<PAGE>
===============================================================================



                       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, 2003



                        Commission File Number 000-28885

                           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.)


                  1145 South 1680 West, Orem, Utah 84058-4930
                    (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 August 4, 2003, 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

                                  June 30, 2003

                                TABLE OF CONTENTS

                                                                           PAGE
PART I - FINANCIAL INFORMATION

         Item 1.  Interim condensed financial statements
                  (unaudited)


         Unaudited Condensed Consolidated Balance Sheets,
               June 30, 2003 and December 31, 2002                           1


         Unaudited Condensed Consolidated Statements of
               Operations, for the three and six months ended
               June 30, 2003 and 2002                                        2


         Unaudited Condensed Consolidated Statements of
               Cash Flows, for the six months ended
               June 30, 2003 and 2002                                        3


         Notes to Unaudited Condensed Consolidated Financial
               Statements                                                    5


         Item 2.  Management's Discussion and Analysis or
                  Plan of Operation                                         16

         Item 3.  Controls and Procedures                                   22

PART II - OTHER INFORMATION

         Item 1. Legal Proceedings                                          23

         Item 2. Changes in Securities and Use of Proceeds                  23

         Item 4. Submission of Matter to a Vote of Security Holders         23

         Item 6. Exhibits and Reports on Form 8-K                           23

SIGNATURES                                                                  24

                                        1

<PAGE>

Item 1.  Interim condensed financial statements
         (unaudited)


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>

                                                                                     June 30,          December 31,
                                                                                       2003               2002
                                                                                   ------------       -------------
<S>                                                                                <C>                <C>
                                     ASSETS
Current Assets:
       Cash in bank                                                                $ 10,726,442       $    115,609
       Restricted cash                                                                1,725,000                  -
       Accounts receivable, net                                                         229,767             51,699
       Inventory                                                                        398,403            165,491
       Deferred taxes                                                                   539,228            539,228
                                                                                   ------------       ------------
            Total Current Assets                                                     13,618,840            872,027
                                                                                   ------------       ------------

Property & Equipment, net                                                             1,683,677          1,035,502

Other Assets:
       Capitalized software development costs, net                                    1,476,812          1,330,053
       Goodwill, net                                                                    144,580            144,580
       Deferred stock offering costs                                                          -             67,115
       Deposits                                                                          31,774             24,074
                                                                                   ------------       ------------
            Total Other Assets                                                        1,653,166          1,565,822
                                                                                   ------------       ------------
            Total Assets                                                           $ 16,955,683       $  3,473,351
                                                                                   ============       ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
       Bank overdraft                                                              $    253,284       $    595,544
       Accounts payable                                                               1,548,497          1,229,701
       Accrued expenses                                                                 381,326            226,635
       Notes payable                                                                     31,350             31,350
       Convertible notes and debentures - current portion (net)                         712,489             43,557
       Capital lease obligations - current portion                                       27,404              5,892
       Related party obligations - current portion                                      170,535
       Contingent liabilities                                                           359,235            359,235
                                                                                   ------------       ------------
            Total Current Liabilities                                                 3,484,120          2,491,914
                                                                                   ------------       ------------

Long-term Obligations:
       Convertible notes payable                                                        143,528            167,690
       Capital lease obligations                                                         47,742             14,754
       Related party obligations                                                        260,692            410,692
       Deferred taxes                                                                   539,228            539,228
                                                                                   ------------       ------------
            Total Long-term Obligations                                                 991,190          1,132,364
                                                                                   ------------       ------------
            Total Liabilities                                                         4,475,310          3,624,278
                                                                                   ------------       ------------

Stockholders' Equity (Deficit):
       Common stock, $.001 par value, 50,000,000 shares
        authorized, 3,665,250 and 1,268,443 shares
        issued and outstanding, respectively                                              3,665              1,268
       Capital in excess of par value                                                22,027,271          7,511,857
       Retained deficit                                                              (9,451,918)        (7,533,102)
                                                                                   ------------       ------------
                                                                                     12,579,018            (19,977)
       Less stock subscription receivable                                               (98,645)          (130,950)
                                                                                   ------------       ------------
            Total Stockholders' Equity (Deficit)                                     12,480,373           (150,927)
                                                                                   ------------       ------------
            Total Liabilities and Stockholders' Equity (Deficit)                   $ 16,955,683       $  3,473,351
                                                                                   ============       ============

</TABLE>

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


                                       1

<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                 For the Three Months                  For the Six Months
                                                                    Ended June 30,                      Ended June 30,
                                                          -------------------------------       -------------------------------
                                                               2003              2002               2003               2002
                                                          ------------       ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>                <C>
Revenues                                                  $  5,930,836       $  7,154,025       $ 11,677,875       $ 13,429,618

Cost of Goods Sold                                           4,427,377          5,302,244          8,735,876          9,961,313
                                                          ------------       ------------       ------------       ------------

Gross Profit                                                 1,503,459          1,851,781          2,941,999          3,468,305
                                                          ------------       ------------       ------------       ------------

Operating Expenses:
      Commissions and fees                                   1,369,569          1,699,342          2,668,082          3,160,458
      Selling expenses                                          81,257             65,134            175,063            129,151
      General and administrative expenses                      379,553            243,011            890,236            484,017
      Depreciation and amortization                            191,871             30,183            351,038             59,282
      Non-cash compensation                                     21,666                  -             43,332                  -
                                                          ------------       ------------       ------------       ------------
           Total Operating Expenses                          2,043,916          2,037,670          4,127,751          3,832,908
                                                          ------------       ------------       ------------       ------------

Loss from Operations                                          (540,457)          (185,889)        (1,185,752)          (364,603)
                                                          ------------       ------------       ------------       ------------

Other Income (Expense):
      Other Income                                                   -                471                 96              3,898
      Interest and Other Expense                              (605,855)           (10,686)          (733,160)           (23,551)
                                                          ------------       ------------       ------------       ------------
           Total Other Income (Expense)                       (605,855)           (10,215)          (733,064)           (19,653)
                                                          ------------       ------------       ------------       ------------

Loss Before Income Taxes                                    (1,146,312)          (196,104)        (1,918,816)          (384,256)

Income Tax Expense                                                   -                  -                  -                  -
                                                          ------------       ------------       ------------       ------------

Net Loss                                                  $ (1,146,312)      $   (196,104)      $ (1,918,816)      $   (384,256)
                                                          ============       ============       ============       ============

Basic Loss per Common Share                               $      (0.79)      $      (0.20)      $      (1.38)      $      (0.41)
                                                          ============       ============       ============       ============

</TABLE>


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



                                       2

<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                 For the Six Months
                                                                                   Ended June 30,
                                                                         --------------------------------
                                                                              2003              2002
                                                                         ------------       -------------
<S>                                                                      <C>                <C>
Cash Flows from Operating Activities:
    Net loss                                                             $ (1,918,816)      $   (384,256)
    Adjustments to reconcile net loss to
      net cash used by operating activities:
       Loss on disposal of property and equipment                              11,818             21,878
       Depreciation and amortization                                          351,038             59,282
       Amortization of discount on debentures and notes                       611,354                  -
       Non-cash compensation                                                   43,332                  -
       Change in assets and liabilities:
          (Increase) decrease in accounts receivable                         (178,068)            13,120
          (Increase) decrease in inventory                                   (232,912)            (3,270)
          Increase in deposits                                                 (7,700)            (8,421)
          Increase (decrease) in accounts payable                             318,796            338,067
          Increase (decrease) in accrued liabilities                          111,358           (120,438)
                                                                         ------------       ------------
            Net Cash Used by Operating Activities                            (889,800)           (84,038)
                                                                         ------------       ------------
Cash Flows from Investing Activities:
    Increase in restricted cash                                            (1,725,000)                 -
    Decrease in certificates of deposit                                             -            100,000
    Purchase of property and equipment                                       (769,200)          (353,720)
    Capitalized software development costs                                   (388,589)          (485,720)
                                                                         ------------       ------------
            Net Cash Used by Investing Activities                          (2,882,789)          (739,440)
                                                                         ------------       ------------
Cash Flows from Financing Activities:
    Issuance of common stock                                               14,320,000          1,970,525
    Cash received from subscription receivable                                 32,305                  -
    Payment of stock offering costs                                        (2,380,528)           (77,599)
    Proceeds from notes and debentures                                      2,700,000                  -
    Payments on convertible notes payable                                     (21,130)          (218,419)
    Payment on notes payable                                                        -           (570,124)
    Proceeds from capital leases                                               66,992                  -
    Payments on capital lease obligations                                     (12,492)            (2,404)
    Increase in related party obligations                                      20,535              3,867
    Decrease in bank overdraft                                               (342,260)           (54,606)
                                                                         ------------       ------------
            Net Cash Provided by Financing Activities                      14,383,422          1,051,240
                                                                         ------------       ------------
Net Increase in Cash                                                       10,610,833            227,762
Cash, Beginning of Period                                                     115,609              2,422
                                                                         ------------       ------------
Cash, End of Period                                                      $ 10,726,442       $    230,184
                                                                         ============       ============

Supplemental Disclosures of Cash Flow Information:
    Cash paid during the period for:
       Interest expense                                                  $     21,608       $      8,938
       Capitalized interest                                              $          -       $     41,543
       Income taxes                                                      $        100       $        100

</TABLE>


                                       3


<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Continued)

Supplemental Schedule of Non-cash Investing and Financing Activities:

                     For the six months ended June 30, 2003:

The Company issued 169,231 shares of common stock and warrants to purchase
169,231 shares of common stock in connection with the sale of convertible
debentures. The stock and warrants were valued at an aggregate of $1,500,000. Of
this amount, $414,495 was amortized to interest expense during the period and
$1,085,505 is unamortized.

The Company issued 24,242 shares of common stock in connection with the sale of
a convertible note. The common stock was valued at $145,454. Of this amount,
$55,516 was amortized to interest expense during the period and $89,938 is
unamortized.

The Company issued warrants to purchase 238,095 shares of common stock in
connection with a note payable. The warrants were valued at $1,000,000. Of this
amount, $141,343 was amortized to interest expense during the period and
$858,657 is unamortized.

                     For the six months ended June 30, 2002:

The Company issued 4,948 shares of common stock for stock offering costs valued
at $74,217.

The Company issued 3,109 shares of common stock for future legal services valued
at $90,000.

The Company issued 5,016 shares of common stock in cashless exercises of common
stock options.

The Company canceled 26,667 shares of common stock, which had been issued as
collateral for a loan.



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


                                       4

<PAGE>



                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO 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. The Company
     provides its products to end users throughout the United States as well
     as Canada and Puerto Rico. 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 June 30, 2003 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, 2002 audited financial statements. The results of operations for the
     periods ended June 30, 2003 and 2002 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 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 June 30, 2003, the Company has
     established an allowance for doubtful accounts of approximately $24,600,
     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
     periods 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 five
     years.

     Intangible Assets - During the year ended December 31, 2002, the Company
     adopted 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.


                                       5

<PAGE>



                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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 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).

     Revenue Recognition - The Company provides electronic delivery of prepaid
     telecommunication products through a variety of 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.

     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 products sold at retail and the cost of terminals
     and other miscellaneous products sold. 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.

     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.

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



                                       6

<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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 12. 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 periods presented in the accompanying financial statements, the
     Company has granted options under the 2000 and 2002 Stock Options Plans
     (see Note 12). 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 unaudited 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 proforma amounts indicated below:

<TABLE>
<CAPTION>

                                                         For the Three Months          For the Six Months
                                                            Ended June 30,               Ended June 30,
                                                       ----------------------        ----------------------
                                                          2003           2002         2003             2002
                                                      -----------     -----------  -----------       -----------
<S>                                                <C>             <C>             <C>             <C>
     Net Loss                   As reported        $  (1,146,312)  $     (196,104) $  (1,918,816)  $   (384,256)
                                Proforma           $  (1,401,788)  $     (319,646) $  (2,429,769)  $   (631,340)

     Basic loss per share       As reported        $      (.79)    $       (.20)   $       (1.38)  $      (.41)
                                Proforma           $      (.96)    $       (.33)   $       (1.75)  $      (.67)
</TABLE>


     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.

     Reclassifications - Certain amounts in the financial statements for the six
     months ended June 30, 2002 have been reclassified to conform to headings
     and classifications used in the June 30, 2003 financial statements.

     Recently Enacted Accounting Standards - Statement of Financial Accounting
     Standards ("SFAS") No. 146, "Accounting for Costs Associated with Exit or
     Disposal Activities" and SFAS No. 147, "Acquisitions of Certain Financial
     Institutions - an Amendment of FASB Statements No. 72 and 144 and FASB
     Interpretation No. 9". SFAS No. 146 and 147 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:

                                                    June 30,      December 31,
                                                      2003            2002
                                                   ----------     ------------

              Point of sale equipment              $1,836,646     $1,134,961
              Office and computer equipment           161,039        140,349
                                                   ----------     ----------
              Total cost                            1,997,685      1,275,310
              Accumulated depreciation               (313,078)      (239,808)
                                                   ----------     ----------
              Property & equipment, net            $1,684,607     $1,035,502
                                                   ----------     ----------

     Depreciation expense for the three months ended June 30, 2003 and 2002 was
     $70,956 and $30,184, respectively, and for the six months ended June 30,
     2003 and 2002 was $109,208 and $59,282, respectively.



                                       7

<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - PROPERTY & EQUIPMENT (Continued)

     Included in the cost of property and equipment at June 30, 2003 is a
     deposit in the amount of approximately $525,000 for various components of
     point of sale equipment to be manufactured for the Company. The deposit
     will be offset against the cost of the equipment to the Company as the
     point of sale equipment is purchased.

NOTE 3 - GOODWILL

     At June 30, 2003, 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 completed its initial test of
     goodwill for impairment during the year ended December 31, 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 during the six months ended June 30, 2003 and 2002.

NOTE 4 - CAPITALIZED SOFTWARE DEVELOPMENT

     Information related to capitalized software development costs at June 30,
     2003 is as follows:

             Capitalized software, January 1, 2003          $1,450,968
             Capitalized during the period                     388,589
                                                            ----------
             Capitalized software, June 30, 2003             1,839,557
             Accumulated amortization                         (362,745)
                                                            ----------
             Capitalized software, net                      $1,476,812
                                                            ----------

     Of the balance at June 30, 2003, approximately $500,000 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 year ended December 31, 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 project was
     placed in service during September 2002, and the Company began recording
     amortization expense. During the six months ended June 30, 2003, the
     Company recorded amortization expense of $241,830.



                                       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 (float) in the Company's bank accounts. The Company
     utilized a portion of this available balance at June 30, 2003 in the amount
     of $253,284, which created an overdraft in the Company's books and records
     while the balance on the bank's records was positive.

NOTE 6 - RELATED PARTY OBLIGATIONS

     At December 31, 2002 the Company owed its CEO a total of $410,692
     consisting principally of unpaid equipment lease expenses, deferred salary,
     notes payable and accrued interest. In February 2003 the amounts were
     combined into a single note payable due the earlier of December 31, 2007 or
     upon 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 retroactive to January 1, 2003. At June 30, 2003 the
     outstanding balance of the note and accrued interest thereon was $431,227.
     Pursuant to the terms of the note, $150,000 was paid to the CEO in July
     2003 out of the proceeds from the public offering that was effective June
     24, 2003 (see Note 13). In addition, all accrued but unpaid interest on the
     note through June 30, 2004 will be due on that date and, beginning July 31,
     2004 monthly payments in the amount required to fully amortize the
     remaining principal amount of the note and interest by December 31, 2007
     will begin. The $150,000 payment and accrued interest on the note of
     $20,535 are shown as a current liability in the accompanying unaudited
     balance sheet at June 30, 2003.

     For the three months ended June 30, 2003 and 2002, the Company recorded
     interest expense on the notes of $10,267 and $4,570, respectively, and for
     the six months ended June 30, 2003 and 2002, the Company recorded interest
     expense on the notes of $20,535 and $9,140, respectively.

NOTE 7 - LONG-TERM DEBT

     NOTES PAYABLE
     During November 2000, the Company issued an unsecured note payable for
     $50,000 with interest at 12% and a due date of November 27, 2001. The due
     date was later extended to November 30, 2003. In connection with obtaining
     the note, the Company issued options to purchase 1,667 shares of common
     stock at $9.00 per share expiring November 2003, with demand registration
     rights. The balance of the note at June 30, 2003 was $31,350. Subsequent to
     June 30, 2003, the note and accrued interest thereon of $2,247 was repaid.




                                       9

<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - LONG-TERM DEBT (Continued)

     During May 2003, the Company issued a note payable in the amount of
     $1,000,000 with interest at 12%, due August 31, 2004. In connection with
     the note, the Company issued warrants to purchase 238,095 shares of
     restricted common stock, which were valued at $1,264,285 using the
     Black-Scholes pricing model and the following assumptions: $5.25 exercise
     price, $6.50 underlying stock price, 132% volatility, 3.5 year expected
     life, 1.67% risk free interest rate and expected dividend yield of zero.
     The value of the warrants was reduced to the $1,000,000 note amount and
     recorded as a discount against the note and will be amortized as interest
     expense over the term of the note. The unamortized discount at June 30,
     2003 was $858,657 and is offset against the outstanding balance of the note
     in the accompanying unaudited balance sheet.

     CONVERTIBLE NOTES AND DEBENTURES
     During November and December 2001, the Company borrowed a total of $250,000
     in the form of a convertible note, with interest at 14% and monthly
     payments of $5,865 through November 2006. In connection with the note, the
     Company issued warrants for the purchase of 10,000 shares of common stock
     at $18.75 per share, expiring in 2008. The exercise price of the warrants
     was later reduced to $11.25. Subsequent to June 30, 2003, the note was
     repaid in full.

     In January 2003, the Company issued a 12% unsecured convertible note with a
     principal amount of $200,000, due February 28, 2004. The Company also
     issued 24,242 shares of restricted common stock, which were valued at
     $145,454 or $6.00 per share, the value of similar restricted common shares
     sold for cash. The value of the shares has been recorded as a discount
     against the note and will be amortized as interest expense over the term of
     the note. The unamortized discount at June 30, 2003 was $89,938 and is
     offset against the outstanding balance of the note in the accompanying
     unaudited balance sheet. Subsequent to June 30, 2003, the Company repaid
     the note and accrued interest thereon of $11,769 and the remaining discount
     was recorded as interest expense.

     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 Company may prepay the debentures without premium or penalty after
     giving the holders thereof 90 days prior written notice. Such notice may be
     given at any time after the debentures have been outstanding for nine
     months. Alternatively, the Company has the right to prepay the debentures
     at any time by paying a 35% premium. The completion of the Company's public
     offering gave the holders the right to demand prepayment at any time out of
     the escrow described below.



                                       10

<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - LONG-TERM DEBT (Continued)

     On July 1, 2003, in accordance with the terms of the agreements relating to
     the issuance of the convertible debentures, the Company transferred $1.725
     million out of the proceeds of the public offering that was effective June
     24, 2003 to an escrow agent as collateral security for the repayment of the
     debentures. This amount is shown as "Restricted cash" in the accompanying
     unaudited balance sheet. As a result, interest on the debentures is
     accruing at a rate equal to the prime rate, currently 4%. The Company also
     agreed to file a registration statement on behalf of the holders of the
     debentures covering the shares issuable upon conversion of the debentures
     as well as the shares issued to them in connection with their purchase of
     the debentures and the shares issuable upon exercise of the warrants issued
     in connection with the debentures. A registration statement on Form S-3 was
     filed by the Company on July 9, 2003 and was declared effective on August
     4, 2003. As a result, the lien on the Company's assets in favor of the
     debenture holders was terminated subsequent to June 30, 2003.

     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, and will be
     amortized as interest expense over the term of the debentures. The
     unamortized discount at June 30, 2003 was $1,085,495 and is offset against
     the outstanding balance of the debentures in the accompanying unaudited
     balance sheet.

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 at June 30,
     2003 of $17,231. The lease is collateralized by equipment with a remaining
     book value of approximately $17,300 at June 30, 2003. Depreciation expense
     of $10,570 was recognized on this equipment during each of the periods
     ended June 30, 2003 and 2002.

     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 $57,915 at June 30, 2003.
     The lease is collateralized by equipment with a remaining book value of
     approximately $58,000 at June 30, 2003. Depreciation expense of $6,500 was
     recognized on this equipment during the six months ended June 30, 2003.

     The Company leases office and warehouse space under an operating lease
     agreement with an expiration date of December 31, 2003. The Company's
     future minimum rental under this operating lease amounts to $19,800 at June
     30, 2003.



                                       11

<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - LITIGATION AND CONTINGENCIES

     In 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 believes the bank reversed charges that
     should not have been reversed under the terms and conditions of the
     consumers' agreement and therefore disputes the bank's claim.

     At June 30, 2003, the Company's CEO was party to a suit in which the
     plaintiff claims the CEO agreed to sell to the plaintiff 20,000 shares of
     the Company's common stock at $.45 per share. The CEO disputes the
     plaintiff's claim that this option is valid. Since the CEO's actions were
     for the benefit of the Company, the Board of Directors has agreed to
     indemnify the CEO by replacing his shares through the issuance of shares
     from treasury or otherwise compensate the CEO for any monetary loss if the
     plaintiff is successful in his claim.

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

     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 $98,645 at
     June 30, 2003. This amount is reflected in the accompanying unaudited
     balance sheet as an offset to stockholders' equity.

     In December 2002, the Company granted a total of 43,334 shares of
     restricted common stock as a bonus payable to four executives and key
     employees. 21,667 of the shares were for past services and are
     distributable anytime after January 31, 2003 at the election of the
     employee. These 21,667 shares were valued at $130,000 and recorded as
     non-cash compensation during the year ended December 31, 2002. The
     remaining 21,667 shares are to be issued in June 2004 or upon a change in
     control of the Company. The employee must remain in the continuous
     employment of the Company until the time the shares become distributable in
     order to receive them. During the six months ended June 30, 2003, the
     Company accrued $43,334 in non-cash compensation related to these
     agreements based on a price per share of common stock of $6.00.




                                       12

<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - CAPITAL STOCK

     A summary of common stock transactions for the periods ended June 30, 2003
and 2002 is as follows:

                         Six Months Ended June 30, 2003

     The Company sold 1,100,000 units in an underwritten public offering for
     $14,300,000 in cash, or $13.00 per unit. Underwriter discount and offering
     costs of $2,417,644 were recognized on the sale. Each unit consisted of two
     shares of common stock and a warrant to purchase one share of common stock
     for $9.75 per share, expiring in 2008. During July 2003, the underwriter
     exercised its overallotment option and sold an additional 165,000 units for
     $2,145,000 in cash. Underwriter discount and offering costs of $261,473
     were recognized on the sale. In total, the Company sold 1,265,000 units,
     realizing gross proceeds of $16,445,000 and recognizing $2,679,117 of
     offering costs. The stock and the warrants included in the units traded
     only as a unit for the first 30 days following the effective date of the
     offering, after which the units were delisted and the stock and warrants
     included in the units began trading separately.

     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 169,231 shares of restricted common stock and warrants
     to purchase 169,231 shares of restricted common stock in connection the
     sale of $1,500,000 of debentures (see Note 7). The shares of common stock
     and the warrants were valued at an aggregate of $1,500,000.

                         Six Months Ended June 30, 2002

     The Company sold 130,278 shares of restricted common stock at $15.00 per
     share through private placements for $1,954,175 in cash. Stock offering
     costs of approximately $125,000 were recorded in connection with the sale,
     including 4,948 shares of restricted common stock valued at $15.00 per
     share.

     The Company issued 1,667 shares of restricted common stock upon the
     exercise of common of stock options for $15,000 in cash.

     The Company issued an aggregate of 5,016 shares of restricted common stock
     in cashless exercises of common stock options. The underlying agreements
     were for a total of 10,296 common stock options with exercise prices
     ranging from $9.00 to $15.00 per share.

     The Company issued 3,109 shares of common stock for future legal services
     valued at $90,000.

     The Company canceled 26,667 shares of common stock, which had been issued
     as collateral for a loan.



                                       13

<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - STOCK OPTIONS AND WARRANTS

     At June 30, 2003, the Company had outstanding 207,083 options to employees
     under various agreements with exercise prices ranging from $15.00 to $16.50
     per share, expiring between May 2005 and February 2008. Of the options
     outstanding at June 30, 2003, 158,750 were vested and 68,667 were
     exercisable. During the six months ending June 30, 2003, 6,333 options were
     granted, 4,563 options were forfeited and no options were exercised.

     At June 30, 2003, the Company had outstanding options and warrants to
     purchase 1,811,404 shares of common stock that were issued to non-employees
     under various agreements with exercise prices ranging from $5.25 to $27.00
     per share, expiring between August 2003 and November 2008. During the six
     months ended June 30, 2003, the Company issued options and warrants to
     purchase 491,660 shares of common stock to non-employees and no options or
     warrants to non-employees were exercised or expired.

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
     periods presented:

<TABLE>
<CAPTION>

                                                                       For the Three                     For the Six
                                                                       Months Ended                     Months Ended
                                                                         June 30,                         June 30,
                                                              ----------------------------      ----------------------------
                                                                  2003            2002               2003             2002
                                                              -----------      -----------      -----------      -----------
<S>                                                           <C>              <C>              <C>              <C>
     Loss from continuing operations
      available to common shareholders
      (numerator)                                             $ 1,146,312      $  (196,104)     $ 1,918,816      $  (384,256)
                                                              -----------      -----------      -----------      -----------
     Weighted average number of common
      shares outstanding during the period used
      in per share calculations (denominator)                   1,459,070          977,888        1,390,895          937,627
                                                              -----------      -----------      -----------      -----------

</TABLE>


     Because the Company incurred losses for the periods ended June 30, 2003 and
     2002, the effect of options/warrants and convertible notes totaling
     2,283,656 and 384,047 equivalent shares, respectively, has been excluded
     from the loss per share computation since its impact would be antidilutive.




                                       14

<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - PUBLIC OFFERING

     In February 2003 the Company's Board of Directors approved the filing by
     the Company with the Securities and Exchange Commission of a registration
     statement on Form SB-2 registering the sale of up to 500,000 units, each
     unit consisting of two shares of stock and one warrant. The registration
     statement was filed April 1, 2003. Subsequently, the Board authorized the
     filing of an amendment to the registration so that it would cover up to
     1,100,000 units before taking into account the underwriter's over
     allotment option. The registration statement was amended accordingly and
     was declared effective June 24, 2003. Net proceeds to the Company were
     approximately $11,900,000 after underwriter discount and offering
     expenses. During July 2003, the underwriter exercised its overallotment
     option and sold an additional $2,145,000 in securities, which resulted
     in net proceeds to the Company of approximately $1,900,000 after
     underwriter discount and offering expenses.

     In connection with the offering, the Company's issued and outstanding
     securities, including common stock, warrants and units, were listed on the
     American Stock Exchange.

     In connection with its authorization of the filing of a registration
     statement, the Company's Board of Directors also authorized, subject to
     stockholder approval, a reverse split of the Company's common stock. On May
     19, 2003, the stockholders authorized the Board to determine the precise
     ratio of the split and the timing thereof. The Board approved a 1-for-15
     reverse stock split that became effective on June 4, 2003.

NOTE 14 - SUBSEQUENT EVENTS

     In July 2003, the Company repaid two convertible notes payable, one note
     payable and related accrued interest in the aggregate amount of $437,525
     (see Note 7).

     In July 2003, the Company repaid $150,000 of a related party obligation
     (see Note 6).

     In July 2003, the Company sold 165,000 units, consisting of two shares of
     common stock and one warrant to purchase a share of common stock at $9.75
     per share, for $2,145,000 in gross proceeds (see Notes 10 and 13).





                                       15

<PAGE>


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

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 telephone 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, 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 the first quarter of 2003, we began generating
revenues from a customer in Canada. 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 new
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, wireline long distance service
or other telephone products, add credit to a prepaid credit card, facilitate
cash transfers or sell other prepaid products. In general, 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, Q Comm and the provider of the prepaid product.

   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.
Telecommunication carriers, such as Verizon, Cingular, T Mobile and AT&T 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 for money transfer services.

   Our principal source of revenue has been the resale of prepaid
telecommunication products that we purchase from suppliers of wireless, long
distance and other products or from distributors who purchase these products
from suppliers. The table below illustrates the revenues we derived from our
principal products and the percentage of total revenues represented by this
amount:


<TABLE>
<CAPTION>
                                          Three months ended June 30,                             Six months ended June 30,
                              ------------------------------------------------    ------------------------------------------------
                                      2003                      2002                       2003                      2002
                              ----------------------   -----------------------    -----------------------   ----------------------
                               Amount     Percentage     Amount     Percentage      Amount     Percentage     Amount    Percentage
                             ----------   ----------   ----------   ----------    -----------  ----------   ----------  ----------
<S>                          <C>          <C>          <C>          <C>           <C>          <C>          <C>         <C>
Wireless ..................  $5,707,837     96.24%     $6,289,103     87.91%      $11,276,156     96.56%    $11,952,360    89.00%
Long distance .............      93,707      1.58         287,592      4.02           190,349      1.63         602,990     4.49
Home dial tone ............       1,779      0.03         123,049      1.72             7,007      0.06         259,192     1.93
Other .....................     127,513      2.15         454,281      6.35           204,363      1.75         615,076     4.58
                             ----------     -----      ----------     -----       -----------     -----     -----------    -----
 Totals ...................  $5,930,836    100.00      $7,154,025    100.00%      $11,677,875     100.0%    $13,429,618    100.0%
                             ==========     =====      ==========     =====       ===========     =====     ===========    =====
</TABLE>

   Historically, our results of operations have been characterized by relatively
high revenues but relatively low gross profits. As a reseller of prepaid
telecommunication products, 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 25.2%
for the six months ended June 30, 2003 and 25.8% for the comparable period in
2002. 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 2.4% for the six months
ended June 30, 2003 and 2.3% for the comparable period in 2002. Because of these
relatively small margins, a minor change in the price that we pay for products

                                       16
<PAGE>

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 believe that, as
our business expands and our financial condition becomes more stable, there may
be opportunities to increase margins in our historical business by purchasing a
greater percentage of our product directly from the supplier and by purchasing
in greater volume. However, the telecommunications business in general, and the
wireless business in particular, is changing rapidly and it is not possible to
anticipate potential changes that may occur in the distribution chain.

   Our business plan contemplates adding new products rapidly and adopting other
sales models. With some of these products and sales models, rather than
purchasing and reselling prepaid products, we will facilitate the purchase of
the product by others, sell or lease terminals and provide transaction
processing services for a fee. In particular, we have developed an alternative
revenue model that we refer to as a "service bureau." Under this model, we
replicate our data center for and license our proprietary transaction processing
software to our customer who is responsible for functions such as inventory
management, product ownership, report generation, and funds transfer. We
generate license fees and ongoing revenues from transaction processing and
management services. We recently established our first service bureau data
center for a customer. While we expect our traditional model, which we refer to
as the "broker model," to continue to be our primary means of business, we also
expect the service bureau model to grow in 2003. We expect that substantially
all of our international expansion will be based on this model and that domestic
customers may also choose to operate in this way.

   Under the service bureau model, since we do not assume an ownership risk with
respect to the product, we will record as revenue only the amount of the fee, as
opposed to the entire value of the transaction. This will result in lower
revenues per transaction. On the other hand, cost of sales should be minimal and
fees and commissions payable to brokers and retailers should be nonexistent. As
a result, we believe our gross profit margin under the service bureau model will
be significantly higher than it is under our broker model. 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 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
a "rent-to-own" 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 rent-to-own 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
rent-to-own option depends on the availability of capital to fund the cost of
the terminals.

   Substantially all of our revenues are collected through automated clearing
house, 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 expect that transaction fees earned under
our service bureau model will be collected in essentially the same manner.
However, we may generate receivables from sales of terminals and from consulting
services provided to assist customers in setting up and operating data centers.

   In order to support expanded operations, we expect to increase sales and
marketing and general and administrative expense. We expect to continue to
invest in product development and improvement, although



                                       17
<PAGE>

the rate of such investment may not equal the rate of expenditure we experienced
to develop our Qxpress system. As gross profit increases, we expect general and
administrative expenses, selling expenses and research and development
expenditures to decrease as a percentage of gross profit, thereby significantly
improving operating margins. However, in the immediate future, we expect to
incur substantial 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.

   Our future capital requirements will 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.

   In the first half of 2003 we entered into a number of financing transactions,
the most significant of which was a registered public offering of units
consisting of stock and warrants. Gross proceeds from the offering were
approximately $16.5 million. Other financings included private sales involving
the sale of investment units consisting of notes, convertible debentures, stock
and warrants. The total amount raised in these private transaction was $2.7
million. The value of the stock and warrants issued in these transaction was
determined to be in excess of $2.6 million, which will be amortized over the
lives of the debt instruments, generally 12 months. As a result we will have
significant interest expense for 2003 and the first quarter of 2004. We believe
that the proceeds from offerings have provided us with the capital that we
anticipate needing to fund our growth and allow us to take advantage of market
opportunities.

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. 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. 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 sales of blank cards, are recorded when earned, net of any sales discounts.
We expect in the future to record revenues from technology licensing and
consulting fees and will record these fees when they are 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 15% 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

                                       18
<PAGE>

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 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, which is 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 June 30, 2003, we had an accumulated net operating loss for federal
and state corporate income tax purposes of approximately $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.




                                       19
<PAGE>

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.

<TABLE>
<CAPTION>
                                                                          Three months               Six months
                                                                         ended June 30,             ended June 30,
                                                                        -----------------          ----------------
                                                                         2003        2002           2003        2002
                                                                        -----       -----          -----       -----
      <S>                                                               <C>         <C>            <C>         <C>
      Revenues ......................................................   100.0%      100.0%         100.0%      100.0%
      Cost of goods sold ............................................    74.7        74.1           74.8        74.2
                                                                        -----       -----          -----       -----
      Gross profit ..................................................    25.3        25.9           25.2        25.8
      Commissions and fees ..........................................    23.1        23.8           22.8        23.5
      Selling expenses ..............................................     1.4         0.9            1.5         1.0
      General and administrative expenses ...........................     6.4         3.4            7.6         3.6
      Depreciation and amortization .................................     3.2         0.4            3.0         0.4
      Non-cash compensation .........................................     0.3           -            0.4           -
                                                                        -----       -----          -----       -----
      Loss from operations ..........................................    (9.1)       (2.6)         (10.1)       (2.7)
      Other income (expense) - net ..................................   (10.2)       (0.1)          (6.3)       (0.1)
                                                                        -----       -----          -----       -----
      Net loss ......................................................   (19.3)       (2.7)         (16.4)       (2.8)
</TABLE>

Three and six-month periods ended June 30, 2003 and 2002

   Revenues. Revenues for the three months ended June 30, 2003 were $5.93
million compared to $7.15 million for the same period in 2002, a decrease of
$1.22 million, or 17.1%. Revenues for the six months ended June 30, 2003 were
$11.68 million compared to $13.43 million for the same period in 2002, a
decrease of $1.75 million, or 13.0%. The second quarter of 2002 was the highest
revenue quarter in our history. Almost $2 million of revenue in that quarter was
derived from a single customer that terminated its relationship with us in the
third quarter of 2002. We had hoped that this revenue loss would have been
offset by the roll-out of our new Qxpress 200 terminal in the third quarter of
2002. However, the development of the terminal and related software took longer
than expected. When the development was finally completed, our lack of liquidity
prevented us from contract-manufacturing a sufficient number of the terminals
that would have enabled us to increase our revenues significantly. Starting in
the first quarter of 2003 and continuing into the third quarter of 2003, we
addressed our liquidity issue through the sale of various debt and equity
securities that yielded gross proceeds of in excess of $19 million. As a result,
we have ordered approximately 7,500 Qxpress 200 terminals since the beginning of
the second quarter of 2003 -- 2,500 in April 2003 and 5,000 in July 2003. We
have begun to take delivery of these terminals and anticipate that they will all
be ready to be placed in service by the end of 2003.

   Cost of goods sold. Cost of goods sold for the three months ended June 30,
2003 was $4.43 million compared to $5.30 million for 2002, a decrease of
$875,000, or 16.5%. Cost of goods sold for the six months ended June 30, 2003
was $8.74 million compared to $9.96 million for the same period in 2002, a
decrease of $1.23 million or 12.3%. As a percentage of revenues, cost of goods
sold for the 3-month and 6-month periods in 2003 was 74.7% and 74.8%,
respectively, compared to 74.1% and 74.2% for the 3-month and 6-month periods in
2002. The majority of the decrease in cost of goods sold is due to decrease in
revenues. On the other hand, the increase in cost of goods sold as a percentage
of revenues is attributable to the fact that some of our newer wireless products
carry lower discounts. This increase was offset by a decrease in commissions and
fees, as we were able to pass on this lower discount to brokers and retailers in
the form of lower commissions.

   Gross profit. Gross profit for the three months ended June 30, 2003 was $1.50
million compared to $1.85 million for the same period in 2002, a decrease of
$348,000, or 18.8%. Gross profit for the six months ended June 30, 2003 was
$2.94 million compared to $3.47 million for the same period in 2002, a decrease
of $526,000, or 15.2%. Gross margin for the 3-month and 6-month periods ended
June 30, 2003 was 25.3% and 25.2%, respectively, compared to 25.9% and 25.8% for
the 3-month and 6-month periods ended June 30, 2002. These decreases are
attributable to lower discounts offered by our suppliers, which translates into
higher costs for us. In the future, we expect our gross margin to fluctuate as
our product mix changes 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 June 30, 2003 were $1.37 million compared to $1.70 million for the
same period in 2002, a decrease of $330,000, or 19.4%. For the six months ended
June 30, 2003 and 2002, commissions and fees were $2.67 million and $3.16
million, respectively, a decrease of $492,000 or 15.6%. As a percentage of
revenues, commissions and fees for the 3-month and 6-month periods ended June
30, 2003 were 23.1% and 22.8%, respectively, compared to 23.8% and 23.5% for the
3-month and 6-month periods ended June 30, 2002. These decreases reflect the
fact that we successfully reduced the commissions we pay to brokers as a result
of a lower discounts we received from our suppliers. A component of commissions
and fees is transaction processing fees paid to a third party for transactions
processed through our prior terminal. These fees were approximately $89,000 in
the first six months of 2003 compared to $124,000 in the first six months of
2002. 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.

                                       20
<PAGE>

   Selling expenses. Selling expenses for the three months ended June 30, 2003
were $81,000 compared to $65,000 for the same period in 2002, an increase of
$16,000, or 24.8%. Selling expenses for the six months ended June 30, 2003 were
$175,000 compared to $129,000 for the same period in 2002, an increase of
$46,000, or 35.5%. As a percentage of revenues, selling expenses for the 3-month
and 6-month periods ended June 30, 2003 were 1.4% and 1.5%, respectively,
compared to 0.9% and 1.0% for the 3-month and 6-month periods ended June 30,
2002. These increases are due to higher travel expenses, reflecting the sales
efforts associated with building an expanded network for the selling and
distribution of our products, and to the cost of a new employee added to our
sales force in 2003.

   General and administrative. General and administrative expenses for the three
months ended June 30, 2003 were $380,000 compared to $243,000 for the same
period in 2002, for an increase of $137,000, or 56.2%. General and
administrative expenses for the six months ended June 30, 2003 were $890,000
compared to $484,000 for 2002, an increase of $406,000, or 83.9%. As a
percentage of revenues, general and administrative expenses for the 3-month and
6-month periods ended June 30, 2003 were 6.4% and 7.6%, respectively, compared
to 3.4% and 3.6% for the 3-month and 6-month periods ended June 30, 2002. These
increases can be attributed to a number of factors. The first factor is an
increase in our general and administrative salaries and benefits of
approximately $80,000 for the first three months of 2003 and $150,000 for the
first six months of the year. This increase is not due to higher gross salaries
paid but to lower salaries eligible to be capitalized as software development
costs in 2003. As previously noted, we placed our data center in service in
September 2002. While we are still developing new applications for our system
and some of the salaries of software engineers are capitalized, this amount is
lower in 2003 and we expect that trend to continue in future periods. A second
factor is a consulting expense of $150,000 that we recorded in the first quarter
of 2003 relating to financial advisory services. We do not expect to incur
similar expenses during future periods.

   Depreciation and amortization. Depreciation and amortization expenses for the
three months ended June 30, 2003 were $192,000, compared to $30,000 for the same
period for 2002. Depreciation and amortization expenses for the six months ended
June 30, 2003 were $351,000 compared to $59,000 in 2002. These increases are
attributable primarily to the amortization of software development costs, which
began in the fourth quarter of 2002 and to higher depreciation expenses from
Qxpress 200 units deployed since that time. The quarterly amount of software
development costs amortized in 2003, $121,000, is the single greatest
contributor to the increase in the 3-month and 6-month periods. The additional
increase is due to depreciation expenses incurred in 2003 related to the
deployment of Qxpress 200 units, which also began the fourth quarter of 2002. As
we continue to amortize software development costs and we increase significantly
the number of Qxpress 200 units in service, we expect depreciation and
amortization expenses to increase in the future.

   Non-cash compensation. In December 2002, we granted a bonus payable in stock
to four executives and key employees. Of the total grant of 650,000 shares, 50%
of those were for past services and accrued as expense in 2002. The other 50% is
payable in June 2004 provided that the employee has been continuously employed
by us. We accrued $21,666 toward this future issuance of stock in each of the
first two quarters of 2003. No expenses of this nature were recorded in 2002.

   Loss from operations. Loss from operations for the three months ended June
30, 2003 was $540,000 compared to $186,000 for 2002. The loss from operations
for the six months ended June 30, 2003 was $1.19 million compared to $365,000
for the same period in 2002. This increase is attributable to factors discussed
above, specifically (i) lower revenues (ii) higher general and administrative
expenses, (iii) higher depreciation and amortization expenses, (iv) an increase
in selling expenses, and (v) non-cash compensation recorded in 2003. We expect
our investment in an expanded distribution network to result in significantly
higher revenues in the future while our ongoing operating expenses, other than
commissions and fees, to increase by a smaller percentage. We believe these
factors will contribute to continuing improvement in the results from operations
in the foreseeable future.

   Other expense -- net. Other income and expense consists primarily of interest
income and expense. Net other expense for the three months ended June 30, 2003
and 2002 was $606,000 and $10,000, respectively. Net other expenses for the six
months ended June 30, 2002 were $733,000 and $24,000, respectively. The
increases in net other expense represent interest expense related to the
unsecured note, convertible note and debentures we sold in 2003. Most of this
interest expense, $520,000 for the 3-months and $611,000 for the 6-months ended
June 30, 2003, is in the form of amortization of discount on these debt
instruments and therefore does not represent an amount to be paid in cash. The
remainder of the amount is related to the actual interest either paid or to be
paid on our debt. In July 2003 we repaid over $570,000 of debt prior to their
maturity dates in order to save interest expense in future quarters. The
interest rates on these debt instruments ranged from 10-14%. In addition, on
June 30, 2003 we transferred $1.725 million to an escrow account as cash
collateral for the repayment of $1.5 million aggregate principal amount, and
accrued interest thereon, of our 12% secured convertible debentures due March
31, 2004. As of July 1, 2003, the interest rate on the debentures decreased to
the prime rate, currently 4%. Based on these factors, we expect to continue to
recognize the amortization of discount on debt during future quarters of 2003
but our interest expense that represents cash payments should decline
significantly in future quarters.

                                       21
<PAGE>

   Income tax expense. At June 30, 2003 we had operating loss carryforwards
of approximately $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 $3 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.

   Net loss. Net loss for the three months ended June 30, 2003 was $1,146,000
compared to $196,000 for the same period in 2002. Net loss for the six months
ended June 30, 2003 was $1,919,000 compared to $384,000 for the same period in
2002. The increased net loss is attributable to the foregoing factors.

Liquidity and Capital Resources

   Historically, we have financed our working capital requirements through cash
flow from operations, the sale of shares of our common stock, proceeds from
short-term bank borrowings, and proceeds from the sale of convertible debentures
and notes. Since the end of 2001, we have not had any working capital credit
facility.

   In June 2003 we successfully completed a registered public offering of
1,100,000 units, 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 $14.3. In July 2003, the underwriter of the offering exercised
its overallotment option to acquire another 165,000 units, yielding additional
gross proceeds of $2,145,000. Net proceeds to us after underwriter discount and
estimated offering costs were approximately $13.8 million. While some of this
amount will be utilized in the short-term to repay debt and purchase new Qxpress
200 units, much of the offering proceeds will be available to us in the
longer-term and allow us to evaluate market opportunities that we have
heretofore been unable to consider. The proceeds will also provide us with
significant balance sheet strength, which can be used to further expand our
financial resources in the areas of equipment financing and other credit
facilities should the need arise.

   Prior to the completion of 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%. During July 2003, we i) repaid a five-year
amortizing convertible note with a remaining principal balance of approximately
$190,000 with interest at 14%; ii) repaid the $200,000 convertible note, due
February 28, 2004, iii) repaid a note with an outstanding balance of $31,350
with interest at 12%, due November 30, 2003, and iv) paid a $150,000 scheduled
installment on a loan from our CEO. Other remaining outstanding debt includes
the $1 million, 12% unsecured note due August 31, 2004 and $1.5 in convertible
debentures, due March 31, 2004. The debentures will accrue interest at the prime
rate (currently 4%) since we cash collateralized the debt by transferring $1.725
million to an escrow account.

   As of June 30, 2003, we had working capital of approximately $10.2 million.

   For the six months ended June 30, 2003, net cash used by operating activities
was $890,000. The primary components of our operating cash flows are our net
loss, increase in accounts payable, depreciation and amortization, and increases
in inventory and accounts receivable.

   Capital expenditures include capitalized software development costs and
purchase of property and equipment. For the six months ended June 30, 2003,
capitalized software development costs were $389,000 and purchases of property
and equipment were $769,000. We expect that capital expenditures will increase
significantly in future periods of 2003 as we place more terminals in service.

   For the six months ended June 30, 2003, net cash provided by financing
activities was $14.4 million. Net cash provided by financing activities
primarily reflects sales of stock and debt instruments, offset by repayments of
existing indebtedness. The single largest contributor to net cash provided by
financing activities were the proceeds of the public offering.

Recent Accounting Pronouncement

   Statement of Financial Accounting Standards ("SFAS") 146, "Accounting for
Costs Associated with Exit or Disposal Activities" and SFAS No. 147,
"Acquisitions of Certain Financial Institutions - an Amendment of FASB
Statements No. 72 and 144 and FASB Interpretation No. 9", were recently issued.
SFAS No. 146 and 147 have no current applicability to us or their effect on our
financial statements are not significant.

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.


                                       22
<PAGE>

PART II

Item 1. Legal Proceedings

   As of August 1, 2003, we are not a party to any legal proceedings, except as
set forth below.

   On October 10, 2000, First Security Bank, N.A. filed suit in the Fourth
Judicial District Court of Utah County, claiming breach of a Merchant
Agreement. The complaint relates to charge-backs of customer credit card
purchases, which resulted in overdrafts of our merchant account with First
Security. First Security claims $175,477 in damages. We believe that First
Security honored charge-backs inappropriately, based on the terms and
conditions of the customers' credit card agreements and the terms and
conditions of their contracts with us. First Security recently filed a motion
for summary judgment, which we are contesting. We anticipate that this case
will not be resolved until after trial, which has not yet been scheduled, but
which will likely be scheduled to take place within the next four to six
months. We have recorded a contingent liability in connection with this matter
and believe the resolution of this suit will not have a material impact on our
financial condition or results of operations.

   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 $99,000 remained
uncollected at June 30, 2003.

   We have agreed to indemnify our chief executive officer, Paul Hickey, against
any and all costs, fees, expenses, damages and liabilities that he may incur in
connection with the matter of Dallin Bagley v. Paul Hickey, filed on October 22,
2001 and pending in the Third District Court in Salt Lake County, Utah. We
indemnified Mr. Hickey because the plaintiff's allegations relate to a matter in
which Mr. Hickey acted in the interests of Q Comm. Specifically, the lawsuit
relates to a financing transaction. Mr. Bagley, who was a Q Comm stockholder at
the time, threatened to revoke his consent to the transaction unless Mr. Hickey
agreed to give him an option to purchase 20,000 shares of Q Comm stock at a
nominal price. Since we needed the financing, Mr. Hickey agreed. When Bagley
tried to exercise his option, Mr. Hickey claimed the option was unenforceable.
Bagley then sued Mr. Hickey, claiming breach of contract and that, as a result,
he had suffered damages to the extent of $400,000. On March 31, 2003, at a
hearing, the court granted plaintiff's motion for partial summary judgment that
the option agreement was enforceable and denied defendant's motion for leave to
file an amended answer and counteclaim. No decision has been made as to the
extent of plaintiff's damages or the relief to which he is entitled. Mr. Hickey
is currently in the process of appealing this decision.

Item 2. Changes in Securities and Use of Proceeds

Recent Sales of Unregistered Securities.

   Since January 1, 2003, we have entered into the following financing
transactions:

   (a) We sold 3,333 shares of common stock to a single investor for $20,000 in
cash.

   (b) We sold a 12% unsecured convertible note in the principal amount of
$200,000 and 24,242 shares of common stock for an aggregate purchase price of
$200,000. The entire principal amount of the note and all accrued interest is
due and payable on February 28, 2004. The note and accrued interest thereon of
$11,769 was paid in July 2003.

   (c) We sold (a) $1.5 million aggregate principal amount of our 12% secured
convertible debentures due March 31, 2004, (b) 169,231 shares of common stock
and (c) warrants to purchase 169,231 shares of common stock. The gross proceeds
to us from the sale of all of these securities was $1.5 million. See note 7 to
the unaudited interim financial statements for more information regarding the
terms of the debentures.

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

   On Monday, May 19, 2003 at 9:00 a.m., we held a Special Meeting of
Shareholders, at which at least a majority of the shares entitled to vote
were present, for the purpose of considering and acting upon the following
matters:

1. To the approve an amendment to Q Comm's articles of incorporation to effect a
reverse stock split of Q Comm's common stock at a ratio within the range from
one-for-six to one-for-fifteen at any time prior to December 31, 2003, at the
sole discretion of Q Comm's board of directors, in connection with an
underwritten public offering by Q Comm. The breakdown of the votes (on a post 1
for 15 reverse split basis) cast with respect to the foregoing matter is a
follows:

FOR                      AGAINST                   ABSTAIN
---                      -------                   -------
828,723                  48,446                    67

2. To approve the adoption of the Q Comm 2003 Stock Option Plan. The breakdown
of the votes (on a post 1 for 15 reverse split basis) cast with respect to the
foregoing matter is a follows:


FOR                      AGAINST                   ABSTAIN
---                      -------                   -------
542,423                  55,219                    8,481

No other matter was submitted to a vote of our shareholders at this meeting.

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 April 2, 2003, we filed a current report a form 8-K under item 7 to
announce the results of operations for the year ended December 31, 2002.

                                       23
<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: August 14, 2003                /s/ Paul Hickey
                                     ---------------
                                     Paul Hickey
                                     Chief Executive Officer

Date: August 14, 2003                /s/ Michael Openshaw
                                     --------------------
                                     Michael Openshaw
                                     Chief Financial Officer
                                     (Principal Accounting Officer)


                                       24