Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000








<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY




                                    CONTENTS

                                                                           PAGE
                                                                          ------
--     Independent Auditors' Report                                          1


--     Consolidated Balance Sheet, December 31, 2000                         2


--     Consolidated Statements of Operations, for the
          years ended December 31, 2000 and 1999                             3


--     Consolidated Statements of Stockholders' Equity (Deficit),
          for the years ended December 31, 2000 and 1999                     4


--     Consolidated Statements of Cash Flows, for the
          years ended December 31, 2000 and 1999                         5 - 6


--     Notes to Consolidated Financial Statements                        7 - 15



<PAGE>






                          INDEPENDENT AUDITORS' REPORT



Board of Directors
Q COMM INTERNATIONAL, INC. AND SUBSIDIARY
Orem, Utah

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Q  Comm
International,  Inc.  and  Subsidiary  at  December  31,  2000,  and the related
consolidated  statements of operations,  stockholders' equity (deficit) and cash
flows  for the years  ended  December  31,  2000 and  1999.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the  consolidated  financial  statements  audited by us present
fairly,   in  all  material   respects,   the  financial   position  of  Q  Comm
International,  Inc. and  Subsidiary as of December 31, 2000, and the results of
its  operations  and its cash flows for the years  ended  December  31, 2000 and
1999, in conformity with generally accepted accounting principles.

The financial  statements  referred to above have been prepared  assuming Q Comm
International,  Inc.  and  Subsidiary  will  continue  as a  going  concern.  As
discussed in Note 18 to the financial statements, Q Comm International Inc., has
incurred  significant  losses in recent  years and has  current  liabilities  in
excess of  current  assets,  raising  substantial  doubt  about its  ability  to
continue as a going concern.  Management's plans in regards to these matters are
also  described  in  Note  18.  The  financial  statements  do not  include  any
adjustments that might result from the outcome of these uncertainties.


/s/ PRITCHETT, SILER & HARDY, P.C.

January 22, 2001
Except for Notes 6 and 17, as to which the date is February 27, 2001.
Salt Lake City, Utah


<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET


                                     ASSETS

                                                                    December 31,
                                                                       2000
                                                                    -----------
CURRENT ASSETS:
     Cash in bank                                                   $    97,740
     Certificates of deposit                                            103,506
     Accounts receivable                                                181,258
                                                                    -----------
               Total Current Assets                                     382,504
                                                                    -----------

PROPERTY & EQUIPMENT, net                                               194,229
                                                                    -----------
OTHER ASSETS:
     Goodwill, net                                                      189,549
     Deposits                                                             2,738
                                                                    -----------
               Total Other Assets                                       192,287
                                                                    -----------
                                                                    $   769,020
                                                                    -----------

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


CURRENT LIABILITIES:
     Lines of credit                                                $    63,368
     Accounts payable                                                   355,633
     Accrued expenses                                                   136,729
     Related party obligations                                          334,529
     Notes payable                                                      100,000
     Investor advances                                                  292,000
     Convertible debenture                                               50,000
     Contingent liability                                               159,235
                                                                    -----------
               Total current liabilities                              1,491,494
                                                                    -----------
LONG TERM OBLIGATIONS:
     Notes payable                                                      100,000
                                                                    -----------
               Total liabilities                                      1,591,494
                                                                    -----------
STOCKHOLDERS' EQUITY (DEFICIT):
     Preferred stock, $.001 par value,
       1,000,000 shares authorized,
       no shares issued and outstanding                                    --
     Common stock, $.001 par value,
       50,000,000 shares authorized,
       9,213,655 shares issued and
       outstanding                                                        9,214
     Capital in excess of par value                                   2,853,633
     Retained Deficit                                                (3,685,321)
                                                                    -----------
               Total Stockholders' Equity (Deficit)                    (822,474)
                                                                    -----------
                                                                    $   769,020
                                                                    -----------



               The accompanying notes are an integral part of this
                       consolidated financial statement.


                                       2
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS




                                                              For the
                                                            Years Ended
                                                            December 31,
                                                    ----------------------------
                                                        2000            1999
                                                    -----------     -----------
SALES, net of returns and allowances                $ 1,713,583     $ 1,120,536

COST OF GOODS SOLD                                    1,322,867         816,262
                                                    -----------     -----------
GROSS PROFIT                                            390,716         304,274

OPERATING EXPENSES:
     Selling expenses                                   240,400         118,668
     General and administrative                       1,179,633       1,148,295
                                                    -----------     -----------
               Total Operating Expenses               1,420,033       1,266,963
                                                    -----------     -----------
LOSS FROM OPERATIONS                                 (1,029,317)       (962,689)

OTHER INCOME (EXPENSE):
     Other income                                        11,892           8,640
     Other (expense)                                   (124,106)       (405,238)
                                                    -----------     -----------

               Total Other Income (Expense)            (112,214)       (396,598)
                                                    -----------     -----------
LOSS BEFORE EXTRAORDINARY ITEM
     AND INCOME TAXES                                (1,141,531)     (1,359,287)

EXTRAORDINARY ITEM - Gain on
     extinguishment of debt                             156,049         164,112
                                                    -----------     -----------

LOSS BEFORE INCOME TAXES                               (985,482)     (1,195,175)


CURRENT TAX EXPENSE                                        --              --

DEFERRED TAX EXPENSE                                       --              --
                                                    -----------     -----------

NET LOSS                                            $  (985,482)    $(1,195,175)
                                                    -----------     -----------

LOSS PER COMMON SHARE:
     Before extraordinary item                      $      (.14)    $      (.22)
     Extraordinary item                                     .02             .02
                                                    -----------     -----------

     Net Loss                                       $      (.12)    $      (.20)
                                                    -----------     -----------

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



                                       3
<PAGE>
<TABLE>
<CAPTION>


                                              Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                                      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                           FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999




                                         Preferred Stock             Common Stock           Capital in       Stocks
                                    ------------------------   ------------------------     Excess of    Subscription    Retained
                                       Shares       Amount       Shares       Amount        Par Value     Receivable     Deficit
                                    ----------   -----------   ----------   -----------    -----------    -----------  -----------
<S>                                 <C>          <C>           <C>          <C>            <C>            <C>          <C>
BALANCE, December 31, 1998                --            --      5,750,842   $     5,751    $   364,841    $   104,823  $(1,504,664)

Issuance of common stock for
  cash, at $.66 to $.75 per share         --            --        457,789           458        314,782           --           --

Issuance of common stock
  for services, at $.75 per share         --            --        113,181           113         84,756           --           --

Issuance of common stock for
  subscription at $ .50 per share         --            --        209,646           210        104,613       (104,823)        --

Issuance of common stock for
  interest, at $.75 per share             --                      125,000           125         93,625           --           --

Beneficial conversion feature of
  convertible debenture                   --            --           --            --          227,500           --           --

Net loss for the year ended
  December 31, 1999                       --            --           --            --             --             --     (1,195,175)
                                    ----------   -----------   ----------   -----------    -----------    -----------  -----------
BALANCE, December 31, 1999                --     $      --      6,656,458   $     6,657    $ 1,190,117    $      --    $(2,699,839)
                                    ----------   -----------   ----------   -----------    -----------    -----------  -----------
Issuance of common stock
  for cash, at $.70 to $.93 per
  share, net of stock offering
  costs of $127,375                       --            --      1,083,784         1,084        806,541

Issuance of common stock
  for services, at $.27 to
  $.28 per share                          --            --         77,358            77         21,583           --           --

Issuance of common stock
   upon conversion of debentures
   at $.70 to $1.00 per share             --            --        896,055           896        659,892           --           --

Issuance of common stock for
  acquisition of Azore Acquisition
  Corporation at $1.76 per share          --            --        100,000           100        175,900           --           --

Issuance of common stock as
  collateral for loan                     --            --        400,000           400           (400)

Net Loss for the year ended
   December 31, 2000                      --            --           --            --             --             --       (985,482)
                                    ----------   -----------   ----------   -----------    -----------    -----------  -----------
BALANCE, December 31, 2000                --     $      --      9,213,655   $     9,214    $ 2,853,633    $      --    $(3,685,321)
                                    ----------   -----------   ----------   -----------    -----------    -----------  -----------



                              The accompanying notes are an integral part of this financial statement.

</TABLE>



                                       4
<PAGE>
<TABLE>
<CAPTION>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                           For the
                                                                         Years Ended
                                                                         December 31,
                                                                 --------------------------
                                                                     2000           1999
                                                                 -----------    -----------
<S>                                                              <C>            <C>
Cash Flows from Operating Activities:
     Net loss                                                    $  (985,482)   $(1,195,175)
     Adjustments to reconcile net
       loss to net cash used by
       operating activities:
        Gain on extinguishment of debt                              (156,049)      (164,112)
        Beneficial conversion feature of convertible debenture          --          227,500
        Depreciation and amortization expense                         75,360          5,279
        Stock issued for non-cash consideration                       21,660         84,869
        Change in assets and liabilities:
           Increase in accounts receivable                           (88,585)       (56,611)
           (Increase) decrease in related party receivable             5,000         (3,379)
           Decrease in notes receivable                                 --          159,061
           (Increase) decrease in other assets                         3,000         (4,729)
           Increase (decrease) in accounts payable                   (29,239)        60,600
           Decrease in accrued expenses                               19,685        (65,785)
           Increase in related party obligations                     107,385         81,457
                                                                 -----------    -----------
               Net Cash Used by Operating Activities              (1,027,265)      (871,025)
                                                                 -----------    -----------
Cash Flows from Investing Activities:
     Purchase of property & equipment                               (175,929)       (61,660)
     Net purchase of certificates of deposit                        (103,506)          --
                                                                 -----------    -----------
               Net Cash Used by Investing Activities                (279,435)       (61,660)
                                                                 -----------    -----------
Cash Flows from Financing Activities:
     Issuance of common stock                                        935,000        420,063
     Proceeds from notes payable                                     150,000           --
     Proceeds from convertible debentures                             50,000        650,000
     Proceeds from investor advances                                 242,000         50,000
     Net decrease in lines of credit                                 (15,048)       (38,668)
     Payments on long-term obligation                                   --          (42,866)
     Payments of stock offering cost                                                (64,375)
                                                                 -----------    -----------
               Net Cash Provided by Financing Activities           1,361,952        974,154
                                                                 -----------    -----------
Net Increase in Cash                                                  55,252         41,469

Cash at Beginning of Year                                             42,488          1,019
                                                                 -----------    -----------
Cash at End of Year                                              $    97,740    $    42,488
                                                                 -----------    -----------

Supplemental Disclosures of Cash Flow Information:
     Cash paid during the year for:
       Interest                                                  $    57,880    $    22,562
       Income taxes                                              $      --      $      --





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

</TABLE>


                                       5



<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Continued)

Supplemental Schedule of Noncash Investing and Financing Activities:

     In 2000,  the  Company  issued  100,000  shares of common  stock and a note
     payable in the amount of $50,000 in the  acquisition  of Azore  Acquisition
     Corporation (See Note 2).

     In 2000,  the Company  issued  77,358  shares of common  stock for services
     rendered valued at $21,660.


     In 2000, the Company issued 896,055 shares of common stock in conversion of
     $650,000 of debentures along with related accrued interest of $10,788.

     In 1999,  the Company  issued  113,181  shares of common stock for services
     rendered valued at $84,869.

     In 1999, the Company recorded an addition to capital in excess of par value
     in the  amount  of  $227,500  due to a  beneficial  conversion  feature  of
     convertible debentures.

     In 1999,  the Company  issued  125,000  shares of common stock for interest
     payable in the amount of $93,750.













                                       6
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION  - Q Comm  International,  Inc. (the Company) was organized on
     February 7, 1986 as Four Rivers Development,  Inc. This name was changed on
     August  3,  1998 to Q Comm  International  Inc.  in  conjunction  with  the
     purchase of three  operating  companies.  The Company is  headquartered  in
     Orem,  Utah but  provides  telecommunication  products  and services to end
     users  throughout the United States.  The Company has, at the present time,
     not paid any  dividends  and any  dividends  that may be paid in the future
     will  depend  upon the  financial  requirements  of the  Company  and other
     relevant factors.

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

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

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

     GOODWILL  -  In  connection  with  the  acquisition  of  Azore  Acquisition
     Corporation (See Note 2), the Company  recorded  goodwill of $224,561 which
     is being amortized over 5 years on a straight-line basis.

     REVENUE  RECOGNITION - The Company provides  electronic delivery of prepaid
     telecommunication  products through a variety of retail locations.  Revenue
     is  recognized  at the  time  of  product  sale.  Sales  of  the  Company's
     electronic  products and services are generally made directly to end-users.
     There  is no right of  return  for  products  sold and the  Company  is not
     obligated for further performance after the sale.

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

     During the year ended December 31, 2000, the Company implemented Securities
     and  Exchange  Commission  Staff  Accounting  Bulletin  No.  101 -  Revenue
     Recognition in Financial  Statements (SAB 101).  There was no impact on the
     Company's revenues or revenue recognition policies resulting from SAB 101.

     LOSS PER SHARE - The Company  computes  loss per share in  accordance  with
     Statement of Financial  Accounting  Standards  (SFAS) No. 128 "Earnings Per
     Share," which  requires the Company to present basic earnings per share and
     dilutive earnings per share when the effect is dilutive (see Note 16).

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

                                       7
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     ADVERTISING  COSTS -  Advertising  and  marketing  costs  are  expensed  as
     incurred.

     ACCOUNTING   ESTIMATES  -  The  preparation  of  financial   statements  in
     conformity  with  generally   accepted   accounting   principles   requires
     management  to make  estimates  and  assumptions  that affect the  reported
     amounts of assets and liabilities, the disclosures of contingent assets and
     liabilities  at the  date of the  financial  statements,  and the  reported
     amounts of  revenues  and  expenses  during the  reporting  period.  Actual
     results could differ from those estimated by management.

     RECENTLY ENACTED ACCOUNTING  STANDARDS - Statement of Financial  Accounting
     Standards  (SFAS)  No.  136,  "Transfers  of  Assets  to a not  for  profit
     organization  or charitable  trust that raises or holds  contributions  for
     others",  SFAS No. 137, "Accounting for Derivative  Instruments and Hedging
     Activities - deferral of the effective  date of FASB  Statement No. 133 (an
     amendment of FASB  Statement  No.  133.),",  SFAS No. 138  "Accounting  for
     Certain  Derivative   Instruments  and  Certain  Hedging  Activities  -  an
     Amendment of SFAS No.  133",  SFAS No. 139,  "Recission  of SFAS No. 53 and
     Amendment  to SFAS No 63,  89 and 21",  and SFAS No.  140,  "Accounting  to
     Transfer  and  Servicing  of  Financial   Assets  and   Extinguishment   of
     Liabilities",  were  recently  issued.  SFAS No. 136, 137, 138, 139 and 140
     have no  current  applicability  to the  Company  or  their  effect  on the
     financial statements would not have been significant.

     RECLASSIFICATIONS  - Certain  amounts in the financial  statements  for the
     year ended December 31, 1999 have been  reclassified to conform to headings
     and classifications used in the December 31, 2000 financial statements.

NOTE 2 - ACQUISITION

     During March 2000, the Company issued 100,000 shares of common stock valued
     at $1.76 and a note  payable for $50,000 to purchase  all of the issued and
     outstanding shares of Azore Acquisition Corporation (Azore). The merger was
     accounted  for as a purchase.  Subsequent  to the merger,  Azore was merged
     into the Company and  dissolved.  Goodwill  of  $224,561  representing  the
     excess of the cost of  purchasing  Azore over the fair market  value of the
     assets at the date of  acquisition  was recorded and is being  amortized on
     the  straight-line  method over 5 years.  Amortization  expense  recognized
     during the year ended December 31, 2000 was $35,012.

NOTE 3 - CERTIFICATES OF DEPOSIT

     The following is a summary of  certificates  of deposit held by the Company
     at December 31, 2000:

                                          Amortized        Market      Maturity
          Date Acquired   Maturity Date      Cost           Value       Value
          -------------   -------------   ---------       --------     ---------
             5/22/00         5/22/01       $ 51,753       $ 51,753     $  53,075
             5/22/00         5/22/01         51,753         51,753        53,075
                                           --------       --------     ---------
                                           $103,506       $103,506     $ 106,150
                                           --------       --------     ---------

     The  certificates  of deposit are  collateral  for the Company's  letter of
     credit and line of credit (See Note 5).



                                       8
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - PROPERTY & EQUIPMENT

     The  following  is a summary of property  and  equipment as of December 31,
     2000:

         Cost                                                 $ 240,423

         Accumulated Deprecation                                (46,194)
                                                              ---------
         Property & Equipment, net                            $ 194,229
                                                              ---------

     Depreciation  expense  for the years ended  December  31, 2000 and 1999 was
     $40,348 and $5,279, respectively.

NOTE 5 - LINES AND LETTERS OF CREDIT

     During May 2000, the Company obtained a $50,000 line of credit with a bank.
     At December 31, 2000, $30,000 was outstanding on the line. The line accrues
     interest  at prime plus 2% (9% at  December  31,  2000),  and is due in May
     2001. The line is secured by a $50,000 certificate of deposit.

     During May 2000,  the  Company  obtained a $50,000  letter of credit with a
     bank. At December 31, 2000,  there was no balance  outstanding.  The letter
     expires in May 2001 and is secured by a $50,000 certificate of deposit.

     At December 31, 2000,  the Company has a $33,368  balance  outstanding on a
     line of credit with a bank.  The line of credit bears interest at a rate of
     11.5% and is due on demand.

     The Company had a $150,000 line of credit with a bank, secured by equipment
     and a  personal  guarantee  from an  officer  of the  Company.  The  amount
     borrowed on the line was $143,920 at December 31, 1999.  The interest  rate
     is prime plus 2 percent,  plus an additional 5 percent  default rate due to
     noncompliance  with the line of credit covenants with interest payments due
     monthly,  and the  principal  due on demand.  The line of credit  agreement
     contained various restrictive  covenants.  At various times during the year
     and as of December 31, 1999, the Company was not in compliance with certain
     covenants and as a result,  the bank imposed a default interest rate on the
     lines of credit.  During the year ended  December  31,  2000,  the  Company
     settled the line of credit and  recorded a gain on  forgiveness  of debt of
     $65,504.

NOTE 6 - RELATED PARTY OBLIGATIONS

     ACCRUED  EXPENSES  - At  December  31,  2000,  the  Company  owed the Chief
     Executive  Officer  $231,546,  principally  consisting of unpaid  equipment
     lease expenses (see Note 15), deferred salary, and accrued interest.

     NOTES  PAYABLE - At December 31, 2000,  the Company had two notes  totaling
     $102,983  payable to the Company's Chief Executive  Officer.  The notes are
     payable on demand and bear  interest at 10%.  Subsequent  to  December  31,
     2000, the Company  borrowed an additional  $45,000 from the Chief Executive
     Officer under the same terms.



                                       9
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - INVESTOR ADVANCES

     At December 31, 2000, the Company owed investors $292,000 for advances. The
     advances bear interest at 10% and have no stated repayment date.

NOTE 8 - NOTES PAYABLE

     During  December 2000, the Company issued a note payable for $100,000.  The
     note bears interest at a rate of 15% per annum, payable monthly, and is due
     January 2, 2002.  If the  Company  does not make the  interest  payments or
     principal  balloon payment,  a late penalty equal to 10% of the amount owed
     will be assessed 5 calendar  days after the  payment  was due.  The Company
     paid a $5,000 finder fee and issued 15,000  restricted common shares valued
     at $4,218 in connection  with  obtaining the note,  which are included with
     common  stock  issued  for  services  in  the  accompanying  Statements  of
     Stockholders' Equity. The Company has also pledged 400,000 common shares as
     collateral for the loan (see Note 11).

     During  November 2000,  the Company issued a note payable for $50,000.  The
     note bears  interest at a rate of 12% and is due on November 27,  2001.  In
     connection  with  obtaining the note,  the Company issued 25,000 options to
     purchase common stock  exercisable at $.60 per share expiring  November 27,
     2003, with demand registration rights.

     During  March  2000,  the  Company  issued a note  payable  for  $50,000 in
     connection with an acquisition  (see Note 2). The note bears interest at 7%
     and is due April 15, 2001.

NOTE 9 - CONVERTIBLE DEBENTURES

     At December 31,  2000,  the Company had $50,000 in  convertible  debentures
     which may be  converted  to common stock at $.92 per share at the option of
     the holder. The debentures bear interest at 12.5% and are due July 6, 2001.

     During the year ended December 31, 2000, $650,000 in debentures and $10,788
     in accrued interest were converted to 896,055 shares of common stock.

NOTE 10 - CONTINGENT LIABILITY

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

     During the year ended December 31, 1999, the Company sold certain  services
     to a third  party who in turn sold these  services to  consumers.  When the
     third  party  failed  to  deliver  as  anticipated,  some of the  consumers
     reversed the charges  that had been made on their  credit card  accounts to
     purchase the services.  These reversals were ultimately  covered by charges
     made  to the  Company's  merchant  account  with a  bank,  resulting  in an
     overdraft of that account. The Company,  under the agreement with the third
     party, is entitled to be reimbursed 50% of the amount of the charge-backs.

                                       10
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - CONTINGENT LIABILITY (Continued)

     Management of the Company  believes the bank  reversed  charges that should
     not have been under the terms and  conditions of the  consumers'  agreement
     and therefore  disputes the $175,477  claimed by the bank.  The Company has
     recorded a contingent liability in connection with this matter.

NOTE 11 - CAPITAL STOCK

     A summary of common  stock  transactions  for the years ended  December 31,
     2000 and 1999 is as follows:

<TABLE>
<CAPTION>

                                                                   No. of     Price
                                                                   Shares   Per Share
                                                                 --------  -----------
<S>                                                            <C>         <C>
Year Ended December 31, 2000
----------------------------
Common stock issued for services of $21,660, December 2000        77,358   $.27 - $.28

Common stock issued for cash of $210,000, September 2000         300,000   $    .70

Common stock issued for cash of $150,000, August 2000            162,162   $    .93

Common stock issued for cash of $25,000, July 2000                27,027   $    .93

Common stock issued for conversion of $650,000 in debentures
 and accrued interest of $10,788, February - May 2000            896,055   $.70 - $1.00

Common stock issued for cash of $550,000, April 2000             594,595   $    .93

Common stock issued for acquisition, March 2000                  100,000   $   1.76

Year Ended December 31, 1999
----------------------------
Common stock issued for interest of $93,750, December 1999       125,000   $    .75

Common stock issued for services of $64,461, December 1999        85,948   $    .75

Common stock issued for cash of $37,500, November 1999            56,711   $    .66

Common stock issued for cash of $172,020, October 1999           260,113   $    .75

Common stock issued for subscription of $104,823, May 1999       209,646   $    .50

Common stock issued for cash of $71,497, May 1999                 95,334   $    .75

Common stock issued for services of $1,408, May 1999               1,900   $    .75

Common stock issued for services of $10,000, March 1999           13,333   $    .75

Common stock issued for cash of $34,223, February 1999            45,631   $    .75

Common stock issued for services of $9,000, January 1999          12,000   $    .75
</TABLE>

     The  Company  also has  400,000  shares of common  stock  held in escrow as
     collateral  for a note  payable  (see Note 8). The  Company  has not valued
     these  shares since they will only be issued in the event of default on the
     loan.

                                       11
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCK OPTIONS

     A summary of the status of options  granted to  employees  at December  31,
     2000 and 1999, and changes during the years then ended are as follows:
<TABLE>
<CAPTION>

                                                         2000                               1999
                                             ----------------------------       ---------------------------
                                                         Weighted Average                  Weighted Average
                                               Shares     Exercise Price         Shares     Exercise Price
                                             ---------    --------------       ---------   ---------------
       <S>                                   <C>          <C>                  <C>         <C>
       Outstanding at beginning of year        820,000    $         1.59              -    $             -
       Granted                                 835,000              1.10        820,000               1.59
       Exercised                                     -                 -              -                  -
       Forfeited                                     -                 -              -                  -
       Expired                                       -                 -              -                  -
                                             ----------   --------------       --------    ---------------
       Outstanding at end of year            1,655,000    $         1.34        820,000    $          1.59
                                             ----------   --------------       --------    ---------------
       Exercisable at end of year              634,000    $         1.25        199,000    $          1.57
                                             ----------   --------------       --------    ---------------
       Weighted average fair value of
         options granted                       835,000    $            -
                                             ----------   --------------

</TABLE>

     A summary of the status of the  options  outstanding  to  employees  of the
     Company at December 31, 2000 is presented below:
<TABLE>
<CAPTION>

                                             Options Outstanding                           Options Exercisable
                          --------------------------------------------------------   -------------------------------
          Range of                        Weighted-Average       Weighted Average                   Weighted-Average
          Exercise          Number            Remaining              Exercise          Number           Exercise
           Prices         Outstanding     Contractual Life             Price         Exercisable          Price
       -------------      ------------    ----------------       ----------------    -----------      --------------
      <S>                 <C>             <C>                    <C>                 <C>             <C>
       $1.00 - $1.50           835,000          4.5 years              $1.10              435,000         $1.10
       $1.50 - $2.25           820,000          3.5 years              $1.59              199,000         $1.57
                          ------------                                               -----------
                             1,655,000                                                    634,000
                          ------------                                               ------------
</TABLE>

     The fair value of each  option  granted is  estimated  on the date  granted
     using  the   Black-Scholes   option  pricing  model,   with  the  following
     weighted-average  assumptions  used for  grants  during  the  period  ended
     December 31, 2000: risk-free interest rate of 6.7%, expected dividend yield
     of zero, expected life of 5 years and expected volatility of 140%.



                                       12
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCK OPTIONS (Continued)

     The Company accounts for options  agreements  under  Accounting  Principles
     Board Opinion No. 25,  "Accounting  for Stock Issued to Employees" (APB 25)
     and related interpretations.  No compensation cost related to stock options
     was  recorded  during the years ended  December 31, 2000 and 1999 under APB
     25. Had compensation  cost for these options been determined,  based on the
     fair value at the grant dates for awards under these agreements, consistent
     with the method prescribed by Statement of Financial  Accounting  Standards
     No.  123,  "Accounting  for  Stock-Based  Compensation",  the effect on the
     Company's  results from operations and related  per-share  amounts would be
     insignificant.

     At December 31, 2000, the Company had outstanding  979,987 stock options to
     non-employees  under various  agreements  with exercise prices ranging from
     $.60 to $3.00 per share,  expiring  between  March 2001 and May 2005. As of
     December 31, 2000 none of the options had been exercised.

NOTE 13 - INCOME TAXES

     The Company  accounts  for income  taxes in  accordance  with  Statement of
     Financial  Accounting Standards No. 109 "Accounting for Income Taxes". SFAS
     No. 109 requires the Company to provide a net deferred tax  asset/liability
     equal to the expected  future tax  benefit/expense  of temporary  reporting
     differences  between  book and tax  accounting  methods  and any  available
     operating  loss or tax credit  carryforwards.  The Company has available at
     December  31,  2000,   operating  loss   carryforwards   of   approximately
     $3,650,000,  which may be applied  against  future taxable income and which
     expires in various years through 2020.

     The amount of and ultimate  realization  of the benefits from the operating
     loss  carryforward for income tax purposes is dependent,  in part, upon the
     tax laws in effect,  the future  earnings of the Company,  and other future
     events,  the  effects  of  which  cannot  be  determined.  Because  of  the
     uncertainty  surrounding  the  realization  of the  loss  carryforward  the
     Company has  established a valuation  allowance  equal to the amount of the
     loss carryforward and, therefore, no deferred tax asset has been recognized
     for the loss  carryforward.  The net  deferred  tax asset is  approximately
     $1,250,000 as of December 31, 2000, with an offsetting  valuation allowance
     at  December  31,  2000 of the same  amount.  The  change in the  valuation
     allowance for the year ended December 31, 2000 is approximately $336,000.

NOTE 14 - EMPLOYMENT AGREEMENTS

     During 1999 the Company entered into a three one-year employment agreements
     with officers of the Company. The employment  agreements called for a total
     combined  salary  of  $250,000  and  expired  on  December  31,  2000.  The
     agreements  can be renewed for  successive  one-year terms at the option of
     the Company.



                                       13
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - OPERATING LEASES

     The Company  leases  equipment  and  furniture  from a company owned by the
     Company's  CEO under an  operating  lease which  expires on March 31, 2001.
     Monthly  payments  are  approximately  $2,700  under  the  operating  lease
     agreement.  The Company is liable to carry  property  insurance and assumes
     the  responsibility  of maintaining the leased equipment and furniture.  At
     December 31, 2000,  there was a balance of $87,970 for past lease  payments
     (see Note 6). The  Company's  future  minimum  rental under this  operating
     lease amounts to $8,016 at December 31, 2000.

     The Company  leases  office and  warehouse  space under an operating  lease
     agreement  dated November 22, 1999. The base monthly rental under the lease
     is $3,190.  The lease expires December 31, 2001, with an option on the part
     of the Company to renew for an additional two years.  The Company's  future
     minimum  rental under this  operating  lease amounts to $38,280 at December
     31, 2000.

NOTE 16 - LOSS PER SHARE

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

                                                              For the
                                                            Years Ended
                                                            December 31,
                                                    ---------------------------
                                                        2000           1999
                                                    -------------  ------------
     Loss from continuing operations
       available to common shareholders
           (numerator)                              $  (1,141,531) $ (1,359,287)
                                                    --------------  ------------

     Gain on extinguishment of debt  (numerator)    $     156,049  $    164,112
                                                    -------------- ------------
     Weighted average number of common
       shares outstanding during the year
       used in per share calculations (denominator)     8,026,597     6,047,500
                                                    -------------  ------------

     At December  31, 2000 and 1999,  the Company had  outstanding  common stock
     purchase options for 2,634,987 and 869,445 shares,  respectively  (see Note
     12),  which were not  included  in the loss per share  computation  because
     their effect would be anti-dilutive.


                                       14
<PAGE>


                          Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - SUBSEQUENT EVENTS

     During  February  2001, the Company sold 133,333 shares of common stock for
     $40,000 cash and issued 281,000 shares for services  valued at $81,929,  of
     which  $72,719 were for services  included in accounts  payable at December
     31, 2000.

NOTE 18 - GOING CONCERN

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

NOTE 19 - SIGNIFICANT CUSTOMERS

     The Company has two significant customers that accounted for 38% and 13% of
     revenues for the year ended December 31, 2000.

NOTE 20 - GAIN ON EXTINGUISHMENT OF DEBT

     The Company has  continued to carry  certain  accounts  payable  items that
     originated with  predecessor  companies (see Note 1). The Company is in the
     process of  negotiating  settlements  for these  items,  which  resulted in
     payments  that were less than the original  amounts  due.  The  differences
     between  the  payments  and  original  amounts  due have been  recorded  as
     extraordinary  gains of $156,049 and $164,112 for the years ended  December
     31, 2000 and 1999, respectively.



                                       15