<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 June 30, 2002
                                       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.)

    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

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 July 31, 2002, the registrant had outstanding 6,386,199 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>
                                                                           JUNE 30,         DECEMBER 31,
                                                                             2002               2001
                                                                        --------------     --------------
                                                                         (unaudited)
<S>                                                                     <C>                <C>

Current assets:
     Cash and cash equivalents .....................................    $   22,884,163     $   25,039,398
     Accounts receivable, net ......................................           344,529            174,098
     Prepaid expenses and other current assets .....................           446,601            277,023
                                                                        --------------     --------------
Total current assets ...............................................        23,675,293         25,490,519

Property and equipment, net ........................................         1,919,538          2,036,378
                                                                        --------------     --------------
Total assets .......................................................    $   25,594,831     $   27,526,897
                                                                        ==============     ==============


Current liabilities:
     Accounts payable ..............................................    $    1,529,878     $    1,455,422
     Accrued expenses ..............................................           386,852            354,226
     Deferred revenue ..............................................           211,498            215,116
     Current portion of term loan ..................................           925,000            925,000
                                                                        --------------     --------------

Total current liabilities ..........................................         3,053,228          2,949,764

Promissory note ....................................................           300,000            300,000

Commitments and contingencies

Stockholders' equity:
     Preferred stock, par value $0.01 per share;
        Authorized shares--10,000,000; none issued and
        Outstanding at June 30, 2002 and December 31, 2001 .........                --                 --
     Common stock, par value $0.01 per share;
        Authorized shares--50,000,000; issued and
        Outstanding shares--6,386,199 at June 30,
        2002 and 6,381,199 at December 31, 2001 ....................            63,862             63,812
     Additional capital ............................................        41,994,594         41,989,644
     Accumulated deficit ...........................................       (19,816,853)       (17,776,323)
                                                                        --------------     --------------
Total stockholders' equity .........................................        22,241,603         24,277,133
                                                                        --------------     --------------
Total liabilities and stockholders' equity .........................    $   25,594,831     $   27,526,897
                                                                        ==============     ==============
</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 JUNE 30,       SIX MONTHS ENDED JUNE 30,
                                                                -----------------------------     -----------------------------
                                                                    2002             2001             2002              2001
                                                                ------------     ------------     ------------     ------------
<S>                                                             <C>              <C>              <C>              <C>

Revenues:
Retail prepaid calling card revenue ........................    $  2,833,934     $  2,376,907     $  5,644,964     $  4,489,070
Wholesale traffic and other ................................         106,152          411,872          169,623        2,110,034
                                                                ------------     ------------     ------------     ------------
     Total revenue .........................................       2,940,086        2,788,779        5,814,587        6,599,104
Cost of revenue ............................................       2,414,709        2,589,194        4,849,456        5,908,346
                                                                ------------     ------------     ------------     ------------
Gross profit ...............................................         525,377          199,585          965,131          690,758
Operating expenses:
Selling, general and administrative ........................       1,299,124        1,374,363        2,661,301        3,182,572
Depreciation and amortization ..............................         265,643          425,908          524,412          841,105
Impairment charges and other write-offs ....................              --        1,872,649               --        2,173,330
Minority interest ..........................................              --         (119,972)              --         (314,040)
                                                                ------------     ------------     ------------     ------------
Total operating expenses ...................................       1,564,767        3,552,948        3,185,713        5,882,967
                                                                ------------     ------------     ------------     ------------
Operating loss .............................................      (1,039,390)      (3,353,363)      (2,220,582)      (5,192,209)
Interest income, net .......................................          90,060          274,510          180,052          643,064
                                                                ------------     ------------     ------------     ------------
Net loss ...................................................    $   (949,330)    $ (3,078,853)    $ (2,040,530)    $ (4,549,145)
                                                                ============     ============     ============     ============

Net loss per share - basic and diluted .....................    $      (0.15)    $      (0.48)    $      (0.32)    $      (0.71)
                                                                ============     ============     ============     ============

Weighted average common shares outstanding - basic
and diluted ................................................       6,386,199        6,381,199        6,386,199        6,381,199
                                                                ============     ============     ============     ============
</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, 2001          6,381,199    $      63,812    $  41,989,644    $ (17,776,323)    $  24,277,133
Exercise of stock options                 5,000               50            4,950               --             5,000
Net loss                                     --               --               --       (2,040,530)       (2,040,530)
                                  -------------    -------------    -------------    -------------     -------------
Balance at June 30, 2002              6,386,199    $      63,862    $  41,994,594    $ (19,816,853)    $  22,241,603
                                  =============    =============    =============    =============     =============
</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>
                                                                 SIX MONTHS ENDED
                                                                     JUNE 30,
                                                          -------------------------------
                                                               2002              2001
                                                          -------------     -------------
<S>                                                       <C>               <C>

OPERATING ACTIVITIES

Net loss .............................................    $  (2,040,530)    $  (4,549,145)

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
   USED IN OPERATING ACTIVITIES:
     Depreciation and amortization ...................          524,412           841,105
     Impairment charges and other write-offs .........               --         2,173,330
     Minority interest in joint ventures .............               --          (325,908)
Changes in operating assets and liabilities:
     Accounts receivable .............................         (170,431)          840,688
     Accrued Interest ................................               --          (320,436)
     Accounts payable and accrued expenses ...........          370,390          (909,062)
     Deferred revenue ................................           (3,618)            1,917
     Other assets ....................................         (169,578)          126,340
                                                          -------------     -------------
Net cash used in operating activities ................       (1,489,355)       (2,121,171)

INVESTING ACTIVITIES
Net additions to property and equipment ..............         (670,880)         (500,346)
                                                          -------------     -------------
Net cash used in investing activities ................         (670,880)         (500,346)

FINANCING ACTIVITIES
Proceeds from exercise of stock options ..............            5,000                --
                                                          -------------     -------------
Net cash provided by financing activities ............            5,000                --

Decrease in cash and cash equivalents ................       (2,155,235)       (2,621,517)
Cash and cash equivalents at beginning of period .....       25,039,398        29,012,196
                                                          -------------     -------------
Cash and cash equivalents at end of period ...........    $  22,884,163     $  26,390,679
                                                          =============     =============

Supplemental Disclosure of Cash Flow Information:
Interest paid ........................................    $      30,855     $     364,262
                                                          =============     =============
Cash paid for fair value of assets acquired ..........    $     263,308     $          --
                                                          =============     =============
</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, 2001 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, 2001. Certain reclassifications have been made to the 2001
financial statements to conform to the 2002 presentation.

2.      NET LOSS PER SHARE

        Stock options and warrants convertible into 1,787,667 and 1,797,249
shares of the Company's common stock at June 30, 2002 and 2001, respectively,
are excluded from the calculation of net loss per share as their effect would be
antidilutive.

3.      RELATED PARTY TRANSACTIONS

        For the six months ended June 30, 2002, the Company paid outstanding
interest of $31,000 on the term loan from Eagle Venture Capital, a significant
stockholder of the Company, which is controlled by the Company's Chairman. The
principal balance of $925,000 on the term loan from Eagle Venture Capital was
due May 5, 2002 and is classified as a current obligation as of June 30, 2002.
The principle balance and accrued interest totaling $930,069 was paid to Eagle
Venture Capital on July 24, 2002, thereby satisfying in full the Company's
obligation on the term loan. The Company also had a $1,400,000 line of credit
with Eagle Venture Capital, none of which was outstanding, which expired on May
5, 2002.

4.      IMPAIRMENT CHARGES AND OTHER WRITE-OFFS

         During the quarter ended March 31, 2001, the Company wrote-off
approximately $301,000 of foreign termination equipment no longer in the
operations 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 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 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.

5.      SIGNIFICANT TRANSACTIONS

         In the quarter ended March 31, 2001, the Company recorded an allowance
for doubtful accounts receivables of approximately $749,000 relating to amounts
owed by a wholesale traffic customer who ceased terminating traffic through the
Company's network during February 2001. In the quarter ended March 31, 2002, the
Company received a cash payment of $100,000 and a note receivable of $200,000 in
satisfaction for the receivable outstanding from this wholesale customer. The
note receivable bears interest at 12% per annum with principal and interest
payments due monthly, and has been fully reserved.



                                      -6-


<PAGE>

6.      CONTINGENCIES

         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 registration 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.

7.      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
be tested for impairment as set forth in the Statement. The adoption of these
standards did 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 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 adoption of this standard did not have a
significant effect on our 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, 2001.
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 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
Cash2India.com), we also provide a web service that enables customers to send
money and a personalized message from the United States, Canada and the United
Kingdom to friends, family, or others in India, Sri Lanka and the Philippines
over our Web, telephony and other networks.

         As of June 30, 2002, Eagle Venture Capital, LLC ("Eagle Venture") owned
approximately 2.7 million, 42%, of our outstanding shares of common stock. Eagle
Venture is primarily owned by our founder and Chairman of the Board.

         Our primary source of revenue is the fees that we receive from our
retail 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 revenue 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.



                                      -8-

<PAGE>

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001

REVENUE

         Revenue increased approximately 5% to $2,940,000 for the three months
ended June 30, 2002 from $2,789,000 for the three months ended June 30, 2001.
This $151,000 increase is a result of a $457,000 increase in retail revenues
offset by a $306,000 decrease in wholesale revenues. The increase in retail
revenue is primarily attributable to an increase in our retail customer base.
The decrease in wholesale revenue 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. Other revenues of $106,000 in
the 2002 quarter are comprised of fees generated from our money transfer
business. 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 REVENUE

         Cost of revenue decreased approximately 7% to $2,415,000 for the three
months ended June 30, 2002 from $2,589,000 for the three months ended June 30,
2001. This $174,000 decrease is primarily attributable to a decrease in
wholesale revenues and improvement in our gross margin percentage. Gross margin
percentage for the June 30, 2002 quarter was approximately 18% compared to
approximately 7% in the June 30, 2001 quarter. The increase in gross margin
percentage is primarily attributable 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. Our gross margin percentage
increased from approximately 15% in the first quarter of 2002 in connection with
the completion of the implementation and testing of our new soft switch and new
Internet gateway locations as part of our network expansion at the end of the
first quarter of 2002. We expect cost of revenues to increase in absolute
dollars in future periods but decrease as a percentage of revenue as our retail
sales volume increases.

SELLING, GENERAL AND ADMINISTRATIVE

         Selling, general and administrative expenses decreased approximately 5%
to $1,299,000 for the three months ended June 30, 2002 from $1,374,000 for the
three months ended June 30, 2001. Selling, general and administrative expenses
for the 2001 quarter include expenditures for the acquisition of key management
and other personal and severance payments to former Company personnel. 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 38% to $266,000
for the three months ended June 30, 2002 from $426,000 for the three months
ended June 30, 2001. The decrease in depreciation and amortization is primarily
attributable to a lower depreciable base in property and equipment and other
assets in the 2002 quarter due to the write-downs of certain assets recorded
primarily in the quarters ended June 30, 2001 and September 30, 2001.

IMPAIRMENT CHARGES AND OTHER WRITE-OFFS

         During the quarter ended March 31, 2001, the Company wrote-off
approximately $301,000 of foreign termination equipment no longer in the
operations 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 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 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.



                                      -9-

<PAGE>

MINORITY INTEREST

         Minority interest for the three months ended June 30, 2001, was a
benefit of $120,000. There was no minority interest in the 2002 period due to
the cessation of the joint ventures in which the Company had a majority interest
during 2001.

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, and our promissory note. Interest
earned on cash and cash equivalents decreased to $111,000 for the three months
ended June 30, 2002 from $300,000 for the three months ended June 30, 2001. This
decline is 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 2002 quarter totaled $21,000 compared to $22,000 in the
comparable 2001 quarter.

NET LOSS

         We incurred a net loss of $949,000 for the three months ended June 30,
2002 as compared to a net loss of $3,079,000 for the three months ended June 30,
2001. The decrease of $2,130,000 in net loss in the 2002 quarter is partly
attributable to a gross margin improvement and a reduction in selling, general
and administrative expenses, and depreciation and amortization, offset by lower
interest income. In addition, the 2001 quarter includes an impairment charge of
$1,873,000, and a minority interest benefit of $120,000.

SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001

REVENUE

         Revenue decreased approximately 12% to $5,815,000 for the six months
ended June 30, 2002 from $6,599,000 for the six months ended June 30, 2001. This
$784,000 decrease is a result of a $1,940,000 decrease in wholesale revenues
offset by a $1,156,000 increase in retail revenues. The decrease in wholesale
revenue 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 $899,000 or 43% of our
wholesale revenues for the six months ended June 30, 2001. The increase in
retail revenue is primarily attributable to an increase in our retail customer
base. Other revenues of $170,000 in the 2002 period are comprised of fees
generated from our money transfer business. 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 REVENUE

         Cost of revenue decreased approximately 18% to $4,849,000 for the six
months ended June 30, 2002 from $5,908,000 for the six months ended June 30,
2001. Gross margin percentage for the June 30, 2002 quarter was approximately
17% compared to approximately 11% in the June 30, 2001 period. This $1,059,000
decrease is primarily attributable to a decrease in wholesale revenues and
improvement in our gross margin percentage. The increase in gross margin
percentage is primarily attributable 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. We expect cost of revenues to
increase in absolute dollars in future periods but decrease as a percentage of
revenue as our retail sales volume increases.

SELLING, GENERAL AND ADMINISTRATIVE

         Selling, general and administrative expenses decreased approximately
16% to $2,661,000 for the six months ended June 30, 2002 from $3,183,000 for the
six months ended June 30, 2001. Selling, general and administrative expenses for
the 2001-period include bad debt expense of $749,000 due to one wholesale
customer while the June 30, 2002 period includes a $100,000 benefit from a cash
payment collected from the same wholesale customer. 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.



                                      -10-

<PAGE>

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization decreased approximately 38% to $524,000
for the six months ended June 30, 2002 from $841,000 for the six months ended
June 30, 2001. The decrease in depreciation and amortization is primarily
attributable to a lower depreciable base in property and equipment and other
assets in the 2002 quarter due to the write-downs of certain assets recorded
primarily in the quarters ended June 30, 2001 and September 30, 2001.

IMPAIRMENT CHARGES AND OTHER WRITE-OFFS

         During the quarter ended March 31, 2001, the Company wrote-off
approximately $301,000 of foreign termination equipment no longer in the
operations 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 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 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 six months ended June 30, 2001, was a benefit
of $314,000. There was no minority interest in the 2002 period due to the
cessation of the joint ventures in which the Company had a majority interest
during 2001.

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, and our promissory note. Interest
earned on cash and cash equivalents decreased to $222,000 for the six months
ended June 30, 2002 from $687,000 for the six months ended June 30, 2001. This
decline is 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 2002 period totaled $42,000 compared to $44,000 in the
comparable 2001 quarter.

NET LOSS

         We incurred a net loss of $2,041,000 for the six months ended June 30,
2002 as compared to a net loss of $4,549,000 for the six months ended June 30,
2001. The decrease of $2,508,000 in net loss in the 2002 quarter is primarily
attributable to a gross margin improvement, reductions in selling, general and
administrative expenses, and depreciation and amortization, offset by lower
interest income. In addition, the 2001 period includes a bad debt expense of
$749,000, an impairment charge of $2,173,000, and a minority interest benefit of
$314,000.

LIQUIDITY AND CAPITAL RESOURCES

         As of June 30, 2002, we had approximately $22,884,000 of cash and cash
equivalents and working capital of approximately $20,622,000. We generated
negative cash flow from operating activities of approximately $1,489,000 during
the six months ended June 30, 2002, compared with negative cash flow from
operating activities of approximately $2,121,000 during the six months ended
June 30, 2001. Net cash used in operating activities for the 2002 and 2001
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 $671,000
for the six months ended June 30, 2002 and $500,000 for the six months ended
June 30, 2001. Net cash used in investing activities for the six months ended
June 30, 2002 includes $263,000 cash paid for the fair value of assets acquired
in connection with the Cash2India acquisition.



                                      -11-

<PAGE>

         As of June 30, 2002, $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. The
principle balance and accrued interest totaling $930,069 was paid to Eagle
Venture Capital on July 24, 2002, thereby satisfying in full the Company's
obligation on the term loan. The Company also had a $1,400,000 line of credit
with Eagle Venture Capital, none of which was outstanding, which expired on May
5, 2002.

         We also have a promissory note outstanding, which bears interest at
prime less 2.25% per annum and is due in October of 2003. The promissory note is
secured by a $300,000 certificate of deposit maturing in September of 2002
bearing interest at 2.2% per annum.

         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 June 30, 2002, we had approximately $17.2 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 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
be tested for impairment as set forth in the Statement. The adoption of these
standards did 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 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 adoption of this standard did not have a
significant effect on our results of operations or financial position.



                                      -12-

<PAGE>


PART II-OTHER INFORMATION

ITEM 1.  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 registration 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.

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 June 30, 2002, the net proceeds were applied toward:

       -        Repayment of indebtedness, $3,551,000;

       -        Equipment purchases including additional back-up systems,
                $3,987,000;

       -        Software development, $348,000; 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, $5,430,000.

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 $3,551,000 paid for repayment of indebtedness, $1,459,000 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.



                                      -13-

<PAGE>


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

         The annual meeting of WorldQuest's stockholders was held on May 21,
2002. The following matters were submitted to our stockholders for their vote
and the results of the vote taken at the meeting were as follows:

         1. At the meeting, the directors named below were elected to hold
office until the 2003 annual meeting of stockholders or until their successors
are elected and qualified. Following is a tabulation of the votes relating to
the election of directors:


<Table>
<Caption>
                                     SHARES VOTED    SHARES VOTED      SHARES
         NAME                            "FOR"         "AGAINST"      WITHHELD
         ----                        ------------    ------------    ----------
<S>                                  <C>             <C>             <C>
         B. Michael Adler              6,095,070            --        12,410
         R. Stephen Polley             6,094,962           108        12,410
         E. Denton Jones               6,095,022            48        12,410
         Gary W. Fiedler               6,095,070            --        12,410
         Robert A. Farmer              6,094,962           108        12,410
         Elizabeth M. Buchler          6,095,070            --        12,410
</Table>

         2. Adoption of the 2002 Stock Option Plan (the "Plan") was ratified by
a vote of 3,752,814 shares "for" ratification, 73,071 against and 12,065
abstaining. Under the Plan, we will reserve 750,000 shares of common stock for
issuance to our key employees, directors and consultants pursuant to options
granted by the Board of Directors during the term of the Plan.

         3. The appointment of Grant Thornton LLP as the Company's independent
public accountants was ratified by a vote of 6,107,197 shares "for"
ratification, 2,933 against and 1,350 abstaining.

ITEM 5.  OTHER INFORMATION

         Not applicable.

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>

2.1           Agreement and Plan of Merger with buyindiaonline.com, Inc., filed
              as Exhibit 2.1 to WorldQuest's Annual Report on Form 10-KSB for
              the fiscal year ended December 31, 2001 and incorporated herein by
              reference.

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.
</Table>



                                      -14-

<PAGE>
<Table>
<S>           <C>
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.

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 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, and incorporated herein by reference.
</Table>

              (b) Reports on Forms 8-K

              No reports on Form 8-K were filed during the second quarter of
              2002.



                                      -15-
<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.


July 31, 2002             By: /s/ Victor E. Grijalva
                              -------------------------------------------------
                              Victor E. Grijalva, Vice President,
                              Chief Financial Officer, Secretary and Treasurer
                              (Principal Financial and Accounting Officer)