##### Table of Contents



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 March 31, 2003
|OR                                           
|o                                             |  | 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
(State or other jurisdiction of
Incorporation or organization)               |  | 75-2838415
(I.R.S. Employer
Identification No.)
|                                                                                      |  |                                                
|14911 Quorum Drive, Suite 140, Dallas, Texas
(Address of principal executive offices) |  | 75254
(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 o

At April 30, 2003, the registrant had outstanding 6,386,199 shares of par value
$.01 common stock.

Transitional Small Business Disclosure Format (check one):

|      |  |     
|----- |  | ----
|Yes o |  | No x

1



---

TABLE OF CONTENTS



|                                                 |                                                                   |  |  |  |  |  |  | 
|------------------------------------------------ | ----------------------------------------------------------------- |  |  |  |  |  |  | 
|PART IFINANCIAL INFORMATION                    
|                                                 | ITEM 1. FINANCIAL STATEMENTS.                                    
|                                                 | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|                                                 | ITEM 3. CONTROLS AND PROCEDURES                                  
|PART II-OTHER INFORMATION                       
|                                                 | ITEM 1. LEGAL PROCEEDINGS                                        
|                                                 | ITEM 2. CHANGES IN SECURITIES                                    
|                                                 | ITEM 3. DEFAULTS UPON SENIOR SECURITIES.                         
|                                                 | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.     
|                                                 | ITEM 5. OTHER INFORMATION                                        
|                                                 | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                        
|SIGNATURES                                      
|CERTIFICATIONS                                  
|Exhibit Index                                   
|EX-99.1 Certification of Chief Executive Officer
|EX-99.2 Certification of Chief Financial Officer



---



##### Table of Contents









WORLDQUEST NETWORKS, INC.

PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

WORLDQUEST NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                           |                                             |                                                                                                                  |            |             |        |              |            |             |        | 
|------------------------------------------ | ------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ---------- | ----------- | ------ | ------------ | ---------- | ----------- | ------ | 
|                                           |                                             |                                                                                                                  |            | March 31,   |        | December 31,
|                                           |                                             |                                                                                                                  |            | 2003        |        | 2002        
|                                           |                                             |                                                                                                                  |            |             |        |             
|                                           |                                             |                                                                                                                  |            | (unaudited) |        |              |            |            
|Current assets:                            |                                             |                                                                                                                  |            |             |        |              |            |            
|                                           | Cash and cash equivalents                   |                                                                                                                  | $          | 19,786,771  |        |              | $          | 20,721,207  |       
|                                           | Accounts receivable, net                    |                                                                                                                  |            | 612,466     |        |              |            | 355,111     |       
|                                           | Note receivable                             |                                                                                                                  |            |            |        |              |            | 202,383     |       
|                                           | Prepaid expenses and other current assets   |                                                                                                                  |            | 583,435     |        |              |            | 370,325     |       
|                                           |                                             |                                                                                                                  |            |             |        |              |            |            
|Total current assets                       |                                             |                                                                                                                  | 20,982,672 |             |        |              | 21,649,026 |            
|Property and equipment, net                |                                             |                                                                                                                  | 1,464,465  |             |        |              | 1,627,507  |            
|Other assets, net                          |                                             |                                                                                                                  | 177,085    |             |        |              |           |            
|                                           |                                             |                                                                                                                  |            |             |        |              |            |            
|Total assets                               |                                             | $                                                                                                                | 22,624,222 |             |        | $            | 23,276,533 |            
|                                           |                                             |                                                                                                                  |            |             |        |              |            |            
|Current liabilities:                       |                                             |                                                                                                                  |            |             |        |              |            |            
|                                           | Accounts payable                            |                                                                                                                  | $          | 1,196,869   |        |              | $          | 1,195,738   |       
|                                           | Accrued expenses                            |                                                                                                                  |            | 366,359     |        |              |            | 146,863     |       
|                                           | Deferred revenue                            |                                                                                                                  |            | 320,174     |        |              |            | 238,936     |       
|                                           | Promissory note                             |                                                                                                                  |            | 300,000     |        |              |            | 300,000     |       
|                                           |                                             |                                                                                                                  |            |             |        |              |            |            
|Total current liabilities                  |                                             |                                                                                                                  | 2,183,402  |             |        |              | 1,881,537  |            
|Commitments and contingencies              |                                             |                                                                                                                  |            |             |        |              |            |            
|Stockholders equity:                      |                                             |                                                                                                                  |            |             |        |              |            |            
|                                           | Preferred stock, par value $0.01 per share; |                                                                                                                  |            |             |        |              |            |             |       
|                                           |                                             | Authorized shares10,000,000; none issued and
outstanding at March 31, 2003 and December 31, 2002                |            |             |       |              |            |             |       | 
|                                           | Common stock, par value $0.01 per share;    |                                                                                                                  |            |             |        |              |            |             |       
|                                           |                                             | Authorized shares50,000,000; issued and
outstanding shares6,386,199 at March 31,
2003 and at December 31, 2002 |            |             | 63,862 |              |            |             | 63,862 | 
|                                           | Additional capital                          |                                                                                                                  |            | 41,994,594  |        |              |            | 41,994,594  |       
|                                           | Accumulated deficit                         |                                                                                                                  |            | (21,617,636 | )      |              |            | (20,663,460 | )     
|                                           |                                             |                                                                                                                  |            |             |        |              |            |            
|Total stockholders equity                 |                                             |                                                                                                                  | 20,440,820 |             |        |              | 21,394,996 |            
|                                           |                                             |                                                                                                                  |            |             |        |              |            |            
|Total liabilities and stockholders equity |                                             | $                                                                                                                | 22,624,222 |             |        | $            | 23,276,533 |            
|                                           |                                             |                                                                                                                  |            |             |        |              |            |            

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

2



---



##### Table of Contents



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

|                                                               |                                     |                          |            |                    |           |      |            |           |           | 
|-------------------------------------------------------------- | ----------------------------------- | ------------------------ | ---------- | ------------------ | --------- | ---- | ---------- | --------- | --------- | 
|                                                               |                                     |                          |            | Three months ended
|                                                               |                                     |                          |            | March 31,         
|                                                               |                                     |                          |            |                   
|                                                               |                                     |                          |            | 2003               |           | 2002
|                                                               |                                     |                          |            |                    |           |     
|Prepaid calling card revenue                                   |                                     | $                        | 2,276,780  |                    |           | $    | 2,811,031  |          
|Financial services and other                                   |                                     |                          | 145,425    |                    |           |      | 63,470     |          
|                                                               |                                     |                          |            |                    |           |      |            |          
|                                                               |                                     | Total revenue            |            |                    | 2,422,205 |      |            |           | 2,874,501 | 
|Cost of revenue                                                |                                     |                          | 1,792,865  |                    |           |      | 2,434,747  |          
|                                                               |                                     |                          |            |                    |           |      |            |          
|Gross profit                                                   |                                     |                          | 629,340    |                    |           |      | 439,754    |          
|Operating expenses:                                            |                                     |                          |            |                    |           |      |            |          
|                                                               | Selling, general and administrative |                          |            | 1,343,709          |           |      |            | 1,362,177 |          
|                                                               | Depreciation and amortization       |                          |            | 301,897            |           |      |            | 258,769   |          
|                                                               |                                     |                          |            |                    |           |      |            |          
|                                                               |                                     | Total operating expenses |            |                    | 1,645,606 |      |            |           | 1,620,946 | 
|                                                               |                                     |                          |            |                    |           |      |            |          
|Operating loss                                                 |                                     |                          | (1,016,266 | )                  |           |      | (1,181,192 | )        
|Interest income, net                                           |                                     |                          | 62,090     |                    |           |      | 89,992     |          
|                                                               |                                     |                          |            |                    |           |      |            |          
|Net loss                                                       |                                     | $                        | (954,176   | )                  |           | $    | (1,091,200 | )        
|                                                               |                                     |                          |            |                    |           |      |            |          
|Net loss per share- basic and diluted                          |                                     | $                        | (0.15      | )                  |           | $    | (0.17      | )        
|                                                               |                                     |                          |            |                    |           |      |            |          
|Weighted average common shares outstanding  basic and diluted |                                     |                          | 6,386,199  |                    |           |      | 6,384,699  |          
|                                                               |                                     |                          |            |                    |           |      |            |          

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

3



---



##### Table of Contents



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

|                             |  |        |           |        |  |            |        |             |  |       |            |  |  |   |             |   |  |   |            |  
|---------------------------- |  | ------ | --------- | ------ |  | ---------- | ------ | ----------- |  | ----- | ---------- |  |  | - | ----------- | - |  | - | ---------- | -
|                             |  | Common |           | Stock  |  | Additional |        | Accumulated |  |       |            | 
|                             |  | Shares |           | Amount |  | Capital    |        | Deficit     |  | Total
|                             |  |        |           |        |  |            |        |             |  |      
|Balance at December 31, 2002 |  |        | 6,386,199 |        |  | $          | 63,862 |             |  | $     | 41,994,594 |  |  | $ | (20,663,460 | ) |  | $ | 21,394,996 |  
|Net loss                     |  |        |          |        |  |            |       |             |  |       |           |  |  |   | (954,176    | ) |  |   | (954,176   | )
|                             |  |        |           |        |  |            |        |             |  |       |            |  |  |   |             |   |  |   |            |  
|Balance at March 31, 2003    |  |        | 6,386,199 |        |  | $          | 63,862 |             |  | $     | 41,994,594 |  |  | $ | (21,617,636 | ) |  | $ | 20,440,820 |  
|                             |  |        |           |        |  |            |        |             |  |       |            |  |  |   |             |   |  |   |            |  

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

4



---



##### Table of Contents



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

|                                                                            |                                       |   |                    |          |      |   |            |          |  
|--------------------------------------------------------------------------- | ------------------------------------- | - | ------------------ | -------- | ---- | - | ---------- | -------- | -
|                                                                            |                                       |   | Three months ended
|                                                                            |                                       |   | March 31,         
|                                                                            |                                       |   |                   
|                                                                            |                                       |   | 2003               |          | 2002
|                                                                            |                                       |   |                    |          |     
|Operating Activities                                                        |                                       |   |                    |          |      |   |            |         
|Net loss                                                                    |                                       | $ | (954,176           | )        |      | $ | (1,091,200 | )       
|Adjustments to reconcile net loss to net cash
used in operating activities: |                                       |   |                    |          |      |   |            |         
|                                                                            | Depreciation and amortization         |   |                    | 301,897  |      |   |            | 258,769  |  
|Changes in operating assets and liabilities:                                |                                       |   |                    |          |      |   |            |         
|                                                                            | Accounts receivable                   |   |                    | (257,355 | )    |   |            | (89,082  | )
|                                                                            | Accounts payable and accrued expenses |   |                    | 220,627  |      |   |            | (101,770 | )
|                                                                            | Deferred revenue                      |   |                    | 81,238   |      |   |            | (11,841  | )
|                                                                            | Other assets                          |   |                    | (213,110 | )    |   |            | (188,809 | )
|                                                                            |                                       |   |                    |          |      |   |            |         
|Net cash used in operating activities                                       |                                       |   | (820,879           | )        |      |   | (1,223,933 | )       
|Investing Activities                                                        |                                       |   |                    |          |      |   |            |         
|Additions to property and equipment                                         |                                       |   | (113,557           | )        |      |   | (450,256   | )       
|Financing Activities                                                        |                                       |   |                    |          |      |   |            |         
|Proceeds from exercise of stock options                                     |                                       |   |                   |          |      |   | 5,000      |         
|Decrease in cash and cash equivalents                                       |                                       |   | (934,436           | )        |      |   | (1,669,189 | )       
|Cash and cash equivalents at beginning of period                            |                                       |   | 20,721,207         |          |      |   | 25,039,398 |         
|                                                                            |                                       |   |                    |          |      |   |            |         
|Cash and cash equivalents at end of period                                  |                                       | $ | 19,786,771         |          |      | $ | 23,370,209 |         
|                                                                            |                                       |   |                    |          |      |   |            |         
|Supplemental Disclosure of Cash Flow Information
Interest paid              |                                       | $ |                   |          |      | $ | 18,855     |         
|                                                                            |                                       |   |                    |          |      |   |            |         

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

5



---



##### Table of Contents



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, 2002 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, 2002.

2. Net Loss Per Share

Stock options and warrants convertible into 1,835,947 and 1,787,667 shares
of the Companys common stock at March 31, 2003 and 2002, respectively, are
excluded from the calculation of net loss per share as their effect would be
antidilutive.

3. Related Party Transactions

During the 2002 first quarter, the Company paid outstanding interest of
approximately $19,000 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 paid in July 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 ever utilized and which expired
in May 2002.

4. Note Receivable

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 a receivable
outstanding from a wholesale customer. The note receivable was fully reserved.
In January 2003, the Company received certain assets from the wholesale
customers prepaid telecom business including customer lists, patents,
trademarks and other assets in satisfaction of the note receivable. The
Company believes the value of the assets received approximates the value of the
balance due on the note receivable and in December 2002 released the reserve of
approximately $202,000 on the note receivable and related accrued interest. As
of March 31, 2003, the value of the assets received, which primarily consist of
customer lists, are included in other assets  long term and are being
amortized over two years. Amortization expense for the three month period
ended March 31, 2003 was $25,298.

5. Legal Matters

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 filed a motion appealing
the judgment. In December 2002, Qwest filed a separate complaint stating that
the Companys prepaid cash card product infringes on the Qwest trademark. In
February 2003, the companies settled all outstanding claims whereby WorldQuest
will receive a cash payment and telecommunication services (primarily long
distance termination) from Qwest and Qwest shall retain all rights to the
trademarks in question. For the three month period ended March 31, 2003,
WorldQuest has only recorded a benefit with respect to the cash component
received which is included a as a reduction in selling, general and
administrative expense. WorldQuest will have 18 months to cease using the name
WorldQuest. We are currently evaluating potential corporate names and
anticipate that a decision will be made in the next 12 months.

6



---



##### Table of Contents



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

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.

6. Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, in the primary financial statements
and has provided supplemental disclosures required by Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123) and by Statement of Financial Accounting Standards No. 148, Accounting
for Stock-Based Compensation  Transition and Disclosure an amendment of FASB
Statement No. 123.

SFAS 123 requires the disclosure of pro forma net loss and loss per share
computed as if the Company had accounted for its employee stock options under
the fair value method set forth in SFAS 123. The Companys reported and pro
forma net loss for the three month period ending March 31, 2003 and 2002 are as
follows:

|                                                              |                                 |  |      |            |      |  |   |            |  
|------------------------------------------------------------- | ------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                                              |                                 |  | 2003 |            | 2002
|                                                              |                                 |  |      |            |     
|Net loss:                                                     |                                 |  |      |            |      |  |   |           
|                                                              | As reported                     |  | $    | (954,176   | )    |  | $ | (1,091,200 | )
|                                                              |                                 |  |      |            |      |  |   |            |  
|                                                              | Pro forma                       |  | $    | (1,016,044 | )    |  | $ | (1,160,989 | )
|                                                              |                                 |  |      |            |      |  |   |            |  
|Net loss per share:                                           |                                 |  |      |            |      |  |   |           
|                                                              | As reported  basic and diluted |  | $    | (0.15      | )    |  | $ | (0.17      | )
|                                                              |                                 |  |      |            |      |  |   |            |  
|                                                              | Pro forma  basic and diluted   |  | $    | (0.16      | )    |  | $ | (0.18      | )
|                                                              |                                 |  |      |            |      |  |   |            |  
|Stock based employee compensation costs included
in net loss: |                                 |  |      |            |      |  |   |           
|                                                              | As reported                     |  | $    |           |      |  | $ |           |  
|                                                              |                                 |  |      |            |      |  |   |            |  
|                                                              | Pro forma                       |  | $    | 61,868     |      |  | $ | 69,789     |  
|                                                              |                                 |  |      |            |      |  |   |            |  

The fair value of options granted was estimated at the date of grant using
the Black-Scholes option pricing model. The assumptions used in the calculations were as follows: risk free interest rate
of 3%, dividend yield of zero, volatility factor of .9, and average expected
life of 4 years.

7. Segment Reporting

Due to the growth in the Companys financial services business commenced
with the Companys acquisition of Cash2India, the Company adopted Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information in the first quarter of 2003. This
statement requires the Company to define and report the Companys business
segments based on how management currently evaluates its business. The
statement also requires disclosures about products and services, geographic
areas and major customers. The adoption of this statement did not affect
results of operations or the financial condition of the Company.

The Company manages its business segments primarily on a products and
services basis. The Companys reportable segments are: 1) Internet telephony
services; and 2) financial services. Internet telephony services primarily
consist of the sale of virtual calling cards which allow customers to utilize
our network of Internet gateways and other traditional networks to place
long-distance calls at discounted rates. We focus on the international long
distance market and a substantial portion of our telephony revenues is derived
from the sale of virtual calling cards to customers calling from the Unites
States to India. Financial services consist of 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, Russia and the Philippines. In addition, financial services include the
sale of the WorldQuest cash card that can be used to withdraw money or check
balances at ATMs worldwide and to pay for merchandise at any location
associated with the Plus®, Pulse® or Star® networks.

7



---



##### Table of Contents



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

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies included in our financial
statements and notes thereto in the Companys Annual Report on Form 10-KSB for
the year ended December 31, 2002. The Company evaluates the performance of its
business units based on segment operating profit. Segment operating profits
includes personnel, sales and marketing expenses and other operating expenses
directly attributable to the segment and excludes certain expenses that are
managed outside the segment. Costs excluded from the segment operating profit
consist of corporate expenses, including interest income and interest expense.
Corporate expenses are primarily comprised of executive compensation, legal,
insurance and other general and administrative expenses that are separately
managed. Corporate assets are not included in segment assets and consist
primarily of cash and cash equivalents.

Summary information by segment as of and for the three months ended March 31,
2003 are as follows:

|                              |  |           |           |           |  |           |           |       |  |   |            |   |  |   |            |  
|----------------------------- |  | --------- | --------- | --------- |  | --------- | --------- | ----- |  | - | ---------- | - |  | - | ---------- | -
|                              |  | Internet  |           | Financial |  |           |           |       |  |   |            |  
|                              |  | Telephony |           | Services  |  | Corporate |           | Total
|                              |  |           |           |           |  |           |           |      
|Revenue                       |  | $         | 2,276,780 |           |  | $         | 145,425   |       |  | $ |           |   |  | $ | 2,422,205  |  
|Depreciation and amortization |  | $         | 235,397   |           |  | $         | 38,591    |       |  | $ | 27,909     |   |  | $ | 301,897    |  
|Operating loss                |  | $         | (95,522   | )         |  | $         | (233,324  | )     |  | $ | (687,420   | ) |  | $ | (1,016,266 | )
|Identifiable assets           |  | $         | 1,514,984 |           |  | $         | 1,193,377 |       |  | $ | 19,915,861 |   |  | $ | 22,624,222 |  

Comparative segment information as of and for the three months ended March 31,
2002 is not available.

8. Recent Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure an amendment of FASB Statement No.
123 which provides alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for
stock-based employee compensation and amends the disclosure provisions of SFAS
123. The Company has adopted the disclosure provisions of this statement.

8



---



##### Table of Contents






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, 2002.

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
Securities Exchange Act of 1934, as amended (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.

Overview

We are an international Internet telephony and financial services company.
Our Internet telephony services segment primarily consists of the sale of
virtual calling cards which allow customers to 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. Our financial services segment
consists of a web service that enables customers to send money and a
personalized message from the Unites States, Canada and the United Kingdom to
friends, family, or others in India, Sri Lanka, Russia and the Philippines. In
addition, financial services include the sale of the WorldQuest cash card that
can be used to withdraw money, check balances at ATMs worldwide and to pay for
merchandise at any location associated with the Plus®, Pulse® or Star®
networks. Our cash card also serves as a prepaid long-distance calling card
and customers can add money to their card via the direct deposit of their
paychecks, by cashing their paychecks, by ACH transfer and by using cash,
credit cards or electronic checks.

As of March 31, 2003, Eagle Venture Capital, LLC (Eagle Venture) owned
approximately 2.6 million, or 41%, 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
and wholesale telephony customers for completing calls over our network and
processing fees we receive for our money transfer service and on the usage of
our cash card. Our Internet telephony 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. Our money
transfer and cash card fees are dependent on the number of transactions
processed and the fees we charge per transaction. Money transfer fees are
recognized upon transfer of funds to the recipient. Cash card fees are
recognized upon usage of the cash card.

Cost of telephony revenue consists primarily of data communication and
telecommunication expenses to terminate long distance traffic over our
networks, which varies proportionately with the volume of traffic carried over
our network. These costs include Internet related expenses to send voice
traffic over the Internet, fees we pay to terminate calls, fees we pay to
utilize the traditional telephone network to terminate our calls and expenses
incurred to connect our customers to our network. Cost of money transfer and
cash card revenue consists primarily of processing fees and usage fees we pay
for utilizing the Plus®, Pulse® or Star® networks which varies proportionally
with the number of transactions processed.

9



---



##### Table of Contents



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.

Critical Accounting Policies

Financial Reporting Release No. 60, which was recently published by the
SEC, recommends that all companies include a discussion of critical accounting
policies used in the preparation of their financial statements. The Companys
significant accounting policies are summarized in Note 2 of its consolidated
financial statements included in the Companys Annual Report on Form 10-KSB for
the year ended December 31, 2002. While all these significant accounting
policies impact its financial condition and results of operations, the Company
views certain of these policies as critical. Policies determined to be critical
are those policies that have the most significant impact on the Companys
financial statements and require management to use a greater degree of judgment
and/or estimates. Actual results may differ from those estimates. The Company
believes that given current facts and circumstances, it is unlikely that
applying any other reasonable judgments or estimate methodologies would cause a
material effect on the Companys consolidated results of operations, financial
position or liquidity for the periods presented in this report. The accounting
policies identified as critical are as follows:

Revenue Recognition

The Company recognizes revenues in accordance with generally accepted
accounting principles as outlined in SAB No. 101 which requires that four basic
criteria be met before revenue can be recognized: (1) persuasive evidence of
an arrangement exists, (2) product delivery, including customer acceptance, has
occurred or services have been rendered, (3) the price is fixed or determinable
and (4) collectibility is reasonably assured. The Company believes that its
revenue recognition policy is critical because revenue is a very significant
component of its results of operations. We bill our telephony calling card
customers on a prepaid basis through credit cards and recognize the revenue in
the period in which the call is completed. A substantial portion of the
Companys revenues is derived from the sale of prepaid phone cards that
terminate in India. Money transfer fees are recognized upon transfer of funds
to the recipient. Cash card fees are recognized upon usage of the cash card.

Property and Equipment

Property and equipment are depreciated over their useful lives. Useful
lives are based on managements estimates of the period that the assets will
generate revenue. Any change in conditions that would cause management to
change its estimate as to the useful lives of a group or class of assets may
significantly impact the Companys depreciation expense on a prospective basis.

Web site Development Costs

Our products and services are sold predominantly through our web sites. We
incur costs to maintain and add new functionality to our existing web sites and
to develop new web sites. Costs related to the planning and post
implementation phases of our web site development efforts are expensed. Direct
costs incurred in the development phase are capitalized and amortized over the
products estimated useful life of one to three years, which is included in
depreciation expense. Costs associated with minor enhancements and maintenance
for websites are expensed.

Income Taxes

As of March 31, 2003, we had approximately $21,857,000 of net operating
loss carry forwards for federal income tax purposes, which expire beginning in
2011. We have not recognized an income tax benefit for our losses, as we have
provided a full valuation allowance on our deferred tax assets, which consist
primarily of net operating loss carry forwards, because of uncertainty
regarding future realizability.

10



---



##### Table of Contents



Results of Operations

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

Revenue

Revenue decreased approximately 16% to $2,422,000 for the three months
ended March 31, 2003 from $2,875,000 for the three months ended March 31, 2002.
This $453,000 decrease is a result of a $534,000 decrease in prepaid calling
card revenue offset by an $81,000 increase in financial services and other
revenues. The decrease in prepaid calling card revenue is due primarily to a
decrease in the average price per minute charged to our customers of which a
substantial portion of our customers are calling from the United States to
India. The Indian international telephony market has been deregulated and
opened up to the private sector resulting in increased competition with a
significant drop in international long distance rates and pricing pressures due
to significantly lower rates offered by providers of Internet telephony. The
decrease in the price per minute has been partially offset by the increase in
the minutes of use, which has increased to 10.7 million minutes for the three
months ended March 31, 2003, up 15% from 9.3 million minutes for the three
months ended March 31, 2002. Although the bulk of the decrease in the price
per minute charged to our customers occurred in the fourth quarter of 2002, it
is unlikely that this trend will reverse in the near future. The increase in
financial services and other revenues is due primarily to the increase in money
transfer transactions processed due to the growth in our Cash2India customer
base.

Cost of Revenue

Cost of revenue decreased approximately 26% to $1,793,000 for the three
months ended March 31, 2003 from $2,435,000 for the three months ended March
31, 2002. This $642,000 decrease is attributable to a corresponding decrease in
the Companys revenue and an increase in gross margin percentage for the March
31, 2003 quarter to approximately 26% compared to approximately 15% in the
March 31, 2002 quarter. The increase in gross margin percentage is primarily
attributable to an increase in our telephony gross margin and the growth in
higher margin, financial services revenue. The increase in our telephony gross
margin is primarily attributable to increased utilization of our proprietary
networks as opposed to using lease lines and to favorable rate improvements in
our lease agreements with carriers to terminate calls.

Selling, General and Administrative

Selling, general and administrative expenses decreased approximately 1% to
$1,344,000 for the three months ended March 31, 2003 from $1,362,000 for the
three months ended March 31, 2002. Selling, general and administrative expenses
for the 2003-quarter includes a benefit in connection with the Companys Qwest
settlement (see Item 1  legal proceedings in Part II of this Report) and
increased personnel, marketing and other general and administrative fees
commensurate with the introduction of our cash card product in the fourth
quarter of 2002. Selling, general and administrative expenses for the
2002-quarter includes a $100,000 benefit from a cash payment collected on a
receivable from a wholesale customer, which had been fully reserved. 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 and incur additional costs related to the growth of our
business.

Depreciation and Amortization

Depreciation and amortization increased approximately 17% to $302,000 for
the three months ended March 31, 2003 from $259,000 for the three months ended
March 31, 2002. The increase in depreciation and amortization is attributable
to a higher depreciable base in property and equipment and other assets in the
2003 quarter commensurate with the capitalization of web site development costs
and other capital costs since March 31, 2002.

Interest Income, Net

Interest income, net consists of interest earned on cash and cash
equivalents less interest expense on borrowings. Interest earned on cash and
cash equivalents decreased to $63,000 for the three months ended March 31, 2003
from $111,000 for the three months ended March 31, 2002. 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 2003-quarter totaled less than $1,000 compared to $21,000 in
the comparable 2002 quarter. The decrease in interest expense is attributable
to the repayment of the term loan from Eagle Venture Capital in 2002.

Net Loss

We incurred a net loss of $954,000 for the three months ended March 31,
2003 as compared to a net loss of $1,091,000 for the three months ended March
31, 2002. The decrease of $137,000 in net loss in the 2003 quarter is primarily
attributable to

11



---



##### Table of Contents



our gross profit improvement of $190,000 and to a $18,000 decrease in
selling, general, and administrative expenses, offset by higher depreciation
and amortization of $43,000 and lower interest income of $28,000.

Liquidity and Capital Resources

As of March 31, 2003, we had approximately $19,787,000 of cash and cash
equivalents and working capital of approximately $18,799,000. We generated
negative cash flow from operating activities of approximately $821,000 during
the three months ended March 31, 2003, compared with negative cash flow from
operating activities of approximately $1,224,000 during the three months ended
March 31, 2002. Net cash used in operating activities for the 2003 and 2002
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 and capitalized web site development costs. Cash
used in investing activities was $114,000 for the three months ended March 31,
2003 and $450,000 for the three months ended March 31, 2002. Cash used in
investing activities for the three months ended March 31, 2002 includes
$263,000 cash paid for the fair value of assets acquired in connection with the
Cash2India acquisition.

In 2001, we borrowed $300,000 from a financial institution under a term
promissory note agreement (the Note). The Note bears interest at the
financial institutions prime rate as adjusted from time to time (4.25% at
March 31, 2003) 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 bearing interest of 1.14% per annum.

In November 2002, we adopted a discretionary stock repurchase program.
The program will expire in November 2003 and we can use up to $1,000,000 to
repurchase our common stock. As of March 31, 2003, no repurchases had been
made.

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 March 31, 2003, we had approximately $21,857,000 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 December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure an amendment of FASB Statement No.
123 which provides alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for
stock-based employee compensation and amends the disclosure provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation. The Company has
adopted the disclosure provisions of this statement.




ITEM 3. CONTROLS AND PROCEDURES

Based on their evaluation, as of a date within ninety days of the filing
of this Report on Form 10-QSB, the Companys Chief Executive Officer and Chief
Financial Officer have concluded that the Companys disclosure controls and
procedures (as defined in rules 13a-14 and 15d-14 under the Securities Exchange
Act of 1934) are effective. There have been no significant changes in internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

12



---



##### Table of Contents






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 filed a motion appealing
the judgment. In December 2002, Qwest filed a separate complaint stating that
the Companys prepaid cash card product infringes on the Qwest trademark. In
February 2003, the companies settled all outstanding claims whereby WorldQuest
will receive a cash payment and services from Qwest and Qwest shall retain all
rights to the trademarks in question. WorldQuest will have 18 months from the
date of the settlement to cease using the name WorldQuest. We are currently
evaluating potential corporate names and anticipate that a decision will be
made in the next 12 months.

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 $36.3 million. From the time of
receipt through March 31, 2003, the net proceeds were applied toward:



| |  |  | Repayment of indebtedness, $4,498,000;                                                                                                                                                                                                            
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Equipment purchases including additional back-up systems, $4,344,000;                                                                                                                                                                             
|
| |  |  | Software development, $628,000; 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,
$7,547,000.

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 $4,499,000 paid for repayment of indebtedness, $1,440,000 was paid
to Eagle Venture Capital, LLC, which owns approximately 41% 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



---



##### Table of Contents






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

The annual meeting of WorldQuests stockholders was held on April 14,
2003. 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 2004 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:

|                     |  |              |           |              |  |          |       |  |  |  |   | 
|-------------------- |  | ------------ | --------- | ------------ |  | -------- | ----- |  |  |  | - | 
|                     |  | Shares voted |           | Shares voted |  | Shares  
|Name                 |  | for        |           | against    |  | withheld
|                     |  |              |           |              |  |         
|B. Michael Adler     |  |              | 6,149,509 |              |  |          | 9,085 |  |  |  |  | 
|R. Stephen Polley    |  |              | 6,149,461 |              |  |          | 9,133 |  |  |  |  | 
|E. Denton Jones      |  |              | 6,149,509 |              |  |          | 9,085 |  |  |  |  | 
|Gary W. Fiedler      |  |              | 6,149,509 |              |  |          | 9,085 |  |  |  |  | 
|Robert A. Farmer     |  |              | 6,149,461 |              |  |          | 9,133 |  |  |  |  | 
|Elizabeth M. Buchler |  |              | 6,149,509 |              |  |          | 9,085 |  |  |  |  | 

2.     The appointment of Grant Thornton LLP as the Companys independent
public accountants was ratified by a vote of 6,156,236 shares for
ratification, 1,300 against and 1,035 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 on Form 10-QSB pursuant to Item 601 of regulation S-B:
| | --- |  | --------------------------------------------------------------------------------------------------------------------------

|        |  |                                                                                                                                                                                                                                                                                                                          
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                          
|Number  |  | Description of Exhibits                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                          
|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.                                                                                                                                                                                  
|4.2.1   |  | 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.                            
|4.2.2   |  | 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.                                                
|4.2.3   |  | 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.                                              
|4.3     |  | 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.
|4.4     |  | Form of Warrant issued in the Private Placement, filed as Exhibit
4.6 to the Second Registration Statement, and incorporated herein
by this reference.                                                                                                                                                                   
|4.5     |  | 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.                                                

14



---



##### Table of Contents



|                 |  |                                                                                                                                                                                                                                                                                                                                    
|---------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.6              |  | 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.                                                                 
|99.1*            |  | Certification of the Companys Chief Executive Officer pursuant to
Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906
pf the Sarbames-Oxley Act of 2002.                                                                                                                                                           
|99.2*            |  | Certification of the Companys Chief Financial Officer pursuant to
Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906
pf the Sarbames-Oxley Act of 2002.                                                                                                                                                           
|                
|* Filed herewith



| | (b) |  | Reports on Forms 8-K                                               
| | --- |  | -------------------------------------------------------------------
|
| |     |  | No reports on Form 8-K were filed during the first quarter of 2003.




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
|            |  |                          |  |                                                                                                                                
|May 9, 2003 |  | By:                      |  | /s/ Victor E. Grijalva                                                                                                         
|            |  |                          |  |                                                                                                                                
|            |  |                          |  | Victor E. GrijalvaVice President,
Chief Financial Officer, Secretary and Treasurer
(Principal Financial and Accounting Officer)

15



---



##### Table of Contents






CERTIFICATIONS

I, R. Stephen Polley, President and Chief Executive Officer of WorldQuest
Networks, Inc. certify that:



| | 1. |  | I have reviewed this quarterly report on Form
10-QSB of WorldQuest Networks, Inc.;                                                                                                                                                                                                                                                
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
quarterly report; and
|
| | 3. |  | Based on my knowledge, the financial statements,
and other financial information included in this quarterly
report, fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report.                       
|
| | 4. |  | The registrants other certifying officers and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:                                                                                                         



| | a. |  | designed such disclosure controls and
procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the
registrants disclosure controls and procedures as of a
date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this quarterly report our
conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I
have disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of registrants
board of directors (or persons performing the equivalent
function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the
design or operation of internal controls which could
adversely affect the registrants ability to record,
process, summarize and report financial data and have
identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that
involves management or other employees who have a
significant role in the registrants internal controls;
and                                                                                                                                        



| | 6. |  | The registrants other certifying officers and I
have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                                       |  |                      
| |  | ------------------------------------------------------------------------------------- |  | ---------------------
| |  | Date: May 9, 2003                                                                    
| |  |                                                                                       |  |                      
| |  | By:                                                                                   |  | /s/ R. Stephen Polley
| |  |                                                                                       |  |                      
| |  | R. Stephen Polley
President and Chief Executive
Officer (Principal
Executive Officer)

16



---



##### Table of Contents



I, Victor E. Grijalva, Vice President, Chief
Financial Officer, Secretary and Treasurer of
WorldQuest Networks, Inc. certify that:



| | 1. |  | I have reviewed this quarterly report on Form
10-QSB of WorldQuest Networks, Inc.;                                                                                                                                                                                                                                                
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
quarterly report; and
|
| | 3. |  | Based on my knowledge, the financial statements,
and other financial information included in this quarterly
report, fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report.                       
|
| | 4. |  | The registrants other certifying officers and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:                                                                                                         



| | a. |  | designed such disclosure controls and
procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the
registrants disclosure controls and procedures as of a
date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this quarterly report our
conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I
have disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of registrants
board of directors (or persons performing the equivalent
function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the
design or operation of internal controls which could
adversely affect the registrants ability to record,
process, summarize and report financial data and have
identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that
involves management or other employees who have a
significant role in the registrants internal controls;
and                                                                                                                                        



| | 6. |  | The registrants other certifying officers and I
have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                                                                                  |  |                       
| |  | -------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------
| |  | Date: May 9, 2003                                                                                                               
| |  |                                                                                                                                  |  |                       
| |  | By:                                                                                                                              |  | /s/ Victor E. Grijalva
| |  |                                                                                                                                  |  |                       
| |  | Victor E. Grijalva
Vice President, Chief
Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)

17



---



##### Table of Contents






Exhibit Index

|        |  |                                                                                                                                                                                                                                                                                                                                    
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                    
|Number  |  | Description of Exhibits                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                    
|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.                                                                                                                                                                                            
|4.2.1   |  | 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.                                      
|4.2.2   |  | 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.                                                          
|4.2.3   |  | 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.                                                        
|4.3     |  | 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.          
|4.4     |  | Form of Warrant issued in the Private Placement, filed as Exhibit
4.6 to the Second Registration Statement, and incorporated herein
by this reference.                                                                                                                                                                             
|4.5     |  | 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.                                                          
|4.6     |  | 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.                                                                 
|99.1    |  | Certification of the Companys Chief Executive Officer pursuant to
Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906
pf the Sarbames-Oxley Act of 2002.                                                                                                                                                           
|99.2    |  | Certification of the Companys Chief Financial Officer pursuant to
Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906
pf the Sarbames-Oxley Act of 2002.