UNITED STATES 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 JUNE 30, 2002

                         COMMISSION FILE NUMBER: 0-28885



                           Q COMM INTERNATIONAL, INC.
                    ----------------------------------------
        (Exact name of small business issuer as specified in its charter)

                            Utah               87-0674277
                  -----------------------  -------------------
                 (State of incorporation) (IRS Employer ID No.)

                   1145 South West 1680, Orem, Utah 84058-4930
                   -------------------------------------------
                    (Address of principal executive offices)

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


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
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No

Number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of August 12, 2002, there were 14,864,985
shares of common stock outstanding.

Transitional Small Business Disclosure Format: [  ] Yes   [X] No



<PAGE>


Part I

Item 1.  Financial Statements

See exhibit 99.1 hereto.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS

The following is a discussion of certain factors affecting Q Comm International,
Inc.'s ("Q Comm" or the "Company") results of operations, liquidity and capital
resources. You should read the following discussion and analysis in conjunction
with the Company's consolidated condensed financial statements and related notes
that are included herein.

CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

The statements contained in the section captioned Management's Discussion and
Analysis of Financial Condition and Results of Operations which are historical
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements represent the
Company's present expectations or beliefs concerning future events. The Company
cautions that such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
uncertainty as to the Company's future profitability; the uncertainty as to the
demand for prepaid telephone services; increasing competition in the
telecommunications market; the Company's ability to hire, train and retain
sufficient qualified personnel; the Company's ability to obtain financing on
acceptable terms to finance its growth strategy; and the Company's ability to
develop and implement operational and financial systems to manage its growth.

OVERVIEW

Q Comm International, Inc. ("Q Comm" or the "Company"), a Utah corporation, is a
national business services provider specializing in the sale and distribution of
various prepaid products throughout the United States including prepaid calling
cards, prepaid wireless service, prepaid home dialtone phone services, prepaid
internet, and prepaid MasterCard (TM). The Company provides electronic delivery
of products through Qxpress (TM), a total management system that allows
retailers to (i) instantly provide any prepaid service at the point of purchase
on demand and thus minimize shelf space requirements; (ii) print flexible sales
reports, and (iii) eliminate expensive inventory, and prevent theft and fraud.
The Company's securities are quoted on the Over-the-Counter Bulletin Board
("OTCBB") under the symbol QCCM.OB.


                                       2
<PAGE>


Q Comm primarily distributes its products through the Qxpress (TM) point-of-sale
activation system, which delivers electronic personal identification numbers
(PINs) for its products to consumers. The Qxpress (TM) terminal connects to a
standard phone line and downloads a personal identification number (PIN) which
is then printed on a blank card with an 800 number and simple activation
instructions. The Qxpress (TM) system also generates service fees when weekly
sales quotas of products and services have not reached minimum amounts set by
the Company. Revenues are also generated from the sale of printed prepaid
wireless and long distance cards and from the sale of Qxpress (TM) terminals,
although presently the Company retains ownership of most of the terminals placed
in service. The Company believes that its principal business in the future will
be in the prepaid wireless market, and providing point-of-sale solutions to
retailers.

The Company utilizes a business-to-business model, wherein large, independent
telecommunications brokers, wholesale food distributors, and wireless carriers
market Q Comm's products to a variety of retailers with whom they have
pre-existing relationships. Q Comm uses its own sales force to recruit, train
and support the independent telecommunications brokers, wholesale food
distributors, and wireless carriers that market the Company's products.

The Company's objective is to be one of the leading electronic point-of-sale
solution providers in the United States and internationally. To achieve this, it
will be necessary for Q Comm to expand the size of its revenues through
expansion of the number of retail locations where its products are sold by
entering into new broker/carrier agreements, increasing sales volume through
existing locations, and to continue to generate new sources of revenue through
development of new products and services.

Q Comm has been developing its proprietary point-of-sale system, marketed as
Qxpress 200 (TM), during much of 2001 and continuing into 2002. The Company has
also been developing proprietary Data Center software concurrent with the
development of the new terminal. A third party has done much of the terminal
development whereas all of the Data Center software has been developed by
software engineers employed by the Company. The Data Center software is the key
to the overall function of the new terminal, as all transactions are reported by
the new terminal to the Data Center where critical functions occur such as ACH
transaction processing (the means by which funds are cleared from retailer
accounts), preparation of sales reports for brokers, retailers and suppliers of
PINs, and PIN inventory management. Q Comm announced a successful beta test of
the new terminal in December 2001. The Company has experienced a strong demand
for the new terminal during various marketing activities and anticipates a
significant number of new locations throughout 2002 and beyond.

In addition to a significantly improved aesthetic design, the new terminal
offers many enhanced features including a magnetic card reader, streaming media
display for retailer advertisements, custom real-time reporting, and capability
for multiple products, denominations, languages and currencies. The Data Center
software developed by the Company also has many new features, such as
just-in-time PIN delivery, real-time transaction processing, PIN and PIN-less
platform support, detailed broker/retailer sales reports, text and graphics
design for custom card backs, and ACH transaction processing. The Company
intends to pursue patents for several innovative features of the new terminal.
The Company has filed initial provisional patent applications with the U.S.
Patent and Trademark Office and received notices of Filing Receipts from such
office.


                                       3
<PAGE>


Concurrent with the release of its new proprietary Qxpress 200 (TM) terminal,
the Company also is marketing a variation of its current business model wherein
telecommunication brokers purchase the terminal from Q Comm and install a Data
Center under a software license from the Company. Under this model, the broker
assumes more responsibility for certain functions such as PIN management,
product ownership, report generation, and funds transfer while the Company
generates revenues from the sale of the terminal and ongoing transaction
processing and management services. Under its current business model, which is
still available for current as well as new customers, the Company retains
ownership of the terminal and maintains control of the functions described
above. The Company has identified additional marketing opportunities for larger
telecommunication brokers who desire the autonomy and control offered by this
new business model.

The Company intends to introduce many more innovative product solutions to the
prepaid services market by exploiting leading technologies and creating
leading-edge, customized solutions for emerging customer segments. Several
features of the Qxpress 200 (TM) terminal and Data Center allow for additional
uses and products to be developed.

International opportunities are also emerging for the Company in the electronic
point-of-sale industry. Overseas deregulation of telecommunications provides Q
Comm with an unprecedented opportunity to develop joint ventures for the
marketing of prepaid telecommunications systems. On February 1, 2002, the
Company announced it had entered into an exclusive five-year agreement with WGR
Limited, a European telecommunications distributor, for the installation of a
Data Center and purchase of Qxpress 200 (TM) terminals. The agreement calls for
over 26,000 of such terminals to be purchased from Q Comm within the first two
years of the agreement. As of May 3, 2002, WGR had been provided with a limited
number of Qxpress 200 (TM) terminals for purposes of function verification. The
Company expects increasing deployment of terminals under this contract
throughout the remainder of 2002.

The key to the Company's future success lies in its ability to continue to
provide premier prepaid products and services, begin large-scale distribution of
its new point-of-sale activation system (Qxpress 200 (TM)), execute its strategy
of broker/wholesaler network expansion, and obtain funding needed to carry out
these objectives.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2001 AND FOR THE THREE MONTHS ENDED JUNE 30, 2002 COMPARED
TO THE THREE MONTHS ENDED JUNE 30, 2001.

REVENUES

Q Comm generates and recognizes revenues under the category entitled
"telecommunications" which includes prepaid wireless services, prepaid calling
cards, prepaid home dialtone services, and other sales and miscellaneous income.
During the six months ended June 30, 2002, Q Comm's net sales were $13,429,618
as compared to $5,739,840 during the six months ended June 30, 2001,
representing an increase of $7,689,778. The increase during the period is
primarily attributable to the acceptance by the prepaid market for the Company's
means of product distribution utilizing point-of-sale technology, the increasing
visibility of the Company in the prepaid market, and the overall growth of the


                                       4
<PAGE>

prepaid wireless market. The Company expects each of these factors to contribute
to further sales growth in the foreseeable future.

During the three months ended June 30, 2002, Q Comm's net sales increased
$3,268,115 to $7,154,025, from $3,885,910 in the comparable period in 2001. The
Company attributes this change to the same factors discussed above.

COST OF GOODS SOLD

For the six months ended June 30, 2002, the Company's cost of goods sold
increased to $9,961,313 from $3,993,487 for the six months ended June 30, 2001,
for an increase of $5,967,826. The increase in the cost of goods sold during
this period is principally associated with the increase in revenues.

During the three months ended June 30, 2002, cost of goods sold increased to
$5,302,244 from $2,686,911 for the three months ended June 30, 2001, for an
increase of $2,615,333. This increase is also attributable to the increase in
revenues as noted above.

OPERATING EXPENSES

Operating expenses for the six months ended June 30, 2002 increased to
$3,832,908 from $2,283,842 during the same period in 2001, or an increase of
$1,549,066 (67.8%). For the three months ended June 30, 2002, total operating
expenses were $2,037,670 compared to $1,463,884 for the same period in 2001.
Factors contributing to the changes are discussed below.

Commissions and fees increased $1,657,181 (110.2%), from $1,503,277 for the six
months ended June 30, 2001 to $3,160,458 for the six months ended June 30, 2002.
For the three months ended June 30, 2002, commissions and fees were $1,699,342
compared to $1,052,493 the three months ending June 30, 2001. These expenses are
principally commissions paid to merchants and brokers for product sales through
the Qxpress (TM) terminals and are a fixed percentage of the product sales
price.

Research and development expenses were $57,500 for both the three- and six-month
periods ended June 30, 2001. During 2001, the Company incurred expenses related
to the development of new products and services. No expenses of this nature were
incurred in the comparable periods in 2002.

Selling expenses increased $11,180 (9.5%) for the six months ended June 30, 2002
compared with the six months ended June 30, 2001. The increase is due to
increased costs in travel expenses, reflecting the sales efforts associated with
building an expanded network for the selling and distribution of the Company's
products. Selling expenses for the three months ended June 30, 2002 were
relatively flat when compared to the same period in 2001, decreasing by $2,239.

General and administrative expenses decreased $51,796 (9.7%) from $535,813 for
the six months ended June 30, 2001 to $484,017 for the comparable six month
period in 2002, and decreased $5,322 (2.1%) from the three-month period ended
June 30, 2001 to the comparable period in 2002. The decrease in general and
administrative expenses is principally the result of lower consulting expenses
in 2002.


                                       5
<PAGE>


Depreciation and amortization expenses were $59,282 for the six months ended
June 30, 2002 compared to $69,281 during the same period in 2001, or an decrease
of $9,999 (14.4%). Such expenses were $30,183 for the three months ended June
30, 2002 compared to $38,185 for the comparable period in 2001, for a decrease
of $8,002 (21.0%). The decrease results from a decrease in amortization expense
resulting from the Company's adoption of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" during the six months
ended June 30, 2002. Reference is made to Notes 1, 3 and 4 of the financial
statements included under Item 1 above. This decrease was partially offset by an
increase in depreciation expense resulting from an increased investment in
property and equipment (principally Data Center hardware and Qxpress (TM)
terminals).

LOSS FROM OPERATIONS

The Company had a loss from operations of $364,603 for the six months ended June
30, 2002 as compared with a loss of $537,489 for the six months ended June 30,
2001. The Company expects its investment in an expanded distribution network to
result in significantly higher revenues in the future while the Company's
ongoing operating expenses (other than commissions and fees) to increase by a
smaller percentage. The Company believes these factors will contribute to
continuing improvement in the results from operations in the foreseeable future.

The loss from operations for the three months ended June 30, 2002 was $185,889
compared to $264,885 for the three months ended June 30, 2001.

TOTAL OTHER INCOME (EXPENSE) AND EXTRAORDINARY ITEM

The Company experienced a gain on extinguishment of debt of $2,112 for the six
months ended June 30, 2002 as compared to $2,224 for the comparable period in
2001. Total other income (expense) for the six months ended June 30, 2002
decreased when compared to June 30, 2001 ($21,765 versus $38,980, respectively),
and decreased $7,852 for the three months ended June 30, 2002 when compared to
the same period in 2001 ($10,215 vs. $18,067), which is primarily the result of
increased interest capitalized as software development costs during 2002 related
to Qxpress 200 (TM) development compared to the amount capitalized during 2001.

NET LOSS

For the six months ended June 30, 2002, the Company had a net loss of $384,256
as compared to $574,245 for the six months ended June 30, 2001. For the three
months ended June 30, 2002, the Company had a net loss of $196,104 as compared
to $282,952 for the same period in 2001. The Company believes a much larger
revenue base and aggressive expense controls will result in profitability in the
foreseeable future.

The Company has available at June 30, 2002, operating loss carryforwards of
approximately $4,900,000 which may be applied against future taxable income in
years through 2021. The loss carryforwards and other items result in net
deferred tax assets of approximately $1,575,000 at June 30, 2002. The amount of
and ultimate realization of the benefits from these deferred tax assets for
income tax purposes is dependent, in part, upon the tax laws in effect, the
Company's future earnings, and other future events, the effects of which cannot
be determined. Because of the uncertainty surrounding the realization of the


                                       6
<PAGE>

deferred tax assets the Company has established a valuation allowance equal to
the net deferred tax assets at June 30, 2002.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has financed its working capital requirements through
internally generated funds, the sale of shares of its common stock, and proceeds
from short-term bank borrowings, convertible debentures, and notes payable. As
of June 30, 2002, the Company had a working capital deficit (current assets less
current liabilities) of approximately $1,350,000. The Company may seek to issue
corporate debt or equity securities in order to satisfy its cash needs for the
coming year. Any debt incurred or issued by the Company may be secured or
unsecured, fixed or variable rate interest and may be subject to such terms as
the board of directors of the Company deems prudent. Any sales of equity
securities may be at or below current market rates for the Company's common
stock. The Company expects any proceeds from such additional credit or sale of
securities to be used primarily in the marketing and development of its network
for the sale of telecommunications products, costs of new placements of Qxpress
200 (TM) terminals, and in the reduction of short-term liabilities. No assurance
can be given that the Company will be successful in generating sufficient
capital from new borrowings or from the sale of its securities to adequately
fund its liquidity needs.

The Company does not believe that its business is subject to seasonal trends.

The Company does not believe that inflation had a significant impact on the
Company's results of operations for the periods presented. On an ongoing basis,
the Company attempts to minimize any effects of inflation on its operating
results by controlling operating costs, and, whenever possible, seeking to
insure that product price rates reflect increases in costs due to inflation.

NEW ACCOUNTING PRONOUNCEMENTS

No new pronouncement issued by the Financial Accounting Standards Board, the
American Institute of Certified Public Accountants or the Securities and
Exchange Commission is expected to have a material impact on the Company's
financial position or reported results of operations.

Part II

Item 1.  Legal Proceedings

The Company was not made a party to any legal proceedings during the period
covered by this Quarterly Report on Form 10-QSB, and is not the subject of any
legal proceedings other than those disclosed in its Annual Report on Form
10-KSB, except as follows: Reference is made to the description of the action
filed by the Company on or about January 2, 2002 in the Supreme Court of the
State of New York, New York County, against Jeffrey Jacobson. On or about May 8,
2002, the Company filed a motion for summary judgment in its favor, asserting
that no material issues of fact exist respecting the debt owed by Jacobson and
requesting that the court award it damages in the amount of $133,500, plus
interest, costs and disbursements, including reasonable attorneys' fees. Barring
final disposition by the court, the Company intends to continue in pursuing this
claim vigorously.


                                       7
<PAGE>

Item 2.  Changes in Securities

There were no changes in the instruments defining the rights of security holders
during the period covered by this Quarterly Report on Form 10-QSB.


Item 3.  Defaults Upon Senior Securities

There were no defaults upon the Company's senior securities during the period
covered by this Quarterly Report on Form 10-QSB.


Item 4.  Submission of Matters to a Vote of Security Holders

No matters were submitted to the Company's security holders for a vote during
the period covered by this Quarterly Report on Form 10-QSB.


Item 5.  Other Information

The Company is not reporting any additional matters under this Item on this
Quarterly Report on Form 10-QSB.


Item 6.  Exhibits and Reports on Form 8-K

99.1 Financial Statements

During the period covered by this Quarterly Report on Form 10-QSB, there were no
reports on Form 8-K filed.


                                       8
<PAGE>


SIGNATURES

In accordance with the requirements of the Securities Exchange Act of
1934, the Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Q Comm International, Inc.

Dated August 14, 2002


By:
   ------------------------------------
Paul C. Hickey, Chief Executive Officer


By:
   ------------------------------------
Stephen C. Flaherty, President


By:
   ------------------------------------
Michael K. Openshaw, Chief Financial Officer



                                       9
<PAGE>







                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2002











<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY




                                    CONTENTS

                                                                            PAGE
                                                                            ----

    Unaudited Condensed Consolidated Balance Sheets,
          June 30, 2002 and December 31, 2001                                  1


    Unaudited Condensed Consolidated Statements of
          Operations, for the three and six months ended
          June 30, 2002 and 2001                                               2


    Unaudited Condensed Consolidated Statements of Cash
          Flows, for the six months ended June 30, 2002
          and 2001                                                         3 - 4


     Notes to Unaudited Condensed Consolidated Financial
          Statements                                                      5 - 12




<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

                                                         June 30,   December 31,
                       ASSETS                             2002          2001
                                                      -----------   -----------
CURRENT ASSETS:
     Cash in bank                                     $   230,184   $     2,422
     Certificates of deposit                                 --         100,000
     Accounts receivable                                   16,193        29,313
     Inventory                                             25,779        22,509
     Prepaid expenses                                      90,000          --
     Deferred taxes                                       303,790       303,790
                                                      -----------   -----------
               Total Current Assets                       665,946       458,034
                                                      -----------   -----------

PROPERTY & EQUIPMENT, net                                 920,243       647,683
                                                      -----------   -----------
OTHER ASSETS:
     Goodwill, net                                        144,580       144,580
     Capitalized software development costs             1,121,940       636,220
     Deferred stock offering costs                         25,000          --
     Deposits                                              11,979         3,558
                                                      -----------   -----------
               Total Other Assets                       1,303,499       784,358
                                                      -----------   -----------
                                                      $ 2,889,688   $ 1,890,075
                                                      ===========   ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
     Bank overdraft                                   $   134,314   $   188,920
     Accounts payable                                   1,096,493       758,426
     Accrued expenses                                     132,830       253,268
     Related party obligations                            417,167       413,300
     Notes payable                                         31,350       601,474
     Convertible notes payable - current portion           40,593       237,885
     Capital lease obligation - current portion             5,284         5,044
     Contingent liability                                 159,235       159,235
                                                      -----------   -----------
               Total Current Liabilities                2,017,266     2,617,552
                                                      -----------   -----------
LONG TERM OBLIGATIONS:
     Convertible notes payable                            190,135       211,262
     Capital lease obligation                              18,001        20,645
     Deferred taxes                                       303,790       303,790
                                                      -----------   -----------
               Total Long-term Obligations                511,926       535,697
                                                                    -----------
               Total Liabilities                        2,529,192     3,153,249
                                                      -----------   -----------
STOCKHOLDERS' EQUITY (DEFICIT):
     Common stock, $.001 par value, 50,000,000
       shares authorized, 14,864,985 and 13,089,719
       shares issued and outstanding, respectively         14,865        13,090
     Capital in excess of par value                     6,099,074     4,094,273
     Retained deficit                                  (5,619,793)   (5,235,537)
                                                      -----------   -----------
                                                          494,146     1,128,174
     Less stock subscription receivable                  (133,650)     (135,000)
                                                      -----------   -----------
               Total Stockholders' Equity (Deficit)       360,496    (1,263,174)
                                                      -----------   -----------
                                                      $ 2,889,688   $ 1,890,075
                                                      ===========   ===========

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


                                      -1-
<PAGE>
<TABLE>
<CAPTION>


                               Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                       UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                  For the Three                   For the Six
                                                  Months Ended                    Months Ended
                                                   June 30,                        June 30,
                                         ----------------------------    ----------------------------
                                             2002            2001            2002             2001
                                         ------------    ------------    ------------    ------------
<S>                                      <C>             <C>             <C>             <C>
SALES, net of returns and allowances     $  7,154,025    $  3,885,910    $ 13,429,618    $  5,739,840

COST OF GOODS SOLD                          5,302,244       2,686,911       9,961,313       3,993,487
                                         ------------    ------------    ------------    ------------
GROSS PROFIT                                1,851,781       1,198,999       3,468,305       1,746,353
                                         ------------    ------------    ------------    ------------
OPERATING EXPENSES:
     Commissions and fees                   1,699,342       1,052,493       3,160,458       1,503,277
     Research and development                    --            57,500            --            57,500
     Selling expenses                          65,134          67,373         129,151         117,971
     General and administrative               243,011         248,333         484,017         535,813
     Depreciation and amortization             30,183          38,185          59,282          69,281
                                         ------------    ------------    ------------    ------------
         Total Operating Expenses           2,037,670       1,463,884       3,832,908       2,283,842
                                         ------------    ------------    ------------    ------------
LOSS FROM OPERATIONS                         (185,889)       (264,885)       (364,603)       (537,489)

OTHER INCOME (EXPENSE):
     Other income                                 471           1,115           1,786           1,776
     Interest and other expense               (10,686)        (19,182)        (23,551)        (40,756)
                                         ------------    ------------    ------------    ------------
         Total Other Income (Expense)         (10,215)        (18,067)        (21,765)        (38,980)
                                         ------------    ------------    ------------    ------------
LOSS BEFORE INCOME TAXES
     AND EXTRAORDINARY ITEM                  (196,104)       (282,952)       (386,368)       (576,469)

CURRENT TAX EXPENSE                              --              --              --              --

DEFERRED TAX EXPENSE                             --              --              --              --
                                         ------------    ------------    ------------    ------------
LOSS BEFORE EXTRAORDINARY
      ITEM                                   (196,104)       (282,952)       (386,368)       (576,469)

EXTRAORDINARY ITEM - Gain on
     extinguishment of debt                      --              --             2,112           2,224
                                         ------------    ------------    ------------    ------------

NET LOSS                                 $   (196,104)   $   (282,952)   $   (384,256)   $   (574,245)
                                         ============    ============    ============    ============

BASIC LOSS PER COMMON SHARE:
Loss from continuing operations          $       (.01)   $       (.03)   $       (.03)   $       (.06)
     Extraordinary item                          --              --              --              --
                                         ------------    ------------    ------------    ------------


BASIC LOSS PER COMMON SHARE              $       (.01)   $       (.03)   $       (.03)   $       (.06)
                                         ============    ============    ============    ============

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

                                                 -2-
<PAGE>
<TABLE>
<CAPTION>

                             Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                     UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                For the Six
                                                                                Months Ended
                                                                                 June 30,
                                                                       --------------------------
                                                                           2002           2001
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
Cash Flows from Operating Activities:
     Net loss                                                          $  (384,256)   $  (574,245)
     Adjustments to reconcile net
       loss to net cash used by
       operating activities:
        Gain on extinguishment of debt                                      (2,112)        (2,224)
        Loss on disposal of property and equipment                          21,878           --
        Depreciation and amortization expense                               59,282         69,281
        Stock and options/warrants issued for non-cash consideration          --          112,711
        Change in assets and liabilities:
           Decrease in accounts receivable                                  13,120        173,986
           Increase in prepaid expenses                                       --          (75,548)
           Increase in inventory                                            (3,270)       (11,835)
           Increase other assets                                            (8,421)          --
           Increase in accounts payable                                    340,179        125,984
           Increase (decrease) in accrued expenses                        (120,438)       100,165
           Increase in related party obligations                             3,867         60,500
                                                                       -----------    -----------
               Net Cash Used by Operating Activities                       (80,171)       (21,225)
                                                                       -----------    -----------
Cash Flows from Investing Activities:
     Purchase of property & equipment                                     (353,720)      (291,944)
     Capitalized software development costs                               (485,720)      (143,478)
     Decrease in certificates of deposit                                   100,000           --
                                                                       -----------    -----------
               Net Cash Used by Investing Activities                      (739,440)      (435,422)
                                                                       -----------    -----------
Cash Flows from Financing Activities:
     Issuance of common stock                                            1,970,525        157,000
     Payment of stock offering costs                                       (77,599)          --
     Net increase in lines of credit                                          --           19,300
     Payments on notes payable                                            (570,124)          (141)
     Payments on convertible notes payable                                (218,419)          --
     Payments on capital lease obligation                                   (2,404)          --
     Increase (decrease) in bank overdraft                                 (54,606)       333,969
                                                                       -----------    -----------
               Net Cash Provided by Financing Activities                 1,047,373        510,128
                                                                       -----------    -----------
Net Increase in Cash                                                       227,762         53,481

Cash, Beginning of Period                                                    2,422         97,740
                                                                       -----------    -----------
Cash, End of Period                                                    $   230,184    $   151,221
                                                                       -----------    -----------

Supplemental Disclosures of Cash Flow Information:
     Cash paid during the period for:
       Interestexpense                                                 $     8,938    $     7,128
       Capitalized interest                                            $    41,543    $     3,766
       Income taxes                                                    $       100    $       100

</TABLE>




                                               -3-
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Continued)

Supplemental Schedule of Non-cash Investing and Financing Activities:

     In 2002, the Company issued 74,217 shares of common stock for stock
     offering costs valued at $74,217.

     In 2002, the Company issued 46,632 shares of common stock for future legal
     services valued at $90,000.

     In 2002, the Company issued 75,242 shares of common stock in cashless
     exercises of common stock options.

     In 2002, the Company canceled 400,000 shares of common stock which had been
     issued as collateral for a loan.

     In 2001, the Company issued 676,000 shares of common stock for services
     rendered valued at $218,979, including stock offering costs of $106,268 and
     a reduction in accounts payable of $72,719.



















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




                                      -4-
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Organization  - Q Comm  International,  Inc. (the Company) was organized on
     February 7, 1986 as Four Rivers Development,  Inc. This name was changed on
     August  3,  1998 to Q Comm  International  Inc.  in  conjunction  with  the
     purchase of three  operating  companies.  Substantially  all operations are
     conducted through the Company's wholly owned  subsidiary,  Q Comm, Inc. The
     Company  is  headquartered  in Orem,  Utah but  provides  telecommunication
     products  and  services  to end users  throughout  the  United  States  and
     internationally.  The  Company  has,  at the  present  time,  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.

     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 June  30,  2002  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, 2001 audited  financial  statements.  The results of operations for the
     periods ended June 30, 2002 and 2001 are not necessarily  indicative of the
     operating results for the full year.

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

     Certificates of Deposits - The Company accounts for investments in debt and
     equity  securities in  accordance  with  Statement of Financial  Accounting
     Standard (SFAS) 115, "Accounting for Certain Investments in Debt and Equity
     Securities".  Under SFAS 115 the  Company's  certificates  of deposit (debt
     securities)  have been classified as  held-to-maturity  and are recorded at
     amortized cost. Held-to-maturity securities represent those securities that
     the  Company  has  both the  positive  intent  and  ability  to hold  until
     maturity.

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

     Loss Per Share - The Company  computes  loss per share in  accordance  with
     Statement of Financial  Accounting  Standards  (SFAS) No. 128 "Earnings Per
     Share," which  requires the Company to present basic earnings per share and
     dilutive earnings per share when the effect is dilutive (see Note 11).


                                      -5-
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Revenue  Recognition - The Company provides  electronic delivery of prepaid
     telecommunication  products through a variety of retail locations.  Revenue
     is  recognized  at the  time  of  product  sale.  Sales  of  the  Company's
     electronic  products and services 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.

     The  Company  also  provides  non-electronic   telecommunication   products
     primarily  to others for  resale.  These  sales are  recorded  net of sales
     discounts and allowances.

     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.

     Research  and  Development  - Research  and  development  costs are for the
     purpose of new product development and are expensed as incurred.

     Intangible  Assets - During the six months ended June 30, 2002, the Company
     adopted  Statement of  Accounting  Standards  No. 142,  "Goodwill and Other
     Intangible  Assets" (SFAS 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  new  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 142, the Company has
     recorded its software development costs as a definite-life intangible asset
     and  will  amortize  these  costs  over  five  years  once the  project  is
     completed.

     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, any remaining  capitalized  amounts are written off (see Notes 3 and
     4).

     Inventory - Inventory consists of prepaid  telecommunication  products sold
     by the Company and is carried at the lower of cost or market.

     Advertising Costs - Advertising costs are expensed as incurred.  Such costs
     amounted to $8,884 and $8,846 during the six months ended June 30, 2002 and
     2001, respectively.


                                      -6-
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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   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.

     Reclassifications  - Certain  amounts in the financial  statements  for the
     periods ended June 30, 2001 have been  reclassified  to conform to headings
     and classifications used in the June 30, 2002 financial statements.

NOTE 2 - PROPERTY & EQUIPMENT

     The following is a summary of property and equipment:

                                          June 30,     December 31,
                                            2002           2001
                                        -----------    -----------
        Point of sale equipment         $   957,879    $   702,609
        Office and computer equipment       127,424         88,242
                                        -----------    -----------
        Total cost                        1,085,303        790,851
        Accumulated depreciation           (165,060)      (143,168)
                                        -----------    -----------
        Property & equipment, net       $   920,243    $   647,683
                                        ===========    ===========

     Depreciation  expense  for the six months  ended June 30, 2002 and 2001 was
     $59,282 and $46,825, respectively.

     Included  in the cost of  property  and  equipment  at June  30,  2002 is a
     $400,000 deposit for various components of equipment to be manufactured for
     the Company.

NOTE 3 - GOODWILL

     At June 30, 2002,  the Company has $144,580 in goodwill  remaining from the
     acquisition   of   Azore   Acquisition   Corporation   classified   as   an
     indefinite-life  intangible  asset.  In  accordance  with SFAS No. 142, the
     Company  completed its initial test of goodwill for  impairment  during the
     period ended June 30, 2002. 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 for the six months ended June 30, 2002.

     Previous to the adoption of SFAS No. 142 on January 1, 2002,  the Company's
     goodwill was being  amortized on a  straight-line  basis over the estimated
     useful life of five years, in accordance with Accounting  Principles  Board
     Opinion No. 17, "Intangible  Assets".  During the six months ended June 30,
     2001, the Company recorded amortization expense of $22,456.


                                      -7-
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - GOODWILL (Continued)

     If SFAS No. 142 had been  applied in all periods  presented,  it would have
     the following effects:

<TABLE>
<CAPTION>

                                                     For the Three              For the Six
                                                     Months Ended              Months Ended
                                                       June 30,                  June 30,
                                                ----------------------    ----------------------
                                                   2002         2001         2002         2001
                                                ---------    ---------    ---------    ---------
     <S>                                        <C>          <C>          <C>          <C>
     Loss from continuing operations            $(196,104)   $(282,952)   $(386,368)   $(576,469)
     Add amortization of assets no longer
       being amortized                               --         11,228         --         22,456
                                                ---------    ---------    ---------    ---------
     Adjusted loss from continuing operations   $(196,104)   $(271,724)   $(386,368)   $(554,013)
                                                ---------    ---------    ---------    ---------

     Net loss as reported                       $(196,104)   $(282,952)   $(384,256)   $(574,245)
     Add amortization of assets no longer
       being amortized                               --         11,228         --         22,456
                                                             ---------    ---------    ---------
     Adjusted loss from continuing operations   $(196,104)   $(271,724)   $(384,256)   $(551,789)
                                                ---------    ---------    ---------    ---------
</TABLE>


NOTE 4 - CAPITALIZED SOFTWARE DEVELOPMENT COSTS

     During the six months  ended  June 30,  2002,  the  Company  completed  its
     initial test of 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.  The capitalized
     costs at June 30, 2002 are related to projects in process and  accordingly,
     no amortization expense has been recorded.

     Information  related  to  capitalized  software  development  costs  is  as
     follows:

        Balance, beginning of period                          $  636,220
        Capitalized during the period                            485,720
                                                              ----------
        Balance, end of period                                $1,121,940
                                                              ==========

     Of the  balance  at June 30,  2002,  approximately  $335,000  was paid to a
     third-party  software  development  company.  The remaining costs represent
     capitalized  internal  costs,  which are  primarily  employee  salaries and
     benefits, and related capitalized interest of approximately $60,000.


                                      -8-
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - BANK OVERDRAFT

     The Company  receives payment on  substantially  all its sale  transactions
     through the automated  clearinghouse  system (ACH system) on either a daily
     or weekly basis. Once the payment has been received,  the Company disburses
     funds via the ACH  system  for the cost of  products  sold and  commissions
     according to the  respective  agreements,  generally  ranging from 1-4 days
     after funds are received.  This timing difference  between receipt of funds
     and payment of product costs and commissions  creates an ongoing balance of
     available  funds in the  Company's  bank  accounts.  At June 30, 2002,  the
     Company has utilized a portion of this  available  balance in the amount of
     $134,314, which created an overdraft for accounting purposes.

NOTE 6 - RELATED PARTY OBLIGATIONS

     Accrued  Expenses - At June 30, 2002, the Company owes the Chief  Executive
     Officer $226,117, principally consisting of unpaid equipment lease expenses
     and deferred salary.

     Notes  Payable - At June 30,  2002,  the  Company has notes  together  with
     accrued interest totaling $191,050 payable to the Company's Chief Executive
     Officer. The notes are payable on demand and bear interest at 10%.

NOTE 7 - LONG-TERM DEBT

     Notes Payable - During  November 2001, the Company issued a note payable in
     the amount of $200,000,  with  interest at prime plus 3%, due June 1, 2002.
     During the six months ended June 30, 2002, the note was repaid according to
     its terms.

     During December 2000, the Company issued a note payable for $100,000,  with
     interest  payable  monthly at 15% per annum,  due  January  31,  2002.  The
     Company  pledged  400,000 common shares as collateral for the loan.  During
     the six months  ended June 30, 2002,  the note was repaid  according to its
     terms and the shares collateralizing the loan were canceled.

     During  November 2000, the Company issued a note payable for $50,000,  with
     interest  at 12% per annum.  The note has a  remaining  balance at June 30,
     2002 of $31,350 and is due November 27, 2002.

     During March 2000,  the Company  issued a note  payable for  $50,000,  with
     interest  at 18% and with  monthly  payments  of $4,950  through  May 2002.
     During the six months ended June 30, 2002, the note was repaid according to
     its terms.

     During January 2000, the Company borrowed $292,000 from certain  investors.
     During 2001,  the Company  repaid a total of $120,000 of the borrowings and
     structured the remaining  amount plus accrued interest of $59,446 as a note
     payable in the  amount of  $231,446  with  interest  at 18% per annum,  due
     January 31, 2002.  During the six months ended June 30, 2002,  the note was
     repaid according to its terms.



                                      -9-
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - LONG-TERM DEBT (Continued)

     Convertible  Notes Payable - During November and December 2001, the Company
     borrowed a total of $250,000 in the form of a convertible note payable. The
     outstanding balance of the note may be converted into common stock at $1.25
     per  share  after  one year at the  option of the  holder.  The note  bears
     interest at 14% and requires  monthly  payments of $5,865 through  November
     2006. The note is secured by the Company's  tangible and intangible assets,
     and the proceeds therefrom. The outstanding balance of the note at June 30,
     2002 is $230,728.

     During  August 2001,  the Company  issued  $200,000 in a  convertible  note
     payable at 6% interest,  due May 31, 2002.  The note was  convertible  into
     common stock at $.30 per share at the option of the Company. During the six
     months ended June 30, 2002, the note was repaid according to its terms.

NOTE 8 - LITIGATION AND CONTINGENCIES

     During the year ended  December 31,  2000,  the Company  purchased  certain
     software and hardware from an unrelated  party for  $1,000,000,  payable at
     various dates through October 2001.  Subsequently,  the Company  determined
     through due  diligence to exercise  its right of recision  specified in the
     contract  and  return  the  items to the  seller.  Under  the  terms of the
     contract,  the Company  may be liable for  amounts due the seller  prior to
     notification of termination.  Management of the Company believes the amount
     that will ultimately be paid to the seller, if any, is not determinable but
     will be immaterial to the financial statements at June 30, 2002.

     During the year ended December 31, 1999, the Company sold certain  services
     to a third  party who in turn sold these  services to  consumers.  When the
     third  party  failed  to  deliver  as  anticipated,  some of the  consumers
     reversed the charges  that had been made on their  credit card  accounts to
     purchase the services.  These reversals were ultimately  covered by charges
     made  to the  Company's  merchant  account  with a  bank,  resulting  in an
     overdraft of that account. The Company,  under the agreement with the third
     party, is entitled to be reimbursed 50% of the amount of the  charge-backs.
     During 2000, the bank filed suit claiming  damages of $175,477.  Management
     of the Company believes the bank reversed charges that should not have been
     under the terms and  conditions of the  consumers'  agreement and therefore
     disputes the bank's claim.

     At June 30,  2002,  the  Company's  CEO was  party  to a suit in which  the
     plaintiff claims the CEO agreed to sell to the plaintiff  300,000 shares of
     the  Company's  common  stock at $.03 per share.  The Company has agreed to
     indemnify  the CEO by replacing  his shares  through the issuance of shares
     from treasury if the plaintiff is successful in his claim.

     During  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  outstanding  balance owed is reflected in the  accompanying
     financial statements as an offset to stockholders' equity.

     The Company has recorded a contingent  liability in  connection  with these
     matters.



                                      -10-
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - CAPITAL STOCK

     A summary of common stock  transactions  for the six-months  ended June 30,
     2002 and 2001 is as follows:

     During the six months  ended June 30,  2002,  the  Company  sold  2,000,000
     shares  of  restricted  common  stock at $1.00 per  share  through  private
     placements for  $1,954,175  cash and $45,825 in  subscriptions  receivable.
     Stock offering costs of approximately  $125,000 were recorded in connection
     with the sale, including 74,217 shares of restricted common stock valued at
     $1.00 per share.

     During June 2002, the Company issued 31,874 shares of common stock upon the
     cancellation of 64,445 stock options ranging from $.40 to $1.00 per share.

     During February 2002, the Company issued 25,000 shares of restricted common
     stock upon the exercise of stock options at $.60 per share ($15,000).

     During February 2002, the Company issued 43,368 shares of common stock upon
     the cancellation of 90,000 stock options at $1.00 per share.

     During  February 2002, the Company issued 46,632 shares of common stock for
     future legal services at $1.93 per share ($90,000).

     During  January 2002, the Company  canceled  400,000 shares of common stock
     which had been issued as collateral for a loan.

     During February 2001, the Company sold 133,333 shares of restricted  common
     stock at $.30 per share ($40,000).

     During May and June 2001,  the Company sold 334,285  shares of common stock
     at $.35 per share ($117,000).

     During the six months  ended June 30,  2001,  the  Company  issued  676,000
     shares of common  stock  (576,000  of which  were  restricted)  for  legal,
     consulting  services and finders fees at $.25 to $.50 per share  ($218,979,
     including $106,268 in stock offering costs).

NOTE 10 - STOCK OPTIONS

     At June  30,  2002,  the  Company  has  outstanding  3,750,000  options  to
     employees under various  agreements with exercise prices ranging from $1.00
     to $1.56 per share,  expiring  between May 2005 and December  2006.  Of the
     options  outstanding  at June 30, 2002,  2,442,506 are vested and 1,030,000
     are  exercisable.  During the six months  ending June 30, 2002,  no options
     were granted or exercised and 40,000 options expired.

     At June 30, 2002, the Company has  outstanding  1,818,667  stock options to
     non-employees  under various  agreements  with exercise prices ranging from
     $.40 to $1.50 per share,  expiring  between  June 2003 and  November  2008.
     During the six months ended June 30, 2002,  179,445  options were exercised
     by non-employees at prices ranging from $.40 to $1.00 per share and 345,271
     options expired or were canceled.



                                      -11-
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - 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
     three months presented:

<TABLE>
<CAPTION>

                                                               For the Three                    For the Six
                                                               Months Ended                    Months Ended
                                                                 June 30,                        June 30,
                                                      ----------------------------    ----------------------------
                                                          2002            2001            2002            2001
                                                      ------------    ------------    ------------    ------------
        <S>                                           <C>             <C>             <C>             <C>
        Loss from continuing operations
         available to common shareholders
         (numerator)                                  $   (196,104)   $   (282,952)   $   (386,368)   $   (576,469)
                                                      ------------    ------------    ------------    ------------

        Gain on extinguishment of debt  (numerator)   $       --      $       --      $      2,112    $      2,224
                                                      ------------    ------------    ------------    ------------
        Weighted average number of common
         shares outstanding during the period used
         in per share calculations (denominator)        14,668,326      10,188,655      14,064,404       9,831,218
                                                      ------------    ------------    ------------    ------------
</TABLE>


     Because the Company  incurred losses for the six months ended June 30, 2002
     and 2001, the effect of  options/warrants  and  convertible  notes totaling
     5,760,707 and 3,715,431 equivalent shares, respectively,  has been excluded
     from the loss per share computation as its impact would be antidilutive.

NOTE 12 - GOING CONCERN

     The accompanying financial statements have been prepared in conformity with
     generally  accepted  accounting  principles  in the  United  States,  which
     contemplate  continuation of the Company as a going concern.  However,  the
     Company  has  incurred  significant  losses in recent  years,  has  current
     liabilities in excess of current assets and has not yet been  successful in
     establishing  profitable operations.  These factors raise substantial doubt
     about the ability of the Company to  continue as a going  concern.  In this
     regard,  management  plans to raise  additional  funds  through debt and/or
     equity offerings and  substantially  increase sales.  There is no assurance
     that the Company will be successful in achieving profitable operations. The
     financial  statements do not include any adjustments that might result from
     the outcome of these uncertainties.



                                      -12-