TRADEQUEST INTERNATIONAL INC - TRDQ Annual Report (Small Business Issuers) (10KSB) PART II

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

Our common stock trades on the OTC Bulletin Board under the symbol “TQSTE.OB.” The following table shows the high and low bid prices for our common stock for each quarter since January 1, 2003 as reported by the OTC Bulletin Board. We consider our stock to be “thinly traded” and any reported sale prices may not be a true market-based valuation of the stock. Some of the bid quotations from the OTC Bulletin Board set forth below may reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

January 1, 2003 to December 31, 2003 (OTC Bulletin Board)	High Bid	Low Bid
First quarter	$0.16	$0.015
Second quarter	0.09	0.05
Third quarter	0.09	0.05
Fourth quarter	0.09	0.06

January 1, 2004 to December 31, 2004 (OTC Bulletin Board)	High Bid	Low Bid
First quarter	$0.10	$0.08
Second quarter	0.40	0.10
Third quarter	0.40	0.18
Fourth quarter	0.18	0.18

As of May 10, 2005, there were approximately 2,500 record holders of our common stock.

We have not paid any cash dividends since our inception and do not contemplate paying dividends in the foreseeable future. It is anticipated that earnings, if any, will be retained to retire debt and for the operation of the business.

Shares eligible for future sale could depress the price of our common stock, thus lowering the value of a buyer’s investment. Sales of substantial amounts of common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for shares of our common stock.

Our revenues and operating results may fluctuate significantly from quarter to quarter, which can lead to significant volatility in the price and volume of our stock. In addition, stock markets have experienced extreme price and volume volatility in recent years. This volatility has had a substantial effect on the market prices of securities of many smaller public companies for reasons unrelated or disproportionate to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.

Limited Market for Common Stock

There is currently a limited trading market for our shares of common stock, and there can be no assurance that a more substantial market will ever develop or be maintained. Any market price for shares of common stock of Tradequest is likely to be very volatile, and numerous factors beyond our control may have a significant adverse effect. In addition, the stock markets generally have experienced, and continue to experience, extreme price and volume fluctuations which have affected the market price of many small capital companies and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions, may also adversely affect the market price of our common stock. Further, there is no correlation between the present limited market price of our common stock and our revenues, book value, assets or other established criteria of value. The present limited quotations of our common stock should not be considered indicative of the actual value of Tradequest or our common stock.

Risks of “Penny Stock”

Our common stock (OTC: TQSTE.OB) is deemed to be “penny stock” as that term is defined in Rule 3a51-1 of the Securities and Exchange Commission. Penny stocks are stocks (i) with a price of less than $5.00 per share; (ii) that are not traded on a “recognized” national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) in issuers with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average sales of less than $6,000,000 for the last three years. Until recently, there had been no “established public market” for our common stock during the last five years. While our stock has traded between $0.05 and $0.40 per share over the past several years, there is no assurance that this price level will continue, as there has thus far been low volume, and our stock may be deemed to be penny stock at any time. Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2 of the Securities and Exchange Commission require broker/dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be a “penny stock.”

Moreover, Rule 15g-9 of the Securities and Exchange Commission requires broker/dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stocks to that investor. This procedure requires the broker/dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker/dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in our common stock to resell their shares to third parties or to otherwise dispose of them.

Recent Sales of Unregistered Securities

There are no recent sales of unregistered securities during the period covered by this report, which have not been previously disclosed in a Quarterly Report on Form 10-QSB or on a Current Report on Form 8-K.

Securities Authorized for Issuance Under Equity Compensation Plans.

None.

Item 6. Management’s Discussion and Analysis or Plan of Operation

General

We were originally incorporated in 1966 under the name Dixie National Corporation. On August 13, 1996, we changed our name to Ethika Corporation, and on April 2, 2001, we changed our name to Tradequest International, Inc.

Until the sale on October 2, 1995 of our 99.3% owned subsidiary, Dixie National Life Insurance Company, a Mississippi corporation organized in 1965, we were an insurance holding company primarily engaged in the life insurance business. From 1996 through 1998, through our wholly-owned subsidiaries, Compass Data Systems, Inc., a Utah corporation acquired on August 17, 1996, Legislative Information Systems, Inc., a Virginia corporation acquired on June 10, 1997, and Text Retrieval Systems, Inc., a Florida corporation acquired on April 2, 1996, we were primarily engaged in publishing electronic reference libraries that link related data sources for convenient access by personal computers. In 1998, we divest ourselves of our electronic publishing business unit which was comprised of Text Retrieval Systems, Inc., Compass Data Systems, Inc., and Legislative Information Systems, Inc., and these businesses were either sold or closed.

On April 2, 2001, we closed an Agreement and Plan of Reorganization with Tradequest, Inc., a Utah corporation headquartered in Salt Lake City, Utah. Tradequest was a developmental stage company engaged in the business of providing barter exchange services for consumers and businesses. As a result of the reorganization, we changed our name to Tradequest International, Inc. A reverse split of our outstanding common stock on a fifty to one basis with fractional shares being rounded up to the next multiple of fifty shares was effective on April 12, 2001 and the shares began to trade under the new symbol of TQST on the split basis on April 16, 2001. New management was also appointed with Dean Casutt as the new President and Chairman. Mr. Casutt was the president and principal shareholder of Tradequest, Inc., purportedly operating the barter exchange business which was to be the new business of the registrant. However due to legal proceedings against Mr. Casutt, initially unrelated to us, Mr. Casutt never began operations of the barter exchange services as our subsidiary.

On September 19, 2002, we entered into a settlement agreement with Randall K. Read, Dean Casutt, Dennis Neilsen and Dennis Brovarone. The settlement agreement provided for the following:

Dismissal of a legal action by Mr. Read against us, Mr. Casutt, Mr. Neilsen and Mr. Brovarone;

The rescission of the April 2001 reorganization agreement between us and Tradequest, Inc.;

The resignation of Mr. Casutt, Catherine Casutt and Larry Casutt from our board of directors;

The appointment of Mr. Read, Karleen Read and Ashley Jorgensen to our board of directors;

The cancellation of 4,486,425 shares of common stock issued to Dean Casutt, Larry Casutt and Choice Holdings Inc.; and

The issuance of 2,335,000 shares to Randall K. Read.

On August 31, 2004, we entered into a Stock Purchase Agreement with Loyola Holdings, Inc., a Nevada corporation, Margot Hutchinson, an individual, and Randall K. Read, an individual and our former controlling stockholder. Pursuant to the terms of the agreement, we issued an aggregate of 40,278,490 shares of our common stock to Loyola Holdings, Inc. and Margot Hutchinson for a purchase price of U.S. $0.002731 per share, or an aggregate of $110,000.00. We issued 20,139,245 shares to Loyola Holdings, Inc. and 20,139,245 shares to Margot Hutchinson.

As of the date of the agreement, we were authorized to issue 50,000,000 shares of Common Stock of which, 5,414,954 shares were issued and outstanding. The 40,278,490 shares constitute approximately eighty percent (80%) of the issued and outstanding shares of our common stock. Accordingly, with the closing of the agreement, a change in control of our company had occurred.

Pursuant to the agreement, we also entered into a Release and Indemnity Agreement with Randall K. Read whereby Mr. Read agreed to release and indemnify us against all claims Mr. Read may have against us. Mr. Read further agreed to indemnify us and hold us and the purchasers harmless in respect of any and all claims, demands, actions, causes of action, damages, losses, costs, liabilities or expenses that existed, or is based on any action or inaction that occurred, prior to August 31, 2004. In consideration for Mr. Read’s release and indemnification, we agreed to (1) pay Mr. Read cash in the amount of $102,500.00, (2) assign to Mr. Read all right, title, and interest and royalty income from Text Retrieval Systems, Inc., pursuant to the sale of our former subsidiary in February, 1998, and (3) issue 4,305,566 shares of our common stock to Mr. Read. The royalty payment is on each subscription of Text Retrieval Systems, Inc.’s HR Comply product and will continue until such time as a total royalty of $1,500,000 has been paid.

Also pursuant to the agreement, Ash Mascarenhas was appointed as a director and Randall K. Read, Karleen Reed, and Ashley R. Jorgensen resigned as directors. None of the director resignations were because of any disagreements with us on matters relating to our operations, policies or practices. In addition, Randall K. Read resigned from his position as an officer and Ash Mascarenhas was appointed as our President, Chief Financial Officer and Secretary. Mr. Mascarenhas is the controlling shareholder of Loyola Holdings, Inc.

On January 5, 2005, Margot Hutchinson, an individual, sold 20,139,245 shares of our common stock to Lalita Janke for $50,000. The 20,139,245 shares constitute approximately forty percent (40%) of the issued and outstanding shares of our common stock, and accordingly, a change in control of our company had occurred. Ms. Janke is the mother of Ash Mascarenhas, our President, Chief Financial Officer and Secretary, and the controlling shareholder of Loyola Holdings, Inc., the other controlling stockholder of our company.

We had nominal revenues from operations during the fiscal years ended December 31, 2004 and December 31, 2003 from royalty income under a royalty stream from Text Retrieval Systems, Inc. We assigned this royalty stream to Mr. Read on August 31, 2004. The accompanying financial statements have been prepared assuming that we will continue as a going concern.

Plan of Operations

We are currently seeking potential acquisition targets. To date, we have reviewed and evaluated a number of business ventures for possible acquisition. However, we do not have any commitment or understanding to enter into or become engaged in a transaction as of the date of this filing. We continue to investigate, review, and evaluate business opportunities as they become available and will seek to acquire or become engaged in business opportunities at such time as specific opportunities warrant. We anticipate that our majority stockholders, affiliates, and consultants will provide us with sufficient capital to continue operations until the end of the year 2005, but there can be no assurance that this expectation will be fully realized.

We currently do not have any plans for the purchase or sale of any plant or equipment. We also do not have any plans to hire any additional employees.

Liquidity and Capital Resources

We have financed our capital requirements through debt financing and issuance of equity securities. Our working capital deficit at December 31, 2004 was $54,846. We had no cash as of December 31, 2004.

We used $123,281 of net cash in operating activities for the year ended December 31, 2004 compared to using $9 in the year ended December 31, 2003. Cash used in operating activities for the year ended December 31, 2004 was mainly due to a net loss of $125,996, gain on forgiveness of debt of $11,523, decreases in payables to related parties of $28,598, decreases in accrued liabilities of $9,323, and decreases in accrued compensation of $22,500. These were offset by non-cash charges of $29,000 of contributed services by officers and directors, $11,840 in common stock issued for services rendered, and $31,819 in increases in accounts payable.

Net cash flows provided by financing activities were $123,259 for the year ended December 31, 2004, compared to no net cash used in financing activities in the year ended December 31, 2003. This increase in net cash provided by financing activities is due to proceeds from stock issuances of $110,000 and proceeds on notes payable of $13,259.

We currently have limited working capital with which to satisfy our cash requirements, and we will require additional capital in order to conduct operations. We anticipate that we will require at least $500,000 in additional working capital in order to sustain operations for the next 12 months. This requirement may increase substantially, depending on the nature and capital requirements of the business opportunities we elect to pursue. In order to obtain the necessary working capital, we intend to continue to seek private equity financing, debt financing, or loans from our affiliates in 2005. Such financing may not be available to us, when and if needed, on acceptable terms or at all. In the event that we are unable to obtain such financing, management may provide additional financing for us. We intend to retain any future earnings to finance the expansion of its business and any necessary capital expenditures, and for general corporate purposes.

Item 7. Financial Statements

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

FINANCIAL STATEMENTS

December 31, 2004

C O N T E N T S

Report of Independent Registered Public Accounting Firm	3

Balance Sheet	4

Statements of Operations	5

Statements of Stockholders’ Equity (Deficit)	6

Statements of Cash Flows	7

Notes to the Financial Statements	8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Tradequest International, Inc.

(A Development Stage Company)

Salt Lake City, Utah

We have audited the accompanying balance sheet of Tradequest International, Inc. (a Development Stage Company) as of December 31, 2004 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2004 and 2003 and from inception of the development stage on January 1, 2001 to December 31, 2004 . These statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. And audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tradequest International, Inc. (a Development Stage Company) as of December 31, 2004 and the results of its operations and its cash flows for the years ended December 31, 2004 and 2003 and from inception of the development stage on January 1, 2001 to December 31, 2004 in conformity with United States generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has sustained recent losses from operations, has a deficit in working capital and a stockholders’ deficit. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

HJ & Associates, LLC

Salt Lake City, Utah

May 19, 2005

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Balance Sheet

December 31,

2004

CURRENT ASSETS

Cash	$	-

Total Current Assets		-

TOTAL ASSETS	$	-

CURRENT LIABILITIES

Accounts payable		24,087
Accrued liability (Note 3)		17,500
Notes payable-related parties (Note 4)		13,259

Total Current Liabilities		54,846

TOTAL LIABILITIES		54,846

STOCKHOLDERS’ EQUITY (DEFICIT)

Common stock; authorized 50,000,000 common shares
at no par value; 49,996,546 shares issued;49,996,000 shares
outstanding at December 31, 2004		15,109,108
Treasury stock (546 shares)		(1,112	)
Additional paid in capital		29,000
Deficit accumulated prior to development stage		(12,335,790	)
Deficit accumulated during development stage		(2,856,052	)

Total Stockholders’ Equity (Deficit)		(54,846	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	-

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

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Statements of Operations

								From
								Inception of the
								Development Stage on January , 2001
	For the Years Ended December 31,							Through December 31,
		2004			2003			2004


REVENUE

Royalty Income	$	14,342		$	16,981		$	73,927

Total Revenue		14,342			16,981			73,927

OPERATING EXPENSES

Consulting fees		57,787			20,000			2,656,913
Professional fees		24,000			14,555			83,939
Legal settlement		-			-			87,500
Officer Compensation		27,642			22,500			50,142
General and administrative		40,405			5,316			58,820

Total Operating Expenses		149,834			62,371			2,937,314


LOSS FROM OPERATIONS		(135,492	)		(45,390	)		(2,863,387	)

OTHER INCOME (EXPENSE)

Gain on forgiveness of debt		11,523			2,579			14,102
Interest expense		(27	)		(2,386	)		(6,779	)
Interest income		-			-			12

Total Other Income (Expense)		11,496			193			7,335

LOSS BEFORE INCOME TAX		(123,996	)		(45,197	)		(2,856,052	)

Income tax		-			-			-

NET LOSS	$	(123,996	)	$	(45,197	)	$	(2,856,052	)

BASIC LOSS PER SHARE	$	(0.01	)	$	(0.01	)

WEIGHTED AVERAGE SHARES OUTSTANDING		25,263,791			5,411,954

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

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Statements of Stockholders' Equity (Deficit)

										Additional
	Common			Stock			Treasury			Paid in		Accumulated
	Shares			Amount			Stock			Capital		Deficit

Balance, December 31, 2000	1,465,646		$	12,345,427		$	(6,112	)	$	-	$	(12,335,790	)

Treasury stock cancelled	(100	)		(5,000	)		5,000			-		-

Common stock issued for
reorganization agreement	1,611,954			2,579,126			-			-		-

Net loss for the year ended
December 31, 2001	-			-			-			-		(2,586,106	)

Balance, December 31, 2001	3,077,500			14,919,553			(1,112	)		-		(14,921,896	)

Common stock issued for
settlement agreement	2,335,000			67,715			-			-		-

Net loss for the year ended
December 31, 2002	-			-			-			-		(100,753	)

Balance, December 31, 2002	5,412,500			14,987,268			(1,112	)		-		(15,022,649	)

Net loss for the year ended
December 31, 2003	-			-			-			-		(45,197	)

Balance, December 31, 2003	5,412,500			14,987,268			(1,112	)		-		(15,067,846	)

Common stock issued for
Cash	40,278,490			110,000			-			-		-

Common stock issued for
services	4,305,556			11,840			-			-		-

Contributed services by officers
and directors	-			-			-			29,000-

Net loss for the year ended
December 31, 2004	-			-			-			-		(123,996	)

Balance, December 31, 2004	49,996,546		$	15,109,108		$	(1,112	)	$	29,000	$	(15,191,842	)

Deficit accumulated prior to the development stage												(12,335,790	)
Deficit accumulated during the development stage												(2,856,052	)

Total Accumulated Deficit											$	(15,191,842	)

The accompanying notes are an integral part of these financial statements.6

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Statements of Cash Flows

								From
								Inception of the
								Development
								Stage on
								January 1, 2001
	For the Years Ended December 31							Through , December 31,
		2004			2003			2004

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss	$	(123,996	)	$	(45,197	)	$	(2,856,052	)
Adjustments to reconcile net loss to cash used
by operations:
Common stock issued for legal settlement		-			-			67,715
Contributed services by officers and directors		29,000			-			29,000
Common stock issued for services		11,840			-			2,590,966
Gain on forgiveness of debt		(11,523	)		(2,579	)		(14,102	)
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable		31,819			(353	)		38,189
Increase (decrease) in payable - related party		(28,598	)		23,598			-
Increase (decrease) in accrued liabilities		(9,323	)		2,022			17,500
Increase (decrease) in accrued compensation		(22,500	)		22,500			-

Net Cash Used by Operating Activities		(123,281	)		(9	)		(126,784	)

CASH FLOWS FROM INVESTING ACTIVITIES		-			-			-

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from stock issuance		110,000			-			110,000
Proceeds from note payables		13,259			-			13,259
Cash received for reorganization agreement		-			-			250,000
Payment of reorganization agreement deposit		-			-			(250,000	)

Net Cash Provided by Financing Activities		123,259			-			123,259

NET DECREASE IN CASH		(22	)		(9	)		(3,525	)

CASH AT BEGINNING OF PERIOD		22			31			3,525

CASH AT END OF PERIOD	$	-		$	22		$	-

CASH PAID DURING THE PERIOD FOR:

Interest	$	-		$	-		$	-
Income taxes	$	-		$	-		$	-

NON-CASH FINANCING ACTIVITIES:

Common stock issued for legal settlement	$	-		$	67,715		$	67,715
Common stock issued for services	$	11,840		$	-		$	2,590,966
Contributed services	$	29,000		$	-		$	29,000

The accompanying notes are an integral part of these financial statements. 7

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Notes to the Financial Statements

December 31, 2004 and 2003

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Organization

The financial statements presented are those of Tradequest International, Inc., (a development stage company) (the Company). The Company was incorporated in the State of Mississippi on August 8, 1966 as Modern Dixie Corporation, for the purpose of seeking business opportunities by mergers, acquisitions and/or asset purchases. The Company changed its name various times. On April 4, 2001, the Company’s name was changed to Tradequest International, Inc.

On January 1, 2001, the Company reentered the development stage and is considered a development stage company as defined by SFAS No. 7.

b. Accounting Method

The Company’s financial statements are prepared using the accrual method of accounting. The Company has selected a December 31 year-end.

c. Cash and Cash Equivalents

For purposes of financial statement presentation, the Company considers all highly liquid investments with a maturity of three months or less, from the date of purchase, to be cash equivalents.

d. Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

e. Revenue Recognition

The Company currently has no source of revenues, however during the year the Company received royalty revenue. Revenue recognition policies will be determined when principal operations begin. The Company recorded the royalty revenue when cash was received. During the year the royalty revenue was sold off as part of the Release and Indemnity Agreement.

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Notes to the Financial Statements

December 31, 2004 and 2003

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

f. Basic Loss Per Share

The computation of basic loss per share of common stock is based on the weighted average number of shares outstanding.

	For the Years Ended December 31,
	2004	2003

Loss (numerator)	$(123,996)	$(45,197)
Shares (denominator)	25,263,791	5,411,954

Per share amount	$(0.01 )	$(0.01 )

g. Provision for Taxes

We recognize deferred tax assets and liabilities for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating loss carry forwards, and tax credits. Determining the valuation allowance requires significant management judgments and assumptions which will reduce deferred tax assets when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax assets consist of the following components as of December 31, 2004 and 2003:

	2004	2003

Deferred tax assets:
NOL carryover	$3,104,178	$3,045,640
Contributed carryover	861,570	861,570

Deferred tax liabilities:	-	-

Valuation allowance	(3,965,748)	(3,907,210 )

Net deferred tax assets	$-	$-

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Notes to the Financial Statements

December 31, 2004 and 2003

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

g. Provision for Taxes (continued)

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rates of 39% to pretax income from continuing operations for the years ended December 31, 2004 and 2003 due to the following:

		2004			2003

Book income	$	(48,358	)	$	(39,330	)
Related party		(10,140	)		10,140
Other		(40	)		(40	)
Valuation allowance		58,538			7,526

	$	-		$	-

At December 31, 2004, the Company had net operating loss carryforwards of approximately $7,959,000 that may be offset against future taxable income from the year 2005 through 2025. No tax benefit has been reported in the December 31, 2004 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.

h. Newly Issued Accounting Pronouncements

During the year ended December 31, 2004, the Company adopted the following accounting pronouncements:

SFAS No. 123(R) -- In December 2004, the FASB issued SFAS No. 123 (Revised 2004) (SFAS 123 (R)) “Share-based payment”. SFAS 123 (R) will require compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. FASB 123 (R) replaces FASB 123, Accounting for Stock-Based Compensation and supersedes APB option No. 25, Accounting for Stock Issued to Employees. This guidance is effective as of the first interim or annual reporting period after December 15, 2005 for Small Business filers.

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Notes to the Financial Statements

December 31, 2004 and 2003

NOTE 1 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

h. Newly Issued Accounting Pronouncements (continued)

SFAS No. 150 -- In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain

Financial Instruments with Characteristics of both Liabilities and Equity” which is effective for financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. This Statement establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is

within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. The adoption of SFAS No. 150 did not have a material effect on the financial statements of the Company.

SFAS No. 151 -- In November 2004, the FASB issued SFAS No. 151 (SFAS 151), “Inventory Costs”. SFAS 151 amends ARB No. 43, Chapter 4. This statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS 151 is the result of a broader effort by the FASB and the IASB to improve financial reporting by eliminating certain narrow differences between their existing accounting standards. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of SFAS 151 will not have a material impact on the results of operations or financial position of the company as it does not have inventory.

SFAS No. 153 -- In December 2004, the FASB issued SFAS No. 153 (SFAS 153) “Exchange of Non-monetary assets”. This statement was a result of a joint effort by the FASB and the IASB to improve financial reporting by eliminating certain narrow differences between their existing accounting standards. One such difference was the exception from fair value measurement in APB Opinion No. 29, Accounting for Non-Monetary Transactions, for non-monetary exchanges of similar productive assets. SFAS 153 replaces this exception with a general exception from fair value measurement for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement is effective for non-monetary assets exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS 153 will not have a material effect on the Company’s financial position or results of operations.

i. Reclassification of Prior Year Balances

The classification of certain balances within the financial statements for the year ended December 31, 2003 have been changed to be consistent with the classification of the financial statements for the year ended December 31, 2004.

NOTE 2 - GOING CONCERN

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Notes to the Financial Statements

December 31, 2004 and 2003

NOTE 2 - GOING CONCERN (Continued)

Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease development of operations.

In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through sales of common stock. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 - DEBT RESTRUCTURING

During the six months ended June 30, 2004, American Capital Partners Limited, Inc. ("ACP") assumed and settled for $17,500 the judgment that Uintah Mountain Ranchers, Inc. had been awarded against the Company. The Company realized a gain of $9,323 on this debt restructuring and liability to ACP in the amount of $17,500. The Company is accruing interest at 12% on the outstanding balance owed to ACP. ACP and the Company are unrelated parties.

NOTE 4 - NOTES PAYABLE-RELATED PARTIES

The Company issued Convertible Promissory Notes to two Company shareholders in the amounts of $10,000 and $3,235, due on demand. The promissory notes accrue interest at 12% per annum and are convertible at $0.09 per share. As of December 31, 2004 no note payable conversions took place. As of December 31, 2004 and the date of this report the Company did not have enough authorized shares available in case of conversion of these notes. Until the Company has adequate shares available to convert the debt the debt cannot be converted.

TRADEQUEST INTERNATIONAL, INC.

(A Development Stage Company)

Notes to the Financial Statements

December 31, 2004 and 2003

NOTE 5 - CHANGE IN OWNERSHIP

During August 2004 the Company; Loyola Holdings, Inc., a Nevada corporation ("Loyola"); and Margot Hutchinson, an individual, ("Hutchinson") entered into a stock purchase agreement whereby the Company issued to Loyola and Hutchinson, collectively, 40,278,490 shares of its no par common stock in exchange for $110,000 cash, collectively, from Loyola and Hutchinson. The Company used the cash as follows: $35,031 to settle in full related party accounts payable as of December 31, 2004; $44,333 to settle in full accrued officer compensation as of December 31, 2004; and $30,636 to compensate its (now former) President for the consulting services he provided relative to the stock purchase agreement. As of December 31, 2004 Loyola and Hutchinson, collectively, owned over ninety percent of the common stock issued and outstanding.

Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 8A. Controls and Procedures.

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-14(c) as of the end of the period covered by this Annual Report on Form 10-KSB. Based on that evaluation, they concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to them to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 8B. Other Information.

None.