<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                   For the fiscal year ended December 31, 2001

                                       OR

| |   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                    For the transition period ___________ to

                         Commission file number 0-27751

                            WORLDQUEST NETWORKS, INC.
                 (Name of small business issuer in its charter)

                      DELAWARE                                 75-2838415
           (State or other jurisdiction of                 (I.R.S. Employer
            incorporation 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

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. |X|

The issuer's revenues for its most recent fiscal year were: $12,176,208.

The aggregate market value of the voting common stock held by non-affiliates of
the issuer, based on the closing sales price of $2.75 per share, was $9,012,443
as of December 31, 2001.

At March 1, 2002, the registrant had outstanding 6,386,199 shares of par value
$.01 common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Annual Report on Form 10-KSB incorporates certain information
by reference from the definitive Proxy Statement for the registrant's 2002
Annual Meeting of Stockholders.

Transitional Small Business Disclosure Format (check one):

                     Yes  | |              No  |X|

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>      <C>                                                                            <C>
PART I
ITEM 1.  DESCRIPTION OF BUSINESS......................................................   3
ITEM 2.  DESCRIPTION OF PROPERTY......................................................  12
ITEM 3.  LEGAL PROCEEDINGS............................................................  12
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........................  13

PART II
ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....................  14
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ...................  15
ITEM 7.  FINANCIAL STATEMENTS.........................................................  25
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE..........................................  25

PART III
ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL.........................  26
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ..................  26
ITEM 10. EXECUTIVE COMPENSATION ......................................................  25
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
</TABLE>


                                       2
<PAGE>

                            WORLDQUEST NETWORKS, INC.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

FORWARD LOOKING STATEMENTS

      This Form 10-KSB includes certain statements that are not historical facts
and are deemed to be "forward looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934. See Item 6 - "Management's
Discussion and Analysis or Plan of Operation -- Forward Looking Statements" for
a further discussion of these "forward looking statements."

GENERAL

      We are an international Internet telephony and money transfer company. Our
customers utilize our networks of Internet gateways and other traditional
networks to place long-distance calls online at discounted rates. We also sell
virtual calling cards processed through other companies' platforms and from time
to time we sell our excess capacity to other long distance carriers. We market
our WebOrganizer, an intelligent address book and calendar that enables
customers to make domestic and international phone calls from anywhere in the
world. Through our wholly-owned subsidiary, buyindiaonline.com (known as
Clicks2India.com), we also provide a web service that enables customers to send
money and a personalized message from the United States to friends, family, or
others in India over our Web and telephony network. We advertise, sell and
deliver our products and services worldwide through the Internet.

      All of our calls are made from phone-to-phone over our networks. The voice
quality of our Internet carried calls is virtually the same as an international
telephone call carried over a traditional telephone line. We believe consumers
are more familiar and comfortable using telephones to make calls, as opposed to
computers which have historically been used for Internet telephony.

      We focus on the international long distance market, with particular
emphasis on the calling patterns between the United States and various
countries. Our virtual calling cards and the WebOrganizer may be used to call
from the United States to other countries, to call from other countries to the
United States, or to call between countries outside the United States. A
substantial portion of our revenues is derived from the sale of virtual prepaid
phone cards to customers calling from the United States to India.

      As of December 31, 2001, Eagle Venture Capital, LLC owned approximately
2.7 million, 42%, of our outstanding shares of common stock. Eagle Venture
Capital, LLC is primarily owned by our founder and Chairman of the Board.

INDUSTRY BACKGROUND

      Emergence of Internet Telephony. Internet telephony or Voice over Internet
protocol (VOIP) has emerged as a low cost alternative to traditional long
distance telephony. With VOIP, voice calls are instantly transformed from analog
to a digital signal and transmitted via the Internet to any telephone in the
world. Once a call reaches its destination, the data is transformed back into
analog voice format and forwarded to the recipient via the public switched
telephone network. Routing calls over the Internet is more cost-effective than
routing calls over traditional circuit-switched networks, because the
packet-switching technology that enables Internet telephony is more efficient
than traditional circuit-switched voice technology. Packet-based networks,
unlike circuit-based networks, do not require a fixed amount of bandwidth to be
reserved for each call. This allows voice and data calls to be pooled, which
means that packet networks can carry more calls with the same amount of
bandwidth. This greater efficiency creates network cost savings that can be
passed on to the consumer in the form of lower long distance rates. Also, the
use of the Internet bypasses a significant portion of international long
distance networks and the relevant tariffs. According to the research firm Frost
& Sullivan, wholesale and retail VOIP traffic worldwide exceeded 15 billion
minutes in 2000. The firm predicts that projected traffic levels of VOIP will
account for approximately 75% of world voice services with revenues in excess of
$21 billion by 2007.


                                       3
<PAGE>

      Emergence of Prepaid Calling Card Industry. International Data Corporation
estimates the total number of United States households using prepaid calling
cards will grow from 29.8 million to 49.3 million in 2005. Furthermore, it
estimates that the market for prepaid calling cards will expand from $3.4
billion to $5.3 billion at the end of 2005. This growth is attributed to three
trends according to industry sources. First, the larger telecommunications
companies have come to understand the strategic and financial benefits of
prepaid calling cards. Second, consumers are becoming more aware of various
advantages of prepaid cards. Third, businesses are beginning to purchase prepaid
cards as a means of controlling telephony costs and simplifying record keeping.
We believe that the affordable pricing, convenience and enhanced features of
prepaid calling cards has attracted price sensitive customers, business
travelers, international callers and other users of long distance service. Also,
while prepaid calling cards are relatively new in the United States, they have
been a widely used and accepted method of making telephone calls in Europe and
Asia since the 1970s.

OUR TELEPHONY SERVICE PRODUCTS

      Virtual Prepaid Calling Cards. We sell virtual prepaid calling cards over
the Internet. They are virtual because we do not issue a physical card. We
electronically issue a personal identification number, or PIN, to the customer
when the electronic purchase transaction is completed. Once sold, the virtual
calling card can be used immediately to make international and domestic long
distance calls. Historically, substantially all of the minutes purchased on our
virtual calling cards have been used within 45 days of purchase. We believe this
rapid use and the convenience of our Web site and our "buy it now, use it now"
capability fosters repeat purchases and repeat customers.

      Our system functions as follows: A potential customer accesses our Web
site, follows the prompts to enter their credit card information to purchase the
virtual calling card, we verify the credit card within seconds, and the
confidential PIN and a toll free number is displayed for the customer to record,
and the virtual calling card can be used immediately to place a call.

      Our virtual calling cards give us the flexibility of promptly changing the
rates and features to respond to changing consumer demand, rather than having an
inventory of physical cards with set features that cannot be changed until all
are recalled or used. This also allows us to offer and test several different
types of virtual calling cards with varying pricing features, thus providing a
greater selection to our customers.

      Our Web site is accessible 24 hours per day, seven days a week, so we are
not constrained by the hours a retail store would be open for business. Our Web
site may also be reached from the customer's home or office. The customer is not
required to physically travel to another location to make a purchase and receive
delivery. Our online purchasing and delivery also allows us to deliver a broad
selection of products to customers worldwide in rural or other locations that do
not have convenient access to physical stores.

      U.S. Access. Our U.S. Access virtual calling cards provide access to our
network for calls from the United States to more than 241 countries and
territories. When using the U.S. Access virtual calling card for a call from the
United States to another country, the customer uses a touch tone telephone to
dial a toll free number and enters the PIN and the telephone number the customer
seeks to reach. Our enhanced services platform determines whether the virtual
calling card is valid and the number of call minutes remaining on it, based on
the rate for the country being called. The platform completes the call and
reduces the available credit balance on the virtual calling card at the
conclusion of the call.

      World Access. When using the World Access virtual calling card for a call
from another country to the United States or from country to country outside the
United States, the customer initiates the call through the Internet by accessing
our Web site and going to the world access page on their WebOrganizer. On the
World Access page, a virtual card is displayed and the customer enters the
telephone number where he or she is, the telephone number he or she wants to
call and his or her PIN and then "clicks" on the call button. This information
is transmitted over the Internet to our platform. The platform determines the
virtual calling card is valid and has a sufficient balance and then routes a
call to the customer at the number where he or she is. When the customer
answers, the platform completes the call by connecting to the number the
customer wanted to call. From their WebOrganizer, these features


                                       4
<PAGE>

allow customers to make calls from anywhere in the world at our international
United States long distance rates using the virtual calling card and Internet
access to our Web site and platform.

      In certain countries where we have an Internet gateway, we can e-mail to
customers a local telephone number to dial. This number connects to our platform
the same as if the toll free number in the United States had been dialed and the
process is the same from that point. This feature allows a customer to place a
call from that country to the United States or another country with a touch-tone
telephone and without the need for Internet access to our Web site and platform.
These calls are also at our international United States long distance rates.

      WebOrganizer(TM). The WebOrganizer is an intelligent electronic address
book and calendar which is maintained by us on our secure Web site. This service
is interactive so the customer can add and delete names, numbers and events. The
WebOrganizer enables an approved customer to make an international long distance
call from any country to any other country at our international United States
long distance rates, or domestic calls within the United States. The customer
simply accesses our Web site and follows the prompts to the page for his or her
WebOrganizer, selects the number where the customer is located and then "clicks"
the name and number of the person to be called or to whom the facsimile
transmission is to be sent.

      Resale of Virtual Calling Cards. We also buy virtual calling cards
processed through other companies' platforms. We buy them at a discount and sell
them to our customers on our Web site as our virtual calling cards. We sell
these virtual calling cards for calls from the United States to other countries
where we have not established our own Internet network and where our negotiated
rates with our international long distance carriers are not as favorable. We
estimate that approximately 65.8% and 72.5%, respectively, of our revenues for
the fiscal years ended December 31, 2001 and 2000 were generated from these
virtual calling cards processed through other companies' platforms. As we
increase our infrastructure and negotiate better rates with international
carriers, it is expected that the resale of these virtual calling cards will
become a less significant part of our total business.

      Resale of Network Capacity. From time to time we sell our excess network
capacity to other long distance carriers. For the years ended December 31, 2001
and 2000, approximately 18.4% and 38.8%, respectively, of our total revenues
were generated from selling our excess network capacity.

OUR INTERNATIONAL TELEPHONY NETWORKS

      Our Enhanced Services Platform. Our enhanced services platform is a
specialized telephone switch. It is connected to our Web site and database and
to our network of outgoing and incoming telephone lines and Internet lines. It
sets up all customer account and PIN information when a virtual calling card is
purchased and immediately activates the virtual calling card so it can be used
at the time of purchase. The platform also accepts and evaluates all calls from
virtual calling card holders over the toll free number and over the Internet and
confirms the validity of the virtual calling card and remaining balance. We have
also programmed into the platform a lowest cost routing matrix. This matrix
automatically routes each call over the route most economical to us. This means
it will select our international carrier with the lowest rate or the Internet if
we have a gateway in the call destination country. Focusing on the international
market, the use of our platform is spread throughout the day as a result of the
different world time zones.

      We plan to develop and offer new products and services, which may require
modifications and enhancements to our platform. For any modification or
enhancement, we will either contract with the manufacturer to develop new
software or develop the software ourselves, or a combination of both. In the
past, we have experienced delays when we have tried to upgrade our platform. If
the software cannot be developed cost effectively, or there will be significant
delays, we may elect to abandon a potential product or service in favor of one
that can be timely developed on a cost effective basis. There can be no
assurance that we can successfully develop the software to enable us to offer
new products or services.

      Our Internet Gateway Network. As of December 31, 2001, we had 12
international gateways operational in Mexico, Sri Lanka, India and a domestic
gateway operational in Dallas, Texas. In India, we have 8 gateways operational
allowing us to terminate calls over our area network in the Indian cities of New
Delhi, Bangalore, Punjab and Mumbai. We intend to place more Internet gateways
in the countries in which we currently operate and also in


                                       5
<PAGE>

various other countries. Before we place a gateway in another country, we enter
into contractual relationships with local persons or entities to operate them.
We typically own or lease the gateway or have the right to purchase it and the
local person or entity is responsible for procuring local Internet provider
connection and local telephone lines and complying with local law. We pay the
local person or entity a negotiated rate per minute for terminating or
originating calls through the gateway.

      Our gateways allow for voice quality transmission through the Internet.
The historical poor sound quality of Internet voice transmission is due to the
Internet not being created for simultaneous voice traffic. Unlike conventional
voice communication circuits, in which the entire circuit is reserved for a
call, Internet telephony uses packet switching technology, in which voice data
is divided into discrete packets that are transmitted over the Internet. These
packets must travel through several routers in order to reach their destination,
which may cause misrouting and delays in transmission and reception. The
software in our gateways connect the packet switched data transmitted over the
Internet to circuit switched public telephone networks in such a manner that
virtually eliminates the delay in transmission normally involved in Internet
voice transmission and the resulting pause and echo effect. We also select
Internet service providers with Internet connections that permit us to limit the
delay between their Internet connections and ours to less than 200 to 400
milliseconds. This also improves the voice quality of our transmissions over the
Internet.

      Our Internet gateways enable us to route voice quality calls through our
enhanced services platform to and from the country via the public Internet or
private intranet networks such as a frame relay network. The cost of these calls
is based on the local telephone rates for the country where the gateway is
located. The cost is not based on international or local long distance rates.

      Our Leased Lines Network. We also lease international telephone lines to
transmit calls. Our lease agreements obligate the carriers to terminate calls
routed by us to them at different rates for different countries and territories.
With these agreements, we have access to more than 241 countries and
territories. Leased capacity is typically obtained on a per-minute basis. Our
agreements are typically one-year agreements with 30-day cancellation rights by
either party. Rates are adjusted approximately every 30 days, are based on
volume and generally decline as volume increases. We are dependent on these
carriers to terminate our calls, and the loss of one or more of them as a source
for terminating calls could have a material adverse affect on us. However, we
believe there are numerous international long distance carriers that transport
calls to the countries we desire to target and we believe we could replace any
of the carriers we lost. If the rates of any replacement carrier are higher, or
our existing carriers raise their rates, our profit margins would decrease. We
also sell to other long distance carriers any excess line capacity we have.
Excess line capacity is the remaining capacity on our telephone lines not used
by us to terminate our own calls during any given month.

      Our Third Party Contracts. Our success depends, in part, on our ability to
continue to lease long distance telephone capacity from third parties at
cost-effective rates to serve the foreign countries we target. It also depends,
in part, on our ability to maintain our contractual relationships with local
terminating parties in those countries where we have Internet gateways. If we
lose our leases or contracts or if these parties are unable to provide these
services, we believe we could replace them. However, it would cause a disruption
of our business until they are replaced. Also, any replacement leases or
contracts may not be at rates or on terms as favorable to us. For instance,
during 2001 we experienced losses of $2,548,000 in connection with the loss of
third party contracts (See Item 6 - "Management's Discussion and Analysis or
Plan of Operation - Impairment Charges").

CREDIT CARD PROCESSING ARRANGEMENTS

      All sales of our virtual calling cards are made over the Internet through
credit card purchases. We use credit card processing companies to verify credit
cards. These companies are connected to our platform and database and
verification or denial is usually accomplished within seconds. We pay these
processing companies a percentage of sales as their fee.

                                       6
<PAGE>
SALES AND MARKETING

      We have developed a marketing strategy focused on increasing customer
traffic to our Web site and strengthening our brand name.

      Internet Advertising. We have taken a selective approach in our
advertising strategy. We attempt to maximize the return from promotional
expenditures by choosing advertising media based on the cost relative to the
likely audience and ability to generate increased traffic for our Web site. We
generally identify a country and customer group to whom we desire to market our
virtual calling cards. We place advertisements on various Web sites and Internet
portals frequently visited by this customer group in the United States and
abroad. These advertisements usually take the form of banner ads that encourage
readers to click through directly to our Web site. We believe placing banner
advertising on these Web sites and portals may significantly increase our
targeted exposure to prospective customers and increase our name identity.

      Customer Electronic Mail Broadcasts. We actively market to our base of
customers through e-mail broadcasts. All new virtual calling card purchasers are
automatically added to our electronic mailing list, which consists of over
258,000 prior purchasers as of March 1, 2002 and Internet customers of our local
Internet service providers in other countries. We e-mail messages on a periodic
basis to our customers announcing new rates, new countries, new products and new
features.

      Electronic Mail to Select Mailing Lists. We also deliver e-mail broadcasts
to certain select mailing lists from time to time announcing pertinent
information, including the addition of a new country, new products and rates.

      Other Methods. We will continually review other potential cost-effective
methods of advertising and marketing our products and services through the
Internet and other channels. Such methods may include the use of an affiliate
program, chat rooms, video e-mail, ethnic movie houses, ethnic cable television
and other methods.

      WebOrganizer(TM). WebOrganizer(TM) is an intelligent address book and
calendar that enables customers to make domestic and international phone calls
and some faxes online with two clicks of a computer mouse from anywhere in the
world. Our WebOrganizer(TM) is currently available in English, Spanish and
Portuguese.

CUSTOMER SUPPORT AND SERVICE

      We believe our ability to establish and maintain long-term relationships
with our customers and encourage repeat purchases is dependent, in part, on the
strength of our customer support and service operations and staff. Our customer
support and service personnel are available from 7:00 a.m. to 11:00 p.m. Central
Time, Monday through Friday, and from 9:00 a.m. to 7:00 p.m. Central time on
Saturday and Sunday to provide assistance via e-mail or telephone. They are
responsible for handling all customer inquiries.

      We provide pre- and post-sales support via both e-mail and telephone
service during business hours. If a customer has encountered a problem in
ordering or using our products, our customer service department will take the
call, or the e-mail, and respond promptly during business hours. If the virtual
calling card is from our own inventory and operates on our enhanced services
platform, problems can be resolved promptly and usually within one business day.
For virtual calling cards that we sell as a reseller, directing traffic through
someone else's switch, we are able to respond to the customer promptly but
resolution of the matter may take two or more business days.

      Our Web site has been designed around industry standard architectures to
reduce downtime in the event of outages or catastrophic occurrences. Our Web
site provides 24 hour a day, seven day a week availability. Our Web site
operations staff consists of systems administrators who manage, monitor and
operate our Web site. The continued uninterrupted operation of our Web site is
essential to our business, and it is the job of the site operations staff to
ensure, to the greatest extent possible, the reliability of our Web site. Our
network is built around a redundant, high availability backbone. In order to
achieve maximum redundancy, our network has several connections to the Internet.
We believe these telecommunications and Internet service facilities are
essential to our operation and we anticipate upgrading these facilities as
volume and demand for our services grow.

                                       7
<PAGE>
TELEPHONY TECHNOLOGY

      We use a combination of our own proprietary software applications and
commercially available licensed technology to conduct our Internet and telephone
routing operations.

      Proprietary Technology. We have developed proprietary customer software
which permits a customer to purchase a virtual calling card on our Web site
using a credit card and to have the virtual calling card delivered while on our
Web site. We have also developed proprietary customer software to allow our
world access virtual calling cards and phone collect PINs to initiate calls
through regular telephone lines using our Web site and enhanced services
platform, and we have developed various proprietary credit and fraud management
applications which aid us in checking credit and limiting fraudulent
transactions.

      Our engineering staff consists of software development engineers and
consultants. We historically have developed and expect to continue to develop
proprietary software internally. Our engineering strategy focuses on the
development of our Web site, which includes the enhancement of features and
functionality of our existing software components, the development of additional
new software components, and the integration of off-the-shelf components into
our systems.

      Commercially Available Licensed Technology. Our strategy has also been to
license commercially available technology whenever possible rather than seek a
custom-made or internally developed solution. We believe that this strategy
enables us to reduce our operating costs and to respond to changing demands due
to growth and technological shifts. This strategy also allows us to focus our
development efforts on creating and enhancing the specialized, proprietary
software applications that are unique to our business. Listed below are some of
our key architectural components:

      -     High speed links to the Internet through the backbones of major
            providers;

      -     Dell clustered Servers for Web and data base applications running
            Windows NT, Windows 2000 and Microsoft SQL Server 7.0;

      -     Microsoft Internet Information Server 4.0 has been chosen for its
            ability to secure sensitive customer information through SSL
            encryption; and

      -     Microsoft SQL Server 7.0 is a relational database within which all
            customer names and addresses, PINs, number of purchases and call
            records are stored.

      We depend on Internet service providers to provide Internet access to us
and our customers. As of March 1, 2002, we had two Internet service providers in
Dallas. Our local terminating parties in foreign countries also rely on local
Internet service providers for access to the Internet in their countries. If we
lost our connection with both of our Dallas Internet service providers, we could
not sell our virtual calling cards through our Web site, and Web initiated calls
could not be made by our customers until the connection was reestablished. If a
local terminating party in a foreign country loses its Internet connection, we
could not route calls over the Internet to that destination until the connection
was reestablished. These failures could cause us to lose customers and our
ability to sell virtual calling cards and telephone services would be affected.

GOVERNMENT REGULATION

      Regulation of the Internet. The United States Congress and the Federal
courts have adopted legislation that requires certain aspect of the Internet,
including online content, user privacy, taxation, liability for third-party
activities, and jurisdiction. In addition, a number of initiatives pending in
Congress and state legislatures would prohibit or restrict advertising of or
sale of certain products and services on the Internet, which may have the effect
of raising the cost of doing business generally on the Internet. The European
Union has also enacted several directives relating to the Internet, one of which
addresses online commerce. In addition, federal, state, local and foreign
governmental organizations are considering other legislative and regulatory
proposals that would regulate the Internet. Increased regulation of the Internet
may decrease growth, which may negatively impact the cost of doing business via
the Internet or otherwise materially adversely affect our business, financial
condition, and results of operation.


                                       8
<PAGE>

      Potential Regulation of Internet Telephony. To our knowledge, there are
currently no domestic and few international laws or regulations that prohibit
the transmission of voice communications over the Internet. If Congress, the
FCC, state regulatory agencies or governments of other countries impose
substantial regulations relating to Internet telephony, the growth of our
business could be adversely affected. In the United States, several efforts have
been made to enact federal legislation that would either regulate or exempt from
regulation telecommunication services provided over the Internet. State public
utility commissions may also attempt to regulate the provision of intrastate
Internet telephony services. However, the FCC has issued two decisions that
suggest that all transmissions over the Internet may be jurisdictionally
interstate, and these decisions may restrict the ability of state public utility
commissions to regulate Internet telephony. Recently, however, a Colorado court
ruled that Internet telephony companies would be subject to payment of
originating and terminating access charges to the incumbent provider. Imposition
of such charges on our services would increase our costs. Internationally, a
number of countries that currently prohibit competition in the provision of
voice telephony have also prohibited Internet telephony. Other countries permit
but regulate Internet telephony.

      On April 10, 1998, the FCC issued a Report to Congress concerning its
implementation of the universal service provisions of the Telecommunications
Act. In the Report, the FCC indicated that it would examine the question of
whether any forms of "phone-to-phone" Internet Protocol telephony are
information services, which are unregulated, or telecommunications services,
which are fully regulated. The Report noted that the FCC did not have, as of the
date of the Report, an adequate record on which to make any definitive
pronouncements. The FCC did, however, note that the record before it suggested
that some forms of phone-to-phone Internet telephony appear to have the same
functionality as non-Internet Protocol telecommunications services.

      While the FCC found that it needed a more complete record to establish new
rules, it tentatively concluded that providers of phone-to-phone Internet
telephony services should be treated like other providers of telephone service.
This means they should be required to make payments into Federal universal
service subsidy programs. To date, the FCC has taken no further action, and has
not imposed this obligation on Internet telephony providers. It may do so at
some time in the future, however, such a decision could have a material
adverse effect on our business, increasing our costs, and the price at which we
can offer our Internet telephony services.

      Regulation of Leased Lines and Carriers. When we lease long distance
telephone capacity from third-party carriers, we rely on them to comply with
local laws and regulations. We have no control over the manner in which these
companies operate in these countries. Foreign regulatory, judicial, legislative
or political entities may raise issues regarding the compliance of these
companies with local laws or regulations, or limit their ability to carry our
calls.

      State Laws. Several states have also proposed legislation that would limit
the uses of personal user information gathered online or require online services
to establish privacy policies. Changes to existing laws or the passage of new
laws intended to address these issues could reduce demand for our services or
increase the cost of doing business. In addition, because our services are
accessible worldwide, and we facilitate the sale of goods to users worldwide,
other jurisdictions may claim that we are required to comply with their laws. We
are qualified to do business in Delaware and Texas only, and failure by us to
qualify as a foreign corporation in a jurisdiction where we are required to do
so could subject us to taxes and penalties for the failure to qualify and could
result in our inability to enforce contracts in such jurisdictions. Any such new
legislation or regulation, or the application of laws or regulations from
jurisdictions whose laws do not currently apply to our business, could have a
material adverse effect on our business, financial condition and operating
results.

      Sales Taxes. We do not currently collect sales or other similar taxes for
virtual calling cards or other services sold through our Web site, other than
for virtual calling cards sold to Texas residents. However, one or more states
may seek to impose sales tax or similar collection obligations on out-of-state
companies, such as ours, which engage in Internet commerce. A number of
proposals have been made at the state and local level that would impose
additional taxes on the sale of goods and services through the Internet. Such
proposals, if adopted, could substantially impair the growth of online commerce,
and could adversely affect our opportunity to derive financial benefit from such
activities. Moreover, a successful assertion by one or more states or any
foreign country that we


                                       9
<PAGE>

should collect sales or other taxes on the sale of virtual calling cards or
services on our system could have a material adverse effect on our operations.

COMPETITION

      With respect to prepaid calling cards, we compete with many of the largest
telecommunications providers, including AT&T, MCI WorldCom, and Sprint. These
companies are substantially larger and have greater financial, technical,
engineering, personnel and marketing resources, longer operating histories,
greater name recognition and larger customer bases than we do. We also compete
with smaller, emerging carriers in the prepaid calling card market, including
RSL Communications, IDT Corp. and ValuComm Communications Corp. We may also
compete with large operators in other countries. These companies may have
larger, more established customer bases and other competitive advantages.
Deregulation in other countries could also result in significant rate
reductions. We believe that additional competitors will be attracted to the
prepaid card market. These competitors include Internet-based service providers
and other telecommunications companies. Competition from existing or new
competitors could substantially reduce our revenues from the sale of these
cards. A general decrease in telecommunication rates charged by international
long distance carriers could also have a negative effect on our operations.

      An increasing number of large, well-capitalized companies are entering the
market for Internet telephony products and services. As a result, we may not be
able to compete effectively with our competitors in this market, or to increase
our customer base. Various major long distance providers, including AT&T, Bell
Atlantic Corporation and Deutsche Telekom AG, as well as other major companies,
including Motorola, Inc., Intel Corporation and AOL-Time Warner, Inc., have all
entered or plan to enter the Internet telephony market, in some cases by
investing in companies engaged in the development of Internet telephony
products. Our competitors also include a number of companies that have
introduced services that make Internet telephony solutions available to
businesses and consumers. Net2Phone, Delta Three, ITXC Corp., iBasis, Inc. and
MCI WorldCom provide a range of Internet telephony services to consumers and
businesses that are similar to the ones we offer. Several other companies,
including AT&T, Sprint and Qwest Communications, have announced their intention
to offer these services on a wider basis in both the United States and
internationally.

      In addition, we compete in the market for Internet telephony services with
companies that produce software and other computer equipment that may be
installed on a user's computer to permit voice communications over the Internet.
Current Internet telephony products include VocalTec Communications, Ltd.'s
Internet Phone, QuarterDeck Corporation's WebPhone and Microsoft's NetMeeting.
Also, a number of large companies, including Cisco Systems, Inc., Lucent
Technologies, Inc., Northern Telecom Limited, Nuera Communications, Clarent
Corporation and Dialogic Corp. offer or plan to offer server-based Internet
telephony products. These products are expected to allow communications over the
Internet between parties using a multimedia PC and a telephone and between two
parties using telephones.

      Increased competition may result in reduced operating margins, loss of
market share and diminished value in our brand. We cannot be certain we will be
able to compete successfully against current and future competitors. As a
strategic response to changes in the competitive environment, we may, from time
to time, make pricing, service or marketing decisions that could have a material
adverse effect on our business, financial condition and operating results.

      New technologies and the expansion of existing technologies may increase
competitive pressures by enabling our competitors to offer lower-cost services.
Certain Web-based applications that direct Internet traffic to other Web sites
may channel users to services which compete with us. In addition, companies that
control access to transactions through network access or Web browsers could
promote our competitors or charge us substantial fees for inclusion. The
occurrence of any of these events could have a material adverse effect on our
business, financial condition and operating results.

THE BUSINESS OF CLICKS2INDIA.COM

      On December 6, 2001, we acquired all of the issued and outstanding common
stock of buyindiaonline.com, Inc., (known as Clicks2India.com) for approximately
$275,000 in cash plus liabilities assumed


                                       10
<PAGE>

of $34,000 and accrued acquisition costs of $84,000. Clicks2India.com is a
web-based company that enables consumers to send money and a personalized
message from the United States to friends, family or others in India.

      Clicks2India has a strategic relationship with the Punjab National Bank,
the second largest bank in India with more than 1,000 branches, approval from
the Reserve Bank of India, a sophisticated on-line customer sales process, and a
streamlined, efficient local delivery system that allows delivery of funds from
the United States to someone in India generally within 48 hours.

      To transfer funds, a U.S. based customer accesses Clicks2India's web site,
enters the recipient's name and a personalized message along with a designated
major credit card or electronic check for payment of funds. Upon credit card or
electronic check authorization, funds are wired to India and delivered by local
courier to the designated recipient using the Punjab National Bank network.
Clicks2India receives revenue as a percentage of the funds transferred. Since
the launch of Clicks2India in October 2000, over $2.5 million has transferred to
more than 7,500 customers with total revenue through December 31, 2001 of
$127,000.

      Clicks2India services are aimed primarily at over 3 million people of
Indian origin who live or work in the United States but maintain strong cultural
and financial relationships with friends and families in India. According to
the Reserve Bank of India, more than 40% of the $12 billion remitted to India
during the year 2000 came from North America.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

      Our success depends in part upon our ability to protect our proprietary
technology and other intellectual property rights. We rely on a combination of
copyright, trademark, service mark and trade secret laws and contractual
restrictions to establish and protect our proprietary rights in our products and
services. We protect our proprietary software through United States copyright
laws, and the source code for our proprietary software is protected under trade
secret laws.

      Effective trademark, service mark, copyright and trade secret protection
may not be available in every country in which our services are made available
online, and thus, the steps that we take may be inadequate to protect our
rights. We cannot assure you that we will be issued any of these trademarks and
may find that such marks are unavailable.

      We currently hold various Internet domain names relating to our
operations, including "wqn.com," "creditcardphone.com," "Clicks2India.com",
"buyindiaonline.com", "Cash2India.com", "click2call.net," "phone-2-phone.com,"
"click-n-dial.com," and "phonecollect.com." Governmental agencies and their
designees are responsible for regulating the acquisition and maintenance of
domain names. The regulation of domain names in the United States and other
countries may change in the near future. Such changes in the United States are
expected to include a transition from the current system to a system that is
controlled by a non-profit corporation and the creation of additional top-level
domains. Governing bodies may establish additional top-level domain name
registrars or modify the requirements for holding domain names. As a result, we
may be unable to acquire or maintain relevant domain names in countries in which
we conduct business. Furthermore, the relationship between regulations governing
domain names and laws protecting trademarks and similar proprietary rights is
unclear. Therefore, we may be unable to prevent third parties from acquiring
domain names that are similar to, infringe upon or otherwise decrease the value
of our trademarks and other proprietary rights.

      We have entered into confidentiality and assignment agreements with our
employees and contractors, and nondisclosure agreements with parties with whom
we conduct business. We do this in order to limit access to and disclosure of
our proprietary information. These agreements are designed to make it clear that
we own any technology developed by our employees and contractors during their
engagement by us and to protect us against unauthorized disclosure of our
proprietary information. We cannot assure you that these contractual
arrangements or the other steps taken by us to protect our intellectual property
will prove sufficient. To date, we have not actively policed unauthorized use of
our technology. This is because the global nature of the Internet makes it
difficult to control the ultimate destination or security of software or other
data transmitted.


                                       11
<PAGE>

      In the future, we may license certain proprietary rights to third
parties. While we will attempt to ensure that the quality of the WorldQuest
Networks' brand is maintained by such licensees, we cannot assure you that such
licensees will not take actions that might materially adversely affect the value
of our proprietary rights or reputation, and have a material adverse effect on
our business, financial condition and operating results. We also rely on certain
technologies that we license from third parties. These may include suppliers of
key database technology, enhanced services platforms, gateway server platforms,
operating systems and specific hardware components for our service. We cannot
assure you that these third-party technology licenses will continue to be
available to us on commercially reasonable terms. The loss of such technology
could require us to obtain substitute technology of lower quality or performance
standards or at greater cost, which could materially adversely affect our
business, financial condition and operating results.

RESEARCH AND DEVELOPMENT

      We consider the amounts spent by us for research and development during
2001 and 2000 to be immaterial.

ENVIRONMENTAL MATTERS

      Environmental contingencies are not expected to have a material adverse
effect on our results of operations or financial condition.

EMPLOYEES

      As of December 31, 2001, we had 28 full-time employees. None of our
employees are represented by a labor union. We have not experienced any work
stoppages and consider our employee relations to be good.

ITEM 2. DESCRIPTION OF PROPERTY

      Our executive offices are located in Dallas, Texas, where we lease
approximately 6,200 square feet under a lease at a monthly rental of
approximately $7,800 which expires August 31, 2003. We also have a network hub
in Dallas, Texas under a co-location arrangement. We believe our space is
adequate for our current needs. As we expand, we expect that suitable additional
space will be available on commercially reasonable terms, although no assurance
can be made in this regard. We also believe our property is adequately covered
by insurance.

ITEM 3. LEGAL PROCEEDINGS

      In December 1996, we applied to the United States Patent and Trademark
Office to register the trademarks: "WorldQuest" and "WorldQuest Networks." We
received a registration for the trademark "WorldQuest" from the U.S. Patent and
Trademark Office on November 23, 1999. In October 1997, the Patent and Trademark
Office issued a notice of publication regarding our application to register
"WorldQuest Networks" as a trademark. In response to that notice, Qwest
Communications filed a notice of opposition in September 1998, which is
currently pending before the Patent and Trademark Office. In July 2000, Qwest
Communications instituted a cancellation proceeding in the Patent and Trademark
Office for the registered trademark "WorldQuest." In December 2001, a judgment
was made in the Company's favor whereby Qwest's motion to cancel our
"WorldQuest" trademark was dismissed, however, Qwest has filed a motion
appealing the judgment. If we do not prevail, the registration for "WorldQuest"
will be cancelled, we will not be able to obtain a registered trademark for
"WorldQuest Networks" and we could be required to stop using the names or pay a
fee to Qwest for permission to use the names.

      The Company is a defendant from time to time in lawsuits and disputes
arising in the ordinary course of business. We are not involved in any other
material legal proceedings at this time.


                                       12
<PAGE>

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

      No matters were submitted to a vote of security holders of the Company
during the fourth quarter ended December 31, 2001.


                                       13
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      WorldQuest's Common Stock trades on the NASDAQ National Market under the
symbol "WQNI". The following table sets forth the per share range of high and
low sales prices of our Common Stock for the periods indicated:

<TABLE>
<CAPTION>
                                                               HIGH       LOW
<S>                                                            <C>        <C>
YEAR ENDED DECEMBER 31, 2001
First Quarter............................................      $3.44      $2.00
Second Quarter...........................................      $3.50      $1.94
Third Quarter ...........................................      $3.10      $1.84
Fourth Quarter...........................................      $3.15      $1.85
</TABLE>

      As of March 1, 2002, there were approximately 31 stockholders of record of
our Common Stock and approximately 2,200 additional beneficial owners of our
Common Stock.

DIVIDEND POLICY

      We have never paid cash dividends on our Common Stock and anticipate that
we will continue to retain our earnings, if any, to finance the growth of our
business.

USE OF PROCEEDS OF INITIAL PUBLIC OFFERING

      As noted above, the effective date of our first registration statement,
filed on Form SB-2 under the Securities Act of 1933 (no. 333-93019) relating to
our initial public offering of our Common Stock, was February 4, 2000. A total
of 3,162,500 shares of our Common Stock were sold at a price of $13.00 per share
to an underwriting syndicate led by Kaufman Bros., L.P., John G. Kinnard and
Company Incorporated and WestPark Capital, Inc. The offering commenced on
February 4, 2000 and the sale of 2,750,000 shares was closed on February 9, 2000
and the sale of an additional 412,500 shares, representing the over-allotment
option, was closed on February 22, 2000. Net proceeds from the offering to
WorldQuest were $36.3 million. From the time of receipt through December 31,
2000, the net proceeds were applied toward:

            -     repayment of indebtedness, $3,532,000;

            -     equipment purchases including additional back-up systems,
                  $3,800,000;

            -     software development, $285,000; and

            -     general corporate purposes, including payment of outstanding
                  payables, payoffs of capital leases, liability insurance
                  premiums, development of strategic relationships and research
                  and development of new products, $3,880,000.

      The remaining proceeds are being used as working capital or are being held
in high quality, short-term investment instruments such as short-term corporate
investment grade or United States Government interest-bearing securities.

      Of the $3,532,000 paid for repayment of indebtedness, $1,440,000 was paid
to Eagle Venture Capital, LLC, which owns approximately 42% of our Common Stock
and is controlled by B. Michael Adler, our Chairman of the Board.


                                       14
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD LOOKING STATEMENTS

      Certain statements in this Form 10-KSB, including statements of our
management's expectations, intentions, plans, objectives and beliefs, including
those contained in or implied by "Management's Discussion and Analysis or Plan
of Operation", are "forward looking statements", within the meaning of Section
21E of the Securities Exchange Act of 1934, that are subject to certain events,
risks and uncertainties that may be outside our control. These forward looking
statements may be identified by the use of words such as "expects,"
"anticipates," "intends," "plans" and similar expressions. They include
statements of our future plans and objectives for our future operations and
statements of future economic performance, information regarding our expansion
and possible results from expansion, our expected growth, our capital budget and
future capital requirements, the availability of funds and our ability to meet
future capital needs, the realization of our deferred tax assets, and the
assumptions described in this report underlying such forward looking statements.
Actual results and developments could differ materially from those expressed in
or implied by such statements due to a number of factors, including without
limitation, those described in the context of such forward looking statements,
our expansion and acquisition strategy, our ability to achieve operating
efficiencies, our dependence on network infrastructure, capacity,
telecommunications carriers and other suppliers, industry pricing and technology
trends, evolving industry standards, domestic and international regulatory
matters, general economic and business conditions, the strength and financial
resources of our competitors, our ability to find and retain skilled personnel,
the political and economic climate in which we conduct operations, the risks
discussed above under "Risk Factors That May Effect Results of Operations and
Financial Condition," and other risk factors described from time to time in our
other documents and reports filed with the Securities and Exchange Commission
(the "Commission"). We do not assume any responsibility to publicly update any
of our forward looking statements regardless whether factors change as a result
of new information, future events or for any other reason.

OVERVIEW

      We were incorporated as a Texas corporation effective October 14, 1996 and
reincorporated as a Delaware corporation effective October 28, 1999. We are an
international Internet telephony and money transfer company. Our customers
utilize our networks of Internet gateways and other traditional networks to
place long-distance calls online at discounted rates. We also sell virtual
calling cards processed through other companies' platforms and from time to time
we sell our excess capacity to other long distance carriers. We market our
WebOrganizer, an intelligent address book and calendar that enables customers to
make domestic and international phone calls from anywhere in the world. We
advertise, sell and deliver our products and services worldwide through the
Internet.

      Effective December 6, 2001, we acquired all of the issued and outstanding
common stock of buyindiaonline.com Inc., (known as Clicks2India.com) for
approximately $275,000 in cash plus liabilities assumed of $34,000 and accrued
acquisition costs of $84,000. Clicks2India.com is a web-based company that
enables consumers to send money and a personalized message from the United
States to friends, family or others in India.

      As of December 31, 2001, Eagle Venture Capital, LLC owned approximately
2.7 million, 42%, of our outstanding shares of common stock. Eagle Venture
Capital, LLC is primarily owned by our founder and Chairman of the Board.

      Our primary source of revenues are the fees we receive from our retail and
wholesale customers for completing calls over our network and contain a variable
expense component, which varies proportionately with the volume of traffic
carried over our network. These revenues are dependent on the volume of voice
traffic carried over the network which is measured in terms of minutes of voice
traffic and the fees per minute of traffic we charge our customers. Revenue from
the sale of prepaid virtual calling cards is deferred and recognized as calling
services are used. Wholesale traffic revenue is recognized as calls are
processed. We bill our retail customers on a prepaid basis through credit cards.
A substantial portion of our revenues is derived from the sale of virtual
prepaid phone cards to customers calling from the United States to India.


                                       15
<PAGE>

      Costs of sales consist primarily of data communication and
telecommunication expenses to terminate long distance traffic over our networks
and are largely proportional to the traffic carried over our network. These
costs include Internet related expenses to send voice traffic over the Internet,
fees we pay to terminate calls, fees we pay to utilize the traditional telephone
network to terminate our calls and expenses incurred to connect our customers to
our network.

      Selling, general and administrative expenses consist of advertising and
promotional expenditures, payroll and related expenses for executive and
administrative personnel, facilities expenses, professional services expenses,
travel and other general corporate expenses. We expect selling, general and
administrative expenses to increase in absolute dollars but decrease as a
percentage of revenue as our sales volume increases.

      Minority interest consists of the portion of earnings and losses of the
two majority owned joint ventures the Company entered into during June 2000 for
the purpose of installation and operation of Internet gateways in foreign
locations attributable to the minority investors. We wrote-off our investments
in these joint ventures during 2001 (see impairment charges in Results of
Operation below).

      Since inception, we have incurred significant losses and, as of December
31, 2001, had an accumulated deficit of $17,776,000. We incurred net losses of
$7,186,000 and $4,745,000 for the years ended December 31, 2001 and 2000,
respectively.

      Our revenues may not continue to grow or even continue at their current
level. We will need to increase our revenues significantly to become profitable,
however, if our revenues do not increase as much as we expect or if our expenses
increase at a greater pace then revenues, we may not achieve profitability or,
if we became profitable, we may not be able to sustain or increase profitability
on a quarterly or annual basis. We expect to incur additional costs and expenses
in 2002 related to:

            -     marketing and advertising related to traffic generation and
                  brand development;

            -     purchases of equipment for our operations and network
                  infrastructure;

            -     the expansion of our telecommunications network into other
                  countries;

            -     the continued development of our Web site transaction
                  processing and network infrastructure;

            -     the development and improvement of additional products and
                  services;

            -     the hiring of additional personnel; and

            -     the payment of commissions to various Internet portals and
                  Internet service providers for marketing our address
                  book/calendar product to their customers.

      We have a limited operating history on which to base an evaluation of our
business and prospects. You must also consider our prospects in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stage of development, particularly companies in new and rapidly evolving
markets such as e-commerce. Such risks for us include, but are not limited to,
an evolving and unpredictable business model and management of growth. To
address these risks, we must, among other things, maintain and expand our
customer base, implement and successfully execute our business and marketing
strategy, continue to develop and upgrade our technology and systems that we use
to process customers' orders and payments, improve our Web site, provide
superior customer service, respond to competitive developments and attract,
retain and motivate qualified personnel. We cannot assure stockholders that we
will be successful in addressing such risks, and our failure to do so could have
a material adverse effect on our business, prospects, financial condition and
results of operations.

                                       16
<PAGE>
RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

REVENUE

      Revenue decreased approximately 6% to $12,176,000 for the year ended
December 31, 2001 from $12,906,000 for the year ended December 31, 2000. This
$730,000 decrease is a result of a $2,757,000 decrease in wholesale revenues
offset by a $2,027,000 increase in retail revenues. The decrease in wholesale
revenues is due primarily to the Company's decision in the second quarter of
2001 to focus on higher-margin retail sales and away from lower-margin, higher
risk wholesale carrier sales. One customer accounted for $898,000 or 40% of our
total wholesale revenues for the year ended December 31, 2001. The increase in
retail revenue is primarily attributable to the aforementioned strategic shift
to focus on higher margin retail sales resulting in an increase in our retail
customer base. We expect revenues in future periods to be comprised primarily of
retail revenues, however, we may supplement our revenue with wholesale traffic
as we see financially beneficial opportunities.

COST OF SALES

      Cost of sales decreased approximately 7% to $10,383,000 for the year ended
December 31, 2001 from $11,109,000 for the year ended December 31, 2000. This
$726,000 decrease is primarily attributable to the reduction in net revenues for
the period. Gross margin percentage for the year 2001 was approximately 15%
compared to approximately 14% in 2000. The increase in gross margin percentage
is primarily attributable to a shift in revenue mix whereby higher margin retail
revenues comprised 82% of total revenues in 2001 compared to 61% in 2000. We
expect cost of sales to increase in absolute dollars in future periods but
decrease as a percentage of revenue as our retail revenues increase as a
percentage of our total revenues.

OPERATING EXPENSES

Selling, General and Administrative

      Selling, general and administrative expenses increased approximately 30%
to $6,451,000 for the year ended December 31, 2001 from $4,975,000 for the year
ended December 31, 2000. Selling, general and administrative expenses for the
2001-year include increased salaries and wages for the addition of key
management and other personnel, severance payments to former Company personnel,
bad debt expense, and increased legal fees. We expect selling, general and
administrative expenses to increase in absolute dollars, but decrease as a
percentage of revenue, as we continue to pursue advertising and marketing
efforts, expand our network termination locations worldwide, expand our staff
and incur additional costs related to the growth of our business.

Impairment Charges and Other Write-Offs

      During 2000, the Company entered into two joint ventures to install and
operate Internet gateways in foreign locations. During 2001, the joint ventures
ceased terminating traffic due to the loss of available economic circuits
resulting in the cessation of the joint ventures operations. Accordingly, the
Company wrote-off its investments in each joint venture resulting in a loss of
$1,974,000, which is included as an impairment charge in the statement of
operations.

      In 1999, the Company formed a joint venture with BDC, LLC, a company owned
by a director of the Company. BDC contributed $50,000 to the joint venture and
the Company agreed to obtain Internet Gateways and to install and operate the
gateways. The Company owned 60% of the joint venture and in April 2000 purchased
the remaining 40% interest for $600,000, which was recorded as goodwill to be
amortized over 5 years. In 2001, the joint venture ceased operations due to the
loss of available economic circuits to terminate traffic. Accordingly, the
Company wrote-off the remaining goodwill of $434,000 in June 2001, which is
included as an impairment charge in the statement of operations.

      During 2001, the Company wrote-off certain deposits and other assets
incurred to terminate traffic in foreign locations due to the unavailability of
those circuits. The write-off totaling approximately $140,000 is included as a


                                       17
<PAGE>

component of impairment charges and other write-offs.

      During 2000, the Company wrote-off certain investments totaling $300,000
in foreign termination arrangements, which were not placed into operation. This
amount is reported under impairment charges and other write-offs in the
statement of operations.

DEPRECIATION AND AMORTIZATION

      Depreciation and amortization increased approximately 45% to $1,334,000
for the year ended December 31, 2001 from $919,000 for the year ended December
31, 2000. The increase in depreciation and amortization is primarily
attributable to a higher depreciable base in property and equipment and other
assets during the first six months of 2001. We expect depreciation and
amortization expense to decrease during 2002 due to a reduction in asset
additions in 2001 compared to prior periods and to the assets written-off in the
impairment charges during the year.

MINORITY INTEREST

      Minority interest for the year ended December 31, 2001 was a benefit of
$353,000 compared to a cost of $104,000 for the year ended December 31, 2000.
The change in minority interest is due to losses generated from the Company's
two joint ventures attributable to the joint ventures loss of available
circuits.

INTEREST INCOME, NET

      Interest income, net consists of interest earned on cash and cash
equivalents less interest expense on borrowings under a credit facility with our
principal stockholder, Eagle Venture Capital. Interest earned on cash and cash
equivalents decreased to $1,087,000 for the year ended December 31, 2001 from
$1,718,000 for the year ended December 31, 2000. This decline is predominantly
due to an overall decrease in short-term interest rates in the United States
financial markets and to a decrease in the average cash balance invested.
Interest expense for the 2001 year totaled $84,000 compared to $337,000 in 2000.
The decrease in interest expense is primarily due to lower outstanding balances
under our credit facilities during 2001.

NET LOSS

      We incurred a net loss of $7,186,000 for the year ended December 31, 2001
as compared to a net loss of $4,745,000 for the year ended December 31, 2000.
The increase of $2,441,000 in net loss in the 2001 year is primarily
attributable to impairment charges of $2,548,000, higher selling, general and
administrative expenses and lower interest income.

LIQUIDITY AND CAPITAL RESOURCES

      As of December 31, 2001, we had approximately $25.0 million of cash and
cash equivalents and working capital of approximately $22.5 million. We
generated negative cash flow from operating activities of approximately
$3,224,000 for the year ended December 31, 2001, compared with negative cash
flow from operating activities of approximately $1,677,000 during the year ended
December 31, 2000. Net cash used in operating activities for the 2001 and 2000
periods primarily consisted of net operating losses as well as changes in
working capital.

      Net cash used in investing activities consists of additions to property
and equipment, including computer equipment and Internet gateways for voice over
the Internet transmission. Net cash used in investing activities was $874,000
for the year ended December 31, 2001 and $3,631,000 for the year ended December
31, 2000.

      Net cash provided by financing activities for the year ended December 31,
2001 was $125,000 due to the $300,000 promissory note borrowing described below
offset by the $175,000 principal payment on our term loan from Eagle Venture
Capital, a significant stockholder of the Company, which is controlled by the
Company's Chairman. Net cash provided by financing activities for the year ended
December 31, 2000 was $33,161,000, which


                                       18
<PAGE>

was attributable to the Company's initial public offering of its common stock
partially offset by debt and other obligation repayments.

      As of December 31, 2001, $925,000 was outstanding under the term loan owed
to our principal stockholder, Eagle Venture Capital. The term loan bears
interest at 8% per annum with interest and principal payable on May 5, 2002. We
also have a $1,400,000 line of credit with Eagle Venture Capital, none of which
was outstanding as of December 31, 2001.

      On October 16, 2001, we borrowed $300,000 from a financial institution
under a term promissory note agreement (the "Note"). The Note bears interest at
the financial institution's prime rate as adjusted from time to time (4.75% at
December 31, 2001) less 2.25% per annum with the $300,000 principal balance due
on October 16, 2003. The Note is collateralized by a $300,000 certificate of
deposit maturing on September 30, 2002 bearing interest of 2.2% per annum.

      We believe our existing cash resources will be sufficient to meet our
anticipated needs for working capital and capital expenditure requirements
through at least the next 18 months. We may need to raise additional funds prior
to the expiration of such period if, for example, we pursue business or
technology acquisitions or experience operating losses that exceed our current
expectations. If we raise additional funds through the issuance of equity,
equity-related or debt securities, such securities may have rights, preferences
or privileges senior to those of the rights of our common stock and our
stockholders may experience additional dilution. We cannot be certain that
additional financing will be available to us on favorable terms or at all.

INCOME TAXES

      As of December 31, 2001, we had approximately $17.2 million of net
operating loss carry-forwards for Federal income tax purposes, which expire
beginning in 2011. We have not recognized an income tax benefit for our losses
because of uncertainty regarding future realizability; therefore, at December
31, 2001 we have provided a full valuation allowance on our deferred tax assets
of approximately $7,000,000. Limitations on the utilization of these
carry-forwards may result if we experience a change of control, as defined in
the Internal Revenue Code of 1986, as amended, as a result of changes in the
ownership or our common stock.

RECENT ACCOUNTING PRONOUNCEMENTS

      In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 "Business Combinations" which requires
the purchase method of accounting for business combination transaction initiated
after June 30, 2001. In July 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets". The Statement requires that goodwill recorded on
acquisitions completed prior to July 21, 2001 be amortized through December 31,
2001. Effective January 1, 2002, goodwill will no longer be amortized but will
not be tested for impairment as set forth in the Statement. The adoption of
these standards will not have a significant effect on results of operations or
financial position.

      In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting No. 144, "Accounting for the Impairment of Disposal of
Long-Lived Assets" ("SFAS 144"), SFAS 144 supercedes Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of ("SFAS 121"). The provisions of this statement are
effective for financial statements issued for fiscal years beginning after
December 15, 2001. The Company does not believe the adoption of this
pronouncement will have a material effect on its results of operations or
financial position.

RISK FACTORS THAT MAY EFFECT RESULTS OF OPERATIONS AND FINANCIAL CONDITION

      You should carefully consider the risks and uncertainties described below
and the other information in this Form 10-KSB. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business, financial condition and operating results.


                                       19
<PAGE>

      We have a limited operating history with which to judge our performance.

      We were incorporated in October 1996. We began selling prepaid virtual
calling cards on our Web site in May 1998. We began routing calls over our
enhanced services platform in August 1998. Accordingly, we have a limited
operating history. We may also encounter risks and difficulties frequently
encountered by early stage companies in new and rapidly evolving markets. We
cannot assure stockholders that our business strategy will be successful or that
we will successfully address these risks. Our failure to do so could materially
adversely affect our business, financial condition and operating results.

      We have a history of losses and we anticipate future losses and negative
cash flow.

      Since inception, we have incurred operating losses, and as of December 31,
2001, we had an accumulated deficit of $17,776,000. We incurred net losses of
$7,186,000 and $4,745,000 for the years ended December 31, 2001 and 2000,
respectively.

      Our revenues may not continue to grow or even continue at their current
level. We will need to increase our revenues significantly to become profitable,
however, if our revenues do not increase as much as we expect or if our expenses
increase at a greater pace then revenues, we may not achieve profitability or,
if we became profitable, we may not be able to sustain or increase profitability
on a quarterly or annual basis. We expect to incur additional costs and expenses
in 2002 related to:

            -     marketing and advertising related to traffic generation and
                  brand development;

            -     purchases of equipment for our operations and network
                  infrastructure;

            -     the expansion of our telecommunications network into other
                  countries;

            -     the continued development of our Web site transaction
                  processing and network infrastructure;

            -     development and improvement of additional products and
                  services;

            -     the hiring of additional personnel; and

            -     evaluating and completing potential acquisitions of other
                  companies.

      Our future profitability depends on our ability to generate and sustain
substantially higher net sales while maintaining reasonable expense levels. If
we do achieve profitability, we cannot assure stockholders that we will be able
to sustain it or improve upon it on a quarterly or annual basis for future
periods.

      Our quarterly operating results are subject to significant fluctuations
and our future operating results are unpredictable.

      Our operating results are unpredictable and have fluctuated significantly
on a quarterly basis. We expect to continue to experience significant
fluctuations in our quarterly results of operations due to a variety of factors,
many of which are outside of our control. As a result, period-to-period
comparisons of our results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance.

      Because of our limited operating history, we cannot accurately forecast
our net sales. We rely upon limited historical financial data to predict our
future operating results. Sales and operating results are difficult to forecast
because they generally depend on the volume of traffic on our network and the
volume and timing of sales of our virtual calling cards. Because of these
factors, we may be unable to adjust our spending in a timely manner to adjust
for any unexpected revenue shortfall.


                                       20
<PAGE>

      Our operations will be negatively affected if our enhanced services
platform fails to operate properly.

      All our calls are routed through our enhanced services platform. Our
success is dependent on our platform working properly. If our platform fails for
any reason, we could not route calls until the failure is corrected. From time
to time, we have experienced short term failures or malfunctions in our
platform. We cannot assure stockholders that future failures will not occur.

      If we do not increase the number of Web sites and portals upon which we
advertise our anticipated expansion could be adversely affected.

      We market our virtual calling cards and services on third-party Web sites
and portals using banner ads. The banner ads connect directly to our Web site
when "clicked" by the customer. If we cannot continue to cost effectively market
our virtual calling cards and services, our ability to expand our customer base
would be adversely affected.

      The telecommunications and Internet telephony markets are highly
competitive and our failure to compete effectively could adversely affect us.

      With respect to prepaid calling cards, we compete with the largest
telecommunications providers in the United States, as well as smaller, emerging
carriers. We may also compete with large operators in other countries. An
increasing number of large, well-capitalized companies are entering the market
for Internet telephony products and services. These competitors include a number
of companies that have introduced services that make Internet telephony
solutions available to businesses and consumers, and that permit voice
communications over the Internet. Many of our competitors are substantially
larger and have greater financial, technical, engineering, personnel and
marketing resources, longer operating histories, greater name recognition and
larger customer bases than we do. Competition from existing or new competitors
could reduce our revenues from the sale of our virtual prepaid calling cards and
other services. A general decrease in telecommunication rates charged by
international long distance carriers could also have a negative effect on our
operations. Our ability to compete also depends on our ability to anticipate and
adapt to rapid technological and other changes occurring in the
telecommunications industry.

      We may not be able to compete with providers that can bundle long distance
services with other offerings.

      Our competitors may be able to bundle services and products that we do not
offer together with long distance or Internet telephony services. These services
could include wireless communications, voice and data services, Internet access
and cable television. This form of bundling would put us at a competitive
disadvantage if these providers can combine a variety of service offerings at a
single attractive price. In addition, some of the telecommunications and other
companies that compete with us may be able to provide customers with lower
communications costs or other incentives with their services reducing the
overall cost of their communications packages, and significantly increasing
pricing pressures on our services. This form of competition could significantly
reduce our revenues.

      We may be vulnerable to technical malfunctions which could adversely
affect our operations.

      We depend upon our software systems, communications hardware and enhanced
services platform to conduct our virtual calling card sales and telephone
routing, manage our network, track virtual calling card balances and perform
other vital functions. Our systems, communications hardware and platform are
vulnerable to damage or interruption from:

      If we experience substantial technical difficulties with our hardware or
software, we may not succeed in routing traffic effectively, or in tracking
virtual calling card balances accurately, which could adversely affect our
operations. We have experienced periodic system interruptions, which we believe
will continue to occur from time-to-time. Since our operations depend on our
ability to successfully expand our network and to integrate new technologies and
equipment into our network, there is an increased risk of system failure as well
as a natural strain on the system.


                                       21
<PAGE>

      Our systems may not accommodate significant growth in the number of users
which could have a negative effect on our operations.

      Our success depends on our ability to handle a large number of
simultaneous calls. We expect that the volume of simultaneous calls will
increase significantly as we expand our operations. If this occurs, additional
stress will be placed upon the network hardware and software that manages our
traffic. We cannot assure stockholders of our ability to efficiently manage a
large number of simultaneous calls. If we are not able to maintain an
appropriate level of operating performance, or if our service is disrupted, then
we may develop a negative reputation and our business, results of operations and
financial condition would be materially adversely affected.

      If the Internet telephony and prepaid calling card markets do not gain
market acceptance by potential customers our business will be adversely
affected.

      We cannot be certain that Internet telephone service will gain market
acceptance or prove to be a viable alternative to traditional telephone service.
If the Internet telephony market fails to develop or develops more slowly than
we expect, then our future revenues would be adversely affected.

      The market for prepaid calling cards is an emerging business with a large
number of market entrants. Therefore, it is difficult to accurately determine
what the demand will be for our products and services in this area. Substantial
markets may not continue to develop for prepaid calling cards, and we may not be
able to sustain or increase our sales of these products and services.

      If the e-commerce market does not continue to develop and gain market
acceptance our revenues may be negatively affected.

      We anticipate that e-commerce will continue to account for substantially
all of our future revenues. Our business will suffer if e-commerce does not grow
or grows more slowly than expected. A number of factors could prevent acceptance
of e-commerce, including:

            -     e-commerce is at an early stage and buyers may be unwilling to
                  shift their purchasing from traditional vendors to online
                  vendors;

            -     increased government regulation or taxation may limit the
                  growth of e-commerce; and

            -     adverse publicity and consumer concern about the security of
                  e-commerce transactions may discourage its acceptance and
                  growth.

      These factors could impair our ability to generate revenues from our
online sales of virtual calling cards, online transmission of telephone calls
and other e-commerce activities.

      If the Internet and Internet infrastructure do not continue to develop as
anticipated our operations will be negatively affected.

      For the Internet to be commercially viable in the long-term, the size of
the network infrastructure, enabling technologies, necessary performance
improvements and user security will need to be continually addressed. To the
extent that the Internet continues to experience an increased number of users,
frequency of use or increased bandwidth requirements, we cannot assure
stockholders that the performance or reliability of the Internet will not be
adversely affected. Furthermore, the Internet has experienced a variety of
outages and other delays as a result of damage to portions of its
infrastructure, and could face such outages and delays in the future. These
outages and delays could adversely affect the level of Internet usage and affect
the level of traffic, the processing of orders and the transmission of calls on
our Web site.

      We cannot assure stockholders that the infrastructure or complementary
products or services necessary to make the Internet a viable commercial
marketplace for the long term will be developed. Even if these products and
services are developed, we cannot assure stockholders that the Internet will
become a viable commercial marketplace


                                       22
<PAGE>

for our virtual calling cards and services. If not, our business, financial
condition and operating results will be materially adversely affected. Also, we
may be required to incur substantial expenditures in order to adapt our products
and services to changing Internet technologies, which could have a material
adverse effect on our business, financial condition and operating results.

      The failure to manage our growth in operations and hire additional
qualified employees could have a material adverse effect on us.

      The expected growth of our operations places a significant strain on our
current management resources. To manage this expected growth, we will need to
improve our:

            -     transaction processing methods;

            -     operations and financial systems;

            -     procedures and controls; and

            -     training and management of our employees.

      Competition for personnel is intense, and we cannot assure stockholders
that we will be able to successfully attract, integrate or retain sufficiently
qualified personnel. Our failure to attract and retain the necessary personnel
or to effectively manage our employee and operations growth could have a
material adverse effect on our business, financial condition and operating
results.

      Our potential customers may have concerns about Internet commerce security
which could inhibit our growth and we may incur losses resulting from credit
card fraud.

      Consumer concerns over the security of transactions conducted on the
Internet or the privacy of users may inhibit the growth of the Internet and
online commerce. To securely transmit confidential information, such as customer
credit card numbers, we rely on encryption and authentication technology that we
license from third parties. We cannot predict whether events or developments
will compromise or breach the technology that protects our customer transaction
data. If our security measures do not prevent security breaches, this could have
a material adverse effect on our business, financial condition and operating
results.

      To date, we have suffered minimal losses as a result of orders placed with
fraudulent credit card data even though the associated financial institution
approved payment of the orders. Under current credit card practices, a merchant
is liable for fraudulent credit card transactions where the merchant does not
obtain a cardholder's signature. We do not obtain the signature of the
cardholder when we process orders. Although we have implemented mechanisms to
try to detect credit card fraud, we cannot assure you that our efforts will be
successful. Our inability to adequately detect credit card fraud could
materially adversely affect our business, financial condition and operating
results.

      To the extent that our activities involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
expose us to a risk of loss or litigation and possible liability. We do not
presently carry insurance policies to reimburse us for losses caused by security
breaches. We cannot assure stockholders that our security measures will prevent
security breaches. Our failure to prevent security breaches could have a
material adverse effect on our business, financial condition and operating
results.

      The market price for our common stock may be volatile, which could cause
stockholders to lose substantial portions of their investment.

      The market prices of the securities of Internet-related and online
commerce companies have been especially volatile. The trading prices of many
Internet companies' stocks fell dramatically during 2000 any may still reflect
valuations substantially above historical levels. We cannot assure stockholders
that these trading prices will not


                                       23
<PAGE>

continue to be volatile or that valuations will be sustained. Broad market and
industry factors may materially and adversely affect the market price of our
common stock, regardless of our operating performance.

      Our business may be adversely affected if we are not able to protect our
intellectual property and other proprietary rights from infringement.

      Our success depends in part upon our ability to protect our proprietary
technology and other intellectual property rights. We rely on a combination of
copyright, trademark, service mark and trade secret laws and contractual
restrictions to establish and protect our proprietary rights. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which our services are made available online.
Therefore, the steps that we take may be inadequate to protect our rights.

      The Internet industry may become subject to increased government
regulation which could have a negative effect on our operations.

      Various actions have been taken by the United States Congress and the
Federal courts that, in some cases impose some forms of regulation on the
Internet, and in other cases protect the Internet from regulation. Domestic and
international authorities regularly consider proposed legislation that could
result in new regulations on the Internet. It is impossible to say at this time
whether and to what extent the Internet may ultimately be regulated domestically
or internationally. Increased regulation of the Internet may decrease its
growth, which may negatively impact the cost of doing business via the Internet
or otherwise materially adversely affect our business, results of operations and
financial condition.

      In addition, because our services are accessible worldwide, and we
facilitate the sale of goods to users worldwide, other jurisdictions may claim
that we are required to comply with their laws. We are qualified to do business
in Delaware and Texas only, and failure by us to qualify as a foreign
corporation in a jurisdiction where we are required to do so could subject us to
taxes and penalties for the failure to qualify.

      Sales tax collection by states may adversely affect our growth.

      We do not currently collect sales or other similar taxes for calling cards
or services sold through our Web site, other than for calling cards sold to
Texas residents. However, one or more states may seek to impose sales tax or
similar collection obligations on out-of-state companies, such as ours, which
engage in Internet commerce. A successful assertion by one or more states or any
other country that we should collect sales or other taxes on the sale of cards
or services on our system could have a material adverse effect on our
operations.

      The loss of key personnel could adversely affect our business.

      We believe that our success will depend on the continued services of our
senior management team, especially B. Michael Adler and R. Stephen Polley. We
carry $2.0 million of key person life insurance on the life of B. Michael Adler.
The loss of the services of any of our senior management team or other key
employees could adversely affect our business, financial condition and operating
results.

      We may not be able to raise needed additional capital in the future.

      We require substantial working capital to fund our business. Our working
capital requirements and cash flow provided by operating activities can vary
from quarter to quarter depending on revenues, operating expenses, capital
expenditures and other factors. We anticipate that the net proceeds of our
initial public offering will be sufficient to meet our anticipated needs through
at least the next 18 months. Thereafter, we may need to raise additional funds.

      We may also need to raise additional funds sooner than anticipated to:

            -     fund more rapid expansion;

            -     develop new or enhanced services or products; and

            -     respond to competitive pressures.


                                       24
<PAGE>

      If additional funds are raised through the issuance of equity or
convertible debt securities the rights and ownership in our company by existing
stockholders may be reduced.

      We cannot assure stockholders that additional financing will be available
on terms favorable to us or at all. If adequate funds are not available, or are
not available on acceptable terms, we may not be able to fund planned expansion,
take advantage of available opportunities, develop or enhance services or
products or respond to competitive pressures. Such inabilities could have a
material adverse effect on our business, financial condition and operating
results.

ITEM 7. FINANCIAL STATEMENTS

      The financial statements required by this item begin at Page F-1 hereof.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      On June 18, 2001, the Company accepted the resignation of Ernst & Young
LLP as the Company's independent accountants. Neither of the reports of Ernst &
Young LLP on the Company's financial statements for the Company's fiscal years
ended December 31, 2000 and 1999 contained an adverse opinion or disclaimer of
opinion, or was modified as to uncertainty, audit scope, or accounting
principles. There were no disagreements with Ernst & Young LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to its satisfaction, would have
caused it to make reference to such disagreement in connection with its report.

      On August 1, 2001, the Company engaged Grant Thornton LLP as the Company's
certified public accountants to audit the Company's financial statements for the
fiscal year ending December 31, 2001.


                                       25
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

      The information regarding the directors and executive officers of
WorldQuest in the Proxy Statement relating to WorldQuest's 2002 Annual Meeting,
which will be filed with the Commission within 120 days after December 31, 2001,
is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

      The information regarding executive compensation in the Proxy Statement
relating to WorldQuest's 2002 Annual Meeting, which will be filed with the
Commission within 120 days after December 31, 2001, is incorporated herein by
reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information regarding the security ownership of certain beneficial
owners and management in the Proxy Statement relating to WorldQuest's 2002
Annual Meeting, which will be filed with the Commission within 120 days after
December 31, 2001, is incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information regarding certain relationships and related transactions
in the Proxy Statement relating to WorldQuest's 2002 Annual Meeting, which will
be filed with the Commission within 120 days after December 31, 2001, is
incorporated herein by reference.


                                       26
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

      (a)   The following documents are filed as part of this Annual Report on
            Form 10-KSB:

            1. Financial Statements: The financial statements filed as part of
      this report are listed in the "Index to Financial Statements" on Page F-1
      hereof.

            2. Exhibits required to be filed by Item 601 of Regulation S-B:

<TABLE>
<CAPTION>
Exhibit
Number      Description of Exhibits
------      -----------------------
<S>         <C>
*2.1        Agreement and Plan of Merger with buyindiaonline.com Inc.
 3.1        Certificate of Incorporation of WorldQuest, filed as Exhibit 3.1 to
            WorldQuest's Form SB-2 Registration Statement, File No. 333-82721
            (the "Prior Registration Statement"), and incorporated herein by
            this reference.
 3.2        Bylaws of WorldQuest, filed as Exhibit 3.2 to the Prior Registration
            Statement, and incorporated herein by this reference.
 4.1        Specimen common stock certificate, filed as Exhibit 4.1 to the Prior
            Registration Statement, and incorporated herein by this reference.
 4.2        Amended and Restated Note dated May 5, 1999 payable to WorldQuest
            Networks, LLC (now known as Eagle Venture Capital, LLC), filed as
            Exhibit 4.2 to the Prior Registration Statement, and incorporated
            herein by this reference.
 4.3.1      Representatives' Warrant dated February 4, 2000 granted to John G.
            Kinnard and Company Incorporated for 68,750 shares of common stock,
            filed as Exhibit 4.3.1 to WorldQuest's Annual Report on Form 10-KSB
            for the fiscal year ended December 31, 1999, and incorporated herein
            by this reference.
 4.3.2      Representatives' Warrant dated February 4, 2000 granted to Kaufman
            Bros., L.P. for 178,750 shares of common stock, filed as Exhibit
            4.3.2 to WorldQuest's Annual Report on Form 10-KSB for the fiscal
            year ended December 31, 1999, and incorporated herein by this
            reference.
 4.3.3      Representatives' Warrant dated February 4, 2000 granted to WestPark
            Capital, Inc. for 27,500 shares of common stock, filed as Exhibit
            4.3.3 to WorldQuest's Annual Report on Form 10-KSB for the fiscal
            year ended December 31, 1999, and incorporated herein by this
            reference.
 4.4        Amended and Restated Note date August 15, 1999 payable to Eagle
            Capital Venture, LLC, which replaces the Amended and Restated Note
            filed as Exhibit 4.2, filed as Exhibit 4.4 to the Prior Registration
            Statement, and incorporated herein by this reference.
 4.5        Form of Unsecured Subordinated Convertible Promissory Note issued in
            the private placement closed in December 1999 (the "Private
            Placement"), filed as Exhibit 4.5 to WorldQuest's Form SB-2
            Registration Statement, file no. 333-93019 (the "Second Registration
            Statement"), and incorporated herein by this reference.
 4.6        Form of Warrant issued in the Private Placement, filed as Exhibit
            4.6 to the Second Registration Statement, and incorporated herein by
            this reference.
 4.7        Warrant to Purchase 50,000 shares of common stock granted to
            Advanced Multimedia Group, Inc. on March 16, 2000.
 4.8        Warrant to Purchase 50,000 shares of common stock granted to
            Advanced Multimedia Group, Inc. on April 26, 2000.
 10.1       Joint Venture Agreement dated April 9, 1999 between WorldQuest and
            BDC LLC, filed as Exhibit 10.1 to the Prior Registration Statement,
            and incorporated herein by this reference.
 10.2       Amended 1997 Stock Option Plan, filed as Exhibit 10.2 to the Prior
            Registration Statement, and incorporated herein by this reference.
 10.3       Stock Option Agreement dated December 7, 1998 granted to Michael R.
            Lanham by WorldQuest, filed as Exhibit 10.3 to the Prior
            Registration Statement, and incorporated herein by this reference.
 10.4       Stock Transfer Agreement dated December 7, 1998 between WorldQuest
            Communications, Inc., WorldQuest Networks, LLC and WorldQuest, filed
            as Exhibit 10.4 to the Prior Registration Statement, and
            incorporated herein by this reference.
 10.5       Amendment and Clarification Agreement dated September 27, 1999
            between WorldQuest Communications, Inc., WorldQuest and Eagle
            Venture Capital, LLC amending and clarifying the
</TABLE>


                                       27
<PAGE>

<TABLE>
<S>         <C>
            Stock Transfer Agreement filed as Exhibit 10.4, filed as Exhibit
            10.7 to the Prior Registration Statement, and incorporated herein by
            this reference.
10.6        Form of Registration Rights Agreement executed in connection with
            the Private Placement, filed as Exhibit 10.6 to the Second
            Registration Statement, and incorporated herein by this reference.
10.7        Purchase Agreement dated April 17, 2000 between WorldQuest and BDC
            LLC, filed as Exhibit 10.1 to WorldQuest's Quarterly Report on Form
            10-QSB for the fiscal quarter ended March 31, 2000, and incorporated
            herein by this reference.
10.8        2001 Stock Option Plan, filed as Exhibit 4.8 to WorldQuest's Form
            S-8 Registration Statement, File No. 333-54498, and incorporated
            herein by this reference.
10.9        Employment agreement by and between WorldQuest Networks, Inc. and R.
            Stephen Polley effective as of May 14, 2001, filed as Exhibit 10.1
            to WorldQuest's Quarterly Report as Form 10-QSB for the quarter
            ended June 30, 2001.
*21.1       List of Subsidiaries.
*23.1       Consent of Grant Thornton LLP.
*23.2       Consent of Ernst & Young LLP.
</TABLE>

-----------------------
*     Filed herewith.

      (b)   Reports on Form 8-K

            No reports on Form 8-K were filed during the fourth quarter ended
      December 31, 2001.


                                       28
<PAGE>

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.

March 12, 2002                     /s/ R. Stephen Polley
                                   --------------------------------------------
                                   R. Stephen Polley, President
                                   and Chief Executive Officer
                                   (Principal Executive Officer)


March 12, 2002                     /s/ Victor E. Grijalva
                                   --------------------------------------------
                                   VICTOR E. GRIJALVA
                                   Vice President, Chief Financial Officer,
                                   Secretary and Treasurer
                                   (Principal Financial and Accounting Officer)

In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.

March 12, 2002                     /s/ B. Michael Adler
                                   --------------------------------------------
                                   B. MICHAEL ADLER
                                   Director (Chairman of the Board)


March 12, 2002                     /s/ R. Stephen Polley
                                   --------------------------------------------
                                   R. STEPHEN POLLEY
                                   Director


March 12, 2002                     /s/ E. Denton Jones
                                   --------------------------------------------
                                   E. DENTON JONES
                                   Director


March 12, 2002                     /s/ Elizabeth H. Buchler
                                   --------------------------------------------
                                   ELIZABETH H. BUCHLER
                                   Director


March 12, 2002                     /s/ Nabil N. El-Hage
                                   --------------------------------------------
                                   NABIL N. EL-HAGE
                                   Director


March 12, 2002                     /s/ Robert A. Farmer
                                   --------------------------------------------
                                   ROBERT A. FARMER
                                   Director

March 12, 2002                     /s/ Victor E. Grijalva
                                   --------------------------------------------
                                   VICTOR E. GRIJALVA
                                   Vice President, Chief Financial Officer,
                                   Secretary and Treasurer
                                   (Principal Financial and Accounting Officer)



                                       29
<PAGE>

                            WORLDQUEST NETWORKS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                    CONTENTS

<TABLE>
<S>                                                                                                             <C>
Report of Independent Certified Public Accountants..........................................................    F-2
Report of Independent Auditors..............................................................................    F-3
Consolidated Balance Sheets as of December 31, 2001 and 2000................................................    F-4
Consolidated Statements of Operations for each of the two years in the period ended December 31, 2001.......    F-5
Consolidated Statements of Changes in Stockholders' Equity for each of the two years in the period ended
December 31, 2001...........................................................................................    F-6
Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2001.......    F-7
Notes to Consolidated Financial Statements..................................................................    F-8
</TABLE>


                                      F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
WorldQuest Networks, Inc.

      We have audited the accompanying consolidated balance sheet of WorldQuest
Networks, Inc., as of December 31, 2001 and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for the year then
ended. 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 audit.

      We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of WorldQuest
Networks, Inc., at December 31, 2001, and the consolidated results of its
operations and cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.


/s/ Grant Thornton LLP

January 25, 2002
Dallas, Texas


                                      F-2
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
WorldQuest Networks, Inc.

      We have audited the accompanying consolidated balance sheet of WorldQuest
Networks, Inc., as of December 31, 2000 and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for the year then
ended. 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 audit.

      We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides a reasonable basis
for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of WorldQuest
Networks, Inc., at December 31, 2000, and the consolidated results of its
operations and cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States.


                                                           /s/ Ernst & Young LLP

February 2, 2001
Dallas, Texas


                                      F-3
<PAGE>

                            WORLDQUEST NETWORKS, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                            ------------------------------
                                                                                 2001             2000
                                                                            ------------      ------------
<S>                                                                         <C>               <C>
                                  ASSETS
Current assets:
     Cash and cash equivalents .......................................      $ 25,039,398      $ 29,012,196
     Accounts receivable, net ........................................           174,098         1,248,619
     Prepaid expenses and other current assets .......................           277,023           343,960
                                                                            ------------      ------------
Total current assets .................................................        25,490,519        30,604,775

Property and equipment, net ..........................................         2,036,378         4,275,289
Other assets .........................................................                --           849,842
                                                                            ------------      ------------
Total assets .........................................................      $ 27,526,897      $ 35,729,906
                                                                            ============      ============
                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable ..................................................      $  1,455,422      $  1,217,027
   Accrued expenses ..................................................           354,226           646,559
   Deferred revenue ..................................................           215,116           316,073
   Current portion of  term loan and accrued interest ................           925,000           320,436
                                                                            ------------      ------------
Total current liabilities ............................................         2,949,764         2,500,095

Term loan ............................................................                --         1,100,000
Promissory note ......................................................           300,000                --
Minority interests in joint ventures .................................                --           666,998
Commitments and contingencies

Stockholders' equity:
   Preferred stock, par value $0.01 per share:
   Authorized shares--10,000,000; none issued and outstanding
      at December 31, 2001 and 2000 ..................................                --                --
   Common stock, par value $.01 per share:
   Authorized shares--50,000,000; issued and
     outstanding shares--6,381,199 at December 31, 2001 and 2000 .....            63,812            63,812
   Additional capital ................................................        41,989,644        41,989,644
   Accumulated deficit ...............................................       (17,776,323)      (10,590,643)
                                                                            ------------      ------------
Total stockholders' equity ...........................................        24,277,133        31,462,813
                                                                            ------------      ------------
Total liabilities and stockholders' equity ...........................      $ 27,526,897      $ 35,729,906
                                                                            ============      ============
</TABLE>


                                      F-4
<PAGE>

                            WORLDQUEST NETWORKS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                                 -------------------------------
                                                                                     2001               2000
                                                                                 ------------       ------------
<S>                                                                              <C>                <C>
Retail prepaid calling card revenue .................................            $  9,931,072       $  7,903,650
Wholesale traffic and other .........................................               2,245,136          5,002,523
                                                                                 ------------       ------------
          Total revenue .............................................              12,176,208         12,906,173
Cost of sales .......................................................              10,383,454         11,109,317
                                                                                 ------------       ------------
Gross margin ........................................................               1,792,754          1,796,856
Operating expenses:
    Selling, general, administrative ................................               6,451,238          5,045,783
    Depreciation and amortization ...................................               1,334,462            919,068
    Impairment charges and other write-offs .........................               2,547,920            300,000
    Minority interest ...............................................                (352,569)            32,906
                                                                                 ------------       ------------
          Total operating expenses ..................................               9,981,051          6,297,757
                                                                                 ------------       ------------
Operating loss ......................................................              (8,188,297)        (4,500,901)
Interest income, net ................................................               1,002,617          1,381,154
                                                                                 ------------       ------------
Loss before extraordinary loss ......................................              (7,185,680)        (3,119,747)
Extraordinary loss ..................................................                      --         (1,625,367)
                                                                                 ------------       ------------
Net loss ............................................................            $ (7,185,680)      $ (4,745,114)
                                                                                 ------------       ------------

Net loss per share before extraordinary loss--basic and diluted .....            $      (1.13)      $      (0.52)
                                                                                 ============       ============
Net loss per share--basic and diluted ...............................            $      (1.13)      $      (0.79)
                                                                                 ============       ============
Weighted-average common shares outstanding--basic and diluted .......               6,381,199          6,021,480
                                                                                 ============       ============
</TABLE>


                                      F-5
<PAGE>

                            WORLDQUEST NETWORKS, INC.

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                            COMMON STOCK
                                                       ----------------------      ADDITIONAL     ACCUMULATED     STOCKHOLDERS'
                                                         SHARES        AMOUNT        CAPITAL         DEFICIT          EQUITY
                                                       ---------      -------      -----------    ------------    -------------
<S>                                                    <C>            <C>          <C>            <C>              <C>
Balance at January 1, 2000 ......................      3,196,699      $31,967      $ 3,571,622    $ (5,845,529)    $ (2,241,940)
   Sale of common stock in connection
     with initial public offering ...............      3,162,500       31,625       36,204,942              --       36,236,567
    Exercise of warrants issued in
      connection with subordinate
      promissory notes ..........................         17,000          170          101,830              --          102,000
   Exercise of employee stock options ...........          5,000           50            4,950              --            5,000
   Fair value of warrants issued for
     services ...................................             --           --        2,106,300              --        2,106,300
   Net loss .....................................             --           --               --      (4,745,114)      (4,745,114)
                                                       ---------      -------      -----------    ------------     ------------
Balance at December 31, 2000 ....................      6,381,199       63,812       41,989,644     (10,590,643)      31,462,813
   Net loss .....................................             --           --               --      (7,185,680)      (7,185,680)
                                                       ---------      -------      -----------    ------------     ------------
Balance at December 31, 2001 ....................      6,381,199      $63,812      $41,989,644    $(17,776,323)    $ 24,277,133
                                                       =========      =======      ===========    ============     ============
</TABLE>


                                      F-6
<PAGE>

                            WORLDQUEST NETWORKS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                     YEAR ENDED DECEMBER 31,
                                                                                                 ------------------------------
                                                                                                      2001             2000
                                                                                                 ------------      ------------
OPERATING ACTIVITIES
<S>                                                                                              <C>               <C>
Net loss ...............................................................................         $ (7,185,680)     $ (4,745,114)
Extraordinary loss .....................................................................                   --         1,625,367
Adjustments to reconcile net loss to net cash
   used in operating activities:
            Depreciation and amortization ..............................................            1,334,462           919,068
            Impairment charges and other write-offs ....................................            2,547,920           300,000
            Fair value of warrants issued for services .................................                   --         1,868,500
Changes in operating assets and liabilities, net of effects of acquisition:
            Accounts receivable ........................................................            1,088,295        (1,134,931)
            Accrued interest ...........................................................             (320,436)          120,622
            Accounts payable and accrued expenses ......................................             (338,954)         (134,790)
            Deferred revenue ...........................................................             (100,957)          156,872
            Other assets ...............................................................             (248,575)         (653,055)
                                                                                                 ------------      ------------
Net cash used in operating activities ..................................................           (3,223,925)       (1,677,461)

INVESTING ACTIVITIES
Net additions to property and equipment ................................................             (873,873)       (3,630,891)
                                                                                                 ------------      ------------
Net cash used in investing activities ..................................................             (873,873)       (3,630,891)

FINANCING ACTIVITIES
Payment on term loan ...................................................................             (175,000)               --
Payments on line of credit .............................................................                   --          (888,725)
Payments on capital leases .............................................................                   --          (127,475)
Payments on notes payable ..............................................................                   --          (266,814)
Borrowings/payments for promissory notes ...............................................              300,000        (1,900,000)
Proceeds from exercise of stock options and warrants ...................................                   --           107,000
Sale of common stock ...................................................................                   --        36,236,567
                                                                                                 ------------      ------------
Net cash provided by financing activities ..............................................              125,000        33,160,553

Increase (decrease) in cash and cash equivalents .......................................           (3,972,798)       27,852,201
Cash and cash equivalents at beginning of year .........................................           29,012,196         1,159,995
                                                                                                 ------------      ------------
Cash and cash equivalents at end of year ...............................................         $ 25,039,398      $ 29,012,196
                                                                                                 ============      ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid ..........................................................................         $    397,058      $    118,589
                                                                                                 ============      ============
NON-CASH INVESTING AND OPERATING ACTIVITIES
Fair value of assets acquired, including cash of $107,657 ..............................         $    392,673      $         --
Acquisition purchase price due .........................................................              358,696                --
Liabilities assumed ....................................................................               33,977                --
</TABLE>


                                      F-7
<PAGE>

                            WORLDQUEST NETWORKS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

      WorldQuest Networks, Inc. ("WorldQuest" or the "Company") was incorporated
as a Texas corporation effective October 14, 1996, and reincorporated as a
Delaware corporation effective October 28, 1999. WorldQuest is an international
Internet telephony company that sells virtual prepaid calling cards through its
Internet website and transmits long distance calls at discounted rates through
its Internet and traditional networks. WorldQuest also sells virtual calling
cards processed through other companies' platforms and from time to time sells
its excess capacity to other long distance carriers. The Company markets an
intelligent address book and calendar that enables customers to make domestic
and international phone calls from anywhere in the world through its website.
Effective December 6, 2001, the Company also provides a web service that enables
customers to send money and a personalized message from the United States to
friends, family or others in India.

      In February 2000, the Company completed its initial public offering
selling a total of 3,162,500 shares of common stock at a price of $13 per share
resulting in net proceeds of approximately $36.2 million. Prior to the
completion of the initial public offering, the majority of the common stock of
the Company was owned by Eagle Venture Capital, LLC ("Eagle Venture Capital")
(formerly WorldQuest Networks, LLC), a limited liability company controlled by
the Company's Chairman of the Board.

2. SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

      The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent 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 these estimates.

PRINCIPLES OF CONSOLIDATION

      The consolidated financial statements include the accounts of the Company,
its subsidiaries and joint ventures in which the Company owns a controlling
interest. All significant intercompany balances and transactions have been
eliminated in consolidation.

CASH EQUIVALENTS

      Cash equivalents include money market mutual funds and other highly liquid
investments purchased with maturities of three months or less.

DEPRECIATION AND AMORTIZATION

      Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. Amortization
of capital leases and leasehold improvements is provided on a straight line
basis over the lives of the related assets or the life of the lease, whichever
is shorter, and is included with depreciation expense.

      Depreciation expense totaled $1,274,462 and $834,973 for 2001 and 2000,
respectively. Amortization expense totaled $60,000 for 2001 and $84,095 for
2000.


                                      F-8
<PAGE>

                            WORLDQUEST NETWORKS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

      The Company evaluates long-lived assets, including goodwill, for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable and the undiscounted cash flows to be
generated by these assets are less than the carrying amounts of these assets.

INCOME TAXES

      Income taxes are determined using the liability method, which gives
consideration to the future tax consequences associated with differences between
the financial accounting and tax basis of assets and liabilities. This method
also gives immediate effect to changes in income tax laws.

REVENUE RECOGNITION

      Retail prepaid phone card revenue is recorded net of returns and
allowances and is recognized as calling services are used or upon expiration of
the calling card. Wholesale traffic revenue is recognized as calls are
processed.

ADVERTISING COSTS

      The Company expenses advertising costs as incurred. Advertising expense
for the years ended December 31, 2001 and 2000, was $440,000 and $446,000,
respectively.

STOCK-BASED COMPENSATION

      The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," in the primary financial
statements and has provided supplemental disclosures required by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."

NET LOSS PER SHARE

      Basic and diluted net loss per share is computed using the Company's net
loss for each period presented divided by the average common shares outstanding
during the period. Stock options and warrants convertible into 1,892,469 and
1,470,567 shares of the Company's common stock for the years ended December 31,
2001 and 2000, respectively, were not considered in the calculation of average
common shares outstanding as the effect would be anti-dilutive due to the
Company's net loss for the periods presented.

COMPREHENSIVE INCOME

      Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For the years ended December 31, 2001 and 2000, the
Company realized no transactions other than those reported in net income.

FAIR VALUE OF FINANCIAL INSTRUMENTS

      The Company's financial instruments consist primarily of cash equivalents,
accounts receivable, accounts payable and long-term debt. At December 31, 2001
and 2000, the carrying amount of the Company's financial instruments
approximates their fair values due to their short maturities. Management
believes the Company's


                                      F-9
<PAGE>

term loan approximates fair value due to its short maturity and all other debt
has floating interest rates so its fair value approximates carrying value.


                                      F-10
<PAGE>

                            WORLDQUEST NETWORKS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CONCENTRATION OF CREDIT AND BUSINESS RISKS

      Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents and accounts
receivable. Accounts receivable consist of amounts owed by credit card
processing companies relating to prepaid phone card sales, and amounts owed by
customers for wholesale traffic.

      Customers purchase the Company's prepaid calling cards primarily using
major credit cards, which are reimbursed by credit card processing companies.
The Company does not routinely perform on-going credit evaluations of its
prepaid calling card customers but does evaluate its credit card processors. The
Company performs credit evaluations and establishes credit limits for its
wholesale traffic customers, including requiring deposits when applicable.

      A substantial portion of the Company's revenues is derived from the sale
of prepaid phone cards, which terminate in India.

      At December 31, 2001 and 2000, one credit card processing company
accounted for 100% and 8%, respectively, of total accounts receivable. For the
year ended December 31, 2001, no customer accounted for more than 10% of total
sales. For the year ended December 31, 2000, one wholesale traffic customer
accounted for 16% of total sales. The Company's receivable from this customer as
of December 31, 2000 was $751,000. At December 31, 2001 and 2000, accounts
receivable are stated net of an allowance for doubtful accounts of $852,000 and
$54,000, respectively.

NEW ACCOUNTING PRONOUNCEMENTS

      In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 "Business Combinations" which requires
the purchase method of accounting for business combination transactions
initiated after June 30, 2001. In July 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 142 "Goodwill and
Other Intangible Assets." The Statement requires that goodwill recorded on
acquisitions completed prior to July 1, 2001 be amortized through December 31,
2001. Effective January 1, 2002, goodwill will no longer be amortized but will
be tested for impairment as set forth in the Statement. The adoption of these
standards will not have a significant effect on results of operations or
financial position.

      In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment of
Disposal of Long-Lived Assets" ("SFAS 144"), SFAS 144 supercedes Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). The provisions of this
statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001. The Company does not believe the adoption of
this pronouncement will have a material effect on its results of operations or
financial position.


                                      F-11
<PAGE>

                            WORLDQUEST NETWORKS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

RECLASSIFICATIONS

      Certain reclassifications have been made to the 2000 financial statements
to conform to the 2001 presentation.

3. ACQUISITION

      Effective December 6, 2001, a wholly-owned subsidiary of the Company
acquired all of the issued and outstanding common stock of buyindiaonline.com,
Inc., (known as Clicks2India.com) for approximately $275,000 in cash plus
liabilities assumed of $34,000 and accrued acquisition costs of $84,000.
Clicks2India.com is a web-based company that enables consumers to send money and
a personalized message from the United States to friends, family or others in
India. The acquisition has been accounted for as a purchase and the total
acquisition cost have been allocated to the assets acquired and liabilities
assumed based on estimates of their respective fair values. Assets acquired
totaled $393,000 (of which $108,000 was cash) and liabilities assumed were
$34,000. No goodwill was recorded in connection with the transaction. The
Company's consolidated results of operations have incorporated
buyindiaonline.com's activity since December 6, 2001. Clicks2India.com's
revenues for the year ended December 31, 2001 were $127,000. Proforma financial
information assuming the acquisition had occurred on January 1, 2001 would not
be significantly different from the actual reported consolidated net loss and
net loss per share of the Company for the year ended December 31, 2001.

4. PROPERTY AND EQUIPMENT

      Property and Equipment consists of the following as of December 31:

<TABLE>
<CAPTION>
                                                          ESTIMATED
                                                         USEFUL LIFE
                                                           (YEARS)        2001           2000
                                                         -----------   -----------    -----------
<S>                                                      <C>           <C>            <C>
     Leasehold improvements                                 2 to 5     $    39,320    $    18,453
     Switches and other network equipment                   2 to 3       3,327,449      5,236,306
     Furniture and fixtures                                   5             64,160         58,694
     Capitalized software                                     5            803,033        536,845
                                                                       -----------    -----------
         Total                                                           4,233,962      5,850,298
     Less: accumulated depreciation and amortization                   (2,197,584)    (1,575,009)
                                                                       -----------    -----------
         Net property and equipment                                    $ 2,036,378    $ 4,275,289
                                                                       ===========    ===========
</TABLE>


                                      F-12
<PAGE>

                            WORLDQUEST NETWORKS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. PREPAID EXPENSES AND OTHER ASSETS

      Prepaid expenses and other current assets consist of the following as of
December 31:

<TABLE>
<CAPTION>
                                                       2001         2000
                                                    --------      --------
<S>                                                 <C>           <C>
      Prepaid Calling Cards                         $ 60,741      $ 82,303
      Deposits                                       111,724       165,634
      Prepaid Expenses                               104,558        96,023
                                                    --------      --------
                                                    $277,023      $343,960
                                                    ========      ========
</TABLE>

      As of December 31, 2000, other assets, non-current include goodwill of
$494,000 (see Note 6), prepaid termination costs of $303,000, and other of
$53,000.

6. IMPAIRMENT CHARGES AND OTHER WRITE-OFFS

      During 2000, the Company entered into two joint ventures to install and
operate Internet gateways in foreign locations. During 2001, the joint ventures
ceased terminating traffic due to the loss of available economic circuits
resulting in the cessation of the joint ventures operations. Accordingly, the
Company wrote-off its investments in each joint venture resulting in a loss of
$1,974,000, which is included as an impairment charge in the statement of
operations.

      In 1999, the Company formed a joint venture with BDC, LLC, a company owned
by a director of the Company. BDC contributed $50,000 to the joint venture and
the Company agreed to obtain Internet Gateways and to install and operate the
gateways. The Company owned 60% of the joint venture and in April 2000 purchased
the remaining 40% interest for $600,000, which was recorded as goodwill to be
amortized over 5 years. In 2001, the joint venture ceased operations due to the
loss of available economic circuits to terminate traffic. Accordingly, the
Company wrote-off the remaining goodwill of $434,000 in June 2001, which is
included as an impairment charge in the statement of operations.

      During 2001, the Company wrote-off certain deposits and other assets
incurred to terminate traffic in foreign locations due to the unavailability of
those circuits. The write-off totaling approximately $140,000 is included as a
component of impairment charges.

      During 2000, the Company wrote-off certain investments totaling $300,000
in foreign termination arrangements, which were not placed into operation. This
amount is reported under impairment charges and other write-offs in the
statement of operations.

7. ACCRUED EXPENSES

      Accrued expenses consist of the following as of December 31:

<TABLE>
<CAPTION>
                                                       2001         2000
                                                    --------      --------
<S>                                                 <C>           <C>
      Sales tax payable                             $  3,650      $ 96,646
      Long distance carrier charges                       --       398,105
      Accrued payroll expenses                       190,822        39,556
      Other                                          159,754       112,252
                                                    --------      --------
                                                    $354,226      $646,559
                                                    ========      ========
</TABLE>


                                      F-13
<PAGE>

                            WORLDQUEST NETWORKS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. DEBT

      Long-term debt consists of the following as of December 31:

<TABLE>
<CAPTION>
                                                   2001            2000
                                               -----------     -----------
<S>                                            <C>             <C>
      Term loan and accrued interest           $   925,000     $ 1,420,436
      Promissory note                              300,000              --
                                               -----------     -----------
      Total                                    $ 1,225,000     $ 1,420,436
      Less current portion                        (925,000)       (320,436)
                                               -----------     -----------
      Long term debt net of current portion    $   300,000     $ 1,100,000
                                               ===========     ===========
</TABLE>

      Scheduled future principal maturities of long-term debt consists of the
following as of December 31:

<TABLE>
<CAPTION>
     Year ending December 31,
     ------------------------
     <S>                                       <C>
     2002                                      $   925,000
     2003                                          300,000
                                               -----------
                                               $ 1,225,000
                                               ===========
</TABLE>

      The term loan is due to Eagle Venture Capital, bears interest at 8%
annually and matures May 5, 2002. The Company also has a $1.4 million line of
credit with Eagle Venture Capital at 8% per annum with accrued interest payable
monthly until May 2002. In 2001, the Company paid outstanding interest of
$397,000 and made a principal payment of $175,000 on the term loan. The
remaining principal balance of $925,000 is classified as a current obligation at
December 31, 2001. There were no borrowings under the line of credit at December
31, 2001 and 2000.

      In 2000, the Company retired a note payable to a Costa Rican party with
whom the Company had formed a joint venture to provide facsimile termination
services and recognized a net gain of approximately $100,000.

      In December 1999, the Company raised $1.9 million, before offering costs
of $255,000, through the private placement of 8% unsecured subordinated
convertible promissory notes and common stock purchase warrants to acquire
323,000 shares of the Company's common stock. The notes were due the earlier of
December 31, 2000 or the successful completion of an initial public offering.
The fair value of the stock purchase warrants of approximately $1.5 million was
accounted for as a discount on the debt and amortized as additional interest
expense over the term of the notes. In 2000, the Company retired all debt
outstanding, excluding the $1,100,000 term loan due Eagle Venture Capital, with
proceeds from the Company's initial public offering. Upon retirement of the 8%
unsecured subordinated convertible promissory notes, the unamortized fair value
of the common stock purchase warrants and deferred offering costs of
approximately $1.6 million were expensed as an extraordinary loss.

      In 2001, the Company borrowed $300,000 from a financial institution under
a term promissory note agreement (the "Note"). The Note bears interest at the
financial institution's prime rate as adjusted from time to time (4.75% at
December 31, 2001) less 2.25% per annum with the $300,000 principal balance due
in October 2003. The Note is collateralized by a $300,000 certificate of deposit
bearing interest of 2.2% per annum.


                                      F-14
<PAGE>

                            WORLDQUEST NETWORKS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. RELATED PARTY TRANSACTIONS

      The Company's founder and Chairman of the Board holds a controlling
interest in Eagle Venture Capital, which owns approximately 2.7 million
outstanding shares of the common stock of the Company as of December 31, 2001
and 2000. Eagle Venture Capital has provided the Company with a term loan and a
line of credit expiring in May 2002 of which $925,000 and $0, respectively, were
outstanding as of December 31, 2001. The term loan and line of credit are
described in Note 8.

During 2000, the Company granted warrants to acquire 100,000 shares of the
Company's common stock as compensation for the execution of two Internet portal
agreements arranged by a consulting company. The consulting company is managed
by one of the Company's directors, who became a Director of the Company
subsequent to the grant of the warrants. The fair value of these warrants,
approximately $1.9 million, was expensed as selling, general and administrative
costs during 2000.

10. INCOME TAXES

      Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
deferred tax assets and liabilities are as follows as of December 31:

<TABLE>
<CAPTION>
                                                  2001            2000
                                              -----------     -----------
<S>                                           <C>             <C>
      Deferred tax assets:
      Deferred revenue                        $    53,650     $    35,478
      Property and equipment                      276,128          75,640
      Accounts receivable                         314,969          14,049
      Other                                        20,579         322,920
      Net operating loss carry forwards         6,340,863       3,431,631
                                              -----------     -----------
      Total deferred tax assets               $ 7,006,189     $ 3,879,918
                  Valuation allowance          (7,006,189)     (3,879,918)
                                              -----------     -----------
                  Net deferred tax assets     $        --     $        --
                                              ===========     ===========
</TABLE>

      The Company has U.S. net operating loss carry forwards of approximately
$17.2 million as of December 31, 2001. The Company has not recognized a deferred
tax asset in the accompanying balance sheet due to the uncertainty of future
realization. Accordingly, no tax benefit has been recognized in the accompanying
statements of operations. No other significant reconciling items exist between
the actual effective tax rate and the expected effective tax rate. During 2001
and 2000, the valuation allowance increased by approximately $3,135,000 and
$2,079,000, respectively. If unused, accumulated net operating losses expire as
follows: 2011 - $213,998; 2012 - $1,530,561; 2018 - $1,446,582; 2019 -
$1,754,788; 2020 - $4,627,959; 2021 - $7,577,483.

11. STOCKHOLDERS' EQUITY

COMMON AND PREFERRED STOCK

      The Company's authorized share capital consists of 50,000,000 shares of
common stock with par value of $0.01 per share, and 10,000,000 shares of
preferred stock with par value of $0.01 per share.

      In February 2000, the Company completed its initial public offering,
selling a total of 3,162,500 shares of common stock at a price of $13 per share.
The offering commenced on February 4, 2000, with the closing of 2,750,000 shares
February 9, 2000 and the sale of an additional 412,000 shares, representing the
over-allotment


                                      F-15
<PAGE>

                            WORLDQUEST NETWORKS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

option, closing on February 22, 2000. The initial public offering resulted in
net proceeds of approximately $36.2 million to the Company.

WARRANTS

      At December 31, 2001 and 2000, the Company had outstanding warrants to
purchase 782,000 shares of its common stock. These warrants expire April 2003
through April 2005 and have a weighted average exercise price of $15.91 per
share. At December 31, 2001, all of the warrants were exercisable. The warrants
outstanding include warrants granted to a consulting company managed by one of
the Company's directors to acquire 100,000 shares of common stock (see Note 9),
warrants granted to representatives of the Company's underwriters in connection
with the Company's initial public offering to acquire 275,000 shares of common
stock, warrants granted in connection with the Company's December 1999 private
placement of promissory notes to acquire 306,000 shares of common stock (see
Note 8); and warrants granted to various service providers and others to acquire
101,000 shares of common stock.

      Included in the warrants to acquire 101,000 shares of common stock are
warrants the Company granted a joint venture partner warrants to acquire 50,000
shares of common stock, with exercise prices of $4.56 to $8.50, for the
completion of ten new Internet circuit installations by the joint venture
partner. The fair value of these options, approximately $238,000, was recorded
as an additional cost of installation of the circuits, capitalized as property
and equipment and subsequently, written off in 2001 upon cessation of the joint
venture's operations as discussed in Note 6.

STOCK OPTIONS

      The Company has stock option plans (the "Plans") under which the Company
may grant Directors and key employees options to purchase up to 1,000,000 shares
of the Company's common stock at an amount at least equal to the fair value of
the Company's common stock on the date of grant. The following table summarizes
the employee stock option transactions for the years ended December 31, 2001 and
2000 under the Plans:

<TABLE>
<CAPTION>
                                                                         WEIGHTED
                                                        NUMBER OF         AVERAGE
                                                         SHARES       EXERCISE PRICE
                                                        ---------     --------------
<S>                                                     <C>           <C>
Outstanding at December 31, 1999                         293,164          $ 3.10
Granted                                                  235,636           10.68
Exercised                                                 (5,000)           1.00
Cancelled                                                (33,100)           3.69
                                                        --------
Outstanding at December 31, 2000                         490,700            6.71

Granted                                                  641,782            2.21
Exercised                                                     --              --
Cancelled                                               (189,880)          11.63
                                                        --------
Outstanding at December 31, 2001                         942,602          $ 7.20
                                                        ========

Options exercisable:
December 31, 2000                                        152,804          $ 6.38
                                                        ========          ======
December 31, 2001                                        409,028          $ 6.09
                                                        ========          ======
</TABLE>


                                      F-16
<PAGE>

                            WORLDQUEST NETWORKS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     A summary of stock options under the Plans outstanding as of December 31,
2001 are as follows:

<TABLE>
<CAPTION>
                                     Options Outstanding            Options Exercisable
                           ------------------------------------    ---------------------
                                        Weighted-     Weighted-                Weighted-
        Range of                        Average        Average                  Average
        Exercise                       Remaining      Exercise                  Exercise
         Prices            Shares     Life (years)      Price       Shares       Price
     ---------------       ------     ------------    ---------     ------     ---------
<S>                       <C>         <C>             <C>          <C>         <C>
     $  1.00 -  1.99       94,500         5.15          $1.35       75,750      $ 1.33
        2.00 -  2.99      641,782         8.44           2.21      150,000        2.12
        3.00 -  3.99       50,500         3.93           3.33       50,500        3.33
        5.00 - 11.00       46,720         5.54           7.02       32,242        6.36
       13.00 - 14.00       40,000         4.89          13.00       37,500       13.00
       19.00 - 20.00       60,000         5.24          19.13       60,000       19.13
       21.00 - 22.00        9,100         5.22          21.63        3,036       21.63
                          -------                                  -------

Total                     942,602         5.60          $7.20      409,028       $6.09
                          =======                                  =======
</TABLE>

      In December 1998, the Company issued options outside of the option plans
to purchase 167,867 shares of its common stock to a former officer of the
Company at an exercise price of $3.33 with a seven-year term. At December 31,
2001, all of these options were vested and outstanding.

      Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation," ("SFAS 123") requires the disclosure of pro forma net loss
and loss per share computed as if the Company had accounted for its employee
stock options under the fair value method set forth in SFAS 123. The Company's
reported and pro forma net loss for the years ending December 31, 2001 and 2000
are as follows:

<TABLE>
<CAPTION>
                                                    2001               2000
                                               -------------      -------------
<S>                                            <C>                <C>
Net loss:
     As reported                               $  (7,185,680)     $  (4,745,114)
                                               =============      =============
     Pro forma                                 $  (8,042,285)     $  (6,081,642)
                                               =============      =============
Net loss per share:
     As reported -- basic and diluted          $       (1.13)     $       (0.52)
                                               =============      =============
     Pro forma -- basic and diluted            $       (1.26)     $       (1.01)
                                               =============      =============
</TABLE>

      The fair value of options granted was estimated at the date of grant using
the Black-Scholes option pricing model. The following weighted average
assumptions used in the December 31, 2001 calculation were as follows: risk free
interest rate of 4%, dividend yield of zero, volatility factor of .8, and
average expected life of 4 years. The weighted average assumptions used in the
December 31, 2000 calculation were as follows: risk free interest rate of 6%,
dividend yield of zero, volatility of 1.5 and average expected life of 4 years.
The options granted during 2001, and 2000 had a weighted average fair value of
$1.37 and $9.34 per share, respectively.


                                      F-17
<PAGE>

                            WORLDQUEST NETWORKS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. BENEFIT PLAN

      The Company adopted a 401(k) benefit plan in 2001. The plan provides for
voluntary employee contributions and the Company matches 15% of employee
contributions to a maximum of 8% contributed by the employee. Employees become
100% vested in employment contributions after 2 years of service accruing 50%
per year of service. The Company had $10,913 of plan contributions for the year
ended December 31, 2001.

13. COMMITMENTS

      The Company has operating leases relating principally to office
facilities. Future minimum lease commitments at December 31, 2001, for leases
with initial or remaining terms of more than one year are summarized by year as
follows:

<TABLE>
<CAPTION>
                                                       Operating
                                                         Leases
                                                       ----------
<S>                                                    <C>
                   2002                                $   93,750
                   2003                                    62,500
                                                       ----------
                   Total                               $  156,250
                                                       ==========
</TABLE>

      Rental expense under operating leases was approximately $77,731 and
$77,216 for the years ended December 31, 2001 and 2000, respectively.

14. CONTINGENCIES

      In October 1997, the Patent and Trademark Office issued a notice of
publication regarding our application to register "WorldQuest Networks" as a
trademark. In September 1998, Qwest Communications ("Qwest") filed a notice of
opposition, which is currently pending before the Patent and Trademark Office.
In July 2000, Qwest Communications instituted a cancellation proceeding for the
Company's registered trademark "WorldQuest." In December 2001, a judgment was
made in the Company's favor whereby Qwest's motion to cancel the "WorldQuest"
trademark was dismissed. Qwest has filed a motion appealing the judgment.
Although the Company considers Qwest's motion to be without merit, the Company
may not be able to obtain a registered trademark for "WorldQuest Networks" and
could be required to stop using the name or pay a fee to Qwest for permission to
use the name.

      The Company is a defendant from time to time in lawsuits and disputes
arising in the ordinary course of business. The Company believes that resolution
of all known contingencies is uncertain, and there can be no assurance that
future costs related to such litigation would not be material to the Company's
financial position or results of operations.

15. INTEREST INCOME, NET

      Interest income for the years ended December 31, 2001 and 2000 was
$1,087,000, and $1,718,000, respectively. Interest expense for the years ended
December 31, 2001 and 2000 was $84,000 and $337,000, respectively.


                                      F-18
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number      Description of Exhibits
------      -----------------------
<S>         <C>
*2.1        Agreement and Plan of Merger with buyindiaonline.com Inc.
 3.1        Certificate of Incorporation of WorldQuest, filed as Exhibit 3.1 to
            WorldQuest's Form SB-2 Registration Statement, File No. 333-82721
            (the "Prior Registration Statement"), and incorporated herein by
            this reference.
 3.2        Bylaws of WorldQuest, filed as Exhibit 3.2 to the Prior Registration
            Statement, and incorporated herein by this reference.
 4.1        Specimen common stock certificate, filed as Exhibit 4.1 to the Prior
            Registration Statement, and incorporated herein by this reference.
 4.2        Amended and Restated Note dated May 5, 1999 payable to WorldQuest
            Networks, LLC (now known as Eagle Venture Capital, LLC), filed as
            Exhibit 4.2 to the Prior Registration Statement, and incorporated
            herein by this reference.
 4.3.1      Representatives' Warrant dated February 4, 2000 granted to John G.
            Kinnard and Company Incorporated for 68,750 shares of common stock,
            filed as Exhibit 4.3.1 to WorldQuest's Annual Report on Form 10-KSB
            for the fiscal year ended December 31, 1999, and incorporated herein
            by this reference.
 4.3.2      Representatives' Warrant dated February 4, 2000 granted to Kaufman
            Bros., L.P. for 178,750 shares of common stock, filed as Exhibit
            4.3.2 to WorldQuest's Annual Report on Form 10-KSB for the fiscal
            year ended December 31, 1999, and incorporated herein by this
            reference.
 4.3.3      Representatives' Warrant dated February 4, 2000 granted to WestPark
            Capital, Inc. for 27,500 shares of common stock, filed as Exhibit
            4.3.3 to WorldQuest's Annual Report on Form 10-KSB for the fiscal
            year ended December 31, 1999, and incorporated herein by this
            reference.
 4.4        Amended and Restated Note date August 15, 1999 payable to Eagle
            Capital Venture, LLC, which replaces the Amended and Restated Note
            filed as Exhibit 4.2, filed as Exhibit 4.4 to the Prior Registration
            Statement, and incorporated herein by this reference.
 4.5        Form of Unsecured Subordinated Convertible Promissory Note issued in
            the private placement closed in December 1999 (the "Private
            Placement"), filed as Exhibit 4.5 to WorldQuest's Form SB-2
            Registration Statement, file no. 333-93019 (the "Second Registration
            Statement"), and incorporated herein by this reference.
 4.6        Form of Warrant issued in the Private Placement, filed as Exhibit
            4.6 to the Second Registration Statement, and incorporated herein by
            this reference.
 4.7        Warrant to Purchase 50,000 shares of common stock granted to
            Advanced Multimedia Group, Inc. on March 16, 2000.
 4.8        Warrant to Purchase 50,000 shares of common stock granted to
            Advanced Multimedia Group, Inc. on April 26, 2000.
 10.1       Joint Venture Agreement dated April 9, 1999 between WorldQuest and
            BDC LLC, filed as Exhibit 10.1 to the Prior Registration Statement,
            and incorporated herein by this reference.
 10.2       Amended 1997 Stock Option Plan, filed as Exhibit 10.2 to the Prior
            Registration Statement, and incorporated herein by this reference.
 10.3       Stock Option Agreement dated December 7, 1998 granted to Michael R.
            Lanham by WorldQuest, filed as Exhibit 10.3 to the Prior
            Registration Statement, and incorporated herein by this reference.
 10.4       Stock Transfer Agreement dated December 7, 1998 between WorldQuest
            Communications, Inc., WorldQuest Networks, LLC and WorldQuest, filed
            as Exhibit 10.4 to the Prior Registration Statement, and
            incorporated herein by this reference.
 10.5       Amendment and Clarification Agreement dated September 27, 1999
            between WorldQuest Communications, Inc., WorldQuest and Eagle
            Venture Capital, LLC amending and clarifying the
</TABLE>
<PAGE>

<TABLE>
<S>         <C>
            Stock Transfer Agreement filed as Exhibit 10.4, filed as Exhibit
            10.7 to the Prior Registration Statement, and incorporated herein by
            this reference.
10.6        Form of Registration Rights Agreement executed in connection with
            the Private Placement, filed as Exhibit 10.6 to the Second
            Registration Statement, and incorporated herein by this reference.
10.7        Purchase Agreement dated April 17, 2000 between WorldQuest and BDC
            LLC, filed as Exhibit 10.1 to WorldQuest's Quarterly Report on Form
            10-QSB for the fiscal quarter ended March 31, 2000, and incorporated
            herein by this reference.
10.8        2001 Stock Option Plan, filed as Exhibit 4.8 to WorldQuest's Form
            S-8 Registration Statement, File No. 333-54498, and incorporated
            herein by this reference.
10.9        Employment agreement by and between WorldQuest Networks, Inc. and R.
            Stephen Polley effective as of May 14, 2001, filed as Exhibit 10.1
            to WorldQuest's Quarterly Report as Form 10-QSB for the quarter
            ended June 30, 2001.
*21.1       List of Subsidiaries.
*23.1       Consent of Grant Thornton LLP.
*23.2       Consent of Ernst & Young LLP.
</TABLE>

-----------------------
*     Filed herewith.

      (b)   Reports on Form 8-K

            No reports on Form 8-K were filed during the fourth quarter ended
      December 31, 2001.