FORM 10-QSB
                                    
                         SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    
                               (Mark One)
                                    
      [X ] Quarterly report pursuant to Section 13 or 15(d) of the 
                      Securities Exchange Act of 1934 
                                    
                For the quarterly period ended...12/31/98
                                   or
      [ ] Transition report pursuant to Section 13 or 15(d) of the 
                       Securities Exchange Act of 1934
                                    
   For the transition period from October 1, 1998 to December 31, 1998
                                    
                    Commission file number 000-24355.
                                    
                      WebQuest International, Inc.
             (Exact name of registrant as specified in its charter)
                                    
                  Nevada                                  86-0894019
      (State or other jurisdiction of                  (I.R.S. Employer 
       incorporation or organization)                 Identification No.)
                                    
                       1662 N. Hwy 395, Suite 203
                             Minden NV 89403
                     (Address of principal executive offices)
                                    
                              775-782-0350
               (Registrant's telephone number, including area code)
                                    
     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 that the registrant was
required to file such reports), and (2) has shorter period been subject to
such filing requirements for the past 90 days.
                                    
                            Yes X     No_____
                                    
 As of December 31, 1998 there were 4,258,618 outstanding shares of the
          issuer's Common stock, $.001 par value, outstanding.
                                    
              Transitional Small Business Disclosure Format
                            Yes_____ No__X___
          
<PAGE>

TABLE OF CONTENTS


Part I-Financial Information
    
   Item 1. Financial Statements.                                         
  
       Unaudited Condensed Balance Sheets as of December 31, 1998
       and September 30, 1998

       Unaudited Condensed Statements of Operations for the three 
       months ended December 31, 1998 and 1997 

       Unaudited Condensed Statements of Comprehensive Income for
       the three months ended December 31, 1998 and 1997

       Unaudited Condensed Statements of Cash Flows for the three 
       months ended December 31, 1998 and 1997

       Notes to Unaudited Condensed Financial Statements   
    
   Item 2. Management's Discussion and Analysis of Financial Condition 
       and Results of Operations. 

Part II Other Information
   Item 1. Legal Proceedings
   Item 2. Changes in Securities and Use of Proceeds
   Item 3. Defaults upon Senior Securities
   Item 4. Submission of Matters to a Vote of Security Holders
   Item 5. Other Information
   Item 6. Exhibits and Reports on Form 8-K

Signatures

<PAGE>
                                    
                      PART  I-FINANCIAL INFORMATION

Item 1. Financial Statements. 
                                    
                                    
                                    
                                    
 


                                  
                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
                     UNAUDITED CONDENSED BALANCE SHEETS
                                      
                                   ASSETS
                                      
                                      
                                      
                                      
                                      
                                       December 31,   September 30,
                                             1998         1998
                                         ___________  ___________
CURRENT ASSETS:
  Cash                                    $   76,569   $    4,682
  Marketable Securities, available-
    for-sale                                  40,119      107,451
  Employee advances                              558          258
                                         ___________  ___________
        Total Current Assets                 117,246      112,391
                                         ___________  ___________

PROPERTY AND EQUIPMENT, net                   24,578       21,875
                                         ___________  ___________
OTHER ASSETS
  Software licensing rights, net             800,000      825,000
  Refundable deposits                          3,751        3,751
                                         ___________  ___________
        Total Other Assets                   803,751      828,751
                                         ___________  ___________
                                          $  945,575   $  963,017
                                         ___________  ___________
                                      
                                      
                                      
                                      
                                      
                                     
                                      
                                      
                                      
                                      
                                 [Continued]

                                    -2-
<PAGE>


                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
                     UNAUDITED CONDENSED BALANCE SHEETS
                                      
                                 [Continued]
                                      
                                      
                    LIABILITIES AND STOCKHOLDERS' EQUITY

                                       December 31,   September 30,
                                             1998         1998
                                         ___________  ___________
CURRENT LIABILITIES:
  Accounts payable                       $    65,096   $   71,114
  Advances - related parties                     559        6,500
  Notes payable - related parties             59,410       17,582
  Other accrued liabilities                  157,852      100,989
  Accrued dividends payable                   40,553       30,779
  Current portion - capital
      lease obligation                         2,627        2,420
                                         ___________  ___________
        Total Current Liabilities            326,097      229,384
                                         ___________  ___________

CAPITAL LEASE OBLIGATION,
      less current portion                     6,398        7,137
                                         ___________  ___________

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value,
    5,000,000 shares authorized,
    302,500 and 396,000 shares of
    12% Series B convertible preferred
    stock issued and outstanding for which
    500,000 shares have been authorized          303          396
  Common stock, $.001 par value,
    20,000,000 shares authorized,
    4,352,118 and 4,258,618 shares
    issued and outstanding                     4,352        4,259
  Capital in excess of par value           2,630,515    2,630,515
  Deficit accumulated during the
    development stage                     (1,798,866)  (1,548,718)
                                         ___________  ___________
                                             836,304    1,086,452

  Less:Receivable stock subscription        (36,114)     (36,114)
       Deferred compensation expense
         in accordance with APB 25         (178,132)    (239,407)
       Unrealized (loss) - marketable
         securities                          (8,978)     (84,435)
                                         ___________  ___________
        Total Stockholders' Equity           613,080      726,496
                                         ___________  ___________
                                         $   945,575   $  963,017
                                         ___________  ___________
                                      
                                      
                                      
                                      
                                      
NOTE: The balance sheet at September 30, 1998 was taken from the audited
      financial statements at that date and condensed.
                                      
 The accompanying notes are an integral part of these financial statements.

                                   -3-

<PAGE>

                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
                                      
                UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
                                      
                                    For the
                                  Three Months       From Inception
                                     Ended           on November 5,
                                  December 31,        1996 Through
                             ________________________ December 31,
                                 1998       1997          1998
                             ___________ ___________  ___________

REVENUE                       $       -   $       -    $       -
                             ___________ ___________  ___________

EXPENSES:
  Selling expense                10,087      34,350      347,283
  General and administrative    249,965     149,933    1,165,018
  Compensation expense recorded
    in accordance with APB 25 for
    stock options issued below
    market value                      -      71,464      273,313
                             ___________ ___________  ___________
        Total Expenses          260,052     255,747    1,785,614
                             ___________ ___________  ___________
LOSS FROM OPERATIONS          (260,052)   (255,747)   (1,785,614)
                             ___________ ___________  ___________
OTHER INCOME (EXPENSE):
  Gain on sale of marketable
    securities                   21,957           -       35,320
  Interest income                    12           -           12
  Interest (expense)            (2,291)       (401)      (8,031)
                             ___________ ___________  ___________
        Total Other Income
          (Expense)              19,678       (401)       27,301
                             ___________ ___________  ___________

LOSS BEFORE INCOME TAXES      (240,374)   (256,148)   (1,758,313)

CURRENT TAX EXPENSE                   -           -            -

DEFERRED TAX EXPENSE                  -           -            -
                             ___________ ___________  ___________

NET LOSS                     $(240,374)  $(256,148)   $(1,758,313)

LESS:  PREFERRED DIVIDEND
  REQUIREMENTS                  (9,774)           -     (40,553)
                             ___________ ___________  ___________
NET LOSS APPLICABLE TO
  COMMON STOCKHOLDERS        $(250,148)  $(256,148)   $(1,798,866)
                             ___________ ___________  ___________
LOSS PER COMMON SHARE         $   (.06)   $   (.07)    $   (.56)
                             ___________ ___________  ___________
                                      
                                      
                                      
                                      
 The accompanying notes are an integral part of these financial statements.

                                 -4-
<PAGE>

                         WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]


              UNAUDITED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

                                    For the
                                  Three Months       From Inception
                                     Ended           on November 5,
                                  December 31,        1996 Through
                             ________________________ December 31,
                                 1998       1997          1998
                             ___________ ___________  ___________

NET LOSS                    $ (240,374)  $ (256,148) $(1,758,313)
                             ___________ ___________  ___________



OTHER COMPREHENSIVE INCOME:
 
  Unrealized holding gains
   (losses) on  Marketable
   securities  available
   For sale                     75,457           -         (8,978)

                             ___________ ___________  ___________

COMPREHENSIVE INCOME (LOSS)  $(164,917)  $ (256,148)  $ (1,767,291)
                             ___________ ___________  ___________






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

                                   -5-

<PAGE>


                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
                UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
                                      
                       Net Increase (Decrease) In Cash
                                      
                                              For The
                                           Three Months     From Inception
                                               Ended        on November 5,
                                            December 31,     1996 Through
                                       ____________________  December 31,
                                          1998       1997         1998
                                       __________  _________    _________
Cash Flows from Operating Activities:
 Net loss applicable to
      common stockholders              $(250,148) $(256,148) $(1,798,866)
 Adjustments to reconcile
  net loss to net cash used
  by operating activities:
   Depreciation and amortization          26,739     25,509      205,277
   Non-cash expense                       63,103      3,000      195,674
   APB 25 compensation recorded
     for stock options issued
     below market value                        -     71,464      273,313
   Changes in assets 
      and liabilities:
     (Increase) in employee advances        (300)         -         (558)
     Increase in accounts payable         (6,018)   (33,984)      65,096
     Increase in advances -
       related parties                    (5,941)       401          559
     Increase in accrued
       liabilities                         56,863     6,323      157,852
                                       __________  _________    _________
   Net Cash (Used) by 
     Operating Activities               (115,702)  (183,435)    (901,653)
                                       __________  _________    _________
Cash Flows from Investing Activities:
  (Increase) in refundable deposits            -     (1,005)      (3,751)
  Purchase of equipment                   (4,442)    (7,042)     (29,855)
  Purchase of software licensing rights        -          -     (300,000)
  Proceeds from marketable
    securities sales                     142,789          -      213,152
                                       __________  _________    _________
    Net Cash Provided (Used) by
          Investing Activities           138,347     (8,047)    (120,454)
                                       __________  _________    _________
Cash Flows from Financing Activities:
  Proceeds from notes payable             40,000          -      168,500
  Payments on notes payable                    -          -     (113,532)
  Payments on capital lease obligation      (532)         -         (864)
  Proceeds from preferred stock issuance       -     93,500      344,750
  Proceeds from common stock issuance          -     93,500      659,269
  Increase in accrued dividends payable    9,774          -       40,553
                                       __________  _________    _________
   Net Cash Provided by
          Financing Activities            49,242    187,000    1,098,676
                                       __________  _________    _________
Net Increase (Decrease) in Cash           71,887     (4,482)      76,569

Cash at Beginning of Period                4,682      9,321            -
                                       __________  _________    _________
Cash at End of Period                   $ 76,569   $  4,839     $ 76,569
                                       __________  _________    _________





                                 [Continued]
  
                                     -6-

<PAGE>
                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
                UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
                                      
                       Net Increase (Decrease) In Cash
                                      
                                 [Continued]

                                              For The
                                           Three Months     From Inception
                                               Ended        on November 5,
                                            December 31,     1996 Through
                                       ____________________  December 31,
                                          1998       1997         1998
                                       __________  _________    _________

Supplemental Disclosures of
 Cash Flow information:
  Cash paid during the year
   and from inception for:
    Interest                           $    780    $    -       $  2,039
    Income taxes                       $      -    $    -       $      -


Supplemental schedule of Non-cash Investing and Financing Activities:
  For the period ended December 31, 1998 (Unaudited):
     None

  For the period ended December 31, 1997 (Unaudited):
     The Company issued 3,000 shares of common stock in exchange for programming
     costs valued at $3,000.
     
     The Company issued stock options to purchase 180,000 shares of common stock
     to an officer of the Company at below market value prices.  Additional paid
     in  capital  of  $159,120  was recorded, $43,095  in  current  compensation
     expense  was  recorded  and $115,843 of deferred  compensation  expense  (a
     reduction to stockholders' equity) was recorded.
     
     Amortization  of  deferred compensation on stock options granted  prior  to
     October 1, 1997 amounted to $28,369.
     
                                      
                                      
                                      
                                      
                                       
                                      
                                      
                                      
                                      
                                      
 The accompanying notes are an integral part of these financial statements.
 
                                 -7-
<PAGE>

                       WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
  Organization  -  The  Company was organized under the laws  of  the  State  of
  Nevada  on  November  5, 1996 as IPONG International, Inc.,  but  subsequently
  reorganized with WebQuest International, Inc. (which was formed to serve as  a
  vehicle  for a reorganization of the Company).  During April 1997, the Company
  entered  into  a  plan and agreement of merger with Phaser  Enterprises,  Inc.
  ["Phaser"],  a  publicly held Utah corporation wherein the operations  of  the
  Company  is  the  surviving entity.  The Company is considered  a  development
  stage  company  as  defined in SFAS No. 7.  The Company  is  engaging  in  the
  business of developing and marketing an interactive game arcade, known as  the
  iPONG  Game  Arcade  on the Internet.  The Company anticipates  that  it  will
  derive  revenue  from the sale of advertising.  The Company  may  also  pursue
  other Internet related businesses.
  
  Condensed  Financial Statements - The accompanying financial  statements  have
  been  prepared  by the Company without audit.  In the opinion  of  management,
  all  adjustments  (which include only normal recurring adjustments)  necessary
  to  present  fairly  the financial position, results of  operations  and  cash
  flows at December 31, 1998 and for all the periods presented have been made.
  
  Certain  information and footnote disclosures normally included  in  financial
  statements   prepared   in  accordance  with  generally  accepted   accounting
  principles  have  been  condensed or omitted.   It  is  suggested  that  these
  condensed  financial  statements  be read in conjunction  with  the  financial
  statements  and  notes thereto included in the Company's  September  30,  1998
  audited financial statements.  The results of operations for the period  ended
  December  31, 1998 is not necessarily indicative of the operating results  for
  the full year.
  
  Marketable  Securities  -  The  Company's  investments  in  marketable  equity
  securities  are  held  for an indefinite period and  thus  are  classified  as
  available-for-sale.  Available-for-sale securities are recorded at fair  value
  under  the  caption  "marketable securities" on the balance  sheet,  with  the
  change in fair value during the period excluded from earnings and recorded  as
  a  separate  component  of equity.  Fair value of the  equity  securities  was
  determined on a specific identification basis in computing unrealized gain  or
  loss.
  
  Property  and  Equipment  -  Property  and  equipment  are  stated  at   cost.
  Expenditures  for major renewals and betterments that extend the useful  lives
  of  property  and  equipment are capitalized, upon being  placed  in  service.
  Expenditures  for maintenance and repairs are charged to expense as  incurred.
  Depreciation  is computed for financial statement purposes on a  straight-line
  basis  over the estimated useful lives of the assets, which ranges from  three
  to seven years.
  
  Software  Licensing  Rights - Software licensing rights are  stated  at  cost.
  The  Company  is  amortizing the software licensing rights on a  straight-line
  basis over ten-years (the original term of the agreement) [See Note 3].
  
  Income  Taxes  -  The  Company accounts for income taxes  in  accordance  with
  Statement  of Financial Accounting Standards No. 109, "Accounting  for  Income
  Taxes."   This  statement  requires  an  asset  and  liability  approach   for
  accounting for income taxes.
  
  Dividend  Policy - The Company has not paid any dividends on common  stock  to
  date  and  does  not  anticipate  paying dividends  on  common  stock  in  the
  foreseeable  future.  The Company has a dividend requirement with  respect  to
  its preferred stock.


                                -8-

<PAGE>  
                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
  
  Revenue   Recognition  -  The  Company  plans  to  receive  revenues   from
  advertising but has not yet generated any revenues.
  
  Earnings  (Loss)  Per Share - The Company presents Earnings (Loss)  Per  Share
  according  to  Statement  of Financial Accounting  Standards  (SFAS)  No.  128
  "Earnings  Per  Share", which requires the Company to present  basic  earnings
  (loss)  per  share and dilutive earnings (loss) per share when the  effect  is
  dilutive.
  
  Cash  and Cash Equivalents - For purposes of the statement of cash flows,  the
  Company  considers  all  highly  liquid  debt  investments  purchased  with  a
  maturity of three months or less to be cash equivalents.
  
  Stock   Based  Compensation  -  The  Company  accounts  for  its  stock  based
  compensation  in  accordance with Statement of Financial  Accounting  Standard
  123   "Accounting  for Stock-Based Compensation".  This statement  establishes
  an  accounting method based on the fair value of equity instruments awarded to
  employees  as  compensation.  However, companies  are  permitted  to  continue
  applying  previous  accounting standards in the determination  of  net  income
  with  disclosure  in the notes to the financial statements of the  differences
  between  previous  accounting measurements and those  formulated  by  the  new
  accounting  standard.  The Company has adopted the disclosure only  provisions
  of  SFAS No. 123, accordingly, the Company has elected to determine net income
  using previous accounting standards.
  
  Accounting  Estimates - The preparation of financial statements in  conformity
  with  generally  accepted accounting principles requires  management  to  make
  estimates  and  assumptions that effect the reported  amounts  of  assets  and
  liabilities, the disclosures 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
  estimated by management.


                                  -9-
<PAGE>

                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  
NOTE 2 - MARKETABLE SECURITIES
  
  At  December  31, 1998, the Company held marketable securities with  a  market
  value  of $40,119 in an entity, which is a shareholder of the Company.  During
  the  three  months  ended December 31, 1998, the Company recorded  a  realized
  gain  on  the  sale of securities of $21,957 and also recorded  an  unrealized
  increase  in  the  market value of the securities held during  the  period  of
  $75,457.
  
NOTE 3 - SOFTWARE LICENSE RIGHTS
  
  Licensing  and  Marketing Agreement - During December 1996, the  Company  paid
  $300,000  for  an  option  to  acquire  licensing  rights  to  an  interactive
  advertising  game  for use on the Internet.  On January 5, 1997,  the  Company
  exercised  its  option  and entered into a licensing and  marketing  agreement
  (with  technical  support)  with a Nevada corporation,  Homeseekers.com,  Inc.
  (formerly,  NDS Software, Inc.), that owns the software rights.   The  license
  agreement  has  a ten-year term, which automatically renews for an  additional
  ten-year term, and allows the Company to develop, use, and market the  product
  on  an exclusive basis.  Licensing rights are capitalized and amortized  on  a
  ten-year  basis  (the  original life of the agreement).   Database  management
  costs  (including programming costs) are expensed as incurred and amounted  to
  $6,191  for  the  period ended December 31, 1998.  As consideration  for  this
  agreement  the  Company  agreed:  i) to pay $58,333  per  month  for  a  year,
  commencing  January  5,  1997.   During September  1997,  the  Company  issued
  700,000  shares of restricted common stock at an agreed upon value of $700,000
  (or  $1.00  per  share) for full consideration of the one  year,  $58,333  per
  month  payment.  ii) to pay 7% of gross revenues for the first year after  the
  live  date  (April 1, 1998), 10% of gross revenues for the second  year  after
  the  live  date, and 15% thereafter.  iii) to pay $20,000 per month commencing
  at  the  live date for "website" fees to the Nevada corporation.  During  July
  1998,  the  payment of $20,000 per month was amended to a pro-rata charge  for
  services.   and  iv)  to  pay $125 per hour for Webpage  development,  website
  changes  or customization, and management consulting, plus $0.50 per  question
  for  question  development to the Nevada corporation  for  technical  support.
  Upon  merger  with  IPONG  International, Inc. on  April  18,  1997,  Webquest
  assumed  the rights and obligations to this agreement.  Homeseekers.com,  Inc.
  is  considered  to  be an affiliate of the Company because  it  has  the  same
  controlling shareholders as the Company.
  
  The  following  is  a summary of software licensing rights  -  at  cost,  less
  accumulated amortization as of December 31, 1998:
  
                                                1998
                                            ___________
         Cash paid for licensing rights       $300,000
         Stock issued for licensing rights     700,000
                                            ___________
                                              1,000,000
         Less:  accumulated amortization      (200,000)
                                            ___________
                                              $800,000
                                            ___________
  
  Amortization  expense  for  the  periods ended  December  31,  1998  and  1997
  amounted to $25,000 and $25,000, respectively.


                                    -10-
<PAGE>

                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
                                      
NOTE 3 - SOFTWARE LICENSE RIGHTS [Continued]
  
  Non-exclusive License Agreement - On July 3, 1997, the Company entered into  a
  non-exclusive  licensing  agreement  with a  Delaware  corporation,  Atari-JTS
  Corp.  that  owns the software, programs, trade names, trademarks, promotional
  material,  and  intellectual property for use on the Internet.  The  agreement
  with  the  Company has a five year term, which is renewable for an  additional
  five  years  if minimum royalty fees received are at least $400,000  over  the
  five  year  period, and allows the Company to license and use the game  (Pong)
  in  connection  with its "website" on a non-exclusive basis.  As consideration
  for  this  agreement  the  Company paid a $5,000 non-refundable  execution  of
  agreement  fee.  The Company also agreed to pay a quarterly 1/10 of  one  cent
  ($.001)  royalty fee for each player who accesses Pong; with a base amount  of
  $5,000  per quarter to the Delaware corporation if the number of Pong  players
  fails  to  exceed  5,000,000 in each quarter.  Royalty fees  are  expensed  as
  incurred.   Royalty expense amounted to $1,667 for the period  ended  December
  31, 1998.
  
NOTE 4 - NOTES PAYABLE - RELATED PARTIES

  Notes payable consist of the following at December 31:
  
                                                       1998
                                                    _________
  Notes payable to a shareholder of the Company,
    annual compounding interest at 12%, due upon
    demand, unsecured                               $ 17,062
  
  Notes payable to a shareholder of the Company,
    interest at 10% and 12% per annum, due upon
    demand, unsecured                                    294
  
  Note payable to a shareholder of the Company,
    interest at 12% per annum, due upon demand,
    unsecured                                             54
  
  Note payable to an entity related to a shareholder
    of the Company, annual compounding interest
    at 12%, due upon demand, unsecured                 2,000
  
  Note payable to an individual, interest at 12%
    per annum, due on February 7, 1999, unsecured
    and currently in default                          20,000
  
  Note payable to an individual, interest at 12%,
    per annum, due on November 28, 1998,
    unsecured and currently in default accruing a
    late penalty of 5,000 warrants to purchase the
    Company's common stock at $1.00 per share
    for every week the loan is delinquent.            20,000
  
                                                    _________
                                                    $ 59,410
                                                    _________



                           -11-
<PAGE> 
  
                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
                                      
NOTE 5 - CAPITAL STOCK
  
  Series  B Convertible Preferred Stock - The Company authorized 500,000  shares
  of  preferred stock to be designated as Series B Convertible Preferred  Stock.
  The  Series  B Convertible Preferred Stock pays dividends at the rate  of  12%
  and  is  fully cumulative.  The Series B Convertible Preferred Stock shall  be
  entitled to receive dividends, commencing December 1, 1998, at an annual  rate
  of  12%  per  share  out  of the funds legally available  and  to  the  extent
  declared  by the Board of Directors.  The dividends shall be payable in  semi-
  annual  installments  on December 1 and June 1 commencing  December  1,  1998.
  The  dividends may be paid either in cash, in common stock of the  corporation
  or  a  combination thereof.  The Series B Convertible Preferred Stock will  be
  automatically converted to one (1) share common stock one year from  the  date
  of  issuance.   The holders of Series B Convertible Preferred Stock  shall  be
  entitled  to  one  (1)  vote for each share of Series B Convertible  Preferred
  Stock  held.   As  of  September 30, 1998, the Company has  accrued  preferred
  dividends  of  $30,779.   During the year ended  September  30,  1998,  93,750
  shares  of  preferred  stock have been accounted for as  converted  to  93,750
  shares  of common stock due to the automatic conversion of preferred to common
  at  one  year  from date of issuance.  During the three months ended  December
  31, 1998, 93,500 shares of preferred stock were accounted for as converted  to
  common stock and $9,774 was accrued as dividends payable.
  
  Warrants - In connection with the issuance of the note payable on October  28,
  1998  to an individual, the Company granted warrants to purchase 20,000 shares
  of the Company's common stock at $1.00 per share through October 28, 2002.
  
  SCAVENGERnet  -  During  October 1998, the Company  entered  into  a  purchase
  agreement  with two individuals to purchase a game (with all rights, software,
  programs,  source codes, copyrights, trade secrets, patent rights,  and  other
  applicable   rights  for  use  on  the  Internet)  called  SCAVENGERnet.    As
  consideration  for  this  purchase agreement  the  Company  gave  $5,000  down
  ($2,500  to  each  individual), $5,000 due on January 9, 1999  (an  additional
  $2,500  to  each individual), and 10,000 shares (5,000 shares of common  stock
  to each individual) of its common stock valued at $10,000 or $1.00 per share.
  
  Stock Options - During December 1998, the Company granted options to the Vice-
  President of the Company to purchase 200,000 shares of common stock  at  $1.00
  per share.  These options vest immediately and expire in December 2003.
  
NOTE 6 - INCOME TAXES
  
  The  Company  accounts  for  income  taxes in  accordance  with  Statement  of
  Financial  Accounting  Standards No. 109 Accounting  for  Income  taxes  [FASB
  109].   FASB 109 requires the Company to provide a net deferred tax  asset  or
  liability  equal  to the expected future tax benefit or expense  of  temporary
  reporting  differences  between  book and tax  accounting  and  any  available
  operating  loss or tax credit carryforwards.  At December 31, 1998, the  total
  of  all  deferred tax assets was approximately $542,000 and the total  of  the
  deferred  tax  liabilities  was  approximately  $80,000.  The  amount  of  and
  ultimate  realization of the benefits from the deferred tax assets for  income
  tax  purposes  is  dependent,  in part, upon  the  tax  laws  in  effect,  the
  Company's  future  earnings, and other future events,  the  effects  of  which
  cannot  be determined.  Because of the uncertainty surrounding the realization
  of  the deferred tax assets, the Company has established a valuation allowance
  of  approximately  $462,000 as of December 31, 1998,  which  has  been  offset
  against  the  deferred tax assets.  The net change in the valuation  allowance
  during the period ended December 31, 1998 amounted to approximately $82,000.


                                -12-
<PAGE>
                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  
NOTE 7 - RELATED PARTY TRANSACTIONS
  
  Notes  Payable - During the three months ended December 31, 1998, the  Company
  accrued  a  total  interest  of $1,498 on related  party  notes  payable.   At
  December  31,  1998  and  September  30, 1998,  related  party  notes  payable
  amounted  to  $19,410  (of  which  $1,828 was  an  additional  compounding  of
  interest) and $17,582.
  
  During  the three months ended December 31, 1998, the Company paid a total  of
  $5,941  to a shareholder for non-interest bearing and due upon demand advances
  made  to  the Company.  At December 31, 1998 and September 30, 1998,  advances
  from a shareholder totaled $259 and $6,200.
  
  Employment Agreements - As of December 31, 1998, the Company had entered  into
  four employment agreements with officers and employees of the Company.
  
  The  employment agreement for the Chief Executive Officer was effective as  of
  September 22, 1997 and has a term of two years.  The agreement provides for  a
  base  salary  of $120,000 per year.  The employee may terminate the  agreement
  on  30 days notice.  The agreement also provides for stock options to purchase
  400,000  shares  of  registered  common stock  of  the  Company.   Options  to
  purchase  100,000 shares of common stock vest immediately while the  remainder
  of  the options vest at the rate of 100,000 shares on each yearly anniversary.
  There  are  no  restrictions on the underlying common stock except  for  those
  imposed  under  Rule  144 of the  Securities Act of 1933,  as  amended.   Once
  vested  the  options are exercisable for a five-year period from the  date  of
  vesting  whether  or  not  the  employee is still  employed  by  the  company.
  However,  the employee must be employed by the company on the date of  vesting
  or  the  options for that date will not vest.  The options are exercisable  at
  $.116  per share which is less than the current market value of the  stock  on
  the date the agreement took effect and the options were granted.
  
  The  employment  agreement  for the position, which  includes  Vice-President,
  Secretary  and Treasurer, was effective as of October 1, 1997 and has  a  term
  of  two  years.  The agreement provides for a base salary of $2,000  per  week
  ($104,000 per year) commencing December 1, 1997.  For the period from  October
  1,  1997  through  November 30, 1997 the employee received  stock  options  as
  follows:   10,000  upon signing and 2,500 per week.  The  options  vest  on  a
  monthly  basis.  At November 30, 1997, all 30,000 options received were  fully
  vested.   Beginning  December  1,  1997, the employee  can  elect  to  receive
  options  in  lieu of cash salary at the rate of 2,500 options per  week.   The
  options  will  vest  on  a  monthly basis.  The  employee  may  terminate  the
  agreement  on 30 days notice.  No such election was made.  The agreement  also
  provided  for  stock  options to be immediately granted  to  purchase  150,000
  shares  of registered common stock of the Company. Options to purchase  75,000
  shares  of  common  stock vest on October 1, 1998 while the remainder  of  the
  options  (75,000  shares) vest on October 1, 1999.  There are no  restrictions
  on  any of the underlying common stock except for those imposed under Rule 144
  of  the   Securities  Act  of 1933, as amended. Once vested  the  options  are
  exercisable  for a five-year period from the date of vesting  whether  or  not
  the employee is still employed by the company.  However, the employee must  be
  employed  by the company on the date of vesting or the options for  that  date
  will  not vest.  The options are exercisable at $.116 per share which is  less
  than  the  current  market value of the stock on the date the  agreement  took
  effect and the options were granted.
  

                                    -13-

 
<PAGE>
                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  
NOTE 7 - RELATED PARTY TRANSACTIONS [Continued]
  
  The  employment agreement for the Director of Promotions was effective  as  of
  September 15, 1998 and is an at-will agreement.  The agreement provides for  a
  base  salary  of  $45,000  per  year, $150 per  month  vehicle  allowance  and
  commission  on  monthly  revenues  generated  through  advertising  sales   as
  follows:   10%  on  revenue up to the first 14,999 during each  month  (5%  on
  revenue  up to the first 10,000 and then 10% as stated from 10,001 to  $14,999
  during  the  first year), 14% on revenue from $15,000 to $24,999  during  each
  month,  18%  on  revenue  from  $25,000 and  above  during  each  month.   The
  agreement  also  provides  for a 20% commission on net  revenue  generated  by
  first  time memberships to play iPONG head to head which are direct  traceable
  sales  efforts of employee.  The agreement also provided for stock options  to
  be  granted  to  purchase 2,500 shares of the Company's  common  stock  at  an
  exercise  price  of  $1.00 per share.  The option vests  each  fiscal  quarter
  during  the employment at a rate of 313 shares per quarter with the first  313
  shares   vesting  on  September  30,  1998.   Once  vested  the  options   are
  exercisable  for  a  three-year period from the date  of  vesting  unless  the
  employee  is no longer employed by the Company.  Subsequent to the year  ended
  September  30,  1998,  the  employee left the Company  and  the  options  were
  cancelled.
  
  The employment agreement for the Vice President of Marketing was effective  as
  of  August 3, 1998 and is an at-will agreement.  The agreement provides for  a
  base  salary  of  $60,000  per  year, $300 per  month  vehicle  allowance  and
  commission  on  monthly revenues generated through the marketing  division  as
  follows:   10%  on  revenue from 10,000 to 14,999 during each  month,  14%  on
  revenue  from  $15,000  to  $24,999 during each month,  18%  on  revenue  from
  $25,000  and above during each month.  The agreement also provided  for  stock
  options  to  be  granted to purchase 200,000 shares of  the  Company's  common
  stock  at  an exercise price of $.80 per share.  The option vests each  fiscal
  quarter during the employment at a rate of 12,500 shares per quarter with  the
  first  12,500 shares vesting on September 30, 1998.  Once vested  the  options
  are  exercisable for a three-year period from the date of vesting  unless  the
  employee  is  no longer employed by the Company.  During September  30,  1998,
  the employee left the Company and the options were cancelled.
  
  Office  Space  -  Prior  to  September 30, 1997, the  Company  had  no  office
  facilities.   Officers  of the Company conducted the Company's  business  from
  their  own  residences or offices at no expense to the  Company.   During  the
  period ended December 31, 1998, the Company rented two office facilities  from
  unrelated parties.
  
  Related  Entity  -  Certain officers or shareholders of the Company  are  also
  affiliated with an entity with whom the Company has a licensing and  marketing
  agreement [See Note 3].  Cash of $300,000 and common stock valued at  $700,000
  was paid to the affiliated company for the licensing rights.

NOTE 8 - GOING CONCERN
  
  The  Company  was  formed with a very specific business  plan.   However,  the
  possibility exists that the Company could expend virtually all of its  working
  capital  in  a  relatively  short time period and may  not  be  successful  in
  establishing on-going profitable operations.  The financial statements do  not
  contain  any allowances, liabilities or other adjustments, which may  need  to
  be  recorded  if  the  Company  is  not  successful  in  achieving  profitable
  operations.

                                   -14-

<PAGE>

                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  
NOTE 8 - GOING CONCERN [Continued]
  
  The  accompanying financial statements have been prepared in  conformity  with
  generally  accepted accounting principles, which contemplate  continuation  of
  the  Company  as a going concern.  However, the Company is newly  formed,  has
  incurred  losses  since its inception, has current liabilities  in  excess  of
  current  assets  of $208,851 and has not yet been successful  in  establishing
  profitable  operations.   These  factors raise  substantial  doubt  about  the
  ability  of  the  Company  to continue as a going concern.   In  this  regard,
  management  is proposing to raise any necessary additional funds not  provided
  by  operations  through loans and/or through additional sales  of  its  common
  stock.  There is no assurance that the Company will be successful  in  raising
  additional   capital  or  achieving  profitable  operations.   The   financial
  statements  do not include any adjustments that might result from the  outcome
  of these uncertainties.
  
NOTE 9 - LEASE OBLIGATIONS

  Operating  Leases  -  During October 1998, the Company extended  the  original
  lease  in  Del  Mar, California.  The lease extension is on a month  by  month
  basis  with an increase in monthly rents to $580.  During September  1998  and
  effective  November 1998, the Company amended the original  lease  in  Minden,
  Nevada.  The lease amendment calls for monthly rents of $1,204 and is for  one
  year  (which  automatically  renews  for another  year  with  a  monthly  rent
  increase of .75% or $1,213).
  
NOTE 10 - CONSULTING AGREEMENTS

  During  November 1997, the Company entered into a consulting agreement with  a
  Colorado  corporation in which the Colorado corporation will  provide  various
  consulting  and  financial public relations with broker-dealers,  shareholders
  and  members of the general public.  This agreement has a term of one year and
  provides  for  monthly  cash  payments  of  $3,500  ($42,000  total).   During
  November 1998, this agreement terminated and was not renewed.
  
  Also  during  November  1997, the Company entered into a consulting  agreement
  with  a  British Virgin Island Corporation in which the British Virgin  Island
  Corporation  will  develop, implement and maintain an  on-going  stock  market
  support  system  that  increases broker awareness of the Company's  activities
  and  stimulates investor interest in the Company.  This agreement has  a  term
  of  one  year  and provides for the issuance of a warrant to purchase  100,000
  shares of the Company's common stock at a price of $3.00 per share, which  for
  a  three-year  period  are subject to piggyback registration  rights.   During
  November  1998,  this  agreement terminated and was not renewed.   During  May
  1998,  the  Company  entered  into an additional agreement  with  the  British
  Virgin Island Corporation in which the British Virgin Island Corporation  will
  develop,  implement and maintain an on-going stock market support system  that
  increases   broker  awareness  of  the  Company's  activities  and  stimulates
  investor  interest in the Company.  This agreement has a term of one year  and
  provides  for  the  issuance of a warrant to purchase 100,000  shares  of  the
  Company's  common stock at a price of $2.00 per share, which for a  three-year
  period  are  subject  to piggyback registration rights.   The  agreement  also
  provides  for  the  issuance of 62,000 shares of the  Company's  common  stock
  valued at $62,000 (or $1.00 per share).

                                  -15-

<PAGE> 

                        WEBQUEST INTERNATIONAL, INC.
                        [A Development Stage Company]
                                      
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  
NOTE 11 - EARNINGS (LOSS) PER SHARE
  
  The  following  data  show the amounts used in computing earnings  (loss)  per
  share  and  the effect on income and the weighted average number of shares  of
  dilutive  potential common stock for the periods ended December 31,  1998  and
  1997 and from inception on November 5, 1996 through December 31, 1998:
  

                                      For The Three           From Inception
                                       Months Ended           on November 5,
                                __________________________    1996 Through
                                 December 31,  December 31,    December 31,
                                      1998         1997        1998
                                   ___________  ___________   ___________
    Income (loss) from continuing
      operations applicable to
      common stock                   (240,374)   $(256,148)  $(1,758,313)
  
    Less: preferred dividends          (9,774)           -       (40,553)
                                   ___________  ___________   ___________
    Income (loss) available to
      common stockholders used in
      earnings (loss) per share      (250,148)   $(256,148)  $(1,798,866)
                                   ___________  ___________  ___________
    Weighted average number of
      common shares outstanding
      used in earnings (loss) per
      share during the period       4,331,477    3,675,451     3,196,082
                                   ___________  ___________  ___________
  
 Dilutive  earnings (loss) per share was not presented, as its 
   effect is  anti- dilutive.
  
NOTE 12 - CONCENTRATION OF RISK
  
  The  Company's  operations are currently dependent upon the  use  of  software
  which  is  licensed  from a related entity and from an unrelated  entity  [See
  Note  3].   In  the  event  the  Company is unable  to  renew  these  software
  licenses,  when  they  expire, a disruption or termination  of  the  Company's
  operations  could  occur.   The  financial  statements  do  not  include   any
  adjustments that might result from the outcome of these uncertainties.

                                    -16

<PAGE>




                                   
                                    
                                    

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.

Results of Operations          
     There were no revenues during the three months ending December 31, 1998.
The company did receive income from the sale of stock.

     Operating expenses for the three months ending December 31, 1998 were
$261,000 representing a 2% increase over the same period in 1997. This
increase is due primarily to an increase 
in purchasing and shipping prizes.

     Net loss for Q1 FY98 is$241,000 or $(.06) per share decreased $16,000
from the net loss of $257,000 or $(.07)

Liquidity and Capital Resources
     Net cash used in operations during Q1FY98 116,000 was financed by the
previous equity sales from the 504 private offering and through two loans
totaling $40,000

     The Company's current financial conditions will carry the operations
for approximately 60 days from the date of this report. 
  
     The Company is conducting a private offering of convertible debt in
which the Company is 
seeking to raise up to $1,500,000 and the minimum will be $500,000. The
Company anticipates reaching the minimum in Q2FY99. There can be no
assurance, however, that the Company will be successful  in raising all or
any significant portion of such amount.
 
     The acquisition of Scavengernet, an online scavenger hunt to be included
in the Arcade by Q2FY99. Playing Scavengernet is simple, we email you a list
of 20 items to find on the Internet (We don't even know if they exist!) Send
us the URLs where you found them, first one who responds wins the GRAND PRIZE!
Balance of the names go into a drawing for nine additional prizes.

     The multi player version of Power iPONG + with a Chat feature, which is
currently in the Alpha  testing stage and will be online for Beta testing
Q2FY99. 
 
     The iPONG Newsletter which will be available online to allow the use of
graphics and banners for advertisers. It will also be archived with
informative Special Features in each edition to encourage people to view past
issues. Each newsletter will contain a link back to The Arcade and
advertiser's banner ads.

<PAGE>

     Additional click-through advertising spots now appear on various pages
throughout the site, allowing players to visit advertisers without
interruption of game play.

     Development of an online Survey Contest to encourage players to provide
accurate demographics which are essential to attracting advertisers. 
 
     Preparation of a comprehensive online Media kit and Rate Card to provide
potential    advertisers the information they need to determine the best level
of advertising within the site.

     The  Company expects to have these enhancements completed by Q2FY99,
 
     The number of registered players has increased substantially in the past
three months and numerous prizes  have been awarded. The number of games
played each week nearly doubled in the three months  covered in this report.

     The Company plans to operate additional games in 1999, including
OctiPong, Multi-player PONG, Multi-player Checkers and Multi-player Chess.
WebQuest will continue to develop new games, license and adapt existing games
and add more amenities, all the while enticing visitors  to the iPONG The
number of employees is expected to increase from four to eight.
The positions expected to be filled are Chief Financial Officer,
Advertising Sales Rep, Administrative Assistant and Games Manager.

Impact of the Year 2000
     The Company does not anticipate any material adverse consequences to
it's business or financial operations as a result of the Y2K bug.
                                    
                        PART II-OTHER INFORMATION
Item 1. Legal Proceedings. 
     The Company is not engaged in any legal proceedings.   

Item 2. Changes in Securities and Use of Proceeds. 
     None

Item 3. Defaults Upon Senior Securities. 
    The Company has accrued dividends on it's Preferred stock and expects
to pay it in the near           future.

Item 4. Submission of Matters to a Vote of Security Holders. 
          None

Item 5. Other Information. 
          
Effective as of January 31, 1999, Bob Horn resigned as an officer and director
of the Company to pursue other interests. The Company's Board of Directors has
elected Kirk Johnson, formerly the Vice President of the Company, to serve as
President and Chief Executive Officer. Mr Johnson also continues to serve as
the Company's Secretary and Treasurer and as a member of the Board Of
Directors  

Item 6. Exhibits and Reports on Form 8-K
      
    None 


<PAGE>



Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.

WebQuest International, Inc.
 (Registrant)                                     

/s/ Kirk Johnson
 .............................................. 
Kirk Johnson             
President, Chief Executive Officer                                 
Secretary and Treasurer                                  

February 19, 1999