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                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                ----------------



                                   FORM 10-KSB

(Mark One)

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                    For the Fiscal Year ended December 31, 2002

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
    EXCHANGE ACT OF 1934

   For the transition period from _______________ to _______________

                        Commission File Number 000-28885

                           Q COMM INTERNATIONAL, INC.
                 (Name of small business issuer in its charter)



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


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

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

   Securities registered under Section 12(b) of the Exchange Act: None

   Securities Registered under Section 12(g) of the Exchange Act: Common Stock,
par value $.001 per share

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

                             Yes  |X|       No |_|

   Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. |X|

   For the year ended December 31, 2002, the revenues of the issuer were
$24,028,002.

   As of March 28, 2003, 21,115,668 shares of the issuer's common stock were
outstanding. The aggregate market value of the issuer's common stock held by
non-affiliates as of March 28, 2003, based on the closing price on the OTC
Bulletin Board of the National Association of Securities Dealers of $0.63 on
that date) was approximately $ 10,997,764.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE
===============================================================================

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                           Q COMM INTERNATIONAL, INC.
                            Form 10-KSB Annual Report

                                TABLE OF CONTENTS

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PART I
  Item 1.        Description of Business ............................................................................. 2
  Item 2.        Description of Property .............................................................................16
  Item 3.        Legal Proceedings ...................................................................................17
  Item 4.        Submission of Matters to a Vote of Security Holders .................................................17
PART II
  Item 5.        Market for Common Equity and Related Stockholder Matters ............................................18
  Item 6.        Management's Discussion and Analysis or Plan of Operations ..........................................19
  Item 7.        Consolidated Financial Statements ...................................................................26
  Item 8.        Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ................26
PART III
  Item 9.        Directors and Executive Officers ....................................................................27
  Item 10.       Executive Compensation ..............................................................................29
  Item 11.       Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ......31
  Item 12.       Certain Relationships and Related Transactions ......................................................33
  Item 13.       Exhibits, List and Reports on Form 8-K ..............................................................34
  Item 14.       Control and Procedures ..............................................................................34
SIGNATURES ...........................................................................................................35
CERTIFICATIONS .......................................................................................................36
</TABLE>


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                           FORWARD-LOOKING STATEMENTS


   This report contains forward-looking statements within the meaning section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements are typically identified by the words "believe",
"expect", "intend", "estimate" and similar expressions. Those statements appear
in a number of places in this report and include statements regarding our
intent, belief or current expectations or those of our directors or officers
with respect to, among other things, trends affecting our financial conditions
and results of operations and our business and growth strategies. These
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties. Actual results may differ materially from those
projected, expressed or implied in the forward-looking statements as a result of
various factors (such factors are referred to herein as "Cautionary
Statements"), including but not limited to the following: (i) our limited
operating history, (ii) potential fluctuations in our quarterly operating
results, (iii) challenges facing us relating to our growth and (iv) our
dependence on a limited number of suppliers. The accompanying information
contained in this report, including the information set forth under
"Management's Discussion and Analysis or Plan of Operations", identifies
important factors that could cause such differences. These forward-looking
statements speak only as of the date of this report, and we caution potential
investors not to place undue reliance on such statements. We undertake no
obligation to update or revise any forward-looking statements. All subsequent
written or oral forward-looking statements attributable to us or persons acting
on our behalf are expressly qualified in their entirety by the Cautionary
Statements.


                                     PART I

Item 1. Description of Business

Overview

   Our historical business has consisted of the purchase and resale of prepaid
telephone products through point of sale terminals that we provide and that are
located in retail establishments in the United States. Having initially used
third-party software and equipment to support these sales, in September 2002 we
introduced our new proprietary Qxpress system, which includes the Qxpress 200
terminal and the software used in our data center to process purchases of
prepaid products. We expect to experience substantial growth in our historical
business while expanding our product line to include a broad range of other
prepaid products and to provide transaction processing and information
management services to other vendors of prepaid products, both in the United
States and abroad.

   The Qxpress system is designed to replace the traditional distribution system
for prepaid products, which consists of vouchers and hard cards that must be
purchased by the retail merchant and that are subject to a number of problems,
including loss, theft and inventory financing and management issues. The new
Qxpress system can support the sale of a broad range of prepaid products, in
electronic format, from a single terminal placed in convenience stores and other
retail establishments. Using an appropriately enabled Qxpress 200 terminal, a
retail merchant can sell wireless telephone time, wireline long distance service
or other telephone products, add credit to a prepaid credit card, facilitate
cash transfers or sell other prepaid products. In general, the prepaid product
is sold in the form of a personal identification number, or "PIN," that the
customer can use to add telephone time or credit card credit by calling the
provider of the product or to transfer cash by providing the PIN to the
recipient. The consumer pays for the product by paying the retail establishment
in which the terminal is located. Revenue from these purchases is split among
the retail merchant, the broker that placed the terminal with the retail
merchant, Q Comm and the provider of the prepaid product.

   Transaction processing and information management services are used by many
different businesses in a variety of contexts. For example, credit card
companies are significant users of these services for post-paid transactions.
Our system is designed to accommodate transactions involving virtually any
prepaid product that can be delivered electronically. Within the prepaid
transaction market, our initial focus has been on the telecommunications market.
Telecommunication carriers, such as Verizon, Cingular, T Mobile and AT&T sell
their prepaid wireless services either directly or through distributors who
purchase these products at rates significantly lower than those that could be
obtained by individual consumers and small businesses. These distributors often
purchase prepaid telecommunication products from different carriers, then resell
these products in smaller quantities to their established networks of retail
outlets, such as convenience stores, check cashing stores, newsstands, grocery
stores and discount

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stores. Qxpress can also be used to sell and reload prepaid credit cards and we
anticipate that it will be able to accommodate money transfer services by the
end of April 2003.

Electronic Processing of Prepaid Products

   Distribution systems for prepaid products such as wireless, phone cards,
debit cards, money transfers and currency exchange have generally failed to take
full advantage of advances in electronic processing technology. For example,
prepaid telecommunication products have generally been sold in the form of a
card or voucher with a PIN number printed on it. Financial transactions, such as
money transfer or currency exchange have generally required the consumer to go
to a bank, telegraph office or other facility providing the required service.

   Electronic processing systems such as our Qxpress system enable these
transactions to be available through a single terminal that can be installed at
an almost unlimited number of commercial locations and that can offer a wide
range of different prepaid options. The electronic nature of the transaction can
offer a variety of efficiencies when compared to traditional distribution
methods. A few of these potential efficiencies are described below.

   Reduction in distribution costs, carrying costs and shrinkage. There are
three fundamental problems with the traditional hard card or voucher system for
delivering prepaid wireless and wireline telecommunication products: high
distribution costs; high carrying costs; and shrinkage. Carriers sell the hard
cards to brokers who resell them to the retail outlets. The carriers print the
cards and ship them to brokers who, in turn, store the cards and ship them to
retail stores. The retailers depend on the brokers to provide to them with a
sufficient number of cards to meet their demand. Both the brokers and retailers
have to allocate valuable working capital to maintain an adequate inventory of
cards. For example, based on informal discussions we have had with distributors
and merchants, we have found that a convenience store may stock up to $18,000
worth of hard cards at any given time in various denominations and from
different carriers. A broker may service hundreds of convenience stores,
requiring it to maintain inventory valued in the millions. If a retailer does
not have a particular card in stock, it loses a potential sale. In addition,
theft is a significant problem for many retailers who carry hard cards because
they are readily accessible, easy to conceal and have an intrinsic value. An
electronic processing system reduces theft risk. It also permits better
inventory management for distributors and merchants by eliminating the need to
stock cards with variety of specific numbers of minutes and by permitting
"just-in-time" inventory purchasing program.

   Improved transactional data. Because traditional prepaid wireless
transactions are virtually anonymous and because carriers are not involved
directly in the sale, carriers have very little information regarding prepaid
wireless transactions. They do not know any demographic information about the
buyers. An electronic system maintains the anonymity of individual users but
permits better demographic data collection by creating an electronic record of
each transaction showing the time, value and location of each purchase.

   Improved distribution of financial services. An appropriately enabled
point-of-sale activation system that can process a wide variety of financial
transactions, including replenishing prepaid credit cards, funds transfers and
currency exchanges, permits the consumer to engage in these kinds of
transactions in his or her neighborhood and at almost all hours.

The Prepaid Wireless Market

   In a prepaid wireless transaction, the consumer pays for a fixed number of
minutes in advance. In the traditional distribution format, to purchase prepaid
wireless products, a consumer purchases a card, referred to in the industry as a
"voucher", "scratch card" or "hard card", which entitles the holder to a
specific number of minutes based on the value of the card. In order to activate
his service, the customer must call the 800 number printed on the card and enter
the PIN printed on the card. The carrier then credits the minutes to the
consumer's phone number. The carrier records usage and deducts the time as the
minutes are used. Once all the minutes are used up, the consumer must purchase
additional minutes.

   Several carriers provide prepaid wireless services in the United States and
Canada. They offer time increments ranging from $10 to $200 with most purchases
being in the $30 to $120 range. Various carriers

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provide their prepaid plans bundled with the purchase of a phone. Prepaid plans
typically allow the end-user 30 to 90 days to use the allotted airtime. If not
used, the minutes are forfeited at the end of the period. However, a consumer
can keep the remaining time if he extends their service before the existing plan
expires. There can be significant differences between the carriers in terms of
quality of equipment, quality of service and plan features, such as voice mail,
call waiting and three-way calling.

   The prepaid wireless market, although the dominant wireless market in most of
the world, has had limited use in the United States and Canada, where it has
been targeted primarily at consumers whose credit history and economic condition
will not support an application for post-paid service. Accordingly, prepaid
wireless has been more expensive on a per minute basis than post-paid wireless,
in part because the target market had no effective alternative and in part
because carriers looking to build and maintain a stable customer base disfavored
prepaid customers who could more easily discontinue service than could postpaid
customers on a contract.

   As competition among wireless carriers has intensified, carriers have become
increasingly interested in prepaid service and have made changes in their
distribution systems in an attempt to attract to prepaid plans not only the
credit challenged but also those with good credit histories who, for various
reasons, may prefer a prepaid plan. This has resulted, among other things, in a
faster reduction in per-minute charges for prepaid services than for postpaid
services and the narrowing of the cost gap between the two alternatives. As a
result, Frost & Sullivan projects that the United States market for prepaid
wireless services will grow from $5.7 billion in 2001 to $14.3 billion in 2005,
a compound annual growth rate of 25.85%, and that the number of subscribers for
prepaid wireless services will grow from 13.3 million to 34.8 million during the
same period.

   As a part of their effort to promote prepaid plans, the carriers have
generally been supportive of improvements in the distribution chain that allow
prepaid wireless products to be more widely and conveniently available to
consumers. Electronic systems, such as our Qxpress system, have the potential to
promote efficiency in the distribution of prepaid products generally and
therefore have the potential to increase the attractiveness of prepaid products
to consumers and merchants and to reduce distribution costs for prepaid
products. At the same time, many carriers are experimenting with the Internet as
a medium to provide product replenishment to prepaid subscribers. The use of the
Internet may offer various advantages to carriers, including the ability to
bypass the traditional distribution network. We view Internet- based systems as
competitive with our system. However, we believe that the traditional
point-of-sale distribution networks will remain robust in order to meet the
needs of consumers who do not have Internet access or credit cards or who have
an immediate need to replenish telephone time when they are not able to connect
through the Internet.

   The market for wireless telecommunication products in general and prepaid
telecommunication products in particular is in a state of rapid change. In order
to succeed in the prepaid telecommunication products, we will be required to
anticipate and respond appropriately to market developments as they occur.

Other Prepaid Services

   We also derive a small amount of revenue from the prepaid credit card market.
We provide terminals to two large distributors of prepaid credit cards. In
addition, in February 2003, we signed an agreement with Universal Express
Capital, which maintains a network of private postal stores in the United
States. We expect to place 500-700 terminals under this agreement over the next
18 months. Universal Express plans to use the Qxpress 200 terminal for our
entire suite of prepaid products as well as for their branded prepaid debit card
and their check guarantee services.

   In the fourth quarter of 2002, we entered into an agreement with EGX
Electronic Funds Transfer, Inc., one of the largest providers of electronic
money transfer services in the world. Electronic money transfer is a high
volume, highly profitable business that has come under increased scrutiny as a
result of the war on terrorism. The Patriot Act, enacted in response to the
terrorist attacks of 9/11, imposes new regulations on the international money
transfer business. Our Qxpress system, particularly our new Qxpress 200
terminals, facilitates compliance with these new rules and regulations as well
as those relating to consumer protection.

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Under our agreement with EGX, we will provide EGX with up to 5,000 Qxpress 200
terminals over the five-year term of the agreement. We expect to begin shipping
the first units to EGX in the second quarter of 2003.

The Q Comm Solution

   Qxpress is an integrated electronic point-of-sale activation and management
information system that addresses many of the challenges to the prepaid products
distribution system. The Qxpress system provides retailers, brokers and
suppliers a network that facilitates and processes transactions for multiple
prepaid products, collections, and custom reporting. It includes an attractive,
compact, proprietary point of sale terminal, proprietary software, data center
functionality and transactional communications/protocols and professional
services, which include customer and technical support. The combination of the
data center and the terminal not only processes transactions but also provides a
suite of information management tools to assist merchants, brokers, carriers and
others in the distribution chain.

   Terminal hardware. Our initial point-of-sale activation system terminal was a
commercially available product with limited functionality. It can only support a
limited number of products and does not have the ability to support transaction
processing services such as sales and management reports. We use this terminal
in over 1,000 locations but plan to gradually replace all of the original
terminals with our new Qxpress 200 terminal.

   In the third quarter of 2002, we began shipping the Qxpress 200 terminal, our
custom-designed, proprietary point-of-sale activation system terminal. The
Qxpress 200 terminal, which is about the size of a telephone and sits on the
checkout counter, features a significantly improved aesthetic design as well as
additional functionality that significantly improves distribution efficiencies
at the retail counter and in the back office. The new features include a large
terminal face that make the operation of the Qxpress 200 unit intuitive for the
first time user and even faster for the seasoned employee and an interactive
training module. Each terminal also incorporates a 3-track magnetic stripe
reader, multi-level password security, unique entry, unique denomination,
real-time PIN and PIN-less transaction capability, and 128-bit encryption
technology in concert with TCP/IP and proprietary protocols. Security is
enhanced by efficient and speedy two-way information flow. Each terminal can
support multiple platforms, methods, suppliers, categories, products and foreign
currencies and languages. A streaming media display reads like a tiny,
electronic billboard that consumers view during purchases -- an effective means
to enhancing brand awareness or to introduce new products.

   All steps required to initiate a prepaid transaction are contained within a
particular sequence of specifically designed screen displays. The information
that is displayed depends on the particular task or product sequence initiated
by the user. The sales process is implemented by the retailer inputting product
selection, language, denomination, password and print or cancel. The retailer
enters all of the relevant information, including the vendor and the transaction
amount, by depressing various keys on the terminal. The terminal prints the PIN,
simple activation instructions and any other relevant information on a blank
card that the retailer keeps in stock. The transaction is reported to our data
center on either a just-in-time or real-time basis over a standard telephone
line. PINs are transferred from the data center to the terminal at the same
time.

   The terminal's media display screen is designed to create a point of purchase
awareness for the consumer. The media display screen is positioned to face the
consumer as they approach the checkout counter in an effort to engage additional
purchasing behavior. The prepaid product market changes frequently with name
changes, different rates, different destinations, and specials of the month.
Currently, any `product change' information, special or other promotion is
handled in paper form or by using sales personnel to deliver the message. The
media display messaging is managed solely at the data center where proprietary
instructions customize the information that is sent to an individual terminal or
group of terminals. The messaging may have come from a variety of sources
including the retailer, broker, carrier or other advertiser. The display itself
is two rows of 40 characters configured in a Fluorescent Vacuum Display internal
to the terminal. The messaging size is dynamic up to 256 characters per message
with scrolling, flashing, top-to- bottom movement capability that can be
implemented in an attempt to gain consumers' attention and action.


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   Dynamically allocated interactive training is available on the Qxpress 200
terminal via the merchant display screen. When the retailer initiates a training
session, the terminal sends a training request to the data center. The data
center queries its database and gathers information on products and services
that are currently supported by the terminal making the request. This
information is compiled into a series of interactive display screens with
training scripts focusing on only the current product line of that terminal.
This real-time dynamic allocation of information means that the retailer is
exposed only to training material pertaining to products being sold at that
location. The training is timely and focused, rather than generalized and dated.

   Data center. The data center is the key to the overall function of the
Qxpress system, serving as an inventory and information hub for the distribution
of prepaid products. At the same time that we developed the Qxpress 200
terminal, we also developed new software for our data center and new
communication protocols that allow for two-way communication between the data
center and the terminals. The data center electronically distributes prepaid
products to the terminals and the terminals report all of their transactions to
the data center where the information is stored to connect our terminals to the
data center. The communications protocols, which work in conjunction with the
Qxpress 200 terminals and data center, create a flexible delivery platform for
multiple services formats, including real-time, just-in- time and batch
inventory distribution, PIN and PIN-less transactions. These methods enable
efficient restock, quick product additions, and reporting and management
capabilities. Through our data center, we are also able to offer electronic
automated clearing house, or ACH, services, eliminating the need for billing and
collecting, as well as detailed accounting, inventory, sales, transaction and
other management information reports for the retailers, brokers and providers.
In addition, the system controls the advertising message on the back face of the
terminal, can produce custom-designed text and graphics for card backs. The
system also works as a mechanism to process traditional magnetic swipe
transactions. Finally, the data center and communication protocols are
TCP/IP-enabled to allow the system to connect to all types of devices and
communications and enterprise systems. As a result, our system can also be
integrated with third-party point-of-sale hardware/ communications systems to
provide an interface with installed legacy equipment.

   The Qxpress system has the ability to produce terminal reports on demand and
in real-time. The data center keeps all sales, product inventory, and terminal
metrics current in its database. When a retailer initiates a report request, the
terminal processes this request and passes it to the communications server. The
communications server validates the request and passes the request to the
reports engine, which gathers the request data from its database and returns the
requested information back to the terminal. The terminal then formats the
information into a report and prints the report using the onboard thermal
printer.

   Communications between the terminal and data center are accomplished by using
a proprietary transmission protocol. This transmission protocol involves
communicating to and from the communications server and the terminal. Each
transaction is handled in its entirety with no parsing to multiple destinations.
There are two communications modes that can be initiated by the terminal:
just-in-time and real-time. Each product has a unique code associated with it
denoting the communication methodology for the product. The terminal keys off of
the type of product being requested in order to successfully complete the
communication requirements.

   The just-in-time communications protocol supports our just-in-time solution.
Just-in-time provides for dynamic assessment and deployment of PIN inventory
versus the standard batch-to-batch based on time or level. The just in time
process is not limited to the product type only, but rather applies also to the
denomination level, allowing for a queue and dynamic assessment to be
established for the lowest level in the product tree. Qxpress is able to
establish a queue of PINs by denomination. This queue is dynamic in the number
of PINs that may be deployed to each queue based on an activity assessment. This
queue is adjusted to meet the demands of the retailer and the just-in- time
inventory methodology. Each denomination queue provides the PIN that is printed
on demand at the point of sale. Following the completion of the transaction, the
terminal establishes a connection to the data center and downloads all relevant
data needed to capture and report this individual transaction to all parties
involved. In addition, during the download connection, a PIN of equal value and
type is sent from the data center to the queue. As prepaid services inventories
continue to escalate, the just-in-time methodology establishes some additional
benefits to the merchant and the carriers by

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providing the PIN or product on demand while allowing for diminishing number of
PINs required at the point of purchase.

   The real-time communications supports any transaction that needs to have a
real-time element to it. A real-time process is usually required in PINless or
immediate crediting environments. This process marries the terminal and the data
center to accomplish the transaction.

   Transaction Processing. We currently process transactions from one primary
and two remote data centers. We administer all of our data centers from our
headquarters. Our primary data center is located in Lindon, Utah and has
multiple backup power sources. Our secondary facility is located in our
headquarters in Orem, Utah. We process transactions originating on our LDC
terminals at a data center maintained by LDC Direct in Atlanta, Georgia. In
addition, a data center that we recently set up for a customer in Montreal,
Canada is fully capable of functioning as a backup facility. To ensure
redundancy, our Lindon and Orem data centers use different physical and network
infrastructures. Both centers have adequate telephone and data access and we
purchase telephone and network services from multiple vendors. Either center is
capable of acting as the sole processing facility for all of our transactions in
the event of a failure of the other center and all transaction data is reported
to both locations.

   Our transaction processing facilities run on industry standard Intel based
hardware. We use SUSE Linux for our operating system. We use multiprocessor, RAM
laden servers with RAID Level 5 on every system. We use MySQL as the platform
for the back end data store and PHP scripting in conjunction with Java servlets
for the administration tools. All information is stored in the back end data
store that is also fully encrypted and secure. All data is backed up a minimum
of once per day. The data store is replicated across physical platforms
constantly so that there are always at least two copies of critical data at any
given point in time. Backups are stored off site in a secure facility. The
administration web site uses 128-bit SSL running on an Apache web server. Java
servlets and applications are run using Tomcat application server. Our networks
are secured by Cisco's Netscreen product. We use VPN technology to connect data
centers and secure data transfer between hosts and Cisco Netscreen technology to
facilitate and manage VPN's. All information is secured from the terminal using
128-bit Blowfish encryption.

   The Qxpress system is monitored each minute by at least two stations outside
our network. Engineers are notified promptly of any problems or performance
degradations. The monitoring system aggressively tests the system from end-to-
end to determine that all terminals in the field can sell products and report
transactions. Software, hardware and network engineers are on call 24 hours a
day, 7 days a week.

Growth Strategy

   Our goal is to become the leading provider of transaction processing and
information management services for prepaid products. In order to achieve this
goal we must expand our distribution network of brokers and distributors,
increase the number of products and services that we sell and develop new
applications and products.

   We will seek to expand our presence in the prepaid telecommunications market.
We believe that the prepaid telecommunications market by itself presents an
attractive opportunity for us. Currently, we purchase wireless
telecommunications products from 10 carriers and distribute Qxpress 200 through
more than 50 brokers, agents and other intermediaries. We believe we can expand
our existing relationships with carriers and independent sales organizations as
well as enter into new relationships to purchase and distribute prepaid
telecommunication products and services. For example, we recently entered into
an agreement with PreNet, Inc., which has the exclusive right to sell prepaid
Sprint PCS in the United States. Under this agreement, we will place our
terminals in various retail locations throughout the country that are serviced
by PreNet, enabling those merchants to sell our suite of prepaid products as
well as prepaid Sprint PCS. In addition, we intend to enter into direct
strategic relationships with large retail chains to distribute prepaid products
and services through their stores. We have also signed a distribution agreement
with a distributor that represents 25,000 retail locations in the United States,
and have secured other strategic distributor partnerships in the United States.


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   We will develop new products and applications. Until now we have focused
almost exclusively on prepaid telecommunication services market, particularly
prepaid wireless products. However, Qxpress 200 can be adapted to accommodate
almost any other prepaid product. For example, we have an agreement with two
large distributors of prepaid MasterCards and we entered into an agreement with
Universal Express Capital, which plans to use Qxpress to sell a variety of
prepaid products, including their own branded prepaid debit card and check
guarantee services. Also, we recently entered into an agreement with EGX Funds
Transfer, one of the largest providers of money transfer services in the world.
We will continue to seek new applications for our point-of-sale activation
system. Other potential applications include prepaid debit cards and prepaid
gift cards.

   We will develop new revenue models. Currently, we derive substantially all of
our revenue from reselling prepaid products. The margins under this model are
relatively small after taking into account our cost to acquire these products
and the commissions and fees we have to pay to intermediaries in connection with
each transaction. In order to address new markets and offer more flexibility to
our customers, we recently introduced a second revenue model, which we call the
"service bureau" model. In this scenario, we license our technology and the
licensee is responsible for buying the prepaid products, reselling them,
deploying the terminals, customer support and providing management information
reports. We earn revenue from transaction fees for each transaction effected
over the Qxpress system. While this model results in lower revenue per
transaction, the gross margins are higher. We anticipate that this will be our
primary model in connection with our international expansion. In connection with
our EGX agreement, we use a hybrid model that incorporates aspects of both the
broker model and the service bureau model. In this case, we sell them the
terminals and manage the data center, deriving both sales revenue and
transaction fees.

   We will seek to expand internationally. The prepaid telecommunications market
is much larger outside the United States than in the United States. For example,
in some European and Asian countries prepaid wireless accounts for up to 80% of
the wireless market. Given the maturity of the prepaid market in Europe, it is a
natural market for our point-of-sale activation system. The same would be true
for Asia and Latin America. In February 2002, we announced that we had entered
into an exclusive five-year agreement with WGR Limited, a European
telecommunications distributor, for the installation of a data center and the
purchase of up to 26,000 Qxpress 200 terminals. In January 2003 we established a
service bureau data center in Canada for a Canadian telecommunications
distributor. We also began deploying Qxpress 200 terminals in Puerto Rico in the
fourth quarter of 2002.

   We will consider strategic acquisitions. At the present time, we have no
plans to make any acquisitions. However, we will consider specific acquisition
opportunities if we feel they have strategic value.

Competition

   Transaction processing and management information services for prepaid
products are a relatively new market. However, we anticipate that this market
will grow rapidly as the demand for prepaid products grows. Competition for our
services may come from a variety of sectors, including companies, such as First
Data Corporation, that provide transaction processing and management information
services to the credit card market, companies, such as HyperCom and VeriFone,
that supply electronic point-of-sale activation equipment, as well as companies,
such as 9278 Communications, Blackstone Calling Card, Pre- Solutions, Debisys,
Advanced Payment Systems and LDC Direct, that distribute a variety of prepaid
telecommunication products and have developed or are in the process of
developing electronic point-of-sale activation systems. Competition may also
come from technology companies and e-commerce solution providers. The technology
for point-of-sale-activation systems is rapidly evolving. Increased competition
could result in reduced operating margins, as well as a loss of market share and
brand recognition. Although most of our competitors are privately held
companies, some have substantially greater resources and/or pre-existing market
share that enable them to establish a stronger competitive position than we
have, in part through greater marketing opportunities. This is particularly true
in light of our lack of liquidity and capital resources.

   Because our system is focused on point-of-sale purchases, we also face
competition from systems that offer prepaid products over the Internet. Internet
based commerce has increased dramatically in recent years as more and more
people have access to the Internet, as e-commerce becomes generally accepted as
safe,

                                        8

<PAGE>
reliable and efficient, and as access speed and convenience increase. Most or
all of the prepaid products that we can offer can also be offered over the
Internet, either by the suppliers themselves or by intermediaries or both. Many
of the advantages of our system over traditional distribution systems will also
be available through the Internet. However, online purchases require access to
the Internet and a credit card or other type of credit account.

   We believe that the principal competitive factors in our market include the
following:

   o Cost efficiencies;

   o Scope of service;

   o Quality of service;

   o Convenience;

   o Breadth of geographic presence;

   o Customer service;

   o Reliability; and

   o Availability of enhanced services.

   We believe that Qxpress 200 will allow us to compete successfully in the
market for prepaid transaction processing and management information services.
Nevertheless, our ability to compete successfully will depend on our ability to
support the distribution channels that are in fact used for prepaid products,
our financial condition and our related ability to form strategic alliances and
joint ventures with third-party telecommunications service providers. We cannot
assure you that we will be able to compete successfully, and a failure to so
successfully compete would have a material adverse effect on our revenue growth
and earnings.

Suppliers and Customers

   We purchase prepaid telecommunication products, primarily PINs, from a number
of sources, including national carriers such as Verizon Wireless, AT&T Wireless,
Cingular and T Mobile, as well as regional and local carriers, such as
Cincinnati Bell, Telefyne Incorporated, Hargray Wireless and Iowa Wireless. We
have carrier agreements with some of these companies. The carriers determine
prices for their products and we do not control the frequency or the quantity of
the sales. To date, we have not experienced any supply side issues, meaning we
have been able to purchase a sufficient number of products to meet customer
demand. Some of our suppliers require that we pay for their products
immediately, others extend us terms and some provide us with product on
consignment.

   We have entered into agreements with approximately 50 brokers who, we
believe, service over 100,000 retail locations throughout the country. As of
December 31, 2002, only 1,600 of these locations used the Qxpress System. Each
broker and each retailer is required to execute a Services and Rental Agreement
and an ACH Agreement under which they authorize us to withdraw funds from their
accounts to pay for the products they sell. In 2001, Cellcards of Illinois
accounted for 39% of our revenues and Hargray Wireless accounted for 10% of our
revenues. In 2002, Iowa Wireless accounted for 30% of our revenues, Cellcards of
Illinois accounted for 28% of our revenues and Hargray Wireless accounted for
13% of our revenues. In 2002, our agreement with Cellcards of Illinois was
terminated by mutual consent of the parties.

   The new Qxpress 200 terminal is manufactured by Universal Electronics, Inc.,
Milwaukee, Wisconsin. We purchased the original Qxpress terminal from LDC
Direct, which also provided us with transaction processing services. We are no
longer purchasing the original terminal, although LDC continues to provide
transaction processing services for those terminals that are still in use. We
expect to replace those original terminals gradually over the next two years.


                                        9

<PAGE>
Sales and Marketing

   Our sales and marketing strategy is designed to attract new customers,
increase the number of retailers that use the Qxpress system, increase the
volume of transactions per unit and develop new applications. Our sales and
marketing department has three people including our president, Steve Flaherty,
our national sales manager, Bruce Siskonen and our marketing director, John
Hickey. Once this offering is complete we plan to hire at least two additional
sales people, one of whom will focus on international distribution. Our sales
staff is responsible for soliciting prospective new customers as well as for
providing technical and training advice and customer support. Finally, our sales
staff is also responsible for identifying new applications for the Qxpress
system. Once these applications have been identified, our technology department
develops the new applications.

   Initially, we relied on in-house sales representatives to market the Qxpress
system directly to retailers. In the later part of 2000, we revised our strategy
and began marketing our system directly to relatively large independent brokers,
agents, distributors and other intermediaries who service multiple retail
locations. We believe that this is a much more efficient way to market our
system, as evidenced by the fact that our revenues increased dramatically in
2001 without a significant increase in our corporate overhead. In addition to
independent brokers, our current marketing strategy also focuses on relatively
large chains with either franchised or company owned stores. We are also
marketing our system in foreign countries where the prepaid transaction market
is quite large. We use the same strategy, i.e., targeting relatively large
brokers rather than retailers. As part of our marketing strategy we offer our
domestic clients the option of our "broker" model or "service bureau" model. For
our foreign clients, we only offer our "service bureau" model.

   In support of our sales effort, we use comprehensive, targeted marketing
programs that include direct mail, public relations, advertising, trade show
participation and ongoing customer communication programs. Our marketing
director is also a monthly contributor to Intelecard News, a publication that
focuses exclusively on the telecommunication industry.

Intellectual Property

   Proprietary rights are important to our success and our competitive position.
To protect our proprietary rights, we rely on a combination of patent,
copyright, common law trademark, and trade secret laws, confidentiality
procedures and contractual provisions.

   We have filed multiple provisional patent applications in the United States
relating to our proprietary technology. We cannot assure you that any allowed
patent claims will result from these applications, that any patents that may
issue will protect our intellectual property or that any issued patents will not
be challenged by third parties. Furthermore, other parties may independently
develop similar or competing technologies or design around any patents that may
be issued to us. It is possible that any patent issued to us may not provide any
competitive advantages, that we may not develop future proprietary products or
technologies that are patentable, and that the patents of others may seriously
limit our ability to do business. In this regard, we have not performed any
comprehensive analysis of patents of others that may limit our ability to do
business.

   We plan to license our software and technology. We anticipate that we will
enter into written license agreements, which will impose restrictions on the use
of the software. Since we have just implemented our first "service bureau"
model, we cannot anticipate what the terms of these license agreements will be,
what protections they will afford us and how a court, arbitrator or regulatory
body would interpret the provisions and enforceability of such an agreement.
Therefore, we cannot assure you that any license agreement that we enter into
will afford us adequate protection.

   We have not applied to register any of the trademarks that we use in our
business, including "Qxpress" and "Qxpress 200", in any jurisdiction. At this
time, we are not planning to register these trademarks and we cannot assure you
that we will be able to continue to use them. Even if we apply to register these
marks, there can be no assurance that we will be successful in obtaining the
trademarks for which we have applied or, if these applications are approved,
that the trademarks will not be challenged by others or invalidated.


                                       10

<PAGE>
   We seek to avoid disclosure of our trade secrets through a number of means,
including but not limited to, requiring those persons with access to our
proprietary information to execute confidentiality agreements with us and
restricting access to our source code. We seek to protect our software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection.

   We cannot assure you that any of our proprietary rights with respect to our
products or services will be viable or of value in the future since the
validity, enforceability and type of protection of proprietary rights such as
the ones we have are uncertain and still evolving.

   Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software may exist, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States,
and effective copyright, trademark and trade secret protection may not be
available in those jurisdictions. Our means of protecting our proprietary rights
may not be adequate to protect us from the infringement or misappropriation of
our rights by others.

   In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights, particularly in the
software and technology industries. We could become subject to intellectual
property infringement claims as the number of our competitors grows and our
products and services overlap with competitive offerings. These claims, even if
not meritorious, could be expensive to defend and could divert management's
attention from our operations. If we become liable to third parties for
infringing their intellectual property rights, we could be required to pay a
substantial award of damages and to develop noninfringing technology, obtain a
license or cease selling the products that contain the infringing intellectual
property. We may be unable to develop noninfringing technology or obtain a
license on commercially reasonable terms, if at all.

Government Regulation

   There are no significant governmental approvals directly related to our
products or services and we are not aware that any significant regulation is
contemplated.

Employees

   As of March 31, 2003, we had 24 employees, of which 23 were full-time
employees.


                                       11

<PAGE>
                                  RISK FACTORS


   You should carefully consider the risks described below, our financial
statements and the notes to those statements, before you purchase any of our
securities.

We have no history of profitable operations. Continuing losses could exhaust our
capital resources and force us to discontinue operations.

   From the date on which we became aC corporation in 1998 through December 31,
2002, we incurred cumulative losses of $7.5 million. For the years ended
December 31, 2001 and 2002 net losses were $1.55 million and $2.3 million
respectively. Unless we can significantly increase the number of our Qxpress 200
terminals in use, we will continue to incur losses for the foreseeable future.
Due to our lack of liquidity, we have not been able to manufacture and
distribute a sufficient number of these new terminals to enable us to achieve
profitability.

We have a significant working capital deficit. This has had an adverse impact on
our ability to manufacture and distribute our new point-of-sale terminal and
increase our revenues.

   At December 31, 2002, we had a working capital deficit of $1.6 million. This
has had an adverse impact on our ability to have additional Qxpress 200
terminals manufactured for us or to obtain vendor or other commercial credit. As
a result, we have not been able to increase the number of Qxpress 200 terminals
in use, which is critical to our future success.

Our margins have historically been low. Our future success depends, in part, on
our ability to increase our revenues significantly, add new products with higher
margins to our portfolio or develop new revenue models with higher margins.

    Our margins, after taking into account the cost of the products sold through
the Qxpress system and the fees and commissions payable to distributors, brokers
and retailers, were approximately 2.2% in 2002 and 3.8% in 2001. As a
consequence, for us to be profitable to any meaningful extent, we must do one or
more of the following:

   o increase our revenue significantly;

   o add new products with higher profit margins to our portfolio; or

   o develop new revenue models.

   We cannot assure you that we will be able to achieve any of these goals. In
order to increase our revenue from our historical business, we must increase the
number of Qxpress 200 units in use. In order to expand our product line, we must
enter into relationships with the suppliers of these products, establish new
sales channels or expand existing channels and develop processing applications
to handle the new products. Finally, new revenue models must be accepted by the
market and may have ancillary adverse consequences, such as recognizing revenue
on a "net" basis rather than a "gross" basis as we do now.

For us to be successful, the prepaid transaction market must recognize and
accept the benefits of electronic point-of-sale solutions and we must
demonstrate the benefits of Qxpress over other competing systems.

   Currently, the established delivery method for prepaid products is vouchers
and hard cards. Our future success depends on the market accepting electronic
point-of-sale solutions as the preferred means to deliver prepaid products and,
particularly, on the market accepting our Qxpress system as the preferred
point-of-sale activation system. We cannot assure you that we will be successful
in meeting this challenge. Our marketing effort requires a large commitment of
capital and personnel in order to convince suppliers, brokers and merchants to
change their traditional way of business. Potential customers may have a
substantial investment in their current distribution and delivery methods and
may be reluctant to adopt a new approach that will compete with or replace their
existing methods. If the market does not accept electronic point-of-sale
solutions or if we cannot establish a significant market share, we may be forced
to discontinue operations.


                                       12

<PAGE>
Our recent revenue growth is almost entirely attributable to our ability to
increase our sales of prepaid wireless products. We cannot assure you that this
market will continue to grow or that we can continue to increase our share of
it.

   Although we currently offer a variety of prepaid products, 92% of our revenue
for the year ended December 31, 2002 was generated from sales of prepaid
wireless products. The market for prepaid wireless has experienced substantial
growth in past years, but we cannot assure you that this growth will continue.
While we believe that the telecommunications industry is committed to developing
this market, we cannot assure you that we are correct or that we will be able to
take advantage of this growth.

The industry in which we operate is highly competitive and has low barriers to
entry. Increased competition could result in margin erosion, which would make
profitability even more difficult to achieve.

   The market for prepaid transaction processing and information management
services is becoming increasingly competitive and is highly fragmented. This
market includes companies that provide either point-of-sale activation terminals
only, such as HyperCom and VeriFone, or information management services only,
such as Blackstone, PreSolutions and DebiSys, as well as companies that provide
integrated solutions, such as LDC Direct. In addition to companies that are
focused solely on the prepaid transactions market, we also face competition from
companies, such as First Data Corporation, that provide transaction processing
and information management services to the postpaid market. We could also face
competition from e-commerce solution providers. Finally, we may, in the future
face competition from suppliers, such as telecommunication companies who may
decide to provide electronic solutions directly to brokers and merchants.

   The industry in which we compete is characterized by low barriers to entry,
rapidly changing technology, evolving industry standards, frequent new product
and service introductions, and changing customer demands. Some of our
competitors have substantially greater financial resources and/or pre-existing
market share that may enable them to establish a stronger competitive position
than we have, in part through better marketing opportunities. Current
competitors or new market entrants could introduce products with features that
may render our system obsolete or uncompetitive. To be competitive and serve our
customers effectively, we must respond on a timely and cost-efficient basis to
changes in technology, industry standards, and procedures and customer
preferences. The cost to modify our products, services or infrastructure in
order to adapt to these changes could be substantial and we cannot assure you
that we will have the financial resources to fund these expenses. Increased
competition could result in reduced operating margins, as well as a loss of
market share and brand recognition.

Our relationships with brokers are usually nonexclusive and brokers can purchase
the products we sell from other sources.

   We rely on independent brokers, distributors, wholesalers and other
intermediaries to distribute our point-of-sale activation system to retail
merchants. Currently, we distribute through 50 brokers. In order for us to
achieve a meaningful level of market penetration, we must significantly increase
this number. Until now, our relationships with our brokers have generally been
on a short-term, non-exclusive basis allowing them to reduce or cancel their
business with us without penalty and with little or short notice. For example,
in 2002, our then largest customer, Cellcards of Illinois, terminated its
distribution agreement with us. The prepaid products that we sell are widely
available from a number of sources. We are not able to offer exclusive products
or price advantages to our brokers. Rather, we rely on the quality of our
Qxpress system to induce brokers to contract with us. If we do not continue to
offer performance and service advantages, our brokers may not aggressively
market our system to their retail networks or may terminate their relationship
with us. We cannot assure you that we will continue to derive revenue, at
current levels, or at all, from our existing brokers, or that we will be able to
successfully establish relationships with new brokers.


                                       13

<PAGE>
Most of our business is placed through a small number of brokers. The loss of
any one of these accounts would materially and adversely affect our business,
operations and financial condition.

   A small number of brokers account for a large percentage of our revenue. We
expect the high level of customer concentration to continue for the foreseeable
future. In 2001, our two largest customers accounted for approximately 39% and
10%, respectively, of revenues. In 2002, our three largest customers accounted
for 30%, 28% and 13%, respectively, of revenues. We cannot assure you that the
level of sales to these brokers will be sustained from year to year and there is
a risk that these principal brokers may not continue to sell our products in the
future. To the extent that any significant broker reduces its reliance on us,
terminates its relationship with us, or defaults on payments, our revenues in
the relevant fiscal period could substantially decline and our operating results
could be adversely affected. The customer that accounted for 39% of our revenue
in 2001 and 28% of our revenue in 2002 terminated its distribution agreement
with us. As a result, our revenue for the third quarter of 2002 was much lower
and our net loss higher than we had anticipated.

Under our current business model, we depend on vendors to provide us with
prepaid products. We have no control over the prices they charge for their
products.

   We depend on suppliers to provide us with prepaid products that we can
resell. We have no control over the prices they charge us. For example, recently
Verizon, one of our largest suppliers, reduced the discount that they offer to
resellers on their prepaid wireless products. While, in this case, we were able
to pass along this reduction to the brokers and merchants, we cannot assure you
that this will always be possible. Depending on the competitive environment,
increases in the costs of our products may reduce our margins.

If we are unable to protect our proprietary technology and intellectual property
rights against infringement or misappropriation, or if third parties assert that
we have infringed on their intellectual party rights, our business, operations
and financial condition could be materially and adversely affected and we may
have to incur significant costs to protect or defend our rights.

   We believe that our proprietary software and hardware provides us with a
competitive advantage. While we have filed patent applications relating to
various features of the Qxpress 200 terminal and proprietary technology, we
cannot assure you that these applications will be approved, or that even if
approved, they will provide us with meaningful protection. Other than our patent
applications described above, we rely on trade secret laws and common law
principles to protect our proprietary rights. For example, we have not
registered or applied to register either "Qxpress" or "Qxpress 200" or any other
trademarks, trade names, service marks, service names or copyrights that we may
own or use.

   Despite our efforts to protect our rights, unauthorized parties may attempt
to copy aspects of our point-of-sale terminals or the source code to our
software or to obtain or use information that we regard as proprietary. The
scope of any proprietary rights that we may have is uncertain and is not
sufficient to prevent others from developing and selling competing products and
services, which could have a material adverse effect on our business. In
addition, third parties may assert infringement claims against us or claim that
we have violated their intellectual property rights. While we know of no basis
for any claims of this type, the existence of and ownership of intellectual
property can be difficult to verify and we have not made an exhaustive search of
all patent filings. If any of our proprietary rights are misappropriated or we
are forced to defend our intellectual property rights, we may have to incur
substantial costs. We cannot assure you that we will have the financial
resources to prosecute any infringement claims we may have or defend any
infringement claims that are brought against us. Even if we do, defending or
prosecuting our proprietary rights will divert valuable working capital and
management's attention from business and operational issues, which could
materially adversely affect business.

If we cannot raise capital at a time when we need to do so, our business may be
significantly impaired.

   In the future, we may need to raise additional capital to meet the capital
requirements of our business or to take advantage of expansion or acquisition
opportunities. If we are unable to do so our ability to operate our business, to
grow our business and to respond to competitive developments will be impaired.
Even if we are able to secure additional capital by selling equity or
equity-linked securities, these securities could dilute

                                       14

<PAGE>
the ownership percentage of our existing stockholders. The securities that we
might sell could also have rights, preferences or privileges senior to those of
our common stock. We cannot assure you that we will be able to obtain additional
financing when needed on acceptable terms or at all. We have no commitments for
any additional financing. If we are unable to obtain additional financing when
needed, the price of our common stock could be materially and adversely
affected.

Our ability to continue as a going concern depends on our ability to raise
additional capital.

   In their report issued in connection with our 2002 financial statement, our
auditors stated "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." Our ability
to continue as a going concern depends on our ability to raise additional
capital. If we are not able, in the future, to achieve positive cash flow from
operations or to secure additional financing as needed, we may again experience
the risk that we will not be able to continue as a growing concern.

We depend on the continued services of our chief executive officer and of our
president. If either one of them terminates his employment, our business could
be adversely affected.

   Our success depends on the continued services of our key personnel, including
our chief executive officer, Paul Hickey, and our president, Stephen Flaherty.
Both Mr. Hickey and Mr. Flaherty have a comprehensive knowledge of our business
and operations and are critical to our key supplier and customer contacts.
Although we have employment agreements with both of them, they can terminate
those agreements at any time. Also, we do not have "key man" insurance for
either of them.

If we are unable to manage our future growth properly, our future profitability
may be adversely affected.

   In order to achieve a meaningful level of profitability, we must increase our
revenues significantly. This growth will strain our existing resources,
particularly our financial and sales and marketing departments. The accounting
system we currently use is marginally adequate for a company of our size. We
will likely need to purchase new accounting software and to hire one or two new
people for our accounting department. Similarly, our sales department must be
expanded from its current level of two persons. Qualified sales personnel are in
great demand and we cannot assure you that we will be able to hire a sufficient
number of competent sales people in a short amount of time. Expanding our
operations will increase the demands on our senior management and our customer
service departments. We will need to continually improve our management,
operational, financial and other departments to manage our growth properly and
any failure to do so may lead to inefficiencies and/or redundancies and
materially adversely affect our business, operations and financial condition.

The market price of our common stock has been volatile and may continue to
fluctuate significantly because of various factors, some of which are beyond our
control.

   Our stock price has been extremely volatile, fluctuating over the last three
years between $0.20 and $2.88. These fluctuations have been unrelated to or
disproportionately affected by our operating performance. The market price of
our common stock could continue to fluctuate significantly in response to a
variety of factors, some of which may be beyond our control. These factors may
include one or more of the following:

   o Quarterly operating results falling below or exceeding expectations in any
     given period;

   o Changes in economic conditions generally or in the telecommunications or
     banking industries;

   o Market fluctuations relating to markets generally or market sectors that
     include our competitors, which may or may not be based on earnings or other
     announcements by us or our competitors;

   o Fluctuations in our revenue which may or may not be related to changes in
     the way we conduct our business;


                                       15

<PAGE>
   o Announcements by our competitors of new technological innovations,
     service offerings, contracts, acquisitions or strategic relationships;

   o Departures of key personnel; and

   o Changes in business or regulatory conditions.

   In the past, following periods of market volatility, stockholders have
instituted securities class action litigation. While we have not been involved
in securities litigation to date, if we were to be involved in securities
litigation, we could incur a substantial cost and experience diversion of
resources and the attention of management away from our business. We cannot
predict the future performance of the capital markets in general and stocks in
our market sector in particular, and we cannot assure you that the price for our
common stock will not drop significantly in the future.

We are controlled by a limited number of stockholders.

   Our principal stockholder, Paul C. Hickey, owns 19.5% of the issued and
outstanding shares of our common stock. As a result, Mr. Hickey has the ability
to exercise substantial control over our affairs and corporate actions requiring
stockholder approval, including electing directors, selling all or substantially
all of our assets, merging with another entity or amending our certificate of
incorporation. This de facto control could delay, deter or prevent a change in
control and could adversely affect the price that investors might be willing to
pay in the future for our securities.

We do not anticipate paying dividends in the foreseeable future. This could make
our stock less attractive to potential investors.

   So long as our convertible debentures remain outstanding, we are prohibited
from paying dividends or redeeming our stock. Even after the debentures are paid
in full, we anticipate that we will retain all future earnings and other cash
resources for the future operation and development of our business and we do not
intend to declare or pay any cash dividends in the foreseeable future. Future
payment of cash dividends will be at the discretion of our board of directors,
taking into account many factors, including our operating results, financial
condition and capital requirements. A recent proposal by the Bush administration
would eliminate the tax on dividends received from corporations. If this
proposal is enacted into law, the stock of corporations that pay dividends may
be more attractive to investors than the stock of corporations that do not pay
dividends.

The existence of outstanding options, warrants and convertible securities impair
our ability to obtain additional equity financing.

   The existence of outstanding options, warrants and convertible securities
could adversely affect the terms at which we could obtain additional equity
financing. The holders of these options and warrants have the opportunity to
profit from a rise in the value or market price of our common stock and to
exercise them at a time when we could obtain equity capital on more favorable
terms than those contained in these securities.

Item 2. Description of Property

   Our executive offices, plants and other property are located in Orem, Utah.
We lease 6,546 sq. ft. of space at 1145 South 1680 West, Orem, Utah from
Highland Ranch, Inc., under a lease agreement dated as of November 22, 1999.
The property consists of two floors of offices, of 1,546 sq. ft. apiece, and
3,454 sq. ft. of warehouse space. The base monthly rent for 2002 was $3,200
and for 2003 is $3,400. The lease expires December 31, 2003. We have not yet
had any discussions with our landlord regarding a new lease. We expect those
discussions to begin no earlier than the second half of this year.

   We also maintain our national sales office in Spring Lake, Michigan. The
lease for this office expires March 31, 2003 and the current monthly rent is
$400. We expect that we will be able to renew the lease on acceptable terms.


                                       16

<PAGE>
Item 3. Legal Proceedings

   As of March 31, 2003, we are not a party to any legal proceedings, except as
set forth below.

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

   In January 2002, we filed an action against an individual for non-payment of
funds owed relating to the purchase of common stock. We have been awarded
summary judgment in the amount of $135,000 and expect to receive the remaining
outstanding amount, which was $130,950 at December 31, 2002.

   As described in Item 12, "Certain Relationships and Related Party
Transactions," we have agreed to indemnify Paul Hickey, our chief executive
officer for any losses, expenses and damages incurred by him in connection with
a lawsuit brought by Dallin Bagley.

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

   None


                                       17

<PAGE>
                                     PART II


Item 5. Market for Common Equity and Related Stockholder Matters

Market Information

   Our common stock is traded on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. under the symbol "QCCM". The following
table sets forth, for the periods indicated, the high and low closing bid
quotations per share for our common stock. These quotations reflect inter-
dealer prices, without retail mark-up, markdown or commission and may not
represent actual transactions.
<TABLE>
<CAPTION>

                                                                             Bid Price
                                                                           -------------
                                                                           High     Low
                                                                           -----   -----
        <S>                                                                <C>     <C>
        2001
          First Quarter................................................    $0.66   $0.25
          Second Quarter...............................................    $0.72   $0.20
          Third Quarter................................................    $0.87   $0.26
          Fourth Quarter...............................................    $2.00   $0.77
        2002
          First Quarter................................................    $2.08   $1.25
          Second Quarter...............................................    $2.00   $1.28
          Third Quarter................................................    $1.57   $0.44
          Fourth Quarter...............................................    $0.97   $0.51
</TABLE>


   As of March 28, 2003, the closing bid price per share for our common stock as
reported on the OTC Bulletin Board was $0.63.

Holders

   As of March 28, 2003, we had approximately 420 stockholders of record.

Dividends

   We have not declared or paid any dividends and do not intend to pay any
dividends in the foreseeable future. We intend to retain any future earnings for
use in the operation and expansion of our business. Any future decision to pay
dividends on common stock will be at the discretion of our board of directors
and will depend on our fiscal condition, results of operations capital
requirements, and other factors our board of directors may deem relevant.

Recent Sales of Unregistered Securities

   Through March 31, 2003 we sold (a) 50,000 shares of common stock to an
accredited investor for $20,000 in cash; (b) a 12% unsecured convertible
promissory note due February 28, 2004 in the principal amount of $200,000 and
363,636 shares of common stock to an accredited investor for $200,000 in cash;
and (c) 12% secured convertible debentures due March 31, 2004 in the aggregated
principal amount of $1.5 million, 2,538,462 shares of common stock and warrants
to purchase 2,538,462 shares of common stock to accredited investors. Of this
amount, $1,250,000 has been funded and the balance, $250,000, is expected to
fund by April 15, 2003.

   In 2002, we sold an aggregate of 4,087,842 shares of common stock to
accredited investors for an aggregate of $2,621,775 in cash.

   In 2002, we issued an aggregate of 1,823,849 shares of common stock to
consultants for services. These shares had an aggregate value at the time of
issuance equal to $689,117.

   In 2002, we issued an aggregate of 100,242 shares of common stock in
connection with the exercise of stock options for $15,000 in cash and the
cancellation of options to purchase 79,203 shares of common stock.


                                       18

<PAGE>
   In 2002, we issued an aggregate of 325,000 shares to four executives and key
employees. These shares had an aggregate value at the time of issuance of
$130,000.

   In 2001, we sold an aggregate of 133,333 shares of common stock to accredited
investors for an aggregate of $40,000 in cash and 1,253,333 units, each unit
consisting of one share of common stock and one warrant to purchase one share of
common stock for $1.00 per share, for an aggregate of $376,000.

   In 2001, we issued an aggregate of 855,934 shares of common stock to
consultants for services. These shares had an aggregate value at the time of
issuance equal to $267,959.

   In 2001, we issued an aggregate of 196,918 shares of common stock to
noteholders in connection with the conversion of notes. The aggregate principal
amount and accrued interest on the notes converted was $59,075.

   The foregoing securities were issued in reliance upon the exemption from the
registration requirements of the Securities Act of 1933, as amended, provided in
Section 4(2) thereof, as a transaction by an issuer not involving a public
offering. The registrant reasonably believed that each purchaser had such
knowledge and experience in financial and business matters to be capable of
valuating the merits and risks of the investment, each purchaser represented an
intention to acquire the securities for investment only and not with a view to
distribution thereof and appropriate legends were affixed to the stock
certificates or warrants. No commissions were paid in connection with such
issuances.

Item 6. Management's Discussion and Analysis or Plan 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 certain risks and uncertainties, which
could cause actual results to differ materially from those indicated in the
forward looking statements. Examples of forward looking statements include, but
are not limited to (i) projections of revenues, income or loss, earnings per
share, capital expenditures, dividends, capital structure and other financial
items, (ii) statements of our plans and objectives with respect to business
transactions and enhancements of stockholder value, (iii) statements of future
economic performance and (iv) statements and assumptions underlying other
statements and statements about our business prospects.

Overview

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

<TABLE>
<CAPTION>

                                                                   2001                        2002
                                                         ------------------------    ------------------------
                                                           Amount      Percentage      Amount      Percentage
                                                        -----------    ----------    -----------   ----------
<S>                                                     <C>            <C>           <C>           <C>
Wireless ............................................   $13,466,953        82.3%     $22,108,620       92.0%
Long distance .......................................     1,365,296         8.3          793,114        3.3
Home dial tone ......................................       910,189         5.6          271,576        1.1
Other ...............................................       617,066         3.8          854,642        3.6
                                                        -----------       -----      -----------      -----
 Totals .............................................   $16,359,504       100.0%     $24,028,002      100.0%
                                                        ===========       =====      ===========      =====
</TABLE>


   Historically, our results of operations have been characterized by relatively
high revenues but relatively low gross profits. As a reseller of prepaid
telecommunication products, we book the entire value of the transaction as
revenues. Our cost of sales includes the amount we pay for the product; it does
not include the fees and commissions we pay the broker and the retailer who
participated in the sale. In the period covered by the above table, our gross
profit margin was approximately 26.7% in 2002 and 28.8% in 2001. However, after
further subtracting the commissions and fees paid to the brokers and retailers
(which vary substantially directly with revenues in our historical sales model),
our margins were approximately 2.2% in 2002 and 3.8% in 2003. Because of these
relatively small margins, a minor change in the price that we pay for products

                                       19
<PAGE>
would have a substantial effect on our margins and profit if we were not able to
(or, in the case of price decreases, were not required to) pass the difference
on to our customers.

   The resale of prepaid telecommunication products has historically been a
commodity market with most price increases or decreases being passed through the
distribution chain to the end user. However, the amount of margin available to
each participant in the distribution chain can be affected by various factors,
such as the functions provided and risk assumed by the participant and the
volume and payment terms on which the participant can purchase product.
Historically, our ability to purchase products at attractive rates has been
negatively impacted by our inability to purchase in volume and our status as an
uncertain credit, which, in some cases, has resulted in our inability to
purchase product directly from the supplier. In those cases, we have purchased
product from a reseller at a markup from the supplier price. We believe that, as
our business expands and our financial condition becomes more stable, there may
be opportunities to increase margins in our historical business by purchasing a
greater percentage of our product directly from the supplier and by purchasing
in greater volume. However, the telecommunications business in general, and the
wireless business in particular, is changing rapidly and it is not possible to
anticipate potential changes that may occur in the distribution chain.

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

   Under the service bureau model, since we do not assume an ownership risk with
respect to the product, we will record as revenue only the amount of the fee, as
opposed to the entire value of the transaction. This will result in lower
revenues per transaction. On the other hand, cost of sales should be minimal and
fees and commissions payable to brokers and retailers should be nonexistent. As
a result, we believe our gross profit margin under the service bureau model will
be significantly higher than it is under our broker model. Accordingly, even if
gross profit remains relatively stable, or increases at a relatively constant
rate from period to period, revenues and gross profit margins may experience
substantial volatility based on changes in the percentage of our business
undertaken on a service fee basis compared to the percentage undertaken as a
product reseller.

   We offer the brokers through whom we deploy the Qxpress system the option
either to buy the Qxpress 200 terminals at a fixed price or to lease them under
a "rent-to-own" program. The sale of the terminal will result in the immediate
recognition of revenue, the immediate recovery of capital for the terminal and
gross profit from the sale. The rent-to-own program has the advantage of ongoing
rental income over the life of the contract and higher margins due to the
premium we are able to charge under this alternative. Our ability to offer the
rent-to-own option depends on the availability of capital to fund the cost of
the terminals.

   Substantially all of our revenues are collected through automated clearing
house, or ACH, transactions initiated by us within 72 hours of the sale of the
product. As a result, we have virtually no receivables from retailers and we do
not have expenses associated with billing and collection. The brokers through
whom we distribute our system are responsible for any unpaid ACH transactions
from retailers so we experience virtually no bad debt expense. We expect that
license fees to be earned under our service bureau model will be collected in
essentially the same manner. However, we may generate receivables from sales of
terminals and from consulting services provided to assist customers in setting
up and operating data centers.

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

                                       20

<PAGE>
the rate of such investment may not equal the rate of expenditure we experienced
to develop our Qxpress system. As gross profit increases, we expect general and
administrative expenses, selling expenses and research and development
expenditures to decrease as a percentage of gross profit, thereby significantly
improving operating margins. However, in the immediate future, we expect to
incur substantial costs in advance of the business growth that they are intended
to support. Accordingly, operating margins may initially decrease and will not
achieve the expected improvement unless and until business in fact expands on a
profitable basis.

   A substantial portion of our net loss in 2001, approximately 17.9%, and in
2002, approximately 36.7%, was attributable to non-cash compensation paid to
employees and consultants. In part, this was due to our limited cash resources
and our need to conserve capital. We do not anticipate that non-cash
compensation expense for 2003 and subsequent years will have as great an impact
on our statement of operations as it has had the last two years.

   Our future capital requirements will depend both on the rate of growth of our
business and the mix of revenue models that we employ. Models that require us to
maintain a large inventory of prepaid products or to continue to own terminals
and/or to invest in transaction processing facilities will require relatively
large amounts of capital. The capital requirements of a pure service bureau
model are, in comparison, substantially less. We anticipate that various
commercial credit options will be available to us to cover many of these capital
requirements. However, we have no such arrangements in place and cannot assure
you that we will be able to make commercially satisfactory credit arrangements.

Critical Accounting Policies and Estimates

   The discussion and analysis of our financial condition and results of
operations are based on our financial statements that have been prepared
according to accounting principles generally accepted in the United States. In
preparing these financial statements, we are required to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and related disclosures of contingent assets and liabilities. We
evaluate these estimates on an on-going basis. We base these estimates on
historical experience and on various other assumptions that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities. Actual
results may differ from these estimates under different assumptions or
conditions. We consider the following accounting policies to be the most
important to the portrayal of our financial condition and that require the most
subjective judgment.

   Revenue recognition

   We record revenue at the time of product sale. Sales of our prepaid products
are generally made directly to end-users. There is no right of return for
products sold and we are not obligated for further performance after the sale.
These sales transactions are accounted for at "gross" since they meet the
requirements specified by Securities and Exchange Commission Staff Accounting
Bulletin No. 101 -- Revenue Recognition in Financial Statements (SAB 101) and
Emerging Issues Task Force No. 99-19 (EITF 99-19). Revenues generated from other
sources, such as from the sale or rental of terminals, minimum performance fees
and sales of blank cards, are recorded when earned, net of any sales discounts.
We expect in the future to record revenues from technology licensing and
consulting fees and will record these fees when they are earned.

   Cost of goods sold

   Cost of goods sold primarily represents the cost of the personal
identification number, or PIN, or other product sold. The cost of a PIN is set
by the carrier and is expressed in terms of a percentage discount from the
denomination value. This discount ranges from 15% to 25% for cellular and home
dial tone products and 40% to 50% for long distance products. We do not have
minimum purchase contracts or exclusivity agreements with any carrier.
Historically, price increases are passed on to customers in the form of lower
broker and merchant commissions, which are recognized as operating expenses
under the caption "commissions and fees" on our statement of operations. Cost of
goods sold and resulting gross profits

                                       21
<PAGE>
fluctuate due to changes in the mix of our products and discount rates offered
by carriers. As already noted, we expect to experience greater fluctuations in
revenues and margins as we introduce our service bureau revenue model.

   Another component of cost of goods sold is transaction-processing services
paid to LDC Direct, the supplier of the original Qxpress terminal. These
transaction-processing fees are approximately 1% of revenues and are not payable
on transactions processed by our proprietary Qxpress 200 terminal. We will
continue to incur transaction-processing fees for revenues generated through the
original terminal. We have not yet established a time frame for changing
existing customers using the original terminal to the Qxpress 200 terminal but
expect that to occur during 2003 and 2004.

   Software development costs

   We have invested a considerable amount of capital in our proprietary Qxpress
200 terminal and data center. We account for this investment in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed" and Statement of
Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Costs
incurred before we established the technological feasibility of the project were
recorded as research and development expenses. Once technological feasibility
was established, costs incurred to develop the data center software and the
embedded software in the terminal were capitalized. These costs include salaries
paid to software engineers employed by us and fees paid to third parties for
software development. Once the new system was placed in service, maintenance
costs are expensed while costs of new software projects under development are
capitalized. Capitalized costs are amortized over the estimated useful life of
the software, which is three years. We periodically evaluate the recoverability
of our capitalized software development costs based on the expected future cash
flows from this asset.

   Stock options and warrants

   We have adopted the disclosure-only requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation." As a
result, no compensation costs are recognized for stock options granted to
employees. Options and warrants granted to non-employees are recorded as an
expense on the date of grant based on the then estimated fair value of the
security in question.

   Income taxes

   At December 31, 2002, we had an accumulated net operating loss for federal
and state corporate income tax purposes of approximately $7.2 million. Because
our ability to use this net operating loss depends on our ability to earn future
taxable income, we have established a valuation allowance equal to the net
deferred tax asset. The amount of and ultimate realization of the benefits from
these deferred tax assets for income tax purposes depends, in part, on
applicable tax laws in effect, our future earnings, and other future events, the
effects of which cannot be determined. However, our ability to offset our
accumulated net operating loss against future taxable income may cause our
future reported earnings and profitability to be greater than they would be if
fully taxable.


                                       22

<PAGE>
Results of Operations

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

                                                                           Year ended
                                                                          December 31,
                                                                          -------------
                                                                         2002       2001
                                                                        -----       -----
      <S>                                                               <C>         <C>
      Revenues ......................................................   100.0%      100.0%
      Cost of goods sold ............................................    73.3%       71.2%
      Gross profit ..................................................    26.7%       28.8%
      Commissions and fees ..........................................    24.5%       25.0%
      Selling expenses ..............................................     1.3%        1.7%
      General and administrative expenses ...........................     4.9%        7.1%
      Depreciation and amortization .................................     1.1%        1.0%
      Research and development ......................................      --         0.9%
      Accrued litigation settlement .................................     0.8%         --
      Non-cash compensation .........................................     3.5%        1.7%
      Loss from operations ..........................................    -9.4%       -8.6%
      Other income (expense) - net ..................................    -0.2%       -0.9%
      Net loss ......................................................    -9.6%       -9.5%
</TABLE>


Years ended December 31, 2002 and 2001

   Revenues. Revenues for 2002, were $24.0 million compared to $16.4 million for
2001, an increase of $7.6 million, or 46.9%. This increase is attributable to
market acceptance of the Qxpress system, an increase in the number of terminals
installed and an increase in the number of transactions per terminal. We expect
each of these factors to contribute to further revenue growth in the foreseeable
future.

   Cost of goods sold. Cost of goods sold for 2002 was $17.6 million compared to
$11.6 million for 2001, an increase of $6.0 million, or 51.2%. The majority of
the increase in cost of goods sold is associated with the increase in revenues.
As a percentage of revenues, cost of goods sold in 2002 was 73.3% compared to
71.2% for 2001. This increase is attributable to the fact that some of our newer
wireless products carry lower discounts and one of our primary suppliers
decreased its discount percentage in August 2001. We were able to pass on this
reduced discount to the brokers and retailers in the form of lower commissions.
Transaction processing fees were $225,000 in 2002 compared to $155,000 in 2001.
These fees have consistently been approximately 1% of gross revenues. Since most
of our revenue growth will come from transactions generated by the new Qxpress
200 terminal, these expenses are not expected to increase from their current
level in terms of absolute dollars and will likely decrease as existing
customers are transitioned to our new terminal.

   Gross profit. Gross profit for 2002 was $6.4 million compared to $4.7 million
for 2001, an increase of $1.7 million, or 36.2%. Gross margin was 26.7% in 2002
compared to 28.8% in 2001. As discussed above, this decrease is attributable to
lower discounts offered by our suppliers, which translates into higher costs for
us. In the future, we expect our gross margin to fluctuate as our product mix
changes and as discount rates offered by carriers change. Gross margin will also
be influenced by the relative growth experienced in our two business models, the
traditional broker model and the service bureau model.

   Commissions and fees. These expenses are principally commissions paid to
retailers and brokers for product sales through the Qxpress terminals and are a
fixed percentage of the product sales price. Commissions and fees for 2002 were
$5.9 million compared to $4.1 million for 2001, an increase of $1.8 million, or
43.8%. As a percentage of revenues, these expenses decreased to 24.5% in 2002
from 25.0% in 2001. This decrease reflects the fact that we successfully reduced
the commissions we pay to brokers as a result of a lower discounts we received
from our suppliers.


                                       23

<PAGE>
   Selling expenses. Selling expenses for 2002 were $308,000 compared to
$282,000 in 2001, an increase of $26,000, or 9.1%. The increase is due to higher
travel expenses, reflecting the sales efforts associated with building an
expanded network for the selling and distribution of our products, and to the
cost of attending trade shows and conferences to increase the visibility of our
new system. As a percentage of revenues, selling expenses decreased to 1.3% in
2002 from 1.7% in 2001, primarily as a result of increased revenues.

   General and administrative expenses. General and administrative expenses for
2002 and 2001 were basically the same. However, as a percentage of revenues,
general and administrative expenses decreased to 4.9% in 2002 from 7.1% in 2001.
While the addition of personnel and the purchase of accounting systems to
support the growth that we anticipate will result in a significant increase in
general and administrative expense, general and administrative expenses are
expected over time to increase at a slower rate than future increases in
revenues.

   Depreciation and amortization. Depreciation and amortization expenses for
2002 were $258,000, compared to $159,000 for 2001, an increase of $99,000, or
62.3%. This increase is attributable primarily to the amortization of software
development costs, which began in the fourth quarter of 2002. The amount
amortized in 2002, $121,000, more than offset, the decrease in amortization
expense as a result of the effect of Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets," which we adopted in 2002. As we
continue to amortize software development costs and we increase significantly
the number of Qxpress 200 units in use, we expect depreciation and amortization
expenses to increase in the future.

   Research and development. Research and development expenses were $146,500 for
2001. These expenses related to design work and other related activities for our
new terminal and data center prior to actual development. No expenses of this
nature were incurred in 2002. We do not anticipate incurring significant
expenses of this nature in the near future.

   Accrued Litigation Settlements. We are named as a defendant in one lawsuit
and have agreed to indemnify our chief executive officer in connection with an
action brought against him individually relating to a transaction involving our
stock. Based on our assessment of the potential liabilities arising from these
lawsuits, at the end of 2002 we recorded an accrued litigation settlement
expense of $200,000, increasing our total reserve for contingent liabilities to
$359,000. We did not accrue any similar expense in 2001. We anticipate that
these lawsuits will be resolved in 2003.

   Non-cash compensation. Non-cash compensation reflects the value of stock
issued to employees, consultants and advisors and stock options issued to
nonemployees for services. Since the transfer of these securities is not
contingent on future services, we recognized an expense at the time of issuance.
Non-cash compensation expense for 2002 was $843,000 compared to $277,000 for
2001. The 2002 amount reflects $130,000 worth of stock issued to four management
employees. The 2001 amount is entirely attributable to payments to consultants.

   Loss from operations. Loss from operations for 2002 was $2.2 million compared
to $1.4 million for 2001. This increase is attributable to factors discussed
above, specifically (i) higher volume of lower margin business and (ii) a higher
amount of non-cash compensation recorded in 2002. We expect our investment in an
expanded distribution network to result in significantly higher revenues in the
future while our ongoing operating expenses, other than commissions and fees, to
increase by a smaller percentage. We believe these factors will contribute to
continuing improvement in the results from operations in the foreseeable future.

   Other expense -- net. Other income and expense consists primarily of interest
income and expense and loss from disposition of assets. Net other expense for
2002 and 2001 was $49,000 and $150,000, respectively. The decrease in net other
expense is primarily the result of more interest capitalized as software
development costs during 2002 compared to the amount capitalized during 2001 and
lower borrowings and associated interest expense during 2002 compared to 2001.
In 2002, we recorded interest income of $4,000, interest expense of $35,000 and
a loss from disposition of assets of $18,000. In 2001, we recorded interest
income of $11,000, interest expense of $156,000 and a loss of $5,200 in
connection with the disposal of assets.


                                       24

<PAGE>
   Income tax expense. At December 31, 2002 we had operating loss carryforwards
of approximately $7.2 million that may be applied against future taxable income
in years through 2022. The loss carryforwards and other items result in net
deferred tax asset of approximately $2.3 million. The amount of and ultimate
realization of the benefits from this deferred tax asset for income tax purposes
depends, in part, on applicable tax laws in effect, our future earnings, and
other future events, the effects of which cannot be determined. As a result of
the uncertainty surrounding the realization of the deferred tax asset, at
year-end we established a valuation allowance equal to the net deferred tax
asset and no income tax benefit from our operating loss has been recognized for
any of the periods presented.

   Net loss. Net loss for 2002, was $2.3 million compared to $1.5 million for
2001. The increased net loss is attributable to the foregoing factors. A
substantial portion of the loss in 2002 is attributable to non-cash expense
items, particularly non-cash compensation and accrued litigation settlements,
which we do not expect to incur in 2003. After eliminating these items, our net
loss was $1.3 million in 2002 and 2001.

Liquidity and Capital Resources

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

   Since January 1, 2003 we have raised $1.72 million by selling stock, warrants
and convertible debt instruments. All but $250,000 of this amount has already
been funded. The remaining amount is expected to fund by April 15, 2003. Our 12%
unsecured convertible note in the principal amount of $200,000 is due and
payable on February 28, 2004. Our 12% secured convertible debentures in the
aggregate principal amount of $1.5 million are due and payable March 31, 2004.
The interest rate on the debentures is reduced to the prime rate once we
transfer $1.725 million to an escrow account.

   As of December 31, 2002, we had a working capital deficit of approximately
$1.6 million. Our working capital deficit takes into account a $359,000 reserve
for contingent liabilities arising in connection with lawsuits in which we are
either a defendant or have agreed to indemnify a defendant.

   For the year ended December 31, 2002, net cash used by operating activities
was $722,000. The primary components of our operating cash flows are our net
loss, increase in accounts payable, depreciation and amortization, stock and
options issued for services and increases in inventory.

   Capital expenditures include capitalized software development costs and
purchase of property and equipment. For the year ended December 31, 2002,
capitalized software development costs were $815,000 and purchases of property
and equipment were $573,000. We expect that capital expenditures will increase
significantly in 2003 as we place more terminals in service.

   For the year ended December 31, 2002, net cash provided by financing
activities was $2.1 million. Net cash provided by financing activities primarily
reflects sales of common stock and convertible debt as well as repayments of
existing indebtedness.

   In the future, we may issue additional debt or equity securities in order to
satisfy our cash needs. Any debt incurred or issued may be secured or unsecured,
at a fixed or variable interest rates and may contain other terms and conditions
that our board of directors deems prudent. Any sales of equity securities may be
at or below current market prices. We expect the proceeds from these financing
activities to be used primarily to manufacture, market and sell additional
Qxpress 200 terminals and to reduce short-term liabilities. We cannot assure you
that we will be successful in generating sufficient capital to adequately fund
our liquidity needs.

Recent Accounting Pronouncement

   Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets", SFAS No. 145, "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections", SFAS No. 146, "Accounting for Costs Associated with Exit
or Disposal Activities", and SFAS No. 147, "Acquisitions of Certain Financial
Institutions - an Amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9", and SFAS 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure - And Amendment of FASB Statement 123" were recently
issued. SFAS No. 144, 145, 146, 147 and 148 have no current applicability to us
or their effect on our financial statements are not significant.

                                       25

<PAGE>

Item 7. Consolidated Financial Statements

   The consolidated financial statements of the Company required by this item
are set forth beginning on page F-1.

Item 8. Change in and Disagreements with Accountants on Accounting Financial
Disclosure.

   None.


                                       26

<PAGE>
                                    PART III


Item 9. Directors and Executive Officers

   Our executive officers and directors and their respective ages, as of March
28, 2003, are as follows:

<TABLE>
<CAPTION>

Name                               Age      Position
----                               ---      --------
<S>                                <C>      <C>
Paul C. Hickey .................    43      Chairman of the board of directors and
                                            chief executive officer
Stephen C. Flaherty ............    55      President
Michael K. Openshaw ............    44      Chief financial officer, chief
                                            operating officer, secretary
                                            and treasurer
Brae Burbidge ..................    36      Director
Lamond Woods ...................    36      Director
Brent Bingham ..................    36      Director
Vicky Johnson ..................    37      Director
</TABLE>


   Each director holds office until the next annual meeting of shareholders and
until his or her successor is elected and qualified. Officers are elected to
service subject to the discretion of the board of directors.

   Set forth below is a brief description of the background and business
experience of our executive officers and directors.

   Paul Hickey, our founder and chief executive officer, had also founded, in
1992 and 1993, two telecom companies, Teleshare 900 and Teleconnect, that we
later acquired and merged with. As founder of Teleshare and Teleconnect, Mr.
Hickey was responsible for creating an Interactive Voice Response (IVR) service
bureau, implementing a nationwide telecom training program, and recruiting
telecom value-added resellers. He has been chairman of our board of directors
since August 1998. Mr. Hickey has a Bachelor of Science degree from Brigham
Young University.

   Stephen Flaherty, our president, joined us in April 1999. From 1996 to 1998,
he served as the president and chief operating officer of Global Business
Solutions, a software consulting firm based in Costa Mesa, California. Mr.
Flaherty has pursued a career in business development, marketing and sales with
an emphasis on startup companies and restructuring.

   Michael Openshaw joined us in November 2000 and was named chief financial
officer in April 2001, our chief operating officer in April 2002 and our
secretary and treasurer in February 2003. From 1996 to November 2000, Mr.
Openshaw served as the chief financial officer of The University of Utah
Hospital. Mr. Openshaw is a Certified Public Accountant and has a Bachelor of
Arts degree in accounting from the University of Utah.

   Brae Burbidge has been a member of our board of directors since June 2000. He
has also been, since July 2002, vice president of sales and marketing of
Clickincome Inc., a website design company. From 1996 until June 2002 he was the
president and chief executive officer and a director of Global Web, Inc., a
reporting company based in Utah that provides web design services. He has a
Bachelor of Arts degree from the University of Utah.

   Lamond Woods has been a member of our board of directors since June 2000. He
has also been, since 1996, the president of SNIS Insurance, a Utah-based
insurance agency.

   Brent Bingham has been a member of our board of directors since January 1999.
He has also been, since 1992, the president and chief executive officer of
Eclipse Marketing, a Utah-based direct sales company. He is a graduate of
Brigham Young University.

   Vicky Johnson joined our board of directors in January 2003. Since June 2002
she has been the international accounting manager of Cadence Design Center,
Inc., a New York Stock Exchange reporting company that provides comprehensive
software, design and methodology services for product development to leading
electronics companies. From April 1999 to March 2002, Ms. Johnson served as the
controller of Inari, Inc., a computer networking company. From September 1995 to
March 1999 she was the accounting manager

                                       27

<PAGE>
of American Stores Company, a retail food and drug store operator. Ms. Johnson
is a licensed CPA and has a degree in accounting and business administration
from Peru State College, Nebraska.

Key Employees

   Chris Leonard, our chief technical officer, joined us in October 2002. From
November 2000 until June 2002 he served as director of data center operations of
TNEXT- Telemar IDC, an Internet data center company. From May 2000 until
November 2000 he was a consultant with KPMG and headed a team of developers for
an ASP infrastructure project for Cisco. From November 1999 until May 2000 he
was technical services director of Qwest Communications and from August 1997
until November 1999 he was chief Internet officer of Myjobsearch.com, a career
services company where he was responsible for the creation and management of a
high-traffic Internet career website.

   Bruce Siskonen, our national sales manager, joined us in August 1999. From
1998 to 1999, Mr. Siskonen served as director of sales and marketing for
Assemtech and Forge Industrial. Mr. Siskonen has a Bachelor of Science degree
from Northern Michigan University.

Committees of the Board of Directors

   Our board of directors has an audit committee and a compensation committee
consisting of Brae Burbidge, Lamond Woods and Vicky Johnson. The audit committee
meets with management and our independent public accountants to determine the
adequacy of our internal controls and other financial reporting matters and
review related party transactions for potential conflict of interest situations.
The compensation committee reviews and recommends the compensation and benefits
payable to our officers, reviews general policy matters relating to employee
compensation and benefits and administers our stock option plans.

Section 16(a) Beneficial Ownership Reporting Compliance

   Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Officers, directors and greater than ten percent (10%) stockholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.

   To the best of the Company's knowledge, based solely on review of the copies
of such forms furnished to the Company, or written representations that no other
forms were required, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
(10%) shareholders were complied with during 2002.


                                       28

<PAGE>
Item 10. Executive Compensation.

   Summary compensation. The following table sets forth information regarding
compensation awarded to, earned by, or paid to our chief executive officer and
our other most highly compensated executive officers whose compensation exceeded
$100,000 in 2002 for all services rendered to us in all capacities during the
last three completed fiscal years.

                           Summary Compensation Table

<TABLE>
<CAPTION>

                                                                                                            Long Term
                                                                                                           Compensation
                                                                                                           -----------
                                                                               Annual Compensation          Securities
                                                                               -------------------          Underlying
Name and principal position                                         Year       Salary        Bonus              Options
---------------------------                                         ----      --------      --------         ------------
<S>                                                                 <C>       <C>           <C>              <C>
Paul Hickey, chairman of the board and                              2002      $120,000            --                --
 chief executive officer                                            2001      $120,000            --           500,000(1)
                                                                    2000      $120,000(2)         --           800,000

Stephen Flaherty, president                                         2002      $120,000      $100,000(3)             --
                                                                    2001      $120,000            --         1,020,000(4)
                                                                    2000      $120,000(5)         --                --

Michael Openshaw, chief financial officer,                          2002      $110,000      $ 10,000(3)        100,000(7)
 chief operating officer, secretary and treasurer (6)               2001      $ 73,333            --           220,000(8)
</TABLE>

---------------
(1) As of December 31, 2002, 343,750 options were vested and the balance were
    forfeited.
(2) Includes $46,154 of deferred compensation.
(3) Represents stock bonus declared December 31, 2002, valued at $0.40 per
    share.
(4) As of December 31, 2002, 426,250 options were vested and 193,750 options
    were forfeited.
(5) Includes $6,769 of deferred compensation. (6) Mr. Openshaw joined us in
    April 2001.
(7) As of December 31, 2002, 18,750 options were vested and 31,245 options were
    forfeited.
(8) As of December 31, 2002, 151,250 options were vested and the balance were
    forfeited.

Options held by Named Executives

   The following tables provide information with respect to stock options
granted during the fiscal year ended December 31, 2002 to each of the executives
named in the summary compensation table above and the number and aggregate value
of unexercised options held by those executives as of December 31, 2002. The per
share exercise price of all options was equal to, or above, the estimated fair
market value of a share of common stock on the date of grant. No options granted
to any named executives have been exercised.

              Option Grants in Fiscal Year Ended December 31, 2002
                               (Individual Grants)

<TABLE>
<CAPTION>

                                                    Number of
                                                   Securities        Percent of Total
                                                   Underlying       Options Granted to       Exercise   Expiration
Name                                                 Options     Employees in Fiscal Year     Price        Date
----                                               ----------    ------------------------    --------   ----------
<S>                                                <C>           <C>                         <C>        <C>
Michael Openshaw ...............................     100,000                33%               $1.00     11/26/2007
</TABLE>



                                       29

<PAGE>
   These options are earned quarterly over 2002 and 2003 based on us meeting
specified revenue goals. Based on our 2002 revenues, out of 50,000 options that
could have been earned during 2002, 18,750 options were actually earned and the
balance of the 50,000 options were forfeited.

                           2002 Year-End Option Values

<TABLE>
<CAPTION>

                                                    Number of Shares Underlying     Value of Unexercised In-
                                                            Unexercised                     the-Money
                                                    Options at Fiscal Year-End     Options At Fiscal Year-End
                                                                (#)                          ($)(1)
                                                    ---------------------------    ---------------------------
Name                                               Exercisable    Unexercisable    Exercisable   Unexercisable
----                                               -----------    -------------    -----------   -------------
<S>                                                <C>            <C>              <C>           <C>
Paul Hickey ....................................   1,143,750(2)         --             --              --
Stephen Flaherty ...............................     426,250(3)     400,000(4)         --              --
Michael Openshaw ...............................     170,000(3)      50,000(4)         --              --
</TABLE>

---------------
(1) Based on a $0.70 closing price of our stock on the OTC Bulletin Board on
    December 31, 2002.
(2) Includes (i) 800,000 options with an exercise price of $1.10 per share and
    (ii) 343,750 options with an exercise price of $1 per share.
(3) These options have an exercise price of $1 per share. (4) Having an exercise
    price of $1 per share.

   None of the options referred to above had been exercised as of December 31,
2002.

Employment Agreements

   We have entered into employment agreements with our chief executive officer,
Paul Hickey, and with our president, Stephen Flaherty. Mr. Hickey's agreement is
for an initial three-year term ending on December 31, 2005. The agreement is
automatically extended for successive one-year periods unless either party gives
the other 180 days prior notice that it elects not to extend the agreement.
Under the agreement, Mr. Hickey receives an annual base salary of $120,000,
which may be increased in the sole discretion of the compensation committee,
plus incentive compensation, which also is at the discretion of the compensation
committee. We may terminate this agreement at any time for "cause". If we
terminate the agreement without "cause", or if Mr. Hickey terminates the
agreement for "good reason", including following a "change in control", he is
entitled to a lump sum payment equal to two times the sum of (a) his then base
salary and (b) the average cash incentive compensation over the immediately
preceding three years. In addition, any stock options held by him will vest
immediately. In the event of his death, we will continue to pay his base salary
to his estate for 12 months. If we elect not to extend the employment agreement,
or we terminate the agreement without "cause", or Mr. Hickey terminates the
agreement for "good reason", we agreed to release Mr. Hickey from any
obligations he may have to us at that time and any amounts we owe to him will
become immediately due and payable. In addition, if Mr. Hickey is still a
guarantor of any of our obligations, we must pay him, in a lump sum, an amount
equal to his average annual compensation for the last three years. During the
term of the agreement and for one year following its termination or expiration,
Mr. Hickey is prohibited from competing with us so long as we have not
terminated the agreement without cause or that he has not terminated the
agreement for good reason.

   Under Mr. Flaherty's agreement, which terminates December 31, 2003, he is
entitled to an annual base salary of $120,000. Either party may terminate the
contract at any time for any reason on at least 30 days prior written notice. In
the event we terminate the contract without "cause", all of his options become
immediately exercisable. During the contract term and for one year following its
termination or expiration, he is prohibited from soliciting our employees and
customers and competing with us, provided we have not terminated the employment
contract without cause. Under the contract, we will indemnify Mr. Flaherty to
the maximum extent permitted by law, for all expenses incurred by him in
connection with any proceedings brought or threatened upon him in connection
with his service as our officer.

Compensation of Directors

   Our directors receive $500 for each board or committee meeting they attend
and are not otherwise reimbursed for travel expenses.


                                       30

<PAGE>
Limitation of Directors' Liability and Indemnification

   Our articles of incorporation limit the liability of individual directors for
specified breaches of their fiduciary duty. The effect of this provision is to
eliminate the liability of directors for monetary damages arising out of their
failure, through negligent or grossly negligent conduct, to satisfy their duty
of care, which requires them to exercise informed business judgment. The
liability of directors under the federal securities laws is not affected. A
director may be liable for monetary damages only if a claimant can show receipt
of financial benefit to which the director is not entitled, intentional
infliction of harm on us or on our shareholders, a violation of section
16-10a-842 of the Utah Revised Business Corporation Act (dealing with unlawful
distributions to shareholders effected by vote of directors), and any amended or
successor provision thereto, or an intentional violation of criminal law.

   Our articles of incorporation also provide that we will indemnify each of our
directors or officers, and their heirs, administrators, successors and assigns
against any and all expenses, including amounts paid upon judgments, counsel
fees, and amounts paid or to be paid in settlement before or after suit is
commenced, actually and necessarily incurred by such persons in connection with
the defense or settlement of any claim, action, suit or proceeding, in which
they, or any of them are made parties, or which may be asserted against them or
any of them by reason of being, or having been, directors or officers of the
corporation, except in relation to such matters in which the director or officer
is adjudged to be liable for his or her own negligence or misconduct in the
performance of his or her duty.

   We have also entered into indemnification agreements with our directors and
our senior executive officers. Under these agreements, we have agreed to
indemnify each of them for all expenses, judgments, fines and settlement amounts
they actually and reasonably incur in connection with any proceeding, actual or
threatened, to which they are party, relating to any action taken by them or
their failure to take any action in their capacity as an officer or director. We
have also agreed to advance these expenses if they provide us with written
affirmation of their good faith belief that they have met the standard of
conduct required under the Utah Revised Business Corporation Act and other
applicable law.

   Except as set forth in Item 12. "Certain Relationships and Related Party
Transactions", there is no pending litigation or proceeding involving any of our
directors, officers, employees or agents in which we are required or permitted
to provide indemnification. We are also not aware of any other threatened
litigation or proceeding that may result in a claim for such indemnification.

   Insofar as indemnification for liabilities arising under the Securities Act
may be permitted for directors, officers or controlling persons under our
articles of incorporation, we have been informed that, in the opinion of the
SEC, indemnification is against public policy as expressed in the Securities Act
and is unenforceable.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The following table sets forth information regarding the beneficial ownership
of our common stock as of March 28, 2003 by:

   o each person, or group of affiliated persons, known by us to be the
     beneficial owner of more than 5% of our outstanding common stock;

   o each of our directors;

   o each executive officer named in the summary compensation table above; and

   o all of our directors and executive officers as a group.


                                       31

<PAGE>
   Except as otherwise indicated, the persons listed below have sole voting and
investment power with respect to all of the common stock owned by them. The
individual stockholders have furnished all information concerning their
respective beneficial ownership to us.

<TABLE>
<CAPTION>

Name and address of                  Common Stock        Percent of Common Stock
beneficial owner (1)             Beneficially Owned(2)      Beneficially Owned
--------------------             ---------------------   -----------------------
<S>                              <C>                     <C>
Paul Hickey .................          4,503,599(3)                19.5%
Stephen Flaherty ............            676,260(4)                 3.0
Michael Openshaw ............            211,000(5)                   *
Brent Bingham ...............              8,000                      *
Brae Burbidge ...............                 10                      *
Lamond Woods ................                 20(6)                   *
Vicky Johnson ...............                  0                     --
Salzwedel Financial
  Communications, Inc. ......          1,400,000                    6.4
All directors and executive
  officers as a group (7
  persons) ..................          5,398,899(7)                22.8%
</TABLE>

---------------
*  Less than 1%
(1) All addresses are c/o Q Comm International, Inc., 1145 South 1680 West,
    Orem, Utah 84058-4930.
(2) According to the rules and regulations of the SEC, shares that a person has
    a right to acquire within 60 days of the date of this report are deemed to
    be outstanding for the purpose of computing the percentage ownership of that
    person but are not deemed outstanding for the purpose of computing the
    percentage ownership of any other person.
(3) Includes 133,000 shares held by family members and an option to purchase
    1,143,750 shares exercisable within 60 days of the date of this report.
(4) Includes 426,250 shares underlying options exercisable within 60 days of the
    date of this report.
(5) Includes 170,000 shares underlying options exercisable within 60 days of the
    date of this report.
(6) Includes 10 shares held by a family member.
(7) Includes 1,740,000 shares underlying options exercisable within 60 days of
    this report.

Securities Authorized for Issuance Under Equity Compensation Plans

   To attract and retain the personnel necessary for our success, in 2000 we
adopted a stock option plan and reserved 2,000,000 shares of stock for future
grants under that plan. Only employees are eligible for grants under this plan.
In February 2003, we adopted, subject to stockholder approval, a new stock
option plan, under which we may grant options covering up to 1,500,000 shares of
common stock to our employees, directors and consultants. The compensation
committee established by the board of directors administers both plans. In
addition, each plan provides that the maximum term for options granted under the
plan is 10 years and that the exercise price for the options may not be less
than the fair market value of the common stock on the date of grant. Options
granted to stockholders owning more than 10% of our outstanding common shares
must be exercised within five years from the date of grant and the exercise
price must be at least 110% of the fair market value of the common stock on the
date of the grant. As of December 31, 2002, we issued options covering 1,296,570
shares of common stock under the 2000 stock option plan. These options have a
weighted exercise price of $1.00. We have not yet granted any options under the
2003 stock option plan.

   In 2002, we entered into stock bonus agreements with two executives and two
key employees. Under these agreements, we agreed to issue 500,000 shares of
common stock to Steve Flaherty and 50,000 shares of common stock to each of
Michael Openshaw, Chris Leonard and Bruce Siskonen. Each employee received 50%
of his shares on or after January 31, 2003 and will receive the balance of the
shares on June 30, 2004, if he is still employed by us on that date.


                                       32

<PAGE>
   The following table sets forth, as of December 31, 2002, information
concerning our 2000 stock option plan, as well as information relating to other
equity compensation plans that we have adopted.

                            Equity Compensation Plans

<TABLE>
<CAPTION>
                                                                                                                       Number of
                                                                                   Number of                           securities
                                                                                 securities to        Weighted         remaining
                                                                                 be issued upon       average         available for
                                                                                  exercise of      exercise price    future issuance
                                                                                  outstanding      of outstanding     under equity
                                                                                  options and       options and       compensation
                                                                                   warrants           warrants           plans
                                                                               ----------------    --------------   ---------------
<S>                                                                            <C>                 <C>              <C>
Equity compensation plans approved by
  stockholders (1).........................................................        1,296,570           $1.00             703,430
Equity compensation plans not approved by stockholders (2).................        2,361,585(4)        $1.08             325,000(4)
                                                                                   ---------           -----           ---------
 Total.....................................................................        3,658,155           $1.05           1,028,435
                                                                                   =========           =====           =========
</TABLE>

---------------
(1) The 2000 stock option plan.
(2) Includes options granted to employees and consultants outside our stock
    option plan and stock bonus grants.
(3) Includes options covering 587,835 shares of common stock granted to
    consultants and options covering 1,773,750 shares of common stock granted to
    employees outside our stock option plan. The options granted to consultants
    vest immediately and are for terms that range from three to five years from
    the date of grant. The options granted to our employees expire at the end of
    five years from date of grant. All of the employees' options have vested
    with the exception of 400,000 options to which vesting is tied to future
    profitability of the Company.
(4) Stock bonus granted to four employees payable on June 30, 2004.

Item 12. Certain Relationships and Related Transactions

   As of January 1, 2003, we owed Paul Hickey, our principal stockholder and
chief executive officer, an aggregate amount of $410,692, consisting of loans
from him to cover cash shortfalls, past due lease payments, and deferred salary.
This amount is reflected in a note that bears interest at 10%, which is less
than Mr. Hickey's cost of funds, and which matures December 31, 2007. The note
provides that we must pay Mr. Hickey $150,000 out of the proceeds of a public
offering. Also, beginning one year after a public offering is completed, we are
obligated to amortize the balance of the note over its remaining term.

   We have agreed to indemnify Paul Hickey against any and all costs, fees,
expenses, damages and liabilities that he may incur in connection with the
matter of Dallin Bagley v. Paul Hickey. In that lawsuit the plaintiff claims
that he had a right to purchase 300,000 shares of our common stock from Mr.
Hickey at a significant discount and that as a result of Mr. Hickey's breach of
their agreement, he suffered damages in the amount of $400,000. Mr. Hickey
contests the enforceability of the alleged agreement. A hearing is scheduled for
March 31, 2003 at which time the court will consider plaintiff's motion for
summary judgement. We indemnified Mr. Hickey because the plaintiff's allegations
relate to a matter in which Mr. Hickey acted in the interest of Q Comm.

   Mr. Hickey has personally guaranteed the repayment of our indebtedness to the
Utah Technology Funding Corporation in the original principal amount of $250,000
as well as the repayment of the $1.5 million aggregate principal amount of our
12% secured convertible debentures. Mr. Hickey has pledged his stock in Q Comm
as collateral security for his guaranty of the repayment of the debentures. Mr.
Hickey has also personally guaranteed customer chargebacks under our merchant
agreement with First Security Bank. As discussed in Item 3. "Legal Proceedings",
First Security Bank has brought a lawsuit claiming that it is owed approximately
$175,000 relating to customer chargebacks.

   We have adopted a policy that the audit committee must review all
transactions with any officer, director or 5% shareholder.


                                       33

<PAGE>
Item 13. Exhibits, List and Reports on Form 8-K

   (a) Exhibits:

<TABLE>
<CAPTION>
Exhibit
  No.          Description
  ---          -----------
<S>            <C>
3.1(i)         Articles of Incorporation (1)

3.1(ii)        Articles of Amendment to Articles of Incorporation (1)

3.2            Bylaws (1)

4.1            Specimen Stock Certificate*

4.2            Form of Securities Purchase Agreement for the sale of the instruments described in exhibits 4.3 and 4.4 below.*

4.3            Form of 12% Secured Convertible Debenture due March 31, 2004*

4.4            Form of Common Stock Purchase Warrant expiring on March 31, 2008*

21             Subsidiary Schedule*

23             Consent of Auditors*

99.1           Chief Executive Officer Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of
               the Sarbanes-Oxley Act of 2002*

99.2           Chief Financial Officer Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of
               the Sarbanes-Oxley Act of 2002*
</TABLE>

---------------
* Included as an exhibit herein.
(1) Incorporated by reference as an exhibit in the Company's Current Report on
    Form 8-K, filed on March 20, 2000.

   (b) Reports on Form 8-K: No reports on Form 8-K were filed during the last
quarter of the period covered by this report.

Item 14. Control and Procedures

   (a) Evaluation of disclosures. We maintain disclosure controls and procedures
designed to provide reasonable assurance that information required to be
disclosed in the reports we file with the SEC is recorded, processed, summarized
and reported within the time periods specified in the rules of the SEC. Within
90 days prior to the filing of this Report on Form 10-KSB, we carried out an
evaluation, under the supervision and participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the design and
operation of this disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including our consolidated subsidiary) required to be included in our
periodic SEC filings.

   (b) Changes in internal controls. There were no significant changes in
internal controls or other factors that could significantly affect our internal
controls subsequent to the date of our evaluation.


                                       34

<PAGE>
                                   SIGNATURES


   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   Q Comm International, Inc.



                                   By:   /s/ Paul C. Hickey
                                       ------------------------------------
                                       Paul C. Hickey,
                                       Chief Executive Officer and Chairman
                                       of the Board of Directors

Date: March 31, 2003

   In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on
March 31, 2003.

<TABLE>
<CAPTION>
                   Signature                                 Title
                   ---------                                 -----
<S>                                             <C>
               /s/ Paul C. Hickey               Chief Executive Officer and Director
--------------------------------------------
                  Paul C. Hickey

            /s/  Michael K. Openshaw            Chief Financial Officer
--------------------------------------------
                Michael K. Openshaw

               /s/ Brae Burbidge                Director
--------------------------------------------
                  Brae Burbidge

                /s/ Lamond Woods                Director
--------------------------------------------
                   Lamond Woods

               /s/  Brent Bingham               Director
--------------------------------------------
                   Brent Bingham

               /s/  Vicky Johnson               Director
--------------------------------------------
                   Vicky Johnson
</TABLE>



                                       35

<PAGE>
                                  CERTIFICATION


   I, Paul C. Hickey, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of Q Comm
          International, Inc. (the "Company").

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the Company as of, and for, the periods presented in
          this annual report;

     4.   The Company's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
          have:

          a)   Designed such disclosure controls and procedures to ensure that
               material information relating to the Company, including its
               consolidated subsidiary, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b)   Evaluated the effectiveness of the Company's disclosure controls
               and procedures as of a date within 90 days prior to the filing
               date of this annual report (the "Evaluation Date"); and

          c)   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date:

     5.   The Company's other certifying officers and I have disclosed, based on
          our most recent evaluation, to the Company's auditors and the audit
          committee of Company's board of directors (or persons performing the
          equivalent functions):

          a)   All significant deficiencies in the design or operation of
               internal controls which could adversely affect the Company's
               ability to record, process, summarize and report financial data
               and have identified for the Company's auditors any material
               weaknesses in internal controls; and

          b)   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the Company's
               internal controls; and

     6.   The Company's other certifying officers and I have indicated in this
          annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.

Date: March 31, 2003

                                   /s/ Paul C. Hickey
                                   ----------------------------
                                   Paul C. Hickey
                                   Chief Executive Officer


                                       36

<PAGE>
                                  CERTIFICATION


   I, Michael K. Openshaw, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of Q Comm
          International, Inc. (the "Company").

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the Company as of, and for, the periods presented in
          this annual report;

     4.   The Company's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
          have:

          a.   Designed such disclosure controls and procedures to ensure that
               material information relating to the Company, including its
               consolidated subsidiary, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b.   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c.   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date:

     5.   The Company's other certifying officers and I have disclosed, based on
          our most recent evaluation, to the Company's auditors and the audit
          committee of registrant's board of directors (or persons performing
          the equivalent functions):

          a.   All significant deficiencies in the design or operation of
               internal controls which could adversely affect the Company's
               ability to record, process, summarize and report financial data
               and have identified for the Company's auditors any material
               weaknesses in internal controls; and

          b.   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the Company's
               internal controls; and

     6.   The Company's other certifying officers and I have indicated in this
          annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.

Date: March 31, 2003

                                   /s/ Michael K. Openshaw
                                   ----------------------------
                                   Michael K. Openshaw
                                   Chief Financial Officer


                                       37

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                                    CONTENTS


<TABLE>
<CAPTION>

                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
--  Independent Auditors' Report ........................................    F-2

--  Consolidated Balance Sheet, at December 31, 2002 ....................    F-3

--  Consolidated Statements of Operations, for the years ended
    December 31, 2002
     and 2001 ...........................................................    F-4

--  Consolidated Statement of Stockholders' Equity (Deficit), for the
    years ended
     December 31, 2002 and 2001 .........................................    F-5

--  Consolidated Statements of Cash Flows, for the years ended
    December 31, 2002
     and 2001 ...........................................................    F-6

--  Notes to Consolidated Financial Statements ..........................    F-8
</TABLE>



                                       F-1

<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, 2002, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years ended December 31, 2002 and 2001. 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 in the United States of America. 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, 2002, and the results of
its operations and its cash flows for the years ended December 31, 2002 and
2001, in conformity with generally accepted accounting principles in the United
States of America.

   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 15 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 15. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

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

Salt Lake City, Utah
March 17, 2003, except for note 17, as to which
the date is March 31, 2003


                                       F-2
<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>

                                                               December 31, 2002
                                                               -----------------
<S>                                                            <C>
                           ASSETS
Current Assets:
 Cash in bank ..............................................      $   115,609
 Accounts receivable, net ..................................           51,699
 Inventory .................................................          165,491
 Deferred taxes ............................................          539,228
                                                                  -----------
   Total Current Assets ....................................          872,027
                                                                  -----------
Property & Equipment, net ..................................        1,035,502
Other Assets:
 Capitalized software development costs, net ...............        1,330,053
 Goodwill, net .............................................          144,580
 Deferred stock offering costs .............................           67,115
 Deposits ..................................................           24,074
                                                                  -----------
   Total Other Assets ......................................        1,565,822
                                                                  -----------
   Total Assets ............................................      $ 3,473,351
                                                                  ===========
       LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
 Bank overdraft ............................................      $   595,544
 Accounts payable ..........................................        1,229,701
 Accrued expenses ..........................................          226,635
 Notes payable .............................................           31,350
 Convertible notes payable - current portion ...............           43,557
 Capital lease obligation - current portion ................            5,892
 Contingent liabilities ....................................          359,235
                                                                  -----------
   Total Current Liabilities ...............................        2,491,914
                                                                  -----------
Long-term Obligations:
 Convertible notes payable .................................          167,690
 Capital lease obligation ..................................           14,754
 Related party obligations .................................          410,692
 Deferred taxes ............................................          539,228
                                                                  -----------
   Total Long-term Obligations .............................        1,132,364
                                                                  -----------
   Total Liabilities .......................................        3,624,278
                                                                  -----------
Stockholders' Equity (Deficit):
 Common stock, $.001 par value, 50,000,000 shares
   authorized, 19,026,652 shares issued and outstanding ....           19,027
 Capital in excess of par value ............................        7,494,098
 Retained deficit ..........................................       (7,533,102)
                                                                  -----------
                                                                      (19,977)
 Less stock subscription receivable ........................         (130,950)
                                                                  -----------
   Total Stockholders' Equity (Deficit) ....................         (150,927)
                                                                  -----------
   Total Liabilities and Stockholders' Equity (Deficit) ....      $ 3,473,351
                                                                  ===========
</TABLE>




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

                                       F-3

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                          For the Years Ended
                                                               December 31,
                                                       -------------------------
                                                          2002           2001
                                                       -----------   -----------
<S>                                                    <C>           <C>
Revenues ..........................................    $24,028,002   $16,359,504
Cost of Goods Sold ................................     17,611,023    11,649,760
                                                       -----------   -----------
Gross Profit ......................................      6,416,979     4,709,744
                                                       -----------   -----------
Operating Expenses:
 Commissions and fees .............................      5,880,793     4,089,066
 Selling expenses .................................        307,734       282,009
 General and administrative expenses ..............      1,175,982     1,157,364
 Depreciation and amortization ....................        258,076       158,672
 Research and development .........................             --       146,490
 Accrued litigation settlements ...................        200,000            --
 Non-cash compensation ............................        842,986       276,722
                                                       -----------   -----------
   Total Operating Expenses........................      8,665,571     6,110,323
                                                       -----------   -----------
Loss from Operations ..............................     (2,248,592)   (1,400,579)
                                                       -----------   -----------
Other Income (Expense):
 Other Income .....................................          3,950        11,119
 Interest and Other Expense .......................        (34,802)     (155,586)
 Loss on Disposal of Assets .......................        (18,121)       (5,170)
                                                       -----------   -----------
   Total Other Income (Expense)....................        (48,973)     (149,637)
                                                       -----------   -----------
Loss Before Income Taxes ..........................     (2,297,565)   (1,550,216)
Income Tax Expense ................................             --            --
                                                       -----------   -----------
Net Loss ..........................................    $(2,297,565)  $(1,550,216)
                                                       ===========   ===========
Basic Loss per Common Share .......................    $     (0.15)  $     (0.14)
                                                       ===========   ===========
</TABLE>




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

                                       F-4

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>
<CAPTION>

                                                                       Common Stock        Capital in       Stock
                                                                   --------------------     Excess of    Subscription     Retained
                                                                     Shares      Amount     Par Value     Receivable      Deficit
                                                                   ----------   -------    ----------    ------------   -----------
<S>                                                                <C>          <C>        <C>           <C>            <C>
BALANCE, January 1, 2001.......................................     9,193,349   $ 9,193    $2,853,654     $      --     $(3,685,321)
Issuance of common stock for cash, at $.30 to $.70 per share,
  net of offering cost of $152,528.............................     2,100,951     2,101       698,899            --              --
Issuance of common stock for services, at $.25 to $.54 per
  share........................................................       955,934       956       149,475            --              --
Issuance of common stock upon conversion of debentures at $.30
  per share....................................................       196,918       197        58,878            --              --
Issuance of common stock for subscription receivable...........       385,715       386       134,614      (135,000)             --
Issuance of common stock upon exercise of warrants under
  cashless exercise option.....................................       256,852       257          (257)           --              --
Issuance of 1,895,334 options/warrants to purchase common
  shares at $.35 to $1.25 per share............................            --        --       199,010            --              --
Net loss for the year ended December 31, 2001..................                                                          (1,550,216)
                                                                   ----------   -------    ----------     ---------     -----------
BALANCE, December 31, 2001.....................................    13,089,719   $13,090    $4,094,273     $(135,000)    $(5,235,537)
                                                                   ----------   -------    ----------     ---------     -----------
Issuance of common stock for cash, at $.30 to $1.00 per share,
  net of offering cost of $149,116.............................     4,112,842     4,113     2,632,662            --              --
Issuance of common stock for services, at $.30 to $1.93 per
  share........................................................     2,148,849     2,149       667,852
Issuance of common stock upon exercise of warrants under
  cashless exercise option.....................................        75,242        75           (75)           --              --
Cancellation of common stock issued as collateral for a loan...      (400,000)     (400)          400            --              --
Issuance of 167,500 options/warrants to purchase common shares
  at $1.50 to $1.80 per share..................................            --        --        98,986            --              --
Cash received for subscription receivable......................            --        --            --         4,050              --
Net loss for the year ended December 31, 2002..................            --        --            --            --      (2,297,565)
                                                                   ----------   -------    ----------     ---------     -----------
BALANCE, December 31, 2002.....................................    19,026,652   $19,027    $7,494,098     $(130,950)    $(7,533,102)
                                                                   ==========   =======    ==========     =========     ===========
</TABLE>



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

                                       F-5

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                          For the Years Ended
                                                              December 31,
                                                       -------------------------
                                                          2002           2001
                                                       -----------   -----------
<S>                                                    <C>           <C>
Cash Flows from Operating Activities:
 Net loss .........................................    $(2,297,565)  $(1,550,216)
 Adjustments to reconcile net loss to net cash
   used by operating activities:
   Loss on disposal of property and equipment......         18,121         5,170
   Depreciation and amortization...................        258,076       158,672
   Non-cash compensation...........................        842,986       276,722
   Change in assets and liabilities:
    (Increase) decrease in accounts receivable ....        (22,386)      155,451
    Increase in inventory .........................       (142,982)      (22,509)
    Increase in other assets ......................        (20,516)         (820)
    Increase in accounts payable ..................        471,275       475,511
    Increase (decrease) in accrued liabilities ....        (26,633)      189,060
    Increase (decrease) in related party
       obligations ................................         (2,608)       78,771
    Increase in contingent liabilities ............        200,000            --
                                                       -----------   -----------
     Net Cash Used by Operating Activities ........       (722,232)     (234,188)
                                                       -----------   -----------
Cash Flows from Investing Activities:
 Purchase of property and equipment ...............       (573,428)     (549,362)
 Capitalized software development costs ...........       (814,748)     (632,742)
 Proceeds from sale of property and equipment .....         30,327            --
 Decrease in certificates of deposit ..............        100,000            --
                                                       -----------   -----------
     Net Cash Used by Investing Activities ........     (1,257,849)   (1,182,104)
                                                       -----------   -----------
Cash Flows from Financing Activities:
 Issuance of common stock .........................      2,636,775       701,000
 Cash received from subscription receivable .......          4,050            --
 Payment of stock offering costs ..................       (141,114)           --
 Net decrease in lines of credit ..................             --       (63,368)
 Proceeds from notes payable ......................             --       200,000
 Proceeds from convertible notes payable ..........             --       450,000
 Payment on notes payable .........................       (570,124)     (154,825)
 Payments on convertible notes payable ............       (237,900)           --
 Payments on capital lease obligation .............         (5,043)         (753)
 Increase in bank overdraft .......................        406,624       188,920
                                                       -----------   -----------
     Net Cash Provided by Financing Activities ....      2,093,268     1,320,974
                                                       -----------   -----------
Net Increase (Decrease) in Cash ...................        113,187       (95,318)
Cash, Beginning of Period .........................          2,422        97,740
                                                       -----------   -----------
Cash, End of Period ...............................    $   115,609   $     2,422
                                                       ===========   ===========
Supplemental Disclosures of Cash Flow Information:
 Cash paid during the period for:
   Interest expense................................    $     9,205   $    27,238
   Capitalized interest............................    $    73,710   $    26,632
   Income taxes....................................    $       100   $        --
</TABLE>


                                       F-6

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Continued)


Supplemental Schedule of Non-cash Investing and Financing Activities:


                      For the year ended December 31, 2002:

     The Company issued 1,823,849 shares of common stock to non-employees for
     services rendered valued at $689,117, including stock offering costs of
     $75,117.

     The Company issued 167,500 in options/warrants to purchase common stock
     valued at $98,986 in exchange for services.

     The Company issued 325,000 shares of common stock to employees with a value
     of $130,000.

     The Company issued 75,242 shares of common stock in cashless exercises of
     common stock options.

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


                      For the year ended December 31, 2001:


     The Company issued 955,934 shares of common stock to non-employees for
     services rendered valued at $302,959, including stock offering costs of
     $152,528 and a reduction in accounts payable of $72,719.

     The Company issued 1,895,334 in options/warrants to purchase common stock
     valued at $199,010 in exchange for services.

     The Company issued 196,918 shares of common stock in conversion of $50,000
     of convertible debentures along with accrued interest of $9,075.

     The Company issued 385,715 shares of common stock for a subscription
     receivable in the amount of $135,000.

     The Company issued 285,852 shares of common stock in a cashless exercise of
     a common stock option.

     The Company converted $63,446 in accrued interest payable to notes payable.

     The Company obtained equipment with a value of $26,422 by entering into a
     capital lease.



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

                                       F-7
<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. Substantially all operations are
conducted through the Company's wholly owned subsidiary, Q Comm, Inc. The
Company is headquartered in Orem, Utah. The Company's business involves
purchasing and reselling prepaid telecommunication products through a
proprietary electronic point-of-sale activation system. The Company provides its
products to end users throughout the United States as well as Canada and Puerto
Rico. The Company has not paid any dividends and any dividends that may be paid
in the future will depend upon the financial requirements of the Company and
other relevant factors.

   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.

   Accounts Receivable - Accounts receivable consists of trade receivables
arising in the normal course of business. At December 31, 2002, the Company has
established an allowance for doubtful accounts of approximately $24,600, which
reflects the Company's best estimate of probable losses in the accounts
receivable balance. The Company determines the allowance based on the status and
age of the accounts, historical experience, and other currently available
evidence. Amounts written off as bad debt for the years presented are
insignificant.

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

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

   Intangible Assets - During the year ended December 31, 2002, the Company
adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" (SFAS No. 142). The Company has classified its goodwill as an
indefinite-life intangible asset and accordingly has stopped recording
amortization.

   The Company capitalizes software development costs incurred to develop
certain of the Company's new products and services in accordance with Statement
of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed". Costs are capitalized only
after the technological feasibility of the project has been established. In
accordance with SFAS No. 142, the Company has recorded its software development
costs as a definite-life intangible asset is amortizing these costs over the
estimated useful life of the software of three years.

   The Company regularly reviews the carrying value of intangible assets. At the
time a determination is made that capitalized amounts are not recoverable based
on the estimated cash flows to be generated from the asset, the difference
between the carrying amount and the value based on estimated cash flows is
written off (see Notes 3 and 4).

   Revenue Recognition - The Company provides electronic delivery of prepaid
telecommunication products through a variety of retail locations. Revenue is
recognized at the time products are sold. Sales of the Company's products are
generally made directly to end-users. There is no right of return for products
sold and the Company is not obligated for further performance after the sale.
These sales transactions are accounted for at "gross" since the Company meets
the requirements specified by Securities and Exchange Commission Staff
Accounting Bulletin No. 101 - Revenue Recognition in Financial Statements (SAB
101) and Emerging Issues Task Force No. 99-19 (EITF 99-19). In the event of
sales where the Company does not have ownership of the product sold and another
entity has such risk and reward of product ownership and/or where certain other
requirements of SAB 101 or EITF 99-19 are not met, the Company records revenues
on a "net" basis.

   The Company also generates revenue from the sale or rental of terminals,
minimum performance fees and sales of other products. These sales are recorded
net of sales discounts and allowances.


                                       F-8

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

   Cost of Goods Sold - The cost of goods sold is primarily the cost of the
prepaid telecommunication products sold at retail and transaction processing
services paid to a third party. Cost of goods sold does not include commissions
and fees paid to brokers and other intermediaries.

   Loss Per Share - The Company computes loss per share in accordance with
Statement of Financial Accounting Standards No. 128 "Earnings Per Share," which
requires the Company to present basic earnings per share and dilutive earnings
per share when the effect of options/warrants and convertible notes is dilutive
(see Note 13).

   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 (see Note 12).

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

   Advertising Costs - Advertising costs are expensed as incurred. Such costs
amounted to $13,513 and $19,573 during the years ended December 31, 2002 and
2001, respectively.

   Consolidation - All intercompany balances and transactions between the parent
and subsidiary have been eliminated in consolidation.

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

   Reclassifications - Certain amounts in the financial statements for the year
ended December 31, 2001 have been reclassified to conform to headings and
classifications used in the December 31, 2002 financial statements.

   Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections", SFAS No.
146, "Accounting for Costs Associated with Exit or Disposal Activities", and
SFAS No. 147, "Acquisitions of Certain Financial Institutions - an Amendment of
FASB Statements No. 72 and 144 and FASB Interpretation No. 9", and SFAS 148,
"Accounting for Stock-Based Compensation -- Transition and Disclosure -- And
Amendment of FASB Statement 123" were recently issued. SFAS No. 144, 145, 146,
147 and 148 have no current applicability to the Company or their effect on the
financial statements would not have been significant.

NOTE 2 - PROPERTY & EQUIPMENT

   The following is a summary of property and equipment at December 31, 2002:
<TABLE>
<CAPTION>

      <S>                                                    <C>
      Point of sale equipment............................    $1,134,961
      Office and computer equipment......................       140,349
                                                             ----------
      Total cost.........................................     1,275,310
      Accumulated depreciation...........................      (239,808)
                                                             ----------
      Property & equipment, net..........................    $1,035,502
                                                             ==========
</TABLE>


   Depreciation expense for the years ended December 31, 2002 and 2001 was
$137,161 and $113,704, respectively.


                                       F-9

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 2 - PROPERTY -- (Continued)

   Included in the cost of property and equipment at December 31, 2002 is a
deposit in the amount of approximately $520,000 for various components of point
of sale equipment to be manufactured for the Company. The deposit will be offset
against the cost of the equipment to the Company as the point of sale equipment
is purchased.

NOTE 3 - GOODWILL

   At December 31, 2002, the Company had $144,580 in goodwill remaining from a
purchase acquisition classified as an indefinite-life intangible asset. In
accordance with SFAS No. 142, the Company completed its initial test of goodwill
for impairment during the year ended December 31, 2002. The Company used the
quoted market price of its common stock to test the remaining goodwill for
impairment and determined that the Company's goodwill was not impaired.
Accordingly, there was no amortization expense recorded during the year ended
December 31, 2002.

   Previous to the adoption of SFAS No. 142 on January 1, 2002, the Company's
goodwill was being amortized on a straight-line basis over the estimated useful
life of five years, in accordance with Accounting Principles Board Opinion No.
17, "Intangible Assets". During the year ended December 31, 2001, the Company
recorded amortization expense of $44,968.

   If SFAS No. 142 had been applied in all years presented, it would have the
following effects:
<TABLE>
<CAPTION>
                                                                    December 31,
                                                             -------------------------
                                                                2002          2001
                                                            -----------    -----------
      <S>                                                   <C>            <C>
      Net loss as reported ..............................   $(2,297,565)   $(1,550,216)
      Add amortization of assets no longer being
       amortized ........................................            --         44,968
                                                            -----------    -----------
      Adjusted net loss .................................   $(2,297,565)   $(1,505,248)
                                                            ===========    ===========
</TABLE>


NOTE 4 - CAPITALIZED SOFTWARE DEVELOPMENT

   Information related to capitalized softwaredevelopment costs at December 31,
2002 is as follows:
<TABLE>
<CAPTION>
      <S>                                                                   <C>
      Capitalized software, beginning of year...........................    $  636,220
      Capitalized during the year.......................................       814,748
                                                                            ----------
      Capitalized software, end of year.................................     1,450,968
      Accumulated amortization..........................................      (120,915)
                                                                            ----------
      Capitalized software, net.........................................    $1,330,053
                                                                            ==========
</TABLE>

   Of the balance at December 31, 2002, approximately $380,000 was paid to a
third-party software development company and other outside entities. The
remaining costs represent capitalized internal costs, which are primarily
employee salaries and benefits, and related capitalized interest of
approximately $100,000.

   During the year ended December 31, 2002, the Company completed its initial
test of capitalized software development costs in accordance with SFAS No. 142.
The Company used the estimated future cash flows related to its capitalized
software development costs and determined that such costs were not impaired. The
Company has classified its capitalized software development costs as a
definite-life intangible asset. The project was placed in service during
September 2002, and the Company began recording amortization expense. During the
year ended December 31, 2002, the Company recorded amortization expense of
$120,915.

                                      F-10
<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 5 - BANK OVERDRAFT

   The Company receives payment on substantially all its sale transactions
through the automated clearinghouse system (ACH system) on either a daily or
weekly basis. Once the payment has been received, the Company disburses funds
via the ACH system for the cost of products sold and commissions according to
the respective agreements, generally ranging from 1-4 days after funds are
received. This timing difference between receipt of funds and payment of product
costs and commissions creates an ongoing balance of available funds (float) in
the Company's bank accounts. At December 31, 2002, the Company has utilized a
portion of this available balance in the amount of $595,544, which created an
overdraft in the Company's books and records while the balance on the bank's
records was positive.

NOTE 6 - RELATED PARTY OBLIGATIONS

   At December 31, 2002 the Company owed its CEO a total of $410,692 consisting
principally of unpaid equipment lease expenses, deferred salary, notes payable
and accrued interest. In February 2003 the amounts were combined into a single
note payable with interest at 10%, due the earlier of December 31, 2007 or upon
a change in control of the Company or a sale or liquidation of the Company's
assets. If the Company enters into a qualified financing (consisting of a
transaction or series of related transactions in which the Company raises at
least $4,000,000), i) a payment of $150,000 is due within three days of the
financing; ii) accrued interest is due the last day of the 12th month following
the financing; and iii) monthly payments in the amount required to fully
amortize the remaining principal amount of the note and interest by December 31,
2007 will begin the last day of the 13th month following the financing. The
entire balance of the note is reflected as a long-term liability as of December
31, 2002.

   During the years ended December 31, 2002 and 2001, the Company recorded
interest expense on the original notes of $ 14,873 and $14,429, respectively.

NOTE 7 - LONG-TERM DEBT

CONVERTIBLE NOTES PAYABLE

   During November and December 2001, the Company borrowed a total of $250,000
in the form of a convertible note payable. The outstanding balance of the note
may be converted into common stock at $1.25 per share after one year at the
option of the holder. The note bears interest at 14% and requires monthly
payments of $5,865 through November 2006. The note is secured by the Company's
tangible and intangible assets, and the proceeds therefrom. In connection with
the note, the Company issued warrants for the purchase of 150,000 shares of
common stock at $1.25 per share, expiring 2008. These warrants were valued at
$15,750 and recorded as interest expense. At December 31, 2002, the outstanding
balance of the note was $211,247. In February 2003, the borrower agreed to
subordinate its security interest related to the note in favor of certain
investors who purchased the Company's convertible debentures (see Note 17). As
consideration for this subordination of security interest, the Company decreased
the exercise price of the warrants to $.75 per share. The effect of the decrease
in the exercise price of the warrant was $2,490, which was recorded as interest
expense in February, 2003.

NOTES PAYABLE

   During November 2000, the Company issued an unsecured note payable for
$50,000 with interest at 12% and a due date of November 27, 2001. The due date
was later extended to November 30, 2003. In connection with obtaining the note,
the Company issued options to purchase 25,000 shares of common stock at $.60 per
share expiring November 2003, with demand registration rights. The options were
exercised during the year ended December 31, 2002. The balance of the note at
December 31, 2002 was $31,350.


                                      F-11

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 7 - LONG-TERM DEBT -- (Continued)

   A summary of maturities of all long-term debt as of December 31, 2002 is as
follows:
<TABLE>
<CAPTION>

      <S>                                                    <C>
      2003...............................................    $ 74,907
      2004...............................................      49,980
      2005...............................................      57,514
      2006...............................................      60,196
                                                             --------
      Total..............................................     242,597
      Less current portion...............................     (74,907)
                                                             --------
      Long-term portion..................................    $167,690
                                                             ========
</TABLE>


   At December 31, 2002, the total of $74,907 due in 2003 is reflected in the
accompanying balance sheet as notes payable of $31,350 and convertible notes
payable of $43,557.

NOTE 8 - LEASES

   During 2001, the Company entered into a capital lease for the purchase of
certain computer equipment. The lease requires monthly payments of $820 through
September 2005 and has an outstanding principal balance at December 31, 2002 of
$20,646. The lease is collateralized by equipment with a remaining book value of
approximately $19,600 at December 31, 2002. Depreciation expense of $5,285 and
$1,506 was recognized on this equipment during the years ended December 31, 2002
and 2001, respectively.

   Total future minimum lease payments, including interest and other costs, are
as follows:
<TABLE>
<CAPTION>

      <S>                                                             <C>
      2003........................................................    $ 9,845
      2004........................................................      9,845
      2005........................................................      8,204
                                                                      -------
      Total.......................................................     27,894
      Less interest and other costs...............................     (7,248)
                                                                      -------
      Present value of future minimum lease payments..............     20,646
      Less current portion........................................     (5,892)
                                                                      -------
      Long-term portion...........................................    $14,754
                                                                      =======
</TABLE>


   In January 2003, the Company entered into a capital lease for certain
equipment (see Note 17).

   The Company leases office and warehouse space under an operating lease
agreement dated November 22, 1999, with an original expiration date of December
31, 2001. In 2001, the Company exercised its option to renew the lease for an
additional two years with base rents of $3,280 per month in 2002 and $3,400 in
2003. The Company's future minimum rental under this operating lease amounts to
$40,800 at December 31, 2002.

NOTE 9 - LITIGATION AND CONTINGENCIES

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

   At December 31, 2002, the Company's CEO was party to a suit in which the
plaintiff claims the CEO agreed to sell to the plaintiff 300,000 shares of the
Company's common stock at $.03 per share. The CEO

                                      F-12

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 9 - LITIGATION AND CONTINGENCIES -- (Continued)

disputes the plaintiff's claim that this option is valid. Since the CEO's
actions were for the benefit of the Company, the Board of Directors has agreed
to indemnify the CEO by replacing his shares through the issuance of shares from
treasury or otherwise compensate the CEO for any monetary loss if the plaintiff
is successful in his claim.

   In January 2002, the Company filed an action against an individual for non-
payment of funds owed for the purchase of common stock in the amount of
$135,000. The Company has been awarded summary judgment in this matter and
expects to receive the remaining outstanding amount, which was $130,950 at
December 31, 2002.

   In December 2002, the Company granted a total of 650,000 shares of restricted
common stock as a bonus payable to four executives and key employees. 325,000 of
the shares are for past services and are distributable anytime after January 31,
2003 at the election of the employee. These 325,000 shares were valued at
$130,000 and recorded as non-cash compensation in the accompanying statement of
operations for the year ended December 31, 2002. The remaining 325,000 shares
are issuable in June 2004 or upon a change in control of the company. The
employee must remain in the continuous employment of the Company until the time
the shares become issuable in order to receive them.

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

NOTE 10 - CAPITAL STOCK

   A summary of common stock transactions for the years ended December 31, 2002
and 2001 is as follows:

Year Ended December 31, 2002

   The Company sold 4,087,842 shares of restricted common stock at prices
ranging from $.30 to $1.00 per share through private placements for $2,621,775
in cash. Stock offering costs of $149,116 were recorded in connection with the
sales, including 77,217 shares of restricted common stock valued at $75,117.

   The Company issued 25,000 shares of restricted common stock upon the exercise
of common of stock options for $15,000 in cash.

   The Company issued 1,746,632 shares of restricted common stock for legal,
consulting and investor relations services valued at $614,000, which is reported
as non-cash compensation in the accompanying statement of operations.

   The Company granted a total of 325,000 shares of restricted common stock to
four executives and key employees for services rendered during the year. The
shares were valued at $130,000 and recorded as non-cash compensation in the
accompanying statement of operations.

   The Company issued 75,242 shares of restricted common stock in a cashless
exercise of common stock options. The underlying agreements were for a total of
154,445 common stock options with exercise prices ranging from $.40 to $1.00 per
share.

   The Company canceled 400,000 shares of common stock that had been issued as
collateral for a loan.

   The Company recorded $98,986 in non-cash compensation in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123) for the issuance of 167,500 options to non-
employees to purchase common stock at $1.50 to $1.80 per share for consulting
services.


                                      F-13

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 10 - CAPITAL STOCK -- (Continued)

   Year Ended December 31, 2001

   The Company sold 1,386,666 shares of restricted common stock at $.30 per
share through private placements for $416,000 in cash. Stock offering costs of
$152,528 were recorded in connection with the sales, including 385,334 shares of
restricted common stock valued at $128,868. In connection with the sales, the
company issued warrants to purchase 1,253,333 shares of restricted common stock
at an exercise price of $1.00 per share.

   The Company issued 1,100,000 shares of registered common stock upon the
exercise of stock options at $.35 to $.70 per share for $285,000 in cash and
$135,000 in a subscription receivable.

   The Company issued 570,600 shares of common stock (470,600 of which were
restricted) for legal, consulting and investor relations services valued at
$174,091, which is reported as non-cash compensation in the accompanying
statement of operations.

   The Company issued 196,918 shares of restricted common stock upon the
conversion of a $50,000 debenture at $.30 per share and related accrued interest
of $9,075.

   The Company issued 256,852 shares of registered common stock in a cashless
exercise of common stock options. The underlying agreement was for a total of
380,000 common stock options with an exercise price of $.35 per share.

   The Company recorded $199,010, including $23,660 in stock offering costs, in
accordance with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (SFAS 123) for the issuance of 126,356 options to
non-employees to purchase common stock at $.35 to $1.25 per share for consulting
services, legal services, extension of notes payable and upon issuance of notes
payable.

   At December 31, 2002 the Company's CEO was party to a suit in which the
plaintiff claims the CEO agreed to sell to the plaintiff 300,000 shares of the
Company's common stock at $.03 per share. (See Note 9).

   On February 7, 2003, the Company's Board of Directors authorized the sale of
convertible notes and debentures, warrants and stock to raise additional capital
as well as the filing of a registration statement with the Commission for an
underwritten public offering of stock and warrants by the Company. The Board of
Directors also authorized the establishment of the Company's 2003 Stock Option
Plan. (See Note 17).

NOTE 11 - STOCK OPTIONS AND WARRANTS

   A summary of the status of options granted to employees at December 31, 2002
and 2001, and changes during the years then ended are as follows:

<TABLE>
<CAPTION>

                                                                            2002                            2001
                                                                ----------------------------    ----------------------------
                                                                            Weighted Average                Weighted Average
                                                                 Shares      Exercise Price      Shares      Exercise Price
                                                               ---------    ----------------    ---------   ----------------
<S>                                                            <C>          <C>                 <C>         <C>
Outstanding at beginning of year ...........................   3,790,000          $1.08         1,655,000         $1.34
Granted ....................................................     325,000          $1.00         3,020,000         $1.02
Exercised ..................................................          --          $  --                --         $  --
Forfeited ..................................................     390,000          $1.12           264,000         $1.44
Expired ....................................................     654,684          $1.00           621,000         $1.60
                                                               ---------          -----         ---------         -----
Outstanding at end of year .................................   3,070,316          $1.03         3,790,000         $1.03
                                                               =========                        =========
Exercisable at end of year .................................   1,030,000          $1.08         1,030,000         $1.08
Weighted average fair value of options granted .............     325,000          $ .57         3,020,000         $ .69
</TABLE>



                                      F-14

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 11 - STOCK OPTIONS AND WARRANTS -- (Continued)

   A summary of the status of stock options outstanding to employees of the
Company at December 31, 2002 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                          268,750        4.9 years             $1.00                 --          $  --
                   $1.00                        1,971,566        3.7 years             $1.00            200,000          $1.00
               $1.00 - $1.10                      830,000        2.4 years             $1.10            830,000          $1.10
                                                ---------                                             ---------
                                                3,070,316                                             1,030,000
                                                =========                                             =========
</TABLE>

   The Company has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation cost has been recognized for the stock option plans
or other agreements. Had compensation cost for the Company's stock option plan
and agreements been determined based on the fair value at the grant date for
awards in 2002 and 2001 consistent with the provisions of SFAS No. 123, the
Company's net earnings and earnings per share would have been increased to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
                                                                  2002          2001
                                                              -----------    -----------
      <S>                        <C>                          <C>            <C>
      Net Income                 As reported ..............   $(2,297,565)   $(1,550,216)
                                 Pro forma ................   $(2,698,369)   $(2,258,918)
      Basic earnings per share   As reported ..............   $      (.15)   $      (.14)
                                 Pro forma ................   $      (.17)   $      (.21)
</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 years ended December 31, 2002 and 2001:
expected dividend yields of zero, expected life of 5 years, expected volatility
of 140%, and risk-free interest rates of 3.1% and 4.6%, respectively.

   At December 31, 2002, the Company had outstanding options and warrants to
purchase 2,086,167 shares of common stock that were issued to non-employees
under various agreements with exercise prices ranging from $.40 to $1.80 per
share, expiring between August 2003 and November 2008. During the year ended
December 31, 2002, the Company issued options and warrants to purchase 167,500
shares of common stock to non-employees at prices ranging from $1.50 to $1.80
per share. During the year ended December 31, 2002, options and warrants to
purchase 179,445 shares of common stock were exercised by non-employees at
prices ranging from $.40 to $1.00 per share and options and warrants to purchase
475,271 shares of common stock expired.

NOTE 12 - 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). SFAS No. 109 requires the Company to provide a net deferred tax asset or
liability equal to the expected future tax benefit or expense of temporary
reporting differences between book and tax accounting and any available net
operating loss or tax credit carryforwards. At December 31, 2002, the total of
all deferred tax assets was approximately $2,823,000 and the total of the
deferred tax liabilities was approximately $539,000. The amount of and ultimate
realization of the benefits from the deferred tax assets for income tax purposes
is dependent, in part, upon the tax laws in effect, the Company's future
earnings, and other future events, the effects of which cannot be determined.
Because of the uncertainty surrounding the realization of the deferred tax
assets, the Company has established a valuation allowance of approximately
$2,284,000 and $1,440,000 at December 31, 2002 and 2001, respectively. The
change in the valuation allowance for the year ended December 31, 2001 was
approximately $844,000.

                                      F-15

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 12 - INCOME TAXES -- (Continued)

   The Company had available at December 31, 2002, net operating loss
carryforwards of approximately $7,234,000, which may be applied against future
taxable income and which expire in various years through 2022.

   The components of income tax expense from continuing operations for the years
ended December 31, 2002 and 2001 consist of the following:
<TABLE>
<CAPTION>

                                                                  2002         2001
                                                              -----------    ---------
      <S>                                                     <C>            <C>
      Current income tax expense:
      Federal .............................................   $        --    $      --
      State ...............................................            --           --
                                                              -----------    ---------
      Current tax expense .................................   $        --    $      --
                                                              -----------    ---------
      Deferred tax expense (benefit) arising from:
      Excess of tax over financial accounting depreciation    $   235,438    $ 303,790
      Deferred compensation ...............................       (69,378)     (35,172)
      Net operating loss carryforwards ....................    (1,000,330)    (780,189)
      Valuation allowance .................................       843,647      522,563
      Other ...............................................        (9,377)     (10,992)
                                                              -----------    ---------
      Net deferred tax expense ............................   $        --    $      --
                                                              ===========    =========
</TABLE>


   Deferred income tax expense results primarily from the reversal of temporary
timing differences between tax and financial statement income.

   A reconciliation of income tax expense at the federal statutory rate to
income tax expense at the company's effective rate is as follows:
<TABLE>
<CAPTION>

                                                                         2002    2001
                                                                        -----    -----
      <S>                                                               <C>      <C>
      Computed at the expected statutory rate .......................    34.0%    34.0%
      State and local income taxes, net of federal benefit ..........     3.3      3.3
      Valuation allowance ...........................................   (36.7)   (33.7)
      Compensation due to issuance of options/warrants ..............    (2.2)    (4.2)
      Other .........................................................     1.6       .6
                                                                        -----    -----
      Income tax expense ............................................      --%      --%
                                                                        =====    =====
</TABLE>


   The temporary differences, tax credits and carryforwards gave rise to the
following deferred tax asset and liability at December 31, 2002:
<TABLE>
<CAPTION>

      <S>                                                                   <C>
      Deferred tax asset:
      Net operating loss carryforwards..................................    $ 2,698,179
      Deferred compensation and other...................................        124,919
                                                                            -----------
         Total deferred tax asset.......................................      2,823,098
      Valuation Allowance ..............................................    $(2,283,870)
                                                                            -----------
         Net deferred tax asset ........................................    $   539,288
                                                                            ===========
      Deferred tax liability:
      Excess of tax over financial accounting depreciation..............    $   539,288
                                                                            ===========
</TABLE>



                                      F-16

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 13 - 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:
<TABLE>
<CAPTION>

                                                                For the Years Ended
                                                                    December 31,
                                                             -------------------------
                                                                2002          2001
                                                            -----------    -----------
      <S>                                                   <C>            <C>
      Loss from continuing operations available to
       common shareholders (numerator) ..................   $(2,297,565)   $(1,550,216)
      Weighted average number of common shares
       outstanding during the year used in per share
       calculations (denominator) .......................    15,419,624     10,914,842

</TABLE>


   Because the Company incurred losses for the years ended December 31, 2002 and
2001, the effect of options/warrants and convertible notes totaling 5,367,730
and 7,294,867 equivalent shares, respectively, has been excluded from the loss
per share computation since its impact would be antidilutive.

NOTE 14 - SIGNIFICANT CUSTOMERS

   The Company has three significant customers that accounted for 29.7%, 27.6%
and 13.4% of revenues for the year ended December 31, 2002.

NOTE 15 - 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, has current liabilities in excess of current assets and has not
yet been successful in establishing profitable operations. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. In this regard, management plans to raise additional funds through debt
and/or equity offerings (see Note 17) and substantially increase sales. There is
no assurance that the Company will be successful in achieving profitable
operations. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

NOTE 16 - EMPLOYMENT AGREEMENTS

   The Company has an employment agreement with its CEO, which expires on
December 31, 2005. The agreement may be extended for successive one-year
periods. If the Company terminates the agreement without cause, or if the CEO
terminates the agreement for good reason, the CEO is entitled to a lump sum
payment equal to the sum of two times his annual salary plus the average cash
incentive pay received over the previous three years. In addition, any stock
options would vest immediately. If the agreement is terminated by the Company
without cause or if the CEO terminates the agreement for good reason, or if the
Company does not extend the agreement beyond its original expiration date, the
CEO will be released from any obligations he has with the Company and any
amounts due from the Company will be immediately due and payable (see Note 6).

   The Company has also entered into an employment agreement with its president,
which expires on December 31, 2003. If the Company terminates the agreement
without cause, any outstanding options of the president will immediately vest
and be exercisable. The Company has agreed to indemnify the president for all
expenses he incurred by him in connection with his employment as an officer of
the Company.

NOTE 17 - SUBSEQUENT EVENTS

   In January 2003, the Company sold 50,000 shares of restricted common stock
through a private placement for $20,000.


                                      F-17

<PAGE>
                   Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 17 - SUBSEQUENT EVENTS -- (Continued)

   In January 2003, the Company entered into a capital lease for certain
computer equipment items. The amount of the lease is $66,992 and requires
monthly payments of $2,842 through January 2006.

   On February 7, 2003, the Company's Board of Directors approved the company's
2003 Stock Option Plan, providing for the issuance to directors, officers,
employees, and consultants of the Company incentive and non-qualified stock
options to purchase up to 1,500,000 shares of common stock.

   In January 2003, the Company issued a 12% unsecured convertible note with a
principal amount of $200,000, due February 28, 2004. The Company also issued
363,636 shares of restricted common stock, which were valued at $145,454 or $.40
per share, the value of similar restricted common shares sold for cash, and will
be recorded as interest expense over the term of the note. The note may be
converted into common stock at the option of the holder at $.55 per share.

   In February and March 31, 2003, the Company received commitments to purchase
(a) $1.5 million aggregate principal amount of 12% secured convertible
debentures due March 31, 2004, (b) 2,538,465 shares of restricted common stock
and warrants to purchase 2,538,465 shares of common stock. As of March 31, 2003,
$1,250,000 from the sale of these securities had been received. The balance is
expected to fund by April 15, 2003.

   The debentures are secured by a lien on all of the Company's assets. The
Company is required to transfer $1.725 million out of the proceeds of any
financing in excess of $5 million (a "Qualified Financing") to an escrow agent
as collateral security for the repayment of the debentures, at which time the
interest rate on the debentures will be reduced to the prime rate, currently
4.25%. The debenture holders may demand prepayment of the debentures at any time
after a Qualified Financing is completed. The Company may prepay the debentures
beginning December 31, 2003, but only after giving the holders 90 days written
notice. Alternatively, the Company has the right to prepay the debentures at any
time by paying a 35% premium. The debenture holders can elect to convert them at
any time into shares of common stock. The conversion price is the lower of the
price of a share of common stock as determined in connection with the proposed
public offering described below or $0.65 per share. The exercise price of the
warrants is 150% of the conversion price of the debentures. The exercise price
and the number of shares covered by the warrant will be adjusted in the case of
stock splits, stock combinations, stock dividends, mergers and consolidations
and stock issuances at a discount to the market price of the stock. The warrants
have a term of five years. The common stock and warrants issued in connection
with the debentures (assuming the full $1.5 million of debentures are sold) were
valued at their relative fair values of $818,442 and $681,558, respectively, for
a total discount of $1,500,000 against the debentures, which will be amortized
as interest expense over the term of the debentures.

   The 2,538,465 restricted common shares were valued at $1,015,386, or $.40 per
share, the value of similar restricted common shares sold for cash. The
2,538,465 warrants were valued at $845,562 using the Black-Scholes pricing model
and the following assumptions: $.975 exercise price, $.40 underlying stock
price, 140% volatility, five year expected life, 2.9% risk free interest rate
and expected dividend yield of zero.

   On February 7, 2003, the Company's Board of Directors approved the filing by
the Company with the Securities and Exchange Commission of a registration
statement on form SB-2 registering the sale by the Company of up to $10,000,000
worth of the Company's common stock and warrants. While the Company expects that
the registration statement will be filed either at the end of the first quarter
or the beginning of the second quarter of 2003, there is no assurance that a
registration statement will be filed or that, if filed, the Company will
successfully complete the offering.

   In connection with its authorization of the filing of a registration
statement, the Company's Board of Directors also authorized, subject to
stockholder approval, a reverse split of the Company's common stock. The
stockholders will be asked to authorize the Board to determine, in its sole
discretion, the precise ratio of the split and the timing thereof.


                                      F-18