UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)

[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                  For the quarterly report ended June 30, 2006

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT

              For the transition period from ________ to __________


                        Commission File Number: 000-03296


                         TRADEQUEST INTERNATIONAL, INC.
                         ------------------------------
          (Exact name of small business issuer as specified in charter)


                    NEVADA                                 64-0440887
                    ------                                 ----------
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                  Identification No.)


                             801 Brickell Bay Drive
                              Miami, Florida 33131
                            -----------------------
                    (Address of principal executive offices)

                                 (305) 377-2110
                                 --------------
                           (Issuer's telephone number)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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]

                       APPLICABLE ONLY TO COPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: At September 18, 2006, there were
57,421,373 shares of common stock were issued and outstanding.

Transitional Small Business Disclosure Format (Check one) Yes[ ]  No[X]

<PAGE>

         References in this report to "Tradequest", the "Company", "we", "us"
and "our" are to Tradequest International, Inc. a Nevada corporation, and our
subsidiaries. All per share information contained in this report gives effect to
the 65 for 1 stock split effective October 11, 2005.

            CAUTIONARY STATEMENT REGARDING FOWARD LOOKING INFORMATION

         This quarterly report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of
the Securities and Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995, as amended. These forward-looking statements are
subject to risks and uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from the
results, performance or achievements expressed or implied by the forward-looking
statements. You should not unduly rely on these statements. Forward-looking
statements can be identified by the fact that they do not relate strictly to
historical or current facts. They use words such as "anticipate," "estimate,"
"expect," "project," "intend," "plan," "believe," "project," "contemplate,"
"would," "should," "could," or "may." With respect to any forward-looking
statement that includes a statement of its underlying assumptions or bases, we
believe such assumptions or bases to be reasonable and have formed them in good
faith, assumed facts or bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results can be material
depending on the circumstances. When, in any forward-looking statement, we
express an expectation or belief as to future results, that expectation or
belief is expressed in good faith and is believed to have a reasonable basis,
but there can be no assurance that the stated expectation or belief will result
or be achieved or accomplished. All subsequent written and oral forward-looking
statements attributable to us, or anyone acting on our behalf, are expressly
qualified in their entirety by the cautionary statements.

                                       2
<PAGE>

                          PART I-FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                  June 30, 2006
                                   (Unaudited)

                                     ASSETS
Current Assets:
  Cash .......................................................      $     4,709
  Accounts receivable ........................................               48
                                                                    -----------
                                                                          4,757

  Property and equipment, net of accumulated depreciation
   of $7,360 .................................................           20,361
  Security deposits ..........................................            6,500
                                                                    -----------

     Total assets ............................................      $    31,618
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Accounts payable and accrued expenses ......................      $    38,165
  Accounts payable to related party ..........................          107,350
  Other liabilities ..........................................            2,500
  Deferred revenues ..........................................              662
  Due to chief executive officer .............................            6,484
  Note payable to related party ..............................          410,567
  Convertible promissory note, net of discount of $6,250 .....           75,695
  Notes payable ..............................................          688,154
                                                                    -----------

     Total current liabilities ...............................        1,329,577

Stockholders' Deficit:
  Preferred stock; $0.001 par value, 10,000,000 shares
   authorized, none issued and outstanding ...................                -
  Common stock; $.001 par value, 100,000,000 shares
   authorized, 57,239,150 issued and outstanding .............           57,238
  Additional paid-in capital .................................        6,342,668
  Accumulated deficit ........................................       (7,697,865)
                                                                    -----------

     Total stockholders' deficit .............................       (1,297,959)
                                                                    -----------

     Total liabilities and stockholders' deficit .............      $    31,618
                                                                    ===========

                       See Notes to Financial Statements.

                                        3
<PAGE>
<TABLE>
                              TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                                  CONSOLIDATED STATEMENT OF OPERATIONS
                                               (Unaudited)
<CAPTION>
                                         For the six-month period         For the three-month period
                                               ended June 30,                    ended June 30,
                                           2006             2005             2006             2005
                                       ------------     ------------     ------------     ------------
<S>                                    <C>              <C>              <C>              <C>
Revenues ..........................    $     10,316     $          -     $      2,500     $          -

Cost of revenues ..................          20,887           23,470            7,918           23,470
                                       ------------     ------------     ------------     ------------

Gross profit: .....................         (10,571)         (23,470)          (5,418)         (23,470)

Operating expenses:
  Sales, general and administrative         321,373          181,614          154,051          110,809
  Sales, general and
   administrative-related party ...          32,100           32,100           16,050           16,050
                                       ------------     ------------     ------------     ------------
     Total operating expenses .....         353,473          213,714          170,101          126,859
                                       ------------     ------------     ------------     ------------

     Operating loss ...............        (364,044)        (237,184)        (175,519)        (150,329)
                                       ------------     ------------     ------------     ------------

Other income (expenses):
Other income-derivatives ..........       8,670,798                -        3,707,715                -
Interest expense-related party ....         (14,000)               -           (7,000)               -
Interest expense ..................        (267,422)         (44,230)        (159,599)         (44,230)
                                       ------------     ------------     ------------     ------------

Net income (loss) .................    $  8,025,332     $   (281,414)    $  3,365,597     $   (194,559)
                                       ============     ============     ============     ============

Basic income (loss) per share .....    $       0.14     $      (0.01)    $       0.06     $      (0.01)
                                       ============     ============     ============     ============

Diluted income (loss) per share ...    $      (0.01)    $      (0.01)    $      (0.01)    $      (0.01)
                                       ============     ============     ============     ============

Basic weighted average shares
 outstanding ......................      57,152,720       20,033,333       57,189,981       20,033,333
                                       ============     ============     ============     ============

Diluted weighted average shares
 outstanding ......................      57,152,720       20,033,333       57,189,981       20,033,333
                                       ============     ============     ============     ============

                              See Notes to Unaudited Financial Statements.

                                                    4
</TABLE>
<PAGE>
<TABLE>
                         TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (Unaudited)
<CAPTION>
                                                             For the six-month period
                                                                  ended June 30,
                                                               2006            2005
                                                            -----------     -----------
<S>                                                         <C>             <C>
Cash flows from operating activities:
Net income (loss) ......................................    $ 8,025,332     $  (281,414)
Adjustments to reconcile net income (loss) to net cash
 used in operating activities:
  Amortization of debt discount ........................        122,609          27,500
  Fair value of derivative liabilities at date of
   issuance, in excess of debt discount ................          9,000               -
  Decrease in fair value of derivative liabilities .....     (8,678,830)              -
  Fair value of shares issued in satisfaction of
   interest on note payable ............................         66,441               -
  Write-off of deferred financing fees .................         10,000               -
  Depreciation .........................................          5,001               -
Changes in operating assets and liabilities
  Accounts receivable ..................................            (48)         35,245
  Security deposits ....................................              -          (6,500)
  Accounts payable to related party ....................         32,100          32,100
  Due to Chief executive officer .......................              -           8,500
  Deferred revenues ....................................            662               -
   Accounts payable and accrued expenses ...............         (2,461)         15,448
  Accrued interest on promissory notes-related party ...              -          15,661
  Accrued interest and premiums on promissory notes ....         78,129           1,069
                                                            -----------     -----------

Net cash used in operating activities ..................       (332,065)       (152,391)

Cash flows from investing activity:
  Purchase of property and equipment ...................           (470)              -
                                                            -----------     -----------
Net cash used in financing activities ..................           (470)              -

Cash flows from financing activities:
  Proceeds from issuance of convertible promissory notes         75,000         110,000
  Proceeds from issuance of promissory notes ...........        310,000         300,000
  Principal repayments of promissory notes .............        (37,500)              -
  Proceeds from issuance of shares of common stock .....              -               -
  Use of bank overdraft ................................        (10,256)              -
                                                            -----------     -----------

Net cash provided by financing activities ..............        337,244         410,000

(Decrease) increase in cash ............................          4,709         257,609

Cash, beginning of period ..............................              -             699
                                                            -----------     -----------

Cash, end of period ....................................    $     4,709     $   258,308
                                                            ===========     ===========

Supplemental disclosures of cash flow information:
  Cash paid during the period for interest .............    $    21,498     $         -
                                                            ===========     ===========

  Cash paid during the period for taxes ................    $         -     $         -
                                                            ===========     ===========

Supplemental schedule of non-cash financing and
 investing activities:

Fair value of embedded conversion features and
 freestanding warrants and corresponding increase
 in debt discount ......................................    $   107,250     $    27,500
                                                            ===========     ===========

Reclassification of contracts from liability to equity .    $ 4,858,184     $         -
                                                            ===========     ===========

                      See Notes to Unaudited Financial Statements.

                                            5
</TABLE>
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization
------------

The Company was incorporated under the laws of the State of Mississippi on
August 8, 1966 and it was reincorporated in Nevada on August 17, 2005. During
August 2005, the Company acquired Incomm Holdings Corp., which name will be
changed to IP1 Network Corporation ("IP1") shortly. The Company is an Internet
communications provider offering worldwide Voice over Internet Protocol and
other services to small and medium size businesses and individuals. The initial
marketing programs are aimed at the Latin American market. The Company's
operations are located in South Florida.

The acquisition of IP1 was treated as a reverse acquisition for financial
reporting purposes. As such, our financial statements have been prepared as if
IP1 was the acquiror. The results of operations discussed below represent the
operations of IP1 through June 30, 2006. The results of operations subsequent to
August 19, 2005 reflect the consolidated operations of IP1 and the Company. We
have retroactively restated our net loss per share and the stockholders' deficit
section of our balance sheet to reflect the reverse acquisition.

Going Concern
-------------

The accompanying financial statements have been prepared on a going concern
basis. The Company has generated minimal revenue since its inception and has
incurred net losses of approximately $7.6 million. The Company's ability to
continue as a going concern is dependent upon its ability to obtain the
necessary financing to meet its obligations and repay its liabilities arising
from normal business operations when they come due, to fund possible future
acquisitions, and to generate profitable operations in the future. Management
plans to continue to provide for its capital requirements by issuing additional
equity securities and debt. The outcome of these matters cannot be predicted at
this time and there are no assurances that if achieved, the Company will have
sufficient funds to execute its business plan or generate positive operating
results.

These matters, among others, raise substantial doubt about the ability of the
Company to continue as a going concern. These financial statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.

Basis of Presentation
---------------------

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form l0-QSB and Article 10 of
Regulation S-B. Accordingly, they do not include all the information and
disclosures required for annual financial statements. These financial statements
should be read in conjunction with the consolidated financial statements and
related footnotes as of and for the nine-month period ended December 31, 2005,
included in the Annual Report filed on Form l0-KSB.

In the opinion of the management, all adjustments (consisting of normal
recurring accruals) necessary to present fairly the Company's financial position
as of June 30, 2006, and the results of operations and cash flows for the
six-month period ending June 30, 2006 have been included. The results of

                                       6
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

operations for the six-month period ended June 30, 2006 are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report filed on Form l0-KSB as filed
with the Securities and Exchange Commission for the nine-month period ended
December 31, 2005.

Concentration of Credit Risks
-----------------------------

The Company is subject to concentrations of credit risk primarily from cash.
During the six-month period ended June 30, 2006, the Company did not reach bank
balances exceeding the FDIC insurance limit. The Company minimizes its credit
risks associated with cash by periodically evaluating the credit quality of its
primary financial institutions.

Product Concentration
---------------------

The Company earns all of its revenues from providing worldwide Voice over
Internet Protocol and other services to small and medium size businesses and
individuals.

Customer Concentration
----------------------

None of the Company's clients accounted for more than 10% of its revenues during
the six-month ended June 30, 2006.

Cash and Cash Equivalents
-------------------------

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments
-----------------------------------

The carrying value of cash, accounts payable and accrued expenses, notes
payables and convertible promissory notes approximate their fair value due to
their short-term maturities. The carrying value of the derivative liabilities is
based on its fair value.

Income Taxes
------------

Income taxes are accounted for in accordance with SFAS No. 109, Accounting for
Income Taxes. SFAS No. 109 requires the recognition of deferred tax assets and
liabilities to reflect the future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. Measurement of
the deferred items is based on enacted tax laws. In the event the future
consequences of differences between financial reporting bases and tax bases of
the Company's assets and liabilities result in a deferred tax asset, SFAS No.
109 requires an evaluation of the probability of being able to realize the
future benefits indicated by such assets. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some or all
of the deferred tax asset will not be realized.

                                       7
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

Use of Estimates
----------------

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates made by management include, but are not
limited to, the realization of receivables, the valuation of stock-based
compensation, and the recoverability of long-lived assets. Actual results will
differ from these estimates.

Earnings per Share
------------------

Basic earnings per share are calculated by dividing income available to
stockholders by the weighted-average number of common shares outstanding during
each period. Diluted earnings per share are computed using the weighted average
number of common and dilutive common share equivalents outstanding during the
period. Dilutive common share equivalents consist of shares issuable upon the
exercise of stock options and warrants (calculated using the reverse treasury
stock method). The outstanding options, warrants and shares equivalent issuable
pursuant to the convertible promissory notes amounted to 15,180,000 and
6,400,476 at June 30, 2006 and 2005, respectively. The outstanding options,
warrants and shares equivalent issuable pursuant to convertible debt at June 30,
2006 and June 30, 2005 are excluded from the loss per share computation for that
period due to their antidilutive effect.

The following sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
                                              Six-month       Six-month       Three-month      Three-month
                                            Period ended     Period ended     Period ended     Period ended
                                              June 30,         June 30,         June 30,         June 30,
                                                2006             2005             2006             2005
                                            ------------     ------------     ------------     ------------
<S>                                         <C>              <C>              <C>              <C>
Numerator:
Net income (loss) ......................    $  8,025,332     $   (281,414)    $  3,310,052     $   (194,559)
Other income- derivatives ..............      (8,670,798)               -        3,707,715                -
                                            ------------     ------------     ------------     ------------
Numerator for diluted earnings per share    $   (645,466)    $   (281,414)    $   (397,663)    $   (194,559)
                                            ============     ============     ============     ============

Denominator:
Denominator for basic and diluted
earnings per share-
Weighted average shares outstanding ....      57,152,720       20,033,333       57,189,981       20,033,333

Basic earnings (loss) per share ........    $       0.14     $      (0.01)    $       0.06     $      (0.01)
                                            ============     ============     ============     ============
Diluted earnings (loss) per share ......    $      (0.01)    $      (0.01)    $      (0.01)    $      (0.01)
                                            ============     ============     ============     ============
Anti-dilutive weighted-average shares ..      15,104,583        3,200,238       15,154,567        6,400,476
                                            ============     ============     ============     ============
</TABLE>

                                        8
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

Stock Splits
------------

The Company's board of directors declared the following reverse split of the
Company's common stock:

         October 11, 2005                65 for 1

The basic and diluted earnings per share have been adjusted retroactively to
give effect to this stock spilt.

Revenue Recognition
-------------------

Revenue is recognized when earned. The Company's revenue recognition policies
are in compliance with the Securities and Exchange Commission's Staff Accounting
Bulletin ("SAB") No. 104 "Revenue Recognition".

The Company generally invoices its customers upon ordering. Revenues from the
sale of phone equipment are recognized upon shipment by the reseller to the
end-user. Revenues from the Internet communications services are in the period
such services are used by the end-user. The invoices are based on specific list
prices for phone equipment and per minute rates for Internet communications
services. The Company adjusts its product prices and services rates based on
volume of services and marketing promotion programs. All adjustments are
recorded at the time the services are rendered.

Segment reporting
-----------------

The Company operates in one segment, Internet communications. The Company's
chief operating decision-maker evaluates the performance of the Company based
upon revenues and expenses by functional areas as disclosed in the Company's
statement of operations.

Derivative Liabilities
----------------------

The Company accounts for its embedded conversion features and freestanding
warrants pursuant to SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", which requires a periodic valuation of their fair value and
a corresponding recognition of liabilities associated with such derivatives. The
recognition of derivative liabilities related to the issuance of shares of
common stock is applied first to the proceeds of such issuance, at the date of
issuance, and the excess of derivative liabilities over the proceeds is
recognized as other expense in the accompanying consolidated financial
statements. The recognition of derivative liabilities related to the issuance of
convertible debt is applied first to the proceeds of such issuance as a debt
discount, at the date of issuance, and the excess of derivative liabilities over
the proceeds is recognized as other expense in the accompanying consolidated
financial statements. Any subsequent increase or decrease in the fair value of
the derivative liabilities is recognized as other expense or other income,
respectively. The reclassification of a contract is reassessed at each balance
sheet date. If a contract is reclassified from permanent equity to an asset or a
liability, the change in the fair value of the contract during the period the
contract was classified as equity is accounted for as an adjustment to equity.

                                        9
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

If a contract is reclassified from an asset or liability to equity, gains or
losses recorded to account for the contract at fair value during the period that
contract was classified as an asset or a liability are not reversed and are
accounted for as an adjustment to equity.

Property and Equipment
----------------------

Computer and office equipment are stated at cost, and is depreciated over their
estimated useful life, using the straight-line method, which is three years.

Share Based Payments
--------------------

In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R),
companies are required to measure the compensation costs of share-based
compensation arrangements based on the grant-date fair value and recognize the
costs in the financial statements over the period during which employees are
required to provide services. Share-based compensation arrangements include
stock options, restricted share plans, performance-based awards, share
appreciation rights and employee share purchase plans. In March 2005 the SEC
issued Staff Accounting Bulletin No. 107, or "SAB 107". SAB 107 expresses views
of the staff regarding the interaction between SFAS No. 123(R) and certain SEC
rules and regulations and provides the staff's views regarding the valuation of
share-based payment arrangements for public companies. SFAS No. 123(R) permits
public companies to adopt its requirements using one of two methods. On April
14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS
123R. Companies may elect to apply this statement either prospectively, or on a
modified version of retrospective application under which financial statements
for prior periods are adjusted on a basis consistent with the pro forma
disclosures required for those periods under SFAS 123. Effective January 1,
2006, the Company has fully adopted the provisions of SFAS No. 123R and related
interpretations as provided by SAB 107. As such, compensation cost is measured
on the date of grant at their fair value. Such compensation amounts, if any, are
amortized over the respective vesting periods of the option grant. The Company
applies this statement prospectively. Performance or service conditions that
affect vesting are not reflected in estimating the fair value of an award at the
grant date because those conditions are restrictions that stem from the
forfeitability of instruments to which the option holder has not yet earned the
right.

During July 2005, the Company issued 2,610,000 options to a consultant of the
Corporation, with an exercise price of $0.01. Such options are not vested or
exercisable at June 30, 2006. There is no expiration date on the options. The
options vest in the year in which the Company achieves $20 million in revenues,
and a prorata portion of the options would vest in the year in which the Company
achieves $10 million in revenues. Accordingly, no compensation cost associated
with the options is recognized during the six-month period ended June 30, 2006.

                                       10
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 2 - RELATED PARTY TRANSACTIONS

The Company subleased space used for its headquarters' and operational
activities from an entity affiliated to one of its stockholders. The sublease
provided for monthly payments of approximately $5,000 and is now renewable every
month. The Company incurred approximately $32,000 and $32,000 during the
six-month period ended June 30, 2006 and 2005, respectively. The Company owes
the related party approximately $107,000 in connection with this sublease at
June 30, 2006.

During June 2005, the Company issued a $200,000 note payable an entity
wholly-owned by one of its executive officers. The note is secured by
substantially all assets of the Company. The note bears interest at 14% per
annum and includes a repayment premium of $200,000 at December 15, 2005. The
note, including accrued interest and premium initially matured on December 15,
2005 and was extended to November 15, 2006. The Company recognized approximately
$14,000 of interest expense in connection with this note during the six-month
period ended June 30, 2006. The amount payable under the note amounts to
approximately $412,000 at June 30, 2006. The Company paid approximately $12,000
of interest expense during the six-month period ended June 30, 2006.

NOTE 3 - DUE TO CHIEF EXECUTIVE OFFICER

The Company owes its chief executive officer approximately $6,500 at June 30,
2006. The advance does not bear interest and is payable on demand.

NOTE 4 - DERIVATIVE LIABILITIES

During March 2005, the Company issued a convertible promissory note. The lender
has the option to convert up to $100,000 principal and accrued interest into
shares of the Company at a 25% discount of the fair value of the shares at the
date of conversion. In connection with the issuance of the convertible
promissory note, the Company also issued 2,200,000 warrants exercisable at $0.10
per share.

As a resulting of the issuance of the promissory note with such terms, there is
no explicit number of shares that are to be delivered upon satisfaction of the
convertible promissory note, the Company is unable to assert that it had
sufficient authorized and unissued shares to settle such note. Accordingly, all
of the Company's previously issued and outstanding instruments, such as warrants
and options as well as those issued in the future, would be classified as
liabilities as well, effective with the issuance of the convertible promissory
note. Absent other transactions which would warrant the same accounting
treatment, the Company will discontinue the recognition of derivative
liabilities once it can assert that it has a sufficient amount of authorized and
unissued shares settle its obligations which can be settled in shares.

At June 28, 2006, the Company renegotiate the terms of the convertible
promissory note. Pursuant to the new terms, the note is no longer convertible
into the Company's shares. As a result of the new terms, the Company can assert
that it has a sufficient amount of authorized and unissued shares settle its
obligations which can be settled in shares at June 30, 2006. Accordingly, the
Company reclassified all contracts, warrants, and other convertible instruments
outstanding at June 28, 2006 from liability to equity. The fair value of such
contracts amounted to approximately $4.9 million at June 28, 2006 and the
Company reduced its derivative liabilities and increased its additional paid-in
capital by a corresponding amount during the six-month period ended June 30,
2006.

                                       11
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 4 - DERIVATIVE LIABILITIES-CONTINUED

The Company believes that the aforementioned embedded derivatives and
freestanding warrants met the criteria of SFAS 133 and EITF 00-19, when
appropriate, prior to the June 28, 2006 transaction, and were accounted for as
separate derivatives with a corresponding value recorded as liability.

The fair value of the derivative liabilities issued at their date of issuance
during the six-month period ended June 30, 2006 and all derivative liabilities,
including those issued prior to January 1, 2006, at June 28, 2006 is as follows:

                                                      At               At June
                                                   issuance            28, 2006
                                                  ----------          ----------

Freestanding warrants ..................          $   24,218          $4,768,850
Embedded conversion feature ............              84,000              89,333
                                                  ----------          ----------
                                                     108,218          $4,858,183
                                                  ==========          ==========

The Company computed the fair value of the outstanding freestanding warrants and
embedded conversion features, at their measurement date, using the Black Scholes
valuation model with the following assumptions:

Freestanding warrants
                                                   At                  At
                                                Issuance          June 28, 2006
                                            -----------------    ---------------

Market price: ..........................    $       0.50-0.51    $          0.40
Exercise price: ........................    $       0.50-1.00    $    0.001-1.50
Term: ..................................              3 years       1.75-3 years
Volatility: ............................                 110%               110%
Risk-free interest rate: ...............                5.17%              5.17%
Number of warrants: ....................               85,000         12,420,000

Embedded conversion features
                                                   At                   At
                                                Issuance          June 30, 2006
                                            -----------------    ---------------

Market price: ..........................    $            1.00    $          0.40
Conversion price: $0.50 ................    $       0.30-0.50
Term: ..................................            0.5 years    0.25-1.75 years
Volatility: ............................                 110%               110%
Risk-free interest rate: ...............                4.82%              5.17%
Maximum liability: .....................    $          75,000    $       179,745

The effective exercise price of the embedded conversion feature of the $110,000
convertible promissory note amounts to 25% of the market value of the shares of
common stock at the indicated date.

                                       12
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 4 - DERIVATIVE LIABILITIES-CONTINUED

The Company had 2,610,000 outstanding options issued to non-employees for which
performance has not occurred at June 30, 2006. The fair value of such options
will be recognized when performance has occurred, pursuant to EITF 00-19.

The aggregate fair value of the warrants and embedded conversion feature issued
during the six-month period ended June 30, 2006 amounted to approximately
$116,000 at the date of their issuance, of which approximately $107,000 has been
recognized as debt discount. The excess of the fair value of the warrants issued
during the six-month period ended June 30, 2006 over the proceeds of the
associated debt amounted to $9,000 and has been recognized as offset to other
income-derivatives. The decrease in fair value of the derivatives between their
measurement date and June 28, 2006, amounting to approximately $8.7 million, has
been recognized as other income.

On August 31, 2006, the Company issued a $1.5 million convertible promissory
note which provides for, among other things, a conversion price amounting to 50%
of the market price of the Company's common shares and liquidated damages in the
event the Company does not timely register the shares issuable pursuant to the
convertible promissory notes. Accordingly, on August 31, 2006, the Company will
no longer be able to assert that it has a sufficient number of authorized but
unissued shares to satisfy its obligations under the convertible promissory
notes and all other outstanding warrants and other convertible instruments.
Therefore, the Company will account for the convertible promissory notes,
outstanding warrants, and other convertible instruments as derivative contracts
and will record a corresponding liability based on the fair value of such
derivatives at the measurement dates.

NOTE 5 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE

Convertible promissory note and notes payable at June 30, 2006 consist of the
following:

   o  $110,000 convertible promissory note, bearing interest at 10% per annum,
      maturing on March 22, 2006. On June 28, 2006, the lender has agreed to
      amend the convertible promissory note as follows: 1) extended the maturity
      date, with principal , accrued interest and penalty aggregating $125,000
      due on September 22, 2006. The lender no longer has the option to convert
      the promissory note into the Company's common shares. The Company owes
      $100,000 and $13,154 in principal and accrued interest and penalties,
      respectively, at June 30, 2006. The note was initially issued in March
      2005 and the Company received $110,000 during the six-month period ended
      June 30, 2005. The promissory note is unsecured.

   o  $200,000 note payable to related party, bearing interest at 14% per annum,
      with principal repayment of $400,000, together with interest, initially
      due on February 15, 2006, and extended to November 15, 2006. The Company
      owes $400,000 and $12,901 in principal and accrued interest, respectively,
      at June 30, 2006. The note is secured by substantially all assets of the
      Company.

                                       13
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 5 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE-CONTINUED

   o  $100,000 note payable, bearing no stated interest, with principal
      repayment of $150,000 due on February 15, 2006. The Company owes $150,000
      at June 30, 2006. On April 15, 2006, the maturity of the note was extended
      to July 15, 2006. In consideration for the extension, the Company issued
      35,000 warrants and 25,000 shares of its common stock. The warrants are
      exercisable at $1 per share and expire on April 2009. The promissory note
      was in default as of July 15, 2006. The note is unsecured.

   o  $100,000 notes payable, bearing no stated interest, with principal
      repayment of $100,000 due on March 15, 2006 as well as 40,000 shares of
      the Company's common stock. The maturity of notes was extended to May 15,
      2006. In consideration for the extension, the Company 50,000 shares to the
      note holders. The Company owes $100,000 in principal at June 30, 2006. The
      promissory note was in default as of June 30, 2006. The notes are
      unsecured.

   o  $75,000 convertible promissory note, bearing interest at 20%, due on July
      12, 2006. The convertible promissory note is convertible in 150,000 shares
      of common stock. The note was issued in January 2006 and the Company
      received $75,000 as consideration. The convertible promissory note was in
      default as of July 15, 2006. The note is unsecured.

   o  $50,000 promissory note, bearing no interest rate, due on May 15, 2006,
      with a premium repayment of 20,000 shares of common stock and 30,000
      warrants. The exercise price of the warrants amounts to $1.50 per share.
      The note was issued in February 2006 and the Company received $50,000 as
      consideration. The promissory note was in default as of June 30, 2006. The
      note is unsecured.

   o  $100,000 promissory note, bearing interest at 10%, due on November 30,
      2006, with a prepayment premium of 350,000 shares of the Company's common
      stock. The note was issued in June 2006 and the Company received $100,000
      as consideration. The note is unsecured.

   o  $100,000 promissory note, bearing interest at 10%, due on July 11, 2006,
      with a prepayment premium of $50,000 and 25,000 shares of the Company's
      common stock. The note was issued in April 2006 and the Company received
      $100,000 as consideration. Additionally, the Company issued 50,000
      warrants in connection with the issuance of the promissory note. The
      warrants are exercisable at $0.50 per share and expire in April 2009. The
      promissory note was in default as of July 15, 2006. The note is unsecured.

   o  $15,000 promissory note, bearing interest rate at 20%, due on July 15,
      2006, with a prepayment premium of $1,000. The note is unsecured. The note
      was satisfied during July 2006.

   o  $15,000 promissory note, bearing interest rate at 12%, due on September
      15, 2006, with a prepayment premium of $1,000. The note is unsecured. The
      note was satisfied during September 2006.

                                       14
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 5 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE-CONTINUED

During the six-month period ended June 30, 2006, the Company issued a $30,000
promissory note payable on May 3, 2006, with a premium repayment of $7,500. The
Company satisfied the $37,500 obligations under such promissory note in May
2006.

Certain of the aforementioned notes are in default. Management is negotiating
with the appropriate noteholders to either satisfy or extend the maturity of the
notes. Management cannot determine whether it will be successful in extending
the maturity of such notes.

The fair value of all warrants and embedded conversion features issued during
the six-month period ended June 30, 2006 has been accounted as derivative
liabilities. A debt discount of approximately $107,000 has been recognized
pursuant to the issuance of the warrants and embedded conversion features during
the six-month period June 30, 2006. The debt discount is amortized using the
effective interest method and amounted to approximately $123,000 during the
six-month period ended June 30, 2006.

The Company issued 55,611 shares of common stock in connection with certain
notes payable. The fair value of such shares amounted to approximately $66,000
and has been recognized as interest expense.

Interest expense, including the amortization of debt discount, amounted to
approximately $267,000 during the six-month period ended June 30, 2006.

NOTE 6 - STOCKHOLDERS' DEFICIT

Warrants

Pursuant to the $110,000 convertible promissory note, the Company issued
2,100,000 warrants during the six-month period ended June 30, 2005. The exercise
price of the warrants amounts to $0.10 per share. Such warrants expire in 2008.

Pursuant to the $50,000 promissory note issued in February 2006, the Company
issued 30,000 warrants during the six-month period ended June 30, 2006. The
exercise price of the warrants amounts to $1.50 per share. Such warrants expire
in March 2009.

Pursuant to the $100,000 promissory note issued in April 2006, the Company
issued 50,000 warrants during the six-month period ended June 30, 2006. The
exercise price of the warrants amounts to $0.50 per share. Such warrants expire
in April 2009.

In consideration for the extension of the $100,000 note payable effective in
April 2006, the Company issued 35,000 warrants. The warrants are exercisable at
$1 per share and expire on April 2009.

The fair value of all warrants issued during the six-month ended June 30, 2006
and 2005 has been recorded as derivative liabilities at their date of issuance.
However, on June 28, 2006, the Company reclassified the warrants as equity
contracts and recorded their fair value at that date as additional paid-in
capital.

                                       15
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 6 - STOCKHOLDERS' DEFICIT-CONTINUED

Stock

During the six-month period ended June 30, 2006, the Company issued 145,666
shares of common stock in connection with the payment of interest on certain
notes payable. The fair value of such shares amounted to approximately $66,000
based on the quoted price of the Company's stock on the day they were issued.

NOTE 7 - SUBSEQUENT EVENTS

On August 31, 2006, Tradequest completed a $1,500,000 financing of its 6%
Secured Convertible Notes and Common Stock Purchase Warrants to purchase
10,000,000 shares of common stock. At the initial closing $500,000 of notes were
issued and paid for. In addition, $500,000 principal amount of notes will be
funded on the date the Company files its registration statement, and the
remaining $500,000 principal amount of notes will be funded at the date that the
registration statement is declared effective with the Securities and Exchange
Commission. The warrants were issued at the closing and are exercisable at $.40
per share, subject to adjustment, and expire on August 29, 2013.

The purchasers of the notes are four accredited institutional investors. The
exercise of the warrants and conversion of the notes are subject to a 4.99% cap
of the beneficial ownership that each purchaser may have at any point in time
while the securities are outstanding.

The notes are secured by all of the assets of Tradequest. The notes are
convertible into common shares of Tradequest at a price equal to 50% of the
market price of the common shares of Tradequest, but the percentage discount
from the trading price would decrease to 45% if the Company timely files its
registration statement and to 40% if the registration statement becomes
effective on a timely basis as described . The notes mature on August 29, 2009.
Interest is payable monthly subject to certain exceptions as provided in the
notes. No holder may convert the greater of (i) $80,000 per calendar month or
(ii) the average daily dollar volume calculated during the 10 business days
prior to a conversion. Each purchaser of the notes is subject to a 4.99% cap on
the beneficial ownership that each purchaser may have at any point in time while
the notes are outstanding. The notes include certain covenants, including
restrictions that preclude (i) future offerings either in the form of equity or
debt, except for indebtedness to trade creditors or financial institutions
incurred in the ordinary course of business, and additionally, these covenants
preclude the Company from, directly or indirectly, using proceeds for any loan
to or investment in any other corporation, partnership, enterprise or other
person (except in connection with its currently existing direct or indirect
subsidiaries), (ii) the satisfaction of any portion of the Company's debt, or
(iii) the redemption of any Common Stock.

Provided Tradequest is not in default under the terms of the transaction
documents, its common shares are trading at or below $0.20 and subject to
certain other conditions, Tradequest shall have the right to prepay the notes in
cash equal to either (i) 120% for prepayments occurring within 30 days of
issuance of the notes, (ii) 130% for prepayments between 31 and 60 days after
the issue date or (iii) 140% for prepayments occurring after the 60th day
following the issue date plus accrued and unpaid interest or any default
interest.

                                       16
<PAGE>

                         TRADEQUEST INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 7 - SUBSEQUENT EVENTS-CONTINUED

The Company has agreed to file a registration statement covering the shares of
common stock underlying the securities issued. In the event the registration
statement is not filed by September 29, 2006 or does not become effective within
120 days from the closing, the Company is required to pay liquidated damages
equal to 2% of the principal amount of the notes outstanding on a monthly basis
until the registration covenant is satisfied. The damages may be satisfied in
common shares of Tradequest at our option. The transaction documents also
provide for the payment of liquidated damages to the investors in certain
events, including the Company's failure to maintain an effective registration
statement covering the resale of the common shares issuable upon conversion or
exercise of the securities.

During the third quarter of 2006, the Company satisfied two promissory notes
with principals aggregating $30,000.

                                       17
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

OVERVIEW

During August 2005, we acquired all the outstanding shares of IP1 ("IP1")
pursuant to a securities purchase agreement and plan of reorganization. The
acquisition of IP1 was treated as a reverse acquisition for financial reporting
purposes. As such, our financial statements have been prepared as if IP1 was the
acquiror. The results of operations for the six-month period ended June 30, 2005
discussed below represent the operations of IP1 and the results of operations
for the six-month period ended June 30, 2006 reflect the consolidated operations
of IP1 and the Company. We have retroactively restated our net loss per share
and the stockholders' deficit section of our balance sheet to reflect the
reverse acquisition.

As a result of the reverse acquisition, our business is now the business of IP1.
We are an Internet communications provider offering worldwide Voice over
Internet Protocol ("VOIP") and other services to small and medium size
businesses and individuals. The initial marketing programs are aimed at the
Latin American market. Our operations are located in South Florida. We began
marketing our products and services during the third quarter of 2005.

PLAN OF OPERATION

Over the course of the next twelve months, we intend to raise operating capital,
execute our business plan and focus our business development efforts in the
following four key areas:

      o  By enabling our customers to communicate more effectively at lower
         costs using our VOIP services;

      o  By diversifying our product and service offerings to enhance the
         usefulness of our solutions for customers who will have already adopted
         one or more products;

      o  By developing partnering relationships with wide-ranging sales and
         distribution channel leaders already serving our vertical and
         geographical market space in a way that assists them in developing new
         revenue streams and opportunities for additional sales and that also
         reduces their dependency on low margin products that may already be in
         the final stages of their product lifecycle.

As the demand for our products and services increases and once we raise
sufficient capital, we intend to add personnel who will primarily focus in the
following areas: sales and marketing personnel, customer service and quality
monitoring as well general and administrative to support growing operations.

                                       18
<PAGE>

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                For the
                                         six-month period ended                Variation
                                               June 30,                       2006 vs 2005
                                          2006            2005             $                %
                                      -----------     -----------     -----------      -----------
<S>                                   <C>             <C>             <C>              <C>
Revenues .........................    $    10,316     $         -     $    10,316           NM

Cost of revenues .................         20,887          23,470          (2,583)          NM
                                      -----------     -----------     -----------      -----------

Gross profit (loss) ..............        (10,571)        (23,470)          7,733           NM

Operating expenses:
Sales, general, and
 administrative expenses .........        321,373         181,614         139,759           77%
Sales, general, and administrative
 expenses-related party ..........         32,100          32,100               -            0%
                                      -----------     -----------     -----------      -----------
                                          353,473         213,714         139,759           65%

Net operating loss ...............       (364,044)       (237,184)        126,860           53%

Other income-derivatives .........      8,670,798               -      (8,670,798)          NM
Interest expense-related party ...        (14,000)              -          14,000           NM
Interest expense .................       (267,422)        (44,230)        267,422           NM
                                      -----------     -----------     -----------      -----------

Net income (loss) ................      8,025,332        (281,414)     (8,306,746)       -2952%
                                      ===========     ===========     ===========      ===========

NM:  Not meaningful
</TABLE>

SIX-MONTH PERIOD ENDED JUNE 30, 2006 AND JUNE 30, 2005

Revenues
--------

We have generated minimal revenues since inception. Our revenues for the six
months ended June 30, 2006 consisted primarily of per-minute usage fees for our
VOIP communication services. As our services were launched during the third
quarter of 2005, we did not report revenues for the first half of fiscal 2005.

Cost of revenues
----------------

Our cost of revenues consists of the costs to secure our VOIP communication
services with network carriers. Our cost of revenues during the six-month period
ended June 30, 2006 is primarily attributable to incurring fixed and variable
costs from network carriers to secure our VOIP communication services associated
with the launch of our VOIP services during the third quarter of 2005. We did
incur similar fees during the six-month period ended June 30, 2006 in
anticipation of the lauch of its VOIP services in the third quarter of 2005.

                                       19
<PAGE>

Sales, general, and administrative expenses and sales, general and
administrative-related party
------------------------------------------------------------------

Our sales, general, and administrative expenses consist primarily of consultant
fees incurred in connection with the sales and support of our VOIP services. The
increase in sales, general, and administrative expenses during the six-month
period ended June 30, 2006 is primarily due to hiring more consultants to
support our sale and support our VOIP services as well as professional fees
associated with being a publicly-traded company. We were still a private company
during the six-month period ended June 30, 2005. Sales, general and
administrative - related party consists of rental expenses. There were no
variation in sales, general, and administrative expenses-related party during
the six-month period ended June 30, 2006 when compared to the prior period.

Other income-derivatives
------------------------

Other income - derivatives includes the recognition of the fair value of
embedded conversion feature, options, warrants, and other rights to receive
shares issued and outstanding. For the six-months period ended June 30, 2006 we
recognized other income of $8,670,798 which represents the change in the fair
value of the derivate instruments between measurement dates. The decrease in the
fair value of the derivative liabilities is primarily due to a decrease in our
stock price since January 1, 2006.

Interest expense and interest expense-related party
---------------------------------------------------

Interest expense and interest expense - related party represents interest
incurred on various notes payable, including a note payable due to Arlington
Investment Group, an entity controlled by one of our executive officers. The
interest expense consists primarily of the amortization of debt discount as well
as interest accrued , whether paid in cash or stock, pursuant to such notes
payable. The increase in interest expense and interest expense-related party is
primarily due to an increase weighted-average debt principal during the
six-month period ended June 30, 2006 when compared to the prior period.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations and otherwise operate on an
ongoing basis. At June 30, 2006 we had cash on hand of approximately $5,000 and
a working capital deficit of $1.3 million. Our independent auditors' report on
our financial statements for fiscal year 2005 contained an explanatory paragraph
regarding our ability to continue as a going concern.

Cash used in our operating activities amounted to approximately $332,000 during
the six-month period ended June 30, 2006. Our net income for that period
amounted to approximately $8.0 million and was adjusted as follows:

   o  Decrease in fair value of derivatives between measurement date of
      approximately $8.7 million

   o  Amortization of debt discount and fair value of share issued in
      satisfaction of interest on note payable of approximately $123,000 and
      $66,000, respectively.

We financed our operating and investing activities during the six-month period
ended June 30, 2006 by issuing a note payable and convertible promissory note
amounting to $385,000. We also satisfied a note payable of $30,000 during the
six-month period ended June 30, 2006.

                                       20
<PAGE>

Cash used in our operating activities amounted to approximately $152,000 during
the six-month period ended June 30, 2005. Our net loss for that period amounted
to approximately $281,000 and was adjusted as follows:

   o  Decrease in accounts receivable amounting to approximately $35,000;

   o  Increase in accounts payable and accounts payable to related party of
      approximately $15,000 and $32,000, respectively.

We financed our operating and investing activities during the six-month period
ended June 30, 2005 by issuing convertible promissory note and promissory notes
amounting to $410,000.

On August 31, 2006, Tradequest completed a $1,500,000 financing of its 6%
Secured Convertible Notes and Common Stock Purchase Warrants to purchase
10,000,000 shares of common stock. At the initial closing $500,000 of notes were
issued and paid for. In addition, $500,000 principal amount of notes will be
funded on the date the Company files its registration statement, and the
remaining $500,000 principal amount of notes will be funded at the date that the
registration statement is declared effective with the Securities and Exchange
Commission. The warrants were issued at the closing and are exercisable at $.40
per share, subject to adjustment, and expire on August 29, 2013.

The purchasers of the notes are four accredited institutional investors. The
exercise of the warrants and conversion of the notes are subject to a 4.99% cap
of the beneficial ownership that each purchaser may have at any point in time
while the securities are outstanding.

The notes are secured by all of the assets of Tradequest. The notes are
convertible into common shares of Tradequest at a price equal to 50% of the
market price of the common shares of Tradequest, but the percentage discount
from the trading price would decrease to 45% if the Company timely files its
registration statement and to 40% if the registration statement becomes
effective on a timely basis as described . The notes mature on August 29, 2009.
Interest is payable monthly subject to certain exceptions as provided in the
notes. No holder may convert the greater of (i) $80,000 per calendar month or
(ii) the average daily dollar volume calculated during the 10 business days
prior to a conversion. Each purchaser of the notes is subject to a 4.99% cap on
the beneficial ownership that each purchaser may have at any point in time while
the notes are outstanding. The notes include certain covenants, including
restrictions that preclude (i) future offerings either in the form of equity or
debt, except for indebtedness to trade creditors or financial institutions
incurred in the ordinary course of business, and additionally, these covenants
preclude the Company from, directly or indirectly, using proceeds for any loan
to or investment in any other corporation, partnership, enterprise or other
person (except in connection with its currently existing direct or indirect
subsidiaries), (ii) the satisfaction of any portion of the Company's debt, or
(iii) the redemption of any Common Stock.

Provided Tradequest is not in default under the terms of the transaction
documents, its common shares are trading at or below $0.20 and subject to
certain other conditions, Tradequest shall have the right to prepay the notes in
cash equal to either (i) 120% for prepayments occurring within 30 days of
issuance of the notes, (ii) 130% for prepayments between 31 and 60 days after
the issue date or (iii) 140% for prepayments occurring after the 60th day
following the issue date plus accrued and unpaid interest or any default
interest.

                                       21
<PAGE>

The Company has agreed to file a registration statement covering the shares of
common stock underlying the securities issued. In the event the registration
statement is not filed by September 29, 2006 or does not become effective within
120 days from the closing, the Company is required to pay liquidated damages
equal to 2% of the principal amount of the notes outstanding on a monthly basis
until the registration covenant is satisfied. The damages may be satisfied in
common shares of Tradequest at our option. The transaction documents also
provide for the payment of liquidated damages to the investors in certain
events, including the Company's failure to maintain an effective registration
statement covering the resale of the common shares issuable upon conversion or
exercise of the securities.

We introduced our services during the third quarter of fiscal 2005 and to date
have generated minimal revenues. Our revenues are not sufficient to pay our
operating expenses and we have relied upon short-term borrowings to provide
funds for working capital. At June 30, 2006 we had an aggregate of approximately
$1.1 million due under short term notes, of which $525,000 are past due as of
the date of this quarterly report. Other of the remaining outstanding notes
include terms which either require principal repayments in excess of the
original amount lent, as well as shares of our common stock upon maturity. While
we are attempting to restructure these obligations, we do not presently have
sufficient funds to pay any of these notes. If the note holders should declare a
default on the notes, if we were unable to pay the obligation the note holders
would be entitled to foreclose on our assets. In this event, we would be unable
to continue our operations.

Our ability to continue as a going concern is dependent upon our ability to
obtain the necessary financing to meet our obligations and repay our liabilities
when they become due until such time, if ever, that we are able to generate
sufficient revenues to attain profitable operations. Our future capital
requirements depend primarily on the rate at which we can increase our revenues
and thereby decrease our use of cash to fund operations. Cash used for
operations will be affected by numerous known and unknown risks and
uncertainties including, but not limited to, our ability to successfully market
our products and services, attain and retain a customer base, and our ability to
attract key personnel as we grow. In addition to funds necessary to fund our
recurring operating expenses and funds to satisfy the short terms notes
discussed above, we will need to raise significant additional capital to
continue to implement our business model. Because we have no firm commitments
from any third party to provide this financing, we cannot assure you we will be
successful in raising working capital as needed. There are no assurances that we
will have sufficient funds to execute our business plan, pay our obligations as
they become due or generate positive operating results for the next twelve
months. If we are unable to raise additional capital, we may be unable to
continue our operations and our stockholders could loose their entire investment
in our company.

ITEM 3.  CONTROLS AND PROCEDURES

Our management, which includes our CEO, has conducted an evaluation of the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-14(c) promulgated under the Securities and Exchange Act of 1934, as amended)
as of a date (the "Evaluation Date") as of the end of the period covered by this
report. Based upon that evaluation, our CEO has concluded that our disclosure
controls and procedures are effective for timely gathering, analyzing and
disclosing the information we are required to disclose in our reports filed
under the Securities Exchange Act of 1934, as amended. There have been no
changes in our internal control over financial reporting identified in
connection with the evaluation that occurred during the last fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

                                       22
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In April 2006, we issued a $100,000 promissory note to an accredited investor.
The promissory note matured on July 11, 2006. In connection with the issuance of
the promissory note, we will be obligated to issue 25,000 shares of our common
stock at the maturity date. We also issued 50,000 warrants in connection with
this transaction. The exercise price of the warrants is $0.50 per share. The
warrants expire in April 2009. The transaction was exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act") in reliance
on an exemption provided by Section 4(2) of the act.

In April 2006, in consideration for the extension of a $100,000 note payable to
an individual, the Company issued 25,000 shares of its common stock and 35,000
warrants, which are valued based on the quoted trading price of our stock over
the terms of the note payable. The warrants expire in April 2009. The recipient
is accredited or otherwise sophisticated investors and the transaction was
exempt from registration under the Securities Act in reliance on an exemption
provided by Section 4(2) of the act.

In June 2006, we issued a $100,000 promissory note to an accredited investor.
The promissory note matures on November 30, 2006. In connection with the
issuance of the promissory note, we will issue 350,000 shares of our common
stock at the maturity date, which are valued based on the quoted trading price
of our stock over the terms of the note payable. The transaction was exempt from
registration under the Securities Act of 1933, as amended (the "Securities Act")
in reliance on an exemption provided by Section 4(2) of the act.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

At June 30, 2006 we had an aggregate of approximately $1.1 million due under
short term notes, of which $525,000 are past due as of the date of this
quarterly report. Other of the remaining outstanding notes include terms which
either require principal repayments in excess of the original amount lent, as
well as shares of our common stock upon maturity. While we are attempting to
restructure these obligations, we do not presently have sufficient funds to pay
any of these notes. If the note holders should declare a default on the notes,
if we were unable to pay the obligation the note holders would be entitled to
foreclose on our assets. In this event, we would be unable to continue our
operations.

ITEM 4.  SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS

31.1     Rule 13a-14(a)/15d-14(a) certification of CEO

31.2     Rule 13a-14(a)/15d-14(a) certificate of principal accounting officer

32.1     Section 1350 certification of CEO and principal accounting officer

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<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has
caused his report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        Tradequest International, Inc.

                                    By: /s/ Luis Alvarez
                                        ----------------
September 20, 2006                      Luis Alvarez, CEO, principal executive
                                        officer and principal accounting officer

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