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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-KSB/A (Amendment No. 1)
 (Mark One) þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2003 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition periodto Commission file number 0-27751 WORLDQUEST NETWORKS, INC.  Delaware
    
    75-2838415(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)14911 Quorum Drive, Suite 140, Dallas, Texas
    
    75254(Address of principal executive offices)
    
    (Zip Code)
 Issuers telephone number, including area code: (972) 361-1980 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months
(or for such shorter period that the issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES x NO o Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and none will be contained, to the best of
registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. o The issuers revenues for its most recent fiscal year were: $9,915,354. The aggregate market value of the voting common stock held by non-affiliates of
the issuer, based on the closing sales price of $3.20 per share, was $9,818,070
as of December 31, 2003. At March 31, 2004, the registrant had outstanding 6,595,232 shares of par value
$.01 common stock. DOCUMENTS INCORPORATED BY REFERENCE There are no documents incorporated by reference herein Transitional Small Business Disclosure Format (check one): Yes o                    No x




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EXPLANATORY NOTE The Registrant is filing this Amendment No. 1 to its Annual Report on Form
10-KSB filed with the Securities and Exchange Commission on March 30, 2004
solely for the purpose of providing information required by Part III of Form
10-KSB. Unless otherwise expressly stated, this Amendment No. 1 does not
reflect events occurring after the filing of the original Form 10-KSB, or
modify or update in any way disclosures contained in the original Form 10-KSB.   TABLE OF CONTENTS 
 Item
    
    
    
    PagePART III9.
    
    Directors and Executive Officers of the Registrant; Compliance with Section
16(a) of the Exchange Act
    
    
    310.
    
    Executive Compensation
    
    
    511.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    712.
    
    Certain Relationship and Related Transactions
    
    
    914.
    
    Principal Accountant Fees and Services
    
    
    9EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
 2




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ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT. The following table provides information as of April 30, 2004, with
respect to our directors and executive officers: Served as ExecutiveOfficer orName
    
    Age
    
    Position
    
    Director SinceDirector NomineesB. Michael Adler
    
    
    56
    
    
    Director, President, and Chief
Executive Officer
    
    
    1996Robert A. Farmer(1)(2)
    
    
    65
    
    
    Chairman of the Board
    
    
    2000E. Denton Jones(1)
    
    
    52
    
    
    Director
    
    
    1999Elizabeth H. Buchler(1)(2)
    
    
    54
    
    
    Director
    
    
    2000Executive OfficersVictor E. Grijalva
    
    
    39
    
    
    Vice President, Chief Financial
Officer, Secretary and Treasurer
    
    
    2001
   (1)
    
    Member of the Compensation Committee.(2)
    
    Member of the Audit Committee. B. Michael Adleris the founder of WorldQuest and was our Chairman of the
Board from our inception in 1996 through March 2004. Mr. Adler has been our
Chief Executive Officer and President since March 2004. Mr. Adler was a
director of Intellicall, Inc., a publicly traded public access communications
company, until its merger with Wireless WebConnect!, Inc. on March 30, 2001.
Mr. Adler founded Intellicall in 1984 and served as Chairman or Vice Chairman
of the Board from its inception until November 1993. From November 1993 until
July 1999, Mr. Adler was the Chairman of the Board of The Payphone Company
Limited, a company that installs and owns a wireless pay phone network in Sri
Lanka. For approximately the last seven years, he has been the Chief Executive
Officer of Eagle Venture Capital, LLC, a Delaware limited liability company,
formerly known as WorldQuest Networks, LLC. Robert A. Farmerhas been our Chairman of the Board since March 2004. Mr.
Farmer has been Chief Executive Officer and Chairman of the Board of Advanced
Multimedia Group, Inc., a privately held Internet incubator and consulting
firm, since November 1999. From August 1994 until March 1999 he was Consul
General of the United States to Bermuda, and from March 1999 until November
1999 he took a sabbatical. Mr. Farmer has been a director of WorldQuest since
August 2000. E. Denton Joneshas been Chairman of the Board and Chief Executive Officer
of New York City Telecommunications Company, Inc., a privately held
telecommunications company, since he co-founded it in June 1993. Mr. Jones has
been involved in the telecommunications industry since 1984 and owned or
operated several privately held telecommunications companies during that time
prior to co-founding New York City Telecommunications. These companies were
Altus Communications, Inc., MSC Services, Inc., MSC National, Inc. and NYLT,
Inc. (formerly known as New York Local Telephone, Inc.). He has been a director
of WorldQuest since July 1999. Elizabeth H. Buchlerhas been the owner and principal broker of Real
Estate Showcase, a real estate sales and management firm since 1985. She has
been active in the real estate business since 1971 and has served as an officer
for the Louisiana Real Estate Commission and various state and local realtor
boards. She has been a director of WorldQuest since December 2000. 3




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Executive Officers Victor E. Grijalvajoined WorldQuest in June 2001 as the Vice President,
Chief Financial Officer, Secretary and Treasurer. From May 2000 to February
2002, he served as Vice President and Chief Financial Officer of Trinity
e-Ventures, Inc., a wholly-owned subsidiary of Trinity Industries, Inc., which
launched companies to develop innovative technology and internet solutions for
the industrial sector. From May 1999 to May 2000, he served as Senior Vice
President and Chief Financial Officer of MH2 Technologies, Ltd., a leading
provider of technology solutions and wireless applications designed to manage
the residential and light commercial construction process. Prior to May 1999,
he held various management positions at PricewaterhouseCoopers, LLP, where he
served in the Houston, London, Denver and Dallas offices providing management
and business advisory services. Board of Directors and Committees of the Board Our Board of Directors has a Compensation Committee and an Audit
Committee. During 2003, the Board of Directors held five meetings, the Audit
Committee held five meetings and the Compensation Committee held one meeting. The Compensation Committee is responsible for recommending to the Board of
Directors all officer salaries, management incentive programs and bonus
payments. Its current members are Messrs. Jones and Farmer and Ms. Buchler. The Audit Committee recommends the firm to be appointed as independent
public accountants to audit WorldQuests financial statements and to perform
services related to the audit; reviews the scope and results of the audit with
the independent public accountants; reviews the Companys year-end operating
results with management and the independent public accountants; considers the
adequacy of WorldQuests internal accounting and control procedures; reviews
the non-audit services to be performed by the independent public accountants,
if any; and evaluates the accountants independence. The Audit Committee is
governed by a written charter approved by the Board. Its members are Messrs.
Farmer and Ms. Buchler. We pay our non-employee directors annual compensation of $20,000 for their
services. In addition, non-employee directors receive a fee of $1,000 for each
meeting attended. Non-employee directors attending any committee meeting
receive an additional fee of $1,000 for each committee meeting attended, unless
the committee meeting is held on the day of a meeting of the Board of
Directors, in which case they receive no additional compensation for attending
the committee meeting. Non-employee directors are also reimbursed for
reasonable costs and expenses incurred for attending any director or committee
meetings. Our officers who are directors are not paid any director fees. Each
new non-employee director will be granted options to purchase 25,000 shares of
common stock under our stock option plans concurrently with his or her initial
election to the Board. Each employee director shall automatically receive an
option to purchase up to 10,000 shares following each annual meeting of the
stockholders of the Company, if immediately after such meeting, he or she will
continue to serve on the Board and has served on the Board for at least the
preceding six months. While comprised entirely of independent directors, the Companys Audit
Comittee does not currently have a financial expert within the meaning of
Item 401(e) of Regulation S-B. In March 2004, Gary Fiedler resigned from our
Board of Directors. At the time of his resignation, Mr. Fiedler was the
Chairman of our Audit Committee. Mr. Fiedler also was a financial expert
within the meaning of Item 401(e) of Regulation S-B. As a result of his
resignation, the Audit Committee was left without a financial expert.
Pursuant to the Merger Agreement, dated as of March 16, 2004, between the
Company and Ntera Holdings, Inc., Ntera is entitled to appoint three new
directors to the Companys Board of Directors. The Company anticipates that
one or more of these designess will be financial experts and will serve on
the Companys Audit Committee. If the transactions contemplated by the merger
agreement are not consummated, the Company intends to identify a new director
to serve on its Audit Committee, who will meet the financial expert
requirement. Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to us pursuant to Rule 16a-3(e) promulgated under the Securities
Exchange Act of 1934 (the Exchange Act), or upon written representations
received by us, we are not aware of any failure by any officer, director or
beneficial owner of more than 10% of our common stock to timely file with the
Securities and Exchange Commission any Form 3, 4 or 5 relating to 2003. 4




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ITEM 10. EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth information concerning the annual and long
term compensation earned by our Chief Executive Officer and each executive
officer who had an annual salary and bonus during fiscal 2003 exceeding
$100,000. We refer to these individuals collectively as the Named Executive
Officers. Long TermCompensationAnnual Compensation
    
    AwardsSecuritiesOther annual
    
    UnderlyingName and principal position
    
    Year
    
    Salary($)
    
    Bonus($)
    
    compensation($)
    
    OptionsB. Michael Adler, Chairman of the Board
    
    
    2003
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    2002
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    2001
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    R. Stephen Polley, President, Chief
    
    
    2003
    
    
    
    300,000
    
    
    
    
    
    
    
    
    
    Executive Officer(1)
    
    
    2002
    
    
    
    300,000
    
    
    
    
    
    
    
    
    
    2001
    
    
    
    189,808
    
    
    
    275,000
    
    
    
    
    
    425,000Victor E. Grijalva, Vice President,
    
    
    2003
    
    
    
    150,000
    
    
    
    
    
    
    
    
    
    Chief Financial Officer, Secretary and
    
    
    2002
    
    
    
    150,000
    
    
    
    25,000
    
    
    
    
    
    Treasurer(2)
    
    
    2001
    
    
    
    46,057
    
    
    
    
    
    
    
    
    
    60,000
   (1)
    
    Mr. Polley started with WorldQuest in May 2001. Mr. Polley resigned from
the Company effective March 16, 2004.(2)
    
    Mr. Grijalva started with WorldQuest in June 2001. WorldQuest has entered into an employment agreement with Mr. Adler, a
director and the Companys President and Chief Executive Officer since March
2004. The agreement expires on April 13, 2006. Under the agreement, Mr. Adler
is entitled to receive a base salary of $175,000 per annum, and annual bonuses
as determined by the Compensation Committee. WorldQuest has also entered into
an employment agreement with Mr. Grijalva, the Companys Vice President, Chief
Financial Officer, Secretary and Treasurer. The agreement expires on April 13,
2006. Under the agreement, Mr. Grijalva is entitled to receive a base salary
of $150,000 per annum, and annual bonuses as determined by the Compensation
Committee. Option Grants The following table provides certain summary information concerning shares
of common stock represented by stock options granted to each of the Named
Executive Officers during fiscal year 2003. Percentage of TotalNumber of Securities
    
    Options Granted to
    
    Exercise
    
    ExpirationUnderlying Options
    
    Employees in Fiscal Year
    
    Price
    
    DateB. Michael Adler
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    R. Stephen Polley
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Victor E. Grijalva
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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Fiscal Year-End Option Values The following table provides information concerning the shares of common
stock represented by outstanding stock options held by each of the Named
Executive Officers on December 31, 2003. No options were exercised by the
Named Executive Officers during fiscal year 2003. Number of SecuritiesUnderlying Unexercised
    
    Value of UnexercisedOptions at
    
    in-the-Money Options atDecember 31, 2003
    
    December 31, 2003(1)Exercisable
    
    Unexercisable
    
    Exercisable
    UnexercisableB. Michael Adler
    
    
    25,000
    
    
    
    
    
    
    $
    11,000
    
    
    $
    R. Stephen Polley
    
    
    425,000
    
    
    
    
    
    
    $
    449,000
    
    
    $
    Victor E. Grijalva
    
    
    40,000
    
    
    
    20,000
    
    
    $
    38,667
    
    
    $
    19,333
   (1)
    
    Value is based on the closing sales price of $3.20 per share on December
31, 2003, the last trading day in 2003. 6




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ITEM 11. PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT AND
RELATED STOCKHOLDER MATTERS The table below provides certain information regarding the ownership of
our common stock as of March 31, 2004, by each stockholder known to us to own
beneficially more than five percent of our outstanding common stock, each
current director and nominee, and all executive officers, directors and
nominees as a group, based on information provided to us by such persons.
Except as otherwise stated, each such person has sole investment and voting
power with respect to the shares set forth in the table. The address for all
our Executive Officers and Directors is 14911 Quorum Drive, Suite 140, Dallas,
Texas 75254. Eagle Venture Capital, LLC is the record and beneficial owner of 2,566,478
shares. B. Michael Adler owns a controlling interest in Eagle Venture and is
deemed to beneficially own these shares. The share ownership for Mr. Adler also
includes vested options to purchase 25,000 shares and 100,000 shares owned by
Adler Family Trust. WorldQuest Communications, Inc. is the record and
beneficial owner of 301,000 shares. E. Denton Jones beneficially owns 99% of
the outstanding capital stock of WorldQuest Communications, Inc. and is deemed
to beneficially own these shares. The ownership for Mr. Jones also reflects
10,000 shares owned by five children of Mr. Jones and 1,000 shares owned by a
company with respect to which he shares investment and dispositive power, as
well as a vested option to purchase 25,000 shares and unvested options to
purchase 10,000 shares. The share ownership for Robert A. Farmer includes
vested options to purchase 25,000 shares and unvested options to purchase
10,000 shares. It also includes 12,750 shares and vested warrants to purchase
100,000 shares owned by Advanced Multimedia Group, Inc. Elizabeth H. Buchlers
beneficial ownership includes vested options to purchase 25,000 shares,
unvested options to purchase 10,000 shares, vested options to purchase 30,000
shares from Eagle Venture and 1,000 shares owned by Ms. Buchlers spouse.
Victor E. Grijalvas beneficial ownership includes vested options to purchase
90,000 shares and unvested options to purchase 45,000 shares. R. Stephen
Polleys beneficial ownership includes vested options to purchase 425,000
shares. Ntera Holdings, Inc. is a party to a Voting Agreement and Proxy dated
March 16, 2004 with Eagle Venture. Pursuant to this agreement, Eagle Venture
has agreed to vote in favor of, and has granted Ntera a proxy with respect to,
the transactions contemplated by the Merger Agreement, dated as of March 16,
2004, between Ntera and the Company. Ntera has disclaimed beneficial ownership
of these shares. Shares beneficially
    
    Percentage ofName
    
    owned
    
    shares ownedExecutive Officers and Directors:B. Michael Adler
    
    
    2,691,478
    
    
    
    40.8E. Denton Jones
    
    
    346,000
    
    
    
    5.2Robert A. Farmer
    
    
    199,250
    
    
    
    3.0Elizabeth H. Buchler
    
    
    67,369
    
    
    
    1.0Victor E. Grijalva
    
    
    138,050
    
    
    
    2.1All executive officers and Directors as a group (5)
    
    
    3,442,147
    
    
    
    52.2Other 5% Stockholders:R. Stephen Polley1623 Main Street, #1203
    
    
    425,000
    
    
    
    6.4Dallas, Texas 75201Ntera Holdings, Inc.1020 NW 163rd DriveMiami, Florida 33169
    
    
    2,566,478
    
    
    
    38.9
   *Less than 1% 7




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On March 16, 2004, the Company and Ntera Holdings, Inc., a Delaware corporation
(Ntera), entered into an Agreement and Plan of Merger dated as of that date
(the Merger Agreement), providing for transactions that, once completed, will
result in a change of control of the Company. Under the terms of the Merger Agreement, Ntera will be merged with and
into WorldQuest, with WorldQuest as the surviving company (the Merger).
Stockholders of Ntera at the effective time of the Merger will be entitled to
receive 80% of the common stock of the surviving company, with existing
WorldQuest stockholders owning the remaining 20% of the common stock of the
surviving company. The Merger has been unanimously approved by the Boards of Directors of
both WorldQuest and Ntera, and is subject to various conditions to closing,
including approval by the holders of not less than a majority of WorldQuests
outstanding common stock, approval of continued listing of WorldQuests common
stock on the Nasdaq Stock Market, completion of audited financial statements
for Nteras fiscal year ended December 31, 2003, receipt of a bring-down of
the fairness opinion rendered to the Board of Directors of WorldQuest,
WorldQuests approval of Nteras financial performance and certain other
conditions. Summary of Equity Compensation Plan Shown below is information concerning all equity compensation plans and
individual compensation arrangements in effect as of the end of the last fiscal
year. Equity Compensation Plan InformationNumber ofNumber of
    
    
    
    
    
    SecuritiesSecurities To Be
    
    
    
    
    
    Remaining AvailableIssued Upon
    
    Weighted Average
    
    For Future IssuanceExercise of
    
    Exercise Price of
    
    Under EquityPlan Category
    
    Outstanding Options
    
    Outstanding Options
    
    Compensation PlansEquity compensation
plans approved by
security
holders
    
    
    901,914
    
    
    $
    3.93
    
    
    
    838,086Equity compensation
plans not approved
by
security holders
    
    
    167,867
    
    
    $
    3.33
    
    
    
    Total
    
    
    1,069,781
    
    
    $
    3.84
    
    
    
    838,086
 The equity compensation plans not approved by security holders consists of
options issued outside the Companys option plans to purchase 167,867 shares of
our common stock to a former officer of the Company at an exercise price of
$3.33 with a seven year term. All of these options are vested and outstanding. 8




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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Companys founder and Chairman of the Board holds a controlling
interest in Eagle Venture Capital, LLC (Eagle Venture) which owns
approximately 2.6 million, 41%, of the outstanding shares of common stock of
our Company as of December 31, 2003. For the year ended December 31, 2002 the
Company paid outstanding interest of $47,000 on its term loan from Eagle
Venture. The principal balance of $925,000 was paid on July 24, 2002, thereby
satisfying in full the Companys obligation on the term loan. The Company also
had a $1.4 million line of credit with Eagle Venture, none of which was ever
utilized and which expired on May 5, 2002. Advanced Multimedia Group, Inc. (AMG), a company managed Robert A.
Farmer, our Chairman, has warrants outstanding to acquire 100,000 shares of the
Companys common stock. The warrants were issued to AMG prior to Mr. Farmer
becoming a Director of the Company. The warrants have an exercise price of
$6.00 per share and expire in 2005. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit Fees The aggregate fees billed for each of the fiscal years ended 2003 and 2002
for professional services rendered by Grant Thornton LLP, the Companys
principal accountant for the Companys annual financial statements and review
of financial statements included in the Companys Form 10-QSB for the fiscal
years then ended, including fees for services that are normally provided by
Grant Thornton in connection with statutory and regulatory filings or
engagements for each such fiscal year, were $94,000 and $66,000, respectively. Audit-Related Fees Grant Thornton LLP did not bill the Company any fees for assurance and
related services, which are reasonably related to the performance of the audit
or review of the Companys financial statements and are not reported in under
the caption Audit Fees above, in either of the fiscal years ended 2002 and
2003. Tax Fees The aggregate fees billed for each of the fiscal years ended 2003 and 2002
for professional services rendered by Grant Thornton LLP for tax compliance,
tax advice and tax planning were $10,000 and $10,000, respectively. These fees
consisted of tax compliance services and tax advice provided to the Company in
connection with the preparation of its tax returns. All Other Fees The aggregate fees billed for each of the fiscal years ended 2003 and 2002
for products and services provided by Grant Thornton LLP, other than fees
reported under the categories above, were $24,000 and $0, respectively. These
fees consisted primarily of business advisory services to evaluate potential
acquisitions and other transactions. Prior to engagement, the Audit Committee pre-approves these services by
category of service. The fees are budgeted and the Audit Committee requires the
independent auditor and management to report actual fees versus the budget
periodically throughout the year by category of service. During the year,
circumstances may arise when it may become necessary to engage the independent
auditor for additional services not contemplated in the original pre-approval.
In those instances, the Audit Committee requires specific pre-approval before
engaging the independent auditor. The Audit Committee may delegate pre-approval authority to one or more of
its members. The member to whom such authority is delegated must report, for
informational purposes only, any pre-approval decisions to the Audit Committee
at its next scheduled meeting. 9




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SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. WORLDQUEST NETWORKS, INC.April 30, 2004
    /s/ B. Michael AdlerB. Michael AdlerPresident and Chief Executive Officer

(Principal Executive Officer) April 30, 2004
    /s/ Victor E. GrijalvaVictor E. GrijalvaVice President, Chief Financial Officer, Secretary and

Treasurer (Principal Financial and Accounting Officer) 10