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

                                   Form 10-QSB

(Mark One)

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

                  For the quarterly report ended June 30, 2007

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

              For the transition period from ________ to __________


                        Commission File Number: 000-03296


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


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


              801 Brickell Avenue, 9th Floor, Miami, Florida 33131
              ----------------------------------------------------
                    (Address of principal executive offices)


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


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

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

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

                       APPLICABLE ONLY TO COPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: At August 15, 2007, there were
82,305,142 shares of common stock were issued and outstanding.

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

<PAGE>

           CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

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

                           OTHER PERTINENT INFORMATION

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

                                      INDEX

PART I - FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements ....................................3

Consolidated Balance Sheet at June 30, 2007 (unaudited)........................3

Consolidated Statement of Operations for the three and six months ended
June 30, 2007 and 2006 (unaudited) ............................................4

Consolidated Statements of Cash Flows for the six months ended
June 30, 2007 and 2006 (unaudited) ............................................5

Notes to Unaudited Consolidated Financial Statements ..........................6

Item 2.  Management's Discussion and Analysis or Plan of Operation ...........22

Item 3.  Controls and Procedures .............................................28

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings ...................................................29

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds .........29

Item 3.  Defaults Upon Senior Securities .....................................31

Item 4.  Submission of Matters to a Vote of Security Holders .................31

Item 5.  Other Information ...................................................31

Item 6.  Exhibits.............................................................31

                                        2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
                           TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                                    CONSOLIDATED BALANCE SHEET
                                           June 30, 2007
                                             Unaudited
<CAPTION>
                                              ASSETS
<S>                                                                                  <C>
Current Assets:
  Cash ...........................................................................   $     64,794
  Accounts receivable ............................................................            866
  Other current assets ...........................................................         27,862
                                                                                     ------------
                                                                                           93,522

  Property and equipment, net of accumulated depreciation of $18,965 .............         13,725
  Deferred financing fees, net of accumulated amortization of $47,461 ............        242,792
  Security deposits ..............................................................         70,478
                                                                                     ------------

     Total assets ................................................................   $    420,517
                                                                                     ============

                               LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Accounts payable and accrued expenses ..........................................   $    123,085
  Deferred revenues ..............................................................         10,589
  Derivative liabilities .........................................................      1,396,049
  Due to related party ...........................................................        118,350
  Note payable to related party and accrued interest .............................        408,667
  Notes payable and accrued interest .............................................        474,362
                                                                                     ------------

     Total current liabilities ...................................................      2,531,102

Long term liabilities:
  Convertible promissory notes and accrued interest, net of discount of $1,294,216        528,675

Stockholders' Deficit:
  Preferred stock; $0.001 par value, 10,000,000 shares authorized,
    1,000,000 issued and outstanding .............................................          1,000
  Common stock; $.001 par value, 100,000,000 shares authorized,
    78,595,137 issued and outstanding ............................................         78,595
  Additional paid-in capital .....................................................      8,079,431
  Deferred compensation ..........................................................       (118,119)
  Accumulated deficit ............................................................    (10,680,167)
                                                                                     ------------

     Total stockholders' deficit .................................................     (2,639,260)
                                                                                     ------------

     Total liabilities and stockholders' deficit .................................   $    420,517
                                                                                     ============

                           See Notes to Unaudited Financial Statements.

                                                 3
</TABLE>
<PAGE>
<TABLE>
                                TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                                     CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
                                                      Three-month period ended         Six-month period ended
                                                              June 30,                        June 30,
                                                    ----------------------------    ----------------------------
                                                        2007            2006            2007            2006
                                                    ------------    ------------    ------------    ------------
                                                     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
<S>                                                 <C>             <C>             <C>             <C>
Revenues- products ..............................   $     40,000    $          -    $     40,000    $          -
Revenues- services ..............................         17,183           2,500          21,720          10,316
                                                    ------------    ------------    ------------    ------------
Revenues ........................................         57,183           2,500          61,720          10,316

Cost of revenues- products ......................         36,622               -          36,622               -
Cost of revenues- services ......................         29,311           7,918          50,359          20,887
                                                    ------------    ------------    ------------    ------------
Cost of revenues ................................         65,933           7,918          86,981          20,887

Gross loss: .....................................         (8,750)         (5,418)        (25,261)        (10,571)

Operating expenses:
  Sales, general and administrative .............        530,096         154,051       1,036,200         321,373
  Sales, general and administrative-related party              -          16,050               -          32,100
                                                    ------------    ------------    ------------    ------------
     Total operating expenses ...................        530,906         170,101       1,036,200         353,473
                                                    ------------    ------------    ------------    ------------

     Operating loss .............................       (538,846)       (175,519)     (1,061,461)       (364,044)
                                                    ------------    ------------    ------------    ------------

Other income (expenses):
Other income-derivatives ........................          7,107       3,707,715         717,438       8,670,798
Interest expense-related party ..................        (27,000)         (7,000)        (34,000)        (14,000)
Interest expense ................................       (160,228)       (159,599)       (343,442)       (267,422)
                                                    ------------    ------------    ------------    ------------

Net income ......................................   $   (718,967)   $  3,365,597    $   (721,465)   $  8,025,332
                                                    ============    ============    ============    ============

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

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

Basic weighted average shares outstanding .......     77,270,925      57,189,981      76,796,459      57,152,720
                                                    ============    ============    ============    ============

Diluted weighted average shares outstanding .....     77,270,925      57,189,981      76,796,459      57,152,720
                                                    ============    ============    ============    ============

                                 See Notes to Unaudited Financial Statements.

                                                      4
</TABLE>
<PAGE>
<TABLE>
                                TRADEQUEST INTERNATIONAL, INC. AND SUBSIDIARY
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                             For the six-month
                                                                                                period ended
                                                                                                  June 30,
                                                                                         --------------------------
                                                                                             2007           2006
                                                                                         -----------    -----------
                                                                                         (Unaudited)    (Unaudited)
<S>                                                                                      <C>            <C>
Cash flows from operating activities:
Net income (loss) ....................................................................   $  (721,465)   $ 8,025,332
Adjustments to reconcile net income (loss) to net cash used in operating activities:
  Amortization of debt discount ......................................................       236,322        122,609
  Amortization of deferred compensation ..............................................       434,885              -
  Amortization of deferred financing costs ...........................................        47,194              -
  Fair value of derivative liabilities at date of issuance, in excess of debt discount             -          9,000
  (Decrease) increase in fair value of derivative liabilities ........................      (717,438)    (8,678,830)
  Fair value of shares issued in satisfaction of interest on note payable ............         5,670         66,441
  Fair value of shares issued for compensation .......................................        20,000
  Write-off of deferred financing fees ...............................................             -         10,000
  Depreciation .......................................................................         6,643          5,001
Changes in operating assets and liabilities
  Accounts receivable ................................................................          (866)           (48)
  Security deposits ..................................................................       (53,878)             -
  Other current assets ...............................................................       (27,862)             -
  Accounts payable to related party ..................................................             -         32,100
  Deferred revenues ..................................................................        (9,877)           662
  Accounts payable and accrued expenses ..............................................        29,500         (2,461)
  Accrued interest on promissory notes-related party .................................        (1,900)             -
  Accrued interest and premiums on promissory notes ..................................        43,423         78,129
                                                                                         -----------    -----------

Net cash used in operating activities ................................................      (709,649)      (332,065)

Cash flows from investing activity:
  Purchase of property and equipment .................................................        (2,855)          (470)
                                                                                         -----------    -----------
Net cash used in financing activities ................................................        (2,855)          (470)

Cash flows from financing activities:
  Proceeds from issuance of convertible promissory notes .............................       780,000         75,000
  Proceeds from issuance of promissory notes .........................................             -        310,000
  Principal repayments of promissory notes ...........................................       (66,666)       (37,500)
  Payment of deferred financing costs ................................................      (108,000)             -
  Use of bank overdraft ..............................................................             -        (10,256)
                                                                                         -----------    -----------

Net cash provided by financing activities ............................................       605,334        337,244

(Decrease) increase in cash ..........................................................      (107,170)         4,709

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

Cash, end of period ..................................................................   $    64,794    $     4,709
                                                                                         ===========    ===========

Supplemental disclosures of cash flow information:
  Cash paid during the period for interest ...........................................   $    46,733    $    21,498
                                                                                         ===========    ===========

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

Supplemental schedule of non-cash financing and investing activities:

Fair value of embedded conversion features and corresponding increase in debt discount   $   600,800    $   107,250
                                                                                         ===========    ===========

Reclassification of contracts from liability to equity ...............................   $     8,980    $ 4,858,184
                                                                                         ===========    ===========

Conversion of convertible promissory notes ...........................................   $    12,710    $         -
                                                                                         ===========    ===========

                                 See Notes to Unaudited Financial Statements.

                                                      5
</TABLE>
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The Company was incorporated under the laws of the State of Mississippi on
August 8, 1966 and it was reincorporated in Nevada on August 17, 2005. During
August 2005, the Company acquired IP1 Network Corporation ("IP1"). The Company
is an Internet communications provider offering worldwide Voice over Internet
Protocol ("VoIP") and other Internet protocol ("IP") services to medium and
large size synergistic businesses that can offer such IP services to their
client base. The Company is providing such services by leveraging the IP
infrastructure of various telecommunications provider. The initial marketing
programs are aimed at the Latin American market. The Company's operations are
located in South Florida.

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

The accompanying financial statements have been prepared on a going concern
basis. The Company has generated minimal revenue since its inception and has
incurred net losses of approximately $10.7 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 the year ended December 31, 2006, included in the Annual
Report filed on Form l0-KSB.

In the opinion of the management, all adjustments (consisting of normal
recurring accruals) necessary to present fairly the Company's financial position
as of June 30, 2007, and the results of operations and cash flows for the
six-month period ending June 30, 2007 have been included. The results of
operations for the six-month period ended June 30, 2007 are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report filed on Form l0-KSB as filed
with the Securities and Exchange Commission for the year ended December 31,
2006.

                                        6
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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

The Company is subject to concentrations of credit risk primarily from cash.
During the six-month period ended June 30, 2007, the Company reached bank
balances exceeding the FDIC insurance limit. The Company minimizes its credit
risks associated with cash by periodically evaluating the credit quality of its
primary financial institutions.

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

The Company earns all of its revenues from providing worldwide VoIP and other IP
services to medium and large size synergistic businesses that can offer such IP
services to their client base.

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

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

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

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

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

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

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

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

                                        7
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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

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

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

Basic earnings per share are calculated by dividing income available to
stockholders by the weighted-average number of common shares outstanding during
each period. Diluted earnings per share are computed using the weighted average
number of common and dilutive common share equivalents outstanding during the
period. Dilutive common share equivalents consist of shares issuable upon the
exercise of stock options and warrants (calculated using the reverse treasury
stock method). The outstanding options, warrants and shares equivalent issuable
pursuant to the convertible promissory notes amounted to 59,853,333 and
15,180,000 at June 30, 2007 and 2006, respectively. Such outstanding options,
warrants and shares equivalent issuable pursuant to convertible debt are
excluded from the loss per share computation for that period due to their
anti-dilutive effect.

The following sets forth the computation of basic and diluted earnings per
share:

                                                Six-month Period Ended June 30,
                                                     2007              2006
                                                -------------     -------------
Numerator:
Net income (loss) ..........................    $    (721,465)    $   8,025,332
Other income, net - derivatives ............         (717,438)       (8,670,698)
                                                -------------     -------------
Numerator for diluted earnings per share ...    $  (1,438,903)    $    (645,466)
                                                =============     =============

Denominator:
Denominator for basic and diluted
earnings per share - Weighted average
shares outstanding .........................       76,796,459        57,152,720

Basic earnings (loss) per share ............    $       (0.01)    $       (0.14)
                                                =============     =============
Diluted earnings (loss) per share ..........    $       (0.02)    $       (0.01)
                                                =============     =============
Anti-dilutive weighted-average shares ......      334,478,000        15,104,583
                                                =============     =============

                                        8
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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

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

The Company generally invoices its customers upon ordering. Revenues from the
sale of phone equipment are recognized upon shipment by the manufacturer to the
reseller. Revenues from the Internet communications services are recognized in
the period such services are used by the end-user. The 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. The Company will
generally receive a deposit from resellers of Internet communication services
and will apply the Internet communication services usage fees against the
resellers' outstanding deposit.

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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

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

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

Depreciation expense amounted to approximately $7,000 and $5,000 during the
six-month period ended June 30, 2007 and 2006, respectively.

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

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

The Company applies this statement prospectively. Performance or service
conditions that affect vesting are not reflected in estimating the fair value of
an award at the grant date because those conditions are restrictions that stem
from the possible forfeiture of instruments to which the option holder has not
yet earned the right.

                                       10
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

The Company accounts for share-based payments awarded to consultants pursuant to
FAS No. 123R and EITF No. 96-16, "Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services". Share-based payments awarded to consultants, including those
awarded by another holder of an economic interest in the Company as compensation
for services to the Company, are share-based payments transactions. The Company
measures the fair value of the equity instruments to consultants using the stock
price and other measurement assumptions as of the earlier of either of the
following: 1) the date at which a commitment for performance, as defined, by the
counterparty to earn the equity instruments is reached, or 2) the date at which
the counterparty's performance is complete.

During July 2005, the Company issued 2,610,000 options to a consultant of the
Company, with an exercise price of $0.01. Such options are not vested or
exercisable at June 30, 2007. There is no expiration date on the options. The
options vest in the year in which the Company achieves $20 million in revenues,
and a pro rata portion of the options would vest in the year in which the
Company achieves $10 million in revenues. Accordingly, no compensation cost
associated with the options is recognized during the six-month period ended June
30, 2007 and 2006, respectively.

Recent accounting pronouncements
--------------------------------

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

On July 13, 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48 ("FIN 48") entitled "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109". Concurrently, FASB issued
a FASB staff position (FSP) relating to income taxes, (FSP) No. FAS 13-2,
"Accounting for a Change or Projected Change in the Timing of Cash Flows
Relating to Income Taxes Generated by a Leveraged Lease Transaction." FASB's
summary of FIN 48 notes that differences between tax positions recognized in the
financial statements and tax positions taken in the tax return (referred to
commonly as "book" vs. "tax") will generally result in: (a) an increase in a
liability for income taxes payable or a reduction of an income tax refund
receivable, (b) a reduction in a deferred tax asset or an increase in a deferred
tax liability, or (c) both of the above. FIN 48 requires the affirmative
evaluation that it is more likely than not, based on the technical merits of a
tax position, that an enterprise is entitled to economic benefits resulting from
positions taken in income tax returns. Further, if a tax position does not meet
the more-likely-than-not recognition threshold, the benefit of that position is
not recognized in the financial statements. Additionally, FIN 48 establishes
guidance for "derecognition" of previously recognized deferred tax items, and
sets forth disclosure requirements. The effective date of FIN 48 is for fiscal
years beginning after December 15, 2006. The Company does not believe that FIN
48, once adopted, will have a significant impact on its financial position,
operating results, or cash flows.

                                       11
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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

   o  Recognized financial assets and financial liabilities except:

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

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

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

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

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

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

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

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

                                       12
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

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

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

The fair value option:

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

   o  Is irrevocable (unless a new election date occurs)

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

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

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 $0 and $32,100 during the six-month period ended June 30, 2007 and
2006, respectively. During August 2006, the related party relinquished all its
rights under the sublease at the condition that the Company vacated the premises
by August 31, 2006, which it did. The Company owed approximately $118,000 to the
related party prior to vacating the premises.

During June 2005, the Company issued a $200,000 note payable to an entity
wholly-owned by one of its executive officers. The note is secured by
substantially all assets of the Company. The note bears interest at 14% per
annum and includes a repayment premium of $200,000 at December 15, 2005. The
note, including accrued interest and premium initially matured on December 15,
2005 and was extended to March 1, 2007. On March 1, 2007, the note was extended
to September 1, 2007 for an extension fee of $20,000. The Company recognized
approximately $34,000 and $14,000 of interest expense in connection with this
note during the six-month period ended June 30, 2007 and 2006, respectively. The
amount payable under the note amounts to approximately $408,000 at June 30,
2007. The Company paid approximately $47,000 and $12,000 of interest expense
during the six-month period ended June 30, 2007 and 2006, respectively.

                                       13
<PAGE>

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

NOTE 3 - DERIVATIVE LIABILITIES

MARCH 2005 TRANSACTION

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

As a result of the issuance of the promissory note with such terms, there was no
explicit number of shares that are to be delivered upon satisfaction of the
convertible promissory note, the Company is unable to assert that it had
sufficient authorized and unissued shares to settle such note. Accordingly, all
of the Company's previously issued and outstanding instruments, such as warrants
and options as well as those issued in the future, would be classified as
liabilities as well, effective with the issuance of the convertible promissory
note.

AUGUST 2006 TRANSACTION

During August 2006, the Company issued $500,000 convertible promissory notes
which provide for, among other things, a conversion price amounting to 50% of
the market price of the Company's common shares and liquidated damages in the
event the Company does not timely register the shares issuable pursuant to the
convertible promissory notes. Accordingly, on August 31, 2006, the Company was
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 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.

Between November 2006 and May 2007, the Company issued an additional $1,280,000
convertible promissory notes which provide for similar terms as those issued
during August 2006.

The Company believes that the aforementioned embedded derivatives and
freestanding warrants met the criteria of SFAS 133 and EITF 00-19, when
appropriate, at June 30, 2007 and 2006, respectively, and were accounted for as
separate derivatives with a corresponding value recorded as liability.

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

                                Six-month period ended    Six-month period ended
                                    June 30, 2007             June 30, 2006
                                    -------------             -------------

Freestanding warrants ..........       $      -                  $ 24,218
Embedded conversion feature ....        600,800                    84,000
                                       --------                  --------
                                       $600,800                  $108,218
                                       ========                  ========

                                       14
<PAGE>

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

NOTE 3 - DERIVATIVE LIABILITIES-CONTINUED

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

Freestanding warrants

                                Six-month period ended    Six-month period ended
                                    June 30, 2007             June 30, 2006
                                    -------------             -------------

Market price: ..................        $0.01                  $0.50 - 0.51
Exercise price: ................        $0.40                  $0.50 - 1.50
Term: ..........................       7 years                   3 years
Volatility .....................         57%                       110%
Risk free interest rate: .......        4.89%                     5.17%
Number of warrants: ............     10,000,000                   85,000

Embedded conversion features

                                Six-month period ended    Six-month period ended
                                    June 30, 2007             June 30, 2006
                                    -------------             -------------

Market price: ..................    $0.01 - $0.05                 $1.00
Conversion price: ..............   $0.005 - $0.025             $0.30 - 0.50
Term: ..........................    2.6 - 3 years               0.5 years
Volatility .....................     52.5 - 57%%                   110%
Risk free interest rate: .......     4.82 - 4.8%                  4.82%
Maximum liability: .............      $780,000                   $75,000

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

                                                             At June 30, 2007
                                                             ----------------

Freestanding warrants ....................................      $   90,000
Embedded conversion feature ..............................       1,306,049
                                                                ----------
                                                                $1,396,049

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:

                                       15
<PAGE>

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

NOTE 3 - DERIVATIVE LIABILITIES-CONTINUED

Freestanding warrants

                                                             At June 30, 2007
                                                             ----------------

Market price: ............................................         $0.05
Exercise price: ..........................................     $0.001 - 1.50
Term: ....................................................    0.75 - 7 years
Volatility ...............................................      52.5 - 57%
Risk free interest rate: .................................     4.54 - 4.89%
Number of warrants: ......................................      33,410,000


Embedded conversion features

                                                             At June 30, 2007
                                                             ----------------

Market price: ............................................        $0.015
Conversion price: ........................................        $0.0025
Term: ....................................................    2.42 - 3 years
Volatility ...............................................          57%
Risk free interest rate: .................................         4.89%
Maximum liability: .......................................      $1,780,000

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

The Company had 2,610,000 outstanding options issued to non-employees for which
performance has not occurred at December 31, 2006. The fair value of such
options will be recognized when performance has occurred, pursuant to EITF
00-19.

The aggregate fair value of the warrants and embedded conversion feature issued
during the six-month period ended June 30, 2007 and 2006 amounted to
approximately $600,800 and $116,000 at the date of their issuance of which
approximately $600,800 and $107,000 has been recognized as debt discount.

The aggregate fair value of the embedded conversion features reclassified from
liability to equity contracts, pursuant to conversion of convertible promissory
notes, amounted to approximately $9,000 during the six-month period ended June
30, 2007.

The decrease in fair value of the derivatives between their measurement date and
June 30, 2007 and 2006, respectively, amounting to approximately $717,000 and
$8.7 million, has been recognized as other income.

                                       16
<PAGE>

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

NOTE 4 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE

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

   o  $110,000 convertible promissory note, bearing interest at 10% per annum,
      initially maturing on March 22, 2006. On June 28, 2006, the lender has
      agreed to amend the convertible promissory note as follows: 1) extended
      the maturity date, with principal, accrued interest and penalty
      aggregating $125,000,toSeptember 22, 2006. The convertible promissory note
      was further extended and is now due March 1, 2007. The lender no longer
      has the option to convert the promissory note into the Company's common
      shares. The Company owes $100,000 and $220 in principal and accrued
      interest and penalties, respectively, at June 30, 2007. The promissory
      note is unsecured. The note is currently in default.

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

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

   o  $50,000 promissory note, bearing no interest rate, initially due on May
      15, 2006, with a premium repayment of 20,000 shares of common stock and
      30,000 warrants. The exercise price of the warrants amounts to $1.50 per
      share. The maturity of the note was extended to August 1, 2007, with six
      principal repayments payable on March 1 through August 1, 2007. In
      consideration for the extensions, the Company issued 150,000 shares of
      common stock. The note is unsecured. The note is currently in default.

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

   o  $100,000 promissory note, bearing interest at 10%, initially due on July
      11, 2006, with a prepayment premium of $50,000 and 25,000 shares of the
      Company's common stock. The note was issued in April 2006 and the Company
      received $100,000 as consideration. Additionally, the Company issued
      50,000 warrants in connection with the issuance of the promissory note.
      The warrants are exercisable at $0.50 per share and expire in April 2009.
      The maturity date of the promissory note was extended to February 28,
      2007. In consideration for the extension, the Company issued 375,000
      shares. The note is unsecured. The note is currently in default.

                                       17
<PAGE>

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

NOTE 4 - CONVERTIBLE PROMISSORY NOTE AND NOTES PAYABLE-CONTINUED

   o  $1,500,000 convertible promissory notes, bearing interest at 6% due on
      August 29, 2009. This convertible promissory note is part of a $1,500,000
      financing of its 6% Secured Convertible Notes and Common Stock Purchase
      Warrants to purchase 10,000,000 shares of common stock. At the initial
      closing $500,000 of notes were issued and paid for. In addition, $500,000
      principal amount of notes were funded in December 2006, the date the
      Company filed its registration statement, and the remaining $500,000
      principal amount of notes was funded in January 2007, at the date that the
      registration statement was declared effective with the Securities and
      Exchange Commission. The warrants were issued at the closing and are
      exercisable at $.40 per share, subject to adjustment, and expire on August
      29, 2013. The amount owed under such notes amounted to $1,487,290 in
      principal and $55,288 in interest at June 30, 2007.

   o  $280,000 convertible promissory notes, bearing interest at 6% due on May
      31, 2010. This convertible promissory note is part of a $280,000 financing
      of its 6% Secured Convertible Notes and Common Stock Purchase Warrants to
      purchase 10,000,000 shares of common stock issued in May 2007. The
      warrants were issued at the closing and are exercisable at $.40 per share,
      subject to adjustment, and expire on August 29,2013. The amount owed under
      such notes amounted to $280,000 in principal and $313 in interest at June
      30, 2007.

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

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

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

                                       18
<PAGE>

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

NOTE 4 - 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, the current
      obligation for which has been waived by the investors. In the event the
      registration statement is not ultimately filed by the applicable date or
      does not become effective within 120 days from such date, the Company is
      required to pay liquidated damages equal to 2% of the principal amount of
      the notes outstanding on a monthly basis until the registration covenant
      is satisfied. The damages may be satisfied in common shares of Tradequest
      at our option. The transaction documents also provide for the payment of
      liquidated damages to the investors in certain events, including the
      Company's failure to maintain an effective registration statement covering
      the resale of the common shares issuable upon conversion or exercise of
      the securities.

The Company generated gross proceeds of $780,000 and $75,000 pursuant to the
issuance of convertible promissory notes during the six-month period ended June
30, 2007 and 2006, respectively.

The Company issued 1,350,000 shares of common stock to holders of the $1,500,000
convertible promissory notes pursuant to notices of conversion of $12,710 in
principal during the six-month period ended June 30, 2007.

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

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

The fair value of certain warrants and embedded conversion features issued and
outstanding at June 30, 2007 and 2006 has been accounted as derivative
liabilities. A debt discount of approximately $600,800 and $107,000 has been
recognized pursuant to the issuance of the warrants and embedded conversion
features during the six-month period ended June 30, 2007 and 2006, respectively.
The debt discount is amortized using the effective interest method and amounted
to approximately $236,000 and $123,000 during the six-month period ended June 30
31, 2007 and 2006, respectively.

The Company issued 94,494 and 55,611 shares of common stock in connection with
certain notes payable during the six-month period ended June 30, 2007 and 2006,
respectively. The fair value of such shares amounted to $6,000 and $66,000
during the six-month period ended June 30, 2007 and 2006, respectively.

                                       19
<PAGE>

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

NOTE 5 - STOCKHOLDERS' DEFICIT

Interest expense, including the amortization of debt discount, amounted to
approximately $343,000 and $267,000 during the six-month period ended June 30,
2007 and 2006, respectively.

Warrants

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

Pursuant to the $280,000 promissory note issued in May 2007, the Company issued
10,000,000 warrants during the six-month period ended June 30, 2007. The
exercise price of the warrants amounts to $0.40 per share. Such warrants expire
in May 2010.

The fair value of all warrants issued during the six-month period ended June 30,
2007 and 2006 has been recorded as derivative liabilities at their date of
issuance. On June 28, 2006, the Company reclassified the warrants as equity
contracts and recorded their fair value at that date as additional paid-in
capital. During August 2006, in connection with the issuance of the August
Convertible Promissory Notes, the Company reclassified the outstanding warrants
as liability contracts and recorded their fair value at that date as other
expenses.

Common Stock

The Company issued 94,494 and 55,611 shares of common stock in connection with
certain notes payable during the six-month period ended June 30, 2007 and 2006,
respectively. The fair value of such shares amounted to $6,000 and $66,000
during the six-month period ended June 30, 2007 and 2006, respectively.

The Company issued shares for one-year term services during fiscal 2006. The
aggregate fair value of such shares amounted to approximately $877,000 and is
amortized over the term of the contracts. The Company recognized amortization of
deferred compensation in connection with such services of approximately $435,000
during the six-month period ended June 30, 2007.

The Company issued 2,000,000 shares of its common stock to an investor relations
firm during the six-month period ended June 30, 2007. The aggregate fair value
of such shares amounted to approximately $20,000 and is included in selling,
general and administrative expenses.

Preferred Stock

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

                                       20
<PAGE>

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

NOTE 5 - STOCKHOLDERS' DEFICIT-CONTINUED

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

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

   o  the shares are not convertible into any other security,

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

   o  the shares are not subject to redemption, and

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

NOTE 6 - SUBSEQUENT EVENTS

The Company issued 1,800,000 shares of common stock pursuant to the conversion
of convertible promissory notes of approximately $7,000 between July 2007 and
August 2007.

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

The Company issued 2,000,000 shares of its common stock to an individual for
services as chief technology officer during August 2007. The fair value of the
shares issued amounted to approximately $20,000.

                                       21
<PAGE>

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

OVERVIEW

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

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

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

         In addition to securing partners and generating recurring revenues,
another significant challenge facing our company is our need for additional
working capital. We do not generate sufficient revenue to fund our operations
and have relied on short-term borrowings to provide working capital. The terms
of some of these notes require significant cash premiums at repayment, as well
as significant equity issuances. While the net proceeds from the sale of the
callable 6% secured convertible notes during fiscal 2006 and fiscal 20077
provided us with capital to begin establishing our partner network, upgrading
certain of our services and for overhead expenses until the end of the third
quarter of fiscal 2007, in addition to obligations under those notes we have
approximately $474,000 outstanding under short-term promissory notes which are
in default and another related party note in the principal amount of $200,000
together with a premium of $200,000 which is due September 1, 2007. We do not
have sufficient funds to satisfy these obligations and the terms of the callable
6% secured convertible notes prohibited us from using the proceeds of those
notes to pay these loans. The terms of the callable 6% secured convertible notes
also restrict our ability to raise capital. While we are attempting to
restructure some of these obligations and we believe that our operations will
begin to generate meaningful revenues during fiscal 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.

                                       22
<PAGE>

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                     SIX MONTHS ENDED JUNE 30,
                                                    --------------------------
                                                        2007           2006       $ CHANGE      % CHANGE
                                                    -----------    -----------    ----------    --------
                                                           (unaudited)
                                                    --------------------------
<S>                                                 <C>            <C>            <C>           <C>
Revenues ........................................   $    61,270    $    10,316        51,404      +498%
Cost of revenues ................................        86,981         20,887        66,094      +316%
                                                    -----------    -----------
Gross loss ......................................       (25,261)       (10,571)       14,690      +139%

Operating expenses:
Sales, general and administrative ...............     1,036,200        321,373       714,827      +222%
Sales, general and administrative - related party             0         32,100       (32,100)     -100%
                                                    -----------    -----------
              Total operating expenses ..........     1,036,200        353,473       682,727      +193%

Operating (loss) ................................    (1,061,461)      (364,044)      697,417      +192%

Other income (expenses):
Other income - derivatives ......................       717,438      8,670,798    (7,953,360)    -91.7%
Interest (expense) - related party ..............       (34,000)       (14,000)       20,000      +143%
Interest (expense) ..............................      (343,442)      (267,422)       76,020     +28.4%

Net income (loss) ...............................   $  (721,465)   $ 8,025,332    (8,746,797)     -109%
</TABLE>

REVENUES

         We have generated minimal revenues since inception. Since we began
marketing our service through the end of fiscal 2006, our revenues were related
to charges to potential partners who were testing our services. Beginning in the
second quarter of fiscal 2007 we began generating recurring revenues from our
first partner. The increase in revenues during the six-month period ended June
30, 2007 when compared to the prior comparable period is primarily attributable
to the sale of phone equipment of $40,000 to one of our reseller and, to a
lesser extent, of increased usage of our VOIP Communication Services. We are
unable, however, to predict at this time the amount of revenue we may generate
from this partner in future periods. In addition, in order to increase our
revenues, we must continue to develop partner relationships with a wide range of
companies in a number of geographic locations that already are serving our
target markets.

COST OF REVENUES

         During the six months ended June 30, 2007 our cost of revenues
represented the cost of equipment sold and variable costs of network carriers
through which we provide our VoIP communications services which is based upon
the actual number of minutes used in the period. Our cost of revenues during the
six months ended June 30, 2007 consisted of the costs to secure our VoIP
communication services with network carriers as well as the cost of phone
equipment sold to distributors. 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 LOSS

         We reported a gross loss of $25,261 for the six months ended June 30,
2007 as compared to a gross loss of $10,571 for the comparable period in fiscal
2006. 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 as our revenues correspondingly increase although we
are unable to quantify the amount of the increase at this time.

                                       23
<PAGE>

TOTAL OPERATING EXPENSES

         Sales, general and administrative

         Our sales, general, and administrative expenses consist of consultant
fees incurred in connection with the sales and support of our VoIP services,
consultant fees paid to our executive officers and directors as compensation,
general overhead expenses and consultant fees incurred with third party
providers. During the six months ended June 30, 2007 our selling, general and
administrative expenses increased $714,827, or approximately 222%, from the
comparable period in fiscal 2006. These increases included amortization of
deferred compensation of $434,885, costs associated with an investor relations
agreement entered into in April 2007 and increased compensation for sales, as
well as increased general and administrative expenses.

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

         Sales, general and administrative - related party

         During fiscal 2006 we sub-leased our office space from a company
affiliated with one of our stockholders and our sales, general and
administrative - related party expense during the six months ended June 30, 2006
represents this rental expense. We terminated this arrangement in August 2006
and, accordingly, our sales, general and administrative - related party for the
six months ended June 30, 2007 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 $1,061,461 for the six months ended
June 30, 2007 as compared to an operating loss of $364,044 for the comparable
period in fiscal 2006. The increase in our operating loss is primarily
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.
During the six months ended June 30, 2007 we recognized non-cash other income of
$717,438 which represents the change in the fair value of the derivative
instruments between measurement dates, as compared to non-cash other income -
derivatives of $8,670,798 during the six months ended June 30, 2006. The
decrease in the fair value of the derivative liabilities is primarily due to a
decrease in our stock price since January 1, 2007. See "The Effect of Derivative
Liabilities on Our Financial Statements" appearing later in this section.

                                       24
<PAGE>

         Interest expense and interest expense-related party

         Interest expense and interest expense - related party represents
interest incurred on various notes payable, including a $200,000 principal
amount note payable due to 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. Interest expense - related party
increased $20,000 for the six months ended June 30, 2007 from the comparable
period in fiscal 2006 and interest expense, which relates to notes due
non-affiliated third parties, increased $76,020 during the six months ended June
30, 2007 as compared to the six months ended June 30, 2006. This increase
represents the amortization of debt discount on callable 6% secured convertible
notes which was offset by a lower value attributed to the shares issued as
payment of interest on notes payable as a result of a lower fair market value of
our common stock.

NET INCOME (LOSS)

         We reported a net loss of $721,465 for six months ended June 30, 2007
as compared to net income of $8,025,332 for the comparable period in fiscal
2006. The net loss reflects the impact of the non-cash other income - derivative
liabilities which had the effect of offsetting our substantially all of our
operating losses and interest expense.

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 June 30, 2007 (unaudited) and December 31, 2006:
<TABLE>
<CAPTION>
                                                                                            CHANGE
                                                        JUNE 30, 2007   DECEMBER 31,     (2007 V 2006)
                                                         (UNAUDITED)        2006           $         %
                                                        -------------   ------------   ---------   ------
<S>                                                      <C>            <C>            <C>         <C>
Working capital (deficit) ............................   $(2,437,580)   $(2,400,040)     37,540      1.6%
Cash .................................................   $    64,794    $   171,964    (107,170)   -62.3%
Accounts receivable ..................................   $       866    $         0         866     +100%
Other current assets .................................   $    27,862    $         0      27,862     +100%
Property and equipment, net ..........................   $    13,725    $    17,513      (3,788)   -21.6%
Deferred financing fees, net .........................   $   242,792    $   181,986      60,806    +33.4%
Security deposits ....................................   $    70,478    $         0      70,478     +100%
Total assets .........................................   $   420,517    $   388,063      32,454     +8.4%

Accounts payable and accrued expenses ................   $   123,085    $    93,585      29,500    +31.5%
Deferred revenues ....................................   $    10,589    $    20,466      (9,877)   -48.3%
Derivative liabilities ...............................   $ 1,396,049    $ 1,521,667    (125,618)     8.3%
Due to related party .................................   $   118,350    $   118,350           0       n/a
Note payable to related party and accrued interest ...   $   408,667    $   410,567      (1,900)        *
Convertible promissory notes and accrued interest, net   $   528,675    $    83,248     445,427     +535%
Notes payable and accrued interest ...................   $   474,362    $   540,220     (65,858)   -12.2%
Total current liabilities ............................   $ 2,531,102    $ 2,788,103     257,001     +9.2%
Total liabilities ....................................   $ 3,059,777    $ 2,788,103     271,671     +9.7%

* represents less than 1%
</TABLE>
                                       25
<PAGE>

         At June 30, 2007 our working capital deficit increased $566,215 from
December 31, 2006. Our total assets at June 30, 2007 increased by $32,454, or
approximately 8%, from December 31, 2006. This increase is attributable to
increases in other current assets, which represents prepaid deposits in
connection with the negotiation of a lease for new office space, security
deposits we paid to network carriers and deferred financing fees relate to our
callable 6% secured convertible notes This increase was partially offset by a
reduction in cash or $107,170, or approximately 62%, and a reduction in property
and equipment, net as a result of depreciation.

         Our total liabilities at June 30, 2007 increased approximately 10% from
December 31, 2006, which is primarily related to increased borrowings which was
partially offset by a decrease in derivative liabilities, both as described
elsewhere here. Other changes in our total liabilities from period to period
included an increase in accounts payable and accrued expenses which was offset
by decreases in deferred revenues and notes payable and accrued interest.
Deferred revenues represents a deposit from resellers of our services which we
apply against the usage fees as incurred. Due to related party, which was
unchanged at June 30, 2007 from December 31, 2006, represents amounts accrued as
rent expense under the sublease for our previous principal executive offices. In
addition, at June 30, 2007 our balance sheet reflects convertible promissory
notes and accrued interest, net of discount of $1,294,216, of $528,675. This
aggregate amount, including the discount, represents the amounts due under the
callable 6% secured convertible notes described below.

         Note payable to related party and accrued interest at each of June 30,
2007 and December 31, 2006 is an amount due an entity wholly-owned by Mr.
Vincent Landis, a member of our Board of Directors. During June 2005, we issued
a note payable to Arlington Investment Group, Inc. for $200,000. We used the
funds for working capital. During March 2007 the due date of the note was
extended from March 1, 2007 to September 1, 2007 in consideration of a $20,000
extension fee. The note bears interest at 14% per annum and accrued interest,
together with a cash premium payment of $200,000, are due at maturity. We
recognized $34,000 of interest expense in connection with this note during the
six months ended June 30, 2007.

         Net cash used in operating activities for the six months ended June 30,
2007 was $709,649 as compared to $332,065 for the comparable period in fiscal
2006, an increase of $374,097. During the six months ended June 30, 2007 we used
cash in operating activities to fund increases in accounts receivable ($866),
security deposits ($53,878), other current assets, which included security
deposits from distributors ($27,862), accounts payable and accrued expenses
($29,500) and accrued interest and premiums on promissory notes ($43,243) with
an add-back of non-cash operating income of $323,276. These increases were
offset by decreases in deferred revenues ($9,877) and accrued interest on
promissory notes - related party ($1,900). For the comparable period in fiscal
2006 we used cash in operating activities to fund increases in accounts
receivable ($48), accounts payable - related party ($32,100), deferred revenues
($662), accounts payable and accrued expenses ($2,461) and accrued interest and
premiums on promissory notes ($78,129), with an add-back of non-cash expense of
$8,465,779.

         Net cash used in investing activities for the six months ended June 30,
2007 was $2,855 as compared to $470 for the comparable period in fiscal 2006.
This increase reflects the purchase of property and equipment during the fiscal
2007 period.

         Net cash provided by financing activities for the six months ended June
30, 2007 was $605,334 as compared to $337,244 for the six months ended June 30,
2006, an increase of $268,090. During the first six months of fiscal 2007 we
received proceeds of $780,000 from the issuance of callable 6% secured
convertible notes, and recognized an expense of $108,000 for deferred financing
costs related to these notes, which was offset by principal repayment of notes
totaling $66,666. During the comparable period in fiscal 2006 we received
proceeds of $385,000 from the issuance of promissory notes, made principal
repayments on these notes of $37,500 and utilized a bank overdraft of $10,256.

                                       26
<PAGE>

         We have generated minimal revenues since inception and the revenues we
have generated have resulted in a gross loss. Our revenues are not sufficient to
pay our operating expenses and we have relied upon short-term borrowings to
provide funds for working capital. Exclusive of the $1,500,000 principal amount
callable 6% secured convertible notes we issued in fiscal 2006 and the
additional $280,000 principal amount callable 6% secured convertible notes we
issued in May 2007 as described elsewhere in this report, we have an aggregate
of approximately $907,000 due under short term notes, $499,000 of which is in
default as of August 10, 2007. The balance of the outstanding notes become due
in September 2007. 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.

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

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

         In connection with our annual report for our fiscal year ending
December 31, 2007 pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 our
management will be required to provide an assessment of the effectiveness of our
internal control over financial reporting, including a statement as to whether
or not internal control over financial reporting is effective. In order to
comply with this requirement we will need to engage a consulting firm to
undertake an analysis of our internal controls as we do not have the expertise
to conduct the necessary evaluation. While we have yet to engage such a
consulting firm, we expect to incur consulting fees in developing the necessary
documentation and testing procedures required. We are unable at this time to
predict the amount of these fees.

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

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

                                       27
<PAGE>

THE EFFECT OF DERIVATIVE LIABILITIES ON OUR FINANCIAL STATEMENTS

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

         The application of EITF Issue No. 00-19 on our financial statements for
the six months ended June 30, 2007 and 2006 resulted in other income to us of
$717,438 and $8,670,798, respectively. While this income item is non-cash, the
application of the accounting standard has a significant impact on our
consolidated statement of operations for the periods and, in both periods,
served to offset our operating losses. In addition, at June 30, 2007 our balance
sheet reflected a current liability of $1,396,049 related to the derivative
liability which represents a non-cash liability. Both of these non-cash items
are tied to the market value of our common stock and, if the price declines, we
could be required to report a non-cash expense associated with the derivative
liability in future periods and the carrying value of the liability could
increase. While we cannot predict the impact of this accounting standard on our
financial statement in future periods as the income/expense calculation is based
upon a current market value of our common stock, it is likely that it will have
similar impacts on our financial statement in future periods.

ITEM 3.  CONTROLS AND PROCEDURES

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

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

                                       28
<PAGE>

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

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

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None.

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

         In April 2007 we entered into an agreement with Pentony Enterprises,
LLC to provide investor awareness coverage on its web site StockGuru.com for an
initial period of 90 days. As compensation we paid the company $15,000 in cash
and issued it 2,000,000 shares of our common stock valued at $20,000. The
recipient was an accredited or otherwise sophisticated investor who had such
knowledge and experience in business matters that it was capable of evaluating
the merits and risks of the prospective investment in our securities. The
recipient had access to business and financial information concerning our
company. The securities were issued in reliance on an exemption from
registration provided by Section 4(2) of the Securities Act of 1933.

         On May 31, 2007, we completed a $280,000 financing of its 6% callable
secured convertible notes to four accredited investors in a private placement
exempt from registration under the Securities Act of 1933. The purchasers of the
notes were four accredited institutional investors who were the same investors
that purchased $1,500,000 principal amount callable 6% secured convertible notes
sold by us in May 2006. We paid a finder's fee of $28,000 and the investors
retained $30,000 of the proceeds as reimbursement for their fees in the
transaction. We are using the net proceeds for working capital.

         The notes are convertible at the option of the holders into shares of
our common stock based on a conversion price which is 50% of the average of the
lowest three trading prices of our common stock as reported on the OTC Bulletin
Board during the 20 trading days prior to conversion. The notes are secured by
all of our assets, including our intellectual property rights. The notes mature
on May 31, 2010. Interest is payable quarterly and no interest is payable for
any month in which the trading price of our common stock is greater than $0.125
per share for each trading day of that month. No holder may convert the greater
of (i) $80,000 per calendar 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

                                       29
<PAGE>

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 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. In addition, for each
month the average price of our common stock is below $0.10 per share, we can
prepay a portion of the notes and stay any conversion.

         In the transaction we issued the holders of the callable 6% secured
convertible notes seven year common stock purchase warrants to purchase an
aggregate of 10,000,000 shares of our common stock at an exercise price of $0.40
per share expiring on May 31, 2014. The number of shares underlying the warrants
and the exercise price of the warrants is subject to adjustment in the event of
stock splits, dividends and similar corporate events. The warrants also contain
a "ratchet" provision which provides that if we should issue or sell shares of
our common stock, including rights or options to purchase shares of our common
stock or other securities which are convertible into shares of our common stock,
for no consideration or for a consideration price per share less than the then
exercise price, the exercise price of the warrants will be adjusted to a lower
price. If the resale of the share of common stock underlying the warrants is not
covered by an effective registration statement, the warrants are exercisable on
a "cashless" basis which means that the holders, rather than paying the exercise
price in cash, may surrender a number of warrants equal to the exercise price of
the warrants being exercised. The ability of the holders to exercise the
warrants is limited in that no holder has the right to exercise its warrant if
by virtue of such exercise the holder and its affiliates would become the
beneficial owner of than 4.9% of our common stock.

         While we have agreed to file a registration statement covering the
shares of common stock underlying the securities , the current obligation for
which has been waived by the investors. Ultimately, if we fail to file the
registration statement by the applicable date or it does not become effective
within 120 days from the to be determined date, we will be 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,
which are not presently accruing, may be satisfied in our common shares at our
option if we are ultimately required to pay any amounts. 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.

         Each of the investors in the offering is an accredited investor within
the meaning of Rule 501 of Regulation D under the Securities Act of 1933. The
investors were provided access to business and financial data about our company
and had knowledge and experience in business and financial matters to as to be
able to evaluate the risks and merits of an investment in our company. No
general solicitation or advertising was deployed in connection with the
transactions. Accordingly, the issuance of the securities was exempt from
registration under the Securities Act of 1933 by reason of Section 4(2) of the
Act as a transaction by an issuer not involving a public offering.

         Copies of the Securities Purchase Agreement, form of 6% Callable
Secured Convertible Note, form of Common Stock Purchase Warrant, the Security
Agreement, Intellectual Property Security Agreement and Registration Rights
Agreement are attached hereto as exhibits. The foregoing description is
qualified in its entirety by reference to the full text of such exhibits.

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<PAGE>

         In August 2007 we issued 2,000,000 shares of our common stock valued at
$20,000 to an individual as partial compensation for servies rendered to us. The
recipient was an accredited or otherwise sophisticated investor who had such
knowledge and experience in business matters that it was capable of evaluating
the merits and risks of the prospective investment in our securities. The
recipient had access to business and financial information concerning our
company. The securities were issued in reliance on an exemption from
registration provided by Section 4(2) of the Securities Act of 1933.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

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

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

         None.

ITEM 5.  OTHER INFORMATION

         None.

ITEM 6.  EXHIBITS

4.18     Form of 6% callable secured convertible note issued on May 31, 2007

4.19     Form of common stock purchase warrant

10.16    Securities Purchase Agreement dated as of May 31, 2007

10.17    Security Agreement dated as of May 31, 2007

10.19    Registration Rights Agreement dated as of May 31, 2007

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

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

32.1     Section 1350 certification of CEO and principal financial and
         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.

August 17, 2007                         By: /s/ Luis Alvarez
                                            ----------------
                                        Luis Alvarez, CEO, principal executive
                                        officer and principal financial and
                                        accounting officer

                                       31