FORM 10-QUNITED
STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the quarterly period ended
August 31, 2008OR[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from
________ to ________Commission file number
333-61801LIFEQUEST WORLD CORPORATION(Exact name of registrant as specified
in its charter)MINNESOTA

88-0407679(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer 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)(Former name, former address and former fiscal year, if
changed since last report.) Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [  ] . Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [   ]. No [X]
..   Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. As of October 6, 2008, there were 40,478,830 shares of the
issuers common stock, $0.001 par value, outstanding.


LIFEQUEST WORLD CORPORATION   INDEX   Page
No. Part I.
 Financial Information  Item
1.  Consolidated Financial Statements 3  Item
2.  Managements Discussion and Analysis of Financial
Condition and Results of Operations 10  Item
3.  Qualitative and Quantitative Disclosure About Market Risk 15  Item
4T.  Controls and Procedures 15  Part II.  Other
Information  Item
1.  Legal Proceedings 16  Item
1.A.  Risk Factors 16  Item
2.  Unregistered Sales of Equity Securities and Use of Proceeds 16  Item
3.  Defaults Upon Senior Securities 16  Item
4.  Submission of Matters to a Vote of Security Holders 16  Item
5.  Other Information 16  Item
6.  Exhibits 16      2     LIFEQUEST WORLD CORPORATIONCONSOLIDATED BALANCE SHEETSItem 1.
 Consolidated Financial StatementsAugust 31

May 31Assets:
2008

2008(unaudited)

(audited)____________

____________Current
assets:Cash
and cash equivalents
$
                     -

$
              16,336Accounts
receivable
-

11,646Inventories,
net
298,780

277,879Prepaid
expenses and advances
6,374

10,920____________

____________Total
current assets
305,154

316,781____________

____________Office
furnishings and equipment, net
26,306

6,024____________

____________Other
assets:Deposits
9,919

6,745Intangible
asset, net
2,388,343

2,388,699____________

____________Total
other assets
2,398,262

2,395,444____________

____________Total
Assets
$
          2,729,722

$
          2,718,249____________

________________________

____________Liabilities and Stockholders' Equity:Current
liabilities:Checks
written in excess of bank balance
$
              24,048

$
                     -Current
portion of capital lease obligation
81

321Accounts
payable
202,256

163,358Accounts
payable-related party
96,912

96,912Accrued
compensation and benefits
240,967

215,018Accrued
royalties-related party
1,218,499

1,087,598Payable
to stockholder/officers
161,849

22,980____________

____________Total
current liabilities
1,944,612

1,586,187Capital lease
obligations, net of current portion
-

-____________

____________Total
liabilities
1,944,612

1,586,187____________

____________Stockholders'
equity:Common
stock, par value $0.001 per share, 150,000,000 sharesauthorized,
40,478,830 shares issued and outstanding atAugust
31, 2008 and May 31, 2008, respectively
40,479

40,479Preferred
stock, par value $0.001 per share, 50,000,000 sharesauthorized,
no shares issued or outstanding atAugust
31, 2008 and May 31, 2008, respectively
-

-Additional
paid-in capital
8,559,885

8,559,885Accumulated
deficit
(7,815,254)

(7,468,302)____________

____________Total
stockholders' equity
785,110

1,132,062____________

____________Total
Liabilities and Stockholders' Equity
$
          2,729,722

$
          2,718,249____________

________________________

____________See
accompanying notes to unaudited consolidated financial statements.


LIFEQUEST
WORLD CORPORATIONCONSOLIDATED
STATEMENTS OF OPERATIONS(unaudited)Three months
ended August 31,2008



2007Revenue:Sales-product
$
162,157


$
282,504Royalty
income-immune booster

-



-Total
Revenue

162,157



282,504Cost of sales

32,189



76,356Gross profit

129,968



206,148Royalty expense-related
party

125,000



125,000Distribution, selling
andadministration
expenses

341,156



399,914Loss from
operations

(336,188)



(318,766)Other income and
(expenses)Interest
expense

(10,764)



(30,658)Total
other income and(expense),
net

(10,764)



(30,658)Net loss before income
taxes

(346,952)



(349,424)Income tax
expense

-



-Net loss
$
(346,952)


$
(349,424)Basic and diluted loss
per common share
$
(0.01)


$
(0.01)Weighted average
outstanding common shares-basic and
diluted

40,478,830



34,412,985
(a)(a) Reflects the 1 for 3
reverse stock split effective August 20, 2007.See
accompanying notes to unaudited consolidated financial statements.


3


LIFEQUEST
WORLD CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)Three months
ended August 31,2008

2007CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
$
               (346,952)

$
               (349,424)Adjustments to reconcile net lossto net cash used in operating
activities:Depreciation and
amortization
776

2,243Changes in operating assets
and liabilities:Accounts
receivable
11,646

(24,708)Inventories
(20,901)

(27,291)Prepaid
expenses and advances
4,546

(1,521)Deposits
(3,174)

21,739Accounts
payable
38,898

17,205Accrued
expenses
156,850

83,500____________
____________Net
cash used in operating activities
(158,311)

(278,257)____________
____________CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of office furnishings and equipment
(20,702)

-____________
____________Net cash
used in investing activities
(20,702)

-____________
____________CASH FLOWS FROM FINANCING ACTIVITIES:Checks issued in excess of bank balance
24,048

-Proceeds from issuance of common stock, net of
issuance costs
-

700,000Payments on installment payable-immune booster
license
-

(465,098)Payments on capital lease obligations
(240)

(228)Advances from (repayment to)
stockholder/officer
138,869

(21,940)____________
____________Net cash
provided by financing activities
162,677

212,734____________
____________NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
(16,336)

(65,523)CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD
16,336

197,338____________
____________CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
                           -

$
                 131,815____________
________________________
____________See accompanying notes to unaudited
consolidated financial statements.


4


NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  NOTE 1 - BASIS OF
PRESENTATION  The
accompanying unaudited consolidated balance sheets of LifeQuest World
Corporation (the Company, We) as of August 31, 2008 and the related
unaudited consolidated statements of operations for the three months ended
August 31, 2008 and 2007 and the unaudited consolidated statements of cash flows
for the three-month periods then ended have been prepared by the Company in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X.  In the opinion of management, all adjustments (which include normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at August 31, 2008 and 2007 and for the
three months then ended have been made.  Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles in the
United States of America have been condensed or omitted.  It is suggested
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Companys May 31, 2008 audited
financial statements and Form 10-KSB.  The results of operations for the
period ended August 31, 2008 are not necessarily indicative of the operating
results for the entire year.  The
presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, and disclosure of contingent
assets and liabilities at the balance sheet date, and the reported amounts of
revenues and expenses during the reporting period.  The estimates and
assumptions used in the accompanying condensed financial statements are based
upon managements evaluation of the relevant facts and circumstances as of the
time of the financial statements.  Actual results could differ from those
estimates.  NOTE
2  COMPANYS CONTINUED EXISTENCE:  The
accompanying unaudited consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern.
 However, the Company has sustained substantial losses and has a
significant working capital deficit.  The Company intends to generate
positive cash flows from operations through increased sales utilizing the
network of distributors in place and from financing activities by issuing
additional stock, and obtaining necessary capital through additional advances
from the Companys principal stockholder or through private placements. There
can be no assurance the Company will be able to obtain additional capital from
private placements in the future.  The Company has no other committed
sources or arrangements for additional financing.  The
financial statements do not include any adjustment relating to recoverability
and classification of recorded assets, or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue to
exist.


5


NOTE
3  INVENTORIES:  Inventories
summarized below are priced at the lower of first-in, first-out cost or
market:  August
31 May
31 2008 2008 Finished
goods and supplies $ 142,599 $ 117,593 Raw
materials 166,181 170,286 Allowance
for obsolescence (10,000) (10,000) Total $ 298,780 $ 277,879  NOTE 4  INTANGIBLE
ASSET:  On December 1, 2006, the Company purchased, through an exclusive
license and distribution agreement, the worldwide marketing rights to the most
powerful, natural immune booster discovered to date (ImmunXT), as stated by the
scientific research team that developed the product. These rights have been
acquired from Nordic Immotech Trading APS, a leading life science company with a
successful history of producing unique, patented products that are distributed
on a global scale. The agreement has an initial term of five years. The
agreement automatically renews an additional five years if minimum purchase
commitments are met. The total recorded cost of the license was $2,390,721. The Company
began marketing the product domestically in February 2008. The Company began
amortizing the license at that time and is calculating the amortization over the
estimated sales volume that is anticipated over the remaining term of the
licensed agreement to properly match revenue and expenses. The accumulated
amortization for the period ended August 31, 2008 and May 31, 2008, was $2,378
and $2,022, respectively. Under this license agreement, the Company has minimum purchase
commitments for the calendar years as follows: 2007-1,000 Kilograms (Kg)
($490,000), 2008-2,000 Kg ($980,000) (as amended), 2009-9,000 Kg ($4,410,000),
2010-15,000 Kg ($7,350,000), and 2011 and each year thereafter-20,000 Kg
($9,800,000). If the Company fails to meet the minimum purchase requirements,
Nordic Immotech has the right to terminate their license agreement with three
months written notice from the expiration of the applicable calendar year. The
Company has met the minimum purchase requirements for calendar year 2007. The
value of these commitments was determined with pricing as of August 31, 2008. As part of the license agreement noted above, Nordic Immotech
shall pay the Company a royalty of ten percent (10%) of net sales of raw
materials sold by Nordic and or affiliates to independent third parties in
territories outside of the United States. In a separate agreement, the Company was granted an option to
purchase all the shares in Nordic Immotech (the supplier). Subject to the terms
and conditions of the separate agreement, the Company has the option to purchase
all of the shares of Nordic Immotech (170,000 shares) at a fixed price of $76.47
per share for a total of $13,000,000. The Company may exercise the option
anytime before December 1, 2008. NOTE 5 DISTRIBUTOR
STOCK BONUS PLAN:  Prior
to June 1, 2007, The Company offered to its distributors a plan whereby the
distributors could earn a stock
bonus based on sales and bonus points. Distributors earned certificates
redeemable for one share of the Companys common stock three years after the
certificate has been earned. The number of


6


certificates outstanding at August 31, 2008 and May 31, 2008 were
88,160. The liability recorded by the Company for these bonus points was
$111,695 at August 31, 2008 and May 31, 2008 which was recorded by the Company
at the fair value of the common stock on the date they were earned. During the
three month period ended August 31, 2008 and year ended May 31, 2008; no shares
were issued to various distributors under this plan. Effective June 1, 2007 this
plan was discontinued and all distributors who had earned certificates under the
plan became fully vested.  As of October 15, 2008, all 88,160 certificates
remain outstanding.  NOTE 6 
CONTINGENCIES:  In the
ordinary course of business, the Company is exposed to legal actions and
threatened claims and incurs costs to defend against such legal actions and
claims.  Company management is not aware of any such outstanding, pending
or threatened action, claim or other circumstance that would materially affect
the Companys financial position or results of operations.  NOTE 7 - INCOME
TAXES:  Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporarydifferences and operating loss and tax credit carryforwards and deferred
tax liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax basis. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of the enactment. The Company has recorded a full
valuation allowance for all deferred tax assets due to the significance of its
continued operating losses.  NOTE 8  RELATED
PARTY TRANSACTIONS:  Intellectual Property License
Agreement  In
January 1999, we entered into an intellectual property license agreement (the
"License Agreement") with Jurak Holdings Limited ("JHL"), a corporation
organized under the laws of the Province of Alberta, Canada and an affiliate of
our Chief Executive Officer and one of our directors. Pursuant to the terms and provisions of the License Agreement, we are required to pay the
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 the
License Agreement (the "Continuing Royalty Fee"). After fiscal 2013, we
are required to make payments in the amount of the Continuing Royalty Fee. On
any amounts past due on this agreement, interest will accrue at prime plus
1%.  For the
three months ended August 31, 2008 and 2007, the minimum royalty fee for the
amount of $125,000 was expensed. The accrued payments due and owing to JHL under
the License Agreement for the Minimum Royalty Fee and the Continuing Royalty Fee
were $1,218,499 and $1,087,598 at August 31, 2008 and May 31, 2008,
respectively. The amount owed as of August 31, 2008 includes interest of $16,850
which was recorded due to continued delinquent payments.  The Company has a payable due to the majority stockholder totaling
$161,849 and $22,980 at August 31, 2008 and May 31, 2008, respectively. These
liabilities are for reimbursement of business expenses due the stockholder and
for working capital advances. No interest is being charged on these balances.


7


The Company has included in accounts payable  related party
balances due to an entity owned by the majority stockholder totaling $96,912 at
August 31, 2008 and May 31, 2008, respectively. These liabilities are for
consulting services and reimbursement of business expenses due the entity. No
interest is being charged on these balances.  NOTE 9
 COMMITMENT  The
Company has entered into an endorsement and consulting agreement with a film and
television actor to promote the immune booster product line. The one year
agreement was effective May 1, 2008, with a Company option to extend two years.
The Company has a minimum commitment of $42,000 during the first year. There are
escalator clauses based on sales milestones, as defined in the agreement, which
could cause the commitment to increase. The Company has expensed $7,000 for the
quarter ended August 31, 2008, relating to this agreement.  NOTE 10
 SUBSEQUENT EVENT:  In
September 2008, the Board of Directors has designated 10,000,000 of 50,000,000
total authorized preferred shares as Series B. The Series B preferred shares
have no liquidating or other preference, cannot be converted to common stock and
have no dividend rights. However, each Series B preferred share has the
equivalent of ten common shares for voting rights. The Company will vote with
Series B preferred stock and common stock shareholders as one class.  As of
October 15, 2008, no shares of the Series B preferred have been sold.  NOTE 11
 RECENTLY ISSUED ACCOUNTING PRNOUNCEMENTS  In
February 2008, the FASB issued FASB Staff Position FAS 157-2 (FSP FAS 157-2) 
Effective Date of FASB Statement No. 157 which delays the effective date
of SFAS No. 157 for non-financial assets and non-financial liabilities that
are recognized or disclosed in the financial statements on a nonrecurring basis
to fiscal years beginning after November 15, 2008.  These
non-financial items include assets and liabilities such as reporting units
measured at fair value in a goodwill impairment test and non-financial assets
acquired and non-financial liabilities assumed in a business combination. The
Company has not applied the provisions of SFAS No. 157 to its non-financial
assets and non-financial liabilities in accordance with FSP FAS 157-2.  In
April 2008, the FASB issued FASB Staff Position (FSP) No. FAS
142-3, Determination of the Useful Life of Intangible Assets. This guidance
addresses the determination of the useful life of intangible assets which have
legal, regulatory or contractual provisions that potentially limit a companys
use of an asset. Under the new guidance, a company should consider its own
historical experience in renewing or extending similar arrangements. We are
required to apply the new guidance to intangible assets acquired after
December 15, 2008.  In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations (SFAS No. 141(R)). SFAS No. 141(R) retains the fundamental
requirements in Statement 141 that the acquisition method of accounting (which
Statement 141 called the purchase method) be used for all business combinations
and for an acquirer to be identified for each business combination. In general,
the statement 1) broadens the guidance of SFAS No. 141, extending its
applicability to all events where one entity obtains control over one or more
other businesses, 2) broadens the use of fair value measurements used to
recognize the assets acquired and liabilities assumed, 3) changes the accounting
for acquisition


8


related fees and restructuring costs incurred in connection with
an acquisition, and 4) increases required disclosures. We are required to apply
SFAS No. 141(R) prospectively to business combinations for which the acquisition
date is on or after January 1, 2009. Earlier application is not permitted.


9


Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Overview  Lifequest World Corporation, a Minnesota corporation incorporated
on November 1, 1997, currently trades on the Over-the-Counter Bulletin Board
under the symbol "LQWC". LifeQuest World Corporation is a Life Science company
that is dedicated to significantly improving the lives of its family members,
associates and distributor organization. We strive daily through our own research and development
laboratories, as well as our professional association with one of the worlds
leading botanical research centers, to provide human beings with solutions to
many of lifes unanswered health challenges. Infusing proprietary science under
the scrutiny of Good Manufacturing Practices (GMP), and adhering to the efficacy
of pharmaceutical protocols, LifeQuests products are effective, safe and
superior within the marketplace for nutritional supplements and consumables. But our commitment does not end there. The worlds demand for
health and well-being only begins with proper nutrition. LifeQuest strives to
present a whole-minded approach for our distributers to better living by putting
equal emphasis on an improved life style, freedom through financial reward and
the enhancement of the Human Spirit. We provide extensive product education and personal development
through sophisticated training programs for our distributers. We offer
substantial earning potential available through a generous compensation plan. To
promote optimum health, we have invested millions of dollars to create superior
nutritional supplements and advanced personal care products. It is with great
pride that LifeQuest World Corporation hopes continue to inspire thousands to
change an average existence, into a life of celebration. LifeQuest World Corporation has recently acquired the worldwide
rights to a new, patented Immune-Stimulatory extract from marine sourced
Spirulina developed by leading research scientists at the National Center for
Natural Product Research (NCNPR) at the University of Mississippi. 
LifeQuest had a limited introduction through its distributors its initial launch
of ImmunXT in February 2008. The product named ImmunXT was researched and
developed over a ten year period with exhaustive clinical and scientific testing
with benchmark criteria that it had to be 100% natural and certified
vegetarian.  Per the studies done by NCNPR, ImmunXT is one of the most
powerful Immune-Stimulatory extracts, specifically with respect to macrophage
activation within the innate immune system.  Recent research has shown that
the innate immune system, primarily in the digestive tract, is the bodys first
line of defense and its main function is to guard the body against disease and
invasion by harmful pathogens. Along with this scientific team, LifeQuests own group has decades
of practical research, development and manufacturing experience in nutritional
products and maintain a professional awareness of any new life changing products
available from major product development centers. To be considered for
acquisition, products must have either good reputable academic pedigrees, backed
with very thorough scientific data, or meet product criteria as LifeQuests
Youth Solution that have very long substantiated consumer use with extremely
credible personal, subjective and objective results.  LifeQuest has made a
substantial financial investment along with years of developmental work in the
acquisition of ImmunXT. LifeQuest products also must meet the requirements of strong
functionality and be results-based because we design product research on the
principle that functional, beneficial nutritional products are desired by
consumers today. The consumer understands that good nutritional practices may
reduce the risk of disease. LifeQuests products have been developed
to enhance immune competence, detoxification,


10


functionality at the cellular level and promote digestive health.
LifeQuest believes that an optimal immune system, positive cellular function and
digestive health are vital and beneficial for overall, better physical
health. The following discussion and analysis of our results of operations
and financial position should be read in conjunction with our audited financial
statements and the notes thereto, included in our 10-KSB filed for the year
ended May 31, 2008. Our financial statements are prepared in accordance with
U.S. GAAP.  SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS  The
following discussion is intended to provide an analysis of our financial
condition and should be read in conjunction with our audited financial
statements and the notes thereto.  The matters discussed in this section,
which are not historical or current facts, deal with potential future
circumstances and developments.  Such forward-looking statements include,
but are not limited to, the development plans for our growth, trends in the
results of our development, anticipated development plans, operating expenses
and our anticipated capital requirements and capital resources.  Our actual
results could differ materially from the results discussed in the
forward-looking statements.  The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern.  However, the
Company has sustained substantial losses and its current liabilities exceed its
current assets.  The Company intends to generate positive cash flows from
operations through increased sales utilizing the network of distributors in
place with existing products and the new natural immune booster products,
issuing additional stock, and obtaining necessary capital through additional
advances from the Companys principal stockholder or through private
placements.  To
continue operations, the Company must raise additional capital. However, there
can be no assurance the Company will be able to obtain additional capital from
private placements in the future. The Company has no other committed sources or
arrangements for additional financing.  Three months Ended August 31, 2008 Compared to Three months
Ended August 31, 2007  Total
revenue for the three months ended August 31, 2008 was $162,157 compared to
$282,504 in the same period ended in 2007.  Gross profit was $129,968 for
the three months ended August 31, 2008 compared to $206,148 for the same period
ended in 2007, as further discussed below. The net loss during the three months
ended August 31, 2008 was $346,952 compared to a net loss of $349,424 in the
same period ended in 2007.  Sales and Gross Profit  All
revenue for the three months ended August 31, 2008 and 2007, respectively, were
for product sales. The Company recorded $24,400 in sales for the new ImmunXT
product line for the three months ended August 31, 2008 and none for the
comparable period. There was no royalty income due from Nordic Immotech for
their sales of our natural immune booster product in Europe during either three
month period ended. Sales by Nordic Immotech were expected to be sporadic in
fiscal 2009 as they continue to introduce the ImmunXT product in new markets.
 They also tend to sell product in bulk to large distributers which is a
different marketing model than the Company.


11


Gross profit in the three months ended August 31, 2008 decreased
to $129,968 compared to $206,148 in the same period ended in 2007. Gross profit
as a percentage of revenue increased slightly to 80% in the three months ended
August 31, 2008 compared to 73% in the same period ended in 2007. The increase
in gross profit as a percentage of sales is due to product mix and continued
effort by management to control costs.  Royalty Expense-Related Party  The
minimum royalty expense-related party accrued to Jurak Holdings Limited (related
party) remained consistent for both periods at $125,000.  Distribution, Selling and Administrative Expenses  Total
distribution, selling and administrative expenses for the three months ended
August 31, 2008 were $341,156 compared with $399,914 for the same period ended
in 2007. The selling and administrative expenses decreased slightly compared to
2007. Management continues to monitor and control expenses including eliminating
personnel during 2008. We anticipate increasing personnel and related
distribution, selling and administrative expenses as the new ImmunXT product
line grows in sales.  Interest expense for the three months ended August 31, 2008 was
$10,764 compared with $30,658 for the same period in the prior year. Current
year interest costs decreased compared to prior year due to imputed interest
expense on the purchase of the Nordic License agreement during 2007. This
agreement was paid in full prior to the three months ended August 31, 2008.  Liquidity and
Capital Resources  Three Month Period Ended August 31, 2008  We have
historically had more expenses and cost of sales than revenue in each year of
our operations. The accumulated deficit as of August 31, 2008 was $7,815,254.
 Generally, we have financed operations to date through the proceeds of the
private placement of equity and debt securities and sales revenue. In connection
with our business plan, management anticipates that there may be additional
increases in operating expenses and capital expenditures relating to the new
immune booster products. We intend to finance these expenses with further
issuances of our securities and revenues from operations. Therefore, we expect
we may need to raise additional capital and increase our revenues to meet
long-term operating requirements.  At
August 31, 2008, the Company had $0 of cash compared to $16,336 of cash at May
31, 2008.  The Company had current assets of $305,154 and current
liabilities of $1,944,612 at August 31, 2008 compared to current assets of
$316,781 and current liabilities of $1,586,187 at May 31, 2008.  Net
cash used in operating activities was $158,311 during the three months ended
August 31, 2008 compared to net cash used in operating activities of $278,257 in
the same period ended in 2007. The decrease in cash used by operations was
primarily due to the increase in current liabilities as the Company continues to
monitor its cash needs during the three months ended August 31, 2008.  Net
cash used in investing activities was $20,702 in the first three months ended
August 31, 2008 compared to $0 in the same period ended in 2007. The increase in
2008 was due to the investment in equipment needed for the new ImmunXT product
line.


12


Net
cash provided by financing activities was $162,677 during the three months ended
August 31, 2008 compared to net cash provided by financing activities in the
same period in 2007 of $212,734.  During the quarter ended August 31, 2008,
our primary source of funding came from advances from our officer / stockholder
totaling $138,819.  Issuance of common stock from a private placement in
excess of cash due on the installment note payments for the immune booster
license resulted in the three months ended August 31, 2007 having more cash
provided by financing activities than 2008.  No common stock sales occurred
during the quarter ended August 31, 2008.  Critical Accounting Policies  Our critical accounting policies, including the assumptions and
judgements underlying them, are discussed in our fiscal 2008 Form 10-KSB in Note
1- Summary of Significant Accounting Policies included in our Consolidated
Financial Statements.  There were no significant changes to our critical
accounting policies during the period ended August 31, 2008. On an ongoing
basis, we evaluate our estimates based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances.
 The result of which form the basis for making judgements about the
carrying value of assets and liabilities that are not readily apparent from
other sources.  Results may differ from these estimates due to actual
outcomes being different from those on which we based our assumptions. We consider the following accounting policies to be those most
important to the portrayal of our results of operations and financial
conditions:  Inventory Valuation: The Companys inventories are valued at the
lower of cost or market using the first-in, first-out method (FIFO). Reserves
for overstock and obsolescence are estimated and recorded to reduce the carrying
value to estimated net realizable value. The amount of the reserve is determined
based on projected sales information, plans for discontinued products and other
factors. Though management considers these reserves adequate and proper, changes
in sales volumes due to unexpected economic or competitive conditions are among
the factors that could materially affect the adequacy of this reserve.  Intangible Asset: Intangible asset, entirely comprised of the
ImmunXT license, is recorded at cost and is presented net of amortization.
Amortization is computed over the estimated sales volume that is anticipated
over the remaining term of the licensed agreement to properly match revenue and
expenses.  Income
Taxes: We account for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes as clarified by FIN 48. In the preparation of the Companys
consolidated financial statements, management calculates income taxes. This
includes estimating the Companys current tax liability as well as assessing
temporary differences resulting from different treatment of items for tax and
book accounting purposes. These differences result in deferred tax assets and
liabilities, which are recorded on the balance sheet. These assets and
liabilities are analyzed regularly and management assesses the likelihood that
deferred tax assets will be realized from future taxable income. The valuation
allowance for deferred income tax benefits is determined based upon the
expectation of whether the benefits are more likely than not to be realized.
 The Company has recorded a full valuation allowance for all deferred tax
assets due to the significance of its continued operating losses.


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FIN No. 48 requires the recognition of a financial statement
benefit of a tax position only after determining that the relevant tax authority
would more likely than not sustain the position following an audit. For tax
positions meeting the more-likely-than-not threshold, the amount recognized in
the financial statements is the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate settlement with the relevant
tax authority.  Revenue Recognition: The Company recognizes revenue when the
earnings process is complete, evidenced by persuasive evidence of an agreement,
delivery has occurred or services have been rendered, the price is fixed or
determinable, and collectability is reasonably assured.  The earning
process completion is evidenced through the shipment of goods, as the sales
terms of our products are FOB shipping point, the risk of loss is transferred
upon shipment and there are no significant obligations subsequent to that point.
There are no significant estimates related to revenue recognition.  Recently Isssued Accounting Pronouncements  In
February 2008, the FASB issued FASB Staff Position FAS 157-2 (FSP FAS 157-2) 
Effective Date of FASB Statement No. 157 which delays the effective date
of SFAS No. 157 for non-financial assets and non-financial liabilities that
are recognized or disclosed in the financial statements on a nonrecurring basis
to fiscal years beginning after November 15, 2008.  These
non-financial items include assets and liabilities such as reporting units
measured at fair value in a goodwill impairment test and non-financial assets
acquired and non-financial liabilities assumed in a business combination. The
Company has not applied the provisions of SFAS No. 157 to its non-financial
assets and non-financial liabilities in accordance with FSP FAS 157-2.  In
April 2008, the FASB issued FASB Staff Position (FSP) No. FAS
142-3, Determination of the Useful Life of Intangible Assets. This guidance
addresses the determination of the useful life of intangible assets which have
legal, regulatory or contractual provisions that potentially limit a companys
use of an asset. Under the new guidance, a company should consider its own
historical experience in renewing or extending similar arrangements. We are
required to apply the new guidance to intangible assets acquired after
December 15, 2008.  In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations (SFAS No. 141(R)). SFAS No. 141(R) retains the fundamental
requirements in Statement 141 that the acquisition method of accounting (which
Statement 141 called the purchase method) be used for all business combinations
and for an acquirer to be identified for each business combination. In general,
the statement 1) broadens the guidance of SFAS No. 141, extending its
applicability to all events where one entity obtains control over one or more
other businesses, 2) broadens the use of fair value measurements used to
recognize the assets acquired and liabilities assumed, 3) changes the accounting
for acquisition related fees and restructuring costs incurred in connection with
an acquisition, and 4) increases required disclosures. We are required to apply
SFAS No. 141(R) prospectively to business combinations for which the acquisition
date is on or after January 1, 2009. Earlier application is not permitted.  Off
Balance Sheet Arrangements None.


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ITEM
3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK Our
financial instruments consist mostly of cash. Our only risk is interest
rates which is not considered significant. The
Company does not hold foreign currency since we do not transact business in
foreign currencies, and therefore have no currency exposure. We do not enter
into futures or forward commodity contracts since we have no market risk
exposure with respect to commodity prices.  Item
4T.  Controls and Procedures  Evaluation of Disclosure Controls and Procedures  An
evaluation of the effectiveness of our disclosure controls and procedures (as
such term is defined in Rules 13(a)-15(e) of the Securities Exchange Act of
1934) was carried out by the Company under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer.  Based
on that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that these disclosure controls and procedures were not effective due
to a lack of segregation of duties in our accounting and financial functions,
including our lack of financial expertise relating to our financial reporting
and our quarterly close process. See our Form 10-KSB for additional information
on this matter. Due to our lack of sufficient capital, management has concluded
that with certain oversight controls that are in place, the risks associated
with the lack of segregation of duties and lack of internal financial expertise
are not sufficient to justify the costs of potential benefits to be gained by
adding additional employees at this time. Management intends to periodically
reevaluate this situation. If we secure sufficient capital, we expect to examine
the possibility of increasing staffing to mitigate the current lack of
segregation of duties within the accounting and financial functions.  Notwithstanding the material weaknesses referred to above that
continued to exist as of August 31, 2008, our Chief Executive/Financial Officer
has concluded that the financial statements included in this Form 10-Q present
fairly, in all material respects, the financial position, results of operations
and cash flows of the Company as required for interim financial statements.  Changes
in Internal Controls Over Financial Reporting  There
were no changes in the Companys internal control over financial reporting,
during the quarter ended August 31, 2008, that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over
financial reporting.


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PART
II.  OTHER INFORMATION  Item 1.  Legal
Proceedings  On
December 13, 2006, a civil suit was filed in the District Court of Clark County
in and for the State of Nevada by Jurak Corporation World Wide, Inc.
(plaintiffs) and one former employee and her spouse (defendants). The suit
entails that the former employee processed credit refunds to a debit/credit card
held at their banking institution. In addition, the former employee embezzled
funds by setting up a merchant processing system and diverting the charging of
our distributors' credit cards from our merchant processor to their processor.
All is evidenced by information located on the computer used by the former
employee at the Company as well as through other reporting mechanisms and
processing systems. The Company is seeking
relief for damages in excess of $60,000; special damages according to proof; for
attorneys' fees and costs of suit; and for other and further relief as the Court
may deem just and proper as compensation for
monies embezzled by the former employee and her spouse. No answer has been
received from the defendant and the Company is seeking a default judgment
granting all of the relief sought.  Item 1A. Risk
Factors  An investment in our
common stock involves a number of very significant risks. See our Form 10-KSB
for additional information on this matter.  Item 2.
  Unregistered Sales of Equity Securities and Use of Proceeds  There
were none during the three months ended August 31, 2008.  ITEM 3.
   Defaults on Senior Securities None. ITEM 4.
   Submission of matters to a Vote of Security Holders None.  Item 5.
   Other Information  No
items occurred during the period of this report which would have been required
to be reported in a Form 8-K which have not been reported.  Item 6.
  Exhibits  The following exhibits are included herein:  31.1 Certification of Chief Executive Officer and Chief Accounting
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14
and 15d-14 of the Exchange Act).  32. Certification pursuant Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. §1350).


16


Signatures  In accordance with
the requirements of the Exchange Act of 1934, the registrant caused this report
to be signed on its behalf by the undersigned thereto, duly authorized.  Lifequest
World Corporation.  By /s/
Anthony Jurak Anthony
Jurak Date:
 October 16, 2008 Chief
Executive Officer and Acting
Chief Accounting Officer


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