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 September 30, 2007

[ ]      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.)

            806 Douglas Road, Suite 580, Coral Gables, Florida 33134
            --------------------------------------------------------
                    (Address of principal executive offices)

                                 (305) 446-1380
                                 --------------
                           (Issuer's telephone number)

                                 not applicable
                                 --------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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 November 9, 2007, there were
83,295,137 shares of common stock were issued and outstanding.

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

<PAGE>

           CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

         This quarterly report contains forward-looking statements. 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.

                           OTHER PERTINENT INFORMATION

         References in this report to "Tradequest", the "Company", "we", "us"
and "our" are to Tradequest International, Inc. a Nevada corporation, and our
subsidiary.

                                      INDEX

PART I - FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements ....................................3
           Consolidated Balance Sheet at September 30, 2007 (unaudited) .......3
           Consolidated Statement of Operations for the three and
             nine months ended September 30, 2007 and 2006 (unaudited) ........4
           Consolidated Statements of Cash Flows for the nine months ended
             September 30, 2007 and 2006 (unaudited) ..........................5
           Notes to Unaudited Consolidated Financial Statements ...............6
Item 2.  Management's Discussion and Analysis or Plan of Operation ...........23
Item 3.  Controls and Procedures .............................................30

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings ...................................................31
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds .........31
Item 3.  Defaults Upon Senior Securities .....................................31
Item 4.  Submission of Matters to a Vote of Security Holders .................31
Item 5.  Other Information ...................................................31
Item 6.  Exhibits.............................................................32

                                      - 2 -
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
                           TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                                    CONSOLIDATED BALANCE SHEET
                                        September 30, 2007
                                            (Unaudited)
<CAPTION>
                                              ASSETS
<S>                                                                                  <C>
Current Assets:
  Cash ...........................................................................   $    168,825
  Accounts receivable ............................................................          3,886
  Other current assets ...........................................................          9,689
                                                                                     ------------
                                                                                          182,400

  Property and equipment, net of accumulated depreciation of $21,442 .............         11,878
  Deferred financing fees, net of accumulated amortization of $99,922 ............        261,078
  Security deposits ..............................................................         56,493
                                                                                     ------------

     Total assets ................................................................   $    511,849
                                                                                     ============

                               LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Accounts payable and accrued expenses ..........................................   $    243,450
  Deferred revenues ..............................................................         28,752
  Derivative liabilities .........................................................      1,470,527
  Due to related party ...........................................................        118,350
  Note payable to related party and accrued interest .............................        408,667
  Notes payable and accrued interest .............................................        494,362
                                                                                     ------------

     Total current liabilities ...................................................      2,764,108

  Convertible promissory notes and accrued interest, net of discount of $1,402,097        738,347

Stockholders' Deficit:
  Preferred stock; $0.001 par value, 10,000,000 shares authorized,
    1,000,000 issued and outstanding .............................................          1,000
  Common stock; $.001 par value, 500,000,000 shares authorized,
    78,595,137 issued and outstanding ............................................         86,708
  Additional paid-in capital .....................................................      8,124,088
  Deferred compensation ..........................................................         (6,045)
  Accumulated deficit ............................................................    (11,196,357)
                                                                                     ------------

     Total stockholders' deficit .................................................     (2,990,606)
                                                                                     ------------

     Total liabilities and stockholders' deficit .................................   $    511,849
                                                                                     ============

                           See Notes to Unaudited Financial Statements.

                                               - 3 -
</TABLE>
<PAGE>
<TABLE>
                                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                                       CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
                                                      Three-month period ended        Nine-month period ended
                                                            September 30,                   September 30,
                                                    ----------------------------    ----------------------------
                                                        2007            2006            2007            2006
                                                    ------------    ------------    ------------    ------------
                                                     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
<S>                                                 <C>             <C>             <C>             <C>
Revenues- products ..............................   $      5,826    $          -    $     45,826    $          -
Revenues- services ..............................         18,645          14,021          40,365          24,337

Cost of revenues-products .......................          3,797               -          40,419               -
Cost of revenues-services .......................         24,507          20,088          74,866          40,975
                                                    ------------    ------------    ------------    ------------

Gross loss: .....................................         (3,833)         (6,067)        (29,094)        (16,638)

Operating expenses:
  Sales, general and administrative .............        457,723         271,059       1,493,923         592,432
  Sales, general and administrative-related party              -          11,000               -          43,100
                                                    ------------    ------------    ------------    ------------
     Total operating expenses ...................        457,723         282,059       1,493,923         635,532
                                                    ------------    ------------    ------------    ------------

     Operating loss .............................       (461,556)       (288,126)     (1,523,017)       (652,170)
                                                    ------------    ------------    ------------    ------------

Other income (expenses):
Other income-derivatives ........................        152,443         658,897         869,881       9,329,695
Other expense- derivatives ......................              -      (2,202,750)              -      (2,202,750)
Interest expense-related party ..................         (7,000)         (7,000)        (41,000)        (21,000)
Interest expense ................................       (200,077)       (189,020)       (543,519)       (456,442)
                                                    ------------    ------------    ------------    ------------

Net income ......................................   $   (516,190)   $ (2,027,999)   $ (1,237,655)   $  5,997,333
                                                    ============    ============    ============    ============

Basic income (loss) per share ...................   $      (0.01)   $      (0.03)   $      (0.02)   $       0.10
                                                    ============    ============    ============    ============

Diluted loss per share ..........................   $      (0.01)   $      (0.01)   $      (0.03)   $      (0.02)
                                                    ============    ============    ============    ============

Basic weighted average shares outstanding .......     83,191,654      59,342,886      78,951,837      57,890,798
                                                    ============    ============    ============    ============

Diluted weighted average shares outstanding .....     83,191,654      59,342,886      78,951,837      57,890,798
                                                    ============    ============    ============    ============

                                   See Notes to Unaudited Financial Statements.

                                                      - 4 -
</TABLE>
<PAGE>
<TABLE>
                                    TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                             For the nine-month
                                                                                                period ended
                                                                                                September 30,
                                                                                         --------------------------
                                                                                             2007           2006
                                                                                         -----------    -----------
                                                                                         (Unaudited)    (Unaudited)
<S>                                                                                      <C>            <C>
Cash flows from operating activities:
Net income (loss) ....................................................................   $(1,237,655)   $ 5,997,333
Adjustments to reconcile net income (loss) to net cash used in operating activities:
  Amortization of debt discount ......................................................       377,012        142,748
  Amortization of deferred compensation ..............................................       546,959        108,970
  Amortization of deferred financing costs ...........................................        76,908          4,306
  Fair value of derivative liabilities at date of issuance, in excess of debt discount             -      2,202,750
  (Decrease) increase in fair value of derivative liabilities ........................      (869,881)    (9,329,695)
  Fair value of shares issued in satisfaction of interest on note payable ............         7,970        207,801
  Fair value of shares issued for compensation .......................................        39,000              -
  Write-off of deferred financing fees ...............................................             -         10,000
  Depreciation .......................................................................         9,120          6,828
Changes in operating assets and liabilities
  Accounts receivable ................................................................        (3,886)           (48)
  Security deposits ..................................................................       (39,893)             -
  Other current assets ...............................................................        (9,689)             -
  Accounts payable to related party ..................................................             -         43,100
  Deferred revenues ..................................................................         8,286          4,882
  Accounts payable and accrued expenses ..............................................       121,865          4,028
  Accrued interest on promissory notes-related party .................................        (1,900)             -
  Accrued interest and premiums on promissory notes ..................................        70,796         65,688
                                                                                         -----------    -----------

Net cash used in operating activities ................................................      (904,988)      (531,309)

Cash flows from investing activity:
  Purchase of property and equipment .................................................        (3,485)          (470)
                                                                                         -----------    -----------
Net cash used in financing activities ................................................        (3,485)          (470)

Cash flows from financing activities:
  Proceeds from issuance of convertible promissory notes .............................     1,100,000        575,000
  Proceeds from issuance of promissory notes .........................................             -        310,000
  Principal repayments of promissory notes ...........................................       (66,666)       (60,000)
  Payment of deferred financing costs ................................................      (128,000)      (105,000)
  Use of bank overdraft ..............................................................             -        (10,256)
                                                                                         -----------    -----------

Net cash provided by financing activities ............................................       905,334        709,744

(Decrease) increase in cash ..........................................................        (3,139)       177,965

Cash, beginning of period ............................................................       171,964              -
                                                                                         -----------    -----------

Cash, end of period ..................................................................   $   168,825    $   177,965
                                                                                         ===========    ===========

Supplemental disclosures of cash flow information:
  Cash paid for interest .............................................................   $    53,733    $    56,897
                                                                                         ===========    ===========

  Cash paid for income taxes .........................................................   $         -    $         -
                                                                                         ===========    ===========

Supplemental schedule of non-cash financing and investing activities:

Fair value of embedded conversion features
 and corresponding increase in debt discount .........................................   $   849,371    $   607,250
                                                                                         ===========    ===========

Reclassification of contracts from liability to equity ...............................   $    15,380    $ 4,858,184
                                                                                         ===========    ===========

Conversion of convertible promissory notes ...........................................   $    22,530    $         -
                                                                                         ===========    ===========

Fair value of freestanding warrants and corresponding
  increase in deferred financing fees ................................................   $         -    $    50,000
                                                                                         ===========    ===========

                                    See Notes to Unaudited Financial Statements.

                                                        - 5 -
</TABLE>
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

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 IP1 Network Corporation ("IP1"). IP1 Network
Corp. is an integrated IP applications service provider offering worldwide Voice
over Internet Protocol ("VoIP") products and other enhanced IP services, through
a White Label platform, to medium and large size synergistic businesses, that
can offer such IP services to their client base, both domestically and
internationally. IP1 Network sells and distributes its IP Communications
products and services through a White Label Branding Strategy consisting of an
indirect sales force made up of domestic and international Preferred Partners.
The Company's initial marketing programs are aimed at the Latin American market.
The Company's operations are located in South Florida.

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 $11.2 million. Additionally, the Company
has approximately $907,000 of short-term notes payable in default. 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 the year ended December 31, 2006, 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 September 30, 2007, and the results of operations and cash flows for the
nine-month period ending September 30, 2007 have been included. The results of
operations for the nine-month period ended September 30, 2007 are not

                                      - 6 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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 year ended December
31, 2006.

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

The Company is subject to concentrations of credit risk primarily from cash.
During the nine-month period ended September 30, 2007, the Company reached 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 IP and
other IP services to medium and large size synergistic businesses that can offer
such IP services to their client base.

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

One of the Company's clients accounted for 65% of the revenues during the
nine-month period ended September 30, 2007.

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. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

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 1,081,525,000 and
40,805,714 at September 30, 2007 and 2006, respectively. Such outstanding
options, warrants and shares equivalent issuable pursuant to convertible debt
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:

                                                     Nine-month period ended
                                                September 30,     September 30,
                                                     2007              2006
                                                     ----              ----
Numerator:
Net (loss) income ..........................    $  (1,237,655)    $   5,997,333
Other income, net- derivatives .............         (869,881)       (7,126,945)
                                                -------------     -------------
Numerator for diluted earnings per share ...    $    (367,774)    $    (645,466)
                                                =============     =============

Denominator:
Denominator for basic and diluted
earnings per share-
Weighted average shares outstanding ........       78,951,837        57,890,798

Basic (loss) earnings per share ............    $       (0.02)    $        0.10
                                                =============     =============
Diluted loss per share .....................    $       (0.03)    $       (0.02)
                                                =============     =============
Anti-dilutive weighted-average shares ......      408,132,555        18,238,829
                                                =============     =============

                                      - 8 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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 manufacturer to the
reseller. Revenues from the Internet communications services are recognized in
the period such services are used by the end-user. The charges 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. The Company
operates under a positive balance credit policy where it receives a pre-payment
from the resellers (Preferred Partners/Distributors/Agents) for their Internet
communications services average usage. This payment is applied towards the
Preferred Partner's account which is then automatically deducted, in real-time,
as the usage (monthly recurring charges, long distance charges, administrative
and special fees) occur.

When a Preferred Partner's account balance falls below $250, the system sends
out a notice advising the Partner of their low balance. The Preferred Partner in
turn must replenish the account via wire transfer or credit card charge for an
amount equal to at least one week's average usage. The Partner can also set up
an automatic re-charge payment process via credit card. In the meantime, any new
account activations, moves, additions, or changes are deactivated in all of the
Preferred Partner's accounts until such time that the funds are received and
verified by the Company.

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

                                      - 9 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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.
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.

In December 2006, FASB issued FASB Staff Position No. EITF 00-19-2 "Accounting
for Registration Payment Arrangements" ("FSP 00-19-2"). FSP 00-19-2 provides
that the contingent obligation to make future payments or otherwise transfer
consideration under a registration payment arrangement, should be separately
recognized and measured in accordance with FASB Statement No.5, "Accounting for
Contingencies". The registration statement payment arrangement should be
recognized and measured as a separate unit of account from the financial
instrument(s) subject to that arrangement. If the transfer of consideration
under a registration payment arrangement is probable and can be reasonably
estimated at inception, such contingent liability is included in the allocation
of proceeds from the related financing instrument.

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.

Depreciation expense amounted to approximately $9,000 and $7,000 during the
nine-month period ended September 30, 2007 and 2006, respectively.

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

                                     - 10 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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 possible forfeiture 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 September 30, 2007. 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 nine-month period ended
September 30, 2007 and 2006, respectively.

Recent Accounting Pronouncements
--------------------------------

In September 2006, the FASB issued FASB Statement No. 157. This Statement
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP), and expands disclosures about
fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is a
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practices. This Statement is effective for
financial statements for fiscal years beginning after November 15, 2007. Earlier
application is permitted provided that the reporting entity has not yet issued
financial statements for that fiscal year. Management believes this Statement
will have no impact on the financial statements of the Company once adopted.

On July 13, 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, ("FIN 48"), entitled, "Accounting for Uncertainty in
Income Taxes - an Interpretation of FASB Statement No. 109". Concurrently, FASB
issued a FASB staff position (FSP) relating to income taxes, (FSP) No. FAS 13-2,
"Accounting for a Change or Projected Change in the Timing of Cash Flows
Relating to Income Taxes Generated by a Leveraged Lease Transaction." FASB's
summary of FIN 48 notes that differences between tax positions recognized in the
financial statements and tax positions taken in the tax return (referred to
commonly as "book" vs. "tax") will generally result in: (a) an increase in a
liability for income taxes payable or a reduction of an income tax refund
receivable, (b) a reduction in a deferred tax asset or an increase in a deferred
tax liability, or (c) both of the above. FIN 48 requires the affirmative
evaluation that it is more likely than not, based on the technical merits of a
tax position, that an enterprise is entitled to economic benefits resulting from
positions taken in income tax returns. Further, if a tax position does not meet

                                     - 11 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

the more-likely-than-not recognition threshold, the benefit of that position is
not recognized in the financial statements. Additionally, FIN 48 establishes
guidance for "derecognition" of previously recognized deferred tax items, and
sets forth disclosure requirements. The effective date of FIN 48 is for fiscal
years beginning after December 15, 2006. The Company does not believe that FIN
48, once adopted, will have a significant impact on its financial position,
operating results, or cash flows.

In February 2007, the FASB issued FASB Statement No. 159 "The Fair Value Option
for Financial Assets and Financial Liabilities--Including an amendment of FASB
Statement No. 115". This Statement permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This Statement is expected to expand the use of fair value
measurement, which is consistent with the FASB's long-term measurement
objectives for accounting for financial instruments. This Statement applies to
all entities, including not-for-profit organizations. Most of the provisions of
this Statement apply only to entities that elect the fair value option. However,
the amendment to FASB Statement No. 115, "Accounting for Certain Investments in
the Debt and Equity Securities," applies to all entities with available-for-sale
and trading securities. Some requirements apply differently to entities that do
not report net income. The following are eligible items for the measurement
option established by this Statement:

o  Recognized financial assets and financial liabilities except:

o  An investment in a subsidiary that the entity is required to consolidate

o  An interest in a variable interest entity that the entity is required to
   consolidate

o  Employers' and plans' obligations (or assets representing net over funded
   positions) for pension benefits, other postretirement benefits (including
   health care and life insurance benefits), postemployment benefits, employee
   stock option and stock purchase plans, and other forms of deferred
   compensation arrangements, as defined in FASB Statements No. 35, "Accounting
   and Reporting by Defined Benefit Pension Plans", No. 87, "Employers'
   Accounting for Pensions", No. 106, "Employers' Accounting for Postretirement
   Benefits Other Than Pensions", No. 112, "Employers' Accounting for
   Postemployment Benefits", No. 123 (revised December 2004), "Share-Based
   Payment", No. 43, "Accounting for Compensated Absences", No. 146, "Accounting
   for Costs Associated with Exit or Disposal Activities", and No. 158,
   "Employers' Accounting for Defined Benefit Pension and Other Postretirement
   Plans", and APB Opinion No. 12, "Omnibus Opinion--1967"

o  Financial assets and financial liabilities recognized under leases as defined
   in FASB Statement No. 13, "Accounting for Leases" (This exception does not
   apply to a guarantee of a third-party lease obligation or a contingent
   obligation arising from a cancelled lease.)

o  Deposit liabilities, withdrawable on demand, of banks, savings and loan
   associations, credit unions, and other similar depository institutions

                                     - 12 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

o  Financial instruments that are, in whole or in part, classified by the issuer
   as a component of shareholder's equity (including "temporary equity"). An
   example is a convertible debt security with a noncontingent beneficial
   conversion feature.

o  Firm commitments that would otherwise not be recognized at inception and that
   involve only financial instruments

o  Nonfinancial insurance contracts and warranties that the insurer can settle
   by paying a third party to provide those goods or services

o  Host financial instruments resulting from separation of an embedded
   nonfinancial derivative instrument from a nonfinancial hybrid instrument.

The fair value option established by this Statement permits all entities to
choose to measure eligible items at fair value at specified election dates. A
business entity shall report unrealized gains and losses on items for which the
fair value option has been elected in earnings (or another performance indicator
if the business entity does not report earnings) at each subsequent reporting
date. A not-for-profit organization shall report unrealized gains and losses in
its statement of activities or similar statement.

The fair value option:

o  May be applied instrument by instrument, with a few exceptions, such as
   investments otherwise accounted for by the equity method

o  Is irrevocable (unless a new election date occurs)

o  Is applied only to entire instruments and not to portions of instruments.

This Statement is effective as of the beginning of an entity's first fiscal year
that begins after November 15, 2007. Early adoption is permitted as of the
beginning of a fiscal year that begins on or before November 15, 2007, provided
the entity also elects to apply the provisions of FASB Statement No. 157, "Fair
Value Measurements". No entity is permitted to apply this Statement
retrospectively to fiscal years preceding the effective date unless the entity
chooses early adoption. The choice to adopt early should be made after issuance
of this Statement but within 120 days of the beginning of the fiscal year of
adoption, provided the entity has not yet issued financial statements, including
required notes to those financial statements, for any interim period of the
fiscal year of adoption. This Statement permits application to eligible items
existing at the effective date (or early adoption date).

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. The Company incurred
approximately $0 and $43,000 during the nine-month period ended September 30,
2007 and 2006, respectively. During August 2006, the related party relinquished
all its rights under the sublease at the condition that the Company vacated the
premises by August 31, 2006, which it did. The Company owed approximately
$118,000 to the related party prior to vacating the premises.

                                     - 13 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 2 - RELATED PARTY TRANSACTIONS

During June 2005, the Company issued a $200,000 note payable to 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 March 1, 2007. On March 1, 2007, the note was extended
to September 1, 2007 for an extension fee of $20,000. The Company recognized
approximately $41,000 and $21,000 of interest expense in connection with this
note during the nine-month period ended September 30, 2007 and 2006,
respectively. The amount payable under the note amounts to approximately
$408,000 at September 30, 2007. The Company paid approximately $54,000 and
$21,000 of interest expense during the nine-month period ended September 30,
2007 and 2006, respectively. The note is currently in default

NOTE 3 - DERIVATIVE LIABILITIES

MARCH 2005 TRANSACTION

During March 2005, the Company issued a convertible promissory note. The lender
had 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 result of the issuance of the promissory note with such terms, there was 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.

AUGUST 2006 TRANSACTION

During August 2006, the Company issued $500,000 convertible promissory notes
which provide 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, since August 31, 2006, the Company is
no longer 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 accounted for the convertible promissory notes,
outstanding warrants, and other convertible instruments as derivative contracts
and recorded a corresponding liability based on the fair value of such
derivatives at the measurement dates.

                                     - 14 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 4 - DERIVATIVE LIABILITIES-CONTINUED

Between November 2006 and September 2007, the Company issued an additional
$1,580,000 pursuant to similar convertible promissory notes.

The Company believes that the aforementioned embedded derivatives and
freestanding warrants met the criteria of SFAS 133 and EITF 00-192 when
appropriate, at September 30, 2007 and 2006, respectively, and were accounted
for as separate derivatives with a corresponding value recorded as liability.

The fair value of the derivative liabilities issued during the nine-month
periods ended September 30, 2007 and 2006, respectively, were as follows:

                               Nine-month period ended   Nine-month period ended
                                 September 30, 2007        September 30, 2006
                               -----------------------   -----------------------

Freestanding warrants .........        $      -                  $ 24,218
Embedded conversion feature ...         849,371                    84,000
                                       --------                  --------
                                       $849,371                  $108,218
                                       ========                  ========

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

Freestanding warrants

                               Nine-month period ended   Nine-month period ended
                                 September 30, 2007        September 30, 2006
                               -----------------------   -----------------------

Market price: .................         $0.004                 $0.50 - 0.51
Exercise price: ...............         $0.40                  $0.50 - 1.50
Term: .........................        7 years                   3 years
Volatility: ...................          57%                       110%
Risk-free interest rate: ......      4.03 - 4.89%                 5.17%
Number of warrants: ...........       20,000,000                  85,000

Embedded conversion features

                               Nine-month period ended   Nine-month period ended
                                 September 30, 2007        September 30, 2006
                               -----------------------   -----------------------

Market price:                       $0.007 - $0.05                $1.00
Conversion price:                  $0.0035 - $0.025            $0.30 - 0.50
Term:                               2.6 - 3 years               0.5 years
Volatility:                           52.5 - 57%                   110%
Risk-free interest rate:             4.03 - 4.8%                  4.82%
Maximum liability:                    $1,080,000                 $75,000

                                     - 15 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 4 - DERIVATIVE LIABILITIES-CONTINUED

The fair value of the derivative liabilities outstanding at September 30, 2007,
is as follows:

                                At September 30, 2007
                                ---------------------

Freestanding warrants .........       $   30,000
Embedded conversion feature ...        1,452,122
                                      ----------
                                      $1,482,122
                                      ==========

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 September 30, 2007
                                ---------------------

Market price: .................         $0.004
Exercise price: ...............      $0.001-1.50
Term: .........................      0.75-7 years
Volatility: ...................          57%
Risk-free interest rate: ......         4.03%
Number of warrants: ...........       40,360,000

Embedded conversion features

                                At September 30, 2007
                                ---------------------

Market price: .................         $0.004
Conversion price: .............        $0.0002
Term: .........................     2.17 - 3 years
Volatility: ...................          57%
Risk-free interest rate: ......         4.03%
Maximum liability: ............       $2,080,000

The Company used the following methodology to value the embedded conversion
features and liquidated damages:

The Company had 2,610,000 outstanding options issued to non-employees for which
performance has not occurred at December 31, 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 nine-month period ended September 30, 2007 and 2006 amounted to
approximately $849,800 and $2.75 million at the date of their issuance of which
approximately $849,800 and $607,000 has been recognized as debt discount.

                                     - 16 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 4 - DERIVATIVE LIABILITIES-CONTINUED

The aggregate fair value of the embedded conversion features reclassified from
liability to equity contracts, pursuant to conversion of convertible promissory
notes, amounted to approximately $26,000 during the nine-month period ended
September 30, 2007. The aggregate fair value of the warrants, embedded
conversion feature and liquidated damages issued or reclassified during the
nine-month period ended September 30, 2006 amounted to approximately $2.75
million at the date of their issuance or reclassification, of which
approximately $607,00 has been recognized as debt discount, $50,000 as deferred
financing fees, and approximately $2.2 million as other expenses-derivative
liability.

The decrease in fair value of the derivatives between their measurement date and
September 30, 2007 and 2006, respectively, amounting to approximately $870,000
and $9.3 million, has been recognized as other income.

NOTE 5 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE

Convertible promissory note and notes payable at September 30, 2007 consist of
the following:

   o  $110,000 convertible promissory note, bearing interest at 10% per annum,
      initially 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 convertible promissory
      note was further extended and is now due March 1, 2007. The lender no
      longer has the option to convert the promissory note into the Company's
      common shares. The Company owes $100,000 and $220 in principal and accrued
      interest and penalties, respectively, at September 30, 2007. The
      promissory note is unsecured. The note is currently in default.

   o  $100,000 note payable, bearing no stated interest, with principal
      repayment of $150,000 initially due on February 15, 2006. The Company owes
      $90,000 under such note at September 30, 2007. The maturity of the note
      was extended twice and is now March 31, 2007. In consideration for the
      extensions, the Company issued in aggregate 35,000 warrants and 300,000
      shares of its common stock. The warrants are exercisable at $1 per share
      and expire on April 2009. The note is unsecured. The note is currently in
      default.

   o  $100,000 notes payable, bearing no stated interest, with principal
      repayment of $100,000 initially due on March 15, 2006 as well as 40,000
      shares of the Company's common stock. The maturity of the notes was
      extended four times and is now August 1, 2007, with six equal installments
      from March 1 to August 1, 2007. In consideration for the extensions, the
      Company issued in aggregate 275,000 shares to the note holders. The
      Company owes $66,667 in principal at September 30, 2007, 2006. The notes
      are unsecured. The Company did not make its April 1, 2007 payment. The
      notes are currently in default.

                                     - 17 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 5 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE-CONTINUED

   o  $50,000 promissory note, bearing no interest rate, initially 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 maturity of the note was extended to August 1, 2007, with six
      principal repayments payable on March 1 through August 1, 2007. In
      consideration for the extensions, the Company issued 150,000 shares of
      common stock. The note is unsecured. The note is currently in default.

   o  $100,000 promissory note, bearing interest at 10%, initially due on
      November 30, 2006, with a prepayment premium of 350,000 shares of the
      Company's common stock. The note was extended to June 15, 2007, with
      monthly principal and interest payments of $25,000 on February 15, 2007,
      $21,667 from March 15, 2007 to May 15, 2007, and $20,833 on June 15, 2007.
      The note is unsecured. The Company did not make the March 15, 2007
      payment. The note is currently in default.

   o  $100,000 promissory note, bearing interest at 10%, initially 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 maturity date of the promissory note was extended to February 28,
      2007. In consideration for the extension, the Company issued 375,000
      shares. The note is unsecured. The note is currently in default.

   o  $1,500,000 convertible promissory notes, bearing interest at 6% due on
      August 29, 2009. This convertible promissory note is part of 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 were funded in December 2006, the date the
      Company filed its registration statement, and the remaining $500,000
      principal amount of notes was funded in January 2007, at the date that the
      registration statement was 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 amount owed under such notes amounted to $1,477,470 in
      principal and $77,642 in interest at September 30, 2007.

   o  $280,000 convertible promissory notes, bearing interest at 6% due on May
      31, 2010. This convertible promissory note is part of a $250,000 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 were funded in December 2006, the date the
      Company filed its registration statement, and the remaining $500,000
      principal amount of notes was funded in January 2007, at the date that the
      registration statement was 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 amount owed under such notes amounted to $280,000 in
      principal and $4,550 in interest at September 30, 2007.

                                     - 18 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 5 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE-CONTINUED

   o  $300,000 promissory notes, bearing interest at 6% due on September 30,
      2010. This convertible promissory note is part of a $250,000 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 were funded in December 2006, the date the
      Company filed its registration statement, and the remaining $500,000
      principal amount of notes was funded in January 2007, at the date that the
      registration statement was 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
      September 2014. The amount owed under such notes amounted to $300,000 in
      principal and $783 in interest at September 30, 2007.

   o  $20,000 promissory note, bearing interest from December 1, 2007 to the
      date the note has been repaid in full in the form of 250,000 shares of
      common stock, due on September 1, 2008.

The purchasers of the convertible promissory 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. 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.

                                     - 19 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 5 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE-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.

The Company has not yet registered the shares underlying the $280,000
convertible promissory notes. The Company is unable to register such shares
because of limitations on the number of shares held by affiliates it can
register. The convertible promissory note holders are aware of this limitation
and have worked with the Company to register the shares underlying the $280,000
convertible promissory notes as soon as practicable.

The Company generated gross proceeds of $1,380,000 and $142,000 pursuant to the
issuance of convertible promissory notes during the nine-month period ended
September 30, 2007 and 2006, respectively.

The Company issued 4,550,000 shares of common stock to holders of the
convertible promissory notes pursuant to notices of conversion of $22,530 in
principal during the nine-month period ended September 30, 2007.

Certain of the aforementioned notes are in default. Management is negotiating
with the appropriate note holders 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.

On May 15, 2007 the Company received a notice entitled Notice of Default in
Payment from a lender related to a $50,000 principal amount unsecured promissory
note. The Company originally borrowed the funds in February 2006 and delivered a
promissory note. As extended, the obligation was due upon the Companies receipt
of the third tranche of proceeds from the sale of the initial callable 6%
secured convertible notes. The notice received on May 15, 2007 specified that
the Company had until May 23, 2007 to satisfy the obligation. The Company did
not satisfy the obligation by the date specified in the Notice of Default in
Payment, and, accordingly, the note remains in default.

The fair value of certain warrants and embedded conversion features issued and
outstanding at September 30, 2007 and 2006 has been accounted as derivative
liabilities. A debt discount of approximately $849,800 and $507,000 has been
recognized pursuant to the issuance of the warrants and embedded conversion
features during the nine-month period ended September 30, 2007 and 2006,
respectively. The debt discount is amortized using the effective interest method
and amounted to approximately $377,000 and $143,000 during the nine-month period
ended September 30, 2007 and 2006, respectively.

The Company issued 194,494 and 1,524,934 shares of common stock in connection
with certain notes payable during the nine-month period ended September 30, 2007
and 2006, respectively. The fair value of such shares amounted to $8,000 and
$208,000 during the nine-month period ended September 30, 2007 and 2006,
respectively.

                                     - 20 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 6 - STOCKHOLDERS' DEFICIT

Interest expense, including the amortization of debt discount, amounted to
approximately $343,000 and $456,000 during the nine-month period ended September
30, 2007 and 2006, respectively.

Warrants

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

Pursuant to the convertible promissory note issued in May 2007 and September
2007, the Company issued 20,000,000 warrants during the nine-month period ended
September 30, 2007. The exercise price of the warrants amounts to $0.40 per
share. Such warrants expire in May 2014

The fair value of all warrants issued during the nine-month period ended
September 30, 2007 and 2006 has been recorded as derivative liabilities at their
date of issuance. 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. During August 2006, in connection with the issuance of the
August Convertible Promissory Notes, the Company reclassified the outstanding
warrants as liability contracts and recorded their fair value at that date as
other expenses.

Common Stock

The Company issued 194,494 and 1,524,934 shares of common stock in connection
with certain notes payable during the nine-month period ended September 30, 2007
and 2006, respectively. The fair value of such shares amounted to $8,000 and
$208,000 during the nine-month period ended September 30, 2007 and 2006,
respectively.

The Company issued shares for one-year term services during fiscal 2006. The
aggregate fair value of such shares amounted to approximately $877,000 and is
amortized over the term of the contracts. The Company recognized amortization of
deferred compensation in connection with such services of approximately $547,000
during the nine-month period ended September 30, 2007.

The Company issued 2 million shares of its common stock to an investor relations
firm during the nine-month period ended September 30, 2007. The aggregate fair
value of such shares amounted to approximately $19,000 and is included in
selling, general, and administrative expenses.

The Company issued 2,000,000 shares of its common stock to an individual for
services as chief technology officer during the nine-month period ended
September 30, 2007. The fair value of the shares issued amounted to
approximately $19,000 and is included in selling, general, and administrative
expenses.

The Company issued 2,911,364 shares of common stock pursuant to the exercise of
3,050,000 cashless warrants.

                                     - 21 -
<PAGE>

                  TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2007

NOTE 6 - STOCKHOLDERS' DEFICIT-CONTINUED

Preferred Stock

The Company's Board of Directors, without further shareholder approval, may
issue preferred stock in one or more series from time to time and fix or alter
the designations, relative rights, priorities, preferences, qualifications,
limitations and restrictions of the shares of each series. The rights,
preferences, limitations and restrictions of different series of preferred stock
may differ with respect to dividend rates, amounts payable on liquidation,
voting rights, conversion rights, redemption provisions, sinking fund provisions
and other matters. The Company's Board of Directors may authorize the issuance
of preferred stock, which ranks senior to our common stock for the payment of
dividends and the distribution of assets on liquidation. In addition, the Board
of Directors can fix limitations and restrictions, if any, upon the payment of
dividends on the Company's common stock to be effective while any shares of
preferred stock are outstanding.

In October 2006 the Board of Directors created a series of 1,000,000 shares of
preferred stock, designated as Series A Preferred Stock. These shares are held
by our chief executive officer and chairman and have following rights and
preferences:

   o  each share has a liquidation preference of $0.001 per share which equals
      the par value of the shares,

   o  the shares are not convertible into any other security,

   o  each share entitles the holder to 250 votes at any meeting of our
      stockholders and such shares will vote together with the Company's common
      stockholders,

   o  the shares are not subject to redemption, and

   o  so long as the shares are outstanding, the Company agreed not to alter or
      change the rights of the security in a manner which would adversely affect
      the Series A Preferred Stock, create a new class of preferred stock having
      preference over the Series A Preferred Stock, or take any action which
      would result in the taxation of the holder under Section 305 of the
      Internal Revenue Code.

NOTE 8 - COMMITMENTS

During September 2007, the Company entered into a sublease agreement whereas it
is subleasing 5,950 square feet commencing on October 1, 2007 through July 31,
2009 in equal monthly installments of $13,883 from October 1, 2007 to July 31,
2008, and $14,379 monthly thereafter.

NOTE 9 - SUBSEQUENT EVENTS

The Company issued 4,700,000 shares of common stock pursuant to the conversion
of convertible promissory notes of approximately $9,000 between October 1, 2007
and November 5, 2007.

                                     - 22 -
<PAGE>

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

OVERVIEW

         Our business model is to provide full service, turnkey IP-based
communication solutions to strategic partners that deliver VoIP service to their
customers. Our branded turnkey IP-based communication solutions provide a
partner with the equipment, software, and support necessary to market a custom
tailored VoIP service. We are targeting partners that include equipment
manufacturers, technology integrators, cellular vendors, cable companies that do
not want to undertake the financial burden of creating an IP-based
telecommunication infrastructure, computer firms, Internet cafes, call centers
as well as wholesale relationships with communications providers, aggregators
and resellers, ISPs and other broadband and service providers. Our marketing
concentration is in the Caribbean, Central and South America. We targeted these
geographic areas as we believe these areas are starting to embrace broadband
and, as a result of government regulations of telecommunications providers, are
generally insulated from the intense competition of the U.S. communications
market.

         Our business model provides that we will generate revenues from
negotiated price points with each partner. These price points will be determined
based upon the individual dynamics of the partner's abilities, geographic
markets, anticipated monthly per minute usage and their overall acceptance of
our proposed and/or negotiated price plan. Some of the sources of revenue are
activation fees, access fees and per minute usage charges. Both access fees and
per minute charges will represent recurring revenues as opposed to a one time
sale of activation fees. In either case, partners are engaged on a pre-pay basis
and accounts will be settled in U.S. currency.

         We began marketing our service on a test basis during the third quarter
of fiscal 2005 and to date have generated minimal revenues. We began generating
recurring revenues during the second quarter of fiscal 2007, however our cost of
revenues continues to result in a gross loss on our sales. Our initial partner
companies, are either licensed or authorized, depending on their local laws to
sell VoIP services in their respective countries. While we believe that our
turnkey solutions will be well received by potential partners, we do not have
the resources to undertake a broad marketing campaign in an effort to secure
partners in our target markets. The network of personal relationships of our
management is integral to our marketing efforts and we primarily rely on those
relationships in our efforts to build our distributor network.

         In addition to securing partners and generating recurring revenues,
another significant challenge facing our company is our need for additional
working capital. We do not generate sufficient revenue to fund our operations
and have relied on short-term borrowings to provide working capital. The terms
of some of these notes require significant cash premiums at repayment, as well
as significant equity issuances. While the net proceeds from the sale of the
callable 6% secured convertible notes during fiscal 2006 and fiscal 2007
provided us with capital to begin establishing our partner network, upgrading
certain of our services and for sales, general, and administrative expenses
until the end of fiscal 2007, in addition to obligations under those notes we
have approximately $494,000 outstanding under short-term promissory notes which
are in default and another related party note in the principal amount of
$200,000 together with a premium of $200,000 which was due September 1, 2007. We
do not have sufficient funds to satisfy these obligations and the terms of the
callable 6% secured convertible notes prohibited us from using the proceeds of
those notes to pay these loans. The terms of the callable 6% secured convertible
notes also restrict our ability to raise capital. While we are attempting to
restructure some of these obligations and we believe that our operations will
begin to generate meaningful revenues during fiscal 2008, so long as these
short-term notes remain outstanding, one of which is secured by our assets and
is presently past due, our ability to continue our operations is in jeopardy.

                                     - 23 -
<PAGE>

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                For the
                                       nine-month period ended
                                     ----------------------------      Variation        Variation
                                     September 30,   September 30,   2007 vs 2006     2007 vs 2006
                                         2007            2006              $                %
                                     ------------    ------------    ------------     ------------
                                      (Unaudited)     (Unaudited)
<S>                                  <C>             <C>             <C>              <C>
Revenues .........................   $     86,191    $     24,337    $     61,854          254%

Cost of revenues .................        115,285          40,975          74,310          181%
                                     ------------    ------------    ------------     ------------

Gross loss .......................        (29,094)        (16,638)        (12,456)          75%

Operating expenses:
Sales, general, and administrative
 expenses ........................      1,493,923         592,432         901,491          152%
Sales, general, and administrative
 expenses-related party ..........              -          43,100         (43,100)          NM
                                     ------------    ------------    ------------     ------------
                                        1,493,923         635,532         858,391          135%

Net operating loss ...............     (1,523,017)       (652,170)        870,847          134%

Other income-derivatives .........        869,881       9,329,695       8,459,814           91%
Other expense-derivatives ........              -      (2,202,750)     (2,202,750)          NM
Interest expense-related party ...        (41,000)        (21,000)         20,000           95%
Interest expense .................       (543,519)       (456,442)         87,077           19%
                                     ------------    ------------    ------------     ------------

Net income .......................   $ (1,237,655)   $  5,997,333    $  7,234,988         -121%
                                     ============    ============    ============     ============
</TABLE>
NM:  Not meaningful

REVENUES

         We have generated minimal revenues since inception. For the nine months
ended September 30, 2007 we generated revenues from the sales of products, which
represented the sale of phone equipment to distributors, and from providing VoIP
and related IP services. Since we began marketing our service through the end of
fiscal 2006, our revenues were related to charges to potential partners who were
testing our services. Beginning in the second quarter of fiscal 2007 we began
generating recurring revenues from our first significant distributor While our
revenues have increased in each fiscal period during the nine months ended
September 30, 2007, and we reasonably believe our revenues will continue to
increase in future periods, we are unable at this time to reasonably quantify
the amount of any future product or service revenues.

COST OF REVENUES

         Our cost of revenues represented the variable costs of network carriers
through which we provide our VoIP communications services which is based upon
the actual number of minutes used in the period, as well as the cost of phone
equipment sold to distributors. Our cost of revenues as a percentage of revenues
from product sales was approximately 88% for the nine months ended September 30,
2007 and our cost of revenues as a percentage of revenues from services was
approximately 185%. We do anticipate that we will continue to incur additional
fixed costs in providing our services in future periods but that any increase in
cost of revenues will be commensurate with an increase in our revenues.

                                     - 24 -
<PAGE>

GROSS LOSS

         We reported a gross loss of $29,094 for the nine-months ended September
30, 2007 as compared to a gross loss of $16,638 for the comparable period in
fiscal 2006. We anticipate that we will increase our gross profit margins in
future periods as our revenues correspondingly increase although we are unable
to quantify the amount of the increase at this time.

TOTAL OPERATING EXPENSES

         Sales, general and administrative

         Our sales, general, and administrative expenses consist of consultant
fees incurred in connection with the sales and support of our VoIP services,
consultant fees paid to our executive officers and directors as compensation,
general overhead expenses and consultant fees incurred with third party
providers. The increase in sales, general and administrative expenses during the
nine-month period ended September 30, 2007 when compared to the prior period is
primarily due to:

         o  amortization of deferred compensation of $546,959 resulting from the
            issuance of shares to certain consultants, including an investor
            relations firm which is a related party. Such shares were primarily
            issued in the latter part of fiscal 2006 and were issued as
            consideration for services to be preformed for periods of up to one
            ear.

         o  Increased in the cash compensation rate to consultants to market our
            services in Latin America.

         We treat all persons performing services for us as independent
contractors and not employees and their compensation is recorded as a consulting
fee. We anticipate that we will enter into employment agreements with our
executive officers and other consultants presently providing services to us
before the end of fiscal 2007 or in the first quarter of fiscal 2008. While we
anticipate that the overall compensation we are paying these individuals will
not increase substantially, the conversion of the status of the individuals from
independent contractors to employees will result in an overall increase in our
compensation expense in future periods. We anticipate our compensation expense
will increase by approximately $10,000 per month during the next 12 months as a
result of the hiring of these individuals as employees, absent any increases in
their base compensation. Subject to the availability of sufficient working
capital, we anticipate we will also hire additional personnel during the fiscal
2008 in areas such as sales and marketing and we anticipate that our sales,
general and administrative expenses will increase in future periods as our
business expands. We are unable at this time to quantify the amount of the
increase as we cannot predict the timing of these new hires or the exact amount
of compensation which will be paid to them.

         Sales, general and administrative - related party

         During fiscal 2006 we sub-leased our office space from a company
affiliated with one of our stockholders and our sales, general and
administrative - related party expense during the nine-months ended September
30, 2006 represents this rental expense. We terminated this arrangement in
August 2006 and, accordingly, our sales, general and administrative - related
party for the nine-month period ended September 30, 2007 reflects the
termination of this agreement. We do not anticipate recognizing a rental expense
to a related party in future periods.

                                     - 25 -
<PAGE>

OTHER INCOME (EXPENSES)

         Other income-derivatives

         Other income - derivatives includes the variation in the fair value of
embedded conversion feature, freestanding warrants, and liquidated damages.
During the nine-months ended September 30, 2007 we recognized other income of
$869,881 which represents the change in the fair value of the derivate
instruments between measurement dates, as compared to non-cash other income -
derivatives of $9,329,695 during the nine-months ended September 30, 2006. The
decrease in the fair value of the derivative liabilities is primarily due to a
decrease in our stock price since January 1, 2007. See "The Effect of Derivative
Liabilities on Our Financial Statements" appearing later in this section.

         Interest expense and interest expense-related party

         Interest expense and interest expense - related party represents
interest incurred on various notes payable, including a $200,000 principal
amount note payable due to an entity controlled by Mr. Vincent Landis, a member
of our Board of Directors. 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. Interest expense - related party
increased $20,000 for the nine-months ended September 30, 2007 from the
comparable period in fiscal 2006 and interest expense, which relates to notes
due non-affiliated third parties, increased $87,077 during the nine-months ended
September 30, 2007 as compared to the nine-months ended September 30, 2006. This
increase represents the amortization of debt discount on callable 6% secured
convertible notes which was offset by a lower cost attributed to the shares
issued as payment of interest on notes payable as a result of a lesser number of
shares issued of common stock and lower fair market value of our common stock
during the nine-month period ended September 30, 2007 when compared to the prior
2006 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. The following table provides certain selected balance sheet
comparisons between September 30, 2007 (unaudited) and December 31, 2006:
<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                        SEPTEMBER 30,   DECEMBER 31,   (2007 V 2006)
                                                             2007           2006             $            %
                                                        -------------   ------------   -------------   -------
                                                         (UNAUDITED)
<S>                                                       <C>            <C>            <C>            <C>
Working capital (deficit) ............................    (2,581,708)    (2,616,139)        34,431      -1.32%
Cash .................................................       168,825        171,964         (3,139)     -1.83%
Accounts receivable ..................................         3,886              -          3,886          NM
Other current assets .................................         9,689              -          9,689          NM
Property and equipment, net ..........................        11,878         17,513         (5,635)    -32.18%
Deferred financing fees, net .........................       261,078        181,986         79,092      43.46%
Security deposits ....................................        56,493         16,600         39,893     240.32%
Total assets .........................................       511,849        388,063        123,786      31.90%

Accounts payable and accrued expenses ................       243,450         93,585        149,865     160.14%
Deferred revenues ....................................        28,752         20,466          8,286      40.49%
Derivative liabilities ...............................     1,470,527      1,521,667        (51,140)     -3.36%
Due to related party .................................       118,350        118,350              -          NM
Note payable to related party and accrued interest ...       408,667        410,567         (1,900)          *
Convertible promissory notes and accrued interest, net             -         83,248        (83,248)         NM
Notes payable and accrued interest ...................       494,362        540,220        (45,858)     -8.49%
Total current liabilities ............................     2,764,108      2,788,103        (23,995)          *
Total liabilities ....................................     3,502,455      2,788,103        714,352      25.62%
</TABLE>
* represents less than 1%

                                     - 26 -
<PAGE>

         At September 30, 2007 our working capital deficit was $2,581,708. Our
total assets at September 30, 2007 increased by $123,786, or approximately 26%,
from December 31, 2006. This increase is attributable to increases in other
current assets, which represents deferred financing fees relate to our callable
6% secured convertible notes, deposits in connection with the lease for new
office space, and security deposits we paid to network carriers.

         Our total liabilities at September 30, 2007 increased approximately 26%
from December 31, 2006, which is primarily related to increased borrowings, net
of debt discount which was partially offset by a decrease in derivative
liabilities. Other changes in our total liabilities from period to period
included an increase in accounts payable and accrued expenses and an increases
in deferred revenues and notes payable and accrued interest. Deferred revenues
represent prepayments from resellers of our services which we apply against the
usage fees as incurred. In addition, at September 30, 2007 our balance sheet
reflects convertible promissory notes and accrued interest, net of discount of
$2,140,444, of $1,402,097. This aggregate amount, including the discount,
represents the amounts due under the callable 6% secured convertible notes
described below.

         Note payable to related party and accrued interest at each of September
30, 2007 and December 31, 2006 is an amount due an entity wholly-owned by Mr.
Vincent Landis, a member of our Board of Directors. During June 2005, we issued
a note payable to Arlington Investment Group, Inc. for $200,000. We used the
funds for working capital. During March 2007 the due date of the note was
extended from March 1, 2007 to September 1, 2007 in consideration of a $20,000
extension fee. The note bears interest at 14% per annum and accrued interest,
together with a cash premium payment of $200,000, are due at maturity. We
recognized $41,000 of interest expense in connection with this note during the
nine-months ended September 30, 2007.

         At September 30, 2007, our cash amounted to approximately $169,000 and
our working deficit amounted to approximately $2.6 million.

         During the nine-month period ended September 30, 2007, we used cash in
our operating activities amounting to approximately $905,000. Our cash used in
operating activities was comprised of our net loss of approximately $1.2 million
adjusted for the following:

         o  Fair value of derivative liabilities of approximately $870,000;

         o  Amortization of debt discount of approximately $377,000;

         o  Amortization of deferred compensation of approximately $547,000;

         o  Amortization of deferred financing costs of approximately $77,000;
            and

         o  Fair value of shares issued for compensation of approximately
            $39,000;

         Additionally, the following variations in operating assets and
liabilities impacted our cash used in operating activity:

         o  Increase in security deposits of approximately $40,000;

         o  Increase in accounts payable and accrued expenses of approximately
            $122,000; and

         o  Increase in accrued interest and premiums on promissory notes of
            approximately $71,000;

                                     - 27 -
<PAGE>

         During the nine-month period ended September 30, 2006, we used cash in
operating activities amounting to approximately $531,000. Our cash used in
operating activities was comprised of our net loss of approximately $6 million
adjusted for the following:

         o  Fair value of derivative liabilities of approximately $9,330,000;

         o  Amortization of debt discount of approximately $143,000;

         o  Amortization of deferred compensation of approximately $109,000;

         o  Fair value of derivative liabilities at date of issuance, in excess
            of debt discount of approximately $2,203,,000; and

         o  Fair value of shares issued in satisfaction of interest on note
            payable of approximately $208,000;

         Additionally, the following variations in operating assets and
liabilities impacted our cash used in operating activity:

         o  Decrease in other current assets of approximately $43,000; and

         o  Increase in accrued interest and premiums on promissory notes of
            approximately $66,000;

         During the nine-month period ended September 30, 2007, we generated
cash from financing activities of approximately $905,000, which primarily
consisted of the proceeds from issuance of convertible promissory notes of $1.1
million, offset by the payment of deferred financing costs of approximately
$130,000 and the principal repayments of promissory notes of approximately
$67,000.

         During the nine-month period ended September 30, 2006, we generated
cash from financing activities of $709,000, which primarily consisted of
proceeds from issuance of convertible promissory notes of $575,000 and the
proceeds from the issuance of promissory notes of $310,000, offset by the
payment of deferred financing costs of $105,000 and the principal repayments of
promissory notes of $60,000.

         We have generated minimal revenues since inception and the revenues we
have generated have resulted in a gross loss. Our revenues are not sufficient to
pay our operating expenses and we have relied upon short-term borrowings to
provide funds for working capital. We have an aggregate of approximately
$907,000 owed under short term notes, all of which are presently in default.
Some of these 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. In addition during fiscal 2006 and the nine months
ended September 30, 2007 we have issued and sold an aggregate of $2,080,000
principal amount of 6% secured convertible notes which are due between May 2009
and September 2010. These notes are secured by all of our assets. While these
notes are convertible into shares of our common stock at a discount to market,
our ability to register all of the shares of common stock issuable upon the
conversion of the notes is limited under Federal securities laws. In addition,
even if we were able to register a sufficient number of shares of our common
stock to provide for the conversion of these notes, the callable 6% secured
convertible notes are not convertible to the extent that the number of shares of
our common stock beneficially owned by the holder and the number of shares of
our common stock issuable upon the conversion of the notes would result in the
beneficial ownership by holder or its affiliates of more than 4.99% of our then
outstanding common stock.

                                     - 28 -
<PAGE>

         On May 15, 2007 we received a notice entitled Notice of Default in
Payment from a lender related to a $50,000 principal amount unsecured promissory
note. We originally borrowed the funds in February 2006 and delivered a
promissory note. As extended, the obligation was due upon our receipt of the
third tranche of proceeds from the sale of the initial callable 6% secured
convertible notes. The notice received on May 15, 2007 specified that we had
until May 23, 2007 to satisfy the obligation. We did not satisfy the obligation
by the date specified in the Notice of Default in Payment and, accordingly, the
note remains in default.

         We do not presently have sufficient funds to pay any of these notes. We
have granted one of the holders of these short-term notes a security interest in
our assets. If the note holder was to seek to collect this note, this note
holder would be entitled to foreclose on our assets. This event could also cause
a default in our callable 6% secured convertible notes. If we default on the
callable 6% secured convertible notes the note holders we are subject to a
number of penalties in addition to the obligation to repay the principal and
accrued interest. In either event, we would be unable to continue our
operations.

         In connection with our annual report for our fiscal year ending
December 31, 2007 pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 our
management will be required to provide an assessment of the effectiveness of our
internal control over financial reporting, including a statement as to whether
or not internal control over financial reporting is effective. In order to
comply with this requirement we will need to engage a consulting firm to
undertake an analysis of our internal controls as we do not have the expertise
to conduct the necessary evaluation. received proposals from several consultants
to provide these services to us, our ability to engage such a consulting firm is
dependent upon our receipt of additional working capital to pay the related
consulting fees. We are unable at this time to predict when we will be able to
engage the consulting firm to assist our company in developing the necessary
documentation and testing procedures required to comply with out obligations
under Section 404 of the Sarbanes-Oxley Act of 2002. This assessment is required
to be furnished as part of our annual report on Form 10-KSB for the fiscal year
ending December 31, 2007. If we were unable to include this assessment in our
annual report, our report would not be considered complete and we would not be
considered current in our filings with the SEC. In such an event, our common
stock would be removed from quotation on the OTC Bulletin Board.

         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
current and future liabilities when they become due until such time, if ever,
that we are able to generate sufficient revenues to attain profitable
operations. In addition to funds necessary to fund our recurring operating
expenses, fund our compliance with the phase in of Section 404 of the
Sarbanes-Oxley Act of 2002 as it relates to small business issuers and satisfy
our obligations, we will require significant additional capital to continue to
implement our business model. Our future capital requirements depend primarily
on the rate at which we can increase our revenues, sell our services at a gross
profit and thereby decrease our use of cash to fund operations.

         We require the consent of the holders of the 6% callable secured notes
to the terms of any financings we wish to enter into. While we are actively
seeking to raise additional capital, we do not presently have any commitments
for additional capital and there are no assurances that we will be successful in
raising working capital given the early stage of our operations and the terms of
the callable 6% secured convertible notes. There are no assurances that we will
have sufficient funds to pay our operating expenses and our obligations as they
become due, fund compliance with Section 404 of the Sarbanes-Oxley Act of 2002
or continue to implement our business model for the next 12 months. If we are
unable to raise additional capital, we may be unable to continue our operations
and our stockholders could lose their entire investment in our company.

                                     - 29 -
<PAGE>

THE EFFECT OF DERIVATIVE LIABILITIES ON OUR FINANCIAL STATEMENTS

         During March 2005 we issued a convertible promissory note in the
principal amount of $100,000, the terms of which permitted the lender to convert
the principal and accrued interest into shares of our common stock at a 25%
discount of the fair value of the shares at the date of conversion. In addition,
as described earlier in this section in fiscal 2006 and fiscal 2007 we issued
the callable 6% secured convertible notes which are also convertible into equity
at a discount to market. Because the conversion price of the notes is tied to
the market value of our common stock and therefore there is no explicit number
of shares that are to be delivered upon satisfaction of the convertible
promissory note, we are unable to assert that we have sufficient authorized and
unissued shares to settle such note. Accordingly, as required under generally
accepted accounting principles, all of our instruments which are convertible
into shares of our common stock, such as warrants and options, were classified
as derivative liabilities on our financial statements.

         The application of EITF Issue No. 00-19 on our financial statements for
the nine-months ended September 30, 2007 and 2006 resulted in other income to us
of $869,881 and $9,329,695, respectively. While this income item is non-cash,
the application of the accounting standard has a significant impact on our
consolidated statement of operations for the periods and, in both periods,
served to offset our operating losses. In addition, at September 30, 2007 our
balance sheet reflected a current liability of $1,396,049 related to the
derivative liability which represents a non-cash liability. Both of these
non-cash items are tied to the market value of our common stock and, if the
price declines, we could be required to report a non-cash expense associated
with the derivative liability in future periods and the carrying value of the
liability could increase. While we cannot predict the impact of this accounting
standard on our financial statement in future periods as the income/expense
calculation is based upon a current market value of our common stock, it is
likely that it will have similar impacts on our financial statement in future
periods.

ITEM 3.  CONTROLS AND PROCEDURES

         As required by Rule 13a-15 under the Securities Exchange Act of 1934,
as of September 30, 2007, the end of the period covered by this report, our
management concluded its evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures. Disclosure controls and
procedures are controls and procedures designed to reasonably assure that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, such as this report, is recorded, processed, summarized
and reported within the time periods prescribed by SEC rules and regulations,
and to reasonably assure that such information is accumulated and communicated
to our management, including our Chief Executive Officer who also acts as our
principal financial and principal accounting officer, to allow timely decisions
regarding required disclosure.

         Our management does not expect that our disclosure controls and
procedures will prevent all error and all fraud. A control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance
that the control system's objectives will be met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. The design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.

                                     - 30 -
<PAGE>

         As of the evaluation date, our CEO who also serves as our principal
financial and accounting officer, concluded that we do not maintain disclosure
controls and procedures that are effective in providing reasonable assurance
that information required to be disclosed in our reports under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods prescribed by SEC rules and regulations, and that such information
is accumulated and communicated to our management to allow timely decisions
regarding required disclosure. Our CEO is not a financial or accounting
professional, and we do not have any other employees, including a chief
financial officer, comptroller or similarly titled senior financial officer, or
any of the accounting staff who is sufficiently trained in the application of
generally accepted accounting principles. As a result of our limited financial
resources, we do not anticipate that we will be in a position to engage such
properly trained professional accounting personnel or a senior financial officer
in the foreseeable future. Until we are able to engage a qualified financial
officer, and/or properly trained accounting staff, we may continue to experience
material weaknesses in our disclosure controls that may result in errors in our
financial statements in future periods.

         There have been no changes in our internal control over financial
reporting during our last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None.

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

         During August 2007, we issued 2,000,000 shares of our common valued at
$19,000 loan individual as partial compensation for his consulting services to
our company pursuant to the terms of a letter agreement described below in Item
5. Other Information. The recipient was an accredited or otherwise sophisticated
investor who had access to applicable information concerning our company and
could afford to bear the economic risk of the transaction. The issuances were
exempt from registration under the Securities Act of 1933 in reliance on an
exemption provided by Section 4(2) of that act.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5.  OTHER INFORMATION

         In April 2007 we engaged a consultant to provide us with consulting
services similar to those which would be provided by a chief technology officer
for a period of 120 days under the terms of a letter agreement. We agreed to pay
the consultant a monthly fee beginning at from $7,000 and increasing to $10,000
following his employment by our company, together with an amount equal to 10% of
our net revenues from all new business he originated. The amount of the
consultant's compensation is net of all taxes which we are obligated to pay. We
also agreed to issue the consultant 2,000,000 shares of our common stock upon
his employment with our company and options to purchase an additional 1,000,000
shares after six months and one year.

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<PAGE>

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


                                   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
                                      ---------------
November 14, 2007                 Luis Alvarez, CEO, principal executive officer
                                  and principal accounting officer

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