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, 2006

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

              For the transition period from ________ to __________

                        Commission File Number: 000-03296


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


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

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

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

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes [ ] No [X]

                       APPLICABLE ONLY TO COPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: At November 13, 2006, there were
75,245,142 shares of common stock were issued and outstanding.

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

<PAGE>

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

           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.

                                        2
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

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

                                     ASSETS
Current Assets:
  Cash ..........................................................   $   177,965

  Property and equipment, net of accumulated
   depreciation of $11,707 ......................................        18,534
  Deferred financing fees, net of accumulated
   amortization of $4,306 .......................................       150,694
  Security deposits .............................................         6,500
                                                                    -----------

     Total assets ...............................................   $   353,693
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Accounts payable and accrued expenses .........................   $    44,612
  Due to stockholder ............................................   $   118,350
  Deferred revenues .............................................         7,382
  Due to chief executive officer ................................         6,484
  Derivative liabilities ........................................     2,092,886
  Note payable to related party and accrued interest ............       410,567
  Convertible promissory notes, net of discount
   of $486,111 ..................................................        98,827
  Notes payable and accrued interest ............................       650,220
                                                                    -----------

     Total current liabilities ..................................     3,429,328

Stockholders' Deficit:
  Preferred stock; $0.001 par value, 10,000,000
   shares authorized, none issued and outstanding ...............             -
  Common stock; $.001 par value, 100,000,000 shares
   authorized, 62,005,115 issued and outstanding ................        62,005
  Additional paid-in capital ....................................     7,222,488
  Deferred compensation .........................................      (634,256)
  Accumulated deficit ...........................................    (9,725,872)
                                                                    -----------

     Total stockholders' deficit ................................    (3,075,635)
                                                                    -----------

     Total liabilities and stockholders' deficit ................   $   353,693
                                                                    ===========

                       See Notes to Financial Statements.

                                        3
<PAGE>
<TABLE>
                              TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                                  CONSOLIDATED STATEMENT OF OPERATIONS
                                               (Unaudited)
<CAPTION>
                                       For the nine-month period       For the nine-month period
                                          ended September 30,              ended September 30,
                                         2006             2005            2006             2005
                                      ------------    ------------    ------------    ------------
<S>                                   <C>             <C>             <C>             <C>
Revenues ..........................   $     24,337    $      1,839    $     14,021    $      1,839

Cost of revenues ..................         40,975          37,980          20,088          14,510
                                      ------------    ------------    ------------    ------------

Gross profit: .....................        (16,638)        (36,141)         (6,067)        (12,671)

Operating expenses:
  Sales, general and administrative        592,432       1,340,245         271,059       1,158,631
  Sales, general and
   administrative-related party ...         43,100          48,150          11,000          16,050
                                      ------------    ------------    ------------    ------------
     Total operating expenses .....        635,532       1,388,395         282,059       1,174,681
                                      ------------    ------------    ------------    ------------

     Operating loss ...............       (652,170)     (1,424,536)       (288,126)     (1,187,352)
                                      ------------    ------------    ------------    ------------

Other income (expenses):
Other income-derivatives ..........      9,329,695               -         658,897               -
Other expense-derivatives .........     (2,202,750)              -      (2,202,750)              -
Interest expense-related party ....        (21,000)       (107,545)         (7,000)       (107,545)
Interest expense ..................       (456,442)        (62,556)       (189,020)        (18,326)
                                      ------------    ------------    ------------    ------------

Net income (loss) .................   $  5,997,333    $ (1,487,092)   $ (2,027,999)   $ (1,205,678)
                                      ============    ============    ============    ============

Basic income (loss) per share .....   $       0.10    $      (0.04)   $      (0.03)   $      (0.02)
                                      ============    ============    ============    ============

Diluted income (loss) per share ...   $      (0.02)   $      (0.04)   $      (0.03)   $      (0.02)
                                      ============    ============    ============    ============

Basic weighted average shares
 outstanding ......................     57,890,798      39,096,676      59,342,886      54,960,426
                                      ============    ============    ============    ============

Diluted weighted average shares
 outstanding ......................     57,890,798      39,096,676      59,342,886      54,960,426
                                      ============    ============    ============    ============

                             See Notes to Unaudited Financial Statements.

                                                   4
</TABLE>
<PAGE>
<TABLE>
                         TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (Unaudited)
<CAPTION>
                                                             For the month-month period
                                                                 ended September 30,
                                                                 2006           2005
                                                             -----------    -----------
<S>                                                          <C>            <C>
Cash flows from operating activities:
Net income (loss) ........................................   $ 5,997,333    $(1,487,092)
Adjustments to reconcile net income (loss) to net cash
 used in operating activities:
  Amortization of debt discount ..........................       142,748         27,334
  Amortization of deferred compensation ..................       108,970         19,770
  Amortization of deferred financing costs ...............         4,306              -
  Fair value of derivative liabilities at date of
   issuance, in excess of debt discount ..................     2,202,750              -
  Decrease in fair value of derivative liabilities .......    (9,329,695)             -
  Fair value of shares of common stock issued in
   satisfaction of interest on note payable ..............       207,801              -
  Fair value of shares issued pursuant to
   recapitalization ......................................             -        997,733
  Write-off of deferred financing fees ...................        10,000              -
  Depreciation ...........................................         6,828          2,398
Changes in operating assets and liabilities
  Accounts receivable ....................................           (48)        35,245
  Security deposits ......................................             -         (3,500)
  Accounts payable to related party ......................        43,100         43,105
  Due to Chief executive officer .........................             -          6,484
  Deferred revenues ......................................         4,882              -
  Accounts payable and accrued expenses ..................         4,028         12,710
  Accrued interest on promissory notes-related party .....             -        107,545
  Accrued interest and premiums on promissory notes ......        65,688         23,478
                                                             -----------    -----------

Net cash used in operating activities ....................      (531,309)      (214,790)

Cash flows from investing activity:
  Purchase of property and equipment .....................          (470)       (20,392)
                                                             -----------    -----------
Net cash used in financing activities ....................          (470)       (20,392)

Cash flows from financing activities:
  Proceeds from issuance of convertible promissory notes .       575,000        110,000
  Proceeds from issuance of promissory notes .............       310,000        400,000
  Principal repayments of promissory notes ...............       (60,000)        (5,255)
  Proceeds from issuance of shares of common stock .......             -              -
  Payment of deferred financing costs ....................      (105,000)             -
  Use of bank overdraft ..................................       (10,256)             -
                                                             -----------    -----------

Net cash provided by financing activities ................       709,744        504,745

(Decrease) increase in cash ..............................       177,965        269,563

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

Cash, end of period ......................................   $   177,965    $   270,262
                                                             ===========    ===========
Supplemental disclosures of cash flow information:
  Cash paid during the period for interest ...............   $    56,897    $         -
                                                             ===========    ===========

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

Supplemental schedule of non-cash financing and investing
 activities:

Fair value of embedded conversion features and
 freestanding warrants and corresponding increase in
 debt discount ...........................................   $   607,250    $    27,500
                                                             ===========    ===========

Liabilities assumed upon merger ..........................   $         -    $    25,130
                                                             ===========    ===========

Reclassification of contracts from liability to equity ...   $ 4,858,184    $         -
                                                             ===========    ===========
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.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

The accompanying financial statements have been prepared on a going concern
basis. The Company has generated minimal revenue since its inception and has
incurred net losses of approximately $9.7 million. The Company's ability to
continue as a going concern is dependent upon its ability to obtain the
necessary financing to meet its obligations and repay its liabilities arising
from normal business operations when they come due, to fund possible future
acquisitions, and to generate profitable operations in the future. Management
plans to continue to provide for its capital requirements by issuing additional
equity securities and debt. The outcome of these matters cannot be predicted at
this time and there are no assurances that if achieved, the Company will have
sufficient funds to execute its business plan or generate positive operating
results.

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

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

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

                                        6
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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, 2006, and the results of operations and cash flows for the
nine-month period ending September 30, 2006 have been included. The results of
operations for the nine-month period ended September 30, 2006 are not
necessarily indicative of the results to be expected for the full year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report filed on Form 10-KSB
as filed with the Securities and Exchange Commission for the nine-month period
ended December 31, 2005.

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

The Company is subject to concentrations of credit risk primarily from cash.
During the nine-month period ended September 30, 2006, the Company reached bank
balances exceeding the FDIC insurance limit. At September 30, 2006, the amount
in excess of FDIC insurance was approximately $78,000. The Company minimizes its
credit risks associated with cash by periodically evaluating the credit quality
of its primary financial institutions.

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

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

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

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

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

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

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

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

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

Income taxes are accounted for in accordance with SFAS No. 109, Accounting for
Income Taxes. SFAS No. 109 requires the recognition of deferred tax assets and
liabilities to reflect the future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. Measurement of
the deferred items is based on enacted tax laws. In the event the future
consequences of differences between financial reporting bases and tax bases of
the Company's assets and liabilities result in a deferred tax asset, SFAS No.
109 requires an evaluation of the probability of being able to realize the

                                        7
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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.

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 40,805,714 and
19,035,476 at September 30, 2006 and 2005, respectively. The outstanding
options, warrants and shares equivalent issuable pursuant to convertible debt at
September 30, 2006 and September 30, 2005 are excluded from the loss per share
computation for that period due to their antidilutive effect.

The following sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
                                                      Nine-month period ended         Three-month period ended
                                                            September 30,                   September 30,
                                                        2006            2005            2006            2005
                                                    ------------    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>             <C>
Numerator:
Net income (loss) ...............................   $  5,997,333    $ (1,487,092)   $ (2,027,999)   $ (1,205,678)
Other income, net-derivatives ...................     (7,126,945)              -               -               -
                                                    ------------    ------------    ------------    ------------
Numerator for diluted earnings per share ........   $ (1,129,612)   $ (1,487,092)   $ (2,027,999)   $ (1,205,678)
                                                    ============    ============    ============    ============

Denominator:
Denominator for basic and diluted earnings per
share-weighted average shares outstanding
                                                      57,890,798      39,096,676      59,342,886      54,960,426

Basic earnings (loss) per share .................   $       0.10    $      (0.04)   $      (0.03)   $      (0.02)
                                                    ============    ============    ============    ============
Diluted earnings (loss) per share ...............   $      (0.02)   $      (0.04)   $      (0.03)   $      (0.02)
                                                    ============    ============    ============    ============
Anti-dilutive weighted-average shares ...........     18,238,829       6,003,294      19,160,833      14,814,643
                                                    ============    ============    ============    ============
</TABLE>
                                        8
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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

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

         October 11, 2005 ...........  65 for 1

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

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

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

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

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

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

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

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

                                        9
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

In June 2005, the Financial Accounting Standard Board issued EITF 05-04. EITF
05-04 addresses the question as to whether liquidated damages pursuant to a
registration rights agreement should be combined as a unit with the underlying
financial instruments and be evaluated as a single instrument. EITF 05-04 does
not reach a consensus on this matter and allows for the treatment as a combined
unit (Views A and B) as well as separate freestanding financial instruments
(View C). On September 15, 2005, the FASB staff postponed further discussion of
EITF 05-04. As of September 30, 2006, the FASB still has not rescheduled EITF
05-04 for further discussion.

In connection with the issuance of a convertible promissory notes and related
warrants, we granted liquidated damages pursuant to a separate registration
right agreement. The Company adopted View C of EITF 05-04. Accordingly, the
liquidated damages pursuant to this registration right agreement were evaluated
as a stand alone financial instrument. This treatment did not have a significant
different effect than if the Company would have adopted View A or B, because the
classification of the warrants and certain embedded features of the convertible
debentures were classified as derivative liabilities. The Company believes that
should the FASB staff reach a consensus on EITF 05-04 and select combined
treatment (View A or B), the embedded conversion features and the warrants will
have to be evaluated as a combined unit with the liquidated damages pursuant to
the registration rights agreement, and accordingly, be evaluated as derivative
liabilities. The Company does not believe that its measurement of the derivative
liabilities under View A or View B would significantly differ from its
measurement of the derivative liabilities under View C in these circumstances.

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

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

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

In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R),
companies are required to measure the compensation costs of share-based
compensation arrangements based on the grant-date fair value and recognize the
costs in the financial statements over the period during which employees are
required to provide services. Share-based compensation arrangements include
stock options, restricted share plans, performance-based awards, share
appreciation rights and employee share purchase plans. In March 2005 the SEC
issued Staff Accounting Bulletin No. 107, or "SAB 107". SAB 107 expresses views
of the staff regarding the interaction between SFAS No. 123(R) and certain SEC
rules and regulations and provides the staff's views regarding the valuation of
share-based payment arrangements for public companies. SFAS No. 123(R) permits
public companies to adopt its requirements using one of two methods. On April
14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS
123R. Companies may elect to apply this statement either prospectively, or on a
modified version of retrospective application under which financial statements
for prior periods are adjusted on a basis consistent with the pro forma
disclosures required for those periods under SFAS 123. Effective January 1,
2006, the Company has fully adopted the provisions of SFAS No. 123R and related
interpretations as provided by SAB 107. As such, compensation cost is measured
on the date of grant at their fair value. Such compensation amounts, if any, are
amortized over the respective vesting periods of the option grant.

                                       10
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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, 2006. There is no expiration date on the options.
The options vest in the year in which the Company achieves $20 million in
revenues, and a prorata portion of the options would vest in the year in which
the Company achieves $10 million in revenues. Accordingly, no compensation cost
associated with the options is recognized during the nine-month period ended
September 30, 2006.

NOTE 2 - RELATED PARTY TRANSACTIONS

The Company subleased space used for its headquarters' and operational
activities from an entity affiliated to one of its stockholders. The sublease
provided for monthly payments of approximately $5,000. The Company incurred
approximately $43,000 and $43,000 during the nine-month period ended September
30, 2006 and 2005, 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 owes
approximately $118,000 at September 30, 2006.

During June 2005, the Company issued a $200,000 note payable an entity
wholly-owned by one of its executive officers. The note is secured by
substantially all assets of the Company. The note bears interest at 14% per
annum and includes a repayment premium of $200,000 at December 15, 2005. The
note, including accrued interest and premium initially matured on December 15,
2005 and was extended to November 15, 2006. The Company recognized approximately
$21,000 of interest expense in connection with this note during the nine-month
period ended September 30, 2006. The amount payable under the note amounts to
approximately $411,000 at September 30, 2006. The Company paid approximately
$21,000 of interest expense during the nine-month period ended September 30,
2006.

NOTE 3 - DUE TO CHIEF EXECUTIVE OFFICER

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

                                       11
<PAGE>

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

NOTE 4 - DERIVATIVE LIABILITIES

MARCH 2005 TRANSACTION

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

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

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

The fair value of the derivative liabilities issued at their date of issuance
between January 1, 2006 and June 28, 2006 and all derivative liabilities,
including those issued prior to January 1, 2006, at June 28, 2006 is as follows:

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

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

                                       12
<PAGE>

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

NOTE 4 - DERIVATIVE LIABILITIES-CONTINUED

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 issuance     At June 28, 2006
                                          -------------     ----------------
         Market price: ................   $0.50 - $0.51                $0.40
         Exercise price: ..............   $0.50 - $1.00       $0.001 - $1.50
         Term: ........................         3 years       1.75 - 3 years
         Volatility: ..................            110%                 110%
         Risk-free interest rate: .....           5.17%                5.17%
         Number of warrants: ..........          85,000           12,420,000


Embedded conversion features
                                            At issuance     At June 28, 2006
                                            -----------    -----------------
         Market price: ................          $ 1.00               $ 0.40
         Conversion price: ............          $ 0.50        $0.30 - $0.50
         Term: ........................       0.5 years    0.25 - 1.75 years
         Volatility: ..................            110%                 110%
         Risk-free interest rate: .....           4.82%                5.17%
         Maximum liability: ...........        $ 75,000            $ 179,745

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

AUGUST 2006 TRANSACTION

On August 31, 2006, the Company issued $500,000 6% Secured 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, on August
31, 2006, the Company will no longer be able to assert that it has a sufficient
number of authorized but unissued shares to satisfy its obligations under the
convertible promissory notes and all other outstanding warrants and other
convertible instruments. Therefore, the Company accounted for the 6% Secured
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.

                                       13
<PAGE>

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

NOTE 4 - DERIVATIVE LIABILITIES-CONTINUED

The fair value of the derivative liabilities issued and outstanding at August
31, 2006 and at September 30, 2006 is as follows:

                                                  At          At June
                                               issuance       28, 2006
                                              ----------     ----------
         Freestanding warrants ..........     $1,963,750     $1,298,600
         Liquidated damages .............         80,000         80,000
         Embedded conversion feature ....        700,000        714,286
                                              ----------     ----------
                                              $2,743,750     $2,092,886
                                              ==========     ==========

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

Freestanding warrants
                                                 At            At September
                                             issuance            30, 2006
                                          --------------     -----------------
         Market price: ................            $0.10                 $0.07
         Exercise price: ..............   $0.001 - $1.50        $0.001 - $1.50
         Term: ........................    1.5 - 7 years     1.33 - 6.92 years
         Volatility: ..................             110%                  110%
         Risk-free interest rate: .....            4.85%                 4.69%
         Number of warrants: ..........       23,410,000            23,410,000

Embedded conversion features

                                                 At            At September
                                             issuance            30, 2006
                                          --------------     -----------------
         Market price: ................            $0.10                 $0.07
         Conversion price: ............    $0.05 - $0.15        $0.035 - $0.15
         Term: ........................   0.01 - 3 years     0.01 - 2.92 years
         Volatility: ..................             110%                  110%
         Risk-free interest rate: .....            4.85%                 4.69%
         Maximum liability: ...........        $ 575,000             $ 575,000

The effective exercise price of the embedded conversion feature of the $110,000
convertible promissory note amounted to 50% of the market value of the shares of
common stock at the indicated date.

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

                                       14
<PAGE>

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

NOTE 4 - DERIVATIVE LIABILITIES-CONTINUED

It estimated the discounted cash flows payable by the Company, using
probabilities and likely scenarios, for subsequent financing reset, and
liquidated damages payable upon untimely effectiveness of a registration
statement. If the additional cash consideration was payable in cash or stock, it
determined the amount of additional shares that would be issuable pursuant to
its assumptions. The Company revisits the weight of probabilities and the
likelihood of scenarios at each measurement date of the derivative liabilities,
which are the balance sheet dates.

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

The aggregate fair value of the warrants, 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 $607,000 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 June 28,
2006, amounting to approximately $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, 2006 consist of
the following:

      o  $110,000 convertible promissory note, bearing interest at 10% per
         annum, originally maturing on March 22, 2006. On June 28, 2006, the
         lender agreed to amend the convertible promissory note to extended the
         maturity date, with principal , accrued interest and penalty
         aggregating $125,000 due on September 22, 2006. The original note was
         convertible into shares of the Company's common stock but the amendment
         eliminated the conversion feature. The Company owes $100,000 and
         $13,219 in principal and accrued interest and penalties, respectively,
         at September 30, 2006. The note was initially issued in March 2005 and
         the Company received $110,000 during the nine-month period ended
         September 30, 2005. The promissory note is unsecured.

      o  $200,000 note payable to related party, bearing interest at 14% per
         annum, with principal repayment of $400,000, together with interest,
         initially due on February 15, 2006, and extended to November 15, 2006.
         The Company owes $400,000 and $10,567 in principal and accrued
         interest, respectively, at September 30, 2006.

                                       15
<PAGE>

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

NOTE 5 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE-CONTINUED

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

      o  $100,000 notes payable, bearing no stated interest, with principal
         repayment of $100,000 due on March 15, 2006 as well as 40,000 shares of
         the Company's common stock. The maturity of the notes was extended
         twice and is now November 1, 2006. In consideration for the extensions,
         the Company issued in aggregate 150,000 shares to the note holders. The
         Company owes $100,000 in principal at September 30, 2006. The notes
         payable were past due as of September 30, 2006. The notes are
         unsecured. The note is in default

      o  $75,000 convertible promissory note, bearing interest at 20%, due on
         July 12, 2006. The convertible promissory note is convertible in
         150,000 shares of common stock. The note was issued in January 2006 and
         the Company received $75,000 as consideration. The convertible
         promissory note was past due at September 30, 2006. The note is
         unsecured. The convertible promissory note was amended during September
         2006 to adjust the number of convertible shares to 500,000. During
         October 2006, the note was converted to 500,000 shares.

      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 note was issued in February 2006 and the Company
         received $50,000 as consideration. On September 29, 2006 the maturity
         of the note was extended to the date of the third funding of the August
         2006 6% Secured Convertible Promissory Note transaction, with a $10,000
         payment due on the second funding of the transaction. In consideration
         for the extension, the Company issued 100,000 shares of common stock.
         The note is unsecured.

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

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

                                       16
<PAGE>

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

NOTE 5 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE-CONTINUED

      o  $500,000 convertible promissory note, 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 will be funded within
         three days following the date the Company files its registration
         statement, and the remaining $500,000 principal amount of notes will be
         funded within three days following the date that the registration
         statement is declared effective with the Securities and Exchange
         Commission. The warrants were issued at the closing and are exercisable
         at $.40 per share, subject to adjustment, and expire on August 29,
         2013.

The purchasers of the notes are four accredited institutional investors.

The notes are secured by all of the assets of the Company. The notes are
convertible into common shares of the Company at a price equal to 50% of the
market price of the common shares of Company. 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 the Company 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, the Company has 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.

                                       17
<PAGE>

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

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 the Company at its 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 registration statement has not been filed by
September 29, 2006 and the Company is accruing liquidated damages which have
been recorded as derivative liabilities at September 30, 2006

During the nine-month period ended September 30, 2006, the Company issued three
promissory notes aggregating $60,000 with a premium repayment and accrued
interest aggregating approximately $11,000. The Company satisfied the $71,000
obligations under such promissory notes during the nine-months ended September
30, 2006.

During the nine-month period ended September 30, 2006, the Company recognized
interest expense of approximately $44,000 in connection with the issuance of
910,000 shares erroneously issued by the Company's transfer agent to certain
former debt holders. While the Company has and will continue to recover such
shares, it believes that the possibility that it can recover such shares is more
remote than possible.

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

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

The Company issued 1,524,934 shares of common stock in connection with certain
notes payable during the nine-month period ended September 30, 2006. The fair
value of such shares amounted to approximately $208,000 and has been recognized
as interest expense.

Interest expense, including the amortization of debt discount, amounted to
approximately $456,000 and $63,000 during the nine-month period ended September
30, 2006 and 2005, respectively.

                                       18
<PAGE>

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

NOTE 6 - STOCKHOLDERS' DEFICIT

Warrants

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

During July 2005, the Company issued 10,000,000 warrants to existing
shareholders pursuant to a recapitalization of the Company. The exercise price
of the warrants amounts to $0.001 per share. Such warrants expire in 2008.

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

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

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

Pursuant to the August Convertible promissory notes, the Company issued
10,000,000 warrants during the nine-month period ended September 30, 2006. The
exercise price of the warrants amounts to $0.40 per share. Such warrants expire
in August 2013. Additionally, the Company issued as finders' fee 1,000,000
warrants to an individual in connection with the issuance of the convertible
notes. The exercise price of the warrants amounts to $0.30 per share. Such
warrants expire in August 2009.

The fair value of all warrants issued during the nine-month ended September 30,
2006 and 2005 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 6% Secured
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

During the nine-month period ended September 30, 2006, the Company issued
1,617,001 shares of common stock in connection with the payment of interest on
certain notes payable. The fair value of such shares amounted to approximately
$224,000 based on the quoted price of the Company's stock on the day they were
issued.

In August 2006, the Company issued 3,000,000 shares of its common stock to an
entity as compensation for consulting services which are valued at $600,000.

During July 2005, the Company issued in 28,506,666 shares to certain of the
Company's shareholders, officers and consultants. The shares were issued as part
of a recapitalization of the Company. The fair value of such shares amounted to
approximately $1.0 million, or $0.035 per share, based on its recent private
placement offering, adjusted for the dilution of debt financing occurring
subsequent to such offering.

                                       19
<PAGE>

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

NOTE 6 - STOCKHOLDERS' DEFICIT-CONTINUED

During August 2005, the existing pre-merger stockholders of the Company retained
149,509 shares of common stock, which are deemed to be issued at that date based
on reverse-merger accounting principles.

NOTE 7 - SUBSEQUENT EVENTS

During October 2006 the Company issued 2,000,000 shares of its common stock as
compensation for services under the terms of a consulting agreement. The shares
were valued at $100,000. A member of our Board of Directors and Secretary of the
Company is an employee of the company providing the consulting services to the
Company.

During October 2006, the Company issued 1,000,000 shares of its Series A
Preferred Stock to its chief executive officer in consideration of his past
services to us and his willingness to continue to participate in the management
and day to day operations of the Company. Each share of Series A Preferred Stock
entitles the Company's chief executive officer to 250 votes on any matter
submitted to its stockholders which gives him voting control of the Company. The
shares are not convertible into the Company's common stock or any other class of
our securities. The shares were valued at $1,000, which is the value attributed
to its liquidation preference.

In October 2006 the Company issued an aggregate of 11,750,000 shares of its
common stock to eight individuals as compensation for services rendered to the
Company which were valued at $587,500. Included in this transaction was an
issuance of an aggregate 8,000,000 shares to three members of the Company's
management which were valued at an aggregate of $400,000.

In October 2006, the Company issued 675,000 shares of its common stock as
compensation for services under the terms of a consulting agreement. The shares
were valued at $33,750.

In October 2006, the Company issued 500,000 shares of its common stock to a
noteholder pursuant to the conversion of a $75,000 convertible promissory note.

In November 2006, the Company issued 275,000 shares of its common stock to a
noteholder pursuant to an extension of the maturity of such note that provides
for repayment of $75,000 of the note upon the receipt of the second tranche of
the 6% Secured Convertible Notes. The remainder of the principal of the note
plus premium amounting to $165,000 is payable upon the receipt of the third
tranche of the 6% Secured Convertible Notes.

                                       20
<PAGE>

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

OVERVIEW

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

         Our business model is to provide full service, turnkey IP-based
communication solutions to distributors that deliver VoIP service to their
customers. Our branded turnkey IP-based communication solution provides a
distributor with the equipment, software, and support necessary to market a
custom tailored VoIP service. We are targeting distributors that include
equipment manufacturers, cellular vendors, cable companies that do not want to
undertake the financial burden of creating an IP-based telecommunication
company, 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 distributor. These price points will be
determined based upon the individual dynamics of the distributor's abilities,
anticipated monthly per minute usage and their overall acceptance of our
proposed and/or negotiated price plan. Sources of revenue are equipment sales,
activation fees, access fees and per minute usage charges. Both access fees and
per minute charges will represent recurring revenues as opposed to one time
sales comprised of equipment sales and activation fees. In either case,
distributors are engaged on a pre-pay basis and accounts will be settled in U.S.
currency.

         Under the terms of the distributor agreement we pay commissions to the
distributor based upon the number of lines for each subscription maintained by
each end user and the base pricing of the services for each subscription
maintained. Commission rates, which are applicable only to active customer
lines, range from $1.75 per line per month to $3.25 per line per month
determined by the base pricing per month. Distributors will also be paid a
commission of $5.00 per activation fee on each line and receive a commission of
8% of the retail price for all long distance services. Distributors that sell at
least 125 subscriptions during the first 90 days of the agreement will be
eligible to receive the monthly residual commission.

         We began marketing our service during the third quarter of fiscal 2005
and to date have generated minimal revenues. Since we began marketing our
service, our revenues have been related to charges to potential distributors who
have been testing our services. Based on our current discussions, we anticipate
that we will begin to generate recurring revenues from our first distributor
during the fourth quarter of fiscal 2006. The company, which is a distributor of
PBX commercial phone equipment and services in Columbia, is also licensed to
sell VoIP in Columbia. In order to increase our revenues we must continue to
develop distributor relationships with a wide range of companies in a number of
geographic locations that already are serving our target markets.

                                       21
<PAGE>

         While we believe that our turnkey solutions will be well received by
potential distributors, we do not have the resources to undertake a broad
marketing campaign in an effort to secure distributors 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. As capital is becoming available to us from the
sale of the callable 6% secured convertible notes we intend to use a portion of
those proceeds for marketing and travel expenses. The proceeds from that
offering will also permit us to expand our technical staff to enable us to
better support distributors in areas of customer service as well as software
support. Lastly, we intend to purchase additional hardware and make additional
deposits with the carriers to further enhance our services and make them more
marketable.

         In addition to securing distributors and increasing our 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 will provide us with capital to begin
establishing our distributor network, upgrading certain of our services and for
overhead expenses until approximately the second quarter of fiscal 2007, we have
approximately $850,000 outstanding under short-term promissory notes which are
either past due or which becomes due in the near future. We do not have
sufficient funds to satisfy these obligations and the terms of the callable 6%
secured convertible notes prohibit 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 2007, 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.

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                For the
                                         nine-month period ended               Variation
                                              September 30,                  2006 vs 2005
                                          2006            2005             $                %
                                      -----------     -----------     -----------      -----------
<S>                                   <C>             <C>             <C>              <C>
Revenues ...........................  $    24,337     $     1,839     $    22,498           NM

Cost of revenues ...................       40,975          37,980           2,995           NM
                                      -----------     -----------     -----------      -----------

Gross profit (loss) ................      (16,638)        (36,141)         25,493           NM

Operating expenses:
Sales, general, and administrative
 expenses ..........................      592,432       1,340,245        (747,813)        -56%
Sales, general, and administrative
 expenses-related party ............       43,100          48,150          (5,050)        -10%
                                          635,532       1,388,395        (752,863)        -54%

Net operating loss .................     (652,170)     (1,424,536)       (772,366)        -54%

Other income-derivatives ...........    9,329,695               -      (9,329,695)          NM
Other expense-derivatives ..........   (2,202,750)              -       2,202,750           NM
Interest expense-related party .....      (21,000)              -          21,000           NM
Interest expense ...................     (456,442)        (62,556)        456,442           NM
                                      -----------     -----------     -----------      -----------

Net income (loss) ..................    5,997,333      (1,487,092)     (7,484,425)          NM
                                      ===========     ===========     ===========      ===========
</TABLE>
NM = not meaningful

                                       22
<PAGE>

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006 AND SEPTEMBER 30, 2005

REVENUES

         We have generated minimal revenues since inception. Our revenues for
the nine months ended September 30, 2006 consisted primarily of per-minute usage
fees for our services to potential distributors testing our services. As our
services were launched during the third quarter of 2005, we did not report
revenues for the first half of fiscal 2005. Based upon current discussions we
believe that we will begin generating recurring revenue from a distributor
during the fourth quarter of fiscal 2006. We are unable to predict at this time
the amount of revenue we may generate from this distributor.

COST OF REVENUES

         Our cost of revenues consists of the costs to secure our VoIP
communication services with network carriers as well as the cost of phone
equipment sold to distributors. The increase in our cost of revenues during the
nine-month period ended September 30, 2006 is primarily attributable to
incurring fixed and variable costs from network carriers to secure our VoIP
communication services associated with the launch of our VoIP services during
the third quarter of 2005. We did incur similar fees during the nine-month
period ended September 30, 2005 in anticipation of the launch of our VoIP
services in the third quarter of 2005. We do not anticipate that we will incur
any additional fixed costs in providing our services in future periods and that
all cost of revenues in future periods will be variable based upon the actual
number of minutes used in the period.

GROSS PROFIT

         We reported a gross loss of $16,638 for the nine months ended September
30, 2006 as compared to a gross loss of $36,141 for the comparable nine month
period in fiscal 2005. Because we have incurred fixed costs associated with our
revenues and cost of revenues in future periods will be the variable cost
associated with the minutes actually used, we anticipate that we will increase
our gross profit margins in future periods 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 primarily of
consultant fees incurred in connection with the sales and support of our VoIP
services. The decrease in sales, general, and administrative expenses during the
nine month period ended September 30, 2006 is primarily due a one-time charge
related the issuance of shares pursuant to a recapitalization valued at $1.0
million during the nine month period ended September 30, 2005 for which there
were no comparable expenses during the fiscal 2006 period, offset by increased
expense associated with hiring more consultants to support our sale and support
our VoIP services as well as professional fees associated with being a
publicly-traded company. During the nine months ended September 30, 2006 we
treated 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 2006 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

                                       23
<PAGE>

as employees, absence any increases in their base compensation. We anticipate we
will also hire additional personnel during the fourth quarter of fiscal 2006 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 the nine months ended September 30, 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 that period
represents this rental expense. We terminated this arrangement in August 2006
and, accordingly, our sales, general and administrative - related party for the
nine months ended September 30, 2006 reflects the termination of this agreement.
We do not anticipate recognizing a rental expense to a related party in future
periods..

OPERATING LOSS

         We reported an operating loss of $652,170 for the nine months ended
September 30, 206 as compared to an operating loss of $1,424,536 for the nine
months ended September 30, 2005. The increase in our operating loss is
attributable to the increase in our sales, general and administrative expenses.

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. For
the nine month period ended September 30, 2006 we recognized other income of
approximately $9.3 million which represents the change in the fair value of the
derivate instruments between measurement dates. The decrease in the fair value
of the derivative liabilities is primarily due to a decrease in our stock price
since January 1, 2006. See "The Effect of Derivative Liabilities on Our
Financial Statements" appearing later in this report.

Other expense-derivatives
-------------------------

         Other expense-derivatives includes the fair value of embedded
conversion features, freestanding warrants, and liquidated damages in excess of
the associated debt or reclassified as liability contracts. The increase in
other expense-derivatives during the nine-month period ended September 30, 2006
is primarily due to the reclassification of equity contracts to derivative
contracts valued at $2.2 million in August 2006. There were no such
reclassification during the nine-month period ended September 30, 2005. See "The
Effect of Derivative Liabilities on Our Financial Statements" appearing later in
this report.

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

         Interest expense and interest expense - related party represents
interest incurred on various notes payable, including a note payable due to
Arlington Investment Group, an entity controlled by one of our 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. The increase in interest expense is primarily due to an increase
weighted-average debt principal during the nine-month period ended September 30,
2006 when compared to the prior period. The decrease in interest expense-related

                                       24
<PAGE>

party during the nine-month period ended September 30, 2006 is primarily due to
the a lower effective interest rate of 14% during that period compared to 114%
during the nine-month period ended September 30, 2005

NET INCOME (LOSS)

         We reported net income of $5,997,333 for the nine months ended
September 30, 2006 as compared to a net loss of $1,487,092 for the nine months
ended September 30, 2006. The net income reflects the impact of the non-cash
other income - derivative liabilities which had the effect of offsetting our
operating losses. As described elsewhere herein, we anticipate that the effects
of other expense from derivative liabilities related to our callable 6% secured
convertible notes in future periods will increase our anticipated operating
losses.

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, 2006 (unaudited) and December 31, 2005:
<TABLE>
<CAPTION>
                                          September 30,
                                              2006         December 31,     $ of change    % of
                                          (Unaudited)         2005            (+/-)       change
                                          ------------     ------------     -----------   ------
<S>                                       <C>              <C>               <C>          <C>
Working capital (deficit) ..............  $ (3,251,363)    $(14,289,309)    +11,037,946      NM
Cash ...................................  $    177,965     $          0        +177,965     100%
Property and equipment, net ............  $     18,534     $     24,893          -6,359    (25)%
Deferred financing fees, net ...........  $    150,694     $     10,000        +140,694     141%
Total assets ...........................  $    353,693     $     41,393        +312,300     750%

Accounts payable and accrued expenses ..  $     44,612     $     40,626          +3,986     9.8%
Accounts payable - related party .......  $    118,350     $     75,250         +43,100      57%
Deferred revenues ......................  $      7,382     $          0          +7,382     100%
Due to Chief Executive Officer .........  $      6,484     $      6,484               0      n/a

Derivative liabilities .................  $  2,092,886     $ 13,420,764     -11,327,878       NM
Note payable - related party and
 accrued interest ......................  $    410,567     $    410,567               0      n/a
Convertible promissory note, net .......  $     98,827     $    104,745          -5,918       NM
Notes payable and accrued interest .....  $    650,220     $    216,029        +434,191    +201%
Total current liabilities ..............  $  3,429,328     $ 14,289,309     -10,859,981       NM
Total liabilities ......................  $  3,429,328     $ 14,289,309     -10,859,981       NM
</TABLE>
NM = not meaningful

         At September 30, 2006 our working capital deficit was $3,251,363 as
compared to a working capital deficit of $14,289,309 at December 31, 2005. Our
total assets at September 30, 2006 increased by $312,300, or approximately 750%,
from December 31, 2005. This increase is primarily attributable to increases in
cash of $177,965 and deferred financing fees of $140,964 which relates to our
callable 6% secured convertible note transaction, net of a write off of $10,000
in the deferred financing fees recorded at December 30, 2005 which represented
amounts advanced to a placement agent for a private offering we did not
undertake. The decrease in the value of property and equipment is attributable
to depreciation expense.

                                       25
<PAGE>

         Our total liabilities at September 30, 2006 also declined from December
31, 2005, primarily a result of the effective of the elimination of the
derivative liabilities in the fiscal 2006 period as described below. Other
changes in our total liabilities from period to period included an increase in
accounts payable and accrued expenses ($3,986) and an increase in notes payable
and accrued interest ($434,191), as well as a net decrease of $5,918 in
convertible notes payable. At December 31, 2005 we had a convertible note
payable, including interest, of $104,745. In June 2006 this note was modified to
remove the conversion feature and the principal and accrued interest currently
due thereunder is included in notes payable and accrued expenses on our balance
sheet at September 30, 2006. In August 2006 we issued a $500,000 principal
amount callable 6% secured convertible promissory note which is one of a series
of three to be issued in a transaction described later in this section.
Convertible promissory notes outstanding on September 30, 2006 as reflected on
our balance sheet represents this note, net of a discount of $486,111.

         Included in notes payable and accrued interest at September 30, 2006
are amounts 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. The
note, as extended, is due November 15, 2006. 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 approximately $21,000 of interest expense in
connection with this note during the nine month period ended September 30, 2006.
The amount payable under the note amounts to approximately $411,000 at September
30, 2006. We paid approximately $21,000 of interest expense during the nine
month period ended September 30, 2006.

         Cash used in our operating activities amounted to approximately
$531,309 during the nine-month period ended September 30, 2006. Our net income
for that period amounted to approximately $6.0 million and was adjusted as
follows:

         o  Decrease in fair value of derivatives between measurement date of
            approximately $9.3 million;

         o  Fair value of derivative liabilities reclassified at date of
            issuance or in excess of debt discount of approximately $2.2
            million;

         o  Amortization of debt discount and fair value of share issued in
            satisfaction of interest on note payable of approximately $143,000
            and $208,000, respectively; and

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

         We financed our operating and investing activities during the
nine-month period ended September 30, 2006 by issuing notes payable and
convertible promissory notes amounting to $885,000. We also satisfied three
notes payable of $60,000 during the nine-month period ended September 30, 2006
and paid $105,000 as finders' fees and legal costs in connection with the
transaction entered into in August 2006 for the sale of the callable 6% secured
convertible promissory notes during the nine-month period ended September 30,
2006.

         Cash used in our operating activities amounted to approximately
$215,000 during the nine-month period ended September 30, 2005. Our net loss for
that period amounted to approximately $1.5 million and was adjusted as follows:

         o  Fair value of shares issued pursuant to recapitalization amounting
            to approximately $1.0 million;

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

         o  Increase in accrued interest on note to related party of
            approximately $107,000; and

         o  Increase in accounts payable and accounts payable to related party
            of approximately $13,000 and $43,000, respectively.

                                       26
<PAGE>

         We financed our operating and investing activities during the
nine-month period ended September 30, 2005 by issuing convertible promissory
note and promissory notes amounting to $510,000, which also funded capital
expenditures of approximately $20,000.

         We have generated minimal revenues since inception. Our revenues are
not sufficient to pay our operating expenses and we have relied upon short-term
borrowings to provide funds for working capital. Exclusive of the $500,000
principal amount callable 6% secured convertible promissory note we issued in
August 2006 in the transaction described below, we have an aggregate of
approximately $850,00 due under short term notes, of which $100,000 is past due
as of November 13, 2006. The balance of the outstanding notes, which includes
$615,000 in principal, accrued interest and premium payments of $200,000, become
due in the near future. 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 August 2006 we received net proceeds of approximately $395,000 from
the issuance of $500,000 principal amount callable 6% secured promissory notes.
Based upon the terms of the notes, we will receive an additional $1,000,000 in
gross proceeds as described below. While these funds will provide us with
capital for sales and marketing, to upgrade certain of our service offering and
for general overhead expenses until approximately the second quarter of fiscal
2007, under the terms of the callable 6% secured convertible notes we are
prohibited from using any of these proceeds to satisfy any of the existing
short-term debt obligations. 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 we were unable to pay the note when it
becomes due and the note holder was to seek to collect this note, this note
holder would be entitled to foreclose on our assets. This event would 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.

         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. Our future capital requirements depend primarily on the rate at
which we can increase our revenues and thereby decrease our use of cash to fund
operations. Cash used for operations will be affected by numerous known and
unknown risks and uncertainties including, but not limited to, our ability to
successfully market our products and services, attain and retain a customer
base, and our ability to attract key personnel as we grow.

         In addition to funds necessary to fund our recurring operating expenses
and funds to satisfy the short terms notes discussed above, we will need to
raise significant additional capital to continue to implement our business
model. We cannot assure you we will be successful in raising working capital as
needed. There are no assurances that we will have sufficient funds to execute
our business plan, pay our obligations as they become due or generate positive
operating results for the next 12 months. If we are unable to raise additional
capital, we may be unable to continue our operations and our stockholders could
loose their entire investment in our company.

THE EFFECT OF DERIVATIVE LIABILITIES ON OUR FINANCIAL STATEMENTS

         As described in Note 4 to the financial statements for the nine months
ended September 30, 2006 which are included elsewhere in this report, the
application of EITF Issue No. 00-19 on our financial statements for the nine
months ended September 30, 2006 resulted in other income to us of $7,126,945,

                                       27
<PAGE>

net of other expense to us of $2,202,750. While this income item is non-cash,
the application of the accounting standard had a significant impact on our net
income for the period through an decrease in our net loss of that amount. In
addition, at September 30, 2006 our balance sheet reflected a current liability
of $2,092,886 related to the derivative liability, as compared to a liability of
$13,420,764 at December 31, 2005.

         In August 2006 we entered into the agreement to sell the $1,500,000
principal amount callable 6% secured convertible notes and related warrants as
described later in this section. The terms of the notes provide for a variable
conversion price tied to the market price of our common stock. Accordingly,
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 the
notes. These notes and warrants are therefore considered derivative liabilities
and we must apply the accounting principles of EITF-0019 to these instruments.
This accounting treatment will also apply to all of our other outstanding
convertible instruments, as well as convertible instruments we may issue in the
future so long as we are unable to assert that we have a sufficient number of
authorized but unissued common shares to provide for the conversion or exercise
these instruments. While we are presently unable to quantify the exact impact of
derivative liabilities on our financial statements in future periods, while
non-cash we anticipate the impact will result in a significant expense during
the period and a significant liability on our balance sheet. In addition, as we
will be required to "mark to market" the value of these derivative liabilities
on a daily basis until such time as they are no longer considered a derivative
liability, we anticipate that we will recognize other income or expense in
future periods based upon the fluctuation of the market price of our common
stock. We are unable to estimate the amount of such income/expense.

RECENT CAPITAL RAISING TRANSACTION

         On August 31, 2006, we completed a financing to four accredited
investors of our callable 6% secured convertible notes and seven year common
stock purchase warrants to purchase 10,000,000 shares of common stock at an
exercise price of $0.40 per share. At the initial closing $500,000 principal
amount of notes were issued and paid for. The note holders will purchase an
additional $500,000 principal amount of notes within three days from the date we
file the registration statement of which this prospectus is a part, and within
three days of the date the Securities and Exchange Commission declares the
registration statement effective the note holders will purchase an additional
$500,000 principal amount of notes.

         The notes are convertible at the holder's option into shares of our
common stock at a variable price equal to 50% of the average of the lowest three
trading prices for our common stock as reported on the OTCBB during the 20
trading day period ending one trading day prior to the date the conversion
notice is sent to us by the note holder (the "Trading Price"). The notes mature
on August 29, 2009. The ability of the note holders to convert the notes is
limited in that no note holder has the right to convert its callable 6% secured
convertible note if, by virtue of such conversion, the holder and its affiliates
would become the beneficial owner of more than 4.99% of our common stock or
during any month immediately succeeding a determination date on which a note
holder exercises its prepayment option. The warrants contain similar
restrictions limiting the ability of the holder to exercise the warrant. The
purchasers of the callable 6% secured convertible notes are affiliates.

         We agreed to pay an individual a finder's fee of $150,000 and issue to
him three year common stock purchase warrants to purchase 1,000,000 shares of
our common stock at an exercise price of $0.30 per share. We received net
proceeds of approximately $395,000 after the costs of the transaction, which
included the reimbursement of $35,000 to the note holders for their expenses.

                                       28
<PAGE>

We intend to use the net proceeds for working capital and to begin our
distributor resale program. The notes include certain covenants which preclude
us from, directly or indirectly, using the proceeds of the notes for:

         o  any loan to or investment in any other corporation, partnership,
            enterprise or other person, except in connection with any of our
            currently existing direct or indirect subsidiaries,

         o  the satisfaction of any portion of our debt other than trade
            payables and accrued expenses in the ordinary course of our
            business, or

         o  the redemption of any common stock.

         We granted the note holders a security interest in our assets,
including our intellectual property.

         Provided we are not in default under the terms of the transaction
documents, our common shares are trading at or below $0.20 and subject to
certain other conditions, we 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.

         We agreed to file a registration statement covering the shares of
common stock underlying the securities issued. In the event we did not file the
registration statement by September 29, 2006, or it does not become effective
within 120 days from the closing, we are 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
shares of our common stock at our option. We did not file the registration
statement by September 29, 2006, accordingly, we began to accrue liquidated
damages on September 30, 2006. We anticipate that we will file the registration
statement shortly after the filing of this report. The transaction documents
also provide for the payment of liquidated damages to the investors in certain
events, including our failure to maintain an effective registration statement
covering the resale of the common shares issuable upon conversion or exercise of
the securities.

ITEM 3.  CONTROLS AND PROCEDURES

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

                                       29
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None

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

         In January 2006 we issued a $100,000 principal amount convertible
promissory note due July 12, 2006 to an accredited investor. The note, as
amended in April 2006 in which the principal amount was reduced to $75,000, is
convertible at the option of the holder into shares of our common stock at the
rate of $0.50 per share. In October 2006 the note holder converted the principal
and accrued interest due under the note and we issued the note holder 500,000
shares of our common stock, valued at $25,000. 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 (the "Securities Act") in reliance on an exemption provided by
Section 4(2) of that act.

         In February 2006 we issued a $50,000 promissory note together warrants
to purchase 30,000 shares of our common stock with an exercise price of $1.50
per share. In October 2006 the note holder agreed to an extension of the due
date of the note and we issued him 150,000 shares of our common stock valued at
$7,500 as consideration for the extension. 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 in reliance on an exemption provided by Section 4(2) of that act.

In December 2005 we issued promissory notes in the aggregate amount of $100,000
together with warrants to purchase an aggregate of 60,000 shares of our common
stock with an exercise price of $1.50 per share to two individuals. Pursuant to
the terms of the notes, as amended, in October 2006 we issued the note holders
an aggregate of 290,000 shares of our common stock valued at $20,300. The
recipients were accredited or otherwise sophisticated investors 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 in reliance on an exemption provided by Section 4(2) of
that act.

         In August 2005 we issued a $100,000 principal amount secured promissory
note, as amended in April 2006, together with a warrant to purchase 35,000
shares of our common stock with an exercise price of $1.00 per share and 25,000
shares of our common stock valued at $9,085. 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 in reliance on an exemption provided by Section 4(2) of that act.

         In April 2006, we issued a $100,000 principal amount promissory note
which was due on June 11, 2006, together with three warrants to purchase 50,000
shares of our common stock with an exercise price of $0.50 per share and 25,000
shares of our common stock valued at $9,250. In connection with an extension of
the due date of the note in October 2006, we granted the note holder additional
three year warrants to purchase 15,000 shares of our common stock at an exercise
price of $0.50 per share and an additional 425,000 shares of our common stock
valued at $29,750. In October 2006 we issued this note holder an aggregate
400,000 shares of our common stock. 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 in reliance on
an exemption provided by Section 4(2) of the act.

                                       30
<PAGE>

         In June 2006, we issued a $100,000 principal amount promissory note to
an accredited investor which matures on November 30, 2006. Pursuant to the terms
of the note, in October 2006 we issued the note holder 350,000 shares of our
common stock valued at $24,500. The transaction was exempt from registration
under the Securities Act in reliance on an exemption provided by Section 4(2) of
the act.

         In September 2006 we issued 387,097 shares of our common stock to an
entity as compensation for services valued at $143,890 under the terms of a
consulting agreement. The recipient was an accredited investor and the issuance
was exempt from registration under the Securities Act in reliance on an
exemption provided by Section 4(2) of that act.

         In October 2006 we issued 2,000,000 shares of our common stock to an
entity which is affiliated with one of our officers and directors as
compensation for consulting services to us which are valued at $100,000. The
recipient was an accredited investor and the issuance was exempt from
registration under the Securities Act in reliance on an exemption provided by
Section 4(2) of that act.

         In October 2006 we also issued 3,000,000 shares of our common stock to
an entity as compensation for consulting services to us which are valued at
$600,000. The recipient was an accredited investor and the issuance was exempt
from registration under the Securities Act in reliance on an exemption provided
by Section 4(2) of that act.

         In October 2006 we issued an aggregate of 11,750,000 shares of our
common stock to eight individuals as compensation for services rendered to us
which were valued at $587,500. Included in this transaction was an issuance of
an aggregate 8,000,000 shares to three members of our management which were
valued at an aggregate of $400,000. The recipients were accredited or otherwise
sophisticated investors 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 in reliance on
an exemption provided by Section 4(2) of that act.

         In August 2005 we issued a $100,000 principal amount secured promissory
note, as amended in April 2006, together with a warrant to purchase 35,000
shares of our common stock with an exercise price of $1.00 per share and 25,000
shares of our common stock valued at $9,085. In October 2006 the due date of the
note was extended and the terms of the loan were modified to provide in part
that the note holder was granted an additional 275,000 shares of our common
stock valued at $13,750 as consideration under the loan. In October 2006 we
issued the note holder an aggregate of 300,000 shares of our common stock. 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 in reliance on an exemption provided by Section 4(2) of
that act.

         In each of these issuances the recipient represented that he was
acquiring the shares for investment purposes only, and not with a view towards
distribution or resale except in compliance with applicable securities laws. No
general solicitation or advertising was used in connection with any transaction,
and the certificate evidencing the securities that were issued contained a
legend restricting their transferability absent registration under the
Securities Act or the availability of an applicable exemption therefrom. No
underwriter participated in the transaction and no commissions were paid in
connection with the transactions.

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<PAGE>

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4   SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS

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

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

32.1     Section 1350 certification of CEO and principal accounting officer


                                   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 13, 2006                      Luis Alvarez, CEO,
                                       principal executive officer
                                       and principal accounting officer


                                       32