UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB

|(Mark One)                                                                            
|--------------------------------------------------------------------------------------
|[X]                                                                                   
|For the quarterly period ended: March 31, 2004                                        
|Or                                                                                    
|[  ]                                                                                  
|For the transition period from ____________ to _____________                          
|Commission File Number: 333-86498                                                     
|Quality Exchange, Inc.
(Exact name of registrant as specified in its charter)         
|                                                                                      
|Nevada
(State or other jurisdiction of incorporation or organization)                 
|                                                                                      
|East 49 Pineridge Court #328
Spokane, WA
(Address of principal executive offices)     
|                                                                                      
|(509) 464-3072
(Registrant's telephone number, including area code)                   
|                                                                                      
|N/A
(Former name, former address and former fiscal year, if changed since last report)
|                                                                                      

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 [ ]



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [ ] No [ ]



APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 2,250,000





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QUALITY EXCHANGE, INC.

(A Development Stage Company)





Table of Contents

|                                                      | Page
|----------------------------------------------------- | ----
|PART I - FINANCIAL INFORMATION                        |     
|Item 1. Financial Statements                          | 3   
|Consolidated Balance Sheets                           | 4   
|Consolidated Statements of Operations                 | 5   
|Consolidated Statements of Cash Flows                 | 6   
|Notes                                                 | 7   
|Item 2. Management's Discussion and Plan of Operation | 8   
|PART II - OTHER INFORMATION                           |     
|Item 4. Controls and Procedures                       | 10  
|Item 6. Exhibits                                      | 10  
|SIGNATURES                                            | 11  





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PART I - FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements



The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission ("Commission").  While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  For further information, refer to the financial statements and footnotes thereto, which are included in the Company's Annual Report on Form 10-KSB previously filed with the Commission on March 30, 2004, and subsequent amendments made thereto.







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Quality Exchange, Inc. and Subsidiary

(a Development Stage Company)

Consolidated Balance Sheets

(unaudited)



|                                                    | March 31,
|--------------------------------------------------- | ---------
|                                                    | 2004     
|Assets                                              |          
|                                                    |          
|Current assets:                                     |          
|Cash                                                | $9,208   
|Total current assets                                | 9,208    
|                                                    |          
|Fixed assets, net                                   | 982      
|                                                    |          
|                                                    | $10,190  
|                                                    |          
|Liabilities and Stockholders Equity                |          
|                                                    |          
|Current liabilities:                                |          
|Accounts payable                                    | $146     
|Due to shareholder                                  | 9,040    
|Total current liabilities                           | 9,186    
|                                                    |          
|Stockholders equity:                               |          
|Common stock, $0.001 par value, 25,000,000 shares   |          
|authorized, 2,250,000 shares issued and outstanding | 2,250    
|Additional paid-in capital                          | 24,750   
|(Deficit) accumulated during development stage      | (25,996) 
|                                                    | 1,004    
|                                                    |          
|                                                    | $10,190  
|                                                    |          



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



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Quality Exchange, Inc. and Subsidiary

(a Development Stage Company)

Consolidated Statements of Operations

(unaudited)



|                                                    | For the three-month | June 3, 1998  
|--------------------------------------------------- | ------------------- | --------------
|                                                    | period ended        | (Inception) to
|                                                    | March 31,           | March 31,     
|                                                    | 2004                | 2003          
|                                                    |                     |               
|Revenue                                             | $-                  | $-            
|                                                    |                     |               
|Expenses:                                           |                     |               
|General and administrative expenses                 | 3,312               | 2,808         
|Depreciation                                        | 61                  | -             
|Total expenses                                      | 3,373               | 2,808         
|                                                    |                     |               
|Net (loss)                                          | $(3,373)            | $(2,808)      
|                                                    |                     |               
|Weighted average number of                          |                     |               
|common shares outstanding  basic and fully diluted | 2,250,000           | 2,091,667     
|                                                    |                     |               
|Net (loss) per share  basic and fully diluted      | $(0.00)             | $(0.00)       



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



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Quality Exchange, Inc. and Subsidiary

(a Development Stage Company)

Consolidated Statements of Cash Flows

(unaudited)



|                                          | For the three-month | June 3, 1998  
|----------------------------------------- | ------------------- | --------------
|                                          | period ended        | (Inception) to
|                                          | March 31,           | March 31,     
|                                          | 2004                | 2003          
|Cash flows from operating activities      |                     |               
|Net (loss)                                | $(3,373)            | $(2,808)      
|Depreciation                              | 61                  | -             
|Adjustment to reconcile net (loss) to     |                     |               
|net cash (used) by operating activities:  |                     |               
|Increase in accounts payable              | 146                 | 200           
|Net cash (used) by operating activities   | (3,166)             | (2,608)       
|                                          |                     |               
|Cash flows from investing activities      |                     |               
|Purchase of fixed assets                  | -                   | -             
|Net cash (used) by investing activities   | -                   | -             
|                                          |                     |               
|Cash flows from financing activities      |                     |               
|Issuances of common stock                 | -                   | 25,000        
|Increase in due to shareholder            | -                   | -             
|Net cash provided by financing activities | -                   | 25,000        
|                                          |                     |               
|Net increase in cash                      | (3,166)             | 22,392        
|Cash  beginning                          | 12,374              | 245           
|Cash  ending                             | $9,208              | $22,637       
|                                          |                     |               
|Supplemental information:                 |                     |               
|Interest paid                             | $ -                 | $ -           
|Income taxes paid                         | $ -                 | $ -           



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



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Quality Exchange, Inc. and Subsidiary

(A Development Stage Company)

Notes



Note 1  Basis of presentation



The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.



These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein.  It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2003 and notes thereto included in the Company's Form 10-KSB.  The Company follows the same accounting policies in the preparation of interim reports.



Results of operations for the interim periods are not indicative of annual results.



Note 2 - Going concern



The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As shown in the accompanying financial statements, the Company has incurred a net loss of $25,996 for the period from June 3, 1998 (inception) to March 31, 2004, and has no sales.  The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities.  Management raised additional capital through an offering of common stock registered on Form SB-2 and believes that the Company has enough capital for operations for a period of twelve months.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.



Note 3  Fixed assets



The Company had computer equipment totaling $1,227 as of March 31, 2004 and recorded depreciation expense of $61 during the three month period ended March 31, 2004.



Note 4  Related party transactions



As of March 31, 2004, the Company owes a total of $9,040 to its sole officer and director.  The amount owed is due upon demand and bears no interest.



Office space and services are provided without charge by a director and shareholder.  Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein.  The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities.  If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests.  The Company has not formulated a policy for the resolution of such conflicts.



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Item 2. Management's Discussion and Plan of Operation



Forward-Looking Statements



This Quarterly Report contains forward-looking statements about Quality Exchange, Inc.s business, financial condition and prospects that reflect managements assumptions and beliefs based on information currently available.  We can give no assurance that the expectations indicated by such forward-looking statements will be realized.  If any of our managements assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, QEXIs actual results may differ materially from those indicated by the forward-looking statements.



The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, managements ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.



There may be other risks and circumstances that management may be unable to predict.  When used in this Quarterly Report, words such as,  "believes,"  "expects," "intends,"  "plans,"  "anticipates,"  "estimates"and similar expressions are intended to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions.



Management's Discussion and Plan of Operation



QEI was incorporated in the State of Nevada on June 3, 1998.  QEI is a startup and has not yet realized any revenues.  QEI had not begun actively pursuing our business plan until Orion Publishing, Inc., a wholly owned subsidiary, was incorporated in the State of Nevada on November 21, 2001.



Since our inception on June 3, 1998 to March 31, 2004, we generated no revenues while incurring $25,996 in total expenses.  This resulted in a cumulative net loss of $25,996 during that period.  The cumulative net loss was materially attributable to the costs of start-up operations.  During the three months ended March 31, 2004, we incurred $3,312 in general and administrative expenses, as well as $61 in depreciation expense.  During the year ago period ended March 31, 2003, we recognized $2,808 in general and administrative costs.



With continuing losses and no sales to date, the future of we are dependent upon our ability to obtain financing and upon future profitable operations from the development of our business opportunities.  On the basis of these facts, our independent auditors expressed doubt about our ability to continue as a going concern.



We expect that we will sell new-issue comic books for between $1.50 to $10.00.  Vintage comic books may range in price from $0.10 to $350.00 per item.  QEI plans to derive revenues from listing and transaction fees.  QEI expects to charge a fee of 2% of the amount of transaction, which we will collect from buyers and sellers (1% from the buyer and 1% from the seller) after each auction is completed.



Our goal is to maintain an innovative attractive web auction that appeals to buyers and sellers in customer-to-customer, business-to-customer and business-to business market places.  We are striving to accomplish the following during the next twelve to eighteen months:



1.

Establish a paying subscriber/member base and benefit from repeat traffic to the website;

2.

Develop strategic alliances with popular web auction sites;

3.

Promote www.Comicauction.biz with leading Internet search engines so that they place www.Comicauction.biz at the top of searches when it comes to researching and purchasing comic books;

4.

Develop distribution channels beyond the website to improve revenues.



During the first quarter of 2004, we engaged the services of Westpac Communications, a consulting firm located in Scottsdale, AZ.  Westpac Communications offers a wide range of consulting and business support services.  Our management believes this relationship with Westpac Communications will be instrumental in further developing and implementing our business strategy in the coming year of operations.



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Managements initial discussions with Westpac Communications have led to the identification of key areas of focus.  During the second quarter of 2004 operations, the focus of Westpac Communications services will be website development of the ComicAuction.Biz website, including E-Commerce solutions.  Website development will include updating the already existing content (graphics, pricing, and product descriptions), and improving the general appearance of the site (adding new graphics, and making site layout modifications).  E-Commerce solutions will include adding merchant account capabilities, including security features that will protect our customers personal and financial information during the product purchase transaction process on the ComicAuction.biz website.



QEI is striving to accomplish the following during the next twelve to eighteen months:



1.

Establish a subscriber/member base and benefit from repeat traffic to the website; the subscriber base will be in the form of a "comic book of the month club" for a set price and have a surprise comic book sent at the first of every month or a monthly news letter that reviews the newest published titles.

2.

Promote www.comicauction.biz with leading Internet search engines so that they place www.comicauction.biz at the top of searches when it comes to researching and purchasing comic books; in particular, QEI expects to use initially and expects be at the top of searches in www.overture.com, which currently lists ebay.com at the top of searches for a "Comic Books" at estimated 41 cents a hit.  All QEI has to do is pay 41 cents a hit to be at the top.  It will be virtually impossible to be at the top of every search engine.  If QEI can maintain a presence in the top three of at least three or four of top search engines.

3.

Develop distribution channels beyond the website to improve revenues.



QEI anticipates that over the next 12 months QEI will not hire any additional full- or part-time employees, as the services provided by the officers and directors of QEI appear sufficient during the initial growth stage.  Sales growth in the next six to 12 months is important for the QEI' plan of operations.  However, we cannot guarantee that we will generate such growth.  If we do not generate sufficient cash flow to support its operations in the next 12 to 18 months, we may need to raise additional capital by issuing capital stock in exchange for cash in order to continue as a going concern.  However, there can be no assurance that we would be able to raise enough capital to stay in business.



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Item 3. Controls and Procedures



Within 90 days prior to the date of filing of this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and our Chief Financial Officer, of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective for gathering, analyzing and disclosing the information we are required to disclose in the reports we file under the Securities Exchange Act of 1934, within the time periods specified in the SECs rules and forms.  There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date of this evaluation.





PART II - OTHER INFORMATION



Item 6. Exhibits



|Exhibit Number | Name and/or Identification of Exhibit                                             
|-------------- | ----------------------------------------------------------------------------------
|               |                                                                                   
|3              | Articles of Incorporation & By-Laws                                               
|               |                                                                                   
|               | (a) Articles of Incorporation (1)                                                 
|               |                                                                                   
|               | (b) By-Laws (1)                                                                   
|               |                                                                                   
|31             | Rule 13a-14(a)/15d-14(a) Certifications                                           
|               |                                                                                   
|32             | Certification under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)



(1) Incorporated by reference to the exhibits to the Company's Registration Statement Under the Securities Act of 1933 on Form SB-2, and amendments thereto, originally filed on April 17, 2002.



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SIGNATURES



Pursuant to the requirements of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|QUALITY EXCHANGE, INC.    
|--------------------------
|(Registrant)              
|                          
|By: /s/ Andrew D. Owens   
|Andrew D. Owens, President































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