**SECURITIES
      AND EXCHANGE COMMISSION**





Washington,
      D.C. 20549





**FORM
      10-Q**





**QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**


**FOR
      THE QUARTERLY PERIOD ENDED** **JUNE
      30, 2006**





Commission
      File Number 001-31718





**Q
      COMM INTERNATIONAL, INC.**


(Exact
      name of registrant as specified in its charter)




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





510
      East Technology Avenue, Building C, Orem, Utah 84097


(Address,
      including zip code, of principal executive office)





(801)
      226-4222


(Registrant’s
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.





Yes
            |
                X
                |
            No
            |__|





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
                accelerated filer |__|
            Accelerated
                filer |__|
            Non-accelerated
                filer | X |





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





Yes
            |__|
            No
            |
                X
                |




Number
      of
      shares outstanding of each of the issuer's classes of common stock, as of the
      latest practicable date: As of May 7, 2006 6,914,795 shares of the issuer’s
      common stock were outstanding.



















**Q
      COMM INTERNATIONAL****,
      INC.**


**QUARTERLY
      REPORT ON FORM 10-Q**





June
      30,
      2006





**TABLE
      OF CONTENTS**








**PAGE**PART
                I
            FINANCIAL
                INFORMATIONItem
                1.
            Financial
                Statements
            3Unaudited
                Condensed Consolidated Balance Sheets as of June 30,
                2006 and December 31, 2005
            3Unaudited
                Condensed Consolidated Statements of Operations and
                Comprehensive Loss for the Three and Six Months Ended June 30, 2006
                and
                2005
            4Unaudited
                Condensed Consolidated Statements of Cash Flows for
                the Six Months Ended June 30, 2006 and 2005
            5Notes
                to Unaudited Condensed Consolidated Financial
                Statements
            6Item
                2.
            Management's
                Discussion and Analysis of Financial Condition
                and Results of Operations
            13Item
                3.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            22Item
                4.
            Controls
                and Procedures
            22PART
                II
            OTHER
                INFORMATIONItem
                1.
            Legal
                Proceedings
            23Item
                1A.
            Risk
                Factors
            23Item
                5.
            Other
                Information
            23Item
                6.
            Exhibits
                and Reports on Form 8-K
            23



















2
 Table
            of Contents







**PART
      I - FINANCIAL****INFORMATION**





**Item
      1.****Financial
      Statements**


**Q
      COMM INTERNATIONAL****,
      INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEETS**





**June
                30,**
            
            **December
                31,****2006**
            
            **2005****ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            $
            1,629,999
            
            $
            3,806,904Trade
                accounts receivable, net
            
            
            1,062,252
            
            
            638,725Inventory,
                net
            
            
            1,596,341
            
            
            1,456,937Equipment
                held for resale
            
            
            -
            
            
            610,000Prepaid
                expenses
            
            
            50,648
            
            
            46,550**Total
                Current Assets**
            
            
            4,339,240
            
            
            6,559,116**Property
                and Equipment, net**
            
            
            739,148
            
            
            1,321,564**Other
                Assets:**Restricted
                cash
            
            
            326,912
            
            
            532,875Capitalized
                software development costs, net
            
            
            100,374
            
            
            283,762Intangible
                assets, net
            
            
            113,188
            
            
            24,000Deposits
            
            
            79,917
            
            
            162,432**Total
                Other Assets**
            
            
            620,391
            
            
            1,003,069**Total
                Assets**
            
            $
            5,698,779
            
            $
            8,883,749**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****Current
                Liabilities:**Accounts
                payable
            
            $
            616,120
            
            $
            909,231Accrued
                expenses
            
            
            558,516
            
            
            463,974Capital
                lease obligations - current portion
            
            
            87,056
            
            
            390,906**Total
                Current Liabilities**
            
            $
            1,261,692
            
            $
            1,764,111**Long
                Term Liabilities:**Related
                party obligation, net of unamortized discount of $145,965 and $223,216,
                respectively
            
            
            468,035
            
            
            390,784Capital
                lease obligations, net of current portion
            
            
            33,859
            
            
            32,297**Total
                Long term Liabilities**
            
            
            501,894
            
            
            423,081**Total
                Liabilities**
            
            
            1,763,586
            
            
            2,187,192**Commitments
                and Contingencies (notes 6, 7, 8, and 11)****Stockholders’
                Equity:**Common
                stock, $0.001 par value; 50,000,000 shares authorized, 6,914,795
                shares
                outstanding
            
            
            6,915
            
            
            6,915Additional
                paid-in capital
            
            
            35,476,198
            
            
            35,038,139Accumulated
                deficit
            
            
            (31,590,387
            )
            
            (28,389,476
            )Accumulated
                other comprehensive income
            
            
            53,235
            
            
            51,747Receivable
                from shareholder
            
            
            (10,768
            )
            
            (10,768
            )**Total
                Stockholders’ Equity**
            
            
            3,935,193
            
            
            6,696,557**Total
                Liabilities and Stockholders’ Equity**
            
            $
            5,698,779
            
            $
            8,883,749








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






3
 Table
            of Contents







**Q
      COMM INTERNATIONAL, INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
      LOSS**





**For
                the Three Months Ended**
            
            **For
                the Six Months Ended****June
                30,**
            
            **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005****SALES
                AND REVENUE**Prepaid
                PIN sales
            
            $
            12,009,522
            
            $
            12,634,887
            
            $
            24,051,724
            
            $
            20,569,749Prepaid
                PIN fees
            
            
            411,159
            
            
            387,044
            
            
            781,944
            
            
            672,705Product
                sales
            
            
            51,605
            
            
            4,315
            
            
            885,949
            
            
            26,380Processing
                and other fees
            
            
            155,885
            
            
            296,447
            
            
            307,814
            
            
            531,118**Total
                sales and revenue**
            
            $
            12,628,171
            
            $
            13,322,692
            
            $
            26,027,431
            
            $
            21,799,952**COST
                OF SALES AND REVENUE**Cost
                of prepaid PIN sales and fees
            
            
            10,501,205
            
            
            12,533,184
            
            
            21,240,955
            
            
            19,406,429Cost
                of product sales
            
            
            82,269
            
            
            3,315
            
            
            887,369
            
            
            20,265Distribution
                commissions and fees
            
            
            1,715,326
            
            
            2,335,209
            
            
            3,521,107
            
            
            4,167,303**Total
                cost of sales and revenue**
            
            
            12,298,800
            
            
            14,871,708
            
            
            25,649,431
            
            
            23,593,997**Gross
                Profit (Loss)**
            
            
            329,371
            
            
            (1,549,016
            )
            
            378,000
            
            
            (1,794,045
            )**OPERATING
                EXPENSES**Selling
            
            
            378,270
            
            
            232,626
            
            
            730,866
            
            
            459,991General
                and administrative
            
            
            1,078,749
            
            
            1,457,948
            
            
            2,253,657
            
            
            2,540,206Non-cash
                compensation related to operations
            
            
            210,044
            
            
            -
            
            
            438,059
            
            
            -Depreciation
                and amortization
            
            
            36,919
            
            
            39,557
            
            
            85,808
            
            
            88,834**Total
                operating expenses**
            
            
            1,703,982
            
            
            1,730,131
            
            
            3,508,390
            
            
            3,089,031**Loss
                from operations**
            
            
            (1,374,611
            )
            
            (3,279,147
            )
            
            (3,130,390
            )
            
            (4,847,076
            )**OTHER
                INCOME (EXPENSE)**Interest
                income
            
            
            2,591
            
            
            4,184
            
            
            7,502
            
            
            10,924Interest
                and other expense
            
            
            (26,379
            )
            
            (22,035
            )
            
            (78,023
            )
            
            (42,434
            )Total
                Other Income Expense, net
            
            
            (23,788
            )
            
            (17,851
            )
            
            (70,521
            )
            
            (31,510
            )**Net
                Loss**
            
            $
            (1,398,399
            )
            $
            (3,296,998
            )
            $
            (3,200,911
            )
            $
            (4,878,586
            )**Basic
                and Diluted Net Loss per Common Share**
            
            $
            (0.20
            )
            $
            (0.61
            )
            $
            (0.46
            )
            $
            (0.94
            )**Basic
                and Diluted Weighted Average Common Shares Outstanding**
            
            
            6,914,795
            
            
            5,448,827
            
            
            6,914,795
            
            
            5,214,812**OTHER
                COMPREHENSIVE LOSS**Net
                loss
            
            $
            (1,398,399
            )
            $
            (3,296,998
            )
            $
            (3,200,911
            )
            $
            (4,878,586
            )Foreign
                currency translation adjustment, net of tax
            
            
            422
            
            
            (48,164
            )
            
            1,488
            
            
            (67,141
            )**Comprehensive
                Loss**
            
            $
            (1,397,977
            )
            $
            (3,345,162
            )
            $
            (3,199,423
            )
            $
            (4,945,727
            )








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





4
 Table
            of Contents






**Q
      COMM INTERNATIONAL** **,
      INC. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**





**For
                the Six Months Ended****June
                30,****2006**
            
            **2005****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            
            $
            (3,200,911
            )
            $
            (4,878,586
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            907,019
            
            
            952,237Amortization
                of discount on debentures and notes
            
            
            77,251
            
            
            -Provision
                for doubtful accounts
            
            
            274,473
            
            
            159,108Impairment
                and write-off of terminals
            
            
            -
            
            
            1,266,704Loss
                from PIN and handset inventory adjustments
            
            
            -
            
            
            535,005Non-cash
                compensation related to options
            
            
            438,059
            
            
            -**Change in
                operating assets and liabilities**Accounts
                receivable
            
            
            (698,000
            )
            
            (232,515
            )Inventory
            
            
            (139,404
            )
            
            (1,074,689
            )Deposit
                on handsets
            
            
            -
            
            
            285,005Prepaid
                expenses
            
            
            (4,099
            )
            
            117,576Accounts
                payable
            
            
            (293,111
            )
            
            (708,971
            )Accrued
                liabilities
            
            
            94,543
            
            
            395,722Other
                assets
            
            
            82,515
            
            
            2,739**Net
                Cash Used in Operating Activities**
            
            
            (2,461,665
            )
            
            (3,180,665
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Change
                in restricted cash
            
            
            205,963
            
            
            (36,970
            )Purchase
                of Intangible assets
            
            
            (117,395
            )
            
            (6,494
            )Purchase
                of property and equipment
            
            
            (93,408
            )
            
            (799,064
            )Proceeds
              from terminals held for sale
            
            
            610,000
            
            
            -Capitalized
                software development costs
            
            
            (19,600
            )
            
            (51,374
            )**Net
                Cash Used in Investing Activities**
            
            
            (585,560
            )
            
            (893,902
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Proceeds
                from issuance of common stock
            
            
            -
            
            
            4,407,653Proceeds
                from issuance of related party notes payable and warrants
            
            
            -
            
            
            614,000Payments
                on capital lease obligations
            
            
            (302,288
            )
            
            (242,041
            )**Net
                Cash Provided by (used in) Financing Activities**
            
            
            (302,288
            )
            
            4,779,612Net
                change in cash and cash equivalents
            
            
            (2,178,393
            )
            
            705,045Effect
                of foreign-exchange-rate changes on cash
            
            
            1,488
            
            
            (18,976
            )Cash
                and cash equivalents, beginning of year
            
            
            3,806,904
            
            
            773,052**Cash
                and cash equivalents, end of year**
            
            $
            1,629,999
            
            $
            1,459,121**Supplemental
                Disclosures of Cash Flow Information:**Cash
                paid during the period for:Interest
            
            $
            107,076
            
            $
            19,106








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








5
 Table
            of Contents







**Q
      COMM INTERNATIONAL****,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




NOTE
      1 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





*Basis
      of Presentation* - The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with Generally Accepted Accounting Principles in the
      United States of America. However, certain information or footnote disclosures
      normally included in financial statements prepared in accordance with generally
      accepted accounting principles have been condensed or omitted pursuant to the
      rules and regulations of the Securities and Exchange Commission. In the opinion
      of management, the financial statements include all normal recurring adjustments
      that are necessary for the fair presentation of the results of the interim
      periods presented. Interim results are not necessarily indicative of results
      for
      the fiscal year. These financial statements should be read in conjunction with
      the Company’s audited financial statements for the year ended December 31, 2005,
      as set forth in the Company’s Annual Report on Form 10-K, filed with the
      Securities and Exchange Commission on March 31, 2006.





*Nature
      of Business* - The
      Company’s business involves purchasing and reselling prepaid telecommunication
      and other products (PINs) through a proprietary electronic point-of-sale
      activation system known as Q Xpress. The Company provides its products to end
      users throughout the United States as well as Canada, France, and the Bahamas.
      The Company is headquartered in Orem, Utah. During 2004, the Company acquired
      Point de Vente (PDV), a company located in Quebec, Canada through the
      acquisition of 100% of its stock.




*Consolidation* - The
      consolidated financial statements include the accounts of Q Comm International,
      Inc. and its wholly owned subsidiaries, Q Comm, Inc. and PDV. All intercompany
      balances and transactions have been eliminated in consolidation.





*Accounting
      Estimates* - The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities, the disclosures of
      contingent assets and liabilities at the date of the financial statements,
      and
      the reported amounts of revenues and expenses during the reporting periods.
      Actual results could differ from those estimates.





Key
      estimates in the accompanying consolidated financial statements include, among
      others, allowances for doubtful accounts, allowances for obsolete inventory,
      impairments of long-lived tangible and intangible assets, and accruals for
      litigation and contingencies.





*Definite-life
      intangible assets* -
      Definite-life intangible assets consists of the purchase of Sun Communication
      on
      February 13, 2006. The Company accounts for definite-life intangible assets
      in
      accordance with provisions of Statement of Financial Accounting Standards “SFAS”
No. 142, “Goodwill and Other Intangible Assets”. Intangible assets acquired
      in a purchase business combination and determined to have an indefinite useful
      life are not amortized, but instead are tested for impairment at least annually
      in accordance with the provisions of SFAS No. 142. Impairment losses
      arising from this impairment test, if any, are included in operating expenses
      in
      the period of impairment. SFAS No. 142 requires that definite intangible
      assets with estimable useful lives be amortized over their respective estimated
      useful lives, and reviewed for impairment in accordance with SFAS No. 144,
      Accounting for Impairment or Disposal of Long-Lived Assets. Definite-life
      intangible assets are being amortized over a straight-line basis.





*Net
      Loss Per Common Share* - The
      Company computes net loss per common 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 and warrants is dilutive. Because the Company incurred
      losses of $1,398,399 and $3,296,998 for the three months ended June 30, 2006
      and
      2005, respectively, and $3,200,911 and $4,878,586 for the six months ended
      June
      30, 2006 and 2005, respectively, the effect of options, warrants and convertible
      notes, totaling 2,846,993 and 2,523,243 equivalent shares, respectively, have
      been excluded from the net loss per common share computation because its impact
      would be antidilutive.





*Realization
      of assets -* The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America,
      which contemplates continuation of the Company as a going concern. However,
      the
      Company sustained losses of $1,398,399 and $3,296,998 for the three months
      ended
      June 30, 2006 and 2005, respectively, and sustained losses of $3,200,911 and
      $4,878,586 for the six months ended June 30, 2006 and 2005, respectively. As
      of
      June 30, 2006, the Company has an accumulated deficit of $31,590,387. The
      Company used, rather than provided, cash in its operations in the amounts of
      $2,461,665 for the six months ended June 30, 2006. At June 30, 2006, the Company
      had $1,629,999 of cash, $3,130,746 of working capital and $3,935,193 of
      stockholders’ equity. If the Company continues to incur losses or if operations
      continue to use cash at rates similar to the six months ended June 30, 2006,
      the
      Company may not have sufficient cash, working capital or net assets to sustain
      its operations. These conditions raise substantial doubt about the Company’s
      ability to continue as a going concern.




In
      view
      of the matters described in the preceding paragraph, the recoverability of
      a
      major portion of the recorded-asset amounts shown in the accompanying
      consolidated balance sheets is dependent upon the following:  continued
      operations of the Company, raising additional capital from investors,
      and succeeding in its future operations. The financial statements do not
      include any adjustments relating to the recoverability and classification of
      recorded-asset amounts or amounts and classification of liabilities that might
      be necessary should the Company be unable to continue as a going concern.




Unless
      the Company can significantly increase the number of terminals in use, it will
      continue to incur losses for the foreseeable future. The Company plans to
      allocate a significant amount of working capital to sales and marketing in
      an
      attempt to increase the number of terminals in use as well as developing new
      products and services with higher profit margins. The Company also plans on
      raising additional capital in 2006 to meet its operating needs. There is no
      assurance that these plans will be successful.


6
 Table
              of Contents


*Stock
      Options* - 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 9. Prior to January 1, 2006, the
      Company applied APB Opinion No. 25, “Accounting for Stock Issued to Employees”,
      and related Interpretations in accounting for awards made under the Company’s
      stock-based compensation plans. Under this method, compensation expense was
      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 its 2000, 2003 and 2004 defined stock options plans.
      The
      Company has adopted the provisions of SFAS No. 123R using the
      modified-prospective transition method and the disclosures that follow are
      based
      on applying SFAS No. 123R. Under this transition method, compensation expense
      recognized during the three and six months ended June 30, 2006 included: (a)
      compensation expense for all share-based awards granted prior to, but not yet
      vested as of January 1, 2006, and (b) compensation expense for all share-based
      awards granted on or after January 1, 2006. Accordingly, for the three and
      six
      month periods ended June 30, 2006, compensation cost of $210,044 and $438,059,
      respectively, has been recognized for grants of options to employees and
      directors in the accompanying statements of operations for the three and six
      month periods ended June 30, 2006. In accordance with the modified-prospective
      transition method, the Company’s financial statements for the prior year have
      not been restated to reflect, and do not include, the impact of SFAS 123R.
      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 2005
      consistent with the provisions of SFAS No. 123R, the Company's net loss and
      basic net loss per common share would have been increased to the pro forma
      amounts indicated below:





**For
                the Three**
              **Months****Ended**
              **June
                30, 2005**
            
            **For
                the Six**
              **Months
                Ended**
              **June
                30, 2005**Net
                loss, as reported
            
            $
            (3,296,998
            )
            $
            (4,878,586
            )Plus
                stock-based employee compensation expense included in reported net
                loss,
                net of related tax effects
            
            
            -
            
            
            -Less
                stock-based employee compensation expense determined under fair value
                based method for all awards, net of related tax effects
            
            
            (166,888
            )
            
            (350,331
            )Pro
                forma net loss
            
            $
            (
                3,463,886
            )
            $
            (5,228,917
            )Basic
                net loss per common share, as reported
            
            $
            (0.61
            )
            $
            (0.94
            )Pro
                forma net loss per common share
            
            $
            (0.64
            )
            $
            (0.96
            )




*Reclassifications* -
      Certain reclassifications to the 2005 amounts have been made to conform to
      the
      2006 presentation.





*Recently
      Enacted Accounting Standards*





In
      February 2006, the FASB issued SFAS No. 155, *Accounting
      for Certain Hybrid Financial Instruments — an amendment of FASB
      Statements No. 133 and 140.* SFAS No. 155 resolves issues addressed in SFAS No. 133
      Implementation Issue No. D1, *Application
      of Statement 133 to Beneficial Interests in Securitized Financial
      Assets.* SFAS No. 155
      will become effective for the Company’s fiscal year after September 15,
      2006. The impact of SFAS No. 155 will depend on the nature and extent of any
      new
      derivative instruments entered into after the effective date.





NOTE
      2 -
      PROPERTY AND EQUIPMENT




The
      following is a summary of property and equipment:





**June
                30,**
            
            **December
                31,****2006**
            
            **2005**Point
                of sale terminals and related items - in service
            
            $
            2,294,702
            
            $
            1,821,225Office
                and computer equipment
            
            
            591,236
            
            
            488,665Total
                cost of depreciable equipment
            
            
            2,885,938
            
            
            2,309,800Accumulated
                depreciation and amortization
            
            
            (2,225,910
            )
            
            (1,134,947
            )Property
                and equipment in service, net
            
            
            660,028
            
            
            1,174,943Point
                of sale terminals and related items - not placed in
                service
            
            
            79,160
            
            
            146,621Total
            
            $
            739,188
            
            $
            1,321,564






7
 Table
            of Contents


Point
      of
      sale terminals that are held by the Company as property and equipment will
      either be sold to customers or placed in service with the Company retaining
      ownership. The Company begins depreciating the terminals that it owns at the
      time they are shipped to the broker or retailer. Depreciation expense for the
      three months ended June 30, 2006, and 2005 was $322,452 and $216,741,
      respectively, and depreciation expense for the six months ended June 30, 2006,
      and 2005 was $665,645 and $442,457, respectively.




NOTE
      3 -
      DEFINITE-LIFE INTANGIBLE ASSETS




On
      February 16, 2006, the Company acquired certain assets from Sun
      Communications, including approximately 350 merchant locations and terminals
      for
      $150,000 in cash. In addition, the Company is obligated to pay an earn-out
      provision totaling up to $50,000 based on acceptance of certain performance
      criteria. The earn-out provision provides for a $15,000 prepayment that was
      made
      to Sun Communications on August 10, 2006 and the remainder, if earned, is due
      February 2007. As of June 30, 2006 the purchase price was allocated as
      follows:





Terminal
                equipment
            
            $
            14,605Customer
                locations
            
            
            135,395Total
            
            $
            150,000





Definite
      life intangible assets consist of the following as of June 30,
      2006:


Customer
                locations
            
            $
            135,395Less:
                accumulated depreciation
            
            
            (28,207
            )Total
            
            $
            107,188





The
      costs
      of these assets are being amortized over their remaining lives of two years.
      Amortization expense for the three months ended June 30, 2006 and 2005 amounted
      to $16,924 and $0, respectively, and amortization expense for the six months
      ended June 30, 2006 and 2005 amounted to $28,207 and $0, respectively. The
      Company estimates amortization expense will be as follows for the years ended
      December 31,





2006
            
            $
            62,0562007
            
            
            67,6982008
            
            
            5,641Total
            
            $
            135,395





NOTE
      4 -
      CAPITALIZED SOFTWARE DEVELOPMENT COSTS




Information
      related to capitalized software development costs is as follows:





Capitalized
                software development costs, net, December 31, 2005
            
            $
            283,762Capitalized
                software development costs, June 30, 2006
            
            
            2,649,360Accumulated
                amortization
            
            
            (2,548,986
            )Capitalized
                software development costs, net, June 30, 2006
            
            $
            100,374





Of
      the
      balance of capitalized software development costs at June 30, 2006,
      approximately $1,200,000 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 that was recorded during the
      time
      the project was under development.




The
      Company regularly tests capitalized software development costs for impairment
      in
      accordance with SFAS No.142. The Company uses the estimated future cash flows
      related to its capitalized software development costs and has determined that
      these costs were not impaired as of June 30, 2006. The Company amortizes
      capitalized software costs over a three-year period. During the three months
      ended June 30, 2006 and 2005, the Company recorded amortization expense of
      $0
      and $212,415, respectively, and for the six months ended June 30, 2006 and
      2005,
      the Company recorded amortization expense of $202,988 and $424,525,
      respectively.


8
 Table
            of Contents




NOTE
      5 -
      ACQUISITION





On
      February 16, 2006, the Company acquired certain assets from Sun
      Communications, including approximately 350 merchant locations and terminals.
      These assets were purchased for $150,000 in cash paid on February 16, 2005.
      In addition, the Company is obligated to pay an earn-out provision totaling
      up
      to $50,000 based on acceptance of certain performance criteria. The earn-out
      provision provides for a $15,000 prepayment that was made to Sun Communications
      on August 10, 2006 and the remainder, if earned, is due February 2007.




NOTE
      6 -
      RELATED PARTY OBLIGATIONS





In
      July
      2005, the Company received $614,000 in cash from a major shareholder, who at
      the
      time was the Company’s Chairman of the Board of Directors, and entered into a
      written agreement, dated July 11, 2005, setting forth the terms of the debt
      financing. This debt arrangement is evidenced by a note bearing interest at
      an
      annual rate of 5% and is payable in full on or before July 7, 2007. The
      Company issued to this shareholder/director a warrant to purchase 230,000 shares
      of common stock that is exercisable for a period of five years at a price of
      $3.51 per share. The proceeds from the debt financing were allocated to the
      financial instruments issued, based upon their fair values, and resulted in
      an
      allocation of $315,240 to the note and $298,760 to the warrants.





The
      $298,760 fair value of the warrant was recorded as a discount against the note.
      For the three months ended June 30, 2006, the Company recorded related party
      interest expense of $46,087 on the note, which includes $38,412 related to
      the
      amortization of the discount and $7,675 in accrued interest expense. For the
      six
      months ended June 30, 2006, the Company recorded related party interest expense
      of $92,601 on the note, which includes $77,251 related to the amortization
      of
      the discount and $15,350 in accrued interest expense.




NOTE
      7 -
      LEASE OBLIGATIONS





Certain
      computer equipment and point of sale terminals are leased under capital lease
      arrangements and are presented in the accompanying consolidated balance sheet
      as
      property and equipment. At June 30, 2006, the total carrying cost of equipment
      that is held under capital leases and the related accumulated amortization
      was
      $132,111.





As
      of
      June 30, 2006, total future minimum lease payments for capital leases, including
      interest and other costs, are as follows:




**Year
                Ending December 31:**2006
            
            $
            90,4772007
            
            
            10,6302008
            
            
            10,6302009
            
            
            10,6302010
            
            
            9,744Total
            
            
            132,111Less
                interest and other costs
            
            
            (11,196
            )Present
                value of future minimum lease payments
            
            
            120,915Less
                current portion
            
            
            (87,056
            )Long-term
                portion
            
            $
            33,859




The
      Company has one capital lease arrangement which requires the Company to maintain
      a letter of credit equal to 50% of the original lease amount during the term
      of
      the lease. The Company secured the letter of credit with a restricted cash
      account at a financial institution, totaling approximately $189,000 at June
      30,
      2006.





The
      Company is committed under non-cancelable operating leases for office space
      and
      office equipment. Rent expense paid for the three months ended June 30, 2006
      and
      2005 was approximately $69,219 and $31,589, respectively. Rent expense paid
      for
      the six months ended June 30, 2006 and 2005 was approximately $112,827 and
      $56,730, respectively. The Company’s future minimum rental payments under
      operating leases at June 30, 2006 are as follows:





**Year
                Ending December 31:**2006
            
            $
            111,0822007
            
            
            206,9582008
            
            
            219,7162009
            
            
            29,855Total
            
            $
            567,611




9
 Table
            of Contents
 NOTE
        8 -
        LITIGATION AND CONTINGENCIES
  *Q
        Comm International, Inc. v. The Phone Store of Missouri, LLC and Kevin* *Montgomery*.
        In April 2005, the Company filed an action against a PIN provider, due to
        approximately $1 million in deactivated PINs that the Company received in
        the fourth quarter of 2004.  Subsequent to June 30, 2005, the Company
        determined that this obligation was approximately $1.5 million and
        includes, in addition to deactivated PINs, losses resulting from handsets
        paid for by the Company that were to be sold by the PIN
        provider.  The PIN provider agreed to sell the handsets in
        order to reimburse the Company for both the handset purchase
        price and the PIN losses.  However, the PIN provider did not
        reimburse the Company.  The Company is proactively taking the
        appropriate legal action to recover the amount due.  However, there is
        no assurance of repayment, and management recorded an allowance against the
        full
        amount of the receivable in the fourth quarter of 2004.
  NOTE
        9 -
        STOCK OPTIONS AND WARRANTS





**Stock
      Options -** The
      Company is authorized to issue stock options under three existing stock option
      plans approved by stockholders. The 2000 plan (133,333 shares), the 2003 plan
      (100,000 shares) and the 2004 plan (500,000 shares) allow for up to 733,333
      shares to be issued under substantially similar terms. The fair value of each
      of
      the Company’s stock option awards is estimated on the date of grant using a
      Black-Scholes option-pricing model that uses the assumptions noted in the table
      below. The fair value of the Company’s stock Option awards is expensed on a
      graded vesting straight-line basis over the vesting period of the options,
      which
      is generally between zero to three years. Expected volatility is based on an
      average of historical volatility of the Company’s stock. The risk-free interest
      rate for periods within the contractual life of the stock option award is based
      on the yield curve of a zero-coupon U.S. Treasury bond on the date the award
      is
      granted with a maturity equal to the expected term of the award. the Company
      uses historical data to estimate forfeitures within its valuation model. The
      expected term of awards granted is derived from historical experience under
      the
      Company’s stock-based compensation plans and represents the period of time that
      awards granted are expected to be outstanding.




The
      significant weighted average assumptions relating to the valuation of the
      Company’s Stock Options for the six months ended June 30, 2006, and 2005, were
      as follows:





**For
                the Six Months**
              **Ended
                June 30,****2006**
            
            **2005**Dividend
                yield
            0%
            
            0%Expected
                life
            10
                years
            
            10
                yearsExpected
                volatility
            86%
            
            113%Risk-free
                interest rate
            4.6%
            
            4.3%





A
      summary
      of the status of options granted at June 30, 2006, and changes during the six
      months then ended are as follows:




**For
                the Six Months Ended**
              **June
                30, 2006****Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Term**
            
            **Aggregate
                Intrinsic**
              **Value**Outstanding
                at beginning of period
            
            
            637,334
            
            $
            4.72
            
            
            7.7
                yearsGranted
            
            
            145,000
            
            
            2.22Exercised
            
            
            -
            
            
            -Forfeited
            
            
            (45,875
            )
            
            4.29Expired
            
            
            (37,125
            )
            
            5.64Outstanding
                at end of period
            
            
            699,334
            
            $
            4.18
            
            
            7.6
                years
            
            $
            0Vested
                and expected to vest in the future
            
            
            685,334
            
            $
            4.18
            
            
            7.6
                years
            
            $
            0Exercisable
                at end of period
            
            
            331,417
            
            $
            4.98
            
            
            7.0
                years
            
            $
            0Weighted
                average fair value of options granted
            
            
            145,000
            
            
            1.92





The
      Company had 465,003 non vested options at the beginning of the period with
      a
      weighted average grant date fair value of $3.56. At June 30, 2006 the Company
      had 367,916 non vested options with a weighted average grant date fair value
      of
      $2.99 resulting in unrecognized compensation expense $586,930 which is expected
      to be expensed over a weighted-average period of 0.8 years which is expected
      to
      vest and be expensed.





The
      total
      intrinsic value of options exercised during the six months ended June 30, 2006
      and 2005 was $0 and $21,800, respectively. Intrinsic value is measured using
      the
      fair market value at the date of exercise (for shares exercised) or at June
      30,
      2006 and 2005 (for outstanding options), less the applicable exercise price.





During
      the six month periods ended June 30, 2006 and 2005, the Company received $0
      and
      $589,763, respectively, upon the exercise of awards. The Company realized
      no tax benefit due to the exercise of options as the Company had a loss for
      the
      period and historical net operating loss carryforwards.


10
 Table
            of Contents


**Warrants** - The
      Company has issued warrants to non-employees under various agreements expiring
      through November 2008. A summary of the status of warrants granted at June
      30,
      2006, and changes during the period then ended is as follows:




**For
                the Six Months Ended**
              **June
                30, 2006****Shares**
            
            **Weighted
                Average**
              **Exercise
                Price**Outstanding
                at beginning of period
            
            
            2,148,659
            
            $
            8.61Granted
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Forfeited
            
            
            -
            
            
            -Expired
            
            
            (1,000
            )
            
            6.00Outstanding
                at end of period
            
            
            2,147,659
            
            $
            8.61Exercisable
                at end of period
            
            
            2,147,659
            
            $
            8.61




A
      summary
      of the status of warrants outstanding at June 30, 2006 is presented
      below:





**Options
                Outstanding**
            
            **Options
                Exercisable****Range
                of**
              **Exercise
                Prices**
            
            **Number**
              **Outstanding**
            
            **Weighted
                Average Remaining Contractual Life**
            
            **Weighted
                Average Exercise Price**
            
            **Number**
              **Exercisable**
            
            **Weighted
                Average Exercise Price**$3.51
            
            230,000
            
            0.59
                years
            
            $         
                3.51
            
            230,000
            
            $         
                3.515.25
                - 7.80
            
            358,095
            
            1.45
                years
            
            6.82
            
            358,095
            
            6.829.75
            
            1,544,231
            
            1.96
                years
            
            9.75
            
            1,544,231
            
            9.7511.25
                - 13.50
            
            15,333
            
            1.19
                years
            
            12.03
            
            15,333
            
            12.03$3.51
                - $ 13.50
            
            2,147,659
            
            
            
            $         
                8.61
            
            2,147,659
            
            $          8.61





At
      June
      30, 2005, the Company had 1,265,000 outstanding warrants to purchase shares
      of
      common stock at $9.75 per share that were publicly traded.





A
      summary
      of all stock options and warrants outstanding at June 30, 2006 is presented
      below:




**Compensatory**
            
            **Non-Compensatory**
            
            **Total**Stock
                options issued to employees and board members under stock option
                plans
            
            
            686,000
            
            
            -
            
            
            686,000Stock
                options issued to employees outside stock option plans
            
            
            13,334
            
            
            -
            
            
            13,334Total
            
            
            699,334
            
            
            -
            
            
            699,334Warrants
                issued to non-employees
            
            
            330,000
            
            
            1,817,659
            
            
            2,147,659Total
                options and warrants outstanding
            
            
            1,029,334
            
            
            1,817,659
            
            
            2,846,993




NOTE
      10 -
      CONCENTRATION OF REVENUES





The
      Company's concentration of revenue by broker, product and MVNO for the three
      and
      six months ended June 30, 2006 and 2005 included:





**For
                the Three Months Ended**
              **June
                30, 2006**
            
            **For
                the Six Months Ended**
              **June
                30, 2006****2006**
            
            **2005**
            
            **2006**
            
            **2005**Top
                Broker
            
            
            8.4%
            
            
            11.4%
            
            
            9.2%
            
            
            8.7%Wireless
                Products
            
            
            94.7%
            
            
            95.7%
            
            
            93.0%
            
            
            94.4%Top
                MVNO(1)
            
            
            32.6%
            
            
            39.1%
            
            
            32.8%
            
            
            36.6%







(1)
      “MVNO” is defined as a “Mobile Virtual Network Operator”.






11
 Table
          of Contents






NOTE
      11 -
      EMPLOYMENT AGREEMENTS





The
      Company has an employment agreement with its President/CEO, which expires on
      December 31, 2006. The agreement may be extended for successive one-year
      periods. If the Company terminates the agreement without cause, or if the
      President/CEO terminates the agreement for good reason, the President/CEO is
      entitled to receive the greater of one year’s salary, plus any target cash bonus
      he would be eligible to receive during that year or payment through the
      expiration date of the agreement. In addition, any stock options would vest
      immediately. The President/CEO was also granted an option to purchase 150,000
      shares of common stock at the $3.59 market price per share on the date of grant
      in January 2005. Subsequent to the employment agreement, the President/CEO
      was
      granted an option to purchase an additional 20,000 shares of common stock at
      the
      $3.30 market price per share on the date of grant in August 2005, and an
      additional 30,000 shares of common stock at the $2.22 market price per share
      on
      the date of grant in February 2006.





The
      Company hired a new Chief Financial Officer on May 31, 2005. On
      August 18, 2005, the Company entered into an employment agreement with its
      Chief Financial Officer, which expires on December 6, 2006. The agreement
      may be extended for successive one-year periods. If the Company terminates
      the
      agreement without cause, or if the CFO terminates the agreement for good reason,
      the CFO is entitled to receive the greater of one year’s salary, plus any target
      cash bonus he would be eligible to receive during that year or payment through
      the expiration date of the agreement. In addition, any stock options would
      vest
      immediately. The CFO was granted an option to purchase 60,000 shares of common
      stock at the $3.30 market price per share on the date of grant in August 2005,
      and an additional 40,000 shares of common stock at the $2.22 market price per
      share on the date of grant in February 2006.




NOTE
      12 -
      BUSINESS SEGMENT INFORMATION





The
      Company predominately operates in the United States and Canada. During the
      three
      months ended March 31, 2006, the Company sold a total of 4,100 terminals to
      a customer in the United Arab Emirates. The Company currently has service bureau
      revenues from customers in the United Arab Emirates, France and the Bahamas,
      which has historically represented less then 1% of revenue. The following table
      represents the Company’s revenue by geographic segment for the three and six
      months ended June 30, 2006 and 2005.





**For
                the Three Months Ended**
              **June
                30, 2006**
            
            **For
                the Six Months Ended**
              **June
                30, 2006****2006**
            
            **2005**
            
            **2006**
            
            **2005**United
                States
            
            $
            10,802,403
            
            $
            12,201,331
            
            $
            22,300,871
            
            $
            19,745,330Canada
            
            
            1,792,930
            
            
            1,085,185
            
            
            2,994,073
            
            
            1,980,402Other
            
            
            32,838
            
            
            36,176
            
            
            732,487
            
            
            74,220Total
            
            $
            12,628,171
            
            $
            13,322,692
            
            $
            26,027,431
            
            $
            21,799,952























12
 Table
          of Contents






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





*Pursuant
      to the “safe harbor” provisions of the Private Securities Litigation Reform Act
      of 1995, readers of this report are advised that this document contains both
      statements of historical facts and forward-looking statements. Forward looking
      statements are subject to risks and uncertainties, which could cause our actual
      results to differ materially from those indicated by the forward-looking
      statements because of the risk factors that are identified in the Company’s most
      recent annual and quarterly report, as filed with the Securities and Exchange
      Commission . Examples of forward-looking statements include, but are not limited
      to, the following: (i) projections of revenues, income or loss, earnings
      per share, capital expenditures, dividends, capital structure and other
      financial items; (ii) statements regarding our plans and objectives
      including product enhancements, or estimates or predictions of actions by
      customers, suppliers, competitors or regulatory authorities;
      (iii) statements of future economic performance; and (iv) statements
      of assumptions underlying other statements.*





*Overview*





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





Q
      Comm’s
      business consists of the purchase and resale of a wide variety many types of
      prepaid telecommunication and other prepaid products and services using a
      proprietary electronic point-of-sale system called Q Xpress. Q Comm also
      supports VeriFone terminals, and in the future, plans to support other third
      party commercially available terminals for merchant processing. The Q Xpress
      system includes either the Q Xpress 200 terminals, or one of a variety of
      third-party merchant processing terminals, a 24x7 data center, and a
      comprehensive transaction processing platform that manages, operates and
      maintains the system, and that enables the terminals to communicate with the
      data center.





We
      intend
      to expand our historical business while expanding our product line to include
      a
      broad range of other prepaid and financial products and services, and to provide
      transaction processing and information management services to other vendors
      of
      prepaid products, both in the United States and abroad. We are currently
      evaluating handset distribution and PIN wholesaling businesses. Both of these
      represent incremental opportunities to increase sales revenue with higher
      margins while continuing to expand our distribution network and add new brokers.





The
      Q
      Xpress 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 potential
      problems, including loss, theft, inventory financing and management issues.
      The
      Q Xpress 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 a terminal, a retail merchant can sell wireless
      telephone time, traditional long distance service or other telephone products,
      add value to a prepaid debit card, make electronic bill payments, and sell
      other
      prepaid products. In general, the prepaid products are sold in the form of
      personal identification numbers, or “PINs,” that the customer can use to add
      time to a prepaid cellular handset, make long distance calls or add funds to
      a
      debit card by calling the provider of the product and providing the PIN. The
      consumer pays for the product or service by paying the retail establishment
      in
      which the terminal is located. The terminal records the transaction and sends
      the relevant information to our data center where it is processed and accounting
      and transaction records are generated. Revenue from these purchases is divided
      among the retail merchant, the broker that placed the terminal with the retail
      merchant, the provider of the prepaid product, and Q Comm.




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. As a
      distributor of prepaid products in this market, we purchase PINs from national
      and regional telecommunication carriers and distribute these through our
      established network of retail outlets, such as convenience stores, wireless
      product stores, check cashing stores, grocery stores and discount stores. The
      prepaid transaction market is rapidly expanding into various types of
      non-telecommunications products, such as gift and loyalty cards, prepaid debit
      cards, bill payment and money transfer. In addition to distributing traditional
      telecommunication products, our system is currently used to provide many of
      these products as well.





In
      the
      first quarter of 2004, we announced that we had modified our software to run
      on
      a VeriFone 3700 series terminal. We began beta testing in March 2004 and
      announced the commercial launch in the second quarter of 2004. This terminal
      is
      capable of providing both our prepaid application, which calls into our data
      center and functions much the same as our Q Xpress 200 terminal, and standard
      debit/credit card processing through the merchant’s processor for such
      transactions. The ability to offer our prepaid solution to the market through
      this alternative hardware option provides us with an opportunity to expand
      our
      market share. While the VeriFone terminal does not offer as many options as
      our
      Q Xpress terminal for selling prepaid products, it is an excellent solution
      for
      customers who prefer to have only one terminal in their retail establishment.
      In
      2006, we plan to further expand the devices through which we distribute prepaid
      products, such as additional debit/credit terminal models, and PC based
      point-of-sale systems. We believe that expanding the number of devices that
      can
      connect to our data center and sell prepaid products will provide access to
      additional customers and increased revenue in the future.





*Sources
      of Revenue*





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






13
 Table
          of Contents





Our
      standard business model is referred to as our broker model. In this model,
      we
      provide a full range of products and services to our customers, including our
      product library, PIN management, transaction processing, and customer service
      to
      the retail locations. Revenue is recognized on a “gross” basis for our prepaid
      products and a “net” basis for all consigned products. Commissions and fees paid
      to brokers and retailers are recorded as distribution commission and fees.





Beginning
      in 2003, we began offering our service-bureau business model. Under this model,
      our customers license our data center software and purchase Q Xpress terminals
      from us. These customers are responsible for functions such as inventory
      management, product ownership, report generation, and ACH funds transfer. Our
      agreements with these customers also provide ongoing fees for software
      maintenance and transactions processed through their system. On an on-going
      basis, we expect service bureau to be a diminishing portion of our business
      as a
      percentage of total revenue.




In
      2003,
      we began generating revenues from customers in Canada, France, the Bahamas,
      and
      Australia. In early 2006 we established a service bureau in the United Arab
      Emirates. Historically, revenues from international operations have, on average,
      accounted for less than 10% of annual revenues. For the three months ended
      June
      30, 2006 international operations accounted for 14.5% of total revenue. The
      increase in international revenues was attributable to growth in Canadian
      operations, which for the three months ended June 30, 2006 accounted for 14.2%
      of total revenues. For the six months ended June 30, 2006, international sales
      accounted for 14.3% of total revenue. Canadian operations accounted for 11.5%
      of
      total revenue, the 4,100 terminals sold to a service bureau in the United Arab
      Emirates accounted for 2.5% of total revenue, and sales from other international
      service bureaus accounted for 0.4% of total revenue. Given that prepaid wireless
      is much more widely accepted in Europe, Asia and Latin America than it is in
      North America, we will continue to explore new international
      opportunities.





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





**For
                the Three Months Ended**
            ****
            **For
                the Three Months Ended**
            ********
            ****
            **June
                30, 2006**
            ****
            **June
                30, 2005****Amount**
            ****
            **Percentage**
            ****
            **Amount**
            ****
            **Percentage**Prepaid
                Wireless
            
            $
            12,005,616
            
            
            95.1%
            
            $
            12,756,349
            
            
            95.7%Terminals
                Sales
            
            
            38,490
            
            
            0.3%
            
            
            -
            
            
            0.0%Prepaid
                Long Distance
            
            
            329,938
            
            
            2.6%
            
            
            181,904
            
            
            1.4%Fees
            
            
            126,728
            
            
            1.0%
            
            
            177,755
            
            
            1.3%Service
                Bureau
            
            
            29,156
            
            
            0.2%
            
            
            86,069
            
            
            0.6%Prepaid
                Debit Card
            
            
            12,489
            
            
            0.1%
            
            
            33,025
            
            
            0.2%Bill
                Pay
            
            
            24,259
            
            
            0.2%
            
            
            14,949
            
            
            0.1%Other
                Revenue
            
            
            61,495
            
            
            0.5%
            
            
            72,641
            
            
            0.5%Total
            
            $
            12,628,171
            
            
            100.0%
            
            $
            13,322,692
            
            
            100.0%





**For
                the Six Months Ended**
            ****
            **For
                the Six Months Ended**
            ********
            ****
            **June
                30, 2006**
            ****
            **June
                30, 2005****Amount**
            ****
            **Percentage**
            ****
            **Amount**
            ****
            **Percentage**Prepaid
                Wireless
            
            $
            24,216,840
            
            
            93.0%
            
            $
            20,578,606
            
            
            94.4%Terminals
                Sales
            
            
            759,613
            
            
            2.9%
            
            
            26,380
            
            
            0.1%Prepaid
                Long Distance
            
            
            497,214
            
            
            1.9%
            
            
            253,585
            
            
            1.2%Fees
            
            
            258,447
            
            
            1.0%
            
            
            268,740
            
            
            1.2%Service
                Bureau
            
            
            49,366
            
            
            0.2%
            
            
            137,355
            
            
            0.6%Prepaid
                Debit Card
            
            
            32,304
            
            
            0.1%
            
            
            70,580
            
            
            0.3%Bill
                Pay
            
            
            42,387
            
            
            0.2%
            
            
            14,949
            
            
            0.1%Other
                Revenue
            
            
            171,260
            
            
            0.7%
            
            
            449,757
            
            
            2.1%Total
            
            $
            26,027,431
            
            
            100.0%
            
            $
            21,799,952
            
            
            100.0%





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




*Terminal
      sales.* Terminal
      Sales includes the sale of proprietary and third party terminal





*Prepaid
      long distance.* P repaid
      long distance revenue continues to be a focus of the Company. Our marketing
      analysis suggests that we can increase prepaid long distance revenues by
      improving our product offering and by providing informative and attractive
      point
      of sale advertising materials to our brokers and merchants.






14
 Table
          of Contents





*Fees* .
      Fee
      revenue is earned on terminal rentals and performance fees. Performance fees
      include fees charged when weekly rentals from a terminal fall below the
      agreed-upon minimum level and other miscellaneous fees. We are seeing increased
      pricing pressures and discounting with fees due to competitive factors. We
      anticipate that competition will continue to force lower fee revenue as a
      percentage of revenue in the future.





*Bill
      pay* .
      Bill
      Pay, or “walk-in payment services,” is a new product category for the Company
      and represents a growing segment of our business. Q Comm receives a transaction
      fee for each walk-in bill payment processed through its system.  By
      offering walk-in bill pay services through our network, we provide retailers
      with a growing revenue source and a means of attracting more store traffic,
      repeat customers and increasing customer loyalty.





*Prepaid
      debit cards.* Prepaid
      debit cards represent a growing segment of our business. This product allows
      a
      user to load funds onto a stored value card that will then function the same
      as
      a typical debit card. We generate revenues by receiving a share of the load
      fee
      charged to the consumer. We currently offer two products that bear the
      MasterCard logo. We believe that the convenience of a stored value card for
      the
      cash-based consumer and increased market awareness of this product will result
      in increased revenues to us in the future.




*Service
      bureau.* We
      first
      began setting up service-bureau customers in 2003 and we acquired our
      service-bureau customer in Canada in July 2004. The overall service-bureau
      revenue model is diminishing as a percentage of total revenue, but provides
      higher margins than our traditional broker model since there are few direct
      costs to offset against the fee revenues.





*Other
      revenue.* Other
      revenue includes thermal card, point of purchase materials, gift and loyalty
      card sales, wireless phone features, home dial tone, wholesale products and
      prepaid internet sales.





*Analysis
      of Margins*




Historically,
      our results of operations have been characterized by low-margin products. Under
      our broker model, we record the entire value of the transaction as revenues.
      Our
      cost of prepaid PIN sales and fees include the amount we pay for the product.
      Our cost of prepaid PIN sales and fees do not include the fees and commissions
      we pay the broker and the retailer who participated in the sale. Several of
      these key measures describing costs and margins are shown in the table below
      for
      the three and six months ended June 30, 2006 and June 30, 2005.




**Three
                Months Ended**
            
            **Six
                Months Ended****June 30,**
            
            **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Total
                sales and revenue
            
            $
            12,628,171
            
            $
            13,322,692
            
            $
            26,027,431
            
            $
            21,799,952Cost
                of prepaid PIN sales and fees
            
            
            10,501,205
            
            
            12,533,184
            
            
            21,240,955
            
            
            19,406,429Percentage
                of revenue
            
            
            83.2%
            
            
            94.1%
            
            
            81.6%
            
            
            89.0%Cost
                of product sales
            
            $
            82,269
            
            $
            3,315
            
            $
            887,369
            
            $
            20,265Percentage
                of revenue
            
            
            0.7%
            
            
            0.0%
            
            
            3.4%
            
            
            0.1%Distribution
                commissions and fees
            
            $
            1,715,326
            
            $
            2,335,209
            
            $
            3,521,107
            
            $
            4,167,303Percentage
                of revenue
            
            
            13.6%
            
            
            17.5%
            
            
            13.5%
            
            
            19.1%Gross
                Profit (Loss)
            
            $
            329,371
            
            $
            (1,549,016
            )
            $
            378,000
            
            $
            (1,794,045
            )Percentage
                of revenue
            
            
            2.6%
            
            
            (11.6)%
            
            
            1.5%
            
            
            (8.2)%Terminal
                depreciation and software amortization
            
            $
            322,452
            
            $
            429,156
            
            $
            868,633
            
            $
            866,982Percentage
                of revenue
            
            
            2.6%
            
            
            3.2%
            
            
            3.3%
            
            
            4.0%Specific
                costs
            
            
            -
            
            
            250,000
            
            
            -
            
            
            530,005Percentage
                of revenue
            
            
            0.0%
            
            
            1.9%
            
            
            0.0%
            
            
            2.4%Adjusted
                gross profit excluding terminal depreciation and amortization, and
                specific costs
            
            $
            651,823
            
            $
            (869,860
            )
            $
            1,246,633
            
            $
            (397,058
            )Percentage
                of revenue
            
            
            5.2%
            
            
            (6.5)%
            
            
            4.8%
            
            
            (1.8)%




The
      increase in gross profit from the three months ended June 30, 2006 to the
      comparable period in 2005 was primarily driven by the following: (i) $1,266,704
      in terminal impairment and fixed asset write-down charges incurred during the
      three months ended June 30, 2005; (ii) a PIN inventory write-down of
      approximately $250,000 incurred for the three months ended June 30, 2005; (iii)
      an increase in the sale of higher margin consigned products, which
      represented 3.3% and 2.7% of revenue for the three months ended June 30, 2006
      and 2005, respectively; (iv) reduced distribution commissions and fees; and
      (v)
improved
      PIN purchase rates. Alternatively, our gross profit percentage was
      negatively impacted by the reduction of our higher-margin fees and service
      bureau sales.






15
 Table
          of Contents





The
      increase in gross profit from the six months ended June 30, 2006 to the
      comparable period in 2005 was primarily driven by the following; (i) $1,266,704
      in terminal impairment and fixed asset write-down charges incurred during the
      three months ending June 30, 2005; (ii) a $280,005 charge incurred in the period
      ended March 31, 2005 for 9,000 handsets a vendor took possession of or sold
      and
      did not reimburse the Company; (iii) a PIN inventory write-down of approximately
      $250,000 incurred for the three months ended June 30, 2005, (iv)  reduced
      distribution commissions and fees; and (v) improved PIN purchase rates.
 Alternatively, our gross profit percentage was impacted by the reduction
      of our higher-margin consigned product sales. Consigned products represented
      3.0% and 3.5% of net revenue for the six months ended June 30, 2006 and 2005,
      respectively. Our gross profit percentage was negatively impacted by the
      reduction of our higher-margin fees and service bureau sales. Because of our
      thin margins, a minor change in the price that we pay for products has a
      substantial effect on our net income or loss if we are not able (or, in the
      case
      of price decreases, are 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. The amount of margin available to each
      participant in the distribution chain can be affected by various factors, such
      as the service provided, the risk assumed by the participant, and the volume
      and
      payment terms on which the participant can purchase product. Historically,
      we
      have purchased product from a reseller at a markup from the supplier price.
      As
      our business expands, we believe that there may be opportunities to increase
      margins by purchasing a greater percentage of our products directly from the
      carrier and by purchasing in greater volume. However, the telecommunications
      business in general, and the wireless business in particular, are changing
      rapidly and it is difficult to anticipate potential changes that may occur
      in
      the distribution chain. Thus, there is no assurance that we will be successful
      in realizing these opportunities.




Substantially
      all of our revenues are collected through automated clearinghouse, or ACH,
      transactions initiated by us within 72 hours of the sale of the product. In
      an
      ACH transaction, funds are electronically transferred from the merchants’
accounts to our accounts. In most cases, our brokers are responsible for any
      unpaid ACH transactions from retailers, which reduces the risk of bad debt
      expense from our product sales through terminals. We generate receivables from
      sales of terminals and from license fees and consulting services provided to
      assist service-bureau customers in setting up and operating data centers.





*Operating
      Metrics*





We
      monitor our business and measure our performance in a number of ways. Several
      of
      these key measures, including our adjusted average monthly revenue per U.S.
      active terminal, are shown in the table below for the last four quarters. We
      note that our average monthly revenue per active terminal increased to $45
      for
      the three months ended June 30, 2006, from $38 for the three months ended
      March 31, 2006.  For the three months ended June 30, 2006, our
      contribution margin was $623,715, an increase of $131,965 compared with the
      three months ended March 31, 2006. This increase is attributable to improved
      PIN
      purchase rates, product mix impacts, reduced distribution commissions and
      fees, and an increase in the sale of consigned products. For the three months
      ended June 30, 2006, we realized 382 net terminal deactivations. This decrease
      was primarily driven by two factors: (i) terminals were activated with one
      large
      customer in the three months ended March 31, 2006 that have a low
      transaction volume; and, (ii) a number of terminals related to this
      customer were categorized as “inactive” during the three months ended June 30,
      2006.





We
      plan
      to improve our contribution margin through the following: (i) improving our
      economies of scale by increasing the sales of prepaid PIN products and fee
      sales; (ii) increasing sales of higher-margin financial services products;
      (iii) increasing sales of PINs by establishing more direct relationships
      with carriers; (iv) improving the terms of pricing agreements with MVNOs
      and brokers; and (v) expanding our product suite to potentially include
      distributing handsets.  In addition, the Company is currently evaluating
      handset distribution and wholesaling PIN businesses which would further improve
      our contribution margin.




**Broker
                Model:**
            
            **For
                the Three Months Ended June 30,**
              **2006**
            
            **For
                the Three Months Ended March 31,**
              **2006**
            
            **For
                the Three Months Ended****December 30,
                2005**
            
            **For
                the Three Months Ended September 30, 2005****(in
                dollars, except for terminal figures)**Net
                active terminals (1)
            
            
            (382
            )
            
            1,007
            
            
            (69
            )
            
            536Total
                active terminals
            
            
            4,434
            
            
            4,816
            
            
            3,809
            
            
            3,878Average
                active terminals (2)
            
            
            4,625
            
            
            4,313
            
            
            3,844
            
            
            3,610**Average
                monthly revenue per unit (ARPU) calculation:**Total
                sales and revenue less product sales and service bureau
                revenue
            
            
            12,547,410
            
            
            12,544,706
            
            
            11,677,055
            
            
            12,055,181Less
                cost of prepaid PIN sales and fees, and distribution commissions
                and fees,
                excluding depreciation and amortization allocable to cost of sales,
                specific charges, and contribution margin derived from business outside
                the United States
            
            
            11,923,695
            
            
            12,052,956
            
            
            11,232,221
            
            
            11,481,198Total
                contribution margin
            
            
            623,715
            
            
            491,750
            
            
            444,834
            
            
            573,983**Average
                monthly revenue per active terminal**
            
            
            **45**
            
            
            **38**
            
            
            **39**
            
            
            **53**




(1)
            A
                terminal is defined as active when it logs into the Q Control system
                for
                the first time from a U.S. retail site and is defined as "inactive"
                if the
                terminal has not completed a transaction over a 120 day training
                period.  "Inactive" terminals are not included in the definition of
                active terminals.




(2)
            Average
                activat terminals includes the average of the total activated terminals
                at
                the end of the current and prior
                quarter.


____________________________






16
 Table
          of Contents





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




Our
      strategy with average revenue per terminal is to focus our sales efforts on
      quality brokers and retail chains with established prepaid sales histories,
      maintain or better the pricing in our contracts with new brokers, gain better
      discounts from suppliers by securing direct relationships and buying larger
      quantities, and continue to charge rental and minimum performance fees on all
      terminals placed.





*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 U.S.
      generally accepted accounting principles. 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 position and results of operations, and that require the most
      subjective judgment.




*Revenue
      recognition.* We
      use
      two models to generate revenues: the broker model and the service-bureau model.
      Under the broker model, which has been and continues to be the dominant
      alternative, we sell our prepaid products through third-party retail locations.
      Revenue is recognized at the time products are sold. Sales of 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, categorized as “prepaid PIN sales” on the consolidated
      statements of operations and comprehensive loss, are accounted for at “gross”
since the Company meets the requirements specified by Securities and Exchange
      Commission Staff Accounting Bulletin No. 104 (SAB 104) and Emerging Issues
      Task
      Force Issue No. 99-19 (EITF 99-19).





In
      cases
      where the Company does not own the product sold and another entity retains
      such
      risk and reward of product ownership or where certain other requirements of
      SAB
      104 or EITF 99-19 are not met, the Company records revenues on a “net” basis.
      Revenue recorded on a “net” basis is categorized as “prepaid PIN fees” on the
      consolidated statements of operations and comprehensive loss.




We
      use
      the service-bureau model primarily with international customers and is a
      diminishing part of our business. In this model, the Company licenses its
      proprietary software and sells its point-of-sale terminals. The customer is
      responsible for operation of the system and providing services to its
      retail stores. We receive an ongoing transaction fee for all sales through
      the
      system, which is recorded on a “net” basis.




*Cost
      of prepaid PIN sales and fees* .
      Cost of
      prepaid sales and fees ** consists
      primarily of the costs of the prepaid telecommunication and other miscellaneous
      products sold at retail and terminals sold to customers, depreciation on
      terminals in use and amortization expense on capitalized software. The full cost
      of the product, as well as all direct costs associated with the sale of the
      product, is recorded at the time of sale.





During
      January 2005, a vendor sold or took possession of approximately 9,000 handsets
      without reimbursing the Company.  We expensed these missing handsets
      in the first quarter of 2005 and recorded a receivable from the vendor, and
      recorded a reserve totaling $285,000 during the three months ended June 30,
      2005. We are pursuing litigation against this vendor (see Item 3—“Legal
      Proceedings” for a more detailed discussion).




*Cost
      of product sales.* Cost of
      product sales includes the cost of terminals sold.





*Distribution
      commissions and fees.* Distribution
      commissions and fees include fees paid to brokers and other intermediaries
      and
      transaction processing fees paid to a third party.





*Software
      development costs.* We
      capitalize software development costs incurred to develop certain of the
      Company’s products and services in accordance with Statement of Position 98-1,
“Accounting for the Costs of Computer Software Developed or Obtained for
      Internal Use” (SOP 98-1). 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-lived
      intangible asset and is amortizing this asset over its three-year estimated
      useful life.




*Stock
      options and warrants.* In
      December 2003, 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”. This Statement amends SFAS No. 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 No. 148 amends the disclosure requirements of SFAS No. 123 to require
      prominent disclosures in both annual and interim financial statements. 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 Financial 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, officers and directors. 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 option or warrant.






17
 Table
          of Contents





Our
      stock
      option plans provide for stock-based employee compensation, including the
      granting of stock options, to certain key employees. The Company accounts for
      grants to employees and directors under its stock option 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.





*Income
      taxes.* At
      June
      30, 2006, we had an accumulated net operating loss for federal and state
      corporate income tax purposes of approximately $24.1 million. Because our
      ability to use this net operating loss depends on our ability to earn future
      taxable income, and because management has determined that the deferred tax
      assets may not be realized, 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 depend, in
      part,
      on applicable tax laws in effect, our future earnings, and other future events,
      the effects of which cannot be determined. Our ability to use our accumulated
      net operating loss against future taxable income, if any, may cause our future
      reported earnings, if any, to be greater than they would be if fully taxable.





*Results
      of Operations*





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




**For
                the Three Months Ended**
            
            **For
                the Six Months Ended****June
                30,**
            
            **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenue
            100.0%
            
            100.0%
            
            100.0%
            
            100.0%Cost
                of prepaid PIN sales and fees
            83.2%
            
            94.1%
            
            81.6%
            
            89.0%Cost
                of product sales
            0.7%
            
            0.0%
            
            3.4%
            
            0.1%Distribution
                commissions and fees
            13.6%
            
            17.5%
            
            13.5%
            
            19.1%Selling
                expenses
            3.0%
            
            1.7%
            
            2.8%
            
            2.1%General
                and administrative expenses
            8.5%
            
            10.9%
            
            8.7%
            
            11.7%Stock
                based compensation
            1.7%
            
            0.0%
            
            1.7%
            
            0.0%Depreciation
                and amortization
            0.3%
            
            0.3%
            
            0.3%
            
            0.4%Loss
                from operations
            (10.9)%
            
            (24.6)%
            
            (12.0)%
            
            (22.2)%Other
                Income (expenses) - net
            (0.2)%
            
            (0.1)%
            
            (0.3)%
            
            (0.1)%Net
                loss
            (11.1)%
            
            (24.7)%
            
            (12.3)%
            
            (22.4)%

























18
 Table
          of Contents


The
        following table presents our statements of operations, showing dollar and
        percentage changes from three and six months ended June, 30 2006 to the
        comparable periods in 2005.


**For
                the Three Months**
              **Ended**
            
            
            
            **For
                the Six Months**
              **Ended****June
                30,**
            
            **Increase
                (Decrease)**
            
            **June
                30,**
            
            **Increase
                (Decrease)****2006**
            
            **2005**
            
            $
            
            %
            
            **2006**
            
            **2005**
            
            $
            
            %**Total
                Sales and Revenues**
            
            $
            12,628,171
            
            $
            13,322,692
            
            $
            (694,521
            )
            
            (5.2)%
            
            $
            26,027,431
            
            $
            21,799,952
            
            $
            4,227,479
            
            
            19.4%**Cost
                of Sales and Revenue:**Cost
                of prepaid PIN sales and fees
            
            
            10,501,205
            
            
            12,533,184
            
            
            (2,031,979
            )
            
            (16.2)%
            
            
            21,240,955
            
            
            19,406,429
            
            
            1,834,526
            
            
            9.5%Cost
                of product sales
            
            
            82,269
            
            
            3,315
            
            
            78,954
            
            
            2381.7%
            
            
            887,369
            
            
            20,265
            
            
            867,104
            
            
            4278.8%Distribution
                commissions and fees
            
            
            1,715,326
            
            
            2,335,209
            
            
            (619,883
            )
            
            (26.5)%
            
            
            3,521,107
            
            
            4,167,303
            
            
            (646,196
            )
            
            (15.5)%**Total
                Cost of Sales and Revenue**
            
            
            12,298,800
            
            
            14,871,708
            
            
            (2,572,908
            )
            
            (17.3)%
            
            
            25,649,431
            
            
            23,593,997
            
            
            2,055,434
            
            
            8.7%**Gross
                Profit (Loss)**
            
            
            329,371
            
            
            (1,549,016
            )
            
            1,878,387
            
            
            (121.3)%
            
            
            378,000
            
            
            (1,794,045
            )
            
            2,172,045
            
            
            (121.1)%**Operating
                Expenses:**Selling
            
            
            378,270
            
            
            232,626
            
            
            145,644
            
            
            62.6%
            
            
            730,866
            
            
            459,991
            
            
            270,875
            
            
            58.9%General
                and administrative
            
            
            1,078,749
            
            
            1,457,948
            
            
            (379,199
            )
            
            (26.0)%
            
            
            2,253,657
            
            
            2,540,206
            
            
            (286,549
            )
            
            (11.3)%Non-cash
                compensation related to operations
            
            
            210,044
            
            
            -
            
            
            210,044
            
            
            -
            
            
            438,059
            
            
            -
            
            
            438,059
            
            
            -Depreciation
                and amortization
            
            
            36,919
            
            
            39,557
            
            
            (2,638
            )
            
            (6.7)%
            
            
            85,808
            
            
            88,834
            
            
            (3,026
            )
            
            (3.4)%**Total
                operating expenses**
            
            
            1,703,982
            
            
            1,730,131
            
            
            (26,149
            )
            
            (1.5)%
            
            
            3,508,390
            
            
            3,089,031
            
            
            419,359
            
            
            13.6%**Loss
                from operations**
            
            
            (1,374,611
            )
            
            (3,279,147
            )
            
            1,904,536
            
            
            (58.1)%
            
            
            (3,130,390
            )
            
            (4,847,076
            )
            
            1,752,686
            
            
            (36.2)%Total
                Other Expense, net
            
            
            (23,788
            )
            
            (17,851
            )
            
            (5,937
            )
            
            33.3%
            
            
            (70,521
            )
            
            (31,510
            )
            
            (39,011
            )
            
            123.8%**Net
                Loss**
            
            $
            (1,398,399
            )
            $
            (3,296,998
            )
            $
            1,910,473
            
            
            (57.9)%
            
            $
            (3,200,911
            )
            $
            (4,878,586
            )
            $
            1,791,697
            
            
            (36.7)%**Basic
                and Diluted Net Loss per Common Share**
            
            $
            (0.20
            )
            $
            (0.61
            )
            $
            0.40
            
            
            (66.6)%
            
            $
            (0.46
            )
            $
            (0.94
            )
            $
            0.47
            
            
            (50.5)%**Basic
                and Diluted Weighted Average Common Shares
                Outstanding**
            
            
            6,914,795
            
            
            5,448,827
            
            
            1,465,968
            
            
            26.9%
            
            
            6,914,795
            
            
            5,214,812
            
            
            1,699,983
            
            
            32.6%**Other
                Comprehensive Income (Loss):**Net
                loss
            
            $
            (1,398,399
            )
            $
            (3,296,998
            )
            $
            1,898,599
            
            
            (57.6)%
            
            $
            (3,200,911
            )
            $
            (4,878,586
            )
            $
            1,677,675
            
            
            (34.4)%Foreign
                currency translation adjustment
            
            
            422
            
            
            (48,164
            )
            
            17,911
            
            
            (37.2)%
            
            
            1,488
            
            
            (67,141
            )
            
            17,911
            
            
            (26.7)%Comprehensive
                Loss
            
            $
            (1,397,977
            )
            $
            (3,345,162
            )
            $
            1,947,185
            
            
            (58.2)%
            
            $
            (3,199,423
            )
            $
            (4,945,727
            )
            $
            1,746,304
            
            
            (35.3)%




*Three
      and Six Months Ended June 30, 2006 and 2005*





*Sales
      and revenues* .
      Our
      sales and revenues decreased by approximately $695,000 for the three months
      ended June 30, 2006 relative to the comparable period in 2005 primarily due
      to
      reduced sales of prepaid wireless products. Wireless products continue to be
      our
      dominant growth category, accounting for 95.1% and 95.7% of revenue for the
      three months ended June 30, 2006 and 2005, respectively. Sales and revenues
      from
      other prepaid products, including fees and prepaid debit cards for the three
      months ended June 30, 2006, relative to the comparable period in 2005.
      Alternatively, sales and revenue for prepaid long distance, and bill pay
      increased for the three months ended June 30, 2006, relative to the comparable
      period in 2005.





Our
      sales
      and revenues increased by approximately $4,228,000 for the six months ended
      June
      30, 2006, relative to the comparable period in 2005. This increase is primarily
      attributable to an increase in the number of terminals in the field. Sales
      and
      revenues from prepaid wireless products increased by approximately $3,638,000
      for the six months ended June 30, 2006, relative to the comparable period in
      2005. Terminal sales increased by approximately $734,000 for the six months
      ended June 30, 2006, relative to the comparable period in 2005. This increase
      is
      attributable to the sale of 4,100 terminals to a service bureau customer in
      the
      United Arab Emirates in February and March of 2006. Sales and revenues from
      other prepaid products, including long distance and bill pay, increased for
      the
      six months ended June 30, 2006. Alternatively, service bureau, fees, prepaid
      debit card sales, and other revenue decreased for the six months ended June
      30,
      2006, relative to the comparable period in 2005.





We
      expect
      the following factors to positively impact revenues for the remainder of 2006:
      (i) a continuing increase in our installed base of terminals; (ii) the
      addition of new means of product distribution, such as debit/credit card
      terminals and PC-based delivery of product; (iii) the addition of new
      products to our library, such as gift/loyalty cards and bill pay, and new
      vendors of existing products; and (iv) the anticipated continuing growth of
      the prepaid wireless market. While we believe that these factors will result
      in
      further revenue growth in 2006, there is no assurance that they will.





*Cost
      of prepaid PIN sales and fees*. Our cost of prepaid PIN sales and fees
      (including terminal depreciation and amortization) for the three months ended
      June 30, 2006, as a percentage of revenues, was 83.2%, compared to 94.1%
      relative to the comparable period in 2005. This decrease was primarily
      attributable to the following: (i) $1,266,704 in terminal impairment and fixed
      asset write-down charges incurred during the three months ended June 30, 2005;
      (ii) a PIN inventory write-down of approximately $250,000 incurred for the
      three
      months ended June 30, 2005; and (iii) improved PIN purchase rates.


19
 Table
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  Our
        cost
        of prepaid PIN sales and fees (including terminal depreciation and amortization)
        for the six months ended June 30, 2006 as a percentage of revenues, was
        81.6%, compared to 89.0%, relative to the comparable period in 2005. This
        decrease was primarily attributable to the following: (i) $1,266,704 in terminal
        impairment and fixed asset write-down charges incurred during the six months
        ended June 30, 2005; (ii) a $280,005 charge incurred in the three months
        ended
        March 31, 2005 for 9,000 Nokia 3300 handsets that a vendor took possession
        of or
        sold but for which the vendor did not pay the Company; (iii) a PIN inventory
        write-down of approximately $250,000 incurred for the six months ended June
        30,
        2005; and (iv) improved PIN purchase rates.


*Cost
        of product sales* .
        Our
        cost of product sales for the three months ended June 30, 2006, as a percentage
        of revenues, was 0.7%, compared to 0.0%, relative to the comparable period
        in
        2005. The decrease was attributable to reduced terminal sales during the
        three
        months ended June 30, 2005.




Our
      cost
      of product sales for the six months ended June 30, 2006, as a percentage of
      revenues, was 3.4%, compared to 0.1%, relative to the comparable period in
      2005.
      This increase was primarily attributable to the sale of approximately 4,100
      terminals to a service bureau customer in the United Arab Emirates.





*Distribution
      commissions and fees* .
      These
      expenses are principally commissions paid to retailers and brokers for product
      sales through the Q Xpress terminals and are a fixed percentage of the product
      sales price. Commissions and fees for the three months ended June 30, 2006
      as a
      percentage of revenues were 13.6%, compared to 17.5% relative to the comparable
      period in 2005. Commissions and fees for the six months ended June 30, 2006
      as a percentage of revenue were 13.5%, compared to 19.1%, relative to the
      comparable period in 2005. This decrease is primarily attributable to a shift
      in
      our sales strategy from brokered sales to direct sales.





*Margin.*After subtracting the cost of prepaid PIN sales and fees, the cost of
      product sales, and distribution commissions and fees paid to the brokers and
      retailers from revenue, we had margins (including terminal depreciation and
      software amortization expenses) of approximately (10.9)% for the three months
      ended June 30, 2006 and approximately (24.6)%, relative to the comparable period
      in 2005. This decrease is primarily attributable to the following: (i)
      $1,266,704 in terminal impairment and fixed asset write-down charges incurred
      during the three months ended June 30, 2005; (ii) a PIN inventory write-down
      of
      approximately $250,000 incurred for the three months ended June 30, 2005 (iii)
      an increase in the sale of higher margin consigned products, which
      represented approximately 3.3% and 2.7% of revenue for the three months ended
      June 30, 2006 and 2005, respectively; (iv) reduced distribution commissions
      and
      fees; and (v) improved PIN purchase rates.  Alternatively, our margin
      percentage was negatively impacted by the reduction of our higher-margin fees
      and service bureau sales.





After
      subtracting cost of prepaid PIN sales and fees, cost of product sales, and
      distribution commissions and fees paid to the brokers and retailers from
      revenue, we had margins (including terminal depreciation and software
      amortization expenses) of approximately (12.0)% for the six months ended June
      30, 2006 and approximately (22.2)% relative to the comparable period in 2005.
      This increase is primarily attributable to the following: (i) $1,266,704 in
      terminal impairment and fixed asset write-down charges incurred during the
      three
      months ended June 30, 2005; (ii) a $280,005 charge incurred in the three months
      ended March 31, 2005 for 9,000 handsets a vendor took possession of or sold
      and
      did not pay the Company; (iii) a PIN inventory write-down of approximately
      $250,000 incurred for the three months ended June 30, 2005; (iv) reduced
      distribution fees; and (v) improved PIN purchase rates. Alternatively, our
      margin percentage was negatively impacted by the reduction of our higher-margin
      consigned product sales, service bureau sales and fees.




*Selling
      expenses* .
      Selling
      expenses increased by approximately $146,000 during the three months ended
      June
      30, 2006, relative to the comparable period in 2005. This increase is primarily
      attributable to an increase in salaries and benefits expenses of approximately
      $154,000 and an increase in tradeshow and conference expenses of approximately
      $12,000, which expenses are offset in part by a reduction in advertising expense
      of approximately $11,000 and a reduction of approximately $9,000 in other
      sales and marketing expenses.




Selling
      expenses increased by approximately $271,000 during the six months ended June
      30, 2006 over relative to the comparable period in 2005. This increase is
      primarily attributable to an increase in salaries and benefits expenses of
      approximately $301,000, which expenses are offset in part by a reduction in
      advertising expenses of approximately $21,000 and a reduction in other sales
      and
      marketing expenses of approximately $9,000.





*General
      and administrative* .
      General
      and administrative expenses for the three months ended June 30, 2006 decreased
      by approximately $379,000, relative to the comparable period in 2005. This
      decrease is primarily attributable to the following: (i) $175,000 in settlement
      costs related to the Dial-Thru International litigation for the three months
      ended June 30, 2005; (ii) a decrease of approximately $85,000 in legal expenses;
      (iii) a decrease of approximately $49,000 in accounting fees; (iv) a decrease
      of
      approximately $44,000 in bad debt expense; (v) a decrease of approximately
      $39,000 in salaries and benefits expenses; (vi) a decrease of approximately
      $35,000 in recruiting fees; and (vii) a decrease of approximately $6,000 in
      other expenses.  These decreases were offset in part by an increase of
      approximately $31,000 in rent expense an approximately $23,000 in travel related
      expenses.





General
      and administrative expenses for the six months ended June 30, 2006 decreased
      by
      approximately $287,000, relative to the comparable period in 2005. The decrease
      is primarily attributable to the following: (i) $175,000 in settlement costs
      related to the Dial-Thru International litigation for the three months ended
      June 30, 2005 (ii) a decrease of approximately $22,000 in legal expenses; (iii)
      a decrease of approximately $54,000 in accounting fees; (iv) a decrease of
      approximately $29,000 in bad debt expense; (v) a decrease of approximately
      $65,000 in salaries and benefits expenses; (vi) a decrease of approximately
      $31,000 in recruiting fees; (vii) a decrease of approximately $12,000 in
      board-related expenses; (viii) a decrease of approximately $10,000 in other
      expenses.  These decreases were offset in part by an increase of
      approximately $51,000 in rent expense, approximately $33,000 in phone-related
      expenses, and approximately $27,000 in travel-related expenses.






20
 Table
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*Stock-based
      compensation.* Stock-based compensation expense for the three months ended June 30, 2006
      increased $210,044, relative to the comparable period in 2005. Stock-based
      compensation expense for the six months ended June 30, 2006 increased $438,059
      relative to the comparable period in 2005. The Company has adopted the
      provisions of SFAS No. 123(R) using the modified-prospective transition method
      based on SFAS No. 123(R). Under this transition method, compensation expense
      recognized during the three months ended June 30, 2006 included: (i)
      compensation expense for all share-based awards granted prior to, but not yet
      vested as of June 30, 2006, and (ii) compensation expense for all share-based
      awards granted on or after June 30, 2006. Accordingly, compensation costs of
      $210,044 and $438,059 has been recognized for grants of options to employees
      and
      directors in the accompanying statements of operations for the three and six
      months ended June 30, 2006, respectively, and no related expenses was recognized
      in the statement of operations for the comparable period in 2005.





*Depreciation
      and amortization.* Depreciation and amortization expenses were approximately $322,452 and $429,156,
      for the three months ended June 30, 2006 and 2005, respectively. Depreciation
      and amortization expenses were approximately $665,645 and $866,982, for the
      six
      months ended June 30, 2006 and 2005, respectively. These decreases are primarily
      attributable to lower amortization of capitalized software development costs
      and
      to higher depreciation expense from an increase in the number of terminals
      in
      service. We expect depreciation expense to increase as the number of terminals
      in service increases. We do not anticipate additional capitalized software
      development expense until Lipman and Ingenico terminals are deployed in the
      Q
      Xpress system.





*Other
      income and expense-net* .
      This
      category consists primarily of interest income and expense on a related party
      note and capital lease obligations. For the three months ended June 30, 2006
      and
      2005, other income and expense-net was $24,000 and $18,000, respectively. For
      the six months ended June 30, 2006 and 2005, other income and expense-net was
      $71,000 and $32,000, respectively. These increases were primarily attributable
      to interest expense related to a warrant to purchase 230,000 shares of common
      stock that was issued to a majority shareholder, who at the time was the
      Company’s Chairman of the Board of Directors, in conjunction with a $614,000
      loan that a major shareholder, who at that time was the Company's Chairman
      of
      the Board of Directors, made to the Company on July 11, 2005. The
      warrant was treated as a discount on the note and amortized over the two-year
      term of the loan. Also, for the three months ended June 30, 2006, the Company
      recognized approximately $38,000 in interest expense related the value of the
      warrant, approximately $8,000 in interest earned related to a $614,000 loan,
      and
      approximately $6,000 in interest expense primarily related to lease obligations.
      For the six months ended June 30, 2006, the Company recognized approximately
      $77,000 in interest expense related the value of the warrant, approximately
      $15,000 in interest earned related to a $614,000 loan, and approximately $15,000
      in interest expense primarily related to lease obligations.





*Income
      tax expense* .
      At June
      30, 2006, we had operating loss carryforwards of approximately $24.1 million
      that may be applied against future taxable income, if any, through 2025. The
      net
      operating loss carryforwards and other items resulted in net deferred tax assets
      of approximately $10.5 million. 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, if any, and other
      future events, the effects of which cannot be determined at this time. As a
      result of the uncertainty surrounding the realization of the deferred tax
      assets, we established a valuation allowance that is equal to the value of
      net
      deferred tax assets, and no income tax benefit from our operating loss has
      been
      recognized for any of the periods presented.




*Liquidity
      and Capital Resources*





*Cash
      and cash equivalents.* As
      of
      June 30, 2006, our balance of cash and cash equivalents was $1,629,999 and
      the
      balance of our restricted cash was $326,912. Restricted cash is maintained
      to
      support letters of credit covering capital lease arrangements and to secure
      a
      bank account that is used for processing automated clearinghouse transactions.
      In order to secure the bank account, the Company must maintain a balance of
      2%
      of the previous month’s total transactions that have been processed through the
      account.





As
      of
      June 30, 2006, we had working capital of approximately $3,130,746 million and
      a
      current ratio of 3.6 to 1.





*Financing
      activity cash flows.* Historically,
      we have financed our working capital requirements from the sale of equity,
      convertible debentures and notes, and short-term and long term
      borrowings.





The
      Company does not have the necessary capital to continue its operations as
      planned. In this regard, our independent auditors have stated in their auditor’s
      report for the year ended December 31, 2005 that our recurring losses raise
      substantial doubt about our ability to continue as a going concern (see Item
      8
“Financial Statements and Supplementary Data” for a more detailed discussion).
      Accordingly, the Company plans to raise additional funds in 2006. These
      additional funds may be in the form of equity, debt or convertible securities,
      or a combination of these.  There is no assurance that the Company will
      successfully raise additional funds.




*Recently
      Enacted Accounting Standards*




For
      a
      discussion of recently enacted accounting standards, see Note 1—“Summary of
      Significant Accounting Policies” to the Consolidated Financial Statements, set
      forth in Item 1.




**Off-Balance
      Sheet Items**





On
      February 16, 2006, the Company acquired certain assets from Sun
      Communications, including approximately 350 merchant locations and terminals.
      These assets were purchased for $150,000 in cash paid on February 16, 2005.
      In addition, the Company is obligated, pursuant to an earn-out provision in
      the
      purchase agreement, to pay additional amounts totaling up to $50,000 if certain
      performance criteria are met. The earn-out provision provides for a $15,000
      prepayment made to Sun Communications on August 10, 2006 and the remainder,
      if
      earned, due February 2007.





Excluding
      normal operating leases and the potential obligations related to Sun
      Communications discussed directly above, the Company has no off-balance sheet
      obligations.






21
 Table
          of Contents





**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**





Not
      applicable.


**Item
        4. Controls****and
        Procedures**
  *Disclosure
        Controls and Procedures*
 
 ·
              *Our
                  Disclosure Controls and Procedures Are Effective.*Pursuant
                  to Rule 13a-15(b) under the Exchange Act, our management is required
                  to
                  evaluate the effectiveness of our disclosure controls and procedures,
                  as
                  defined in Rule 13a-15(e), as of the end of each fiscal quarter.
                  Such
                  evaluation must include the participation of our principal executive
                  officer and our principal financial officer. Accordingly, as of
                  June 30,
                  2006, the end of our second fiscal quarter, our management has
                  completed
                  an evaluation of the effectiveness and the design and operation
                  of our
                  disclosure controls and procedures. Based upon this evaluation
                  our
                  management (including our CEO and CFO) has concluded that our disclosure
                  controls and procedures were effective as of June 30, 2006.
  *Internal
        Controls Over Financial Reporting*
 
 *Change
        in Our Internal Control over Financial Reporting in the Three Months Ended
        June
        30, 2006.* the
        Company has taken the following actions to remedy the following internal
        control
        issues:
 
 ·
              We
                  previously identified a “significant deficiency” (as defined by the PCAOB)
                  in our ability to summarize timely and adequately our financial
                  data in
                  our financial statements, including the timely and adequate preparation
                  of
                  the supporting schedules thereto and the timely reconciliation
                  of general
                  ledger accounts. We have taken steps to remedy this “significant
                  deficiency” during the three months ended June 30, 2006 by: (i) hiring
                  additional accounting personnel; (ii) further training our accounting
                  personnel; (iii) refining the processes and procedures through
                  which we
                  conduct our review, prepare our financial statements (including
                  the
                  schedules thereto), and prepare our general ledger accounts; and
                  (iv)
                  upgrading our accounting software. Management understands that
                  the
                  remedies in place have been implemented only recently and further
                  testing
                  of the effectiveness of these remedies, as well as additional process
                  improvements, will be necessary to ensure that similar “significant
                  deficiencies” do not reoccur in the
                  future.
 
 ·
              We
                  previously identified a “material weakness” (as defined by the PCAOB) in
                  our ability to track our terminals in the hands of our brokers
                  and
                  customers. We have taken steps to remedy this “material weakness” during
                  the three months ended June 30, 2006 by: (i) tasking a senior staff
                  member
                  with tracking terminals in the hands of our brokers and merchants;
                  (ii)
                  electronically tracking the serial numbers of all in- and out-bound
                  terminals; (iii) utilizing certain operations and sales personnel
                  in
                  tracking terminals in the hands of our brokers and merchants; and
                  (iv)
                  more carefully monitoring out-bound terminals to reduce the number
                  of
                  inventoried terminals sent to broker locations. Management understands
                  that the remedies in place have been implemented only recently,
                  and
                  further testing of the effectiveness of these remedies, as well
                  as
                  additional process improvements, will be necessary to ensure
                  that similar “material weaknesses” do not reoccur in the
                  future.
 
 Other
        than the completion of the items outlined directly above, there has been
        no
        change in our internal control over financial reporting, as defined in Rule
        13a-15(f), during the three months ended June 30, 2006 that has materially
        affected, or is reasonably likely to materially affect, our internal control
        over financial reporting.








22
 Table
          of Contents







**PART
      II - OTHER****INFORMATION**




**Item
      1. Legal Proceedings**





As
      of May
      22, 2006, we are not a party to any legal proceedings, except as set forth
      below.





*Q
      Comm International, Inc. v. The Phone Store of Missouri, LLC and Kevin* *Montgomery*.
      In April 2005, the Company filed an action against a PIN provider, due to
      approximately $1 million in deactivated PINs that the Company received in
      the fourth quarter of 2004.  Subsequent to June 30, 2005, the Company
      determined that this obligation was approximately $1.5 million and
      includes, in addition to deactivated PINs, losses resulting from handsets
      paid for by the Company that were to be sold by the PIN
      provider.  The PIN provider agreed to sell the handsets in
      order to reimburse the Company for both the handset purchase
      price and the PIN losses.  However, the PIN provider did not
      reimburse the Company.  The Company is proactively taking the
      appropriate legal action to recover the amount due.  However, there is
      no assurance of repayment, and management recorded an allowance against the
      full
      amount of the receivable in the fourth quarter of 2004.




**Item
      1A. Risk Factors**





In
      addition to the other information in this report, you should carefully consider
      the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
      Report on Form 10-K for the year ended December 31, 2005, which we hereby
      incorporate herein by reference. There have been no material changes to such
      risk factors since the date of that report **.**


**Item****5.
        Other Information.**
  The
        Company's Board of Directors has approved two forms of Stock Option Grant,
        which are filed
        herewith as exhibits,
        under the 2004 Stock Option Plan.


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




(a)
      Exhibits:




**Exhibit
              No.**
            **Description**





3.1(i)
            Articles
                of Incorporation (1)


3.1(ii)
            Amendment
                to Articles of Incorporation (2)





3.2
            Amended
                and Restated Bylaws (2)




4.1
            Specimen
                Stock Certificate (2)





4.2
            Form
                of warrant agreement, including form of warrant
                (2)





4.3
            Form
                of unit certificate (2)





4.4
            Form
                of representative’s warrant (2)





10.1
            2000
                Stock Option Plan (2)*





10.2
            2003
                Stock Option Plan (2)*





10.3
            Securities
                Purchase Agreement, dated February 10, 2003
                (2)





10.4
            Form
                of 12% Secured Convertible Debentures due June 30, 2004
                (2)





10.5
            Form
                of Stock Purchase Warrant (2)





10.6
            Form
                of Lock-Up Agreement executed by all officers, directors, and 5%
                shareholders (2)





10.7
            Form
                of Lock-Up Agreements for 12% Secured Convertible Debenture holders
                (2)





10.11
            Employment
                Agreement between Q Comm International, Inc. and Michael D.
                Keough(4)*





10.12
            Employment
                Agreement between Q Comm International, Inc. and Mark W.
                Robinson(5)*





10.13
            Securities
                Purchase Agreement, dated May 20, 2003
                (2)






23
 Table
          of Contents






10.15
            Form
                of Stock Purchase Warrant, dated May 20, 2003
                (2)





10.16
            Service
                Agreements between Q Comm International, Inc. and each of Cellcards
                of
                Illinois, Iowa Wireless and Hargray Wireless
                (2)





10.17
            Agreement
                between Q Comm International, Inc. and PreCash Corporation
                (2)




10.18
            WGR
                Ltd. Agreement (2)****





10.19
            Marceco
                Ltd. Agreement (2)





10.20
            Success
                Concepts Enterprises Inc. Agreement (2)****





10.21
            510
                East Technology Avenue Lease (3)





10.22#
            Agreement
                between Q Comm International, Inc. and Cricket Communications, Inc.
                (4)





10.23
            2004
                Stock Option Plan (7)*





10.24
            9350
                South 150 East, Suite 840, Sandy, Utah****Lease
                (8)




10.25
              Standard
                  Form of Stock Option Grant for
                  Incentive Stock Options under the 2004 Stock Option Plan
                  **


10.26
            Standard
                Form of Stock Option Grant for
                Non-Qualified Stock Options under the 2004 Stock Option Plan
                **




14
            Code
                of Ethics (2)





16
            Letter
                from Tanner LC to the Securities and Exchange Commission, dated
                October 11, 2005 regarding change in certifying accountant
                (6)





21
            Subsidiary
                schedule (3)





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**


________________________





*
      Denotes
      a management contract or a compensatory plan or arrangement.


**
      Included as an exhibit herein.





(1)
            Previously
                filed on February 24, 2000, as an exhibit to Form 10-SB, and on
                March 20, 2000, as an exhibit in the Company’s Current Report on Form
                8-K and incorporated herein by reference.





(2)
            Previously
                filed as an exhibit to the Company’s Registration Statement on Form SB-2
                (File No.333-104232) and incorporated herein by reference.





(3)
            Previously
                filed as an exhibit to Form 10-KSB on June 30, 2003 and incorporated
                herein by reference.





(4)
            Previously
                filed as an exhibit to Form 10-KSB on April 12, 2005 and incorporated
                herein by reference.





(5)
            Previously
                filed as an exhibit to Form 10-KSB/A on August 10, 2005 and
                incorporated herein by reference.





(6)
            Previously
                filed on October 11, 2005, as an exhibit in the Company’s Current
                Report on Form 8-K and incorporated herein by reference.





(7)
            Previously
                filed on May 3, 2004, as Appendix C to Schedule 14a and incorporated
                herein by reference.





(8)
            Previously
                filed as an exhibit for Form 10-K on March 31, 2006 and incorporated
                herein by reference.





#
            Application
                has been made to the Securities and Exchange Commission to seek
                confidential treatment of certain portions of this exhibit under
                Rule 406
                of the Securities Act of 1933 or Rule 24(b)-2 under the Securities
                Exchange Act of 1934. Omitted material for which confidential treatment
                has been requested has been filed separately with the Securities
                and
                Exchange Commission.




24
 Table
          of Contents





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, as amended, the registrant has duly caused this Quarterly Report on Form
      10-Q for the three and six months ended June 30, 2006, to be signed on its
      behalf by the undersigned, thereunto duly authorized, on August 14,
      2006.







Q
      Comm
      International, Inc.







By:
            /s/
                Mark W.
                RobinsonMark
                W. RobinsonChief
                Financial Officer, Secretary and Treasurer










































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