31, 2008Gross Medical Clinic Revenue (1)
        
        $       1,146,559
        
        $       1,174,388Expense recorded for Contractual adjustment/Bad Debt Allowance
        
        (394,911)
        
        (408,955)Net Medical Clinic Revenue
        
        $          751,648
        
        $          765,433# of Days in period (2)
        
        90
        
        92Average Daily Charge (3) = (1) / (2)
        
        $            12,739
        
        $            12,765Medical Clinic Accounts Receivable (4)
        
        $          451,070
        
        $          497,303Other Accounts Receivable
        
        $            17,048
        
        $            31,408$          468,118
        
        $          528,711Days in medical accounts receivable = (4) / (3)
        
        35
        
        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 six 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 fully reserved. 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.  We have no contracts or commitments for additional funds and there can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.



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



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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 shareholders. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek
alternative financing.



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




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



Critical Accounting Policies



Accounts Receivable



Accounts receivable principally represent receivables from customers and third-party payors for medical services provided by clinic physicians, less an allowance for contractual adjustments and doubtful accounts. We utilize a third party billing organization that estimates the collectability of receivables based on industry standards and our collection history.  We recorded contractual adjustments and bad debt expense of approximately $395,000 and $368,000 for the three months ended March 31, 2009 and 2008, respectively. We recorded contractual adjustments of approximately $338,000 and $313,000 for three months ended March 31, 2009 and 2008, respectively.  We recorded bad debt expense of approximately $57,000 and $55,000 for the three months ended March 31, 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 and our collection experience.




As of March 31, 200960 days or less
        61  120 days
        Greater than 120 days
        TotalMedicare
        $      11,967
        $           3,949
        $           3,657
        $       19,573





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Third party insurance (1)
        196,073
        30,308
        41,513
        267,894Self pay (2)
        39,073
        18,997
        105,533
        163,603Other
        6,782
        57
        10,209
        17,048Total Accounts Receivable
        $    253,895
        $         53,311
        $      160,912
        $     468,118






As of December 31, 200860 days or less
        61  120 days
        Greater than 120 days
        TotalMedicare
        $      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 in accordance with Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 104,Revenue Recognition in Financial Statements(SAB 104). Under SAB 104, revenue is recognized when the title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is determinable and collectability is reasonably assured.



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



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



Earnings Per Share



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



In computing Diluted EPS, only potential common shares that are dilutive  those that reduce earnings per share or increase loss per share  are included. Exercise of options and warrants or conversion of convertible securities is not assumed if the result would be antidilutive, such as when a loss from continuing operations is reported. The control number for determining whether including potential common shares in the Diluted EPS computation would be antidilutive is income from continuing operations. As a result, if there is a loss from continuing operations, Diluted EPS would be computed in the same



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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 month period ended March 31, 2009. Therefore, basic EPS and diluted EPS are computed in the same manner for that period.   Anti dilutive and/or non-exercisable warrants and convertible preferred stock and convertible subordinated debentures represent approximately 16,200,000 and 15,400,000 common shares at March 31, 2009 and 2008, respectively which may become dilutive in future calculations of EPS.



Share-Based Payment



In December 2004, the Financial Accounting Standards Board issued SFAS No.. 123R,Share-Based Payment(SFAS 123R).  SFAS 123R is a revision of SFAS 123,Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees, and its related implementation guidance.  Under paragraph 7 of SFAS 123R, if the fair value of goods or services received in a share-based payment transaction with nonemployees is more reliably measurable than the fair value of the equity instruments issued, the fair value of the goods or services received shall be used to measure the transaction. In contrast, if the fair value of the equity instruments issued in a share-based payment
transaction with nonemployees is more reliably measurable than the fair value of the consideration received, the transaction shall be measured based on the fair value of the equity instruments issued.  We utilized the fair value of the equity instruments issued to nonemployees to value the shares issued.  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, the Company entered into a one year agreement with a consulting company for public and investor relations services.  Pursuant to that agreement, the Company will pay the consultant $6,000 per month ($72,000 per year) and issue 348,600 shares of common stock.  As of March 31, 2009, the Company has not issued the shares.  The shares have been valued at $0.08888 per share and $30,984 has been recorded as an accrued liability on the Companys balance sheet and as general corporate expense on the Companys income statement.



Recent Accounting Pronouncements



In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161,Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB Statement No.133(SFAS 161). SFAS 161 requires enhanced disclosures about an entitys derivative and hedging activities, including qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company adopted SFAS 161 as of January 1, 2009. The adoption of SFAS 161
did not have a material effect on its financial statements and related disclosures.



In April 2009, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 107-1 and APB 28-1,Interim Disclosure about Fair Value of Financial Instruments(FSP 107-1). FSP 107-1 amends FASB Statement No. 107,Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP 107-1 also amends APB Opinion No. 28,Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP 107-1 is effective for interim reporting periods ending after June 15, 2009. The Company does not expect the adoption of FSP 107-1 to have a
material effect on its financial statements and related disclosures.



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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 March 31, 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.



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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.




None.



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






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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:  May 12, 2009
        By:/s/ STEVE SWIFTSteve SwiftChief Executive Officer (Principal Executive Officer)Date:  May 12, 2009
        By:/s/ GREG PRIMMGreg PrimmChief Financial Officer (Principal Financial Officer and Principal Accounting Officer)




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