SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549
                                FORM 10-KSB

  [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
                           EXCHANGE ACT OF 1934
               For the fiscal year ended September 30, 1998
                                     
                                    OR
                                     
     [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934
                 For the Transaction period from____to____
                                     
                   Commission File Number_______________
                       WebQuest International, Inc.
           (Exact name of small business issuer in its charter)
                                     
           Nevada                                    86-0894019
  (State or other jurisdiction of       (IRS Employer Identification No.)
   incorporation or organization)
                                     
                                     
                                     
                                     
               1662 N. Hwy 395, Suite 203, Minden, NV 89423
       (Address of principal executive offices, including Zip Code)
                                     
                               775-782-0350
           (Registrant's telephone number, including area code)
                                     
   Securities registered pursuant to Section 12(b) of the Exchange Act:
                       Common Stock, $.001 par value
   Securities registered pursuant to Section 12(g) of the Exchange Act:
                       Common Stock, $.001 par value
                                     
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such 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      [ ]

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or any amendment
to this Form 10-KSB.
                                     
State issuer's revenues for its most recent fiscal year:   $0.00
                                     
As of September 30, 1998 there were 4,258,618 shares of the issuer's Common
                   Stock, $.001 par value, outstanding.
                                     
                                     
                                     
DOCUMENTS INCORPORATED BY REFERENCE
NONE






                            WEBQUEST INTERNATIONAL, INC.
                                      INDEX

                                Table of Contents
                                Part I

Item 1.   Description of Business ...................................... 1
Item 2.   Description of Property ......................................11
Item 3.   Legal Proceedings ............................................12
Item 4.   Submission of Matters to a Vote of Security Holders ..........12

                               Part II

Item 5.   Market for Common Equity and Related Stockholder Matters .....12
Item 6.   Plan of Operation.............................................13
Item 7.   Financial Statements..........................................19
Item 8.   Changes In and Disagreements with Accountants on Accounting
          and Financial Disclosure .....................................19

                              Part III

Item 9.   Directors, Executive Officers, Promoters and Control
          Persons; Compliance with Section 16(a) of the Exchange Act ...20
Item 10. Executive Compensation ........................................23
Item 11. Security Ownership of Certain Beneficial Owners and
         Management ....................................................25
Item 12. Certain Relationships and Related Transactions ................25
Item 13. Exhibits and Reports on Form 8-K ..............................27
                                     
                                     
                                     
                                     
                                     
                        FORWARD LOOKING STATEMENTS
                                     
         WebQuest International, Inc. (the "Company") cautions readers that
certain important factors may affect the Company's actual results and could
cause such results to differ materially from any forward-looking statements
that may be deemed to have been made in this Form 10-KSB or that are otherwise
made by or on behalf of the Company. For this purpose, any statements
contained in the Form 10-KSB that are not statements of historical fact may
be deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as "may," "expect," "believe," "anticipate,"
"intend," "could," "estimate," or "continue" or the negative other variations
thereof or comparable terminology are intended to identify forward-looking
statements. Factors that may affect the Company's results include, but are not
limited to, the Company's limited history of profitability, its dependence on
a limited number of customers and key personnel, its possible need for
additional financing and its dependence on certain industries. The Company is
also subject to other risks detailed herein or detailed from time to time in
the Company's filings with the Securities and Exchange Commission.


                                     
                                     
                                     
                                     
                                  PART-I
                                     
ITEM 1.  DESCRIPTION OF BUSINESS

WebQuest International, Inc., incorporated in Nevada on March 25, 1998,(the
"Company"), is the successor by merger with WebQuest International, Inc., a
Utah corporation formerly known as Phaser Enterprises, Inc. ("WB Utah"). 

In April 1997 WB Utah entered into an Agreement and Plan of Reorganization
with WebQuest International, Inc., a Nevada Corporation ("old WB"),
incorporated in November 1996, formerly known as iPONG International, Inc.,
pursuant to which agreement the old WB merged with and into WB Utah. Prior to
April 1997 WB Utah had no operations. The Company's present business is the
development and marketing of an interactive game arcade, known as the iPONG
Game Arcade on the Internet. Site visitors use their eye/hand coordination and
trivia knowledge to win cash and/or prizes. The Company anticipates that it
will derive revenue from the sale of advertising. 

The iPONG Game Arcade is an interactive game site. The site provides visitors
a variety of PONG games, a simple arcade game licensed from Atari, a division
of JTSR corporation (acquired by Hasbro), with 10 different categories of
trivia. After entering the Company's web site at www.iPONG.com, players
compete for points on a weekly basis. As players respond to questions
throughout the game, each question or activity is accompanied by advertising.
iPONG is a game of skill and knowledge. Players who successfully score high
win cash and/or prizes. 
The markets of this Arcade include Players and Advertisers. Our Player
demographics indicate that our present market is between the ages of 25 and
35 with the largest percentage being male, although the Arcade attracts a good
percentage of Players from all age groups.  Advertisers would be retail and
service companies attempting to reach this market. The Company intends to
charge advertisers per advertisement placed with the games questions. As of
the date of this Registration Statement the Company has not entered into
contracts for advertising with any person, and the Company has not engaged any
advertising agency to do so, although it intends to do so in the future.
The iPONG Game Arcade is distributed solely online at http://www.ipong.com.
We inform potential Players about the site through a variety of online
marketing methods, including weekly drawings from a pool of Players who have
scored a minimum score of 2000 points per week. This allows the Company  to
maintain regular contact with the Players through email weekly announcements.
It also allows the Company to announce our contests on a weekly basis at
numerous contest sites, discussion forums, newsgroups and mailing lists. The
Company is  also engaged in banner exchanges with entertainment-oriented
sites.  The Company  also place and exchange classified newsletter ads in
pertinent publications and are also engaged in focus marketing in which the
Company  can attract specific groups of Players based on their interests.
Prizes awarded will be related to those interests. This allows the Company 
to communicate with interest-specific website owners to promote our weekly
drawings.
The market for Internet advertising is extremely competitive and WebQuest
expects that competition will intensify in the future.  WebQuest believes that
it's ability to compete successfully depends on a number of factors, including
market presence; ease of access to and navigation of the Internet; the pricing
policies of  its competitors; WebQuest's ability to support existing and
emerging industry standards; and  industry and general economic trends.
WebQuest's current and prospective competitors include many large companies
that have substantially greater market presence and financial, technical,
marketing and other resources than WebQuest, including the following
interactive advertising companies:

     "You Don't Know Jack, the Netshow ", launched  in December of 1996.
Nearly  25, 000 people logged on to the off-beat trivia game during, it's
three-week pilot test period. It logged it's 1,000,000th player in July of
1997. There are currently 160,000 registered visitors. According to a rigorous
study commissioned by Berkeley Systems, Inc., the use of advertising combined
with a fast-paced entertainment experience proved to generate higher brand
recall than banner advertisements. The current list of advertisers include
Nabisco, Jack Daniels, Amstel, 7-up, Twentieth Century Fox, and Yahoo!.

     Cybergold, an Internet marketing service that also rewards members with
money for reading advertisements and answering questions.  Members enroll free
of charge, supply interests and demographics and then are offered individual
menus of advertisements matching their demographic information.  Members
receive between $1.00 to $1.50 for each advertisement read and answered
correctly.  

     Yoyodyne is the creator of on-line games and promotions including "Get
Rich Click!", a multi-sponsored, sweepstakes game offering a grand prize of
$100,000 in cash, a  Mazda Miata, and other prizes. 

Increased competition could result in significant price competition, which in
turn, could result in significant reductions in the anticipated average
selling price of WebQuest's services.  In addition, competition could result
in increased selling and marketing expenses and related costs, which could
adversely affect WebQuest 's operating results.  There can be no assurance
that WebQuest will be able to offset the effects of any such price reductions
through an increase in the number of advertisers,  higher revenue from
enhanced services to advertisers, cost reductions or otherwise.  There can be
no assurance that WebQuest will have the financial resources, technical
expertise or marketing and support capabilities to continue to compete
successfully.

The Company's competitive strategies include, but are not limited to,
maintaining a site which is easy to navigate, creating games which are simple
to play and require less than 15 minutes each to play, awarding prizes based
on points instead of games won, which increases the play and the chance of the
Player to be included in the weekly drawings. While other sites mentioned
above award high ticket prizes, the odds of a Player winning them are very
high. We currently award lower cost prizes but also have low odds in an effort
to generate a large number of winners until such time as more valuable prizes
can be awarded.
We also provide Player support and respond quickly to any questions or
comments our Players may have. We award our players on several levels in an
effort to build trust and obtain accurate demographics, including sending them
small gifts when they report a problem with the site. We include Players who
respond to our Welcome letter with information about how they found our site
in a monthly drawing for a prize. 
We do not anticipate  a dependence on one or a few major advertisers due to
the wide variety of interests our Players express. There are avenues for
numerous types of advertisers within our site.
The Company has entered into a Licensing and Marketing Agreement with
HomeSeekers.com, Inc., Inc. (formerly NDS Software, Inc.) ("NDS"), which owns
17.2% of the Company's Common Stock. Pursuant to this Agreement, the Company
licensed from NDS the software and trademarks related to iPONG for a ten year
term. The license fee is 7% of the revenues for the first year commencing on
the April 1, 1998, the live date for the site,  10% in the second year, and
15% thereafter. In addition, the Company is required to pay NDS for technical
services rendered by NDS.

WebQuest is not currently subject to direct regulation by the Federal
Communications Commission or any other agency, other than regulations
applicable to businesses generally, nor does WebQuest  believe that it is
subject to any rules or regulations concerning games or sweepstakes.  However,
it is possible that some of the aspects of WebQuest's Game and advertising
strategy could be considered "gambling", thus restricted in certain states and
regulated in other states. At present the player is not charged a fee and,
therefore, incurs no financial risk in playing iPONG. 

Changes in the regulatory environment relating to the Internet advertising or 
rights of privacy, could have an adverse effect on WebQuest 's business. 
WebQuest 's joint venture or licensing program for the expansion of its
operations will likely involve compliance with federal and/or state franchise,
securities or business opportunity laws which would hinder or increase the
costs of conducting business. WebQuestcannot predict the impact, if any, that
future regulation or regulatory changes may have on its business.

The Company has not incurred any expense associated with environmental law
compliance and does not expect to do so.
The Company currently has 4 employees, two in management, one administration
and one in clerical. WebQuest, from time to time, utilizes part-time and
independent contractors.

ITEM 2.  DESCRIPTION OF PROPERTY
                                     
Main Offices
The Company subleases 1100 square feet of office space in Minden, Nevada from
a non-affiliated party for$1203.88 per month for it's corporate headquarters.
The lease expires in June 1999. The Company also leases 200square feet in Del
Mar, California from a non-affiliated party at the rate of $550 per month. The
lease expires on October 6, 1998. The Del Mar location is used for game
development. The Company will seek additional office space in Nevada over the
next four to six months.
                                     
ITEM 3. LEGAL PROCEEDINGS
                                     
WebQuest is not involved in any legal proceedings as of this date.
                                     

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None


                                  PART II
                                     
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has not traded for the past three years. As of
August 24, 1998, there were approximately 200 holders of Company common stock. 

The Company's preferred stock, issued through a 504 offering, has an automatic
conversion after one year. There are presently 93,750 shares that are being
treated as common stock even though the stockholders have not exchanged their
certificates as of this date.

The Company has accrued dividends on it's preferred stock and expects to pay
them in the near future.

The 504 Offering realized $20,114 less than the anticipated $1,000,000 at it's
closing date.

The Company has yet to receive compensation for 36, 114 shares of stock from
the 504 Offering.

The Company acquired  Scavengernet, an online scavenger hunt game, on October
9, 1998.   5,000 shares of stock were issued each of two Sellers on October
29, 1998 as partial consideration for payment. The Company also paid $5,000
as a down payment with a balance of $5,000 due on January 9, 1999.




ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of operations for WebQuest International Inc, FYE 1999. 

WebQuest's current financial conditions will carry the operations for
approximately ninety days from the date of this report. 

The Company is conducting a private offering of convertible debt in which
the Company is seeking to raise $1,500,000. The Company anticipates the
first closing will occur in mid-February. There can be no assurance,
however, that the Company will be successful in raising all or any
significant portion of such amount. 

WebQuest will develop the iPONG  GAME COMMUNITY.  The iPONG  Game Arcade is
the first step to the development of the iPONG  Game Community, a fee-based
site offering numerous member services and advertising opportunities. The
iPONG Game Arcade as it exists today, will serve as a free sample of what
players can expect when they subscribe to The iPONG Game Community. The
member services will include, but not be limited to, the following;
Free member websites.

An @ipong.com e-mail address for use in communicating with other players.

Players who choose to do so can post their email hypertext link and
Introductory Greeting at the communication center in order to communicate
with other players privately. It will also include a Public Message Board
and Chat Center for players to challenge others in a game or announce their
winnings.

The iPONG Boutique will provide a place for players to purchase iPONG brand
merchandise and view or purchase special offers from our advertisers.

The  weekly newsletter will announce site updates, upcoming tournaments,
special drawings and classified advertising.

WebQuest plans to operate additional games in 1999, including OctiPong,
Multi-player PONG, Multi-player Checkers and Multi-playerChess. WebQuest
will continue to develop new games, license and adapt already existing
games and add more amenities, all the while enticing Memberships to the
iPONG   Game Community.

The Company does not anticipate any material adverse consequences to it's
financial or business operations as a result of the Year 2000 computer
"bug".
                                     
                                     
                                     
ITEM 7. FINANCIAL STATEMENTS
Financial Statements appear after the Signature Page.
                                     

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no changes in or disagreements with the company's
independent auditors.



                                 PART III
                                     

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Persons 
The members of the Board of Directors of the Company serve until the next
annual meeting of stockholders, or until their successors have been elected.
The officers serve at the pleasure of the Board of Directors. Information as
to the directors and executive officers of the Company is as follows: 
          Name                Age            Position
Robert Horn         43             Chairman, Chief Executive Officer and 
                                   President
Kirk Johnson        42             Vice President, Secretary, Treasurer and
                                   Director
Frank Howard        50             Director 

Robert Horn has been Chairman, Chief Executive Officer and President of
WebQuest International Inc. since September 1997. From June 1995 to August1997
he was employed as Executive Producer for Blue Sky Software, a San Diego
computer and video game developer. From July 1988 to May 1995 he owned Bob
Horn Productions, a commercial and industrial video production company. From
1984 to1988 he produced "San Diego at Large", a local television show for KFMB
TV. Prior to that Mr. Horn was a middle linebacker for the San Diego Chargers
and the San Francisco 49ers from 1976 to 1984. Mr. Horn was the subject of a
chapter7 personal bankruptcy which became final on September 18, 1992.

 Kirk Johnson has been Vice President, Secretary, Treasurer and Director of
the Company since October 1997. From 1981 to Oct 1997 he was active Chief
Executive Officer and President of Nevada Johnson, Inc., a Nevada real estate
and construction firm.

Frank Howard has been a Director since December 1997. Since 1989 he has been
President and CEO of STI (Sales Technology, Inc.). From 1976 to 1989 he worked
for Bently Nevada Corporation. His last position for Bently was as acting Vice
President of Sales.
                                     
(b) There are no other significant employees.
(c) No family relationship exists between any officers, directors or
employees.
(d) No officer or director is involved in any legal proceeding associated
with bankruptcy, criminal offenses, court order or state securities
violation which would prevent them from any business involvement.
(e)To the Company's knowledge, no persons have made any filings with
respect to the Company under Section 16(a) of The Securities and Exchange
Act of 1934 since the Company's Form 10SB was declared effective in
October, 1998. However, the Company's stock has not yet begun trading and
the Company anticipates that any required 16(a) filings will be made
contemporaneous with or prior to the commencement of trading.
                                     
                                     

ITEM 10. EXECUTIVE COMPENSATION
     The Company has entered into a two year employment agreement with it's
President and Chief Executive Officer Mr. Horn, effective September 29, 1997
providing for annual compensation of $120,000, and the issuance of options to
purchase 400,000 shares of common stock at a price of $.116 per share. The
options vest at the rate of 100,000 shares each September 23, commencing on
September 23, 1997. The Agreement provides Mr. Horn shall be eligible for
benefits under any health, life and retirement plan which may be established
for all employees  in the future. In the event of any termination without
cause, all options become immediately vested and Mr. Horn shall be entitled
to six months severance pay. 

The Company has entered into a two year employment agreement with its Vice
President, Secretary and Treasurer, Kirk Johnson, commencing on October 1,
1997 pursuant to which Mr. Johnson shall be paid $2,000 per week, or in lieu
thereof, options to purchase 2,500 shares of common stock at a price of $.116
per share, for each week. Mr. Johnson elected to receive 30,000 share options
in lieu of salary. In addition, Mr. Johnson was granted stock options to
purchase 150,000 shares of common stock at a price of $.116 per share vesting
one half on October 1, 1998 and the remainder on October 1, 1999. Mr. Johnson
is also entitled to participate in any group medical or pension plan that may
be implemented for all employees in the future.

Frank Howard receives $500 per month and $100 per meeting for his services as
Director.



                        SUMMARY COMPENSATION TABLE

                                          Other                     All
Name and                                  Annual                    Other
Principal       Fiscal  Salary           Compen-  Options/  LTIP    Compen-
Position         Year     (1)    Bonus   sation     (#)    Payouts  sation

Bob Horn         1997        -       -        -   100,000       -      -
 CEO, Chairman,
 Pres.           1998  120,000       -        -   100,000       -      -
Kirk Johnson     1997        -       -        -         -       -      -
 Vice-President  1998  104,000       -        -    85,000       -      -




                     OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth information with respect to the grant of
options to purchase shares of Common Stock during the fiscal year ended
September 30, 1998 to each person listed above in the executive officer
Summary Compensation Table.

                     Number of     % of total
                    Securities      Options
                    Underlying     Granted to     Exercise or
                     Options       Employees in   Base Price     Expiration
Name                Granted (#)    Fiscal year    ($ / Shares)      Date

Bob Horn            400,000            51%        $00.116         09/23/03
Kirk Johnson        180,000            23%        $00.116         10/01/03
Michael Krell       200,000            26%        $00.80          09/30/98
Chris Turner          2,500             0%         $1.00          12/11/98

The options granted to Mike Krell and Chris Turner expired without being
exercised.
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
            AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR 
                      AND FISCAL YEAR-END OPTION/SAR VALUES
                                     


                                            Securities          Value of
                                           Underlying        Unexercised in-
                                           Unexercised         the-Money
                Number of                 Options/SARS at   Options/Sars at
             Shares Acquired     Value      FY-End (#)         FY-End (#)
                   on           Realized    Exercisable/      Exercisable
                Exercise       Exercisable/ Unexercisable   Unexercisable(1)
                   (#)             ($)

Bob Horn, CEO    100,000         $88,400   100,000/200,000  $11,600/$23,200
Kirk Johnson,
 Vice President        0         $00.00    105,000/75,000   $12,180/$8700  
                                        
                                     
        The Company issued Option to Purchase 200,000 shares of stock,
restricted under Rule 144, to Kirk Johnson on December 14, 1998 at $1.00
per share,  issued immediately and vested upon issuance in lieu of interest
for bridge loans to WebQuest and delays in issuance of Mr. Johnson's
salary.
                                     
        In accordance with the Securities and Exchange Commission's rules,
   values are calculated by subtracting the exercise price from the fair
  market value of the underlying common stock. For purpose of this table,
fair market value is deemed to be $1.00 per share as of September  30, 1998
                                     
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Management The following table sets forth certain information regarding the
Company's common stock, par value $.001 ("Common Stock") beneficially owned
as of August 24, 1998 for each stockholder known by the Company to be the
beneficial owner of five (5%) percent or more of the Company's outstanding
Common Stock,
each of the Company's directors, each named executive officer (as defined
in Item 402(a)(2) of Regulation S-B), and 
all executive officers and directors as a group. 

At August 24, 1998 there were 4,059,601shares of Common Stock outstanding.
Except as specifically set forth in the notes below, the table does not
give effect to (a) the exercise of warrants to purchase 441,125 shares of
Common Stock and (b) the exercise of options to purchase an aggregate of
371,666 shares of Common Stock.

Stockholder                   Number Of Shares         Percentage

Bob Horn (1)                         205,000                 4.9% 
1662 N. Hwy 395, Suite 203
Minden, NV 89423

Kirk Johnson)(2)                     373,554                 9.0% 
1662 N. Hwy 395, Suite 203
Minden, NV 89423

Frank Howard(3)                        7,500                 2.0% 
1662 N. Hwy 395, Suite 203
Minden, NV 89423

Greg & Jeannie Johnson(4)            474,249                11.7% 
2241 Park Place Suite E
Minden, NV 89423

Dr. Jack Kelly(4)                    878,138                21.6% 
75 Pringle Way Suite 1009
Reno, NV 89502

Darin Murphy                         679,943                16.7% 
4465 Juniper Trail
Reno, NV 89509

HomeSeekers.com, Inc.(4)             700,000                17.2% 
2241 Park Place Suite E
Minden, NV 89423

Topaz Limited/
Octagon Worldwide, LTD(5)            523,616                12.3% 
Southfield Park Tower II, Suite 100
12835 East Arapahoe Rd.
Englewood, CO 80112

All directors and officers as a
group (three people)                 586,054                13.7%

(1) Includes currently exercisable options to purchase 200,000 shares of
common stock. See Item 6, "Executive Compensation."
(2) Includes currently exercisable options to purchase 105,000 shares of
common stock. See Item 6, " Executive Compensation."
(3) Includes 2,500 shares issuable upon exercise of warrants.
(4) HomeSeekers.com, Inc., Inc., Inc. is a public corporation whose common
stock is registered under Section 12(g) of the Securities Exchange Act of
1934. According to the public disclosure documents filed by
HomeSeekers.com, Inc., Inc., Inc., Greg Johnson, John Giaimo, John C.
Kelly, Douglas Swanson and William Tomerlin beneficially own more than 5%
of HomeSeekers.com, Inc., Inc., Inc. common stock. The number of share
listed above for Messrs. Johnson and Kelly do not include the shares owned
by HomeSeekers.com, Inc., Inc., Inc. The Company owns 11,324 shares of
HomeSeekers.com, Inc., Inc., Inc. common stock, which it received as
partial finding of a 504 stock offering.
(5) The principals of Topaz Limited, a Bahamas International Business
Company, are Merrill, Scott & Associates Limited, Director and president;
Global Management Limited, Director and Secretary and Estate Planning
Institute (Bahamas) Limited, Director. The Director of Merrill, Scott &
Associates Limited and Estate Planning Institute is Pat Brody, whose
address is Katherina Court, 101 East Hill Place, Market Street North,
Nassau, Bahamas. The Director of Global Management Limited is David E.
Ross, whose address is Katherina Court, 101 East Hill Place, Market Street
North, Nassau, Bahamas. Includes warrants to purchase 100,000 Shares at
$3.00 per share through November 18, 2000 and includes warrants to purchase
100,000 Shares at $2.00 per share through May 1,  2001.





ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into a Licensing and Marketing Agreement with
HomeSeekers.com, Inc., Inc., Inc., formerly NDS Software, Inc. as discussed
under Part I, Item 1 - Business. HomeSeekers.com, Inc., Inc., Inc. owns
700,000 shares of Company's common stock, or 17.2% of the outstanding
shares. 

 The Company borrowed $10,000 and $100,000, respectively, on April 23,1997
and December 31, 1996 from Jack Kelly, the father of the Company's then
President. The notes bear interest of 12% and are due on demand. The
balance owed as of August 24, 1998 was $14,620.

 Kirk Johnson, the Company's Vice President, Secretary and Treasurer is the
brother of Greg Johnson, also a holder of Common and Preferred Stock of the
Company and the CEO of HomeSeekers.com, Inc. 













ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K


A) Index To Exhibits

3.2       Articles Of Incorporation for WebQuest International, Inc. dated
          April 17, 1997 (1)
3.2       Articles Of Merger for WebQuest International, Inc. dated May 12,
          1997(1)
3.3       By-laws for WebQuest International, Inc. dated April 18, 1997(1)
10.1      Licensing Agreement between NDS Software, Inc. and WebQuest
          International, Inc.(1)
10.2      Bob Horn Employment Agreement dated September 24, 1997(1)
10.3      Kirk Johnson Employment Agreement dated October 1, 1997(1)
10.4      Scavengernet Purchase Agreement dated October 9, 1998(2)
10.5      Atari Contract dated July 3, 1997 (2)
27        Financial Data Schedule


(1) Incorporated by reference to Exhibits with corresponding numbers from
the Company's Form 10-SB Registration Statement, as amended, as filed with
the Securities and Exchange Commission.
(2) Included with this document

B) Report on Form 8-k.
     None

          
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                SIGNATURES

In accordance with Section 13 or 15 (d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. 

                       WEBQUEST INTERNATIONAL, INC.
                               (Registrant)
                                     

Date:     01/11/99                 By: /s/Bob Horn
                                   Bob Horn
                                   Chief Executive Officer and
                                   Director_______________________________

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and
on the date indicated.


Date:     01/11/99

By: /s/Bob Horn
Bob Horn
Chief Executive Officer and Director_____________________________
(principal executive officer)

By: /s/Kirk Johnson 

Kirk Johnson   
Vice-President and Director____________________________________
(principal financial and accouting officer)       


By: /s/Frank Howard
Frank Howard
Director _____________________________________    





                                
<PAGE>        
                                
                                
                                
                                
                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                      FINANCIAL STATEMENTS
                                
                   SEPTEMBER 30, 1998 AND 1997
                                
                                
                                
                                
                                
                                
                                
                                

                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                 PRITCHETT, SILER & HARDY, P.C.
                  CERTIFIED PUBLIC ACCOUNTANTS
                                
<PAGE>
                                
                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                                
                                
                                
                            CONTENTS

                                                                     PAGE

        -  Independent Auditor's Report                                  1


        -  Balance Sheets, September 30, 1998 and 1997               2 - 3


        -  Statements of Operations, for the year ended
             September 30, 1998 and from inception on
             November 5, 1996 through September 30,
             1998 and 1997                                               4


        -  Statement of Stockholders' Equity, from inception
             on November 5, 1996 through September 30, 1998          5 - 7


        -  Statements of Cash Flows, for the year ended
             September 30, 1998 and from inception on
             November 5, 1996 through September 30,
             1998 and 1997                                           8 - 9


        -  Notes to Financial Statements                           10 - 26

<PAGE>










                  INDEPENDENT AUDITOR'S REPORT



Board of Directors
WEBQUEST INTERNATIONAL, INC.
Minden, Nevada

We  have  audited  the accompanying balance  sheets  of  Webquest
International, Inc. [a development stage company] as of September
30,  1998  and  1997, and the related statements  of  operations,
stockholders' equity and cash flows for the year ended  September
30,  1998 and for the periods from inception on November 5,  1996
through  September 30, 1997 and 1998.  These financial statements
are   the  responsibility  of  the  Company's  management.    Our
responsibility  is  to  express an  opinion  on  these  financial
statements based on our audits.

We  conducted  our  audits in accordance with generally  accepted
auditing  standards.  Those standards require that  we  plan  and
perform  the  audit to obtain reasonable assurance about  whether
the  financial statements are free of material misstatement.   An
audit  includes  examining, on a test basis, evidence  supporting
the  amounts  and  disclosures in the financial  statements.   An
audit also includes assessing the accounting principles used  and
significant  estimates made by management, as well as  evaluating
the  overall  financial statement presentation.  We believe  that
our audits provide a reasonable basis for our opinion.

In  our  opinion,  the  financial statements  referred  to  above
present  fairly, in all material respects, the financial position
of  Webquest  International, Inc. as of September  30,  1998  and
1997,  and  the results of their operations and their cash  flows
for  the  year ended September 30, 1998 and for the periods  from
inception through September 30, 1997 and 1998, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming
the  Company  will continue as a going concern.  As discussed  in
Note  11  to  the financial statements, the Company  has  current
liabilities  in  excess of current assets,  has  incurred  losses
since   inception   and   has  not  yet  established   profitable
operations,  raising  substantial  doubt  about  its  ability  to
continue  as a going concern.  Management's plans in  regards  to
these  matters  are  also described in Note  11.   The  financial
statements do not include any adjustments that might result  from
the outcome of these uncertainties.

/s/ Pritchett, Siler & Hardy, P.C.

December 10, 1998
Salt Lake City, Utah

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                         BALANCE SHEETS
                                
                                
                             ASSETS
                                
                                
                                
                                
                                
                                              September 30,
                                         ________________________
                                             1998         1997
                                         ___________  ___________
CURRENT ASSETS:
  Cash                                    $   4,682    $   9,321
  Marketable Securities, available-
    for-sale                                107,451            -
  Employee advances                             258            -
                                         ___________  ___________
        Total Current Assets                112,391        9,321
                                         ___________  ___________

PROPERTY AND EQUIPMENT, net                  21,875        5,716
                                         ___________  ___________
OTHER ASSETS:
  Software licensing rights, net            825,000      925,000
  Refundable deposits                         3,751            -
                                         ___________  ___________
        Total Other Assets                  828,751      925,000
                                         ___________  ___________
                                          $ 963,017    $ 940,037
                                         ___________  ___________
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                           [Continued]

<PAGE>

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

                                              September 30,
                                         ________________________
                                             1998         1997
                                         ___________  ___________
CURRENT LIABILITIES:
  Accounts payable                        $  71,114    $ 140,896
  Advances - related parties                  6,500          300
  Notes payable - related parties            17,582       12,620
  Other accrued liabilities                 100,989       12,347
  Accrued dividends payable                  30,779            -
  Current portion - capital
    lease obligation                          2,420            -
                                         ___________  ___________
        Total Current Liabilities           229,384      166,163
                                         ___________  ___________

CAPITAL LEASE OBLIGATION, less
  current portion                             7,137            -
                                         ___________  ___________
STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par
   value, 5,000,000 shares
   authorized, 396,000 and
   93,750 shares of 12% Series
   B convertible preferred
   stock issued and outstanding
   for which 500,000 shares
   have been authorized                         396           94
  Common stock, $.001 par
   value, 20,000,000 shares
   authorized, 4,258,618 and
   3,578,951 shares issued
   and outstanding                            4,259        3,579
  Capital in excess of par value          2,630,515    1,578,879
  Deficit accumulated during the
   development stage                     (1,548,718)    (459,001)
                                         ___________  ___________
                                          1,086,452    1,123,551
 Less: Receivable stock
        subscription                        (36,114)           -
       Deferred compensation expense
         in accordance with APB 25         (239,407)    (349,677)
       Unrealized (loss) - marketable
         securities                         (84,435)            -
                                         ___________  ___________
       Total Stockholders' Equity            726,496      773,874
                                         ___________  ___________
                                           $ 963,017    $ 940,037
                                         ___________  ___________
                                
                                
                                
                                
                                
                                
                                
                                
                                
 The accompanying notes are an integral part of these financial
                           statements.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                    STATEMENTS OF OPERATIONS
                                
                                                      From Inception
                                                       on November 5,
                                  For the Year         1996 Through
                                     Ended       ________________________
                                  September 30, September 30, September 30,
                                      1998          1997           1998
                                   ___________   ___________   ___________

REVENUE                           $         -   $         -   $         -
                                   ___________   ___________   ___________

EXPENSES:
  Selling expense                     137,906       199,290       337,196
  General and administrative          661,671       253,382       915,053
  Compensation expense recorded
    in accordance with APB 25 for
    stock options issued below
    market value                      269,390         3,923       273,313
                                   ___________   ___________   ___________
        Total Expenses              1,068,967       456,595     1,525,562
                                   ___________   ___________   ___________
LOSS FROM OPERATIONS               (1,068,967)     (456,595)   (1,525,562)
                                   ___________   ___________   ___________
OTHER INCOME (EXPENSE):
  Gain on sale of marketable
    securities                         13,363             -        13,363
  Interest expense                     (3,334)       (2,406)       (5,740)
                                   ___________   ___________   ___________
        Total Other Income
          (Expense)                    10,029        (2,406)        7,623
                                   ___________   ___________   ___________

LOSS BEFORE INCOME TAXES           (1,058,938)     (459,001)   (1,517,939)

CURRENT TAX EXPENSE                         -             -             -

DEFERRED TAX EXPENSE                        -             -             -
                                   ___________   ___________   ___________

NET LOSS                          $(1,058,938)  $  (459,001)  $(1,517,939)

LESS:  PREFERRED DIVIDEND
  REQUIREMENTS                        (30,779)            -       (30,779)
                                   ___________   ___________   ___________
NET LOSS APPLICABLE TO
  COMMON STOCKHOLDERS             $(1,089,717)  $  (459,001)  $(1,548,718)
                                   ___________   ___________   ___________
LOSS PER COMMON SHARE             $   (.28)     $   (.21)     $   (.51)
                                   ___________   ___________   ___________
                                
                                
                                
                                
                                
                                
 The accompanying notes are an integral part of these financial
                           statements.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                STATEMENT OF STOCKHOLDERS' EQUITY
                                
         FROM THE DATE OF INCEPTION ON NOVEMBER 5, 1996
                                
                   THROUGH SEPTEMBER 30, 1998
                                
                                                                  Deficit
                                                                Accumulated
                 Preferred Stock   Common Stock     Capital in   During the
                  ______________ __________________  Excess of  Development
                  Shares  Amount   Shares   Amount   Par Value      Stage
                  _______  ____  _________  _______  __________  __________
BALANCE,
  November 5,
  1996                  -  $  -          -  $     -  $        - $         -

Issuance of
  2,438,333
  shares common
  stock for cash,
  January 1997,
  at $.123 per
  share                 -     -  2,438,333    2,438     297,562           -

Issuance of
  116,667
  shares common
  stock for
  services,
  January 1997,
  at $.116
  per share             -     -    116,667      117      13,417           -

Recapitalization
  of Phaser,
  issuance of
  200,201 shares
  of common stock
  for Phaser
  stock, May
  1997                  -     -    200,201      200      (2,282)          -

Issuance of
  93,750 shares
  preferred and
  common stock
  for cash,
  March through
  September
  1997, at
  $1.00 per
  share            93,750    94     93,750      941      87,312           -

Issuance of
  30,000
  shares common 
  stock for
  services,
  August 1997,
  at $1.00
  per share             -     -     30,000       30      29,970           -

Issuance of
  700,000 
  shares common
  stock for
  licensing
  agreement,
  at $1.00
  per share,
  September 1997        -     -    700,000      700     699,300           -

Granting of
  options to
  acquire 400,000
  shares of
  common stock
  at below
  market value.
  Compensation
  expense
  calculated in
  accordance with
  APB 25.               -     -          -        -     353,600           -

Net loss for the
  period ended
  September 30,
  1997                  -     -          -        -           -    (459,001)
                  _______  ____  _________  _______  __________  __________
BALANCE,
  September 30,
  1997             93,750  $ 94  3,578,951  $ 3,579  $1,578,879 $  (459,001)

Issuance of
  251,000
  shares
  preferred
  and common
  stock for
  cash, October,
  1997 through
  September,
  1998 at
  $1.00 per
  share           251,000   251    251,000      251     501,498           -





                           [Continued]

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                STATEMENT OF STOCKHOLDERS' EQUITY
                                
         FROM THE DATE OF INCEPTION ON NOVEMBER 5, 1996
                                
                   THROUGH SEPTEMBER 30, 1998
                                
                           [Continued]

                                                                  Deficit
                                                                Accumulated
                  Preferred Stock   Common Stock     Capital in  During the
                  ______________ __________________  Excess of  Development
                  Shares  Amount   Shares   Amount   Par Value      Stage
                  _______  ____  _________  _______  __________  __________
Issuance of
  126,943
  shares
  preferred
  and common
  stock for
  non-cash
  consideration,
  July, 1998
  at $1.00 per
  share           126,943   127    126,943      127     253,632           -

Issuance of
  18,057
  shares
  preferred
  and common
  stock at
  $1.00 per
  share,
  accounted
  for as a
  subscription
  receivable,
  July to
  September,
  1998             18,057    18     18,057       18      36,078           -

Granting of
  options to
  an officer
  to acquire
  150,000
  shares of
  common stock
  at below
  market value.
  Compensation
  expense
  calculated
  in accordance
  with APB 25,
  October 1997          -     -          -        -     132,600           -

Granting of
  options to
  an officer
  to acquire
  30,000
  shares of
  common stock
  at below
  market value.
  Compensation
  expense
  calculated
  in accordance
  with APB 25,
  October 1997          -     -          -        -      26,520           -

Issuance of
  50,000
  shares common
  stock upon
  exercise of
  options by
  an officer,
  February
  1998, at
  $.116 per
  share                 -     -     50,000       50       5,750           -

Issuance of
  50,000
  shares common
  stock upon
  exercise of
  options by
  an officer,
  July 1998,
  at $.116
  per share             -     -     50,000       50       5,750           -

Issuance of
  5,000
  shares common
  stock to
  an officer
  for cash
  at $1.00
  per share,
  July, 1998            -     -      5,000        5       4,995           -











                           [Continued]

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                STATEMENT OF STOCKHOLDERS' EQUITY
                                
         FROM THE DATE OF INCEPTION ON NOVEMBER 5, 1996
                                
                   THROUGH SEPTEMBER 30, 1998
                                
                           [Continued]

                                                                  Deficit
                                                                Accumulated
                  Preferred Stock  Common Stock      Capital in  During the
                  ______________ __________________   Excess of Development
                  Shares  Amount  Shares    Amount    Par Value    Stage
                  _______  ____  _________  _______  __________  __________
Issuance of
  62,000
  shares common
  stock for
  consulting
  services at
  $1.00 per
  share, May,
  1998                  -     -     62,000       62      61,938           -

Issuance of
  shares of
  common stock
  for consultation,
  programming
  and other
  services 
  rendered at
  $1.00 per
  share, to
  employees,
  officers and
  directors of
  the Company           -     -     22,898       23      22,875           -

Assumed mandatory
  conversion of
  Series B
  preferred
  stock during
  the period
  ended
  September 30,
  1998            (93,750)  (94)    93,750       94           -           -

Accrued
  preferred
  dividends
  for period
  ending
  September 30,
  1998                  -     -          -        -           -     (30,779)

Shares
  issued due
  to rounding           -     -         19        -           -           -

Net loss
  for the
  year ended
  September 30,
  1998                  -     -          -        -           -  (1,058,938)
                  _______  ____  _________  _______  __________  __________
BALANCE,
  September 30,
  1998            396,000  $396  4,258,618  $ 4,259  $2,630,515 $(1,548,718)
                  _______  ____  _________  _______  __________  __________
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
  The accompanying notes are an integral part of this financial
                           statement.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                    STATEMENTS OF CASH FLOWS
                                
                   Increase (Decrease) in Cash
                                
                                                        From Inception
                                                        on November 5,
                                  For the Year           1996 Through
                                     Ended        ________________________
                                 September 30,  September 30,  September 30,
                                      1998          1997           1998
                                  ___________    ___________    ___________
Cash Flows from Operating
  Activities:
   Net loss applicable to
     common stockholders         $ (1,089,717)  $   (459,001)  $ (1,548,718)
   Adjustments to
     reconcile net loss
     to net cash used by
     operating activities:
    Depreciation and
      amortization                    103,167         75,371        178,538
    Non-cash expense                   89,038         43,533        132,571
    APB 25 compensation
      recorded for stock
      options issued below
      market value                    269,390          3,923        273,313
    Changes in assets
      and liabilities:
      (Increase) in
        employee advances                (258)             -           (258)
      Increase in accounts
        payable                       (69,782)       140,896         71,114
      Increase in advances
        - related parties               6,200            300          6,500
      Increase in accrued
        liabilities                    88,642         12,347        100,989
                                  ___________    ___________    ___________
        Net Cash (Used) by
          Operating Activities       (603,320)      (182,631)      (785,951)
                                  ___________    ___________    ___________
Cash Flows from Investing
  Activities:
  (Increase) in
    refundable deposits                (3,751)             -         (3,751)
  Purchase of equipment               (19,326)        (6,087)       (25,413)
  Purchase of software
    licensing rights                        -       (300,000)      (300,000)
  Proceeds from marketable
    securities sales                   70,363              -         70,363
                                  ___________    ___________    ___________
        Net Cash Provided (Used)
          by Investing Activities      47,286       (306,087)      (258,801)
                                  ___________    ___________    ___________
Cash Flows from Financing
  Activities:
  Proceeds from notes payable          18,500        110,000        128,500
  Payments on notes payable           (16,152)       (97,380)      (113,532)
  Payments on capital lease
    obligation                           (332)             -           (332)
  Proceeds from preferred
    stock issuance                    251,000         93,750        344,750
  Proceeds from common
    stock issuance                    267,600        391,669        659,269
  Increase in accrued
    dividends payable                  30,779              -         30,779
                                  ___________    ___________    ___________
        Net Cash Provided by
          Financing Activities        551,395        498,039      1,049,434
                                  ___________    ___________    ___________
Net Increase (Decrease) in Cash        (4,639)         9,321          4,682

Cash at Beginning of Period             9,321              -              -
                                  ___________    ___________    ___________
Cash at End of Period            $      4,682   $      9,321   $      4,682
                                  ___________    ___________    ___________

Supplemental Disclosures of Cash Flow information:
  Cash paid during the year and from inception for:
    Interest                     $        541   $        174   $        715
    Income taxes                 $          -   $          -   $          -
                           [Continued]

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
              STATEMENTS OF CASH FLOWS [Continued]
                                
                   Increase (Decrease) in Cash
                                
                           [Continued]

Supplemental schedule of Non-cash Investing and Financing
Activities:
  For the year ended September 30, 1998:
     The  Company has accounted for 93,750 shares of common stock
     due to the mandatory conversion of 93,750 preferred shares.
     
     The  Company has issued a total of 22,898 shares  of  common
     stock to employees, officers and directors for consultation,
     programming, or other services rendered, valued at $22,898.
     
     The  Company issued 2,500 shares of common and 2,500  shares
     of preferred stock in payment of legal fees.
     
     The  Company  issued  124,443 shares of common  and  124,443
     shares   of   preferred  stock  for  non-cash  consideration
     consisting of marketable securities valued at $248,886.
     
     The  Company issued a total of 18,057 shares of  common  and
     18,057  shares  of  preferred stock valued  at  $36,114  and
     recorded a subscription receivable of $36,114.
     
     The  Company issued 62,000 shares of common stock valued  at
     $62,000  along with warrants to purchase 100,000  shares  of
     common stock to another company for consulting services.
     
     The  Company issued stock options to purchase 180,000 shares
     of common stock to an officer of the Company at below market
     value  prices.  Additional paid in capital of  $159,120  was
     recorded,  $92,638  in  current  compensation  expense   was
     recorded  and  $66,482 of deferred compensation  expense  (a
     reduction to stockholders' equity) was recorded.
     
     Amortization  of  deferred  compensation  on  stock  options
     granted prior to October 1, 1997, amounted to $176,752.
     
  For the period ended September 30, 1997:
     The  Company issued a total of 700,000 shares of  restricted
     common  stock to a related entity in exchange for  licensing
     rights valued at $700,000.
     
     The  Company issued a total of 146,667 shares of  restricted
     common  stock  in exchange for services rendered  valued  at
     $43,533.
     
     The  Company issued stock options to purchase 400,000 shares
     of common stock to an officer of the
     Company  at below market value prices.  Additional  paid  in
     capital   of  $353,600  was  recorded,  $3,923  in   current
     compensation expense was recorded and $349,677  of  deferred
     compensation expense ( a reduction to stockholders'  equity)
     was recorded.
     
     The Company issued a total of 200,201 shares of common stock
     in exchange for merger with Phaser valued at $(2,082).
                                
                                
                                
                                
                                
                                
                                
                                
 The accompanying notes are an integral part of these financial
                           statements.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
  Organization - The Company was organized under the laws of  the
  State  of  Nevada  on November 5, 1996 as IPONG  International,
  Inc.,    but    subsequently    reorganized    with    WebQuest
  International,  Inc. (which was formed to serve  as  a  vehicle
  for  a reorganization of the Company).  During April 1997,  the
  Company  entered  into  a  plan and agreement  of  merger  with
  Phaser  Enterprises,  Inc. ["Phaser"],  a  publicly  held  Utah
  corporation  wherein  the operations  of  the  Company  is  the
  surviving  entity.   The  Company is considered  a  development
  stage  company  as  defined in SFAS  No.  7.   The  Company  is
  engaging  in  the  business  of  developing  and  marketing  an
  interactive game arcade, known as the iPONG Game Arcade on  the
  Internet.  The Company anticipates that it will derive  revenue
  from  the  sale  of advertising.  The Company may  also  pursue
  other Internet related businesses.
  
  Comparative   Financial  Statements  -  Prior  year   financial
  statements   of   Phaser   are   not   included   because   the
  reorganization  with the Company has been accounted  for  as  a
  recapitalization  in  a manner similar to a  reverse  purchase.
  Phaser  was  inactive  prior  to  the  reorganization  and  the
  operations  of the Company are the on-going operations  of  the
  combined  enterprise.   Accordingly, the operations  of  Phaser
  prior to the date of reorganization have been eliminated.
  
  Marketable   Securities   -   The  Company's   investments   in
  marketable equity securities are held for an indefinite  period
  and  thus are classified as available-for-sale.  Available-for-
  sale  securities are recorded at fair value under  the  caption
  "marketable securities" on the balance sheet, with  the  change
  in  fair  value  during the period excluded from  earnings  and
  recorded as a separate component of equity.  Fair value of  the
  equity  securities was determined on a specific  identification
  basis in computing unrealized gain or loss.
  
  Property  and Equipment - Property and equipment are stated  at
  cost.   Expenditures  for major renewals and  betterments  that
  extend   the  useful  lives  of  property  and  equipment   are
  capitalized,  upon being placed in service.   Expenditures  for
  maintenance  and  repairs are charged to expense  as  incurred.
  Depreciation is computed for financial statement purposes on  a
  straight-line  basis  over the estimated useful  lives  of  the
  assets, which ranges from three to seven years.
  
  Software  Licensing  Rights  - Software  licensing  rights  are
  stated  at  cost.   The  Company  is  amortizing  the  software
  licensing  rights on a straight-line basis over ten-years  (the
  original term of the agreement) [See Note 4].
  
  Income  Taxes  -  The  Company accounts  for  income  taxes  in
  accordance  with  Statement of Financial  Accounting  Standards
  No.   109,  "Accounting  for  Income  Taxes."   This  statement
  requires  an  asset and liability approach for  accounting  for
  income taxes.
  
  Dividend  Policy  - The Company has not paid any  dividends  on
  common  stock to date and does not anticipate paying  dividends
  on  common stock in the foreseeable future.  The Company has  a
  dividend  requirement with respect to its preferred stock  [See
  Note 7].
  
  Revenue  Recognition  - The Company plans to  receive  revenues
  from advertising but has not yet generated any revenues.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
  
  Earnings  (Loss)  Per  Share - Effective  for  the  year  ended
  September  30, 1998, the Company adopted Statement of Financial
  Accounting  Standards  (SFAS) No.  128  "Earnings  Per  Share",
  which  requires  the Company to present basic  earnings  (loss)
  per  share  and  dilutive earnings (loss) per  share  when  the
  effect  is  dilutive.   There was no effect  on  the  financial
  statements  for  the change in accounting principle  [See  Note
  14].
  
  Cash  and  Cash Equivalents - For purposes of the statement  of
  cash  flows,  the  Company considers  all  highly  liquid  debt
  investments purchased with a maturity of three months  or  less
  to be cash equivalents.
  
  Stock  Based Compensation - The Company accounts for its  stock
  based  compensation in accordance with Statement  of  Financial
  Accounting    Standard   123    "Accounting   for   Stock-Based
  Compensation".   This  statement  establishes   an   accounting
  method  based  on the fair value of equity instruments  awarded
  to   employees   as  compensation.   However,   companies   are
  permitted  to  continue applying previous accounting  standards
  in  the  determination  of net income with  disclosure  in  the
  notes  to  the financial statements of the differences  between
  previous  accounting measurements and those formulated  by  the
  new   accounting  standard.   The  Company  has   adopted   the
  disclosure  only  provisions of SFAS No. 123, accordingly,  the
  Company  has  elected  to determine net income  using  previous
  accounting standards.
  
  Reverse  Stock Split - In connection with the recapitalization,
  Phaser reverse split its outstanding common stock on the  basis
  of  1  share  issued for each 27 shares previously outstanding.
  The  financial  statements have been restated  to  reflect  the
  common stock split for all periods presented.
  
  Reclassification  of  Financial  Statements  -  The   financial
  statements for all periods presented have been reclassified  to
  conform  to  the titles and headings used in the September  30,
  1998 financial statements.
  
  Recently  Enacted  Accounting Standards - In  June  1997,  SFAS
  Nos.   130,   "Reporting   Comprehensive   Income"   and   131,
  "Disclosures  about  Segments  of  an  Enterprise  and  Related
  Information"  were  issued.  SFAS No.  130  requires  that  all
  items  that  are  required  to be recognized  as  comprehensive
  income  be  reported in a financial statement that is displayed
  with  the  same  prominence as the other financial  statements.
  SFAS  No.  131  sets standards for reporting information  about
  operating segments in the financial statements.  SFAS  No.  131
  also  sets standards for the disclosures about products,  major
  customers,  and geographical areas.  SFAS No. 132 provides  for
  disclosures about pensions and other post-retirement  benefits.
  Although  such statements are not effective until fiscal  years
  beginning  after  December 15, 1997, had such  statements  been
  adopted  for  the  periods  presented,  their  effect  on   the
  financial statements would not have been significant. SFAS  No.
  133   dictates   the   accounting  standards   for   Derivative
  Instruments and Hedging Activities and is effective for  fiscal
  years  beginning after June 15, 1999.  SFAS No. 134 relates  to
  Mortgage  Backed  Securities and has no  applicability  to  the
  Company. Had such SFAS statements been adopted for the  periods
  presented, their effect on the financial statements  would  not
  have been significant.
  
  Accounting  Estimates - The preparation of financial statements
  in  conformity  with  generally accepted accounting  principles
  requires  management  to make estimates  and  assumptions  that
  effect  the  reported  amounts of assets and  liabilities,  the
  disclosures  of contingent assets and liabilities at  the  date
  of  the  financial  statements, and  the  reported  amounts  of
  revenues  and  expenses  during the reporting  period.   Actual
  results could differ from those estimated by management.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 2 - RECAPITALIZATION

  The  Company  was  organized  on  November  5,  1996  as  IPONG
  International, Inc. and subsequently reorganized with  Webquest
  International,  Inc. (which was formed to serve  as  a  vehicle
  for  a reorganization of the Company).  During April 1997,  the
  Company  entered  into  a  plan and agreement  of  merger  with
  Phaser   Enterprises,  Inc.,  a  public  corporation,   wherein
  Webquest  International, Inc. was the surviving  entity.    The
  transaction  has  been accounted for as a  recapitalization  of
  the  Company.  The operations of Phaser are included only  from
  the   date  of  recapitalization.   Accordingly,  the  previous
  operations  and retained deficits of Phaser prior to  the  date
  of  reorganization  have been eliminated.  In  anticipation  of
  the  reorganization, Phaser effected a reverse stock  split  on
  the  basis  of  1  share issued for each 27  shares  previously
  outstanding.    The   former  shareholders   of   Phaser   held
  approximately 200,201 shares of common stock immediately  after
  the reorganization.
  
NOTE 3 - MARKETABLE SECURITIES
  
  During  the year ended September 30, 1998, the Company accepted
  53,924  shares of marketable securities valued at  $248,886  in
  an  entity,  which  is a shareholder of the  Company,  for  the
  purchase  of  124,443 shares of common and preferred  stock  of
  the  Company.   During the year ended September 30,  1998,  the
  Company  sold  12,000 shares of the marketable  securities  for
  $70,363  and  realized a gain of $13,363.  As of September  30,
  1998  the  remaining  marketable securities  have  a  value  of
  $107,451  and  the Company has recorded an unrealized  loss  on
  such   securities   of  $84,435,  which  was  subtracted   from
  stockholders' equity.
  
NOTE 4 - SOFTWARE LICENSE RIGHTS
  
  Licensing  and Marketing Agreement - During December 1996,  the
  Company  paid  $300,000  for  an option  to  acquire  licensing
  rights  to  an  interactive advertising game  for  use  on  the
  Internet.   On  January  5,  1997, the  Company  exercised  its
  option  and  entered  into a licensing and marketing  agreement
  (with   technical   support)   with   a   Nevada   corporation,
  Homeseekers.com,  Inc.  (formerly, NDS  Software,  Inc.),  that
  owns  the  software rights.  The license agreement has  a  ten-
  year  term,  which automatically renews for an additional  ten-
  year  term, and allows the Company to develop, use, and  market
  the  product  on  an  exclusive basis.   Licensing  rights  are
  capitalized  and  amortized on a ten-year basis  (the  original
  life  of the agreement).  Database  management costs (including
  programming  costs) are expensed as incurred  and  amounted  to
  $102,462  and $194,290 for the year and period ended  September
  30,  1998  and  1997.  As consideration for this agreement  the
  Company  agreed:   i)  to pay $58,333 per  month  for  a  year,
  commencing  January  5,  1997.   During  September  1997,   the
  Company issued 700,000 shares of restricted common stock at  an
  agreed  upon  value of $700,000 (or $1.00 per share)  for  full
  consideration of the one year, $58,333 per month payment.   ii)
  to  pay 7% of gross revenues for the first year after the  live
  date  (April  1,  1998), 10% of gross revenues for  the  second
  year  after  the live date, and 15% thereafter.   iii)  to  pay
  $20,000  per  month commencing at the live date  for  "website"
  fees  to the Nevada corporation.  During July 1998, the payment
  of  $20,000  per  month was amended to a  pro-rata  charge  for
  services.    and  iv)  to  pay  $125  per  hour   for   Webpage
  development,  website changes or customization, and  management
  consulting,  plus  $0.50 per question for question  development
  to  the  Nevada corporation for technical support.  Upon merger
  with  IPONG  International, Inc. on April  18,  1997,  Webquest
  assumed   the   rights  and  obligations  to  this   agreement.
  Homeseekers.com, Inc. is considered to be an affiliate  of  the
  Company  because  it has the same controlling  shareholders  as
  the Company.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
NOTE 4 - SOFTWARE LICENSE RIGHTS [Continued]
  
  The  following is a summary of software licensing rights  -  at
  cost,  less accumulated amortization as of September  30,  1998
  and 1997:
  
                                      1998           1997
                                 ___________    ___________
          Cash paid for
            licensing rights    $    300,000   $    300,000
          Stock issued for
            licensing rights         700,000        700,000
                                 ___________    ___________
                                   1,000,000      1,000,000
           Less: accumulated
             amortization           (175,000)       (75,000)
                                 ___________    ___________
                                    $825,000       $925,000
                                 ___________    ___________
  
  Amortization  expense for the year and period  ended  September
  30,   1998   and   1997  amounted  to  $100,000  and   $75,000,
  respectively.
  
  Non-exclusive License Agreement - On July 3, 1997, the  Company
  entered  into  a  non-exclusive  licensing  agreement  with   a
  Delaware  corporation, Atari-JTS Corp. that owns the  software,
  programs,  trade names, trademarks, promotional  material,  and
  intellectual  property for use on the Internet.  The  agreement
  with  the Company has a five year term, which is renewable  for
  an  additional five years if minimum royalty fees received  are
  at  least  $400,000 over the five year period, and  allows  the
  Company  to license and use the game (Pong) in connection  with
  its  "website" on a non-exclusive basis.  As consideration  for
  this   agreement  the  Company  paid  a  $5,000  non-refundable
  execution of agreement fee.  The Company also agreed to  pay  a
  quarterly 1/10 of one cent ($.001) royalty fee for each  player
  who accesses Pong; with a base amount of $5,000 per quarter  to
  the  Delaware  corporation if the number of Pong players  fails
  to   exceed  5,000,000  in  each  quarter.   Royalty  fees  are
  expensed as incurred.  Royalty expense amounted to $23,333  and
  $5,000  for  the year and period ended September 30,  1998  and
  1997, respectively.
  
NOTE 5 - PROPERTY AND EQUIPMENT
  
  The  following  is  a summary of property and  equipment  -  at
  cost,  less accumulated depreciation as of September  30,  1998
  and 1997:
  
                                      1998           1997
                                 ___________    ___________
         Office equipment           $ 13,299       $  2,357
         Computer equipment           12,114          3,730
                                 ___________    ___________
                                      25,413          6,087
           Less: accumulated
             depreciation             (3,538)          (371)
                                 ___________    ___________
                                    $ 21,875       $  5,716
                                 ___________    ___________
  
  Depreciation  expense for the year and period  ended  September
  30, 1998 and 1997 amounted to $3,167 and $371, respectively.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
NOTE 6 - NOTES PAYABLE - RELATED PARTIES

  Notes payable consist of the following at September 30:
  
                                                         1998        1997
                                                       _________  _________
  Notes payable to a shareholder of the Company,
    annual compounding interest at 12%, due upon
    demand, unsecured                                 $   15,234 $   12,620
  
  Notes payable to a shareholder of the Company,
    interest at 10% and 12%, due upon demand,
    unsecured                                                294          -
  
  Note payable to a shareholder of the Company,
    interest at 12%, due upon demand, unsecured               54          -
  
  Note payable to an entity related to a shareholder
    of the Company, annual compounding interest
    at 12%, due upon demand, unsecured                     2,000          -
                                                       _________  _________
                                                      $   17,582 $   12,620
                                                       _________  _________
  
  During  June  1998,  a shareholder of the  Company  loaned  the
  Company  $10,000, which bears interest at 12%  and  is  payable
  upon  demand.  In connection with the note, the Company granted
  the  lender warrants to purchase 20,000 shares of the Company's
  common  stock at $1.00 per share at any time through  June  11,
  2001.   During  July  1998, the unsecured  note  payable,  plus
  interest amounting to $155, was paid in full.
  
NOTE 7 - CAPITAL STOCK
  
  Common  Stock - During the year ended September 30,  1998,  the
  Company  made various issuances of common stock.   A  total  of
  22,898  shares were issued to employees, officers and directors
  for  consultation,  programming, or  other  services  rendered.
  The  stock  was  valued at $1.00 per share.  The  Company  also
  issued 62,000 shares of common stock valued at $1.00 per  share
  and  100,000  warrants to purchase common stock  at  $2.00  per
  share  to  an entity pursuant to a consultation agreement  [See
  Note 13].
  
  During  the year ended September 30, 1998, an officer exercised
  options  to purchase a total of 100,000 shares of common  stock
  [See  Note  8].   The  same officer also paid  $5,000  cash  to
  acquire 5,000 shares of common stock.
  
  During  January  1997, the Company issued 2,438,333  shares  of
  its  previously authorized, but unissued common  stock  to  its
  initial  shareholders.  Total proceeds from the sale  of  stock
  amounted  to  $300,000 (or $.123 per share).  During  September
  1997,  the Company issued 700,000 shares of common stock to  an
  affiliated  company for software licensing rights,  which  were
  valued at $700,000 (or $1.00 per share).  During January  1997,
  the  Company issued 116,667 shares of common stock for services
  rendered  which  were valued at $13,534 (or $.116  per  share).
  Also,  during August 1997, the Company issued 30,000 shares  of
  common  stock  for  services  rendered  which  were  valued  at
  $30,000 (or $1.00 per share).
  

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
NOTE 7 - CAPITAL STOCK [Continued]
  
  Public   Offering  -  During  the  period  from  March  through
  September 1997, the Company sold 93,750 shares of common  stock
  and  93,750  shares of series B preferred stock pursuant  to  a
  public  offering.   From October 1997 through  September  1998,
  the  Company  sold an additional 396,000 shares of  common  and
  preferred    stock.    This   offering   was   registered    by
  qualification in the State of Utah and was made in reliance  on
  Rule 504 of Regulation D under the Securities Act of 1933.   An
  offering  price of $10,000 per unit was arbitrarily  determined
  by  the  Company and the sales agent.  Each unit sold consisted
  of  5,000  shares of common stock, 2,500 warrants  to  purchase
  common  stock  and  5,000 shares of Series  B  12%  convertible
  preferred  stock.  Total proceeds from the stock  sold  through
  September  30,  1997 amounted to $187,500.  Proceeds  from  the
  subsequent  sales through September 1998 amounted to  $792,000.
  The  warrants  are  exercisable at $7.50 per  share  commencing
  July  11,  1999  and  continuing  until  July  11,  2000.   The
  warrants  are subject to redemption by the Company at $.01  per
  warrant provided the common stock of the Company has traded  at
  a  price of more than $10.00 for 10 consecutive days concluding
  within  any 20 consecutive day period immediately prior to  the
  date  the  Company  has  provided notice  of  such  redemption.
  Included  in  the above sales are 2,500 shares  of  common  and
  preferred  stock, which were issued for legal fees and  124,443
  shares  of  common and preferred stock, which were  issued  for
  marketable securities [See Note 3].
  
  Stock Subscriptions - During the year ended September 30,  1998
  the  Company  issued a total of 18,057 shares of  common  stock
  and  18,057  shares of preferred stock, pursuant to its  public
  offering  (see  above),  where the stock  was  issued  but  the
  consideration  has not yet been received.  Management  believes
  the consideration will be received in full and has recorded  an
  account  receivable for the consideration amounting to $36,114.
  The   subscription  receivable  has  been  reflected   in   the
  financial statements as a reduction to stockholders' equity.
  
  Warrants  -  At  September 30, 1998, the  Company  had  244,875
  warrants  to  purchase  common  stock  outstanding  that   were
  issued  in  conjunction  with  the  public stock  offering (see
  above).   The warrants are exercisable at $7.50 per  share  and
  are  subject  to  redemption by the Company at $.01  per  share
  under  the  conditions explained above (See  Public  Offering).
  As  of  September  30,  1998, none of the  warrants  have  been
  exercised.
  
  Also  at  September  30, 1998, the Company  had  an  additional
  320,000  warrants  outstanding  to  purchase  common  stock  at
  prices  ranging  from  $1.00 to $3.00 per  share  and  expiring
  through  June 1, 2001 that were issued in conjunction with  the
  Company  obtaining financing and for consulting  services  [See
  Notes  10  and  13, respectively].  As of September  30,  1998,
  none of the warrants have been exercised.
  
  Preferred  Stock - The Company authorized 5,000,000  shares  of
  preferred  stock, $.001 par value with such rights, preferences
  and  designations and to be issued in such series as determined
  by the Board of Directors.
  

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
NOTE 7 - CAPITAL STOCK [Continued]
  
  Series  B  Convertible Preferred Stock - The Company authorized
  500,000 shares of preferred stock to be designated as Series  B
  Convertible   Preferred  Stock.   The  Series   B   Convertible
  Preferred Stock pays dividends at the rate of 12% and is  fully
  cumulative.  The Series B Convertible Preferred Stock shall  be
  entitled to receive dividends, commencing December 1, 1998,  at
  an  annual  rate  of  12% per share out of  the  funds  legally
  available  and  to  the  extent  declared  by  the   Board   of
  Directors.   The  dividends  shall be  payable  in  semi-annual
  installments  on December 1 and June 1 commencing  December  1,
  1998.   The  dividends may be paid either in  cash,  in  common
  stock  of the corporation or a combination thereof.  The Series
  B  Convertible Preferred Stock will be automatically  converted
  to  one  (1)  share  common stock one year  from  the  date  of
  issuance.  The holders of Series B Convertible Preferred  Stock
  shall  be  entitled to one (1) vote for each share of Series  B
  Convertible  Preferred Stock held.  As of September  30,  1998,
  the   Company  has  accrued  preferred  dividends  of  $30,779.
  During  the  year  ended September 30, 1998, 93,750  shares  of
  preferred stock have been accounted for as converted to  93,750
  shares  of  common  stock  due to the automatic  conversion  of
  preferred to common at one year from date of issuance.
  
NOTE 8 - STOCK OPTIONS
  
  During  September  1997,  the Company  granted  options  to  an
  officer  of  the Company to purchase 400,000 shares  of  common
  stock  at  $.116, which was below the current market  value  of
  $1.00  per  share.  Total compensation expense  (in  accordance
  with  APB 25) of $353,600 has been calculated with $3,923 being
  recorded  as a compensation expense through September 30,  1997
  and  $176,752  for  the  year ended September  30,  1998.   The
  deferred  portion  of  $172,925 as of September  30,  1998,  is
  recorded  as  a  reduction  to  stockholders'  equity.   During
  February 1998, the officer exercised 50,000 options for  $5,800
  or  $.116  per share.  During July 1998, the officer  exercised
  an additional 50,000 shares for $5,800 or $.116 per share.
  
  During  October 1997, the Company granted options to the  Vice-
  President  of the Company to purchase 150,000 shares of  common
  stock  at  $.116, which was below the current market  value  of
  $1.00  per  share.  Total compensation expense  (in  accordance
  with  APB  25)  of  $132,600 has been calculated  with  $66,118
  being  recorded  as  compensation expense for  the  year  ended
  September  30,  1998.  The deferred portion of  $66,482  as  of
  September   30,   1998,  is  recorded   as   a   reduction   to
  stockholders' equity.
  
  During November 1997, the Company granted options to the  Vice-
  President  of the Company to purchase 30,000 shares  of  common
  stock  at  $.116, which was below the current market  value  of
  $1.00  per  share.  The options were issued in lieu  of  salary
  for  services rendered during October and November 1997.  Total
  compensation  expense (in accordance with APB  25)  of  $26,520
  has been recorded as of November 1997.
  
  During  August  1998, the Company granted  200,000  options  to
  purchase  the  Company's stock at $.80 per share in  connection
  with  an  employment agreement [See Note 10].  During September
  1998,  the  individual  ended his employment  and  all  200,000
  options were canceled.
  
  During  September  1998, the Company granted 2,500  options  to
  purchase  the  Company's common stock at  $1.00  per  share  in
  connection  with  an  employment  agreement  [See   Note   10].
  Subsequent  to the year ended September 30, 1998, the  employee
  ended his employment and the 2,500 options were cancelled.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 8 - STOCK OPTIONS [Continued]
  
  A   summary  of  the  status  of  the  options  granted   under
  agreements  at September 30, 1998 and 1997, and changes  during
  the  year  and  period then ended are presented  in  the  table
  below:
  
                                        1998              1997
                             ______________________  ______________________
                                          Weighted                 Weighted
                                          Average                  Average
                              Shares      Exercise    Shares       Exercise
                                           Price                    Price
                             __________  __________  __________  __________
      Outstanding at
        beginning of
        period                  400,000  $     .116           -  $        -
      Granted                   382,500        .479     400,000        .116
      Exercised                (100,000)       .116           -           -
      Forfeited                (200,000)       .80            -           -
      Canceled                        -           -           -           -
                             __________  __________  __________  __________
      Outstanding at
        end of
        period                  482,500        .12      400,000  $     .116
                             __________  __________  __________  __________
      Exercisable at
        end of
        period                  130,313        .117     100,000  $     .116
                             __________  __________  __________  __________
      Weighted average
        fair value of
        options granted         382,500         .52     400,000  $     .88
                             __________  __________  __________  __________
  
  The  fair value of each option granted is estimated on the date
  granted using the Black-Scholes option pricing model, with  the
  following  weighted-average assumptions used for grants  during
  the  year and period ended September 30, 1998 and 1997:   risk-
  free  interest  rate of 5.6% and 6.1%, expected dividend  yield
  of  zero,  expected  lives  of  4  and  5  years  and  expected
  volatility of 167% and 225%.
  
  A  summary  of  the  status  of the options  outstanding  under
  agreements at September 30, 1998 is presented below:
  
                   Options Outstanding             Options Exercisable
          _____________________________________  ________________________
                         Weighted-                            
                          Average     Weighted-                 Weighted-
Range of                 Remaining     Average                   Average
Exercise     Number     Contractual   Exercose       Number     Exercise
 Prices   Outstanding      Life        Price      Exercisable    Price
________  __________    __________   __________   __________   __________
$   .116     480,000      5 years    $     .116      130,000   $     .116
$  1.00        2,500      3 years    $    1.00           313   $    1.00
  
  

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 8 - STOCK OPTIONS [Continued]
  
  The  Company  accounts for options agreements under  Accounting
  Principles  Board Opinion No. 25, "Accounting for Stock  Issued
  to  Employees", and related interpretations.  Had  compensation
  cost  for  these  options been determined, based  on  the  fair
  value  at  the  grant dates for awards under these  agreements,
  consistent   with  the  method  prescribed  by   Statement   of
  Financial Accounting Standards No. 123, "Accounting for  Stock-
  Based  Compensation", the Company's net loss  would  have  been
  the proforma amounts as indicated below:
  
                                                 From Inception
                             Year EndedPeriod Ended Through
                            September  30,September  30,September
  30,
                                         1998         1997         1998
                                      ___________  ___________  ___________
  Net Loss applicable to
   common  stockholders   As reported $(1,089,717) $  (459,001) $(1,548,718)
                          Proforma    $(1,089,717) $  (459,001) $(1,548,718)
  
  Earnings per Share      As reported $   (.28)    $    (.21)   $   (.51)
                          Proforma    $   (.28)    $    (.21)   $   (.51)
  
NOTE 9 - INCOME TAXES
  
  The  Company  accounts  for  income taxes  in  accordance  with
  Statement  of Financial Accounting Standards No. 109 Accounting
  for Income taxes [FASB 109].  FASB 109 requires the Company  to
  provide  a  net deferred tax asset or liability  equal  to  the
  expected  future tax benefit or expense of temporary  reporting
  differences  between book and tax accounting and any  available
  operating  loss or tax credit carryforwards.  At September  30,
  1998  and  1997,  the  total of all  deferred  tax  assets  was
  $460,396  and  $164,298  and  the total  of  the  deferred  tax
  liabilities  was  $80,378  and  $118,890.  The  amount  of  and
  ultimate  realization  of the benefits from  the  deferred  tax
  assets for income tax purposes is dependent, in part, upon  the
  tax  laws  in effect, the Company's future earnings, and  other
  future  events,  the  effects of which  cannot  be  determined.
  Because of the uncertainty surrounding the realization  of  the
  deferred  tax assets, the Company has established  a  valuation
  allowance of $380,018 and $45,408 as of September 30, 1998  and
  1997,  which  has been offset against the deferred tax  assets.
  The  net  change  in the valuation allowance during  the  years
  ended  September  30, 1998 and 1997 amounted  to  approximately
  $334,610 and $45,408.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 9 - INCOME TAXES [Continued]
  
  The   components   of  income  tax  expense   from   continuing
  operations  for  the years ended September 30,  1998  and  1997
  consist of the following:
  
                                                       1997         1996
                                                  ___________   ___________
    Current income tax expense:
     Federal                                     $          -  $          -
     State                                                  -             -
                                                  ___________   ___________
      Net tax expense                                       -             -
                                                  ___________   ___________
    Deferred tax expense (benefit) arising from:
     Excess of tax over financial
       accounting depreciation                   $    (10,706) $     (8,258)
     Excess of tax over financial
       accounting compensation                        (10,512)            -
     Carryforward of excess contributions                (156)            -
     Deferred compensation - stock options            (38,513)      118,891
     Net operating loss carryforward                 (274,723)     (156,041)
     Valuation allowance                              334,610        45,408
                                                  ___________   ___________
      Net deferred tax expense                   $          -  $          -
                                                  ___________   ___________

  Deferred   income  tax  expense  results  primarily  from   the
  reversal  of  temporary  timing  differences  between  tax  and
  financial statement income.
  
  A   reconciliation  of  income  tax  expense  at  the   federal
  statutory   rate  to  income  tax  expense  at  the   company's
  effective rate is as follows:
  
                                                      1998          1997
                                                  ___________   ___________
    Computed tax at the expected
      statutory rate                                  34.00%        34.00%
                                                  ___________   ___________
    State and local income taxes, net of
      federal benefit                                     -             -
    Other                                              (.22)         1.80
    Deferred compensation - stock options             (2.18)       (25.91)
    Valuation allowance                              (31.60)        (9.89)
                                                  ___________   ___________
    Income tax expense                                    -             -
                                                  ___________   ___________
  
  As  of  September  30, 1998 and 1997 the Company  has  net  tax
  operating  loss  (NOL) carryforwards available  to  offset  its
  future  income tax liability.  The NOL carryforwards have  been
  used   to   offset  deferred  taxes  for  financial   reporting
  purposes.   The  Company  has  federal  NOL  carryforwards   of
  $1,266,953 that expire in 2012 and 2013.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 9 - INCOME TAXES [Continued]
  
  The  temporary differences and carryforwards gave rise  to  the
  following deferred tax asset (liability) at September 30,  1998
  and 1997:
  
                                                      1998          1997
                                                  ___________   ___________
        Excess of tax over book accounting
          depreciation                           $     18,964  $      8,258
        Excess of tax over book accounting
          compensation                                 10,512             -
        Contribution carryover                            156             -
        Deferred compensation - stock options         (80,378)     (118,891)
        Net operating loss carryover                  430,764       156,041
  
  As of September 30, 1998 and 1997 the deferred tax asset
  (liability) consisted of the following:
                                                      1998           1997
                                                  ___________   ___________
         Current deferred tax assets             $    460,396  $    164,298
         Deferred tax assets (liabilities)            (80,378)     (118,890)
                                                  ___________   ___________
                                                 $    380,018  $     45,408
                                                  ___________   ___________
  
NOTE 10 - RELATED PARTY TRANSACTIONS
  
  Notes Payable - During the year and period ended September  30,
  1998  and 1997, the Company entered into several notes  payable
  with  shareholders  and entities related  shareholders  of  the
  Company  [See Note 6].  i) a shareholder of the Company  loaned
  the  Company  a  total  of  $110,000 during  the  period  ended
  September  30,  1997.   The notes are  due  upon  demand,  bear
  interest  at  12%  compounding annually and  have  a  remaining
  balance  of  $15,234  (of which $2,614 consists  of  compounded
  interest)  and  $12,620  as of September  30,  1998  and  1997,
  respectively.   The Company has paid $0 and $174  interest  and
  total  unpaid interest for the year and period ended  September
  30,  1998  and  1997  totaled $1,367 and $2,232,  respectively.
  ii)  during  October 1997 through April 1998, a shareholder  of
  the  Company  loaned the Company a total of  $11,500  of  which
  $5,000  bears interest at 10% and $6,500 bears interest  at12%.
  The  notes are payable upon demand and have a remaining balance
  of  $15  and  $279 as of September 30, 1998.  The  Company  has
  paid  $15 and $279 interest and total unpaid interest  for  the
  year  ended September 30, 1998 totaled $1 and $10.  iii) during
  June  1998,  a  shareholder of the Company loaned  the  Company
  $10,000,  which  bears  interest at 12%  and  is  payable  upon
  demand.   During  July 1998, the unsecured note  payable,  plus
  interest  amounting  to $155, was paid  in  full.   iv)  during
  April  1998,  a shareholder of the Company loaned  the  Company
  $5,000,  which  bears interest at 12% and is due  upon  demand.
  During the year ended September 30, 1998, the Company paid  $92
  in  interest leaving an unpaid interest balance of  $2  and  an
  unpaid  principal balance of $55 as of September 30, 1998.   v)
  during  April 1998, an entity related to a shareholder  of  the
  Company  loaned  the  Company $2,000.  The  note  is  due  upon
  demand,  bears interest at 12% compounding annually and  has  a
  remaining  balance  of $2,000 as of September  30,  1998.   The
  unpaid interest amounted to $101 as of September 30, 1998.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 10 - RELATED PARTY TRANSACTIONS [Continued]
  
  During  February  1998 through September  1998,  a  shareholder
  advanced the Company a total of $17,700.  The advances are non-
  interest bearing and are due upon demand.  As of September  30,
  1998, the unpaid balance of the advances amounted to $6,200.
  
  Employment  Agreements  -  During the  year  and  period  ended
  September  30,  1998 and 1997, the Company  entered  into  four
  employment  agreements  with  officers  and  employees  of  the
  Company.
  
  The  employment agreement for the Chief Executive  Officer  was
  effective  as  of  September 22, 1997 and has  a  term  of  two
  years.   The  agreement provides for a base salary of  $120,000
  per  year.  The employee may terminate the agreement on 30 days
  notice.   The  agreement also provides  for  stock  options  to
  purchase  400,000  shares of registered  common  stock  of  the
  Company.   Options to purchase 100,000 shares of  common  stock
  vest  immediately while the remainder of the  options  vest  at
  the  rate  of 100,000 shares on each yearly anniversary.  There
  are  no restrictions on the underlying common stock except  for
  those  imposed under Rule 144 of the  Securities Act  of  1933,
  as  amended.   Once  vested the options are exercisable  for  a
  five-year  period from the date of vesting whether or  not  the
  employee  is  still  employed by  the  company.   However,  the
  employee  must  be  employed by the  company  on  the  date  of
  vesting  or  the  options for that date  will  not  vest.   The
  options  are exercisable at $.116 per share which is less  than
  the  current  market  value  of  the  stock  on  the  date  the
  agreement  took effect and the options were granted  [See  Note
  7].
  
  The employment agreement for the position, which includes Vice-
  President,  Secretary  and  Treasurer,  was  effective  as   of
  October  1,  1997 and has a term of two years.   The  agreement
  provides  for  a base salary of $2,000 per week  ($104,000  per
  year)  commencing  December  1,  1997.   For  the  period  from
  October   1,  1997  through  November  30,  1997  the  employee
  received  stock  options as follows:  10,000 upon  signing  and
  2,500  per  week.   The options vest on a  monthly  basis.   At
  November  30,  1997,  all 30,000 options  received  were  fully
  vested.  Beginning December 1, 1997, the employee can elect  to
  receive  options in lieu of cash salary at the  rate  of  2,500
  options  per  week.  The options will vest on a monthly  basis.
  The  employee  may terminate the agreement on 30  days  notice.
  No  such  election was made.  The agreement also  provided  for
  stock  options  to  be immediately granted to purchase  150,000
  shares  of  registered common stock of the Company. Options  to
  purchase 75,000 shares of common stock vest on October 1,  1998
  while  the  remainder of the options (75,000  shares)  vest  on
  October  1,  1999.  There are no restrictions  on  any  of  the
  underlying  common  stock except for those imposed  under  Rule
  144  of  the   Securities Act of 1933, as amended. Once  vested
  the  options  are exercisable for a five-year period  from  the
  date  of  vesting whether or not the employee is still employed
  by  the company.  However, the employee must be employed by the
  company  on  the date of vesting or the options for  that  date
  will  not vest.  The options are exercisable at $.116 per share
  which  is  less than the current market value of the  stock  on
  the  date  the  agreement  took effect  and  the  options  were
  granted [See Note 7].

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 10 - RELATED PARTY TRANSACTIONS [Continued]
  
  The  employment  agreement for the Director of  Promotions  was
  effective   as  of  September  15,  1998  and  is  an   at-will
  agreement.   The  agreement  provides  for  a  base  salary  of
  $45,000  per  year,  $150  per  month  vehicle  allowance   and
  commission  on  monthly revenues generated through  advertising
  sales  as  follows:   10% on revenue up  to  the  first  14,999
  during  each  month (5% on revenue up to the first  10,000  and
  then  10%  as  stated from 10,001 to $14,999 during  the  first
  year),  14%  on  revenue from $15,000 to  $24,999  during  each
  month,  18%  on  revenue  from $25,000 and  above  during  each
  month.  The agreement also provides for a 20% commission on net
  revenue generated by first time memberships to play  iPONG head
  to  head  which are direct traceable sales efforts of employee.
  The agreement also provided for stock options to be granted  to
  purchase  2,500  shares of the Company's  common  stock  at  an
  exercise  price  of  $1.00 per share.  The  option  vests  each
  fiscal  quarter during the employment at a rate of  313  shares
  per  quarter with the first 313 shares vesting on September 30,
  1998.   Once  vested the options are exercisable for  a  three-
  year period from the date of vesting unless the employee is  no
  longer  employed by the Company.  Subsequent to the year  ended
  September  30,  1998,  the employee left the  Company  and  the
  options were cancelled.
  
  The  employment agreement for the Vice President  of  Marketing
  was   effective  as  of  August  3,  1998  and  is  an  at-will
  agreement.   The  agreement  provides  for  a  base  salary  of
  $60,000  per  year,  $300  per  month  vehicle  allowance   and
  commission on monthly revenues generated through the  marketing
  division  as  follows:  10% on revenue from  10,000  to  14,999
  during  each  month,  14% on revenue from  $15,000  to  $24,999
  during  each  month,  18%  on revenue from  $25,000  and  above
  during  each  month.   The agreement also  provided  for  stock
  options  to  be  granted  to purchase  200,000  shares  of  the
  Company's common stock at an exercise price of $.80 per  share.
  The  option vests each fiscal quarter during the employment  at
  a  rate  of  12,500  shares per quarter with the  first  12,500
  shares  vesting on September 30, 1998.  Once vested the options
  are  exercisable  for  a three-year period  from  the  date  of
  vesting  unless  the  employee is no  longer  employed  by  the
  Company.   During  September 30, 1998, the  employee  left  the
  Company and the options were cancelled.
  
  Office Space - Prior to September 30, 1997, the Company had  no
  office  facilities.   Officers of  the  Company  conducted  the
  Company's business from their own residences or offices  at  no
  expense  to  the Company.  During the year ended September  30,
  1998,   the  Company  rented  one  office  facility   from   an
  affiliated  company  and two office facilities  from  unrelated
  parties [See Note 12].
  
  Related  Entity  -  Certain officers  or  shareholders  of  the
  Company  are  also  affiliated with an  entity  with  whom  the
  Company  has a licensing and marketing agreement [See Note  4].
  Cash  of $300,000 and common stock valued at $700,000 was  paid
  to the affiliated company for the licensing rights.

NOTE 11 - GOING CONCERN
  
  The  Company  was  formed with a very specific  business  plan.
  However,  the possibility exists that the Company could  expend
  virtually  all  of  its working capital in a  relatively  short
  time  period and may not be successful in establishing on-going
  profitable  operations.   The  financial  statements   do   not
  contain  any  allowances,  liabilities  or  other  adjustments,
  which  may need to be recorded if the Company is not successful
  in achieving profitable operations.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 11 - GOING CONCERN [Continued]
  
  The  accompanying  financial statements have been  prepared  in
  conformity   with  generally  accepted  accounting  principles,
  which  contemplate  continuation of  the  Company  as  a  going
  concern.   However, the Company is newly formed,  has  incurred
  losses  since its inception, has current liabilities in  excess
  of  current  assets of $116,993 and has not yet been successful
  in  establishing  profitable operations.  These  factors  raise
  substantial doubt about the ability of the Company to  continue
  as  a  going concern.  In this regard, management is  proposing
  to  raise  any  necessary  additional  funds  not  provided  by
  operations  through  loans and/or through additional  sales  of
  its  common stock. There is no assurance that the Company  will
  be  successful  in  raising  additional  capital  or  achieving
  profitable  operations.   The  financial  statements   do   not
  include  any adjustments that might result from the outcome  of
  these uncertainties.
  
NOTE 12 - LEASE OBLIGATIONS

  Operating Leases - During September 1997 and effective  October
  1997,  the  Company entered into a month to month sublease  for
  office   space  and  telephone  line  access  with   the   same
  affiliated  company  that the Company purchased  the  licensing
  rights  from (and is performing the technical support), wherein
  the  Company  pays  $400  per month.  During  June  1998,  this
  sublease  agreement  was canceled.  During  October  1997,  the
  Company  entered  into  a one-year lease agreement  for  office
  space  in  Del Mar, California.  The lease agreement calls  for
  monthly  rents  of  $550  and  expires  during  October   1998.
  Subsequent  to the year ended September 30, 1998,  the  Company
  extended the lease to a month by month basis at $580 per  month
  [See  Note  16].  During May 1998 and effective June 1998,  the
  Company  entered  into  a one-year lease agreement  for  office
  space  in  Minden,  Nevada.   The  lease  agreement  calls  for
  monthly   rents  of  $815  and  is  for  one  year.   Effective
  subsequent to the year  ended  September 30,  1998, the Company
  amended their lease agreement in Minden, Nevada  [See Note 16].
  Rent expense amounted to  $13,060 and  $0 for the periods ended
  1998 and 1997, respectively.
  
  Capital Lease - The Company is the lessee of equipment under  a
  capital  lease  expiring in 2001.  The assets  and  liabilities
  under the capital lease were recorded at the fair value of  the
  assets  at  the time of purchase, which was the  lower  of  the
  present  value of the minimum lease payments or the fair  value
  of  the  assets  at  the  time of  purchase.   The  assets  are
  amortized  over  the related lease term.  Amortization  expense
  amounted  to $1,057 for the assets under the capital  lease  as
  of  September  30, 1998 and the amortization expense  has  been
  included  in depreciation expense for the year ended  September
  30, 1998.
  
  Equipment  at  September 30, 1998 and 1997 under capital  lease
  obligations is as follows:
  
                                                          1998
                                                      ___________
         Office equipment                            $      9,889
         Less:  accumulated amortization                   (1,057)
                                                      ___________
                                                     $      8,832
                                                      ___________
  

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 12 - LEASE OBLIGATIONS [Continued]
  
  Total  future  minimum  lease  payments,  executory  costs  and
  current portion of capital lease obligations are as follows:
  
  Future minimum lease payments for the year ended September 30:
  
            Year Ended September 30,                      Lease Payments
            _______________________                        ___________
                      1999                                $      5,620
                      2000                                       5,620
                      2001                                       4,684
                      2002                                           -
                      2003                                           -
                                                           ___________
               Total future minimum lease payments        $     15,924
               Less:  amounts representing interest
                 and executory costs                            (6,367)
                                                           ___________
               Present value of the future minimum
                 lease payments                                  9,557
               Less: lease current portion                      (2,420)
                                                           ___________
               Capital lease obligations - long term             7,137
                                                           ___________
  
NOTE 13 - CONSULTING AGREEMENTS

  During  November  1997, the Company entered into  a  consulting
  agreement  with  a Colorado corporation in which  the  Colorado
  corporation  will  provide  various  consulting  and  financial
  public  relations with broker-dealers, shareholders and members
  of  the general public.  This agreement has a term of one  year
  and  provides  for  monthly cash payments  of  $3,500  ($42,000
  total).
  
  Also   during  November  1997,  the  Company  entered  into   a
  consulting  agreement with a British Virgin Island  Corporation
  in  which  the British Virgin Island Corporation will  develop,
  implement and maintain an on-going stock market support  system
  that  increases  broker awareness of the  Company's  activities
  and   stimulates  investor  interest  in  the  Company.    This
  agreement has a term of one year and provides for the  issuance
  of  a  warrant  to  purchase  100,000  shares of  the Company's
  common  stock at a price of $3.00 per share, which for a three-
  year period  are  subject  to  piggyback  registration  rights.
  During  May  1998,  the  Company  entered  into  an  additional
  agreement with the British Virgin Island Corporation  in  which
  the  British Virgin Island Corporation will develop,  implement
  and  maintain  an  on-going stock market  support  system  that
  increases  broker  awareness of the  Company's  activities  and
  stimulates  investor interest in the Company.   This  agreement
  has  a  term  of  one year and provides for the issuance  of  a
  warrant  to  purchase 100,000  shares  of  the Company's common
  stock  at a  price  of  $2.00  per  share,  which  for a three-
  year  period are subject to piggyback registration rights.  The
  agreement  also provides for the issuance of 62,000  shares  of
  the  Company's  common stock valued at $62,000  (or  $1.00  per
  share).

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 14 - EARNINGS (LOSS) PER SHARE
  
  The  following data show the amounts used in computing earnings
  (loss)  per  share  and the effect on income and  the  weighted
  average  number  of shares of dilutive potential  common  stock
  for  the  year  ended September 30, 1998 and from inception  on
  November 5, 1996 through September 30, 1998 and 1997:
  
                                                     From Inception on
                                                        November 5,
                                  For the               1996 Through
                                Year Ended      ___________________________
                                 September 30,  September 30,  September 30,
                                    1998         1997           1998
                                 ___________    ___________    ___________
    Income (loss) from
      continuing operations
      applicable to
      common  stock             $ (1,058,938)  $   (459,001)  $ (1,517,939)
  
     Less: preferred dividends       (30,779)             -        (30,779)
                                 ___________    ___________    ___________
    Income (loss) available
      to common stockholders
      used in earnings (loss)
      per share                 $ (1,089,717)  $   (459,001)  $ (1,548,718)
                                 ___________    ___________    ___________
    Weighted average number
      of common shares
      outstanding used in
      earnings (loss) per
      share during the period      3,852,383      2,150,469      3,045,568
                                 ___________    ___________    ___________
  
  Dilutive  earnings (loss) per share was not presented,  as  its
  effect  is  anti-dilutive.  The Company had  at  September  30,
  1998,  options  and  warrants to purchase 1,047,375  shares  of
  common  stock, at prices ranging from $.116 to $7.50 per share,
  that  were not included in the computation of diluted  earnings
  (loss)  per share because their effect was anti-dilutive.   The
  Company  also has preferred stock outstanding at September  30,
  1998,  which  is convertible into approximately 396,000  shares
  of  common  stock that was not included in the  computation  of
  diluted  earnings  (loss) per share as  its  effect  was  anti-
  dilutive.
  
NOTE 15 - CONCENTRATION OF RISK

  The  Company's operations  are currently dependent upon the use
  of software  which is licensed  from a related  entity and from
  an unrelated entity [See Note 4].  In the event  the Company is
  unable to  renew these software  licenses, when they  expire, a
  disruption  or termination of  the  Company's  operations could 
  occur.  The financial statements do not include any adjustments
  that might result from the outcome of these uncertainties.

<PAGE>

                  WEBQUEST INTERNATIONAL, INC.
                  [A Development Stage Company]
                                
                  NOTES TO FINANCIAL STATEMENTS
  
NOTE 16 - SUBSEQUENT EVENTS

  Operating  Leases  - During October 1998, the Company  extended
  the   original  lease  in  Del  Mar,  California.   The   lease
  extension  is  on a month by month basis with  an  increase  in
  monthly  rents  to $580.  During September 1998  and  effective
  November  1998,  the  Company amended  the  original  lease  in
  Minden,  Nevada.  The lease amendment calls for  monthly  rents
  of  $1,204 and is for one year (which automatically renews  for
  another year with a monthly rent increase of .75% or $1213).
  
  SCAVENGERnet - During October 1998, the Company entered into  a
  purchase  agreement  with two individuals to  purchase  a  game
  (with   all   rights,   software,   programs,   source   codes,
  copyrights, trade secrets, patent rights, and other  applicable
  rights  for  use  on  the  Internet) called  SCAVENGERnet.   As
  consideration  for  this purchase agreement  the  Company  gave
  $5,000  down ($2,500 to each individual), $5,000 due on January
  9,  1999 (an additional $2,500 to each individual), and  10,000
  shares  (5,000  shares of common stock to each  individual)  of
  its common stock valued at $10,000 or $1.00 per share.
 
  Notes Payable - On October 7, 1998, the Company entered into  a
  note payable to an individual for $20,000.  The note is due  on
  February  7,  1999  and bears interest at 12%  per  annum.   On
  October  28, 1998, the Company entered into an additional  note
  payable to the same individual for $20,000.  This note  is  due
  on  November 28, 1998 and bears interest at 12% per annum.  The
  Company  is in default in regards to this note and is  accruing
  a  late  penalty of 5,000 warrants, to purchase  the  Company's
  common  stock at $1.00 per share, for every week  the  loan  is
  delinquent.
  
  Warrants - In connection with the issuance of the note  payable
  on  October  28,  1998  to an individual, the  Company  granted
  warrants  to  purchase  20,000 shares of the  Company's  common
  stock at $1.00 per share through October 28, 2002.
  
  Options - During December 1998, the Company granted options  to
  the  Vice-President of the Company to purchase  200,000  shares
  of  common  stock  at  $1.00  per share.   These  options  vest
  immediately and expire in December 2003.