UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   Form 10-KSB

    Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
               1934, for the fiscal year ended December 31, 2001.


                           Q COMM INTERNATIONAL, INC.
         ---------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

                       Utah                             87-0674277
           -----------------------------     ---------------------------
             (State of incorporation)             IRS Employer ID No.

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

                                 (801) 226-4222
                ------------------------------------------------
                         (Registrant's telephone number)

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

              Common Stock, par value $.001 NASD OTC Bulletin Board
              -----------------------------------------------------
         Securities registered under Section 12(g) of the Exchange Act

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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] 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  Registrant'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]

Issuer's revenues for its most recent fiscal year were: $16,359,504

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold on March 25, 2002, is: $19,960,026 based on a closing price of $1.85 on
such date.

The number of shares outstanding of Registrant's common stock, as of March 25,
2002, is: 14,352,988





                                       1
<PAGE>


Part I.

Item 1.  Description of the Business

(A)  Business Development.

The Registrant was organized under the laws of the State of Utah as Four Rivers
Development, Inc. on February 7, 1986. The Registrant changed its name to Q Comm
International, Inc. on August 3, 1998, in conjunction with the purchase of three
operating companies. These operating companies were: Teleconnect, Inc., a Utah
corporation, Teleshare 900, Inc., a Utah corporation, and Q Comm International,
Inc., a Nevada corporation. Each of these operating companies were merged to
form QCMERCO, Inc., which was subsequently renamed Q Comm, Inc., which is a
wholly owned subsidiary of Registrant incorporated under the laws of the State
of Utah, and which is the operating entity of Registrant; there are no
operations recorded at the parent level (i.e., Registrant). On March 20, 2000,
Registrant acquired 100% of Azore Acquisition, Inc., a corporation organized
under the laws of the State of Nevada. Azore was afterwards merged into
Registrant and dissolved. Azore had no operations at the time of the merger.

On October 25, 2001, the Registrant filed a Current Report on Form 8-K
announcing it had entered into an agreement with American Payment Systems, Inc.
(APS) wherein APS would purchase 11,400,000 shares of the Registrant's common
stock for $5.7 million. Upon closing, APS was also to have been granted an
option to allow it to purchase additional common stock such that the total
shares owned by APS would be 52% of the Registrant's outstanding fully-diluted
shares. Subsequently, the parties elected to terminate the financing agreement
and a Current Report on Form 8-K was filed on December 12, 2001 announcing such
termination. See further discussion of related issues under Item 6 herein,
"Management's Discussion and Analysis or Plan of Operation."

(B) Business of the Issuer.

Principal Products or Services and Their Markets. The Registrant is a
------------------------------------------------
telecommunications service provider which specializes in the sale and
distribution of prepaid telecommunications products, including prepaid calling
cards, prepaid wireless service, and prepaid home dialtone phone services
throughout the United States. Registrant primarily distributes its products
through the Qxpress (TM) point-of-sale activation system, which delivers
electronic personal identification numbers (PINs) for its products to consumers.
The Qxpress system also generates service fees when weekly sales quotas of
products and services have not reached minimum amounts set by the Registrant.
Revenues are also generated from the sale of printed prepaid wireless cards.
Registrant believes that its principal business in the future will be in the
prepaid wireless market, and providing point-of-sale solutions to wireless
carriers.


Distribution Methods of the Products or Services. The Registrant utilizes a
------------------------------------------------
business-to-business model, wherein large, independent telecommunications
brokers and wholesale food distributors market the Registrant's products to a
variety of retailers with whom they have pre-existing relationships. Registrant
uses its own sales force to recruit, train and support the independent
telecommunications brokers and wholesale food distributors that market the
Registrant's products. The Qxpress (TM) point-of-sale system is the Registrant's
principal means of distributing its products at these retail locations. The
Qxpress (TM) terminal connects to a standard phone line and downloads a personal
identification number (PIN) which is then printed on a blank card with an 800
number and simple activation instructions. See further discussion of the Qxpress
(TM) terminal under "Status of Any Publicly Announced New Product or Service"
below. Since the Qxpress (TM) system produces cards on demand, Registrant
believes that the system allows retailers to instantly provide a wide variety of
products at the point of purchase, and thus minimize shelf space requirements,
eliminate expensive inventory, and prevent theft and fraud. The system also
allows for new products of the Registrant to be added rapidly.


                                       2
<PAGE>

Status of Any Publicly Announced New Product or Service. The Registrant has been
-------------------------------------------------------
developing its proprietary point-of-sale system, marketed as Qxpress 200 (TM),
during much of 2001. The Registrant has also been developing proprietary Data
Center software concurrent with the development of the new terminal. A third
party has done much of the terminal development whereas all of the Data Center
software has been developed by software engineers employed by the Registrant.
The Data Center software is the key to the overall function of the new terminal,
as all transactions are reported by the new terminal to the Data Center where
critical functions occur such as ACH transaction processing (the means by which
funds are cleared from retailer accounts), preparation of sales reports for
brokers, retailers and suppliers of PINs, and PIN inventory management. The
Registrant announced a successful beta test of the new terminal in December
2001, and began the initial deployment of Qxpress 200 (TM) terminals during the
latter part of the first quarter of 2002.

The Registrant has experienced a strong demand for the new terminal during
various pre-marketing activities and anticipates a significant number of new
locations throughout 2002 and beyond. On February 1, 2002, the Registrant
announced it had entered into an exclusive five-year agreement with WGR Limited,
a European telecommunications distributor, for the installation of a Data Center
and purchase of Qxpress 200 (TM) terminals. The agreement calls for 26,000 of
such terminals to be purchased from Q Comm within the first two years of the
agreement. In addition to a significantly improved aesthetic design, the new
terminal offers many enhanced features including a magnetic card reader,
streaming media display for retailer advertisements, custom real-time reporting,
and capability for multiple products, denominations, languages and currencies.
The Data Center software developed by the Registrant also has many new features,
such as just-in-time PIN delivery, real-time transaction processing, PIN and
PIN-less platform support, detailed broker/retailer sales reports, text and
graphics design for custom card backs, and ACH transaction processing.


Competitive Business Conditions and Registrant's Competitive Position in the
----------------------------------------------------------------------------
Industry and Methods of Competition. Generally speaking, the market for prepaid
-----------------------------------
telecommunications services is highly competitive, and is marked by a highly
fragmented market, consisting of many small, mid-sized and large providers. The
basis for competition in such an industry is the ability of a provider to
provide the prepaid telecommunications services at a competitive price and with
a high level of quality, and marketing such services at as many points of sale
as possible. Registrant does not believe that the business is subject to any
seasonal trends. While Registrant believes that it is able to compete on the
basis of the quality and price of its products and services (in particular, the
advantages of its Qxpress 200 (TM) system, which are described above under the
caption "Distribution Methods of the Products or Services" and "Status of Any
Publicly Announced New Product or Service"), certain of its competitors
(Pre-solutions, U.S. South, and LDC Direct) have substantially greater resources
and/or pre-existing market share which may enable such competitors to establish
a stronger competitive position than the Registrant, in part through greater
marketing opportunities. This is particularly true in light of the Registrant's
liquidity and capital resources, which are discussed below under the caption
"Management's Discussion and Analysis - Liquidity and Capital Resources." In
addition, increased competition could result in reduced operating margins for
Registrant, as well as a loss of market share and brand recognition. The ability
of the Registrant to compete will depend not only on financial conditions, but
its related ability to form strategic alliances and joint ventures with
third-party telecommunications service providers. There can be no assurances
that Registrant will be able to compete successfully in the telecommunications
marketplace, and a failure to so successfully compete could have a material
adverse effect on Registrant's revenue growth and earnings.


                                       3
<PAGE>

Sources and Availability of Raw Materials and the Names of Principal Suppliers.
-------------------------------------------------------------------------------
The Registrant purchases electronic PINs from a variety of long distance,
wireless and home dialtone providers. Printed prepaid wireless cards are also a
source of revenue for Registrant. The principal providers of such products
include Verizon Wireless Distribution, Telefyne Incorporated, Hargray Wireless,
Cingular, AT&T Wireless, PowerTel, PrimeCo and Iowa Wireless. The Registrant
purchases transaction processing services for its current Qxpress terminals from
LDC Direct. The new Qxpress 200 (TM) terminal will be manufactured by a U.S
manufacturer.


Dependence On One or a Few Major Customers. The Registrant had sales of
------------------------------------------
approximately $6,400,000 during fiscal year 2001 with CellCards of Illinois,
which represented approximately 39% of its revenues for the year. The Registrant
also had sales of approximately $1,600,000 from a contract with Hargray
Wireless, which represented approximately 10% of its revenues for the year. No
other customer accounted for more than 10% of the Registrant's revenues.


Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreement or
----------------------------------------------------------------------------
Labor Contracts, Including Duration. The Registrant is in the process of
-----------------------------------
obtaining patents for unique features of its new Qxpress 200(TM) terminal. On
January 30, 2002, the Registrant filed an initial provisional patent application
with the U.S. Patent Trademark Office and intends to pursue patents for at least
four features of the new terminal. The Registrant also has used "Qxpress" as a
trademark for its current and future point-of-sale terminals.


Need for Governmental Approval of Principal Products or Services. There are no
----------------------------------------------------------------
governmental approvals related to Registrant's products or services.

Effect of Existing or Probable Governmental Regulations on the Business. There
-----------------------------------------------------------------------
are no significant governmental regulations, either existing or probable, that
have an effect on Registrant's business.


Estimate of the Amount Spent During Each of the Last Two Fiscal Years on
------------------------------------------------------------------------
Research and Development Activities, and Extent to Which Same Are Borne By
--------------------------------------------------------------------------
Customers. In fiscal year 2001, Registrant spent approximately $775,000 on
---------
research and development activities (of which approximately $635,000 was
capitalized as software development), as opposed to approximately $10,000 during
fiscal year 2000. All of the expenditures in 2001 were related to the
development of the new Qxpress 200 (TM) terminal and Data Center (see discussion
above under "Status of Any Publicly Announced New Product or Service"). None of
the costs of these activities have been borne by customers.


Costs and Effects of Compliance with Federal, State and Local Environmental
---------------------------------------------------------------------------
Laws. There are no significant costs and/or effects of compliance with federal,
-----
state and local environmental laws on Registrant's business.


Number of Total Employees and Number of Full Time Employees. As of December 31,
-----------------------------------------------------------
2001, Registrant had 22 total employees, of which 21 were full-time employees.


Item 2.  Description of the Property

The principal plants and other property of the Registrant are located in Orem,
Utah. The Registrant leases 6,546 sq. ft. of space at 1145 South 1680 West,
Orem, Utah from Highland Ranch, Inc., pursuant to 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 rental during
calendar 2001 was $3,195. The initial term of the lease was for two years,
expiring on December 31, 2001, with an option on the part of Registrant to renew
for two additional years at rents which would increase to $3,280 per month
during 2002 and $3,373 during 2003. Registrant exercised such option in December
2001, extending such lease to December 31, 2003. (Reference is made to Item 13
of this Form 10-KSB for information regarding such lease agreement, which has
been previously filed by Registrant, and the amendment to the lease agreement,
which is filed concurrently.)

                                       4
<PAGE>

Item 3.  Legal Proceedings

As of December 31, 2001, and as of March 25, 2002, the Registrant is 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 contract
between First Security and the Registrant. The complaint relates to charge-backs
of customer credit card purchases, which resulted in overdrafts of Registrant's
merchant account with First Security. Registrant believes First Security honored
charge-backs inappropriately, based on the terms and conditions of the
customers' credit card agreements. First Security claims $175,477 in damages.
Registrant has recorded a contingent liability in connection with this matter,
and believes the resolution of this suit will not have a material impact on the
financial condition or results of operations of the Registrant. There has been
no activity on this suit during 2001.

On October 22, 2001, Dallin Bagley filed suit in the Third District Court of
Salt Lake County against the Registrant's CEO, Paul Hickey, claiming the right
to purchase 300,000 shares of common stock from Mr. Hickey for $0.03 per share,
based on a purported agreement between the parties. The Registrant has agreed to
replace Mr. Hickey's shares by issuing shares from treasury in the event the
plaintiff is successful in his suit. The Registrant denies any such valid claim
exists and intends to vigorously contest the claim.

On or about January 2, 2002, the Registrant filed an action in the Supreme Court
of the State of New York against Jeffrey Jacobson for non-payment for common
stock purchased from the Registrant during 2001 in the amount of $135,000,
pursuant to the exercise of a stock option issued to Mr. Jacobson. The
Registrant intends to pursue this claim vigorously.

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

No matters were submitted to the shareholders of the Registrant during the
fourth quarter of the fiscal year ended December 31, 2001.

Part II

Item 5.  Market for Common Equity and Related Stockholder Matters

Market Information. The principal market on which the Registrant's Common Stock
------------------
is traded is the OTC Bulletin Board. The ticker symbol for Registrant's Common
Stock is QCCM.OB. The following table sets forth the range of high and low bid
information for Registrant's Common Stock since the year ended December 31,
2000. This information was obtained from quotes provided on the quote service
maintained by the Yahoo! Internet site. As these are over-the-counter market
quotations, these quotations reflect inter-dealer prices, without retail markup,
markdowns, or commissions, and may not represent actual transactions.


                                       5
<PAGE>


For the quarter ended:              High              Low

March 31, 2001                      $0.66            $0.25
June 30, 2001                       $0.72            $0.20
September 30, 2001                  $0.87            $0.26
December 31, 2001                   $2.00            $0.77
March 31, 2002 (through 3/25/02)    $2.08            $1.25


Holders. The approximate number of holders of record of the Registrant's common
-------
stock, as of March 25, 2002, is 365. Such information was obtained from the
Registrant's transfer agent, Alpha Tech Stock Transfer, located in Draper, Utah.


Dividends. Historically, no dividends have been paid on the Registrant's common
---------
stock, and Registrant does not foresee paying any dividends on its common stock,
owing to its accumulated equity deficit and lack of profitability.


The following narrative describes the sales of unregistered securities between
January 1, 2001 and February 28, 2002:

Common stock was issued for services rendered in the following amounts and
prices per share, on the following dates:

          240,000 shares, at $0.28 per share, for $67,218, February 2001
          16,000 shares, at $0.31 per share, for $4,992, February 2001
          25,000 shares, at $0.39 per share, for $9,719, February 2001
          245,000 shares, at $0.34 per share, for $83,300, March 2001
          100,000 shares, at $0.35 per share, for $35,000, March 2001
          25,000 shares, at $0.25 per share, for $6,250, May 2001
          25,000 shares, at $0.50 per share, for $12,500, June 2001
          79,934 shares, at $0.30 per share, for $23,980, September 2001
          200,000 shares, at $0.30 per share, for $60,000, October 2001

The nature of the services provided were legal services, consulting services,
and fees in connection with the sale of common stock under private placements.

During December 2001, the Registrant issued 196,918 shares at $0.30 per share in
connection with the conversion of $50,000 of its debentures, together with
accrued interest thereon of $9,075.

During September 2001, the Registrant issued 385,715 shares of common stock at
$0.35 per share for a subscription receivable of $135,000.

During October 2001, the Registrant issued 256,852 shares of common stock in a
cashless exercise of a common stock option.

During February 2002, the Registrant issued 43,368 shares of common stock in a
cashless exercise of a common stock option.


                                       6
<PAGE>


Common stock was issued for cash in the following amounts and prices per share,
on the following dates:

         133,333 shares, at $0.30 per share, for $40,000, February 2001
         285,714 shares, at $0.35 per share, for $100,000, May 2001
         48,571 shares, at $0.35 per share, for $17,000, June 2001
         71,429 shares, at $0.35 per share, for $25,000, July 2001
       * 680,000 units, at $0.30 per unit, for $204,000, August 2001
       * 573,333 units, at $0.30 per unit, for $172,000, September 2001
         208,571 shares, at $0.35 per share, for $73,000, September 2001
         100,000 shares, at $0.70 per share, for $70,000, September 2001
      ** 1,629,225 shares, at $1.00 per share, for $1,629,225, February 2002
         25,000 shares, at $.60 per share, for $15,000, February 2002

All of the transactions set forth above involved transactions under Rule 144
promulgated under the Securities Act of 1933, with the exception of the sale of
shares from May 2001 to July 2001 and the last two sales in September 2001,
which were registered on Form S-8, but are included here for completeness.

* Each unit consisted of one share of common stock and a warrant to purchase one
share of common stock at $1.00, exercisable for two years.

** Shares were sold through a private placement where a total of 2,000,000
shares were sold for $1.00 per share. As of March 25, 2002, $1,629,225 has been
received in cash with $370,775 in outstanding subscriptions.

Item 6.  Management's Discussion and Analysis or Plan of Operation

 The following is a discussion of certain factors affecting Q Comm's results of
operations, liquidity and capital resources. You should read the following
discussion and analysis in conjunction with the Company's consolidated financial
statements and related notes that are included herein under Item 7 below.

CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

The statements contained in the section captioned Management's Discussion and
Analysis of Financial Condition and Results of Operations which are historical
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements represent the
Company's present expectations or beliefs concerning future events. The Company
cautions that such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
uncertainty as to the Company's future profitability; the uncertainty as to the
demand for prepaid telephone services; increasing competition in the
telecommunications market; the Company's ability to hire, train and retain
sufficient qualified personnel; the Company's ability to obtain financing on
acceptable terms to finance its growth strategy; and the Company's ability to
develop and implement operational and financial systems to manage its growth.


                                       7
<PAGE>


OVERVIEW

Q Comm International, Inc. ("Q Comm" or the "Company"), a Utah corporation, is a
national telecommunications service provider specializing in the sale and
distribution of various prepaid telecommunications products including prepaid
calling cards, prepaid wireless service and prepaid home dialtone phone services
throughout the United States. The Company dispenses its products through Qxpress
(TM), a total management system that allows retailers to (i) instantly provide
any prepaid telecommunications service at the point of purchase on demand and
thus minimize shelf space requirements; (ii) print flexible sales reports, and
(iii) eliminate expensive inventory, and prevent theft and fraud. The Company's
securities are quoted on the Over-the-Counter Bulletin Board ("OTCBB") under the
symbol QCCM.OB

The Company's revenues originate from the sale of prepaid calling cards,
wireless services and prepaid home dialtone through the Qxpress (TM)
point-of-sale activation system and from weekly service fees associated with the
Qxpress (TM) system, which are charged when weekly sales quotas have not reached
the minimum amount set by Q Comm. The Company also generates revenues from the
sale of printed prepaid wireless phone cards. Other revenues include interest
and miscellaneous income. While Q Comm offers several prepaid telecommunication
products, the Company believes that its future business will be primarily in the
prepaid wireless market and providing point-of-sale solutions to wireless
carriers.

The Company utilizes a business to business model wherein large independent
telecommunications brokers and wholesale food distributors market the Company's
products to a variety of retailers with whom they had pre-existing
relationships. Under this business to business model, Q Comm uses its own sales
force to recruit, train and support the independent telecommunications brokers
and wholesale food distributors that market Q Comm's products.

The Company's objective is to be one of the leading prepaid telecommunications
companies in the United States. To achieve this, it will be necessary for Q Comm
to expand the size of its revenues through expansion of the number of retail
locations where its products are sold by entering into new broker/carrier
agreements, increasing sales volume through existing locations, and to continue
to generate new sources of revenue through development of new products and
services. Concurrent with the release of its new proprietary Qxpress 200 (TM)
terminal, the Company also is marketing a variation of its current business
model wherein telecommunication brokers purchase the terminal from Q Comm and
install a Data Center under a software license from the Company. Under this
model, the broker assumes more responsibility for certain functions such as PIN
management, product ownership, report generation, and funds transfer while the
Company generates revenues from the sale of the terminal, transaction
processing, and management services. Under its current business model, the
Company retains ownership of the terminal and maintains control of the functions
discussed above. The Company has identified additional marketing opportunities
for larger telecommunication brokers who desire the autonomy and control offered
by this new business model.

The Company intends to introduce many more innovative product solutions to the
prepaid telecommunication market by exploiting leading technologies and creating
leading-edge, customized solutions for emerging customer segments. See
discussion above under Part I, "Status of Any Publicly Announced New Product or
Service" for information regarding the Company's newly developed products.

International opportunities are also emerging for the Company in the
telecommunications industry. Overseas deregulation of telecommunications
provides Q Comm with an unprecedented opportunity to develop joint ventures for
the marketing of prepaid telecommunications systems. On February 1, 2002, the
Registrant announced it had entered into an exclusive five-year agreement with
WGR Limited, a European telecommunications distributor, for the installation of
a Data Center and purchase of Qxpress 200 (TM) terminals. The agreement calls
for 26,000 of such terminals to be purchased from Q Comm within the first two
years of the agreement.


                                       8
<PAGE>

The key to the Company's future success lies in its ability to continue to
provide premier prepaid telecommunications products and services, begin
large-scale distribution of its new point-of-sale activation system (Qxpress 200
(TM)), execute its strategy of broker/wholesaler network expansion, and obtain
funding needed to carry out these objectives.

RESULTS OF OPERATION FOR THE YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR
ENDED DECEMBER 31, 2000.

REVENUES

Q Comm generates and recognizes revenues under the category entitled
"telecommunications" which includes prepaid wireless services, prepaid calling
cards, prepaid home dialtone services, and miscellaneous income. During the year
ended December 31, 2001, Q Comm's net sales were $16,359,504 as compared to
$1,713,583 during 2000, representing an increase of $14,645,921. The increase
during the year was primarily attributable to the acceptance by the prepaid
telecommunications market for the Company's means of product distribution
utilizing point-of-sale technology, the increasing visibility of the Company in
the prepaid telecommunications market, and the overall growth of such market in
general. The Company expects each of these factors to contribute to further
sales growth in the foreseeable future.

COST OF GOODS SOLD

The Company's cost of goods sold increased to $11,649,760 from $963,548, or an
increase of $10,686,212 for the year ended December 31, 2001 as compared with
2000. The increase in the cost of goods sold during this period is principally
associated with the increase in revenues.

OPERATING EXPENSES

Operating expenses for the year ended December 31, 2001 increased to $6,110,323
from $1,779,352 during 2000, or an increase of $4,330,971. Factors contributing
to this increase are discussed below.

Commissions and fees increased $3,729,747, from $359,319 for the year ended
December 31, 2000 to $4,089,066 for the year ended December 31, 2001. These
expenses are principally commissions paid to merchants and brokers for product
sales through the Qxpress (TM) terminals and are a fixed percentage of the sale
amount. The increase in commissions and fees is solely a function of increased
revenues.

For the year ended December 31, 2001 as compared with 2000, selling expenses
increased $41,609 (17.3%). The increase was due to increased costs in travel
expenses, reflecting the sales efforts associated with building an expanded
network for the selling and distribution of the Company's products.

General and administrative expenses increased $329,813 (29.9%), from $1,104,273
in 2000 to $1,434,086 in 2001. This increase can be attributed to the following
significant items: i) an increase in legal costs of approximately $85,000 from
2000 to 2001, mostly resulting from expenses incurred in the fourth quarter of
2001 related to the proposed APS transaction discussed under Item 1,
"Description of Business" above, ii) a valuation of common stock options granted
to consultants and others for services as required for accounting purposes by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" in the amount of approximately $150,000, and iii) an increase in
general and administrative salaries of approximately $65,000 (9.5%) in 2001


                                       9
<PAGE>

compared to 2000 to support the Company's expanded customer base. After
consideration of the above items, general and administrative expenses in total
increased 2% from 2000 to 2001. Management of the Company believes that its
general and administrative expenses are largely fixed and that only modest
expense increases of this nature will be incurred in the foreseeable future.

Depreciation and amortization expenses increased $83,312, from $75,360 during
the year ended December 31, 2000 compared to $158,672 during the year ended
December 31, 2001, reflecting increased investment in property and equipment
(principally Qxpress(TM) terminals).

Research and development expenses were $146,490 for the year ended December 31,
2001. No expenses of this nature were incurred during 2000. Beginning with the
second quarter of 2001, the Company incurred research and development expenses
related to the development of its new Qxpress 200 (TM) terminal as described
under Item I, "Status of Any Publicly Announced New Product or Service." These
expenses are primarily fees paid to an external company. The Company expects to
incur only minimal research and development expenses in the foreseeable future
as development activities of the new terminal were completed in the latter part
of 2001.

LOSS FROM OPERATIONS

The Company had a loss from operations of $1,400,579 for the year ended December
31, 2001 as compared with a loss of $1,029,317 for the year ended December 31,
2000. The increase in the loss from operations is attributable to the increases
in operating expenses discussed above. The Company expects its investment in an
expanded distribution network to result in significantly higher revenues in the
future while the Company's ongoing operating expenses (other than commissions
and fees) will increase by a smaller percentage. The Company believes these
factors will contribute to a significant improvement in the results from
operations in the foreseeable future.

TOTAL OTHER INCOME (EXPENSE) AND EXTRAORDINARY ITEMS

The Company experienced a gain on extinguishment of debt of $6,878 for the year
ended December 31, 2001 as compared with $156,049 for 2000. This decrease is due
to the non-recurring nature of these items. Other income was $4,241 for the year
ended December 31, 2001 compared to $11,892, while other expense increased
$31,480, from $124,106 for 2000 compared to $155,586 for 2001. Most of the
increase in other expense is due to increased interest expense associated with
borrowings. In 2001, a loss on disposal of assets of $5,170 was recorded while
no expense of this nature occurred in 2000.

NET LOSS

For the year ended December 31, 2001, the Company had a net loss of $1,550,216
as compared with $985,482 for 2000. This resulted from increased expenses as
discussed above, some of which the Company anticipates to be non-recurring in
nature. The Company believes a much larger revenue base and aggressive expense
controls to result in profitability in the foreseeable future.

The Company has available at December 31, 2001, operating loss carryforwards of
approximately $4,500,000, which may be applied against future taxable income in
years through 2021. At December 31, 2001, the total of all deferred tax assets
was $1,744,013 and the total of the deferred tax liabilities was $303,790. 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
$1,440,223 at December 31, 2001.



                                       10
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has financed its working capital requirements through
internally generated funds, the sale of shares of its common stock, and proceeds
from short-term bank borrowings, convertible debentures, and notes payable. As
of December 31, 2001, the Company had a working capital deficit (current assets
less current liabilities) of approximately $2,160,000. The Company may seek to
issue corporate debt or equity securities in order to satisfy its cash needs for
the coming year. During February 2002, the Company sold 2,000,000 shares of
restricted common stock for $1.00 per share, with $1,629,225 received in cash
and $370,775 in outstanding subscriptions as of March 25, 2002. Any debt
incurred or issued by the Company may be secured or unsecured, fixed or variable
rate interest and may be subject to such terms as the board of directors of the
Company deems prudent. Any sales of equity securities may be at or below current
market rates for the Company's common stock. The Company expects any proceeds
from such additional credit or sale of securities to be used primarily in the
marketing and development of its network for the sale of telecommunications
products, costs of new placements of Qxpress 200 (TM) terminals, and in the
reduction of short-term liabilities. No assurance can be given that the Company
will be successful in generating sufficient capital from new borrowings or from
the sale of its securities to adequately fund its liquidity needs.

The Company does not believe that inflation had a significant impact on the
Company's results of operations for the period presented. On an ongoing basis,
the Company attempts to minimize any effects of inflation on its operating
results by controlling operating costs, and, whenever possible, seeking to
insure that product price rates reflect increases in costs due to inflation.

NEW ACCOUNTING PRONOUNCEMENTS

No new pronouncement issued by the Financial Accounting standards board, the
American Institute of Certified Public Accountants or the Securities and
Exchange Commission is expected to have a material impact on the Company's
financial position or reported results of operations. Reference is made to Note
1 to the financial statements included under Item 7 of this Report.

Item 7.  Financial Statements

The financial statements called for by this Item are attached to this Report as
Exhibit (99)(i), and are herein incorporated by reference.

Item 8. Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure

At no time during the Registrant's two most recent fiscal years, did the
principal independent accountant (or a significant subsidiary's independent
accountant on whom the principal accountant expressed reliance in its report)
resign, decline to stand for re-election, or get dismissed by Registrant.


                                       11
<PAGE>


Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act

All information presented in this Item is as of December 31, 2001.

The following table lists Registrant's Directors and Executive Officers:

Name                       Position         Age               Director Since

Brae Burbidge              Director         35                June 2000
Lamond Woods               Director         35                June 2000
Brent Bingham              Director         35                January 1999
Paul Hickey                CEO, Director    41                August 1998
Stephen Flaherty           President        54                N/A

The directors of the Registrant do not have any term specified in the
Registrant's by-laws.

There are no family relationships among the directors and executive officers of
the Registrant.

In addition, Registrant has engaged Michael Openshaw as its Chief Financial
Officer and Lynn Thackeray as its Director of Operations.

Mr. Burbidge is also President and CEO of Global Web, Inc., a corporation based
in Utah that provides web design services. He is a graduate of the University of
Utah.

Mr. Woods is also the owner of SNIS Insurance, a Utah-based insurance agency.

Mr. Bingham is also the President and CEO of Eclipse Marketing, a Utah-based
direct sales company. He is a graduate of Brigham Young University.

Mr. Hickey has been with Registrant since its inception in 1986, and had founded
certain of the entities that now comprise Q Comm, Inc. in 1992 and 1993. He is a
graduate of Brigham Young University.

Mr. Flaherty was an executive with Global Business Solutions, based in Costa
Mesa, California. As a management executive, Mr. Flaherty has been brought in to
manage various small and medium-sized businesses, including a technical
documents publisher (First Image) and a medical services company (MERX).
Previously, Mr. Flaherty was an executive at General Electric and Bell & Howell.
Mr. Flaherty joined the Registrant in April 1999.

None of the individuals listed above holds directorships in reporting companies,
with the exception of Mr. Burbidge, who is a director of Global Web, Inc. None
of the individuals listed above has been involved in any significant legal
proceeds in the last five years that are material to an evaluation of the
ability or integrity of them to serve as a director or executive officer of the
Registrant.

Section 16(a) Beneficial Ownership Reporting Compliance. Based solely on a
-------------------------------------------------------
review of Forms 3 and 4, and amendments thereto furnished to the Registrant
under Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934 during
the most recent fiscal year, and Form 5 and amendments thereto furnished to the
Registrant with respect to its most recent fiscal year, all reports required


                                       12
<PAGE>

under Section 16(a) of the Securities Exchange Act of 1934 were timely filed,
except as follows: On the Form 5 filed by Paul Hickey on February 15, 2002,
certain transactions not previously reported on Form 4 were reported on Form 5.

Item 10.  Executive Compensation

The following narrative provides a discussion of the compensation provided to
the Registrant's chief executive officer and the Registrant's four most highly
compensated executive officers other than the chief executive officer who were
serving as executive officers at the end of the last completed fiscal year,
provided that any of such four executive officers earned more than $100,000 in
total annual salary and bonus. All of these officers are collectively referred
to herein as the "named executive officers".

Summary Compensation Table
--------------------------

The following table sets forth compensation for Registrant's last three
completed fiscal years for the named executive officers, including salary,
bonus, other annual compensation, long term incentive plan payouts, and all
other long-term compensation. Grants of stock options are referred to in the
next chart following.

Name and Title             Year       Salary Paid    Salary Deferred    Total

Paul Hickey, CEO           2001       $ 120,000        $  -0-           $120,000
                           2000       $  73,846        $ 46,154         $120,000
                           1999       $   2,000        $ 52,000         $ 54,000

Stephen Flaherty,
President                  2001       $ 120,000        $  -0-           $120,000
                           2000       $ 113,231        $ 6,769          $120,000
                           1999       $  64,077        $  -0-           $ 64,077


Mr. Flaherty joined the Registrant in April 1999 at an annualized salary of
$100,000.

Option/Stock Appreciation Rights Table
--------------------------------------

The following table sets forth information regarding the grants of options or
stock appreciation rights during the last completed fiscal year for each of the
named executive officers, indicating the number of securities underlying the
options or stock appreciation rights granted, the percentage of the total
options and stock appreciation rights granted to all employees in the fiscal
year represented by such grant, the exercise or base price(s), and the
expiration date(s).
<TABLE>
<CAPTION>

                                                                                                                % of total
                                                                                                                ----------
Name and Position Options at 1/1/01   Grants during 2001     Canceled during 2001    Options at 12/31/01       2001 grants
                  -----------------   ------------------     --------------------    --------------------      ------------
<S>               <C>                 <C>                    <C>                     <C>                       <C>
Paul Hickey, CEO       800,000             500,000                    -                   1,300,000                20.0%
Stephen Flaherty,      520,000           1,020,000                (520,000)               1,020,000                40.9%
President

</TABLE>

None of the options referred to above had been exercised as of March 25, 2002.


                                       13
<PAGE>


Mr. Hickey's options at January 1, 2001 are to purchase shares at $1.10 per
share, and expire in April 2003. All of these options are vested. Mr. Hickey's
options granted in 2001 are to purchase shares at $1.00 per share, and expire in
2006. These options are earned quarterly over a two-year period based on
revenues of the Registrant. At December 31, 2001, 250,000 of these options are
vested but may not be exercised before January 1, 2003.

Mr. Flaherty's options at January 1, 2001 were to purchase shares at $1.50 per
share, expiring in April 2004. These options were canceled during 2001. Mr.
Flaherty's options granted in 2001 are to purchase shares at $1.00 per share,
and expire in 2006. 620,000 of such options are earned quarterly over a two-year
period based on revenues of the Registrant. At December 31, 2001, 310,000 of
these options are vested but may not be exercised before January 1, 2004. The
remaining 400,000 options granted in 2001 are earned quarterly over a two-year
period based on profitability of the Registrant. None of these options were
vested as of December 31, 2001. Any such options that vest in the future may not
be exercised before January 1, 2004.

No stock appreciation rights have been granted.

Directors' Compensation
-----------------------

The Registrant's directors receive no compensation at the present time for their
service as directors.

Employment Contracts and Termination of Employment, and Change in Control
-------------------------------------------------------------------------
Arrangements
------------

There are no employment contracts between the Registrant and a named executive
officer, nor any compensatory plan or arrangement resulting from resignation,
retirement, termination, or change in control.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

The following table sets forth the ownership of the Registrant's securities by
any person (including any group) who is known to the Registrant to be the
beneficial owner of more than 5% of any class of Registrant's securities, and by
the Registrant's executive officers and directors. The address of each
individual listed below is c/o the Registrant.


Title of class   Name and Address          Amount and Nature          % of class
               Of Beneficial Owner        of Beneficial Owner


Common Stock      Paul Hickey             3,481,755 directly
                                             58,000 through family
                                             ------
                                          3,539,755 total (1)            24.7%

Common Stock      Stephen Flaherty                0 total (2)               0%

(1) In addition, Mr. Hickey has options to purchase an additional 1,300,000
shares of common stock which, if exercised, would increase his ownership
percentage to 33.7%.

(2) In addition, Mr. Flaherty has options to purchase an additional 1,020,000
shares of common stock which, if exercised, would increase his ownership
percentage to 7.1%.

There are no current arrangements which may result in a change in control of the
Registrant.

                                       14
<PAGE>


Item 12.  Certain Relationships and Related Transactions

The following discussion sets forth (by name, relationship to the Registrant,
nature of interest, and amount of interest) any transactions during the last two
years, or proposed transactions, to which the Registrant was or is to be a
party, in which any of the following persons had or is to have a direct or
indirect material interest: (1) any director or executive officer of Registrant;
(2) any security holder referenced in Item 11 on this Form 10-KSB; and (3) any
member of the immediate family (spouse, parents, children, siblings and in-laws)
of any person referenced in (1) or (2) hereto. This discussion does not include
information for any transactions where competitive bids determined the rates or
charges in the transaction, the rate or charges are fixed by law or governmental
authority, or the amount involved in the transaction or a series of similar
transactions does not exceed $60,000.

Paul Hickey, the CEO of the Registrant, is the sole owner of a company that
leased certain equipment to the Registrant during 2001, for which Registrant
recorded lease expenses of approximately $8,016. Registrant owes Mr. Hickey a
total of $413,300 at December 31, 2001 consisting principally of unpaid
equipment lease expenses, deferred salary, accrued interest and notes payable.
Reference is made to Notes 8 and 12 to the financial statements included under
Item 7 of this Report.
<TABLE>
<CAPTION>

Item 13.     Exhibits, List and Reports on Form 8-K
<S>          <C>
(3)(i)(1)     Articles of Incorporation, Four Rivers Development, Inc., filed February 7, 1986.
                (1, Ex. 3)
(3)(i)(2)     Articles of Amendment, Four Rivers Development, Inc., filed August 3, 1998,
                which changed Registrant's name to Q Comm International, Inc. (1, Ex. 2)
(3)(ii)(1)    By-laws of Registrant (1, Ex. 4)
(10)(i)(1)    Lease Agreement, dated as of November 22, 1999, by and between Registrant
                and Highland Ranch, Inc. (1, Ex. 5)
(10)(i)(2)    Agreement to Modify and Extend Lease Agreement, dated December 6, 2001,
                between Registrant and Highland Ranch,
(10)(iii)(1)  Stock Option Agreement for Stephen C. Flaherty, dated May 3, 1999. (1, Ex. 7)
(10)(iii)(2)  Stock Option Agreement for John Hickey, dated May 3, 1999. (1, Ex. 8)
(10)(iii)(3)  Stock Option Agreement for Bruce Siskonen, dated May 3, 1999. (1, Ex. 9)
(10)(iii)(4)  Stock Option Agreement (1) for Stephen Flaherty, dated September 6, 2001
(10)(iii)(5)  Stock Option Agreement (2) for Stephen Flaherty, dated September 6, 2001
(10)(iii)(6)  Stock Option Agreement for Paul Hickey, dated September 6, 2001
(10)(iii)(7)  Stock Option Agreement (1) for John Hickey, dated September 6, 2001
(10)(iii)(8)  Stock Option Agreement (2) for John Hickey, dated September 6, 2001
(10)(iii)(9)  Stock Option Agreement for Bruce Siskonen, dated September 6, 2001
(10)(iii)(10) Stock Option Agreement for Michael Openshaw, dated September 6, 2001
(10)(iii)(11) Stock Option Agreement for Lynn Thackeray, dated September 27, 2001



                                       15
<PAGE>


(10)(iii)(12) Loan Agreement between Registrant and UTFC Financing Solutions LLC dated November 27, 2001
(10)(iii)(13) Secured Convertible Note between Registrant and American Payment Systems, Inc. dated
                August 9, 2001
(10)(iii)(14) Loan and Security Agreement between Registrant and American Payment Systems, Inc.
                dated October 31, 2001

(21)          Subsidiaries:

         Q Comm, Inc., a Utah corporation, wholly owned by Registrant

(99)(i) -     Financial Statements of the Registrant.

(1) - Incorporated by reference from Registrant's filing on Form 8-K, dated
March 20, 2000, and the exhibit referenced thereto.

</TABLE>

Registrant filed three Current Reports during the fourth quarter of 2001.

On October 25, 2001, an 8-K was filed to announce an agreement for the sale of
11,400,000 shares of common stock of the Registrant to American Payment Systems,
Inc. for $5,700,000.

On November 28, 2001, an 8-K was filed related to an amendment of the above
agreement, which extended the date within which APS could perform their due
diligence procedures.

On December 12, 2001, an 8-K was filed to announce the termination of the
agreements referred to in the prior two 8-K reports.



                                       16
<PAGE>


                                   SIGNATURES



         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


Q Comm International, Inc.


Dated: March 28, 2001

Stephen Flaherty, President                          /s/ Stephen Flaherty
(principal executive officer)                        --------------------------

Paul Hickey, Chief Executive
Officer (principal executive                         /s/ Paul Hickey
officer) and Director                                --------------------------

Michael Openshaw, Chief
Financial Officer and principal                      /s/ Michael Openshaw
accounting officer                                   --------------------------


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

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

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




                                       17

<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2001








<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY




                                    CONTENTS

                                                                           PAGE
                                                                           ----

       --     Independent Auditors' Report                                  1


       --     Consolidated Balance Sheet, December 31, 2001                 2


       --     Consolidated Statements of Operations, for the
                  years ended December 31, 2001 and 2000                    3


       --     Consolidated Statement of Stockholders' Equity (Deficit),
                  for the years ended December 31, 2001 and 2000            4


       --     Consolidated Statements of Cash Flows, for the
                  years ended December 31, 2001 and 2000                   5 - 6


       --      Notes to Consolidated Financial Statements                 7 - 19



<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,  2001,  and the related
consolidated  statements of operations,  stockholders' equity (deficit) and cash
flows  for the years  ended  December  31,  2001 and  2000.  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, 2001, and the results of
its  operations  and its cash flows for the years  ended  December  31, 2001 and
2000, 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 19 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  19.  The  financial  statements  do not  include  any
adjustments that might result from the outcome of these uncertainties.


PRITCHETT, SILER & HARDY, P.C.

February 25, 2002
Salt Lake City, Utah


                                                                               1
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET

                                     ASSETS
                                                                    December 31,
                                                                        2001
                                                                    -----------
CURRENT ASSETS:
     Cash in bank                                                   $     2,422
     Certificates of deposit                                            100,000
     Accounts receivable                                                 29,313
     Inventory                                                           22,509
     Deferred taxes                                                     303,790
                                                                    -----------
               Total Current Assets                                     458,034
                                                                    -----------
PROPERTY & EQUIPMENT, net                                               647,683
                                                                    -----------
OTHER ASSETS:
     Goodwill, net                                                      144,580
     Capitalized software development                                   636,220
     Deposits                                                             3,558
                                                                    -----------
               Total Other Assets                                       784,358
                                                                    -----------
                                                                    $ 1,890,075
                                                                    -----------

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
     Bank overdraft                                                 $   188,920
     Accounts payable                                                   758,426
     Accrued expenses                                                   253,268
     Related party obligations                                          413,300
     Notes payable                                                      601,474
     Convertible notes payable - current portion                        237,885
     Capital lease obligation - current portion                           5,044
     Contingent liability                                               159,235
                                                                    -----------
               Total Current Liabilities                              2,617,552
                                                                    -----------
LONG-TERM OBLIGATIONS:
     Convertible notes payable - long-term portion                      211,262
     Capital lease obligation - long-term portion                        20,645
     Deferred taxes                                                     303,790
                                                                    -----------
               Total Long-term Obligations                              535,697
                                                                    -----------
               Total Liabilities                                      3,153,249
                                                                    -----------
STOCKHOLDERS' EQUITY (DEFICIT):
     Common stock, $.001 par value, 50,000,000 shares
        authorized,13,089,719 shares issued and outstanding              13,090
     Capital in excess of par value                                   4,094,273
     Retained deficit                                                (5,235,537)
                                                                    -----------
                                                                     (1,128,174)
     Less stock subscription receivable                                (135,000)
                                                                    -----------
               Total Stockholders' Equity (Deficit)                  (1,263,174)
                                                                    -----------
                                                                    $ 1,890,075
                                                                    -----------

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


                                                                               2
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                             For the
                                                           Years Ended
                                                           December 31,
                                                   ----------------------------
                                                       2001            2000
                                                   ------------    ------------
SALES, net of returns and allowances               $ 16,359,504    $  1,713,583

COST OF GOODS SOLD                                   11,649,760         963,548
                                                   ------------    ------------
GROSS PROFIT                                          4,709,744         750,035

OPERATING EXPENSES:
     Commissions and fees                             4,089,066         359,319
     Selling expenses                                   282,009         240,400
     General and administrative                       1,434,086       1,104,273
     Depreciation and amortization                      158,672          75,360
     Research and development                           146,490            --
                                                   ------------    ------------
               Total Operating Expenses               6,110,323       1,779,352
                                                   ------------    ------------
LOSS FROM OPERATIONS                                 (1,400,579)     (1,029,317)

OTHER INCOME (EXPENSE):
     Other income                                         4,241          11,892
     Interest and other expense                        (155,586)       (124,106)
     Loss on disposal of assets                          (5,170)           --
                                                   ------------    ------------
               Total Other Income (Expense)            (156,515)       (112,214)
                                                   ------------    ------------
LOSS BEFORE INCOME TAXES
     AND EXTRAORDINARY ITEM                          (1,557,094)     (1,141,531)

CURRENT TAX EXPENSE                                        --              --

DEFERRED TAX EXPENSE                                       --              --
                                                   ------------    ------------
LOSS BEFORE EXTRAORDINARY ITEM                       (1,557,094)     (1,141,531)

EXTRAORDINARY ITEM - Gain on
     extinguishment of debt                               6,878         156,049
                                                   ------------    ------------

NET LOSS                                           $ (1,550,216)   $   (985,482)
                                                   ------------    ------------
BASIC LOSS PER COMMON SHARE:
     Loss from continuing operations               $       (.14)   $       (.14)
     Extraordinary item                                    --               .02
                                                   ------------    ------------

BASIC LOSS PER COMMON SHARE                        $       (.14)   $       (.12)
                                                   ------------    ------------

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

                                                                               3
<PAGE>
<TABLE>
<CAPTION>


                                     Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                             CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

                                  FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000



                                                  Common Stock           Capital in      Stock
                                            -------------------------    Excess of    Subscription     Retained
                                               Shares       Amount       Par Value     Receivable       Deficit
                                            -----------   -----------   -----------    -----------    -----------
<S>                                         <C>           <C>           <C>            <C>            <C>
BALANCE, December 31, 1999                    6,636,152   $     6,636   $ 1,190,138    $      --      $(2,699,839)
                                            -----------   -----------   -----------    -----------    -----------
Issuance of common stock for cash,
  at $.70 to $.93 per share, net of stock
  offering costs of $127,375                  1,083,784         1,084       806,541           --             --

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

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

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

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

Net loss for the year ended
   December 31, 2000                               --            --            --             --         (985,482)
                                            -----------   -----------   -----------    -----------    -----------
BALANCE, December 31, 2000                    9,193,349   $     9,193   $ 2,853,654    $      --      $(3,685,321)
                                            -----------   -----------   -----------    -----------    -----------
Issuance of common stock for cash,
  at $.30 to $.70 per share                   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)
                                            -----------   -----------   -----------    -----------    -----------


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

                                                                                                                4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                             Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                               CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                 For the
                                                                               Years Ended
                                                                               December 31,
                                                                       --------------------------
                                                                           2001           2000
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
Cash Flows from Operating Activities:
     Net loss                                                          $(1,550,216)   $  (985,482)
     Adjustments to reconcile net
       loss to net cash used by
       operating activities:
        Gain on extinguishment of debt                                      (6,878)      (156,049)
        Loss on disposal of assets                                           5,170           --
        Depreciation and amortization expense                              158,672         75,360
        Stock and options/warrants issued for non-cash consideration       276,722         21,660
        Change in assets and liabilities:
           (Increase) decrease in accounts receivable                      155,451        (88,585)
           Decrease in related party receivable                               --            5,000
           Increase in inventory                                           (22,509)          --
           (Increase) decrease in other assets                                (820)         3,000
           Increase (decrease) in accounts payable                         482,389        (29,239)
           Increase in accrued expenses                                    189,060         19,685
           Increase in related party obligations                            78,771        107,385
                                                                       -----------    -----------
               Net Cash Used by Operating Activities                      (234,188)    (1,027,265)
                                                                       -----------    -----------
Cash Flows from Investing Activities:
     Purchase of property & equipment                                     (549,362)      (172,451)
     Net purchase of certificates of deposit                                  --         (103,506)
     Capitalized software development costs                               (632,742)        (3,478)
                                                                       -----------    -----------
               Net Cash Used by Investing Activities                    (1,182,104)      (279,435)
                                                                       -----------    -----------
Cash Flows from Financing Activities:
     Issuance of common stock                                              701,000        935,000
     Proceeds from notes payable                                           650,000        442,000
     Net decrease in lines of credit                                       (63,368)       (15,048)
     Payments on notes payable                                            (154,825)          --
     Payments on capital lease                                                (753)          --
     Increase in cash overdraft                                            188,920           --
                                                                       -----------    -----------
               Net Cash Provided by Financing Activities                 1,320,974      1,361,952
                                                                       -----------    -----------
Net Increase (Decrease) in Cash                                            (95,318)        55,252

Cash, Beginning of Year                                                     97,740         42,488
                                                                       -----------    -----------
Cash, End of Year                                                      $     2,422    $    97,740
                                                                       -----------    -----------

Supplemental Disclosures of Cash Flow Information:
     Cash paid during the year for:
       Interestexpense                                                 $    27,238    $    57,880
       Capitalized interest                                            $    26,632    $      --
       Income taxes                                                    $      --      $      --




                                                                                                5
</TABLE>

<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Continued)

Supplemental Schedule of Non-cash Investing and Financing Activities:

         In 2001, the Company issued 955,934 shares of common stock for services
         rendered valued at $302,959, including stock offering costs of $152,528
         and a reduction in accounts payable of $72,719.

         In 2001, the Company issued 1,895,334 in  options/warrants  to purchase
         common stock valued at $199,010 in exchange for services.

         In  2001,  the  Company  issued  196,918  shares  of  common  stock  in
         conversion  of $50,000 of  convertible  debentures  along with  accrued
         interest of $9,075.

         In 2001,  the  Company  issued  385,715  shares of  common  stock for a
         subscription receivable in the amount of $135,000.

         In 2001,  the  Company  issued  256,852  shares  of  common  stock in a
         cashless exercise of a common stock option.

         In 2001, the Company  converted  $63,446 in accrued interest payable to
         notes payable.

         In 2001,  the  Company  obtained  equipment  with a value of $26,422 by
         entering into a capital lease.

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

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


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

         In 2000, the Company issued 400,000 shares of stock as collateral for a
         note payable.  The shares were canceled in January 2002 upon  repayment
         of the note.








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


                                                                               6
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

     Revenue  Recognition - The Company provides  electronic delivery of prepaid
     telecommunication  products through a variety of retail locations.  Revenue
     is  recognized  at the  time  of  product  sale.  Sales  of  the  Company's
     electronic  products and services are generally made directly to end-users.
     There  is no right of  return  for  products  sold and the  Company  is not
     obligated for further  performance after the sale. 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  provides  non-electronic   telecommunication   products
     primarily  to others for  resale.  These  sales are  recorded  net of sales
     discounts and allowances.

     Loss Per Share - The Company  computes  loss per share in  accordance  with
     Statement of Financial  Accounting  Standards  (SFAS) No. 128 "Earnings Per
     Share," which  requires the Company to present basic earnings per share and
     dilutive earnings per share when the effect is dilutive (see Note 17).



                                                                               7
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

     Software  Development Costs - 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
     (SFAS) 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.  Once
     completed,  project costs will be amortized over the estimated  useful life
     of the software of five years.

     The  Company  regularly  reviews  the  carrying  value of such  capitalized
     software  costs.  At the  time a  determination  is made  that  capitalized
     amounts  are not  recoverable  based  on the  estimated  cash  flows  to be
     generated from the applicable software,  any remaining  capitalized amounts
     are written off.

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

     Advertising Costs - Advertising costs are expensed as incurred.  Such costs
     amounted to $19,573 and $21,477  during the years ended  December  31, 2001
     and 2000 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.

     Recently Enacted Accounting  Standards - Statement of Financial  Accounting
     Standards  ("SFAS")  No.  141,  "Business  Combinations",   SFAS  No.  142,
     "Goodwill and Other Intangible Assets", SFAS No. 143, "Accounting for Asset
     Retirement  Obligations",  and SFAS No. 144, "Accounting for the Impairment
     or Disposal of Long-lived Assets", were recently issued. SFAS No. 141, 142,
     143 and 144 have no current applicability to the Company or their effect on
     the financial statements would not have been significant.

     Reclassifications  - Certain  amounts in the financial  statements  for the
     year ended December 31, 2000 have been  reclassified to conform to headings
     and classifications used in the December 31, 2001 financial statements.



                                                                               8
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - ACQUISITION

     During March 2000, the Company issued 100,000 shares of common stock valued
     at $1.76 per share and a note  payable for  $50,000 to purchase  all of the
     issued and outstanding shares of Azore Acquisition Corporation (Azore). The
     merger was accounted for as a purchase. Subsequent to the merger, Azore was
     merged into the Company and  dissolved.  Goodwill of $224,561  representing
     the excess of the cost of  purchasing  Azore over the fair market  value of
     the assets at the date of acquisition  was recorded and is being  amortized
     on the straight-line  method over 5 years.  Amortization expense recognized
     during the years ended  December 31, 2001 and 2000 was $44,968 and $35,012,
     respectively.

NOTE 3 - CERTIFICATES OF DEPOSIT

     The following is a summary of  certificates  of deposit held by the Company
     at December 31, 2001:

                                      Amortized         Market         Maturity
      Date Acquired   Maturity Date     Cost             Value          Value
     ---------------    ---------    -----------      -----------     ----------
         5/22/01         5/22/02      $   50,000      $   50,000     $   50,000
         5/22/01         5/22/02          50,000          50,000         50,000
                                      -----------     -----------    -----------
                                      $  100,000      $  100,000     $  100,000
                                      -----------     -----------    -----------

     One of the certificates of deposit is pledged as security for the Company's
     line of credit (see Note 7).

NOTE 4 - PROPERTY & EQUIPMENT

     The  following  is a summary of property  and  equipment as of December 31,
     2001:

               Point of sale equipment         $ 702,609
               Office and computer equipment      88,242
                                               ---------
               Total cost                        790,851

               Accumulated deprecation          (143,168)
                                               ---------
               Property & equipment, net       $ 647,683
                                               ---------

     Depreciation  expense  for the years ended  December  31, 2001 and 2000 was
     $113,704 and $40,348, respectively.

     Included in the cost of property  and  equipment  at December 31, 2001 is a
     $100,000 deposit for various components of equipment to be manufactured for
     the Company.

                                                                               9
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - CAPITALIZED SOFTWARE DEVELOPMENT

     Capitalized  software costs at December 31, 2001 are related to projects in
     process and  accordingly,  no amortization  has been recorded.  Information
     related to capitalized software costs is as follows:

               Balance, beginning of year    $  3,478
               Capitalized during the year    632,742
                                             --------
               Balance, end of year          $636,220
                                             --------

     Approximately  $240,000  of the  above  costs  were  paid to a  third-party
     software  development  company.  The remaining costs represent  capitalized
     internal costs,  which are primarily  employee  salaries and benefits,  and
     related capitalized interest of $26,632.

NOTE 6 - 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 in the Company's bank accounts.  At December 31, 2001, the
     Company has utilized a portion of this  available  balance in the amount of
     $188,920, which created an overdraft for accounting purposes.

NOTE 7 - LINE OF CREDIT

     The Company has a $50,000 line of credit with a bank.  There was no balance
     outstanding at December 31, 2001.  The line accrues  interest at prime plus
     2% (7% at December 31, 2001),  and is due in May 2002.  The line is secured
     by a $50,000 certificate of deposit (see Note 3).

NOTE 8 - RELATED PARTY OBLIGATIONS

     Accrued  Expenses  - At  December  31,  2001,  the  Company  owed the Chief
     Executive  Officer  $228,583,  principally  consisting of unpaid  equipment
     lease expenses (see Note 12) and deferred salary.

     Notes Payable - At December 31, 2001,  the Company had notes  together with
     accrued interest totaling $184,717 payable to the Company's Chief Executive
     Officer.  The notes are payable on demand and bear interest at 10%.  During
     the years ended December 31, 2001 and 2000, the Company  recorded  interest
     expense on these notes of $14,429 and $9,534, respectively.



                                                                              10
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - LONG-TERM DEBT

     NOTES PAYABLE
     During  November  2001,  the Company issued a note payable in the amount of
     $200,000,  with  interest at prime plus 3% (8% at December 31,  2001),  due
     June 1, 2002.  The note is  collateralized  by the  Company's  accounts and
     intellectual property.

     During  December 2000, the Company issued a note payable for $100,000.  The
     note bears interest at a rate of 15% per annum, payable monthly, and is due
     January 31, 2002. The Company  pledged  400,000 common shares as collateral
     for the  loan.  Subsequent  to  December  31,  2001,  the note  was  repaid
     according  to its  terms  and the  shares  collateralizing  the  loan  were
     canceled.

     During  November 2000,  the Company issued a note payable for $50,000.  The
     note  bears  interest  at a rate  of 12% and had an  original  due  date of
     November 27, 2001.  During 2001,  the due date was extended to November 27,
     2002 in  consideration of payment of accrued interest to date of $4,350 and
     principal  reduction  of  $3,650.  The  outstanding  balance of the note at
     December 31, 2001 was $46,350.  In connection  with obtaining the note, the
     Company  issued 25,000  options to purchase  common stock at $.60 per share
     expiring November 2003, with demand registration rights.

     During  March  2000,  the  Company  issued a note  payable  for  $50,000 in
     connection  with an  acquisition  (see Note 2) with  interest  at 7% and an
     original due date of April 15, 2001. During 2001, the Note was restructured
     with monthly payments of $4,950 through May 2002, including interest at 18%
     per annum,  and $4,000 in accrued  interest  added to the note. At December
     31, 2001, the  outstanding  balance of the note was $23,678.  In connection
     with the  extension  of the note,  the  Company  issued  60,000  options to
     purchase  common stock at $.60 per share expiring May 2006,  with piggyback
     registration  rights.  These  options were valued at $6,300 and recorded as
     interest expense.

     During January 2000, the Company borrowed $292,000 from certain  investors.
     During 2001,  the Company  repaid a total of $120,000 of the borrowings and
     structured the remaining  amount plus accrued interest of $59,446 as a note
     payable in the  amount of  $231,446  with  interest  at 18% per annum,  due
     January 31, 2002. In connection  with the note,  the Company  issued 80,000
     options to purchase common stock at $.90 per share expiring September 2006,
     with piggyback registration rights. These options were valued at $8,400 and
     recorded as interest expense. Subsequent to December 31, 2001, the note was
     repaid according to its terms.

     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.

                                                                              11
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - LONG-TERM DEBT (Continued)

     During August 2001, the Company issued $200,000 in convertible  notes which
     may be  converted  to common  stock at $.30 per share at the  option of the
     holder.  The note bears interest at 6% and is due May 31, 2002. The note is
     secured by certain  equipment with a remaining book value of  approximately
     $121,440  at  December  31,  2001.  If the holder of the note elects to not
     convert the note,  the Company has the option to satisfy the  obligation by
     releasing the collateral securing the note.

     During the year ended  December 31, 2001,  $50,000 in debentures and $9,075
     in accrued interest were converted to 196,918 shares of common stock.


     A summary of maturities of all long-term debt is as follows:

               2002                        $   839,359
               2003                             43,544
               2004                             49,976
               2005                             57,510
               2006                             60,232
                                           -----------
               Total                         1,050,621
               Less current portion           (839,359)
                                           -----------
               Long-term portion           $   211,262
                                           -----------

     The total of $839,359 due in 2002 is reflected in the accompanying  balance
     sheet as notes  payable  of  $601,474  and  convertible  notes  payable  of
     $237,885.

NOTE 10 - CAPITAL LEASE OBLIGATION

     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,  2001 of  $25,689.  The lease is  collateralized  by  equipment  with a
     remaining book value of approximately $25,000 at December 31, 2001.

     Total future minimum lease  payments,  including  interest and other costs,
     are as follows:

               2002                                 $  9,845
               2003                                    9,845
               2004                                    9,845
               2005                                    8,204
                                                    --------
               Total                                  37,739
               Less interest and other costs         (12,050)
                                                    --------
               Present value of future
                 minimum lease payments               25,689
               Less current portion                   (5,044)
                                                    --------
               Long-term portion                    $ 20,645
                                                    --------


                                                                              12
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - LITIGATION AND CONTINGENCIES

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

     During the year ended December 31, 1999, the Company sold certain  services
     to a third  party who in turn sold these  services to  consumers.  When the
     third  party  failed  to  deliver  as  anticipated,  some of the  consumers
     reversed the charges  that had been made on their  credit card  accounts to
     purchase the services.  These reversals were ultimately  covered by charges
     made  to the  Company's  merchant  account  with a  bank,  resulting  in an
     overdraft of that account. The Company,  under the agreement with the third
     party, is entitled to be reimbursed 50% of the amount of the  charge-backs.
     During 2000, the bank filed suit claiming  damages of $175,477.  Management
     of the Company believes the bank reversed charges that should not have been
     under the terms and  conditions of the  consumers'  agreement and therefore
     disputes the bank's claim.

     At December 31, 2001,  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 Company has agreed to
     indemnify  the CEO by replacing  his shares  through the issuance of shares
     from treasury if the plaintiff is successful in his claim.

     During  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. This amount is reflected in the accompanying financial statements
     as an offset to stockholders' equity.

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

NOTE 12 - OPERATING LEASES

     The Company  leased  equipment  and  furniture  from a company owned by the
     Company's  CEO under an operating  lease which  expired  March 31, 2001. At
     December 31, 2001,  there was a balance of $94,285 for past lease  payments
     (see Note 8).

     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.  During 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 $3,373 in 2003. The Company's  future minimum rental under this
     operating lease amounts to $79,836 at December 31, 2001.


                                                                              13
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - CAPITAL STOCK

     A summary of common  stock  transactions  for the years ended  December 31,
     2001 and 2000 is as follows:

     During the year ended  December 31, 2001, the Company issued 714,285 shares
     of common  stock  upon the  exercise  of stock  options at $.35 to $.70 per
     share ($285,000).

     During February, 2001, the Company issued 133,333 shares of common stock at
     $.30 per share ($40,000).

     In  September  2000,  the Company  completed a private  placement of common
     stock.  The Company issued  1,253,333 units for $376,000 in proceeds.  Each
     unit  consisted  of one share of common stock and a warrant to purchase one
     share of common stock at an exercise price of $1.00.

     During  December,  2001,  the Company issued 196,918 shares of common stock
     upon the  conversion  of a $50,000  debenture at $.30 per share and related
     accrued interest of $9,075.

     During  October,  2001,  the Company  issued 256,852 shares of common stock
     upon the cancellation of 380,000 stock options at $.35 per share.

     During the year ended  December 31, 2001, the Company issued 955,934 shares
     of common stock for legal,  consulting services and finders fees at $.30 to
     $.50 per share ($302,959, including $122,868 in stock offering costs).

     During  September,  2001, the Company issued 385,715 shares of common stock
     at $.35 per share for a $135,000 subscription receivable.

     During,  2001, 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 1,895,334 options to non-employees to purchase common stock
     at $.35 to $1.25 per share for finders fees,  legal services,  extension of
     notes payable and upon issuance of notes payable.

     During the year ended  December  31,  2000,  the Company  issued  1,083,784
     shares of common stock upon the  exercise of stock  options at $.70 to $.93
     per share ($935,000, net of $127,375 in stock offering costs).

     During the year ended  December 31, 2000,  the Company issued 77,358 shares
     of common stock for legal services at $.27 to $.28 per share ($21,660).

     During March,  2000,  the Company  issued 100,000 shares of common stock in
     the acquisition of Azore (See Note 2).


                                                                              14
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - CAPITAL STOCK (Continued)

     During  February  through May,  2000,  the Company issued 896,055 shares of
     common stock upon the conversion of  a $650,000 debenture at $.70 to $1.00
     per share and related accrued interest of $10,788.

     During March,  2000,  the Company  issued 400,000 shares of common stock as
     collateral  for a $100,000  note  payable.  In January  2002,  the note was
     repaid and the shares were canceled.


     At December 31, 2001,  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 Company has agreed to
     indemnify  the CEO by replacing  his shares  through the issuance of shares
     from treasury if the plaintiff is successful in his claim.

     During  February  2002,  the Company sold  2,000,000  shares of  restricted
     common stock at $1.00 per share through  private  placements for $1,629,225
     cash and $370,775 in  subscriptions   receivable.  Stock  offering costs of
     approximately $126,000 were recorded in connection with the sale.

NOTE 14 - STOCK OPTIONS

     A summary of the status of options  granted to  employees  at December  31,
     2001 and 2000, and changes during the years then ended are as follows:

<TABLE>
<CAPTION>

                                                      2001                              2000
                                         -------------------------------   --------------------------------
                                                         Weighted Average                  Weighted Average
                                              Shares      Exercise Price          Shares    Exercise Price
                                         --------------   --------------   --------------   --------------
      <S>                                <C>              <C>              <C>              <C>
      Outstanding at beginning of year        1,655,000   $         1.34          820,000   $         1.59
      Granted                                 3,020,000             1.02          835,000             1.10
      Exercised                                    --               --               --               --
      Forfeited                                 264,000             1.44             --               --
      Expired                                   621,000             1.60             --               --
                                         --------------   --------------   --------------   --------------
      Outstanding at end of year              3,790,000   $         1.03        1,655,000   $         1.34
                                         --------------   --------------   --------------   --------------
      Exercisable at end of year              1,030,000   $         1.08          634,000   $         1.25
                                         --------------   --------------   --------------   --------------
      Weighted average fair value of
        options granted                       3,020,000   $          .69          835,000   $          .63
                                         --------------   --------------   --------------   --------------
</TABLE>


                                                                              15
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - STOCK OPTIONS (Continued)

     A summary of the status of the  options  outstanding  to  employees  of the
     Company at December 31, 2001 is presented below:
<TABLE>
<CAPTION>

                                             Options Outstanding                           Options Exercisable
                           ------------------------------------------------------    -------------------------------
          Range of                        Weighted Average       Weighted Average                   Weighted Average
          Exercise           Number           Remaining              Exercise          Number           Exercise
           Prices          Outstanding     Contractual Life           Price          Exercisable          Price
         ----------        -----------    -----------------      ----------------    -----------      --------------
       <S>                 <C>            <C>                    <C>                 <C>            <C>
       $1.00 - $1.61         2,960,000          4.5 years              $1.02            200,000           $1.00
       $1.00 - $1.10           830,000          3.5 years              $1.10            830,000           $1.10
                           -----------                                               ----------
                             3,790,000                                                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 2001 and 2000  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:


                                                      2001             2000
                                                ---------------   --------------
         Net Income
            As reported                         $   (1,550,216)   $    (985,482)
            Proforma                            $   (2,258,918)   $  (1,205,979)

         Basic earnings per share
            As reported                         $        (.14)    $        (.12)
            Proforma                            $        (.21)    $        (.15)

     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,  2001 and 2000:  risk-free  interest  rates of 4.6% and 6.7%,
     expected  dividend yields of zero,  expected life of 5 years,  and expected
     volatility of 161% and 140%, respectively.

     At December 31, 2001, the Company had  outstanding  2,573,383 stock options
     to non-employees under various agreements with exercise prices ranging from
     $.40 to $3.00 per share,  expiring  between  March 2002 and November  2008.
     During the year ended  December  31,  2001,  the Company  issued  3,148,667
     options  (consisting  of  1,253,333  options in  connection  with a private
     placement and 1,895,334 options for finders fees, legal services, extension
     of notes payable and upon issuance of notes  payable) to  non-employees  at
     prices ranging from $.35 to $1.25 per share. During the year ended December
     31, 2001,  1,480,000  options were  exercised  by  non-employees  at prices
     ranging from $.35 to $.70 per share.


                                                                              16
<PAGE>


                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - 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,
     2001,  the total of all deferred tax assets is  $1,744,013 and the total of
     the  deferred  tax  liabilities  is   $303,790.  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
     $1,440,223  and  $918,000  at  December 31, 2001 and  2000,   respectively.
     The  change in the  valuation  allowance  for the year ended  December  31,
     2001 is approximately $525,000.

     The  Company has  available  at  December  31,  2001,  net  operating  loss
     carryforwards  of  approximately  $4,552,000,  which may be applied against
     future taxable income and which expire in various years through 2021.

     The  components of income tax expense from  continuing  operations  for the
     years ended December 31, 2001 and 2000 consist of the following:

<TABLE>
<CAPTION>
                                                               2001         2000
                                                             ---------    ---------
    <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   $ 303,790    $    --
      Deferred compensation                                    (35,172)        --
      Net operating loss carryforwards                        (780,189)    (406,000)
      Valuation allowance                                      522,563      406,000
      Other                                                    (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:

                                                               2001     2000
                                                             --------  -------
       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                                     (33.7)   (37.3)
       Compensation due to issuance of options/warrants         (4.2)    --
       Other                                                      .6     --
                                                             --------  -------
            Income tax expense                                  -- %     -- %
                                                             --------  -------


                                                                              17
<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - INCOME TAXES (Continued)

     The temporary  differences,  tax credits and carryforwards gave rise to the
     following deferred tax asset (liability) at December 31, 2001:


                                                                 2001
                                                              -----------
       Excess of tax over financial accounting depreciation   $  (303,790)
                                                              -----------
           Total deferred tax liability                       $  (303,790)
                                                              -----------
       Net operating loss carryforwards                       $ 1,697,849
       Deferred compensation                                       35,172
       Other                                                       10,992
       Valuation allowance                                     (1,440,223)
                                                              -----------
           Total current tax asset                            $   303,790
                                                              -----------

NOTE 16 - GAIN ON EXTINGUISHMENT OF DEBT

     The Company has  continued to carry  certain  accounts  payable  items that
     originated with  predecessor  companies (see Note 1). The Company is in the
     process of  negotiating  settlements  for these  items,  which  resulted in
     payments  that were less than the original  amounts  due.  The  differences
     between the  payments to  negotiate  and settle such  amounts and  original
     amounts  due have  been  recorded  as  extraordinary  gains of  $6,878  and
     $156,049 for the years ended December 31, 2001 and 2000, respectively.

NOTE 17 - LOSS PER SHARE

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

                                                        For the Years Ended
                                                            December 31,
                                                   ----------------------------
                                                       2001            2000
                                                   ------------    ------------
    Loss from continuing operations
      available to common shareholders
          (numerator)                              $ (1,557,094)   $ (1,141,531)
                                                   ------------    ------------

    Gain on extinguishment of debt  (numerator)    $      6,878    $    156,049
                                                   ------------    ------------
    Weighted average number of common
      shares outstanding during the year
      used in per share calculations (denominator)   10,914,842       8,026,597
                                                   ------------    ------------

     Because the Company  incurred  losses for the years ended December 31, 2001
     and 2000, the effect of  options/warrants  and  convertible  notes totaling
     7,294,867 and 2,634,987 equivalent shares, respectively,  has been excluded
     from the loss per share computation as its impact would be antidilutive.


                                                                              18
<PAGE>

                    Q COMM INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 18 - SIGNIFICANT CUSTOMERS

     The Company has two significant customers that accounted for 39% and 10% of
     revenues for the year ended December 31, 2001.

NOTE 19 - 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 20)
     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 20 - SUBSEQUENT EVENTS

     During  February  2002,  the Company sold  2,000,000  shares of  restricted
     common stock through private placements for $1,629,225 cash and $370,775 in
     subscriptions  receivable.  Stock offering costs of approximately  $126,000
     were recorded in connection with the sale.

     During  January  2002,  the  Company  repaid a total of  $331,446  in notes
     payable on their due dates (see Note 9). In connection  with the repayment,
     400,000  shares  of common  stock  collateralizing  one of the  notes  were
     canceled and returned to treasury (see Note 13).


                                                                              19