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

                                   FORM 10-QSB

(MARK ONE)

[X]       QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 2001
                                       OR
          TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

         For the transition period from ______________ to _____________

                         Commission file number 0-27751

                            WORLDQUEST NETWORKS, INC.
        (Exact name of small business issuer as specified in its charter)

                   Delaware                                  75-2838415
       (State or other jurisdiction of                   (I.R.S. Employer
        Incorporation or organization)                  Identification No.)

16990 Dallas Parkway, Suite 220, Dallas, Texas                 75248
   (Address of principal executive offices)                  (Zip Code)

Issuer's telephone number, including area code:            (972) 818-0460

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

At October 31, 2001, the registrant had outstanding 6,381,199 shares of par
value $.01 common stock.

Transitional Small Business Disclosure Format (check one):

        Yes        No  X
            ---       ---

                                      -1-

<PAGE>

                            WORLDQUEST NETWORKS, INC.

                          PART I--FINANCIAL INFORMATION

                          Item 1. Financial Statements.

                            WORLDQUEST NETWORKS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                 SEPTEMBER 30,     DECEMBER 31,
                                                                     2001              2000
                                                                 -------------     ------------
<S>                                                              <C>               <C>
Current assets:                                                   (unaudited)
        Cash and cash equivalents ..........................     $ 25,856,786      $ 29,012,196
        Accounts receivable, net ...........................          270,664         1,248,619
                                                                 ------------      ------------
Total current assets .......................................       26,127,450        30,260,815

Property and equipment, net ................................        1,707,985         4,275,289
Other assets ...............................................          342,317         1,193,802
                                                                 ------------      ------------
Total assets ...............................................     $ 28,177,752      $ 35,729,906
                                                                 ============      ============


Current liabilities:
        Accounts payable ...................................     $    564,130      $  1,217,027
        Accrued expenses ...................................          725,037           646,559
        Accrued interest ...................................               --           320,436
        Deferred revenue ...................................          390,126           316,073
        Term loan ..........................................          925,000                --
                                                                 ------------      ------------
Total current liabilities ..................................        2,604,293         2,500,095

Term loan ..................................................               --         1,100,000

Minority interest in subsidiaries ..........................               --           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 September 30, 2001 and
            December 31, 2000 ..............................               --                --
        Common stock, par value $0.01 per share;
        Authorized shares--50,000,000; issued and
            outstanding shares--6,381,199 at September 30,
            2001 and 6,381,199 at December 31, 2000 ........           63,812            63,812
        Additional capital .................................       41,989,644        41,989,644
        Accumulated deficit ................................      (16,479,997)      (10,590,643)
                                                                 ------------      ------------
Total stockholders' equity .................................       25,573,459        31,462,813
                                                                 ------------      ------------
Total liabilities and stockholders' equity .................     $ 28,177,752      $ 35,729,906
                                                                 ============      ============
</Table>

              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.

                                      -2-

<PAGE>

                            WORLDQUEST NETWORKS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<Table>
<Caption>
                                                     THREE MONTHS ENDED                NINE MONTHS ENDED
                                                        SEPTEMBER 30,                    SEPTEMBER 30,
                                                   2001             2000             2001             2000
                                               ------------     ------------     ------------     ------------
<S>                                            <C>              <C>              <C>              <C>
Revenues:
Retail prepaid calling card revenue .......    $  2,739,869     $  1,954,890     $  7,228,939     $  5,848,342
Wholesale traffic and other ...............         126,275        1,057,092        2,236,308        1,306,998
                                               ------------     ------------     ------------     ------------
        Total revenue .....................       2,866,144        3,011,982        9,465,247        7,155,340
Cost of sales .............................       2,348,383        2,598,233        8,256,728        6,206,267
                                               ------------     ------------     ------------     ------------
Gross margin ..............................         517,761          413,749        1,208,519          949,073
Operating expenses:
Selling, general and administrative .......       1,477,796          881,916        4,660,369        3,999,730
Depreciation and amortization .............         262,394          291,144        1,103,498          521,753
Impairment charges ........................         374,590               --        2,547,920               --
Minority interest .........................         (38,529)          (8,414)        (352,569)           3,810
                                               ------------     ------------     ------------     ------------
Operating loss ............................      (1,558,490)        (750,897)      (6,750,699)      (3,576,220)
Interest income, net ......................         218,281          493,162          861,345          938,467
                                               ------------     ------------     ------------     ------------
Loss before extraordinary item ............      (1,340,209)        (257,735)      (5,889,354)      (2,637,753)
Extraordinary item ........................              --               --               --       (1,625,367)
                                               ------------     ------------     ------------     ------------
Net loss ..................................    $ (1,340,209)    $   (257,735)    $ (5,889,354)    $ (4,263,120)
                                               ============     ============     ============     ============
Net loss per share before extraordinary
   item-basic and diluted .................    $      (0.21)    $      (0.04)    $      (0.92)    $      (0.45)
                                               ============     ============     ============     ============
Net loss per share - basic and diluted ....    $      (0.21)    $      (0.04)    $      (0.92)    $      (0.72)
                                               ============     ============     ============     ============

Weighted average common shares
   outstanding - basic and diluted ........       6,381,199        6,375,362        6,381,199        5,900,698
                                               ============     ============     ============     ============
</Table>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.

                                      -3-

<PAGE>

                            WORLDQUEST NETWORKS, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)

<Table>
<Caption>

                                      COMMON             STOCK             ADDITIONAL        ACCUMULATED
                                      SHARES             AMOUNT              CAPITAL           DEFICIT              TOTAL
                                    ------------       ------------       ------------       ------------        ------------
<S>                                 <C>                <C>                <C>                <C>                 <C>
Balance at December 31, 2000           6,381,199       $     63,812       $ 41,989,644       $(10,590,643)       $ 31,462,813

Net loss                                      --                 --                 --         (5,889,354)         (5,889,354)
                                    ------------       ------------       ------------       ------------        ------------
Balance at September 30, 2001          6,381,199       $     63,812       $ 41,989,644       $(16,479,997)       $ 25,573,459
                                    ============       ============       ============       ============        ============
</Table>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                      -4-
<PAGE>




                            WORLDQUEST NETWORKS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<Table>
<Caption>


                                                                 NINE MONTHS ENDED
                                                                    SEPTEMBER 30
                                                                    ------------
                                                              2001                2000
                                                          ------------        ------------
<S>                                                       <C>                 <C>
OPERATING ACTIVITIES

Net loss ..........................................       $ (5,889,354)       $ (4,263,120)

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
     USED IN OPERATING ACTIVITIES:
        Depreciation and amortization .............          1,103,499             521,753
        Impairment charges ........................          2,547,920                  --
        Write-off of deferred debt costs ..........                 --          (1,405,433)
        Fair value of warrants issued for services                  --           1,868,500
        Minority interest in joint ventures .......           (666,998)            730,244
Changes in operating assets and liabilities:
        Accounts receivable .......................            977,955            (552,279)
        Accrued interest ..........................           (320,436)             81,040
        Accounts payable and accrued expenses .....           (574,419)           (632,574)
        Deferred revenue ..........................             74,053              84,181
        Other assets ..............................            350,450             255,238
                                                          ------------        ------------
Net cash used in operating activities .............         (2,397,330)         (3,312,450)

INVESTING ACTIVITIES
Net additions to property and equipment ...........           (583,080)         (3,149,001)
                                                          ------------        ------------
Net cash used in investing activities .............           (583,080)         (3,149,001)

FINANCING ACTIVITIES
Changes in line of credit .........................                 --            (888,725)
Payments on capital leases ........................                 --            (127,475)
Payments on notes payable and term loan ...........           (175,000)           (266,814)
Payments on promissory notes ......................                 --            (494,568)
Proceeds from exercise of stock options ...........                 --             107,000
Sale of common stock ..............................                 --          36,236,567
                                                          ------------        ------------
Net cash provided by (used by) financing activities           (175,000)         34,565,985

Increase (decrease) in cash and cash equivalents ..         (3,155,410)         28,104,534
Cash and cash equivalents at beginning of period ..         29,012,196           1,159,995
                                                          ------------        ------------
Cash and cash equivalents at end of period ........       $ 25,856,786        $ 29,264,529
                                                          ============        ============

Supplemental Disclosure of Cash Flow Information
Interest paid .....................................       $    384,797        $    118,589
                                                          ============        ============
</Table>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                      -5-
<PAGE>



                            WORLDQUEST NETWORKS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
of WorldQuest Networks, Inc. and Subsidiaries (collectively, "the Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for annual financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. The results for the interim periods presented
are not necessarily indicative of the results that may be expected for any
future period. The balance sheet at December 31, 2000 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The financial statements in this Form 10-QSB
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2000.

2.       NET LOSS PER SHARE

         Stock options and warrants convertible into 1,967,969 and 1,401,947
shares of the Company's common stock at September 30, 2001 and 2000,
respectively, are excluded from the calculation of net loss per share as their
effect would be antidilutive. The extraordinary loss per share for the nine
months ended September 30, 2000 was $0.27 per share.

3.       INITIAL PUBLIC OFFERING

         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 initial public offering resulted in net proceeds of approximately $36
million to the Company.

4.       JOINT VENTURES

         During June 2000, the Company entered into two joint ventures to
install and operate Internet gateways in foreign locations. The Company owns a
controlling interest in these joint ventures and has consolidated the financial
position and results of operations in the accompanying financial statements,
with the ownership applicable to the joint venture partners recorded as minority
interest. As of September 30, 2001, the Company had written-off its investments
in the two joint ventures. See note 6 below.

5.       RELATED PARTY TRANSACTIONS

         During 2001 the Company paid outstanding interest of $385,000 on the
term loan from Eagle Venture Capital, a significant stockholder of the Company,
which is controlled by the Company's Chairman. During the quarter ended
September 30, 2001, the Company made a principal payment of $175,000 on the
$1,100,000 term note from Eagle Venture Capital. The remaining principal balance
of $925,000 on the term loan from Eagle Venture Capital is due May 5, 2002 and
is classified as a current obligation as of September 30, 2001.

6.       IMPAIRMENT CHARGES

         During the three months ended September 30, 2001, one of the Company's
majority-owned joint venture operations to install and operate Internet gateways
in foreign locations ceased terminating traffic due to the loss of available
circuits resulting in the cessation of the joint venture operations.
Accordingly, the Company wrote-off its investment in the joint venture resulting
in a loss of $375,000.

         During the three months ended March 31, 2001, the Company wrote-off
approximately $301,000 of foreign termination equipment no longer in operation
owned by one of the Company's majority-owned joint venture operations to install
and operate Internet gateways in foreign locations. During the second quarter of
2001, the joint venture ceased terminating traffic due to the loss of available
circuits resulting in the cessation of the joint venture's operations.
Accordingly, the Company wrote-off its investment in the joint venture resulting
in a loss of $1,300,000.

         In April 1999, the Company formed a joint venture with BDC, LLC, a
company owned by a director of the Company. The


                                      -6-
<PAGE>


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 June 2001, the Company decided to no longer use the joint venture to
terminate traffic, resulting in the cessation of its operations. Accordingly,
the Company wrote-off the remaining goodwill of $434,000 in June 2001.

         During the second quarter of 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.

7.       SUBSEQUENT EVENT

         On October 16, 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
(5.5% at October 16, 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. The Note proceeds will be used during the fourth quarter of 2001 to
purchase telephone switching equipment and other assets.


8.       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 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. Goodwill amortization is precluded on acquisitions completed after June
30, 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 our 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 or 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 that the
adoption of this pronouncement will have a material effect on its results of
operations or financial position.



                                      -7-
<PAGE>



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

         The following discussion of the financial condition and results of
operations of WorldQuest Networks, Inc. should be read in conjunction with the
Management's Discussion and Analysis or Plan of Operation (including Risk
Factors That May Affect Results of Operations and Financial Condition) and the
Consolidated Financial Statements and the Notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.
This quarterly report on Form 10-QSB contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").

FORWARD-LOOKING STATEMENTS

         Certain statements in this report, including statements of WorldQuest's
and management's expectations, intentions, plans and beliefs, including those
contained in or implied by "Management's Discussion and Analysis or Plan of
Operation" and the Notes to Condensed Consolidated Financial Statements, are
"forward-looking statements", within the meaning of Section 21E of the Exchange
Act, that are subject to certain events, risk and uncertainties that may be
outside WorldQuest's control. These forward-looking statements include
statements of management's plans and objectives for WorldQuest's 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 and the risk factors described from time to time in our other
documents and reports filed with the Securities and Exchange Commission (the
Commission").

OVERVIEW

         We are an international Internet telephony company. We sell virtual
prepaid calling cards to our retail customers through our Website (www.wqn.com)
and transmit long distance phone-to-phone calls at discounted rates through our
Internet and traditional networks. We supplement our revenue with wholesale
traffic as we see financially beneficial opportunities. We advertise, sell and
deliver our products worldwide through the Internet.

         In February 2000, we completed our initial public offering, selling a
total of 3,162,500 shares of common stock at a price of $13 per share. The
initial public offering resulted in net proceeds of approximately $36 million to
the Company.

         Our primary source of revenue is the fees that 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. This revenue is 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. We
recognize this revenue in the period in which the call is completed. We bill our
retail customers on a prepaid basis through credit cards.

         Cost of sales consists 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,
primarily 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.


                                      -8-
<PAGE>


RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2000

REVENUE

         Revenue decreased approximately 5% to $2,866,000 for the three months
ended September 30, 2001 from $3,012,000 for the three months ended September
30, 2000. This $146,000 decrease is a result of a $931,000 decrease in wholesale
revenues offset by an $785,000 increase in retail revenues. The decrease in
wholesale revenues is due primarily to the cessation of one of the Company's two
joint ventures to install and operate Internet gateways in foreign locations in
the second quarter of 2001 and the cessation of operations of the second joint
venture in the third quarter of 2001. The increase in retail revenue is
primarily attributable to 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 10% to $2,348,000 for the three
months ended September 30, 2001 from $2,598,000 for the three months ended
September 30, 2000. This $250,000 decrease is primarily attributable to a
decrease in wholesale revenues offset by an increase in retail revenues. Gross
margin percentage for the September 30, 2001 quarter was approximately 18%
compared to approximately 14% in the September 30, 2000 quarter. The increase in
gross margin percentage is primarily attributable to a shift in revenue mix
whereby higher margin retail revenues comprised 96% of total revenues in the
September 30, 2001 quarter compared to 65% in the September 30, 2000 quarter. We
expect cost of sales to increase in absolute dollars in future periods but
decrease as a percentage of revenue as our retail sales volume increases.

OPERATING EXPENSES

SELLING, GENERAL AND ADMINISTRATIVE

         Selling, general and administrative expenses increased approximately
68% to $1,478,000 for the three months ended September 30, 2001 from $882,000
for the three months ended September 30, 2000. Selling, general and
administrative expenses for the 2001 quarter include increased salaries and
wages for the addition of key management and other personnel, severance payments
to former Company personnel, 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.

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization decreased approximately 10% to $262,000
for the three months ended September 30, 2001 from $291,000 for the three months
ended September 30, 2000. The decrease in depreciation and amortization is
primarily attributable to a reduction in the depreciable base in property and
equipment and other assets due to the write-downs of certain assets recorded in
the first and second quarter of 2001.

IMPAIRMENT CHARGES

         During the three months ended September 30, 2001, one of the Company's
majority-owned joint venture operations to install and operate Internet gateways
in foreign locations ceased terminating traffic due to the loss of available
circuits resulting in the cessation of the joint venture operations.
Accordingly, the Company wrote-off its investment in the joint venture resulting
in a loss of $375,000.

MINORITY INTEREST

         Minority interest for the three months ended September 30, 2001 was a
benefit of $39,000 compared to a benefit of $8,000 for the three months ended
September 30, 2000.

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 $239,000 for the three months ended September 30, 2001
from $488,000 for the three months ended September 30, 2000. This


                                      -9-
<PAGE>


decline is predominantly due to an overall decrease in short-term interest rates
in the United States financial markets and to a lesser extent a decrease in the
average cash balance invested. Interest expense for the 2001 quarter totaled
$20,000 compared to $0 in the comparable 2000 quarter.

NET LOSS

         We incurred a net loss of $1,340,000 for the three months ended
September 30, 2001 as compared to a net loss of $258,000 for the three months
ended September 30, 2000. The increase of $1,082,000 in net loss in the 2001
quarter is primarily attributable to an impairment charge of $375,000, higher
selling, general and administrative expenses and lower interest income.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000

REVENUE

         Revenue increased approximately 32% to $9,465,000 for the nine months
ended September 30, 2001 from $7,155,000 for the nine months ended September 30,
2000. This $2,310,000 increase is a result of additional retail revenue of
$1,381,000 and wholesale revenue of $929,000. The increase in retail revenue is
primarily attributable to an increase in our retail customer base. The increase
in wholesale revenue is primarily attributable to one customer who generated
approximately $899,000 of wholesale revenue during the nine months ended
September 30, 2001, but ceased terminating traffic over the Company's network
during February 2001.

COST OF SALES

         Cost of sales increased approximately 33% to $8,257,000 for the nine
months ended September 30, 2001, from $6,206,000 for the nine months ended
September 30, 2000. This $2,051,000 increase is primarily attributable to
increased retail sales volume. We expect cost of sales to increase in absolute
dollars in future periods but decrease as a percentage of revenue as our retail
sales volume increases.

OPERATING EXPENSES

SELLING, GENERAL AND ADMINISTRATIVE

         Selling, general and administrative expenses increased approximately
17% to $4,660,000 for the nine months ended September 30, 2001, from $4,000,000
for the nine months ended September 30, 2000. Selling, general and
administrative expenses for 2001 include bad debt expense of $749,000 relating
to one wholesale customer, increased salaries and wages for the addition of key
management and other personnel in the period, and severance payments to former
personnel of the Company. Selling, general and administrative expenses for 2000
include a charge of $1,868,500 relating to the fair value of warrants granted to
a consultant on completion of strategic portal relationship agreements. 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.

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization increased approximately 111% to
$1,103,000 for the nine months ended September 30, 2001 from $522,000 for the
nine months ended September 30, 2000. The increase in depreciation and
amortization is primarily attributable to the consolidation of the majority
owned joint ventures for the entire 2001 period as compared to four months in
the comparable 2000 period.

IMPAIRMENT CHARGES

         During the three months ended September 30, 2001, one of the Company's
majority-owned joint venture operations to install and operate Internet gateways
in foreign locations ceased terminating traffic due to the loss of available
circuits resulting in the cessation of the joint venture operations.
Accordingly, the Company wrote-off its investment in the joint venture resulting
in a loss of $375,000.

         During the three months ended March 31, 2001, the Company wrote-off
approximately $301,000 of foreign termination equipment no longer in operation
owned by one of the Company's majority-owned joint venture operations to install
and operate Internet gateways in foreign locations. During the second quarter of
2001, the joint venture ceased terminating traffic due to the loss of available
circuits resulting in the cessation of the joint venture's operations.
Accordingly, the Company wrote-off its


                                      -10-
<PAGE>


investment in the joint venture resulting in a loss of $1,300,000.

         In April 1999, the Company formed a joint venture with BDC, LLC, a
company owned by a director of the Company. 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 June 2001, the
Company decided to no longer use the joint venture to terminate traffic,
resulting in the cessation of its operations. Accordingly, the Company wrote-off
the remaining goodwill of $434,000 in June 2001.

         During the second quarter of 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.

MINORITY INTEREST

         Minority interest for the nine months ended September 30, 2001 was a
benefit of $353,000 compared to an expense of $4,000 for the nine months ended
September 30, 2000.

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 $926,000 for the nine months ended September 30, 2001
from $1,247,000 for the nine months ended September 30, 2000. This decline is
predominantly due to an overall decrease in short-term interest rates in the
United States financial markets and to a lesser extent a decrease in the average
cash balance invested. Interest expense for the 2001 period totaled $64,000
compared to $308,000 in the comparable 2000 period, which included a non-cash
charge of $224,000 relating to the fair value of warrants relating to financing
activities prior to our initial public offering which were paid off with
proceeds from the offering.

EXTRAORDINARY LOSS

         For the nine months ended September 30, 2000, the unamortized fair
value of warrants and issuance costs relating to the Company's private placement
of $1,900,000 of promissory notes in December 1999 was expensed as an
extraordinary loss upon early retirement with proceeds of the IPO and amounted
to $1,625,000.

NET LOSS

         We incurred a net loss of $5,889,000 for the nine months ended
September 30, 2001 as compared to a net loss of $4,263,000 for the nine months
ended September 30, 2000. Included in the 2001 net loss are impairment charges
of $2,548,000 and bad debt expense of $749,000 relating to one wholesale
customer. Included in the 2000 net loss were non-cash marketing expenses of
$1,858,500, $224,000 in interest relating to warrants issued in financing
activities prior to the company's public offering which were paid off with
proceeds from the offering, and an extraordinary loss of $1,625,000 relating to
the write-off of unamortized fair value of warrants and issuance costs upon
early retirement of the Company's private placement of $1,900,000 of promissory
notes.

LIQUIDITY AND CAPITAL RESOURCES

         As of September 30, 2001, we had approximately $25.9 million of cash
and cash equivalents and working capital of approximately $23.5 million. We
generated negative cash flow from operating activities of approximately
$2,397,000 during the nine months ended September 30, 2001, compared with
negative cash flow from operating activities of approximately $3,312,000 during
the nine months ended September 30, 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 $583,000
for the nine months ended September 30, 2001 and $3,149,000 for the nine months
ended September 30, 2000. During the remainder of the year 2001, we expect
capital expenditures of approximately $500,000, of which $300,000 will be for
telephone switching equipment, and the remainder will be for gateway servers,
database servers, software and miscellaneous other equipment.

         Net cash used in financing activities for the nine months ended
September 30, 2001 was $175,000 due to 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 nine months ended September 30, 2000 was $34.6


                                      -11-
<PAGE>


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

         As of September 30, 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 September 30, 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 (5.5% at
October 16, 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. The
Note proceeds will be used during the fourth quarter of 2001 to purchase
telephone switching equipment and other assets.

         We currently anticipate that our existing cash resources will be
sufficient to meet our anticipated needs for working capital and capital
expenditure requirements through at least the next 24 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
when required, or at all.

INCOME TAXES

         As of September 30, 2001, we had approximately $9.3 million of net
operating loss carryforwards for federal income tax purposes, which expire
beginning in 2011. We have not recognized an income tax benefit for our losses,
as we have provided a full valuation allowance on our deferred tax assets, which
consist primarily of net operating loss carryforwards, because of uncertainty
regarding future realizability. Limitations on the utilization of these
carryforwards 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 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. Goodwill amortization is precluded on acquisitions completed after June
30, 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 our 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 or 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 that the
adoption of this pronouncement will have a material effect on its results of
operations or financial position.


                                      -12-
<PAGE>


PART II-OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         The Company is a defendant from time to time in lawsuits and disputes
arising in the ordinary course of their 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.

ITEM 2.  CHANGES IN SECURITIES

         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. Net
proceeds to WorldQuest were approximately $36 million. From the time of receipt
through September 30, 2001, the net proceeds were applied toward:

         -        Repayment of indebtedness, $3,485,000;

         -        Equipment purchases including additional back-up systems,
                  $3,642,000;

         -        Software development, $300,000; and

         -        General corporate purposes, including operating losses,
                  payment of outstanding payables, payoffs of capital leases,
                  liability insurance premiums, development of strategic
                  relationships and research and development of new products,
                  $4,864,000.

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 $3,485,000 paid for repayment of indebtedness, $1,407,000 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.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

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

Not applicable.

ITEM 5.  OTHER INFORMATION

         On October 5, 2001 Peter S. Lynch of Boston, filed Schedule 13G,
Statement of Beneficial Ownership, with the U.S. Securities and Exchange
Commission to reflect an investment in the Company. Mr. Lynch purchased 364,000
shares of the Company's common stock representing 5.7 percent of outstanding
shares of WorldQuest Networks, Inc. stock.



                                      -13-
<PAGE>
ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      The following exhibits are filed as a part of this Quarterly
                  Report as Form 10-QSB pursuant to Item 601 of regulation S-B:

<Table>
<Caption>
EXHIBIT
NUMBER            DESCRIPTION OF EXHIBITS
-------           -----------------------
<S>               <C>
3.1               Certificate of Incorporation of WorldQuest, filed as Exhibit
                  3.1 to WorldQuests' Form SB-2 Registration Statement, File No.
                  333-82721 (the "Prior Registration Statement"), and
                  incorporated herein by 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 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 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 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, filed as
                  Exhibit 4.7 to WorldQuest's Annual Report on Form 10-KSB for
                  the fiscal year ended December 31, 2000, and incorporated
                  herein by this reference.

4.8               Warrant to purchase 50,000 shares of common stock granted to
                  Advanced Multimedia Group, Inc. on April 26, 2000, filed as
                  Exhibit 4.8 to WorldQuest's Annual Report on Form 10-KSB for
                  the fiscal year ended December 31, 2000, and incorporated
                  herein by this reference.

</Table>

         (b)      Reports on Forms 8-K

                  No reports on Form 8-K were filed during the third quarter of
                  2001.


                                      -14-
<PAGE>


SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, there unto
duly authorized.

                         WORLDQUEST NETWORKS, INC.


November 13, 2001           By: /s/ Victor E. Grijalva
                               ------------------------------------------------
                               Victor E. Grijalva, Vice President,
                               Chief Financial Officer, Secretary and Treasurer
                               (Principal Financial and Accounting Officer)

                                      -15-