UNITED STATES  SECURITIES AND EXCHANGE COMMISSION  Washington, D.C. 20549**FORM 10-QSB**
(Mark One)

** [x]                                                                                                                                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIESEXCHANGE ACT OF 1934**
 

For the quarterly period ended **                                                                               AUGUST 31, 2007**                                                                                    
 

OR

 

**[ ]                                                                                       TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THESECURITIES EXCHANGE ACT OF 1934**
 

For the transition period from______________________________ to_____________________________________________________

 

Commission File Number: 333-61801**LIFEQUEST WORLD CORPORATION
(formerly  Phytolabs, Inc. and Jurak Corporation World Wide, Inc.)
(Exact name of registrant as specified in its charter)
 

      MINNESOTA                                                    88-0407679    

(State or other jurisdiction of                                                                  (Federal Employer
incorporation ororganization)                                                                 Identification No.)

 

             1181 Grier Drive, Suite C, Las Vegas, NV                            89119-3746                     **(Address of principal executive offices) (Zip Code)** 

(702)  914-9688**Registrant's telephone number, including area code
Check whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was requiredto file such reports), and (2) has been subject to such filing requirements forthe past 90 days. YES [x]    NO [ ]

Indicate by check mark whether the registrant is a shell company (as definedin Rule 12b-2 of the Exchange Act. YES [x]    NO [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes ofcommon stock, as of the latest practicable date.
                         Class                                           Outstanding at October 12, 2007                   Common Stock,                                     no par value 34,478,833
LIFEQUEST WORLD CORPORATION (formerly PHYTOLABS, INC. AND JURAK CORPORATION WORLD WIDE, INC.)

INDEX
 
 Page No.Part I. Financial Information 
Item 1. Financial Statements 
Condensed Balance Sheets 3
Condensed Statements of Operations    4
Condensed    Statements of Cash Flows 5
Selected Notes to    Condensed Financial Statements 6
Item 2.    Management's Discussion and Analysis of 
    Financial Condition and Results of Operations 
11
Item    3. Controls and Procedures 15Part II. Other    Information  
Item 1.    Legal Proceedings 16
    Item 2. Unregistered Sales of Equity Securities and Use of Proceeds     16
Item 5. Other    Information 16
Item 6. Exhibits 17    SIGNATURES 17     
 

 
 
 
 

 
 
LIFEQUEST WORLD CORPORATION(formerly) PHYTOLABS, INC. AND JURAK CORPORATION WORLD WIDE, INC.)NOTES TO CONDENSED FINANCIALSTATEMENTS

NOTE 1 - CONDENSED FINANCIAL STATEMENTS
**Company Name Change and Nature of Business**
Effective August 20, 2007, the Company changed its name toLifequest World Corporation (formerly Phytolabs, Inc. and Jurak CorporationWorld Wide, Inc.) to better reflect the business the company is involved in --that of products designed to positively affect the lives of people worldwide.The shares of the Company trade on the Over the Counter Bulletin Board under thesymbol, "LQWC." We are a product-focused company specializing in the herbalsupplement industry and market.

Lifequest World Corporation (formerly Phytolabs, Inc. andJurak Corporation World Wide, Inc.) was incorporated under the laws of the Stateof Minnesota on November 1, 1997. In this Quarterly Report, the terms "Company","us", "we", "our" and "its" are used as references to Phytolabs Inc. We developand distribute dietary herbal supplement products. Our "JC Tonic, The YouthSolution" first developed in the 1920's and 1930's and introduced to themarketplace in 1943 by Mr. Carl Jurak, the father of the founder of our company.Our dietary herbal supplement products are distributed through a networkmarketing system using independent distributors that we refer to as "Ambassadorsof Health" (distributors). 

The consolidated balance sheets as of August 31, 2007 and therelated consolidated statements of operations for the three months ended August31, 2007 and 2006 and the consolidated statements of cash flows for thethree-month periods then ended have been prepared by the Company without audit.In the opinion of management, all adjustments (which include normal recurringadjustments) necessary to present fairly the financial position, results ofoperations, and cash flows at August 31, 2007 and 2006 and for the three monthsthen ended have been made. 

Certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with generally acceptedaccounting principles in the United States of America have been condensed oromitted. It is suggested these condensed financial statements be read inconjunction with the financial statements and notes thereto included in theCompany's May 31, 2007 audited financial statements and form 10-KSB. The resultsof operations for the three-month period ended August 31, 2007 are notnecessarily indicative of the operating results for the entire year.

The presentation of financial statements in conformity withgenerally accepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets, liabilities, anddisclosure of contingent assets and liabilities at the balance sheet date, andthe reported amounts of revenues and expenses during the reporting period. Theestimates and assumptions used in the accompanying condensed financialstatements are based upon management's evaluation of the relevant facts andcircumstances as of the time of the financial statements. Actual results coulddiffer from those estimates.

NOTE 2 - COMPANY'S CONTINUED EXISTENCE

The accompanying consolidated financial statements have beenprepared in conformity with accounting principles generally accepted in theUnited States of America, which contemplate continuation of the 

Company as a going concern. However, the Company hassustained substantial losses and has a significant working capital deficit. TheCompany intends to generate positive cash flows from operations throughincreased sales utilizing the network of distributors in place and fromfinancing activities by issuing additional stock, and obtaining necessarycapital through additional advances from the Company's principal stockholder orthrough private placements.

To continue operations, the Company must raise additionalcapital. In December 2006, the Company announced a best efforts privateplacement of $3,000,000 at $1.50 per share. This placement was subsequentlycancelled, and a new offering was immediately introduced for $3,000,000 U.S. at$1.00 per unit. The proceeds of the private placement are to be used for regularcorporate needs as well as funding the product launch of our recently acquiredrights to the world's most powerful as stated by the scientific research teamthat developed the natural immune booster product. One group of investors hasinvested funds to date. That group required that all investments be made for anaverage of $1.00 per share, with a one-year warrant to purchase an additionalshare at $1.25 per share, prior to the 1 for 3 reverse stock split approved onJuly 27, 2007. The Company received the first $600,000 on December 6, 2006,$999,950 on March 31, 2007, $700,000 on July 23, 2007 and $500,000 on September28, 2007. However, there can be no assurance the Company will be able to obtainadditional capital from private placements in the future. The Company has noother committed sources or arrangements for additional financing.

The financial statements do not include any adjustmentrelating to recoverability and classification of recorded assets, or the amountsand classification of liabilities that might be necessary should the Company beunable to continue to exist. Management believes that actions presently beingtaken provide the opportunity for the Company to continue as a going concern.

NOTE 3 - INVENTORIES

Inventories summarized below are priced at the lower of first-in, first-outcost or market:

 
August 31 
 
May 31         2007          2007Finished goods and supplies         $                                68,276          $                                56,050Raw materials 24,525  26,571
Allowance for obsolensce 
(1,500) 
 
 (18,611)     Total           $                                  91,301                   $                                  64,010
 

NOTE 4 - OTHER ASSET- IMMUNE BOOSTER LICENSE

 

From December 6, 2006 through August 31, 2007, the Companyhas made payments of $1,567,531 for licensing fees associated with an exclusivelicense and distribution agreement to acquire the worldwide marketing rights tothe world's most powerful, natural immune booster discovered to date, as statedby the scientific research team that developed the product. These rights arebeing acquired from Nordic Immotech Trading APS, a leading life science companywith a successful history of producing unique, patented products that aredistributed on a global scale. On December 1, 2006, the Company, through itswholly owned subsidiary, Phytolab Solutions, Inc. finalized the closing of thisexclusive global license and distribution agreement with respect to this naturalimmune booster product. Phytolab Solutions, Inc. has not yet begun to market orsell these products. As part of the closing for this agreement, the Company paid$550,000 per the terms of the agreement on December 6, 2006 and two additional$500,000 payments in April and August 2007. The agreement calls for additionalinstallment payments totaling $950,000 to be paid as follows:

$500,000                            September 30, 2007             $450,000                            November 30, 2007

The Company has imputed interest on these installments at arate of 10%. The discounted value of the licensed asset totals $2,373,190.Additional costs for legal were also incurred which totaled $17,531. Theremaining installments payable, net of the calculated imputed interest, totals$919,415 as of August 31, 2007. Since the sales and marketing of this new immunebooster product has not been initiated, no amortization of the licensed assethas been made for the three months ended August 31, 2007. The Company is in thefinal stages of completing the packaging and marketing materials for this newproduct. 

As part of the license agreement noted above Nordic Immotechshall pay a royalty of ten percent (10%) of net sales of products sold by Nordicand or affiliates to independent third parties in territories outside of theUnited States.

In a separate agreement, the Company was granted an option topurchase all the shares in Nordic Immotech (the supplier). Subject to the termsand conditions of the separate agreement, the Company has the option to purchaseall of the shares of Nordic Immotech (170,000 shares) at a fixed price of $76.47per share for a total of $13,000,000. The Company may exercise the optionanytime before December 1, 2008.

 

NOTE 5 - DISTRIBUTOR STOCK BONUS PLAN

Prior to June 1, 2007, The Company offered to itsdistributors a plan whereby the distributors could earn a stock bonus based onsales and "bonus points." Distributors earned certificates redeemable for oneshare of the Company's common stock three years after the certificate has beenearned. The number of certificates outstanding at August 31, 2007 and May 31,2007 were 103,952. The liability for the bonus points of $111,695 at August 31,2007 and May 31, 2007 is included in accrued compensation and benefits. Theseamounts are redeemable into common stock at a fair market value on the date thatthey are fully earned and redeemed. During the quarter ended August 31, 2007 andyear ended May 31, 2007, no shares were issued to various distributors underthis plan. Effective June 1, 2007 this plan was discontinued, however theliability will remain for a period of 3 years relating to the 103,952 shareswhich were earned but not yet issued. As the shares vest over the three yearperiod of time, the stock certificates will be issued and will correspondinglyreduce this liability.

NOTE 6 -STOCKHOLDERS' EQUITY

On July 27, 2007, the Board of Directors approved a reversesplit of its common stock on a basis of 1 new share for each 3 old shares.Shareholders of record as of the effective date of August 20, 2007 have received1 new share for three old shares outstanding. All per share information and EPScalculations including prior periods reflects the effect of this reverse stocksplit.

In July 2007, we continued our private placement offering of1,000,000 shares of our common stock after taking into account the 1 for 3reverse stock split in August 2007. The placement consisted of selling unitswhich included one share of common stock and a warrant (one year term) topurchase one share of our common stock at an exercise price of $3.75 for a unitprice of $3.00. We sold 233,333 units for $700,000. As of August 31, 2007 we hadsold 766,667 units and received $2,299,950 in proceeds, net of transaction costsin connection with this private placement.

Stock Warrants

As of August 31, 2007 the Company has 533,333 warrantsoutstanding at an exercise price of $3.75 with a remaining term of no longerthan 1 year.

Stock Option Plan

In June 2007, The Board of Directors authorized a stockoption plan whereby management could issue of up to 2,000,000 options topurchase shares of the Company's common stock. The stock options may be issuedto directors, officers, employees and consultants of the Company. Optionsgranted under this plan are non-qualified stock options and have exercise pricesand vesting terms established by the Board of Directors at the time of eachgrant. Options must be exercised within five years of grant date, unlessotherwise extended by the Board of Directors or unless grantee ceases to be anofficer, director, employee or consultant of the Company. As of August 31, 2007,no stock options were issued under this plan.

NOTE 7 - CONTINGENCIES

In the ordinary course of business, the Company is exposed tolegal actions and threatened claims and incurs costs to defend against suchlegal actions and claims. Company management is not aware of any suchoutstanding, pending or threatened action, claim or other circumstance thatwould materially affect the Company's financial position or results ofoperations. 

NOTE 8 - INCOME TAXES

Effective June 1, 2007, the Company adopted FASBInterpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes" toaddress the non-comparability in reporting tax assets and liabilities resultingfrom a lack of specific guidance in FASB Statement of Financial AccountingStandards No. 109 (SFAS 109), "Accounting for Income Taxes" on the uncertaintyin income taxes recognized in an enterprise's financial statements.Specifically, FIN 48 prescribes (a) a consistent recognition threshold and (b) ameasurement attribute for the financial statement recognition and measurement ofa tax position taken or expected to be taken in a tax return, and providesrelated guidance on derecognition, classification, interest and penalties,accounting interim periods, disclosure and transition. To the extent interestand penalties would be assessed by taxing authorities on any underpayment ofincome taxes, such amounts would be accrued and classified as a component ofincome tax expenses on the consolidated statement of operations. The adoption ofFIN 48 did not impact the consolidated financial statements for the three monthsended August 31, 2007. The Company's federal and state tax returns arepotentially open to examinations for fiscal years 2003-2006.
Deferred taxes are provided on a liability method wherebydeferred tax assets are recognized for deductible temporarydifferences and operating loss and tax credit carryforwards and deferredtax liabilities are recognized for taxable temporary differences. Temporarydifferences are the differences between the reported amounts of assets andliabilities and their tax basis. Deferred tax assets are reduced by a valuationallowance when, in the opinion of management, it is more likely than not thatsome portion or all of the deferred tax assets will not be realized. Deferredtax assets and liabilities are adjusted for the effects of changes in tax lawsand rates on the date of the enactment. The Company has recorded a fullvaluation allowance for all deferred tax assets due to the significance of itscontinued operating losses.

NOTE 9 - RELATED PARTY TRANSACTIONS
**Intellectual Property License Agreement**
In January 1999, we entered into an intellectual propertylicense agreement (the "License Agreement") with Jurak Holdings Limited ("JHL"),a corporation organized under the laws of the Province of Alberta and anaffiliate of our Chief Executive Officer and one of our directors. Pursuant tothe terms and 

provisions of the License Agreement, we are required to paythe greater of $500,000 for fiscal year 2003 and each calendar year thereafter,during the first ten years of the License Agreement (the "Minimum Royalty Fee"),or eight percent of the net sales price of all licensed products sold under theLicense 

Agreement (the "Continuing Royalty Fee"). After fiscal 2013,we are required to make payments in the amount of the Continuing Royalty Fee.

For the three months ended August 31, 2007 and 2006, theminimum royalty fee for the amount of $125,000 was expensed. The accruedpayments due and owing to JHL under the License Agreement for the MinimumRoyalty Fee and the Continuing Royalty Fee were $735,686 and $631,856 at August31, 2007 and May 31, 2007, respectively.

NOTE 10 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 2007, the FASB issued Statement of FinancialAccounting Standards Statement No. 159, *The Fair Value Option for FinancialAssets and Financial Liabilities - Including an Amendment of FASB Statement No.115* ("SFAS No. 159"). This standard permits an entity to choose to measuremany financial instruments and certain other items at fair value. This standardis effective for financial statements issued for fiscal years beginning afterNovember 15, 2007. We believe the adoption of SFAS No. 159 will not have amaterial impact on our consolidated financial position or results of operations

In September 2006, the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standards No. 157, *Fair ValueMeasurements*("SFAS No. 157"). This standard clarifies the principle thatfair value should be based on the assumptions that market participants would usewhen pricing an asset or liability. Additionally, it establishes a fair valuehierarchy that prioritizes the information used to develop those assumptions.This standard is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007. We are currently evaluating the impact ofthis statement. We believe the adoption of SFAS No. 157 will not have a materialimpact on our consolidated financial position or results of operations.

NOTE 11 - SUBSEQUENT EVENTS 

As a continuation to the Company's private placement offering initiated inDecember 2006, the Company issued an additional 166,667 restricted common sharesand warrants in exchange for $500,000 cash on September 28, 2007. Proceeds wereused to pay the September 30, 2007 immune booster license installment payment of$500,000.

 
Item 2.Management's Discussion and Analysis of Financial

Condition and Results of Operations 

Overview

Lifequest World Corporation, (formerly Phytolabs, Inc. andJurak Corporation World Wide, Inc.), a Minnesota corporation incorporated onNovember 1, 1997, currently trades on the Over-the-Counter Bulletin Board underthe symbol "LQWC". We are a product-focused company specializing in the herbalsupplement industry and market.

We distribute our products through a network marketing systemusing independent distributors. Network marketing appeals to a widecross-section of people, particularly those seeking to supplement income, starta home-based business or pursue entrepreneurial opportunities other thanconventional full-time employment. We consider our attractive compensation planand cash bonus pools to be attractive components of our network marketingsystem. We also believe that our network marketing system is ideally suited tomarket herbal supplement products because sales of such products arestrengthened by ongoing personal contact between our distributors and theircustomers. Distributors are given the opportunity through sponsored events andtraining sessions to network with other distributors, develop selling skills andestablish personal goals. We supplement monetary incentives with other forms ofrecognition in order to further motivate and foster an atmosphere of excitementthrough our distributor network. 

We have obtained trademark protection for the name "JC Tonic"within the United States and within Canada. We also own the web siteswww.jurak.com, www.jctonic.com and www.tonicman.com. 

The Company is also obtaining the worldwide marketing rightsto the world's most powerful, natural immune booster discovered to date, asstated by the scientific research team that developed the product. These rightsare being acquired from a leading life science company with a successful historyof producing unique, patented products that are distributed on a global scale.On December 1, 2006, the Company finalized the closing of this exclusive globallicense and distribution agreement with respect to this natural immune boosterproduct. The Company has not yet begun to market or sell these products, butexpects to begin in the second quarter of fiscal 2008. (See Note 4)

The following discussion and analysis of our results ofoperations and financial position should be read in conjunction with our auditedfinancial statements and the notes thereto, included in our 10-KSB filed for theyear ended May 31, 2007. Our financial statements are prepared in accordancewith U.S. GAAP. 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

The following discussion is intended to provide an analysisof our financial condition and should be read in conjunction with our auditedfinancial statements and the notes thereto.  The matters discussed in thissection, which are not historical or current facts, deal with potential futurecircumstances and developments.  Such forward-looking statements include,but are not limited to, the development plans for our growth, trends in theresults of our development, anticipated development plans, operating expensesand our anticipated capital requirements and capital resources.  Our actualresults could differ materially from the results discussed in theforward-looking statements.

The accompanying financial statements have been prepared inconformity with accounting principles generally accepted in the United States ofAmerica, which contemplate continuation of the Company as a going concern.However, the Company has sustained substantial losses and its liabilities exceedits assets. The Company intends to generate positive cash flows from operationsthrough increased sales utilizing the network of distributors in place withexisting products and the new natural immune booster products, issuingadditional stock, and obtaining necessary capital through additional advancesfrom the Company's principal stockholder or through private placements.

To continue operations, the Company must raise additionalcapital. As stated in Note 6, the Company has sold additional stock in a privateplacement during the three months ended August 31, 2007.  Additionally, theCompany has sold additional stock in September 2007 for proceeds of $500,000. However, there can be no assurance the Company will be able to obtain additionalcapital from private placements in the future.

In December 2006, the Company announced a best effortsprivate placement of $3,000,000 at $1.50 per share. The proceeds of the privateplacement are to be used for regular corporate needs as well as funding theproduct launch of our recently acquired rights to the world's most powerful,natural immune booster product. One group of investors has invested funds todate. That group required that all investments be made for an average of $1.00per share, with a one-year warrant to purchase an additional share at $1.25 pershare, these terms have not been restated to reflect the 1 for 3 reverse stocksplit on August 20, 2007. The Company received the first $600,000 on December 6,2006, $999,950 on March 31, 2007, $700,000 on July 23, 2007 and $500,000 onSeptember 28,2007.

With the formal completion of the exclusive global licenseand distribution agreement relative to the natural immune booster product, theCompany will accelerate work on the packaging and branding of this new productto make it widely available to North American and European markets with ananticipated launch in the 3rd quarter of fiscal 2008.
**Three months Ended August 31, 2007 Compared to Three monthsEnded August 31, 2006**
Total sales for the three months ended August 31, 2007 was$282,504 compared to $255,491 in the same period ended in 2006. Gross profit was$206,148 for the three months ended August 31, 2007 compared to $203,586 for thesame period ended in 2006, as further discussed below. The net loss during thethree months ended August 31, 2007 was $349,424 compared to a net loss of$280,257 in the same period ended in 2006.

Sales and Gross Margins

Sales for three months ended August 31, 2007 increasedslightly to $282,504 compared to $255,491 in the same period ended in 2006.Management is confident that improved computer system tracking and reporting, areplicated website and significant new product offerings in fiscal 2008 willresult in an increase in sales volumes.

Gross profit in the three months ended August 31, 2007increased slightly to $206,148 compared to $203,586 in the same period ended in2006. Gross profit as a percentage of revenue decreased to 73% in the threemonths ended August 31, 2007 compared to 80% in the same period ended in 2006 asa result of increased material, packaging and freight costs in the currentperiod.

Royalty Expense-Related Party

The minimum royalty expense-related party accrued to JurakHoldings Limited (related party) remained consistent for both periods at$125,000.

Distribution, Selling and Administrative Expenses

Total distribution, selling and administrative expenses forthe three months ended August 31, 2007 were $399,914 compared with $358,843 forthe same period ended in 2006. The increase is primarily related to increases inexpenses and consulting fees associated with the development and promotion ofthe Company's new product offerings expected to be available late 2007. Otherselling and administrative expenses were consistent with the prior period. 

Interest expense for the three months ended August 31, 2007was $30,658 compared with $0 for the same period in the prior year. Current yearinterest costs relate primarily to the imputed interest on the installmentpayable-immune booster license. 

Liquidity and Capital Resources
**Three Month Period Ended August 31, 2007

We have historically had more expenses and cost of sales thanrevenue in each year of our operations. The accumulated deficit as of August 31,2007 was $6,360,658 compared to $6,011,234 as of May 31, 2007. Generally, wehave financed operations to date through the proceeds of the private placementof equity and debt securities and sales revenue. In connection with our businessplan, management anticipates that there may be additional increases in operatingexpenses and capital expenditures relating to the new immune booster products.We intend to finance these expenses with further issuances of our securities andrevenues from operations. Therefore, we expect we may need to raise additionalcapital and increase our revenues to meet long-term operating requirements.

We currently have a $3,000,000 private placement offering inprocess. These funds will be used to make the required payments for our newlicense agreement and to launch and market our natural immune booster products.

At August 31, 2007, the Company had $131,815 of unrestrictedcash compared to $197,338 of unrestricted cash at May 31, 2007. The Company hadcurrent assets of $270,821 and current liabilities of $1,991,569 at August 31,2007 compared to current assets of $282,824 and current liabilities of$2,377,809 at May 31, 2007. 

Net cash used in operating activities was $278,257 during thethree months ended August 31, 2007 compared to net cash used in operatingactivities of $183,238 in the same period ended in 2006. The increase was dueprimarily to the increased operating loss for the three months ended August 31,2007 compared to the operating loss for the three months ended August 31, 2006after adjusting for the net increase in trade payables and accrued expenses.

Net cash used in investing activities was $0 in the firstthree months ended August 31, 2007 compared to $17,372 in the same period endedin 2006. The change was caused primarily by the initial costs associated withthe purchase of the other asset-immune booster license in 2006. 

Net cash provided by financing activities was $212,734 in thefirst three months ended August 31, 2007 compared to net cash provided byfinancing activities in the same period in 2006 of $156,691. Proceeds from theissuance of common stock were $700,000 in the first three months ended August31, 2007 compared to $200,000 in the same period of 2006. In December, 2006 theCompany announced a best efforts private placement of $3,000,000 U.S. at $1.50per share. The placement was subsequently cancelled, and a new offering wasimmediately introduced for $3,000,000 U.S. at $1.00 per unit. Each unit consistsof one share of common stock and one-year warrant to purchase one share ofcommon stock at $1.25. These terms do not reflect the 1 for 3 reverse stocksplit on August 20, 2007.The proceeds of the private placement are to be usedfor regular corporate needs as well as funding the product launch of ourrecently acquired rights to the world's most powerful as stated by thescientific research team that developed the natural immune booster product. TheCompany received the first $600,000 on December 6, 2006, $999,950 on March 31,2007, $700,000 on July 23, 2007 and $500,000 on September 28, 2007.

Critical Accounting Policies

Our critical accounting policies, including the assumptionsand judgments underlying them, are discussed in our fiscal 2007 Form 10-KSB inNote 1 Summary of Significant Accounting Policies included in our ConsolidatedFinancial Statements. There were no significant changes to our criticalaccounting policies during the three months ended August 31, 2007. Thesepolicies have been consistently applied in all material respects and disclosesuch matters as allowance for doubtful accounts, sales returns, inventoryvaluation, warranty expense, income taxes, revenue recognition and fixed assetand intangible asset impairment recognition. On an ongoing basis, we evaluateour estimates based on historical experience and on various other assumptionsthat are believed to be reasonable under the circumstances, the result of whichform the basis for making judgments about the carrying value of assets andliabilities that are not readily apparent from other sources. Results may differfrom these estimates due to actual outcomes being different from those on whichwe based our assumptions. Management on an ongoing basis reviews these estimatesand judgments.

Recently Issued Accounting Pronouncements

In February 2007, the FASB issued Statement of FinancialAccounting Standards Statement No. 159, *The Fair Value Option for FinancialAssets and Financial Liabilities - Including an Amendment of FASB Statement No.115* ("SFAS No. 159"). This standard permits an entity to choose to measuremany financial instruments and certain other items at fair value. This standardis effective for financial statements issued for fiscal years beginning afterNovember 15, 2007. We believe the adoption of SFAS No. 159 will not have amaterial impact on our consolidated financial position or results of operations.

In September 2006, the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standards No. 157, *Fair ValueMeasurements*("SFAS No. 157"). This standard clarifies the principle thatfair value should be based on the assumptions that market participants would usewhen pricing an asset or liability. Additionally, it establishes a fair valuehierarchy that prioritizes the information used to develop those assumptions.This standard is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007. We are currently evaluating the impact ofthis statement. We believe the adoption of SFAS No. 157 will not have a materialimpact on our consolidated financial position or results of operations. 

Item 3. Controlsand Procedures 

(a)    Evaluation of Disclosure Controls andProcedures

The Company's management, Anthony Carl Jurak, our ChiefExecutive Officer and acting Chief Accounting Officer, conducted an evaluationof the effectiveness of the Company'ss disclosure controls and procedures, asdefined in Exchange Act Rule 13a-15(e), as of August 31, 2007 (the "DisclosureControls Evaluation"). Based on that evaluation, the Company's chief executiveofficer and chief accounting officer, President and Vice President ofOperations/Assistant Secretary concluded that as of the end of the periodcovered by this report the Company's disclosure controls and procedures wereeffective to provide a reasonable level of assurance that: (i) informationrequired to be disclosed by the Company in the reports the Company files orsubmits under the Exchange Act is recorded, processed, summarized and reportedwithin the specific time periods in the Securities and Exchange Commission'srules and forms and (ii) information required to be disclosed in the reports theCompany files or submits under Exchange Act are accumulated andcommunicated to management, including the chief executive officer and chiefaccounting officer, to allow timely decisions regarding required disclosure, allin accordance with Exchange Act Rule 13a-15(e). 

There were no changes in the Company's internal control overfinancial reporting, as defined in Exchange Act Rule 13a-15(f), during thequarter ended August 31, 2007, that have materially affected, or are reasonablylikely to materially affect, the Company's internal control over financialreporting.

A control system, no matter how well conceived and operated,can provide only reasonable, not absolute, assurance that the objectives of thecontrol system are met. Further, the design of a control system must reflect thefact that there are resource constraints, and the benefits of controls must beconsidered relative to their costs. Because of the inherent limitations in allcontrol systems, no evaluation of controls can provide absolute assurance thatall control issues and instances of fraud, if any, within the Company have beendetected. Because of the inherent limitations in a cost-effective controlsystem, misstatements due to error or fraud may occur and not be detected.
However, due to the limited number of Company employeesengaged in the authorization, recording, processing and reporting oftransactions, there is inherently a lack of segregation of duties. The companyperiodically assesses the cost versus benefit of adding the resources that wouldremedy or mitigate this situation, and currently does not consider the benefitsto outweigh the costs of adding additional staff in light of the limited numberof transactions related to the Company's operations.

(b)    Changes in Internal Controls OverFinancial Reporting

There have been no significant changes in internal controlover financial reporting that occurred during the quarter ended covered by thisreport that have materially affected or are reasonably likely to materiallyaffect the Company's internal control over financial reporting.

 

PART II. OTHER                INFORMATION

Item 1. Legal Proceedings

On December 13, 2006, a civil suit was filed in the DistrictCourt of Clark County in and for the State of Nevada by Jurak Corporation WorldWide, Inc. (plaintiffs) and one former employee and her spouse (defendants). Thesuit entails that the former employee processed credit refunds to a debit/creditcard held at their banking institution. In addition, the former employeeembezzled funds by setting up a merchant processing system and diverting thecharging of our distributors' credit cards from our merchant processor to theirprocessor. All is evidenced by information located on the computer used by theformer employee at the Company as well as through other reporting mechanisms andprocessing systems. The Company is seeking relief for damages in excess of$60,000; special damages according to proof; for attorneys' fees and costs ofsuit; and for other and further relief as the Court may deem just and proper ascompensation for monies embezzled by the former employee and her spouse. Noanswer has been received from the defendant and the Company is seeking a defaultjudgment granting all of the relief sought. 

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

During the three month period ended August 31, 2007 theCompany sold 233,333 shares of unregistered common stock at $3.00 under aprivate placement, for a total proceeds of $700,000 to the Company. Relative tothe 233,333 units, each unit consists of one share of common stock and onewarrant to purchase a share of common stock at $3.75. No underwriters were usedfor the sale of common stock. The shares of stock were sold pursuant to anexemption from registration under Rule 506 of Regulation D. 

Item 5 Other Information

No items occurred during the period of this report whichwould have been required to be reported in a Form 8-K which have not beenreported.

There have been on material changes to the procedures bywhich security holders may recommend nominees to the Company's board ofdirectors. 

Item 6 Exhibits
****
The following exhibits are included herein:

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

32. Certifications pursuant        Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sect. 1350).
 
 
Signatures

In accordance with the requirements of the Exchange Act of 1934, theregistrant caused this report to be signed on its behalf by the undersignedthereto, duly authorized.

LifequestWorld Corporation.

By                    /s/ Anthony Jurak 
AnthonyJurak

Date: October 19, 2007                                                                                       Chairman of the Board, Director

ActingChief Accounting Officer**********