SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

                        Commission File Number 001-31718

                           Q COMM INTERNATIONAL, INC.
                 (Name of small business issuer in its charter)

                      Utah                          87-0674277
                      ----                          ----------
           (State or other jurisdiction         (I.R.S. Employer
         of incorporation or organization)     Identification No.)

            510 East Technology Avenue, Building C, Orem, Utah 84097
                     (Address of principal executive office)

                    Issuer's telephone number: (801) 226-4222

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 |_|

Number of shares  outstanding of each of the issuer's  classes of common equity,
as of the latest practicable date:

As of May 10, 2004, there were 3,995,250 shares of common stock outstanding.

Transitional Small Business Disclosure Format. Yes |_| No |X|




<PAGE>


                           Q COMM INTERNATIONAL, INC.
                               FORM 10-QSB REPORT

                                 March 31, 2004

                                TABLE OF CONTENTS

                                                                       PAGE
PART I - FINANCIAL INFORMATION

     Item 1. Interim condensed financial statements (unaudited)

             Unaudited Condensed  Consolidated  Balance Sheets,
             March 31 2004 and December 31, 2003                        1

             Unaudited Condensed Consolidated Statements of
             Operations, for the three months ended
             March 31, 2004 and 2003                                    2

             Unaudited Condensed Consolidated Statements of
             of Cash Flows, for the three months ended
             March 31, 2004 and 2003                                    3

             Notes to Unaudited Condensed Consolidated
             Financial Statements                                       5

     Item 2. Management's Discussion and Analysis or Plan of Operation
             Operation                                                  11

     Item 3. Controls and Procedures                                    19

PART II - OTHER INFORMATION

     Item 1. Legal Proceedings                                          19

     Item 6. Exhibits and Reports on Form 8-K                           19

SIGNATURES                                                              20





<PAGE>
Item 1.  Interim condensed financial statements (unaudited)

                                       Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                                         CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>

                                                                                                March 31,     December 31,
                                                                                                 2004            2003
                                                                                              -----------      -----------
<S>                                                                                        <C>              <C>
                                                     ASSETS
         Current Assets:
           Cash in bank                                                                       $  4,103,012     $  5,524,774
           Restricted cash                                                                              -         1,450,583
           Accounts receivable, net                                                                500,699          444,009
           Inventory                                                                             1,301,728          717,116
           Note receivable                                                                         150,000          150,000
                                                                                               -----------      -----------
              Total Current Assets                                                               6,055,439        8,286,482
                                                                                               -----------    -----------
         Property & Equipment, net                                                               3,197,019        2,867,389

         Other Assets:
           Capitalized software development costs, net                                           1,426,248        1,561,325
           Goodwill, net                                                                           144,580          144,580
           Deposits                                                                                 31,078           33,815
                                                                                               -----------      -----------
              Total Other Assets                                                                 1,601,906        1,739,720
                                                                                               -----------      -----------
              Total Assets                                                                    $ 10,854,364     $ 12,893,591
                                                                                               ===========      ===========

                               LIABILITIES AND STOCKHOLDERS' EQUITY
         Current Liabilities:
           Accounts payable                                                                   $  1,013,637     $    788,856
           Accrued expenses                                                                        207,183          141,295
           Unearned revenue                                                                         80,000           80,000
           Convertible notes and debentures (net of $300,947 discount
              at December 31, 2003)                                                                     -           929,053
           Capital lease obligations - current portion                                              31,020           29,766
           Related party obligations - current portion                                              88,566           65,485
           Contingent liabilities                                                                       -            70,000
                                                                                               -----------      -----------
              Total Current Liabilities                                                          1,420,406        2,104,455
                                                                                               -----------      -----------
         Long-term Obligations:
           Capital lease obligations                                                                22,343           30,610
           Related party obligations                                                               212,212          228,776
                                                                                               -----------      -----------
              Total Long-term Obligations                                                          234,555          259,386
                                                                                               -----------      -----------
              Total Liabilities                                                                  1,654,961        2,363,841
                                                                                               -----------      -----------
         Stockholders' Equity:
           Common stock, $.001 par value, 50,000,000 shares
              authorized, 3,995,250 shares issued and outstanding                                    3,995            3,995
           Capital in excess of par value                                                       23,812,400       23,812,400
           Retained deficit                                                                    (14,573,919)     (13,227,420)
                                                                                               -----------      -----------
                                                                                                 9,242,476       10,588,975
           Less stock subscription receivable                                                      (43,073)         (59,225)
                                                                                               -----------      -----------
              Total Stockholders' Equity                                                         9,199,403       10,529,750
                                                                                               -----------      -----------
              Total Liabilities and Stockholders' Equity                                      $ 10,854,364     $ 12,893,591
                                                                                               ===========      ===========

     The  accompanying  notes are an integral part of these unaudited  condensed
consolidated financial statements.
</TABLE>
                                       1
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                     For the Three Months
                                                        Ended March 31,
                                               ----------------------------
                                                  2004              2003
                                               ----------        ----------

   Revenues                                  $  8,487,830      $  5,747,039

   Cost of Goods Sold                           6,174,528         4,308,499
                                               ----------        ----------
   Gross Profit                                 2,313,302         1,438,540
                                               ----------        ----------
   Operating Expenses:
     Commissions and fees                       2,024,907         1,298,513
     Selling expenses                             142,697            93,806
     General and administrative expenses          782,639           510,683
     Depreciation and amortization                399,191           159,167
     Non-cash compensation                             -             21,666
                                               ----------        ----------
       Total Operating Expenses                 3,349,434         2,083,835
                                               ----------        ----------
   Loss from Operations                        (1,036,132)         (645,295)
                                               ----------        ----------
   Other Income (Expense):
     Interest income                               13,948                96
     Interest and other expense                  (324,315)         (127,305)
                                               ----------        ----------
       Total Other Income (Expense)              (310,367)         (127,209)
                                               ----------        ----------
   Loss before Income Taxes                    (1,346,499)         (772,504)

   Income Tax Expense                                  -                 -
                                               ----------        ----------
   Net Loss                                  $ (1,346,499)     $   (772,504)
                                               ----------        ----------
   Basic Loss per Common Share               $       (.34)   $         (.58)
                                               ----------        ----------

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

                                       2
<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                      For the Three Months
                                                                                        Ended March 31,
                                                                            ---------------------------------
                                                                               2004                 2003
                                                                             ----------           ----------
<S>                                                                              <C>            <C>
 Cash Flows from Operating Activities:
   Net loss                                                              $ (1,346,499)          $  (772,504)
   Adjustments to reconcile net loss to
      net cash used by operating activities:
        Loss on disposal of property and equipment                               -                   10,888
        Provision for doubtful accounts                                        30,000                    -
        Depreciation and amortization                                         399,191               159,167
        Amortization of discount on debentures and notes                      300,947                91,748
        Non-cash compensation                                                     -                  21,666
        Change in assets and liabilities:
   Increase in accounts receivable                                            (86,690)             (140,247)
   Increase in inventory                                                     (584,612)             (170,535)
   Decrease in other assets                                                     2,737                    -
   Increase in accounts payable                                               224,781               580,340
   Increase in accrued liabilities                                             72,405               104,308
   Decrease in contingent liabilities                                         (70,000)                   -
                                                                            ---------            ----------
          Net Cash Used by Operating Activities                            (1,057,740)             (115,169)
                                                                            ---------            ----------
 Cash Flows from Investing Activities:
   Decrease in restricted cash                                              1,450,583                    -
   Purchase of property and equipment                                        (511,557)             (209,888)
   Capitalized software development costs                                     (82,187)             (168,304)
                                                                           ----------           -----------
          Net Cash Provided (Used) by Investing Activities                    856,839              (378,192)
                                                                           ----------           -----------
 Cash Flows from Financing Activities:
   Issuance of common stock                                                        -                 20,000
   Cash received from subscription receivable                                  16,152                16,152
   Payment of stock offering costs                                                 -               (247,742)
   Proceeds from notes and debentures                                              -              1,450,000
   Payments on convertible notes payable                                   (1,230,000)              (10,421)
   Proceeds from capital leases                                                    -                 66,992
   Payments on capital lease obligations                                       (7,013)               (7,872)
           Decrease in bank overdraft                                              -               (342,470)
                                                                            ----------            ----------
           Net Cash Provided (Used) by Financing Activities                 (1,220,861)              944,639
                                                                            ----------            ----------
  Net Increase (Decrease) in Cash                                           (1,421,762)              451,278

  Cash and Cash Equivalents, Beginning of Period                             5,524,774               115,609
                                                                            ----------            ----------
  Cash and Cash Equivalents, End of Period                                $  4,103,012          $    566,887
                                                                               -------               -------
  Supplemental Disclosures of Cash Flow Information:
      Cash paid during the period for:
      Interest expense                                                    $     92,047          $         -
      Income taxes                                                        $        100          $        100
</TABLE>
                                       3
<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Continued)

Supplemental Schedule of Non-cash Investing and Financing Activities:


                      For the period ended March 31, 2004:

The Company  amortized  discount on debt in the amount of $300,947  and recorded
the amount as interest expense.

                           For the period ended March 31, 2003:

The  Company  issued  141,026  shares of common  stock and  warrants to purchase
141,026  shares  of  common  stock in  connection  with the sale of  convertible
debentures.

The Company issued 24,242 shares of common stock in connection  with the sale of
a convertible note.


























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

                                       4
<PAGE>
                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Nature  of  Business  - The  Company's  business  involves  purchasing  and
     --------------------
     reselling   prepaid   telecommunication   and  other  products   through  a
     proprietary  electronic  point-of-sale  activation system known as Qxpress.
     The Company provides its products to end users throughout the United States
     as well as Canada,  France,  Australia and the Bahamas. The Company has not
     paid any dividends  and any  dividends  that may be paid in the future will
     depend upon the financial  requirements  of the Company and other  relevant
     factors.  Substantially  all operations are conducted through the Company's
     wholly owned subsidiary, Q Comm, Inc. The Company is headquartered in Orem,
     Utah.

     Unaudited  Condensed  Financial  Statements  - The  accompanying  financial
     ------------------------------------------
     statements  have been prepared by the Company without audit. In the opinion
     of  management,  all  adjustments  (which  include  only  normal  recurring
     adjustments) necessary to present fairly the financial position, results of
     operations  and  cash  flows  at March  31,  2004  and for all the  periods
     presented have been made.

     Certain information and footnote disclosures normally included in financial
     statements  prepared  in  accordance  with  generally  accepted  accounting
     principles in the United States of America have been  condensed or omitted.
     These condensed financial statements should be read in conjunction with the
     financial  statements and notes thereto included in the Company's  December
     31, 2003 audited  financial  statements.  The results of operations for the
     periods ended March 31, 2004 and 2003 are not necessarily indicative of the
     operating results for the full year.

     Consolidation  - All  intercompany  balances and  transactions  between the
     -------------
     parent and subsidiary have been eliminated in consolidation.

     Accounting   Estimates  -  The  preparation  of  financial   statements  in
     ----------------------
     conformity  with  generally  accepted  accounting  principles in the United
     States of America  requires  management to make  estimates and  assumptions
     that affect the reported amounts of assets and liabilities, the disclosures
     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  estimated by
     management.

     Cash and Cash Equivalents - For purposes of the financial  statements,  the
     ------------------------
     Company  considers all highly  liquid debt  investments  purchased  with an
     original maturity of three months or less to be cash equivalents.

     Accounts  Receivable - Accounts  receivable  consists of trade  receivables
     -------------------------------
     arising in the normal  course of  business.  At March 31, 2004 and December
     31, 2003, the Company has established an allowance for doubtful accounts of
     $60,000 and  $30,000,  respectively,  which  reflects  the  Company's  best
     estimate of probable losses in the accounts receivable balance. The Company
     determines  the  allowance  based on the  status  and age of the  accounts,
     historical  experience,  and other currently  available  evidence.  Amounts
     written off as bad debt for the years presented are insignificant.

     Inventory - Inventory consists of prepaid  telecommunication  products sold
     ---------
     by the Company  and is carried at the lower of cost or market  value on the
     first-in, first-out method.

     Depreciation  -  Depreciation  of property and equipment is provided on the
     ------------
     straight-line method over the estimated useful lives of the assets of three
     to five years.

     Intangible  Assets  -  Under  the  provisions  of  Statement  of  Financial
     ------------------
     Accounting  Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS
     No. 142),  the Company has  classified  its goodwill as an  indefinite-life
     intangible asset and accordingly has stopped recording amortization.

     The Company  capitalizes  software  development  costs  incurred to develop
     certain of the Company's products and services in accordance with Statement
     of Financial  Accounting  Standards  No. 86,  "Accounting  for the Costs of
     Computer  Software to Be Sold,  Leased, or Otherwise  Marketed".  Costs are
     capitalized  only after the  technological  feasibility  of the project has
     been established. In accordance with SFAS No. 142, the Company has recorded
     its  software  development  costs as a  definite-life  intangible  asset is
     amortizing  these costs over the  estimated  useful life of the software of
     three years.

     The Company regularly  reviews the carrying value of intangible  assets. At
     the  time  a  determination  is  made  that  capitalized  amounts  are  not
     recoverable  based on the  estimated  cash flows to be  generated  from the
     asset, the difference  between the carrying amount and the estimated valued
     based on cash flows are written off. (See Notes 3 and 4).

                                       5
<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Revenue Recognition - The Company uses two models to generate revenues: the
     --------------------
     broker model and the service  bureau model.  Under the broker model,  which
     has been and  continues to be the dominant  alternative,  the Company sells
     its prepaid products through retail locations. Revenue is recognized at the
     time products are sold. Sales of the Company's  products are generally made
     directly to  end-users.  There is no right of return for products  sold and
     the Company is not obligated for further  performance after the sale. These
     sales transactions are accounted for at "gross" since the Company meets the
     requirements   specified  by  Securities  and  Exchange   Commission  Staff
     Accounting Bulletin No. 101 - Revenue  Recognition in Financial  Statements
     (SAB 101) and  Emerging  Issues Task Force No. 99-19 (EITF  99-19).  In the
     event of sales where the  Company  does not have  ownership  of the product
     sold and  another  entity  has such risk and  reward of  product  ownership
     and/or where  certain other  requirements  of SAB 101 or EITF 99-19 are not
     met, the Company records revenues on a "net" basis.

     In  2003  the  Company  introduced  the  service  bureau  model  to be used
     primarily with international customers. In this model, the Company licenses
     its  proprietary  software  and  sells  its  point-of-sale  terminals.  The
     customer is responsible for operation of the system and providing  services
     to its retail stores.  The Company receives an ongoing  transaction fee for
     all sales through the system, which is recorded on a "net" basis.  Software
     license  revenue is recorded at the time the  installation  is complete and
     the  customer  accepts  the  product.  The  Company had $80,000 in unearned
     revenue for software license fees at March 31, 2004 and December 31, 2003.

     The Company also  generates  revenue from the sale or rental of  terminals,
     minimum  performance  fees and  sales of other  products.  These  sales are
     recorded net of sales discounts and allowances.

     Cost of Goods  Sold - The cost of goods sold is  primarily  the cost of the
     -------------------
     prepaid  telecommunication and other miscellaneous  products sold at retail
     as well as the cost of terminals  sold to  customers.  The full cost of the
     product,  as well as all  direct  costs  associated  with  the  sale of the
     product,  are  recorded  at the time of sale.  Cost of goods  sold does not
     include  commissions and fees paid to brokers and other  intermediaries and
     transaction processing fees paid to a third party.

     Stock Options - In December 2002, the Financial  Accounting Standards Board
     ------------
     (FASB) issued SFAS No. 148,  "Accounting  for  Stock-Based  Compensation --
     Transition  and  Disclosure,  an amendment of FASB Statement No. 123" (SFAS
     148).  This  Statement  amends SFAS 123 to provide  alternative  methods of
     transition  for a voluntary  change to the fair value method of  accounting
     for stock-based  employee  compensation.  In addition,  SFAS 148 amends the
     disclosure  requirements  of SFAS 123 to require  prominent  disclosures in
     both annual and interim  financial  statements.  Certain of the  disclosure
     modifications  are required for fiscal years ending after December 15, 2002
     and are included in the notes to these consolidated financial statements.

     The Company has stock option plans that  provide for  stock-based  employee
     compensation,  including  the  granting  of stock  options,  to certain key
     employees.  The plans are more  fully  described  in Note 11.  The  Company
     accounts for the stock options plans in accordance with the recognition and
     measurement  principles of APB Opinion No. 25, "Accounting for Stock Issued
     to Employees" and related Interpretations.  Under this method, compensation
     expense is recorded on the date of grant only if the current  market  price
     of the underlying stock exceeded the exercise price.

     During the years presented in the accompanying  financial  statements,  the
     Company has granted  options under the 2000 and 2002 Stock  Options  Plans.
     The Company has adopted the  disclosure-only  provisions  of  Statement  of
     Financial   Accounting  Standards  No.  123,  "Accounting  for  Stock-Based
     Compensation."  Accordingly,  no  compensation  cost under SFAS No. 123 has
     been  recognized  for the stock  option  plans or other  agreements  in the
     accompanying  statements  of  operations.  Had  compensation  cost  for the
     Company's stock option plans and agreements  been  determined  based on the
     fair value at the grant date for  awards in 2003 and 2002  consistent  with
     the  provisions  of SFAS No. 123, the Company's net loss and basic loss per
     share would have been reduced to the pro forma amounts indicated below:

                                                   For the Three Months
                                                     Ended March 31,
                                             -----------------------------
                                                2004              2003
                                             ----------        ---------
Net Loss                As reported       $ (1,346,499)      $  (772,504)
                        Pro forma         $ (1,508,284)      $  (772,504)

Basic loss per share    As reported            $(.34)            $(.58)
                        Pro forma              $(.38)            $(.58)

                                       6
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Loss Per Share - The Company  computes  loss per share in  accordance  with
     ---------------
     Statement of Financial  Accounting  Standards No. 128 "Earnings Per Share,"
     which requires the Company to present basic earnings per share and dilutive
     earnings  per share when the  effect of  options/warrants  and  convertible
     notes is dilutive. (See Note 12.)

     Income Taxes - The Company  accounts for income  taxes in  accordance  with
     ------------
     Statement of Financial Accounting Standards No. 109, "Accounting for Income
     Taxes."  This  statement  requires  an asset  and  liability  approach  for
     accounting for income taxes.

     Recently Enacted Accounting  Standards - Statement of Financial  Accounting
     ---------------------------------------
     Standards  SFAS  No.  149,   "Amendment  of  Statement  133  on  Derivative
     Instruments  and Hedging  Activities",  and SFAS No. 150,  "Accounting  for
     Certain Financial  Instruments with Characteristics of both Liabilities and
     Equity",  were  recently  issued.  SFAS  No,  149 and 150  have no  current
     applicability  to the Company or their effect on the  financial  statements
     would not have been significant.

     Reverse  Stock Split - All  references  to the number of shares,  price per
     --------------------
     share, and earnings per share have been  retroactively
     adjusted to reflect a 1-for-15  reverse stock split that was effective June
     4, 2003.

NOTE 2 - PROPERTY & EQUIPMENT

     The following is a summary of property and equipment:

                                                   March 31,        December 31,
                                                     2004               2003
                                                  ----------         ----------
        Point of sale terminals - in service      $1,702,881         $1,518,205
        Point of sale terminals - in inventory     2,036,905          1,738,855
        Office and computer equipment                223,095            194,264
                                                  ----------         ----------
        Total cost                                 3,962,881          3,451,324
        Accumulated depreciation                    (765,862)          (583,935)
                                                  ----------         ----------
        Property & equipment, net                 $3,197,019         $2,867,389
                                                  ----------         ----------

     Depreciation  expense  for the  periods  ended  March 31, 2004 and 2003 was
     $181,927 and $38,252, respectively.

     Point of sale  terminals in  inventory  will either be sold to customers or
     placed in service with the Company retaining ownership.  The Company begins
     depreciating  terminals  on which it  retains  ownership  at the time it is
     placed in service.

NOTE 3 - GOODWILL

     At March 31, 2004, the Company had $144,580 in goodwill remaining from a
     purchase acquisition classified as an indefinite-life intangible asset. In
     accordance with SFAS No. 142, the Company has tested its goodwill for
     impairment during the periods ended March 31, 2004 and 2003. The Company
     used the quoted market price of its common stock to test the remaining
     goodwill for impairment and determined that the Company's goodwill was not
     impaired. Accordingly, there was no amortization expense recorded during
     the periods ended March 31, 2004 and 2003.

NOTE 4 - CAPITALIZED SOFTWARE DEVELOPMENT

     Information related to capitalized  software development costs at March 31,
     2004 is as follows:

            Capitalized software, beginning of period     $2,262,249
            Capitalized during the period                     82,187
                                                            --------
            Capitalized software, end of period            2,344,436
            Accumulated amortization                        (918,188)
                                                           ---------
            Capitalized software, net                     $1,426,248
                                                           ---------


                                       7
<PAGE>


                  Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - CAPITALIZED SOFTWARE DEVELOPMENT (Continued)

     Of the  balance at March 31,  2004,  approximately  $900,000  was paid to a
     third-party  software  development company and other outside entities.  The
     remaining costs represent  capitalized  internal costs, which are primarily
     employee  salaries  and  benefits,  and  related  capitalized  interest  of
     approximately $100,000.

     During the periods  ended March 31, 2004 and 2003,  the Company  tested its
     capitalized software development costs in accordance with SFAS No. 142. The
     Company used the  estimated  future cash flows  related to its  capitalized
     software  development  costs  and  determined  that  such  costs  were  not
     impaired.  The Company has classified its capitalized  software development
     costs as a definite-life  intangible asset.  During the periods ended March
     31, 2004 and 2003, the Company  recorded  amortization  expense of $217,264
     and 120,915, respectively.

NOTE 5 - NOTE RECEIVABLE

     During 2003, the Company loaned $150,000 to an unrelated  third party.  The
     note bears  interest  at 10% per  annum,  payable  monthly,  and is due the
     earlier of  December  31, 2004 or the date on which the  borrower  receives
     gross  proceeds  of at least  $750,000  from the sale of its debt or equity
     securities.  The Company had the option to convert the note, in whole or in
     part, into common stock of the borrower at anytime before the due date at a
     conversion  price of $.15 per share. The note was repaid in full subsequent
     to March 31, 2004.

NOTE 6 - RELATED PARTY OBLIGATIONS

     At March 31, 2004 and December 31, 2003, the Company owed an officer of the
     Company   $260,692   plus   accrued   interest  of  $40,086  and   $33,569,
     respectively. The note is due the earlier of December 31, 2007, a change in
     control of the Company or a sale or  liquidation  of the Company's  assets.
     Interest on the note is at 10% and is calculated on the outstanding amount.
     All accrued but unpaid  interest on the note  through June 30, 2004 will be
     due on that  date  and,  beginning  July 31,  2004  monthly  principal  and
     interest  payments  in the amount of $7,382 are  required in order to fully
     amortize the remaining  principal  amount of the note by December 31, 2007.
     During the  periods  ended March 31,  2004 and 2003,  the Company  recorded
     interest expense on this obligation of $6,517 and $10,267, respectively.

NOTE 7 - LONG-TERM DEBT

     From  February  through  April  2003,  the  Company  issued (a) 12% secured
     convertible debentures due March 31, 2004 in the aggregate principal amount
     of $1.5  million,  (b) 169,231  shares of  restricted  common stock and (c)
     warrants to  purchase  169,231  shares of common  stock.  The total  amount
     raised by the Company from the sale of these  securities  was $1.5 million.
     The  debentures are secured by a lien on all of the Company's  assets.  The
     conversion  price on the  debentures is $6.50 and the exercise price of the
     warrants is $9.75.  The exercise  price and the number of shares covered by
     the  warrants  will  be  adjusted  in  the  case  of  stock  splits,  stock
     combinations,   stock  dividends,  mergers  and  consolidations  and  stock
     issuances at a discount to the market price of the stock.

     The 169,231  restricted  common shares were valued at $1,015,386,  or $6.00
     per share, the value of similar restricted common shares sold for cash. The
     169,231  warrants were valued at $845,562 using the  Black-Scholes  pricing
     model  and  the  following   assumptions:   $14.63  exercise  price,  $6.00
     underlying stock price, 140% volatility, five year expected life, 2.9% risk
     free interest rate and expected  dividend  yield of zero.  The value of the
     shares and warrants were reduced on a pro-rata basis to the $1.5 million in
     debentures and recorded as a discount against the debentures.  The discount
     was  amortized  as interest  expense over the term of the  debentures.  The
     unamortized  discount at December  31,  2003 of  $300,947  was  recorded as
     interest expense during the period ended March 31, 2004.  Debentures having
     an aggregate  principal  amount of $270,000  were  prepaid  during the year
     ended December 31, 2003 according the holders' rights for  prepayment.  The
     remaining  principal  amount of the debentures and accrued interest thereon
     in the aggregate  amount of $1,317,439  were repaid during the period ended
     March 31, 2004.

                                       8
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - LEASES

     During 2001,  the Company  entered into a capital lease for the purchase of
     certain  computer  equipment.  The lease requires  monthly payments of $820
     through September 2005 and has an outstanding  principal balance of $12,268
     and $14,000 at March 31, 2004 and  December  31,  2003,  respectively.  The
     lease  is  collateralized  by  equipment  with a  remaining  book  value of
     approximately  $10,000 at those dates.  Depreciation  expense of $5,289 was
     recognized  on this  equipment  during each of the periods  ended March 31,
     2004 and 2003.

     In January  2003,  the  Company  entered  into a capital  lease for certain
     equipment.  The lease requires  monthly  payments of $2,842 through January
     2006 and has an  outstanding  principal  balance of $41,095  and $46,376 at
     March  31,  2004  and  December  31,  2003,  respectively.   The  lease  is
     collateralized  by equipment with a remaining  book value of  approximately
     $40,000 at those dates.  Depreciation  expense of $3,250 was  recognized on
     this  equipment  during the each of the  periods  ended  March 31, 2004 and
     2003.

     In December  2003,  the Company  entered into a five-year  lease for office
     space under an operating  lease  agreement  requiring  monthly  payments of
     $6,856. The lease is cancelable after three years with 120-written  notice.
     The Company's  future minimum rental under this operating  lease amounts to
     $226,248.

NOTE 9 - LITIGATION AND CONTINGENCIES

     The  Company was party to a suit from a bank  claiming  damages of $175,477
     related to a merchant credit card account.  Management  disputed the bank's
     claim.  During the period  ended  March 31,  2004,  the  parties  reached a
     settlement wherein the Company paid $70,000 in satisfaction of the claim.

     On January 23, 2004,  a complaint  was filed  against the Company  claiming
     that it had breached an Asset  Purchase  Agreement  between the Company and
     the  plaintiff  dated  October 31,  2000.  The  plaintiff  asserts that the
     Company owes $4,000,000 in consideration  for assets purchased and earn-out
     fees for referral services.  Management believes the Company  appropriately
     exercised its right of recision  specified in the contract and returned the
     items to the seller,  and that no amounts are due under the  contract.  The
     Company plans to vigorously contest the claim.

     In January  2002,  the Company filed an action  against an  individual  for
     non-payment of funds owed for the purchase of common stock in the amount of
     $135,000.  The Company has been awarded summary judgment in this matter and
     expects to receive the remaining  outstanding amount, which was $43,073 and
     $59,255  at March 31,  2004 and  December  31,  2003,  respectively.  These
     amounts are  reflected in the  accompanying  balance  sheet as an offset to
     stockholders' equity.

NOTE 10 - CAPITAL STOCK

     A summary of common stock transactions for the periods ended March 31, 2004
     and 2003 is as follows:

                           Period Ended March 31, 2004
     None.

                           Period Ended March 31, 2003

     The Company sold 3,333 shares of restricted common stock at $6.00 per share
     through a private placement for $20,000 in cash.

     The Company  issued 24,242 shares of restricted  common stock in connection
     with a convertible  note in the amount of $200,000 (see Note 7). The shares
     were valued at $6.00 per share, or $145,454.

     The Company issued  141,026 shares of restricted  common stock and warrants
     to purchase  141,026  shares of restricted  common stock in connection  the
     sale of  $1,250,000  of  debentures.  The  shares of  common  stock and the
     warrants were valued at an aggregate of $1,250,000.

                                       9
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - STOCK OPTIONS AND WARRANTS

     At March 31, 2004, the Company had outstanding 324,250 options to employees
     under various  agreements with exercise prices ranging from $6.50 to $16.50
     per share,  expiring  between May 2005 and  December  2013.  Of the options
     outstanding  at March 31,  2004,  128,050  were  vested  and  102,000  were
     exercisable.  During the three months ending March 31, 2004, 20,000 options
     were granted and no options were forfeited or exercised.

     At March 31,  2004,  the Company had  outstanding  options and  warrants to
     purchase  2,052,826  shares of common stock (including  1,265,000  publicly
     traded warrants) that were issued to non-employees under various agreements
     with  exercise  prices  ranging  from $5.25 to $27.00  per share,  expiring
     between June 2004 and November  2008. Of the options  outstanding  at March
     31, 2004,  1,707,826  were vested.  During the three months ended March 31,
     2004, no options or warrants were issued, expired or exercised.


NOTE 12 - LOSS PER SHARE

     The  following  data show the amounts used in computing  loss per share and
     the weighted  average number of shares of common stock  outstanding for the
     years presented:

                                                          For the Three Months
                                                            Ended March 31,
                                                       -------------------------
                                                         2004             2003
                                                       ---------        --------
       Loss from continuing operations available
          to common shareholders (numerator)         $(1,346,499)     $(772,504)

       Weighted average number of common
         shares outstanding during the year used
         in per share calculations (denominator)       3,995,250      1,321,963


     Because the Company  incurred  losses for the periods  ended March 31, 2004
     and 2003, the effect of  options/warrants  and  convertible  notes totaling
     2,377,076 and 706,755  equivalent shares,  respectively,  has been excluded
     from the loss per share computation since its impact would be antidilutive.

NOTE 13 - SUBSEQUENT EVENTS

     A note receivable in the amount of $150,000 was repaid during April 2004.

                                       10


<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operations

     Pursuant  to  the  "safe  harbor"  provisions  of  the  Private  Securities
Litigation  Reform Act of 1995,  readers of this  report are  advised  that this
document  contains  both  statements  of  historical  facts and forward  looking
statements.  Forward looking  statements are subject to risks and uncertainties,
which could cause our actual results to differ  materially  from those indicated
by the  forward  looking  statements.  Examples  of forward  looking  statements
include,  but are not limited to (i)  projections  of revenues,  income or loss,
earnings per share, capital expenditures, dividends, capital structure and other
financial items,  (ii) statements  regarding our plans and objectives  including
product  enhancements,  or estimates  or  predictions  of actions by  customers,
suppliers,  competitors or regulatory  authorities,  (iii)  statements of future
economic  performance,  and (iv)  statements  of  assumptions  underlying  other
statements.

Overview

     The following is a discussion of certain  factors  affecting our results of
operations,  liquidity  and capital  resources.  You should  read the  following
discussion and analysis in conjunction with our consolidated condensed financial
statements and related notes that are included herein.

     Our   business   consists   of  the   purchase   and   resale  of   prepaid
telecommunication   and  other  products  through  our  proprietary   electronic
point-of-sale system,  Qxpress. The key components of the Qxpress system include
the  Qxpress  200  terminals,  our data  center and the  software  that runs the
terminals and the data center and the  communication  protocols that connect the
terminals to the data center.  The Qxpress  system was  introduced  in September
2002. Prior to that date, we used third party equipment and software.  We expect
to experience  substantial growth in our historical business while expanding our
product line to include a broad range of other  prepaid  products and to provide
transaction  processing and information  management services to other vendors of
prepaid products, both in the United States and abroad.

     Historically,  revenues from  international  operations  have accounted for
less than 1% of annual  revenues.  In 2003,  we began  generating  revenues from
customers in Canada, France, the Bahamas and Australia.  During the period ended
March 31, 2004,  international  revenues were 1.8% of total revenues.  We expect
that revenues from  international  operations  will grow over the next few years
and  will  represent  a  more  meaningful   portion  of  our  overall  revenues,
particularly  as prepaid  wireless is much more  common and  accepted in Europe,
Asia and Latin America than it is in North America.

     The Qxpress  system is designed  to replace  the  traditional  distribution
system for prepaid products, which consists of vouchers and hard cards that must
be  purchased  by the  retail  merchant  and that  are  subject  to a number  of
problems,  including loss, theft and inventory  financing and management issues.
The Qxpress system can support the sale of a broad range of prepaid  products in
electronic format from a single terminal placed in convenience  stores and other
retail  establishments.  Using an appropriately  enabled Qxpress 200 terminal, a
retail merchant can sell wireless telephone time, long distance service or other
telephone products,  add credit to a prepaid credit card, add wireless time to a
customer's  account by electronic bill payment,  sell other prepaid  products or
process debit/credit card transactions.  The prepaid product is sold in the form
of a personal  identification number, or "PIN," that the customer can use to add
telephone  time or credit card credit by calling the  provider of the product or
to transfer  cash by providing the PIN to the  recipient.  The consumer pays for
the product by paying the retail establishment in which the terminal is located.
Revenue from these purchases is split among the retail merchant, the broker that
placed the  terminal  with the retail  merchant,  the  provider  of the  prepaid
product and us.

     Our system is designed to accommodate  transactions involving virtually any
prepaid  product  that  can be  delivered  electronically.  Within  the  prepaid
transaction market, our initial focus has been on the telecommunications market.
National  telecommunication  carriers,  such as  Verizon,  Cingular,  AT&T and T
Mobile,  as well  as  regional  carriers,  such as  Iowa  Wireless  and  Hargray
Wireless,  sell their  prepaid  wireless  services  either  directly  or through
distributors who purchase these products at rates significantly lower than those
that could be obtained  by  individual  consumers  and small  businesses.  These
distributors  often purchase prepaid  telecommunication  products from different
carriers,  then resell these products in smaller quantities to their established
networks of retail outlets,  such as convenience  stores,  check cashing stores,
newsstands, grocery stores and discount stores. Qxpress can also be used to sell
and reload  prepaid  credit cards and to pay  wireless  phone bills for selected
carriers that do not offer PIN-based prepaid programs.

     In the first  quarter of 2004 we announced  that we have also  modified our
software  to run on a VeriFone  3750  terminal.  We began beta  testing in March
2004. We have not yet announced the date of full commercial launch,  although it
is anticipated  to be in the third quarter of 2004.  This terminal is capable of
providing both our prepaid  application,  which calls into our data center,  and
standard  debit/credit card processing through the merchant's processor for such
transactions.  The ability to offer our prepaid  solution to the market  through
this  alternative  hardware option provides us with an opportunity to expand our
market  share.  In 2004 we plan to further  expand the devices  through which we
distribute prepaid products,  such as additional  debit/credit  terminal models,

                                       11
<PAGE>

ATMs,  electronic cash register systems and PC based  point-of-sale  systems. We
believe  that  expanding  the number and type of devices that can connect to our
data center and sell our prepaid  products  will  provide  access to  additional
customers and increased revenues to us in the future.

Sources of Revenue

     Our   principal   source  of  revenue   has  been  the  resale  of  prepaid
telecommunication products, including wireless, long distance and other products
that we purchase  directly  from carriers or indirectly  from  distributors  who
purchase these products from the carriers.

     Our standard  business  model is referred to as our broker  model.  In this
model,  we provide a full  range of  products  and  services  to our  customers,
including our product  library,  PIN  management,  transaction  processing,  and
customer  service to the retail  locations.  We recognize  revenues at the gross
sales price of the  products,  cost of goods sold  representing  the cost of the
products and commission expenses paid to brokers and retailers.

     Beginning in 2003 we began  offering  our service  bureau  business  model.
Under this model,  our customers  license our data center  software and purchase
Qxpress terminals from us. These customers are responsible for functions such as
inventory  management,  product  ownership,  report  generation,  and ACH  funds
transfer.  Our agreements  with these  customers  also provide  ongoing fees for
software maintenance and transactions processed through their system. Because we
do not provide or control the products sold, we do not meet the  requirements to
record these sales at "gross." Transaction  processing,  license and maintenance
fees are all recorded on a "net" basis.  Sales of terminals  are recorded at the
sales price and a corresponding cost of sale is recognized.

     The table below  illustrates  the  revenues we derived  from our  principal
products and services and the percentage of total  revenues  represented by this
amount.  The discussion  that follows  focuses on the sources of revenue that we
believe are the most important to our present and future results of operations.

                                          Three months ended March 31,
                                ------------------------------------------------
                                         2004                        2003
                                --------------------          ------------------
                                  Amount     Percentage      Amount   Percentage
                                  ------     ----------      ------   ---------
        Wireless                 $7,449,894       87.8%    $5,568,540      96.9%
        Other products              315,343        3.8         18,550       0.3
        Credit card                 236,778        2.8         17,631       0.3
        Long distance               163,966        1.9         97,426       1.8
        Rental and other fees       146,959        1.7         25,119       0.4
        Service bureau              156,997        1.8         11,100       0.2
        Miscellaneous                17,893        0.2          8,673       0.1
                                  ---------     ------     ----------  --------

        Totals                   $8,487,830      100.0%    $5,747,039     100.0%
                                  --------      ------     ----------  --------

     Prepaid wireless continues to be our largest source of revenue. The prepaid
wireless  industry is  projected to continue to grow and we  anticipate  that it
will continue to be our largest revenue source.  Our prepaid  wireless  products
include many major  national  carriers and many smaller  regional  carriers.  We
frequently add new wireless products as the demand arises.

     Other  products  include  items such as prepaid  internet,  home dial tone,
custom ring tones and email that are downloaded to cellular phones,  gift cards,
blank cards used by  retailers,  fees from bill pay  applications,  and PINs and
cellular phones that we sell to other distributors outside our customer network.

     Prepaid credit card is a relatively  new product for the prepaid  industry.
This product allows a user to load funds onto a stored value card that will then
function the same as a typical debit card.  We generate  revenues by receiving a
share of the load fee charged to the consumer, which ranges from $4.95 to $9.95.
We currently offer two products that bear the MasterCard logo and are evaluating
other  products.  We  believe  the  convenience  of a stored  value card for the
cash-based  consumer and increased  market awareness of this product will result
in increased revenues to us in the future.

     Prepaid long  distance  revenue is a focus of ours in 2004. We believe that
our revenues  from this source should grow both in terms of gross dollars and as
a percentage of total revenues in the future.  Our marketing  analysis  suggests
that we can increase  prepaid long  distance  revenues by improving  our product
offering and by providing  informative and attractive  point of sale advertising
materials to our brokers and merchants.  In April 2004 we announced our new long
distance program and began promotion to our broker network.

     We offer the brokers  through whom we deploy the Qxpress  system the option
either to buy the Qxpress 200  terminals at a fixed price or to lease them under

                                       12
<PAGE>

a  rental  program.  The  sale of the  terminal  will  result  in the  immediate
recognition of revenue,  the immediate  recovery of capital for the terminal and
gross  profit from the sale.  The rental  program has the  advantage  of ongoing
rental  income  over the life of the  contract  and  higher  margins  due to the
premium we are able to charge under this  alternative.  Our ability to offer the
rental option over the long-term  depends on the availability of capital to fund
the cost of the  terminals.  Substantially  all of the  terminals  in our broker
model are currently under the rental program.  Other types of fee income include
performance fees that are charged when weekly rentals from a terminal fall below
the agreed-upon  minimum level and other miscellaneous fees. Our fee income will
continue to increase as we deploy more units into the market.

     We first began setting up service  bureau  customers in 2003. We expect the
majority  of revenues  from  service  bureau  customers  will be from  customers
outside the United States since that is the only business  model we have offered
them  to  date.  This  revenue  model  will  provide  higher  margins  than  our
traditional  broker model since there are few direct costs to offset against the
fee revenues.  However,  we anticipate a significantly lower average revenue per
unit for these  customers  since they are  performing  many of the  services  we
provide to our  broker  customers.  Accordingly,  even if gross  profit  remains
relatively  stable,  or increases at a relatively  constant  rate from period to
period,  revenues and gross profit margins may experience substantial volatility
based on changes in the  percentage of our business  undertaken on a service fee
basis compared to the percentage undertaken as a product reseller. We anticipate
this source of revenue to increase in 2004 and beyond.  We established our first
service bureau  customer in Canada in early 2003. In late 2003 we set up service
bureaus for new  customers in France,  Australia  and the  Bahamas.  Most of the
revenue we have recorded from our service bureaus in 2003 and 2004 was for sales
of  terminals.  We have $80,000 in unearned  software  license fees from service
bureau  customers  at March 31, 2004 that we  anticipate  recording  as revenues
during 2004.

     Historically,   our  results  of  operations  have  been  characterized  by
relatively  high revenues but  relatively  low gross  profits.  Under our broker
model,  we book the entire value of the  transaction  as  revenues.  Our cost of
sales  includes the amount we pay for the product;  it does not include the fees
and commissions we pay the broker and the retailer who participated in the sale.
Our gross profit margin was approximately 27.2% for the three month period ended
March 31,  2004 and  25.0% for the  comparable  period in 2003.  However,  after
further  subtracting  the commissions and fees paid to the brokers and retailers
(which vary substantially directly with revenues in our historical sales model),
our margins were approximately 3.4% for the period ended March 31, 2004 and 2.4%
for the  comparable  period in 2003.  The  increase of 1.0% in our margin  after
commissions and fees in 2004 is attributable to increased  rental and other fees
charged in 2004.  Such fees do not have a direct cost  associated  with them and
therefore have a  dollar-for-dollar  impact on the margin after  commissions and
fees.  Because of these  relatively  small margins,  a minor change in the price
that we pay for  products  would have a  substantial  effect on our  margins and
profit  if we were not able to (or,  in the  case of price  decreases,  were not
required to) pass the difference on to our customers.

     The resale of prepaid  telecommunication  products has historically  been a
commodity market with most price increases or decreases being passed through the
distribution chain to the end user.  However,  the amount of margin available to
each participant in the  distribution  chain can be affected by various factors,
such as the  functions  provided  and risk  assumed by the  participant  and the
volume  and  payment  terms on  which  the  participant  can  purchase  product.
Historically,  our ability to purchase  products  at  attractive  rates has been
negatively  impacted by our inability to purchase in volume and our status as an
uncertain  credit,  which,  in some  cases,  has  resulted in our  inability  to
purchase product  directly from the supplier.  In those cases, we have purchased
product  from a  reseller  at a markup  from the  supplier  price.  We will seek
opportunities  to increase  margins by  purchasing a greater  percentage  of our
product directly from the carrier and by purchasing in greater volume.  However,
the  telecommunications  business  in  general,  and the  wireless  business  in
particular,  are changing rapidly and it is not possible to anticipate potential
changes that may occur in the distribution chain.

     Substantially   all  of  our  revenues  are  collected   through  automated
clearinghouse,  or ACH, transactions initiated by us within 72 hours of the sale
of the product. In an ACH transaction, funds are electronically transferred from
the  merchants'  accounts to our  accounts.  As a result,  we have  virtually no
receivables  from retailers and we do not have expenses  associated with billing
and  collection.   The  brokers  through  whom  we  distribute  our  system  are
responsible  for any unpaid ACH  transactions  from  retailers so we  experience
virtually no bad debt expense.  We generate  receivables from sales of terminals
and from license fees and consulting  services provided to assist service bureau
customers in setting up and operating data centers.

                                       13
<PAGE>
Operating Metrics

     We  monitor  our  business  and  measure  performance  in a number of ways.
Several  of these  key  measures  are shown in the table  below  along  with the
results for our last two quarters.  These are historical  amounts and should not
be used as a projection for future results.
<TABLE>
<CAPTION>
                                                      For the Quarter Ended      For the Quarter Ended
           Broker Model                                   March 31, 2004           December 31, 2003
           ------------                                   --------------           -----------------
        <S>                                             <C>                        <C>
              Qxpress terminals shipped                         1,178                      889
              Qxpress terminals canceled                         (123)                    (172)
                                                                -----                    -----
              Net Qxpress terminals placed                      1,055                      717
              Ending Qxpress terminals in service               2,898                    1,843
              LDC terminals in service                            248                      280
                                                                  ---                      ---
              Total terminals in service                        3,146                    2,123

              Average monthly net revenue per terminal            $34(1)                   $39(2)
              Average monthly net revenue per terminal for
                terminals in service more than 90 days            $46(1)                   $48(2)

              Acquisition cost per broker units shipped           $89                      $61
              Acquisition cost per total units shipped            $69                      $34
              Cash cost per unit in service (excluding
                acquisition)                                       $8                      $10

            Service Bureau Model
              Terminals shipped                                   453                      625
              Terminals canceled                                   -                         -
              Net terminals placed                                453                      625
              Total terminals in service                        1,462                    1,009

              Average monthly net revenue per terminal             $4(2)                    $4(2)
              Average monthly net revenue per terminal for
                 terminals in service more than 90 days           $21(2)                   $12(2)

            Blended average monthly net revenue per terminal      $26                      $38
</TABLE>

          (1) Includes  gross  revenues less cost of goods sold and  commissions
          paid to brokers and retailers.

          (2) Excludes one-time revenues from terminal sales,  installation fees
          and license fees.

     The exact timing of cash flow break even  depends on many items,  including
how  aggressively  we  add  to  our  sales  organization,  which  increases  our
short-term  burn rate,  our actual sales  results,  the pace of our growth,  the
relative  numbers of broker terminals in service and service bureau terminals in
service,  and how quickly  terminals  are  installed  and become  fully  revenue
producing after shipment.  Based on our current sales organization growth plans,
we  believe  our cash flow break  even  point  will  likely be at  approximately
9,000-10,000  installed broker units plus 4,000-5,000  installed  service bureau
units in service.  These break even points assume  terminals  that have achieved
full  revenue  potential,  which  typically  occurs  in 90-120  days.  Given the
differing economics of these two models,  different combinations of these two in
service unit numbers will yield different cash flow break-even  points.  We will
continue to reevaluate the market  potential and implications for our break-even
point as time progresses.

     Our broker model  revenues  depend on the following  factors:  i) number of
terminals in service,  ii) average gross sales per terminal,  iii) net margin on
product sales,  and iv) fees and other  ancillary  charges.  The first factor is
shown in the data on units  shipped,  exchanged,  canceled and net units placed.
The other  factors  are  captured  in the  measurement  of average  revenue  per
terminal (referred to as "ARPU").

     During 2003 we had a higher rate of returned units than anticipated,  which
was due to service  issues  related to the  terminals.  These  issues  have been
addressed  and, we believe,  resolved.  We anticipate  that the rate of canceled
units will be lower as a percentage of total units shipped in 2004.

     Our  strategy  to  increase  the  number  of  units  in  service   includes
significantly  increasing  our sales  force in order for us to gain more  market
exposure. During the first quarter of 2004 we have hired a new vice president of
sales and two new sales personnel.  We anticipate adding more sales personnel in
the next six months.  We anticipate that our selling expenses will increase more
rapidly than revenues in the near term,  but expect that the long-term  benefits
of the additional sales personnel will outweigh the costs.

                                       14
<PAGE>
     As  discussed  above,  we plan to develop  other  distribution  methods for
distributing  products  using our back-end data center.  As we add customers who
use distribution  methods other than our Qxpress terminal (e.g.  electronic cash
registers)  our focus  will  shift from  terminals  in  service to total  retail
locations regardless of the method of product  distribution.  We anticipate that
ARPU for units that do not  involve a Qxpress  terminal  will fall  between  the
broker model and service bureau model currently experienced.

     Our  strategy  with  average  revenue  per  terminal  is to focus our sales
efforts on quality  brokers and retail  chains with  established  prepaid  sales
history,  maintain or better the pricing in our contracts with new brokers, gain
better  discounts from  suppliers by securing  direct  relationships  and buying
larger quantities, and to continue to charge rental and minimum performance fees
on all  terminals  placed.  We show  average  revenue per  terminal  for average
terminals  outstanding during the year and for average terminals excluding those
shipped  within the last 90 days since our  experience  shows that it  generally
takes 60-90 days for a terminal to ramp up to full revenue potential.

     We evaluate our service  bureau model in different  ways.  While we measure
ARPU for these customers,  the revenues from software licensing and profits from
terminal sales are likely to be more  significant than the transaction fees from
sales of products.  The total net profit on a per-customer  basis is the measure
we focus on  rather  than  transaction  fees per  unit.  As our  service  bureau
customers  continue to grow we will have more  meaningful data of this nature to
report.

     Our strategy  with  respect to service  bureau  revenues is to  selectively
choose  opportunities  that will bring us the most net revenues.  We plan to add
one   full-time   sales   position  to  focus   exclusively   on   international
opportunities.  In  addition,  our  former  CEO  who is now our  executive  vice
president of business  development will be devoting a significant  amount of his
effort on expanding our international presence.

Critical Accounting Policies and Estimates

     The  discussion  and  analysis of our  financial  condition  and results of
operations  are  based on our  financial  statements  that  have  been  prepared
according to accounting  principles  generally  accepted in the United States of
America.  In  preparing  these  financial  statements,  we are  required to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses  and  related   disclosures  of  contingent  assets  and
liabilities.  We evaluate these  estimates on an on-going  basis.  We base these
estimates on  historical  experience  and on various other  assumptions  that we
believe are reasonable  under the  circumstances,  the results of which form the
basis for making  judgments about the carrying values of assets and liabilities.
Actual results may differ from these estimates  under  different  assumptions or
conditions.  We  consider  the  following  accounting  policies  to be the  most
important to the portrayal of our financial  condition and that require the most
subjective judgment.

     Revenue recognition

     We  record  revenue  at the  time of  product  sale or  when  services  are
provided.  Under our broker model,  sales of our prepaid  products are generally
made directly to end-users. There is no right of return for products sold and we
are  not  obligated  for  further   performance  after  the  sale.  These  sales
transactions  are  accounted  for at "gross"  since  they meet the  requirements
specified by Securities and Exchange  Commission Staff  Accounting  Bulletin No.
101 -- Revenue Recognition in Financial Statements (SAB 101) and Emerging Issues
Task Force No. 99-19 (EITF 99-19).  Revenues generated from other sources,  such
as from the sale or rental of terminals,  minimum  performance fees and software
license fees are recorded  when earned,  net of any sales  discounts.  Under our
service bureau model, software license,  transaction  processing and maintenance
fees are all recorded on a net basis when earned.

     Cost of goods sold

     Cost  of  goods  sold  primarily   represents  the  cost  of  the  personal
identification  number,  or PIN, or other product sold. The cost of a PIN is set
by the carrier  and is  expressed  in terms of a  percentage  discount  from the
denomination  value.  This discount ranges from 12% to 25% for cellular and home
dial tone  products and 40% to 50% for long  distance  products.  We do not have
minimum  purchase   contracts  or  exclusivity   agreements  with  any  carrier.
Historically,  price  increases  are passed on to customers in the form of lower
broker and merchant  commissions,  which are  recognized  as operating  expenses
under the caption "commissions and fees" on our statement of operations. Cost of
goods sold and resulting  gross  profits  fluctuate due to changes in the mix of
our products and discount rates offered by carriers. As already noted, we expect
to experience  greater  fluctuations in revenues and margins as we introduce our
service bureau revenue model.

     Software development costs

     We have  invested  a  considerable  amount of  capital  in our  proprietary
Qxpress  200  terminal  and data  center.  We  account  for this  investment  in
accordance with Statement of Financial  Accounting Standards No. 86, "Accounting
for the Costs of Computer Software to Be Sold,  Leased,  or Otherwise  Marketed"
and Statement of Accounting  Standards No. 142,  "Goodwill and Other  Intangible
Assets." Costs incurred before we established the  technological  feasibility of
the  project  were  recorded  as  research  and   development   expenses.   Once
technological  feasibility was  established,  costs incurred to develop the data

                                       15
<PAGE>
center  software and the embedded  software in the  terminal  were  capitalized.
These costs include salaries paid to software  engineers employed by us and fees
paid to third parties for software  development.  Once the new system was placed
in service,  maintenance costs are expensed while costs of new software projects
under  development  are  capitalized.  Capitalized  costs are amortized over the
estimated  useful life of the software of three years. We periodically  evaluate
the  recoverability of our capitalized  software  development costs based on the
expected future cash flows from this asset.

     Stock options and warrants

     We have adopted the disclosure-only  requirements of Statement of Financial
Accounting  Standards No. 123,  "Accounting  for Stock-Based  Compensation,"  as
provided  by  Statement  of  Accounting   Standards  No.  148,  "Accounting  for
Stock-Based  Compensation  -- Transition  and Disclosure -- an amendment to FASB
Statement No. 123." As a result, no compensation  costs are recognized for stock
options granted to employees.  Options and warrants granted to non-employees are
recorded  as an expense on the date of grant  based on the then  estimated  fair
value of the security in question.

     Income taxes

     At March 30, 2004, we had an accumulated net operating loss for federal and
state corporate income tax purposes of approximately $12.9 million.  Because our
ability to use this net  operating  loss  depends on our  ability to earn future
taxable  income,  we have  established  a valuation  allowance  equal to the net
deferred tax asset. The amount of and ultimate  realization of the benefits from
these  deferred  tax  assets  for  income  tax  purposes  depends,  in part,  on
applicable tax laws in effect, our future earnings, and other future events, the
effects  of which  cannot be  determined.  However,  our  ability  to offset our
accumulated  net  operating  loss against  future  taxable  income may cause our
future reported  earnings and  profitability to be greater than they would be if
fully taxable.

Results of Operations

     The  following  table sets forth for the periods  presented,  statement  of
operations data as a percentage of revenues.  The trends suggested by this table
may not be indicative  of future  operating  results.  As noted  earlier,  these
percentages  can  be  expected  to  change  substantially  as a  result  of  our
implementation of different sales models and other factors.

                                                    Period ended March 31,
                                                    ----------------------
                                                    2004             2003
                                                    ----             ----
         Revenues                                   100.0%           100.0%
         Cost of goods sold                         72.7             75.0
                                                    ----             ----
         Gross profit                               27.3             25.0
         Commissions and fees..                     23.9             22.6
         Selling expenses                            1.7              1.6
         General and administrative expenses         8.9              8.9
         Depreciation and amortization               4.7              2.8
         Non-cash compensation                       0.0              0.4
                                                     ---              ---
         Loss from operations                      (11.9)           (11.3)
         Other income (expense) - net               (3.6)            (2.2)
                                                    -----            -----
         Net loss                                  (15.5)           (13.5)
                                                   ------           ------

     The following  table presents our statement of  operations,  showing dollar
and percentage changes from 2003 to 2004.
<TABLE>
<CAPTION>

                                                           Three months ended March 31,     Increase (Decrease)
                                                           ----------------------------     -------------------
                                                        <S>                     <C>          <C>         <C>
                                                              2004              2003             $           %
                                                              ----              ----             -           -
         Revenues                                        $  8,487,830     $  5,747,039     $ 2,740,791     47.7%
         Cost of goods sold                                 6,174,528        4,308,499       1,866,029     43.3
         .........                                         ----------       ----------       ---------     -----
         Gross profit                                       2,313,302        1,438,540         874,762     60.1
         Commissions and fees                               2,024,907        1,298,513         726,394     55.9
         Selling expenses                                     142,697           93,806          48,891     52.1
         General and administrative expenses                  782,639          510,863         271,776     53.2
         Depreciation and amortization                        399,191          159,167         240,024    150.8
         Non-cash compensation                                     -            21,666         (21,666)  (100.0)
         .......                                           ----------       ----------       ---------     -----
         Total operating expense                            3,349,434        2,083,835       1,255,599     60.3
         Loss from operations                              (1,036,132)        (645,295)       (390,837)   (60.6)
         Other income (expense) - net                        (310,367)        (127,209)       (183,158)  (143.9)
         .......                                           ----------       ----------       ----------   -----
         Net loss                                        $ (1,346,499)    $   (772,504)   $   (573,995)   (74.3)%
                                                           ----------       ----------       ----------   -----
</TABLE>
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<PAGE>
Three months ended March 31, 2004 and 2003

     Revenues.  Our 2004  revenues  increased  over the  2003  amount  due to an
increase in the number of terminals in service and to increasing  our sources of
revenues.  Our first  quarter  revenues  were the  highest  in our  history  and
represent  more than a 17% increase from the fourth quarter of 2003, in which we
reported  our  previous  high.  Our  installed  base of  terminals  increased by
approximately  48% during the quarter.  Many of these  terminals  were  recently
installed  and  therefore  have  only  marginally  impacted  our  first  quarter
revenues. We expect the following factors to positively impact revenues in 2004:
i) continuing to increase our installed base of terminals; 2) our expanded sales
force that will be in place for much of 2004; iii) the advantages we are able to
offer the market with our proprietary  system as previously  described;  and iv)
the addition of new means of product  distribution,  such as  debit/credit  card
terminals, electronic cash registers, etc.

     Cost of goods sold. Our cost of goods sold for the three months ended March
31, 2004 as percentage of revenues was 72.7% compared to 75.0% in the comparable
period in 2003.  Changes in cost of goods sold as a  percentage  of revenues are
attributable  to our mix of  sales.  Wireless  products  generally  carry  lower
discounts  than long distance and other  products.  In 2004,  wireless  revenues
represented  87.8% of  revenues  compared to 96.9% in 2003.  In the  future,  we
expect our gross margin to  fluctuate  as our product mix changes,  our level of
fees charged and as discount rates offered by carriers change. Gross margin will
also be  influenced  by the  relative  growth  experienced  in our two  business
models, the traditional broker model and the service bureau model.

     Commissions and fees.  These expenses are principally  commissions  paid to
retailers and brokers for product sales through the Qxpress  terminals and are a
fixed percentage of the product sales price.  Commissions and fees for the three
months ended March 31, 2004 were higher than the  comparable  period in 2003 due
to the  increase in  revenues.  Also, a portion of the decrease in cost of goods
sold as a  percentage  of revenues was passed on to brokers and  retailers.  Our
contracts  with  brokers  generally  protect  us from any price  decreases  from
carriers.  A component of commissions  and fees is a transaction  processing fee
paid to LDC for  transactions  processed  through the LDC terminals.  These fees
were approximately  $12,000 in 2004 compared to $45,000 in 2003. These fees have
been  consistently in the range of 1% of gross revenues  processed  through that
system.  Since most of our revenue growth will come from transactions  generated
by the new Qxpress 200  terminal,  these  expenses  are not expected to increase
from their current level in terms of absolute  dollars and will likely  continue
to decrease as existing customers are transitioned to our new terminal.

     Selling  expenses.  Selling  expenses  for the three months ended March 31,
2004 increased by approximately  $50,000 when compared to 2003. This increase is
a result of adding  three new sales  personnel  in 2004 and to a new  commission
program  introduced  in  January  2004.  Sales  staff are  eligible  to  receive
commission  pay based on the number of terminals  placed in a month  compared to
the  individual's  quota and on the plan level the terminals  were placed on. We
expect selling expenses to increase significantly in 2004 over 2003 levels as we
continue to add to our sales force during the second quarter.

     General and administrative.  General and administrative  expenses increased
by approximately  $270,000 during the first quarter of 2004 compared to the same
period in 2003. As a percentage of revenues, such expenses were constant in 2004
and 2003. The increase can be attributed to a number of factors. Our general and
administrative  salaries and benefits increased by $170,000 for the three months
ended March 31, 2004 when compared to 2003. However, this increase is not due to
higher  gross  salaries  paid but to an accrual of $135,000  toward a team bonus
program  which will be paid  according  to our  performance  during  2004 and to
$30,000  less in salaries  eligible to be  capitalized  as software  development
costs in 2004 compared to 2003.  While we are still  developing new applications
for our system and some of the salaries of software  engineers are  capitalized,
we expect  that the  amount of  capitalized  salaries  in 2004 will be less than
those  capitalized in 2003. Other items  contributing to the increase in general
and  administrative  expenses are the cost of Directors  and Officers  insurance
($20,000),  a  provision  for  doubtful  accounts  ($30,000)  and an increase in
professional  services such as legal,  accounting and consulting fees ($45,000).
In order to support  expanded  operations,  we expect to  increase  general  and
administrative  expense.  As gross  profit  increases,  we  expect  general  and
administrative  expenses to decrease as a percentage  of gross  profit,  thereby
significantly improving operating margins.  However, in the immediate future, we
expect to incur costs in advance of the  business  growth that they are intended
to support.  Accordingly,  operating margins may initially decrease and will not
achieve the expected  improvement unless and until business in fact expands on a
profitable basis.

     Depreciation and amortization.  Depreciation and amortization  expenses for
the three months ended March 31, 2004 increased by  approximately  $240,000 when
compared to 2003. These increases are attributable primarily to the amortization
of  software  development  costs and to  higher  depreciation  expenses  from an
increased number of Qxpress 200 terminals in service.  We also determined in the
fourth  quarter of 2003 to decrease in the expected  useful life of our point of
sale  terminals  from five years to three  years,  causing  higher  depreciation
expenses in the first quarter of 2004 compared to the same period in 2003. As we
continue to amortize software  development  costs and we increase  significantly
the number of Qxpress 200  terminals  in  service,  we expect  depreciation  and
amortization expenses to increase in the future.

     Other  expense - net.  Other  income  and  expense  consists  primarily  of
interest income and expense.  Net other expense for the three months ended March
31, 2004 and 2003 were $310,000 and $127,000,  respectively. The increase in net
other expense  represent  interest  expense related to the debentures we sold in
2003. Most of this interest expense, $300,000 for the three months ended

                                       17
<PAGE>
March  31,  2004,  is in the form of  amortization  of  discount  on these  debt
instruments  and therefore does not represent an amount paid in cash.  Since the
debentures were repaid in full on March 31, 2004, the discount on debt was fully
amortized as of that date.  Presently,  our debt  consists of a $250,000 note to
our former CEO and $55,000 in capital leases. Based on this relatively low level
of debt, we expect interest  expenses to be significantly  less in 2004 compared
to 2003.

     Income tax expense.  At March 31, 2004 we had operating loss  carryforwards
of approximately $12.9 million that may be applied against future taxable income
in years  through  2023.  The loss  carryforwards  and other items result in net
deferred tax asset of  approximately  $4.5  million.  The amount of and ultimate
realization of the benefits from this deferred tax asset for income tax purposes
depends,  in part, on applicable tax laws in effect,  our future  earnings,  and
other future events,  the effects of which cannot be determined.  As a result of
the  uncertainty  surrounding  the  realization  of the deferred  tax asset,  at
year-end we  established  a valuation  allowance  equal to the net  deferred tax
asset and no income tax benefit from our operating loss has been  recognized for
any of the periods presented.

Liquidity and Capital Resources

     Historically,  we have financed our working  capital  requirements  through
cash  flow  from  operations,  the  sale of  equity,  proceeds  from  short-term
borrowings, and proceeds from the sale of convertible debentures and notes.

     In 2003 we  entered  into a  number  of  financing  transactions,  the most
significant of which was a registered  public  offering.  The offering closed in
June 2003 and was for 1,265,000 units including the overallotment  option,  each
unit  consisting  of two shares of common  stock and one common  stock  purchase
warrant.  The units were priced at $13.00  each,  yielding us gross  proceeds of
$16.445  million.  Net proceeds to us after  underwriter  discount and estimated
offering costs were approximately $13.6 million.

     Before completing this offering,  we raised a total of $2.7 million through
the sale of (a) a $200,000 unsecured  convertible note due February 28, 2004 and
bearing interest at 12%; (b) $1.5 million aggregate  principal amount of secured
convertible  debentures due March 31, 2004; and (c) an unsecured promissory note
in the  original  principal  amount of  $1,000,000  due August 31, 2004  bearing
interest at 12%.

     We used these funds to repay and cash  collateralize  debt in the aggregate
amount of $3.59 million,  decrease  current  liabilities  by $1.1 million,  fund
purchases of capital  equipment and software  development in the amount of $3.09
million,  fund an increase in inventory and accounts  receivable of $974,000 and
fund our operations.

     As of March 31, 2004, we had working capital of approximately $4.64 million
and a working capital ratio of 4.3 to 1.

     Existing  commitments  for  cash  in 2004  include  another  4,000  Qxpress
terminals in the amount of $1.51  million,  total payments of $90,000 toward our
capital and operating leases and payments on a note payable to our former CEO in
the amount of $78,000. We anticipate that our inventory of PINs, which was $1.27
million at March 31, 2004, will continue to grow as our business expands. Due to
the  short  order  time  required  for these  products,  we are able to keep our
inventory in the range of 10 day's sales. Our future capital  requirements  will
also  depend both on the rate of growth of our  business  and the mix of revenue
models that we employ.  Models that require us to maintain a large  inventory of
prepaid products or to continue to own terminals and/or to invest in transaction
processing  facilities  will require  relatively  large amounts of capital.  The
capital  requirements  of a  pure  service  bureau  model  are,  in  comparison,
substantially less.

     At this time we believe our available  resources are sufficient to fund our
operations and capital requirements through the end of 2004.

Recent Accounting Pronouncements

     Statement of Financial  Accounting  Standards  SFAS No. 149,  "Amendment of
Statement 133 on Derivative  Instruments and Hedging  Activities",  and SFAS No.
150, "Accounting for Certain Financial  Instruments with Characteristics of both
Liabilities  and Equity",  were  recently  issued.  SFAS No, 149 and 150 have no
current  applicability  to us or their effect on the financial  statements would
not have been significant.

                                       18
<PAGE>
Item 3.  Controls and Procedures

          a)  Evaluation of Disclosure  Controls and  Procedures.  The Company's
          management,  with the participation of the chief executive officer and
          the  chief  financial  officer,  carried  out  an  evaluation  of  the
          effectiveness  of the Company's  "disclosure  controls and procedures"
          (as  defined in the  Securities  Exchange  Act of 1934 (the  "Exchange
          Act")  Rules  13a-15(e)  and  15-d-15(e))  as of the end of the period
          covered by this quarterly report (the "Evaluation  Date").  Based upon
          that evaluation,  the chief executive  officer and the chief financial
          officer  concluded  that,  as of the  Evaluation  Date,  the Company's
          disclosure controls and procedures are effective,  providing them with
          material  information  relating  to  the  Company  as  required  to be
          disclosed  in the  reports  the  Company  files or  submits  under the
          Exchange Act on a timely basis.

          b) Changes in Internal Control over Financial Reporting. There were no
          changes in the Company's  internal controls over financial  reporting,
          known to the chief executive  officer or the chief financial  officer,
          that  occurred  during the  period  covered  by this  report  that has
          materially affected, or is reasonably likely to materially affect, the
          Company's internal control over financial reporting.

PART II

Item 1. Legal Proceedings

As of May 13, 2004, we are not a party to any legal  proceedings,  except as set
forth below.

In January 2002, we filed a lawsuit  against an individual  for  non-payment  of
funds owed  relating  to the  purchase  of common  stock.  We have been  awarded
summary  judgment  in  the  amount  of  $135,000,   of  which  $43,000  remained
uncollected at March 31, 2004.

In January 2004, Dial-Thru International  corporation filed a lawsuit against us
in the  Superior  court  of the  State of  California,  County  of Los  Angeles,
claiming  damages of $4 million as a result of our breach of an  agreement  that
was signed in October 2000. It is our position that claim is without merit as we
properly exercised a contractual right to terminate the terminate agreement.  In
February  2004 we filed a motion to dismiss the case on the  grounds  that under
the  agreement  in  question  the proper  venue for this case was the federal or
state  courts in Orem,  Utah.  In April  2004,  the  California  court  issued a
tentative ruling granting our motion for dismissal.  The proceedings were stayed
pending the outcome of the matter in the state of Utah. A status  conference  is
scheduled for December 2004. No action has yet been filed in Utah.

Item 6. Exhibits and Reports on Form 8-K

a. Exhibits:

Exhibit No.    Description

  31.1         Chief Executive Officer Certification pursuant to section
               302 of the Sarbanes-Oxley Act of 2002.

  31.2         Chief Financial Officer Certification pursuant to section
               302 of the Sarbanes-Oxley Act of 2002.

  32.1         Chief Executive Officer Certification pursuant to section
               906 of the Sarbanes-Oxley Act of 2002.

  32.2         Chief Financial Officer Certification pursuant to section
               906 of the Sarbanes-Oxley Act of 2002.

b. Reports on Form 8-K:

On each of February 3, 2004 and on March 11, 2004,  we filed a current report on
form 8-K under items 5 and 7.


                                       19
<PAGE>
                                   SIGNATURES

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


                                         Q Comm International, Inc.
                                         (Registrant)

Date   ____May 13, 2004______            /s/Terry D. Kramer
                                         Terry D. Kramer
                                         Chief Executive Officer

Date   ____May 13, 2004 _____            /s/ Michael K. Openshaw
                                         Michael K. Openshaw
                                         Chief Financial Officer
                                         (Principal Financial Officer)


















                                       20