----

|   | Nevada                                                     | 65-1071956                             |   |
|--------|------------------------------------------------------------|----------------------------------------|--------|
|   | (State      or other jurisdiction of                       | (IRS      Employer Identification No.) |   |
|   | incorporation      or organization)                        |                                   |   |
|   |                                                       |                                   |   |
|   | 3923      Coconut Palm Drive, Suite 107                    |                                   |   |
|   | Tampa,      Florida                                        | 33619                                  |   |
|   | (Address      of principal executive offices)              | (Zip      Code)                        |   |
|   |                                                       |                                   |   |
|   | Issuer’s      telephone number, including area code: | (813)      367-4400                    |   |

| Yes   | X | No   |   |   |
|-----------------|---|----------------|--------|--------|

|   | Large      accelerated filer   £                                             | Accelerated      filer   £    |
|--------|--------------------------------------------------------------------------------------------------|---------------------------------------------------|
|   | Non-accelerated      filer (Do not check if a smaller reporting company)   £ | Smaller      reporting company   T |

| Yes   |   | No   | X |   |
|-----------------|--------|----------------|---|--------|

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| nFinanSe      Inc.                              |
|------------------------------------------------------|
| A      Development Stage Enterprise             |
|  Table      of Contents                    |
|                                                 |   | Page      No. |
|  NOTE      REGARDING FORWARD LOOKING STATEMENTS |  3 |
|                                                 |   |
| PART      I - FINANCIAL INFORMATION             |   |
|                                                 | Item      1.     Financial Statements:  |   |
|                                                 | Consolidated      Balance Sheets as of March 29, 2008 (unaudited) and December 29, 2007      (audited)  | 4 |
|                                                 | Consolidated      Statements of Operations (unaudited) for the three months ended March 29,      2008 and March 31, 2007, and for the period July 10, 2000 (inception) to      March 29, 2008  | 5 |
|                                                 | Consolidated      Statements of Cash Flows (unaudited) for the three months ended March 29,      2008 and March 31, 2007, and for the period July 10, 2000 (inception) to      March 29, 2008  | 6 |
|                                                 | Notes      to Consolidated Financial Statements (unaudited)  | 8 |
|                                                 | Item      2.     Management’s Discussion and Analysis of      Financial Condition and Results of Operations.  | 22 |
|                                                 | Item      3.     Quantitative and Qualitative Disclosures      About Market Risk.  | 29 |
|                                                 | Item      4.     Controls and Procedures.  | 29 |
| PART      II - OTHER INFORMATION                |   |
|                                                 | Item      1.     Legal Proceedings.  | 29 |
|                                                 | Item      1A.  Risk Factors.  | 29 |
|                                                 | Item      2.     Unregistered Sales of Equity Securities      and Use of Proceeds.  | 30 |
|                                                 | Item      3.     Defaults Upon Senior      Securities.  | 32 |
|                                                 | Item      4.     Submission of Matters to a Vote of      Security Holders.  | 32 |
|                                                 | Item      5.     Other Information.  | 32 |
|                                                 | Item      6.     Exhibits. | 33 |
|                                                 |   |   |   |
| SIGNATURES                                           |   |

----

| · | our      current cash expectations of our operations to fund normal and recurring      operating commitments over the next twelve months;                          |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the      competitive advantages and customer acceptance of a Discover® Network      branded stored value cards (“SVCs”);                          |
| · | our      ability to expand the number of active retail locations through our      distributors selling our retail gift and reloadable general spend SVCs;      and |
| · | our      ability to successfully recruit operations, information technology and      customer service employees in the Tampa, Florida  area.                       |

| · | our      ability to design and market our products;                                                                                                                                                                                                                                                                                                                                    |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | our      ability to protect our intellectual property rights and operate our      business without infringing upon the intellectual property rights of      others;                                                                                                                                                                                                                    |
| · | whether      or not markets for our products develop and, if they do develop, the pace      at which they develop;                                                                                                                                                                                                                                                                     |
| · | our      ability to attract the qualified personnel to implement our growth      strategies;                                                                                                                                                                                                                                                                                           |
| · | our      ability to develop sales and distribution capabilities;                                                                                                                                                                                                                                                                                                                       |
| · | the      accuracy of our estimates and projections;                                                                                                                                                                                                                                                                                                                                    |
| · | our      ability to fund our short-term and long-term financing    needs;                                                                                                                                                                                                                                                                                                              |
| · | the      effect of certain accounting interpretations on our financial      results;                                                                                                                                                                                                                                                                                                   |
| · | changes      in our business plan and corporate strategies; and                                                                                                                                                                                                                                                                                                                        |
| · | other      risks and uncertainties discussed in greater detail in this quarterly      report and our Annual Report on Form 10-KSB for the year ended December      29, 2007, including those factors under the heading “Risk Factors” and      those risks discussed under the heading “Management’s Discussion and      Analysis or Plan of Operation.” |

----

|                                                                                                                                                                                                                                                                                                                                                                                |   | March      29,  |        |   | December      29, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|-------------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                |   | 2008(unaudited) |        |   | 2007(audited)     |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                              |   |            |        |   |              |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |
| CURRENT      ASSETS:                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |
| Cash      and cash equivalents                                                                                                                                                                                                                                                                                                                                                      |   | $               | 1,313,148   |   |              | $      | 2,497,365 |   |
| Short      term investment                                                                                                                                                                                                                                                                                                                                                          |   |            | -           |   |              |   | 728,000 |   |
| Receivables:                                                                                                                                                                                                                                                                                                                                                                        |   |            |        |   |              |   |   |   |
| Accounts      (net of allowance for doubtful accounts of $0 and $0,      respectively)                                                                                                                                                                                                                                                                                              |   |            | 7,129       |   |              |   | 10,957 |   |
| Other                                                                                                                                                                                                                                                                                                                                                                               |   |            | 10,056      |   |              |   | 19,027 |   |
| Prepaid      expenses and other current assets (including prepaid marketing costs of      approximately $822,000 and $312,000, respectively)                                                                                                                                                                                                                                        |   |            | 1,530,884   |   |              |   | 705,608 |   |
| Inventories      (net of inventory reserves of $53,400 and $24,500,      respectively)                                                                                                                                                                                                                                                                                              |   |            | 2,287,768   |   |              |   | 1,942,206 |   |
|                Total      current assets                                                                                                                                                                                                                                                                 |   |            | 5,148,985   |   |              |   | 5,903,163 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |   |   |
| PROPERTY      AND EQUIPMENT (net of accumulated depreciation of $521,627 and $446,306,      respectively)                                                                                                                                                                                                                                                                           |   |            | 735,692     |   |              |   | 759,261 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |   |   |
| OTHER      ASSETS                                                                                                                                                                                                                                                                                                                                                                   |   |            | 205,948     |   |              |   | 338,160 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |   |   |
| TOTAL                                                                                                                                                                                                                                                                                                                                                                               |   | $               | 6,090,625   |   |              | $      | 7,000,584 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |   |   |
| LIABILITIES AND      STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                     |   |            |        |   |              |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |   |   |
| CURRENT      LIABILITIES:                                                                                                                                                                                                                                                                                                                                                           |   |            |        |   |              |   |   |   |
| Accounts      payable                                                                                                                                                                                                                                                                                                                                                               |   | $               | 860,843     |   |              | $      | 139,635 |   |
| Accrued      personnel costs                                                                                                                                                                                                                                                                                                                                                        |   |            | 105,010     |   |              |   | 130,804 |   |
| Accrued      inventory liability                                                                                                                                                                                                                                                                                                                                                    |   |            | -           |   |              |   | 593,431 |   |
| Accrued      lease and contractual obligations                                                                                                                                                                                                                                                                                                                                      |   |            | 193,346     |   |              |   | 220,809 |   |
| Deferred      revenues                                                                                                                                                                                                                                                                                                                                                              |   |            | 87,500      |   |              |   | 106,250 |   |
| Derivative      liability                                                                                                                                                                                                                                                                                                                                                           |   |            | 101,016     |   |              |   | - |   |
| Other      accrued liabilities                                                                                                                                                                                                                                                                                                                                                      |   |            | 540,711     |   |              |   | 371,298 |   |
|                Total      current liabilities                                                                                                                                                                                                                                                            |   |            | 1,888,426   |   |              |   | 1,562,227 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |   |   |
| COMMITMENTS      AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                  |   |            |        |   |              |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |   |   |
| STOCKHOLDERS’      EQUITY:                                                                                                                                                                                                                                                                                                                                                    |   |            |        |   |              |   |   |   |
| Preferred      stock - $.001 par value:  25,000,000 shares authorized;      8,600,484 and 8,820,484 outstanding on March      29, 2008 and December 27, 2007, respectively, as follows:                                                                                                                                                                              |   |            |        |   |              |   |   |   |
|    Series      A Convertible Preferred Stock – 9,327,934 shares authorized; 7,600,484 and      7,820,484 shares  issued and outstanding with liquidation values      of $7,694,189 and $8,213,651 (including undeclared accumulated dividends      in arrears of $93,705 and $393,167) as of March 29, 2008 and December 29,      2007, respectively |   |            | 7,600       |   |              |   | 7,820 |   |
|    Series      B Convertible Preferred Stock – 1,000,010 shares authorized; 1,000,000      shares issued and outstanding with a liquidation value of $3,000,000 at      March 29, 2008 and December 29, 2007                                                                                                                                                   |   |            | 1,000       |   |              |   | 1,000 |   |
| Common      stock - $0.001 par value: 200,000,000 shares authorized; 8,386,454 and      7,371,929 shares issued and outstanding as of March 29, 2008 and December      29, 2007, respectively                                                                                                                                                                                       |   |            | 8,386       |   |              |   | 7,372 |   |
| Additional      paid-in capital                                                                                                                                                                                                                                                                                                                                                     |   |            | 44,543,600  |   |              |   | 42,002,195 |   |
| Deficit      accumulated during the development stage                                                                                                                                                                                                                                                                                                                               |   |            | (40,358,387 | )      |              |   | (36,580,030 | ) |
|                Total      stockholders’ equity                                                                                                                                                                                                                                                     |   |            | 4,202,199   |   |              |   | 5,438,357 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |   |   |
| TOTAL                                                                                                                                                                                                                                                                                                                                                                               |   | $               | 6,090,625   |   |              | $      | 7,000,584 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |            |        |   |              |   |   |   |

----

|                                                                                    |   | For      the threemonths      endedMarch      29, 2008 |       |   | For      the threemonths      endedMarch      31, 2007 |   |       | For      the periodJuly      10, 2000(inception)      toMarch      29, 2008 |   |
|-----------------------------------------------------------------------------------------|--------|--------------------------------------------------------|------------|--------|--------------------------------------------------------|--------|------------|-----------------------------------------------------------------------------|--------|
|                                                                                    |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| REVENUES                                                                                |   | $                                                      | 8,647      |   |                                                   | $      | 1,769      |                                                                        |   | $ | 1,214,815 |   |
|                                                                                    |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| OPERATING      EXPENSES                                                                 |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| Transaction      and operating expenses                                                 |   |                                                   | 453,306    |   |                                                   |   | 200,440    |                                                                        |   |   | 3,041,940 |   |
| Selling      and marketing expenses                                                     |   |                                                   | 915,036    |   |                                                   |   | 529,903    |                                                                        |   |   | 5,271,667 |   |
| General      and administrative expenses                                                |   |                                                   | 2,022,925  |   |                                                   |   | 1,945,108  |                                                                        |   |   | 24,369,142 |   |
|    Total      operating expenses                                         |   |                                                   | 3,391,267  |   |                                                   |   | 2,675,451  |                                                                        |   |   | 32,682,749 |   |
|                                                                                    |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| Loss      before other income (expense)                                                 |   |                                                   | (3,382,620 | )      |                                                   |   | (2,673,682 | )                                                                           |   |   | (31,467,934 | ) |
|                                                                                    |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| Other      income (expense):                                                            |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| Interest      expense                                                                   |   |                                                   | (416       | )      |                                                   |   | -          |                                                                        |   |   | (1,688,680 | ) |
| Interest      income                                                                    |   |                                                   | 997        |   |                                                   |   | 23,441     |                                                                        |   |   | 1,141,237 |   |
| Gain      on derivative instruments                                                     |   |                                                   | -          |   |                                                   |   | -          |                                                                        |   |   | 1,845,262 |   |
| Loss      on debt extinguishment                                                        |   |                                                   | -          |   |                                                   |   | -          |                                                                        |   |   | (4,685,518 | ) |
| Registration      rights penalties                                                      |   |                                                   | -          |   |                                                   |   | -          |                                                                        |   |   | (98,649 | ) |
| Other      income (expense)                                                             |   |                                                   | -          |   |                                                   |   | 33,326     |                                                                        |   |   | (93,856 | ) |
|    Total      other income (expense)                                     |   |                                                   | 581        |   |                                                   |   | 56,767     |                                                                        |   |   | (3,580,204 | ) |
|                                                                                    |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| Loss      from continuing operations                                                    |   |                                                   | (3,382,039 | )      |                                                   |   | (2,616,915 | )                                                                           |   |   | (35,048,138 | ) |
|                                                                                    |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| Income      (loss) from discontinued operations                                         |   |                                                   | -          |   |                                                   |   | 4,940      |                                                                        |   |   | (3,861,579 | ) |
|                                                                                    |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| Net      loss                                                                           |   |                                                   | (3,382,039 | )      |                                                   |   | (2,611,975 | )                                                                           |   |   | (38,909,717 | ) |
| Dividends      paid on Series A Convertible      Preferred    Stock |   |                                                   | (3,151     | )      |                                                   |   | -          |                                                                        |   |   | (1,448,670 | ) |
| Undeclared      and unpaid dividends on Series A Convertible Preferred    Stock         |   |                                                   | (93,705    | )      |                                                   |   | (121,390   | )                                                                           |   |   | (93,705 | ) |
| Net      loss attributable to common stockholders                                       |   | $                                                      | (3,478,895 | )      |                                                   | $      | (2,733,365 | )                                                                           |   | $ | (40,452,092 | ) |
| Net      loss per share - basic and diluted:                                            |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |
| Continuing      operations                                                              |   | $                                                      | (0.46      | )      |                                                   | $      | (0.72      | )                                                                           |   |   |   |   |
| Discontinued      operations                                                            |   | $                                                      | -          |   |                                                   | $      | -          |                                                                        |   |   |   |   |
| Total      net loss per share                                                           |   | $                                                      | (0.46      | )      |                                                   | $      | (0.72      | )                                                                           |   |   |   |   |
| Weighted      average number of shares outstanding                                      |   |                                                   | 7,544,153  |   |                                                   |   | 3,821,487  |                                                                        |   |   |   |   |
|                                                                                    |   |                                                   |       |   |                                                   |   |       |                                                                        |   |   |   |   |

----

|                                                                                                                                  |   | For      the three months      ended March      29,      2008 |       |   | For      the three months      ended March      31,      2007 |   |       | For      the periodJuly      10, 2000(inception)      toMarch      29,      2008 |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|------------|--------|---------------------------------------------------------------|--------|------------|----------------------------------------------------------------------------------|--------|
| CASH      FLOWS FROM OPERATING ACTIVITIES:                                                                                            |   |                                                          |       |   |                                                          |   |       |                                                                             |   |
|     Net      loss                                                                                                 |   | $                                                             | (3,382,039 | )      |                                                          | $      | (2,611,975 | )                                                                                |   | $ | (38,909,717 | ) |
|     Adjustments      to reconcile net loss to net cash used in operating      activities:                         |   |                                                          |       |   |                                                          |   |       |                                                                             |   |   |   |   |
|        Depreciation      and amortization                                                          |   |                                                          | 78,416     |   |                                                          |   | 57,626     |                                                                             |   |   | 1,040,649 |   |
|        Provision      for inventory obsolescence                                                   |   |                                                          | 28,971     |   |                                                          |   | 4,607      |                                                                             |   |   | 547,827 |   |
|        Provision      for bad debts                                                                |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | 462,009 |   |
|        Amortization      of intangible assets                                                      |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | 15,485 |   |
|        Stock      based compensation and consulting                                                |   |                                                          | 600,015    |   |                                                          |   | 730,082    |                                                                             |   |   | 6,774,381 |   |
|        Purchased      in process research and development                                          |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | 153,190 |   |
|        Gain      on derivative instruments                                                         |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | (1,845,262 | ) |
|        Losses      on debt extinguishments                                                         |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | 4,685,518 |   |
|        Loss      (gain)  on disposal of assets                                           |   |                                                          | -          |   |                                                          |   | (1,633     | )                                                                                |   |   | 28,368 |   |
|        Loss      from impairment of assets                                                         |   |                                                          | -          |   |                                                          |   | 30,982     |                                                                             |   |   | 1,095,903 |   |
|        Forgiveness      of indebtedness as a result of      litigation   settlement |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | (50,000 | ) |
|        Non-cash      interest expense                                                              |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | 1,579,020 |   |
|        Amortization      of premium on convertible promissory note                                 |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | (863,049 | ) |
|        Value/expense      of third party warrants                                                  |   |                                                          | 86         |   |                                                          |   | -          |                                                                             |   |   | 5,793 |   |
|       Changes in assets and      liabilities, net:                                                      |   |                                                          |       |   |                                                          |   |       |                                                                             |   |   |   |   |
|         Receivables                                                                           |   |                                                          | 15,303     |   |                                                          |   | 43,426     |                                                                             |   |   | (316,930 | ) |
|         Prepaid      expenses and other current assets                                        |   |                                                          | (684,748   | )      |                                                          |   | 247,907    |                                                                             |   |   | (1,404,012 | ) |
|         Inventories                                                                           |   |                                                          | (374,534   | )      |                                                          |   | (368,785   | )                                                                                |   |   | (2,480,944 | ) |
|         Other      assets                                                                     |   |                                                          | (8,400     | )      |                                                          |   | (7,871     | )                                                                                |   |   | (19,614 | ) |
|         Assets      of discontinued operations                                                |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | (229,060 | ) |
|         Accounts      payable and accrued  liabilities                              |   |                                                          | 243,813    |   |                                                          |   | 20,220     |                                                                             |   |   | 1,881,752 |   |
|         Accrued      registration rights penalties                                            |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | 98,649 |   |
|         Deferred      revenues                                                                |   |                                                          | (18,750    | )      |                                                          |   | -          |                                                                             |   |   | 87,500 |   |
|         Liabilities      of discontinued operations                                           |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | - |   |
| NET      CASH USED IN OPERATING ACTIVITIES                                                                                            |   |                                                          | (3,501,867 | )      |                                                          |   | (1,855,414 | )                                                                                |   |   | (27,662,544 | ) |
|                                                                                                                                  |   |                                                          |       |   |                                                          |   |       |                                                                             |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES:                                                                                            |   |                                                          |       |   |                                                          |   |       |                                                                             |   |   |   |   |
|   Purchases      of property and equipment                                                                                  |   |                                                          | (54,847    | )      |                                                          |   | (20,825    | )                                                                                |   |   | (2,009,181 | ) |
|   Early      redemption of short-term investment                                                                            |   |                                                          | 725,497    |   |                                                          |   | -          |                                                                             |   |   | (2,503 | ) |
|   Investment      in Product Benefits Systems Corporation                                                                   |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | (15,737 | ) |
|   Cash      advanced under note receivable                                                                                  |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | (202,000 | ) |
|   Other                                                                                                                     |   |                                                          | -          |   |                                                          |   | -          |                                                                             |   |   | (15,000 | ) |
|  NET CASH PROVIDED BY (USED IN)      INVESTING ACTIVITIES                                                                        |   |                                                          | 670,650    |   |                                                          |   | (20,825    | )                                                                           |   |   | (2,244,421 | )  |
|                                                                                                                                  |   |                                                          |       |   |                                                          |   |       |                                                                             |   |   |   |   |

----

|                                                                |   | For      the three months      ended March      29,      2008 |      |   | For      the three months      ended March      31,      2007 |   |   | For      the periodJuly      10, 2000(inception)      toMarch      29,      2008 |   |
|---------------------------------------------------------------------|--------|---------------------------------------------------------------|-----------|--------|---------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------|--------|
| CASH      FLOWS FROM FINANCING ACTIVITIES:                          |   |                                                          |      |   |                                                          |   |   |                                                                             |   |
|   Proceeds      from issuance of Series A Preferred Stock |   |                                                          | -         |   |                                                          |   | -      |                                                                             |   |   | 4,000,000 |   |
|   Proceeds      from issuance of Series B Preferred Stock |   |                                                          | -         |   |                                                          |   | -      |                                                                             |   |   | 3,000,000 |   |
|   Proceeds      from borrowings                           |   |                                                          | -         |   |                                                          |   | -      |                                                                             |   |   | 5,365,162 |   |
|   Repayments      of notes payable                        |   |                                                          | -         |   |                                                          |   | -      |                                                                             |   |   | (147,912 | ) |
|   Collections      on note receivable from stockholder    |   |                                                          |      |   |                                                          |   | -      |                                                                             |   |   | 3,000,000 |   |
|   Payments      for stock issuance costs                  |   |                                                          | (78,000   | )      |                                                          |   | (5,622 | )                                                                                |   |   | (891,161 | ) |
|   Proceeds      from the exercise of vested stock options |   |                                                          | -         |   |                                                          |   | -      |                                                                             |   |   | 8,249 |   |
|   Proceeds      from the issuance of Common Stock         |   |                                                          | 1,725,000 |   |                                                          |   | -      |                                                                             |   |   | 16,885,775 |   |
| NET      CASH PROVIDED BY FINANCING ACTIVITIES                      |   |                                                          | 1,647,000 |   |                                                          |   | (5,622 | )                                                                                |   |   | 31,220,113 |   |
|                                                                |   |                                                          |      |   |                                                          |   |   |                                                                             |   |   |   |   |

| NET      CHANGE IN CASH AND CASH EQUIVALENTS                                                                                       |   |   | (1,184,217 | )      |   |   | (1,881,861 | )      |   |   | 1,313,148 |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|-----------|--------|
|                                                                                                                               |   |   |       |   |   |   |       |   |   |   |      |   |
| CASH      AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                                                |   |   | 2,497,365  |   |   |   | 4,186,623  |   |   |   | -         |   |
|                                                                                                                               |   |   |       |   |   |   |       |   |   |   |      |   |
| CASH      AND CASH EQUIVALENTS, END OF PERIOD                                                                                      |   | $      | 1,313,148  |   |   | $      | 2,304,762  |   |   | $      | 1,313,148 |   |
|                                                                                                                               |   |   |       |   |   |
| SUPPLEMENTAL      DISCLOSURE OF CASH FLOW INFORMATION:                                                                             |   |   |       |   |   |
| Interest      paid                                                                                                                 |   | $      | 416        |   |   | $      | -          |   |   | $      | 17,412    |   |
| Income      taxes paid                                                                                                             |   | $      | -          |   |   | $      | -          |   |   | $      | -         |   |
|                                                                                                                               |   |   |       |   |   |   |       |   |   |   |      |   |
| SUPPLEMENTAL      DISLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                                                        |   |
| Acquisition      of assets by issuance of Common Stock                                                                             |   | $      | -          |   |   | $      | -          |   |   | $      | 818,200   |   |
| Reclassification      of proceeds from sales of common stock to derivative financial instrument      liabilities                   |   | $      | -          |   |   | $      | -          |   |   | $      | 4,007,443 |   |
| Issuance      of common stock for net assets of Pan American Energy Corporation in a      recapitalization  - see Note A |   | $      | -          |   |   | $      | -          |   |   | $      | 2,969,000 |   |
| Issuance      of common stock in lieu of cash payment of registration      penalties                                               |   | $      | -          |   |   | $      | -          |   |   | $      | 652,625   |   |
| Reclassification      of long-lived assets to assets of discontinued telecom      operations                                       |   | $      | -          |   |   | $      | -          |   |   | $      | 100,000   |   |
| Warrants      Issued to DFS Services, LLC                                                                                          |   | $      | (86        | )      |   | $      | -          |   |   | $      | 535,216   |   |
| Reclassification      of long-lived assets to prepaid expenses and other current      assets                                       |   | $      | 140,613    |   |   |   |       |   |   |   | 140,613   |   |
| Conversion      of Series A Preferred Stock to Common Stock                                                                        |   | $      | 220        |   |   | $      | -          |   |   | $      | 1,728     |   |
| Dividends      on Series A Convertible Stock Preferred Stock                                                                       |   | $      | 395,309    |   |   | $      | -          |   |   | $      | 1,448,670 |   |
| Conversion      of Senior Secured Convertible Promissory Notes and accrued interest to      Series A Convertible Preferred Stock   |   | $      | -          |   |   | $      | -          |   |   | $      | 5,327,934 |   |
|                                                                                                                               |   |   |       |   |   |   |       |   |   |   |      |   |

----

----

| ·   | Wholesale      fees, which arise when our SVCs are sold and activated and when the      nFinanSe NetworkTM       is used to reload a card. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Transaction      fees, which arise when our SVCs are used in a purchase or ATM      transaction. |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | Maintenance      fees, which arise when a card with a cash balance is charged for monthly      maintenance. |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | Interest      revenue, which arises from earnings on overnight investing of card      balances by our card  issuingbank. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                  |   |                                                                    |   |
|-------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
| Description                                           |   | Shares      of common      stock and      common stock      equivalents |   |
|                                                  |   |                                                                    |   |
| Common      stock outstanding                         |   | 8,386,454                                                               |   |
| Series      A Convertible Preferred Stock outstanding |   | 7,600,484                                                               |   |
| Series      B Convertible Preferred Stock outstanding |   | 1,000,000                                                               |   |
| Stock      options outstanding                        |   | 2,745,122                                                               |   |
| Warrants      outstanding                             |   | 2,540,028                                                               |   |
|                                                  |   |                                                                    |   |
| Total                                                 |   | 22,272,088                                                              |   |
|                                                  |   |                                                                    |   |

----

|                                                                                                         |   |                                                 |    |   |                                           |   |
|--------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|---------|--------|------------------------------------------------|--------|
| Stock      based compensation charged to:                                                                    |   |  For      the three months ended March 29, 2008 |    |   | For      the three months ended March 31, 2007 |   |
|                                                                                                         |   |                                                 |    |   |                                           |   |
| Transaction      and operating expenses                                                                      |   | $                                                    | 243     |   |                                           | $      | 461 |   |
| Selling      and marketing expenses                                                                          |   |                                                 | 62,912  |   |                                           |   | 44,874 |   |
| General      and administrative expenses                                                                     |   |                                                 | 536,860 |   |                                           |   | 684,747 |   |
|     Total      stock based compensation included in loss from continuing      operations |   |                                                 | 600,015 |   |                                           |   | 730,082 |   |
|                                                                                                         |   |                                                 |    |   |                                           |   |   |   |
| Stock      based compensation charged to discontinued operations                                             |   |                                                 | -       |   |                                           |   | - |   |
|                                                                                                         |   |                                                 |    |   |                                           |   |   |   |
| Total      stock based compensation                                                                          |   | $                                                    | 600,015 |   |                                           | $      | 730,082 |   |
|                                                                                                         |   |                                                 |    |   |                                           |   |   |   |

----

In September 2006, the FASB issued Financial AccountingStandard No. 157, “Fair ValueMeasurements” (“FAS 157”) and weadopted FAS 157, on December 30, 2007, the first day of fiscal year 2008.FAS 157 defines fair value, establishes a methodology for measuring fair value,and expands the required disclosure for fair value measurements. OnFebruary 12, 2008, the FASB issued FASB Staff Position FAS 157-2, “Effective Date of FASB StatementNo. 157,” which amends FAS 157 by delaying its effective date by oneyear for non-financial assets and non-financial liabilities, except for itemsthat are recognized or disclosed at fair value in the financial statements on arecurring basis. Therefore, beginning on December 30, 2007, this standardapplies prospectively to new fair value measurements of financial instrumentsand recurring fair value measurements of non-financial assets and non-financialliabilities. On January 4, 2009, the beginning of our 2009 fiscal year, thestandard will also apply to all other fair value measurements.

| ·   | Level      1-Inputs are unadjusted quoted prices in active markets for identical      assets or liabilities that we have the ability to access at the      measurement date. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level      2-Inputs include quoted prices for similar assets and liabilities in      active markets, quoted prices for identical or similar assets or      liabilities in markets that are not active, inputs other than quoted      prices that are observable for the asset or liability (e.g., interest      rates, yield curves, etc.), and inputs that are derived principally from      or corroborated by observable market data by correlation or other means      (market corroborated inputs). |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level      3-Unobservable Inputs that reflect our assumptions about the assumptions      that market participants would use in pricing the asset or liability. We      develop these inputs based on the best information available, including      our own data. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                     |   | Fair      Value Measurements as of March 29, 2008 |    |
|----------------------------------------------------------|--------|---------------------------------------------------|---------|
| Description                                              |   |  Balance      at March      29, 2008         |    |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |
| Liabilities:                                             |   |                                              |    |   |   |   |   |   |   |   |   |   |
|      Derivative      instrument |   | $                                                 | 101,106 |   |   | $ | - |   |   | $ | 101,016 |   |   | $ | - |   |
|                                                     |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| ·   | Engaged      investment bankers to assist us in raising up to $7 million in additional      equity capital to fund our 2008 fiscal year operations.  We have      recently closed on approximately $2.3 million of this equity      raise.  Our need for additional equity results from the      additional time needed to make our major retail distribution contracts      operational and reach critical mass of SVCs in the      marketplace. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Engaged      the investment bankers to also assist us in sourcing short-term accounts      receivable financing that we will need to fund the face amount of gift      cards and the load amount of reloadable general spend cards prior to      receiving the money from ourdistributors. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Twelve      monthsending |   |      | Amounts |   |
|--------------------------|--------|-----------|---------|--------|
|                     |   |      |    |
| March      2009          | $      | 379,800   |    |
| March      2010          |   | 197,400   |    |
| March      2011          |   | 201,700   |    |
| March      2012          |   | 206,200   |    |
| March      2013          |   | 104,200   |    |
| Total                    | $      | 1,089,300 |    |
|                     |   |      |    |

| ● | The      employment agreement with our Chief Executive Officer, Jerry R. Welch, has      a term from September 5, 2006 to December 31, 2008 and provides him with      an annual salary of $235,000 (raised to $275,000 in February 2008). The      agreement is to be automatically renewed indefinitely for succeeding terms      of two years unless otherwise terminated in accordance with the agreement.      Additionally, Mr. Welch received the option to purchase approximately      603,400 shares of our common stock at $1.50 per share (the “Welch Option      Shares”), which were valued using the Black-Scholes option pricing model      at an aggregate fair value of approximately $845,000. This amount is being      recognized as stock-based compensation expense on a straight line basis as      the options vest. The grant was equal to 4.25% of the total of our      outstanding shares, options and warrants as of December 28, 2006 (the date      we completed the permanent financing required for the grant of such      options). The Welch Option Shares are divided into 28 equal installments.      The first six installments vested on February 28, 2007 and additional      installments vest on the final day of each month through December 31,      2008.  |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | On  July      12, 2007, Mr. Welch was awarded 197,855 stock options at $3.40 per share,      which were valued using the Black-Scholes option pricing model at an      aggregate fair value of approximately $619,000.  The grant was      equal to approximately 4.25% of the shares of our total stock and warrants      issued under the June 29, 2007 Securities and Purchase Agreements. These      options vest in 28 equal installments. The first eleven installments      vested on July 31, 2007 and accordingly at that time 11/28 of the      aforementioned stock-based compensation was recognized as compensation      expense.  The remaining compensation expense is being recognized      on a straight line basis as additional installments vest on the final day      of each month through December 31,2008. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | The      employment agreement with our Chief Financial Officer, Raymond Springer,      has a term from September 5, 2006 to December 31, 2008 and provides him      with an annual salary of $185,000 (raised to $200,000 in February 2008).      Additionally, Mr. Springer received the option to purchase approximately      284,000 shares of our common stock at $1.50 per share (the “Springer      Option Shares”), which were valued using the Black-Scholes option pricing      model at an aggregate fair value of approximately $400,000. This amount is      being recognized as stock-based compensation expense on a straight line      basis as the options vest. This grant was equal to 2.0% of the total of      our outstanding shares, options and warrants on December 28, 2006 (the      date we completed the permanent financing required for the grant of such      options). The Springer Option Shares are divided into 28 equal      installments. The first six installments vested on February 28, 2007, and      additional installments vest on the final day of each month through      December 31, 2008. On      July 12, 2007, Mr. Springer was awarded 93,108 stock options at $3.40 per      share, which were valued using the Black-Scholes option pricing model at      an aggregate fair value of approximately $291,000.  The grant      was equal to approximately 2.00% of the shares of our total stock and      warrants issued under the June 29, 2007 Securities and Purchase      Agreements. These options vest in 28 equal installments. The first eleven      installments vested on July 31, 2007 and accordingly at that time 11/28 of      the aforementioned stock-based compensation was recognized as compensation      expense.  The remaining compensation expense is being recognized      on a straight line basis as additional installments vest on the final day      of each month through December 31,2008. |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                 |   |                    |                   |   |
|--------------------------------------|--------|-------------------------|------------------------|--------|
|                                 |   | Three      months ended |                   |   | Three      months ended |   |   |
|                                 |   | March      29, 2008     |                   |   | March      31, 2007 |   |   |
| Expected      Term in years          |   |                    | 5                      |   |   |   | 5 |   |   |
| Expected      stock price volatility |   |                    | 73.1                   | %      |   |   | 106.3% - 169.0 | % |   |
| Risk      free interest rate         |   |                    | 2.67% - 3.08 | %      |   |   | 4.5% - 4.75 | % |   |
| Dividend      yield                  |   |                    | 0                      | %      |   |   | 0 | % |   |
|                                 |   |                    |                   |   |   |   |   |   |   |

|                                                                                            |   | Number      ofOptions |      |   | Weighted      averageexerciseprice      per share(priced      at date of grant) |   |
|-------------------------------------------------------------------------------------------------|--------|-----------------------|-----------|--------|---------------------------------------------------------------------------------|--------|
|                                                                                            |   |                  |      |   |                                                                            |   |
| Outstanding      at December  29, 2007                                                |   |                  | 2,403,696 |   |                                                                            | $      | 3.59 |   |
| Granted                                                                                         |   |                  | 363,000   |   |                                                                            | $      | 3.95 |   |
| Cancelled                                                                                       |   |                  | (21,574   | )      |                                                                            | $      | 2.01 |   |
|                                                                                            |   |                  |      |   |                                                                            |   |   |   |
| Outstanding      at March 29, 2008                                                              |   |                  | 2,745,122 |   |                                                                            | $      | 3.65 |   |
|                                                                                            |   |                  |      |   |                                                                            |   |   |   |
| Options      granted at or above market value during the three months ended March 29,      2008 |   |                  | 363,000   |   |                                                                            |   |   |   |

----

|                                  |   | Options      outstanding |   | Options      exercisable                              |
|---------------------------------------|--------|--------------------------|--------|-------------------------------------------------------|
|                                  |   |                     |   |
| Range      ofexercise      prices     |   | Numberoutstanding        |   | Weightedaverageremainingcontractuallife      in years |   | Weightedaverageexerciseprice |   | Numberexercisable |   | Weightedaverageexerciseprice      pershare |
| $1.50                                 |   | 1,155,828           |   | 8.8                                                   | $ | 1.50  |   | 706,419  | $ | 1.50  |
| $3.20-$10.18                          |   | 1,439,794           |   | 6.2                                                   | $ | 4.17  |   | 824,082  | $ | 4.27  |
| $10.20-$13.80                         |   | 95,750              |   | 2.5                                                   | $ | 12.26  |   | 95,750  | $ | 12.25  |
|          $15.60-$32.00 |   | 53,750              |   | 2.2                                                   | $ | 20.34  |   | 53,750  | $ | 20.34  |
|                                  |   | 2,745,122           |   | 7.0                                                   | $ | 3.65  |   | 1,680,001  | $ | 4.07  |

| ·   | Mr.      Welch was awarded 95,000 stock options and Mr. Springer was awarded 45,000      stock options at an exercise price of $4.00 per share. Using the      Black-Scholes option valuation model an aggregate fair value of      approximately $344,400 is expected to be recognized over the vesting      periods of the options.  The first seventeen installments vested      on January 28, 2008 and accordingly at that time 17/28 of the      aforementioned stock-based compensation was recognized as compensation      expense.  The remaining compensation expense will be recognized on a      straight line basis as additional installments vest on the final day of      each month through December 31,2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A      total of 155,000 stock options were awarded to eight officers at an      exercise price of $4.00 per share.  Using the Black-Scholes option      valuation model an aggregate fair value of approximately $381,300 is      expected to be recognized as stock based compensation over the vesting      periods of the options.  The options for the eight officers vest      one third at the one year anniversary and then ratably for the following      24 months. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Warrants      issued in connection with/as:                                                                                                                           |   | Number      outstanding |   | Exercise      price per      share |   | Expiration      date            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|------------------------------------|--------|---------------------------------|
| Partial      compensation for our placement agent in connection with the sale of our      Series A Convertible Preferred Stock on December 28, 2006                   |   | 320,000                 |   | $1.10                              |   | December      28, 2011          |
|                                                                                                                                                                  |   |                    |   |                               |   |                            |
| Partial      compensation for our placement agent in connection with the sale of our      Series B Convertible Preferred Stock and Common Stock on June 29,      2007 |   | 120,928                 |   | $3.30                              |   | June      29, 2012              |
|                                                                                                                                                                  |   |                    |   |                               |   |                            |
| Issued      pursuant to Securities Purchase Agreements dated June 29,    2007                                                                                         |   | 1,511,600               |   | $5.00                              |   | June      29, 2012              |
|                                                                                                                                                                  |   |                    |   |                               |   |                            |
| Issued      pursuant to a Securities Purchase Agreement dated March 21,      2008                                                                                     |   | 100,000                 |   | $3.25                              |   | March      21, 2011             |
|                                                                                                                                                                  |   |                    |   |                               |   |                            |
| Issued      pursuant to Securities Purchase Agreements dated March 28,      2008                                                                                      |   | 245,000                 |   | $3.25                              |   | March      28, 2011             |
|                                                                                                                                                                  |   |                    |   |                               |   |                            |
| Warrants      held by DFS Services LLC dated November 12, 2007                                                                                                        |   | 200,000                 |   | $3.00                              |   | November      12, 2010          |
|                                                                                                                                                                  |   |                    |   |                               |   |                            |
| Consulting      services agreement                                                                                                                                    |   | 37,500                  |   | $5.00                              |   | Various      dates through 2011 |
|                                                                                                                                                                  |   |                    |   |                               |   |                            |
| Cooperation      Agreement dated November 22, 2006                                                                                                                    |   | 5,000                   |   | $1.20                              |   | November      22, 2011          |
|                                                                                                                                                                  |   |                    |   |                               |   |                            |
| Total      warrants and weighted average exercise price per share outstanding at      March 29, 2008                                                                  |   | 2,540,028               |   | $4.03                              |   |                            |

----

----

|   |   |
|--------|--------|

----

----

| ·   | Wholesale      fees, which arise when our SVCs are sold and activated and when the      nFinanSe NetworkTM      is used to reload a card. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Transaction      fees, which arise when our SVCs are used in a purchase or ATM      transaction. |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | Maintenance      fees, which arise when a card with a cash balance is charged for monthly      maintenance. |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | Interest      revenue, which arises from earnings on overnight investing of card      balances by our card  issuingbank. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·        | Transaction and operating      expenses. Transaction and operating expenses for the three months      ended March 29, 2008 and the three months ended March 31, 2007 were      $453,306 and $200,440, respectively, a 126% increase.   The      components of expense are: |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Description                                                            |   | For      the three months      ended March      29, 2008 |    |   | For      the three months      ended March      31, 2007 |   |
|------------------------------------------------------------------------|--------|----------------------------------------------------------|---------|--------|--------------------------------------------------------------------|--------|
|    SVC      card cost, program and transaction expenses |   | $                                                        | 236,368 |   |                                                               | $      | 98,896 |   |
| Inventory      reserves                                                |   |                                                     | 28,971  |   |                                                               |   | 4,607 |   |
| Stock      based compensation                                          |   |                                                     | 243     |   |                                                               |   | 461 |   |
| Customer      service expenses                                         |   |                                                     | 187,724 |   |                                                               |   | 96,476 |   |
| Total      Transaction and Operating Expenses                          |   | $                                                        | 453,306 |   |                                                               | $      | 200,440 |   |
|                                                                   |   |                                                     |    |   |                                                               |   |   |   |

----

|   | SVC      card cost, program and transaction expenses increased $137,472, or 139%,      when comparing the three month period ended March 29, 2008 with the three      month period ended March 31, 2007.  These increases are      primarily attributable to the periodic transaction costs associated with      carrying a larger number of cards available for sale in 2008 versus the      amount of cards available for sale in 2007.  The number of cards      available for sale during the three months of 2008 was approximately 3.5      million compared to 0.5 million in the same period of 2007. Inventory      reserves increased $24,364 to $28,971 for the three month period ended      March 29, 2008 from $4,607 for the three month period ended March 31, 2007      due primarily to the higher inventory levels at our distributors and the      resulting increase in potential lost, damaged or obsolete SVC card      packages. Customer      service expenses increased $91,248 to $187,724, when comparing the three      month period ended March 29, 2008 with the three month period ended March      31, 2007.  This is due to the increase in staff for our 24      hour/seven days a week customer service department to support our SVC      products. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   ·   | Selling and marketing      expenses. Selling and marketing expenses increased $385,133 to      $915,036 when comparing the three month period ended March 29, 2008 with      the same period from a year ago, a 73% increase.  The components      of expense are: |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Description                               |   | For      the three months      ended March      29, 2008 |    |   | For      the three months      ended March      31, 2007 |   |
|-------------------------------------------|--------|----------------------------------------------------------|---------|--------|--------------------------------------------------------------------|--------|
| Advertising      and marketing expenses   |   | $                                                        | 308,077 |   |                                                               | $      | 144,335 |   |
| Sales      force expenses                 |   |                                                     | 544,047 |   |                                                               |   | 340,694 |   |
| Stock      based compensation             |   |                                                     | 62,912  |   |                                                               |   | 44,874 |   |
| Total      selling and marketing expenses |   | $                                                        | 915,036 |   |                                                               | $      | 529,903 |   |

|   | Advertising      and marketing expenses increased 113%, or $163,742, to $308,077 when      comparing the three month period ended March 29, 2008 with the three month      period ended March 31, 2007.   This period to period change      was primarily composed of increases in media and advertising agency      expenses for a national trade print advertising campaign. Sales      force expenses increased $203,353 to $544,047, a 60% increase for the      three month period ended March 29, 2008 when compared with the three month      period ended March 31, 2007.  The principal components of this      increase are employee compensation and benefits expense, travel and      entertainment expense, and rent expense.  The increase in sales      force compensation and travel and entertainment expenses can be attributed      to the 10 additional hires for the sales force that occurred primarily in      the three month period ended March 29, 2008.  In addition, the      increase in rent expense is comprised of rent for the sales offices      located in Atlanta and Dallas that were opened within the past twelve      months, and rent for temporary warehouse space to store point-of-purchase      displays for our distributors that were produced in anticipation of      increased sales during this fiscalyear. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | General and administrative      expenses. General and administrative expenses increased 4%, or      $77,817, to $2,022,925 during the three month period ended March 29, 2008      when compared with the three month period ended March 31, 2007. This      increase is primarily due to increasesin: |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | ▪          |  recruiting      and consulting expenses of approximately $107,300 due to the new sales      hires, programming costs to extend the life of our existing telephone      system, and additional expenses related to complying with state and      federal regulations, |
|--------|---------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ▪               | legal      and professional fees of approximately $34,300 incurred in connection with      our state licensing initiative, and                                                                                                                                             |
|   | ▪               | taxes      and licenses expense of approximately $57,600 due to additional expenses      incurred in connection with our state licensing initiative, offset      slightly by decreases in:                                                                                 |
|   | ▪               | stock      based compensation expense of $147,887, primarily the result of stock      options granted to our Board of Directors on March 1, 2007 (options are      granted at the Company’s Annual Stockholders Meeting, which took place on      May 8, 2008), and  |
|   | ▪               | impairment      of assets expense which was $0 for the three month period ended March 29,      2008 and $30,982 for the same period in2007.                                                                                                                                |

----

----

| Twelve      monthsending |   |      | Amounts |   |
|--------------------------|--------|-----------|---------|--------|
|                     |   |      |    |
| March      2009          | $      | 379,800   |    |
| March      2010          |   | 197,400   |    |
| March      2011          |   | 201,700   |    |
| March      2012          |   | 206,200   |    |
| March      2013          |   | 104,200   |    |
|                     |   |      |    |
| Total                    | $      | 1,089,300 |    |
|                     |   |      |    |

| ● | The      employment agreement with our Chief Executive Officer, Jerry R. Welch, has      a term from September 5, 2006 to December 31, 2008 and provides him with      an annual salary of $235,000 (raised to $275,000 in February 2008). The      agreement is to be automatically renewed indefinitely for succeeding terms      of two years unless otherwise terminated in accordance with the agreement.      Additionally, Mr. Welch received the option to purchase approximately      603,400 shares of our common stock at $1.50 per share (the “Welch Option      Shares”), which were valued using the Black-Scholes option model at an      aggregate fair value of approximately $845,000. This amount is being      recognized as stock-based compensation expense on a straight line basis as      the options vest. The grant was equal to 4.25% of the total of our      outstanding shares, options and warrants as of December 28, 2006 (the date      we completed the permanent financing required for the grant of such      options). The Welch Option Shares are divided into 28 equal installments.      The first six installments vested on February 28, 2007 and additional      installments vest on the final day of each month through December 31,      2008. On      July 12, 2007, Mr. Welch was awarded 197,855 stock options at $3.40 per      share, which were valued using the Black-Scholes option model at an      aggregate fair value of approximately $619,000.  The grant was      equal to approximately 4.25% of the shares of our total stock and warrants      issued under the June 29, 2007 Securities and Purchase Agreements. These      options vest in 28 equal installments. The first eleven installments      vested on July 31, 2007 and accordingly at that time 11/28 of the      aforementioned stock-based compensation was recognized as compensation      expense.  The remaining compensation expense is being recognized      on a straight line basis as additional installments vest on the final day      of each month through December 31,2008. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | The      employment agreement with our Chief Financial Officer, Raymond Springer,      has a term from September 5, 2006 to December 31, 2008 and provides him      with an annual salary of $185,000 (raised to $200,000 in February 2008).      Additionally, Mr. Springer received the option to purchase approximately      284,000 shares of our common stock at $1.50 per share (the “Springer      Option Shares”), which were valued using the Black-Scholes option model at      an aggregate fair value of approximately $400,000. This amount is being      recognized as stock-based compensation expense on a straight line basis as      the options vest. This grant was equal to 2.0% of the total of our      outstanding shares, options and warrants on December 28, 2006 (the date we      completed the permanent financing required for the grant of such options).      The Springer Option Shares are divided into 28 equal installments. The      first six installments vested on February 28, 2007, and additional      installments vest on the final day of each month through December 31,      2008. |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |  On      July 12, 2007, Mr. Springer was awarded 93,108 stock options at $3.40 per      share, which were valued using the Black-Scholes options model at an      aggregate fair value of approximately $291,000.  The grant was      equal to approximately 2.00% of the shares of our total stock and warrants      issued under the June 29, 2007 Securities and Purchase Agreements. These      options vest in 28 equal installments. The first eleven installments      vested on July 31, 2007 and accordingly at that time 11/28 of the      aforementioned stock-based compensation was recognized as compensation      expense.  The remaining compensation expense is being recognized      on a straight line basis as additional installments vest on the final day      of each month through December 31,2008. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | ● | implementation      of our sales and marketingstrategies; |
|--------|---------|-----------------------------------------------------------|

|   | ● | competitive      developments in our market; |
|--------|---------|----------------------------------------------|

|   | ● | customer      acceptance of and demand for our SVCs and  services; |
|--------|---------|--------------------------------------------------------------------|

|   | ● | our      ability to attract, retain and motivate qualified personnel, particularly      sales associates; and |
|--------|---------|---------------------------------------------------------------------------------------------------------------|

|   | ● | the      continued adoption by consumers ofSVCs. |
|--------|---------|--------------------------------------------------|

----

----

----

|  Exhibit      Number |   |  Description      of Exhibit                                                                                                                                                                                                                                                                                                           |
|---------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.1                      |   | Letter      of Credit Accommodation (together with a sample Irrevocable Letter of      Credit to be issued thereunder), dated February 14, 2008, between the      Company and National Penn Bank (Incorporated by reference to Exhibit 99.1      of the Company's Current Report on Form 8-K filed with the SEC on February      22, 2008). |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.2                      |   | Guaranty      and Indemnification Agreement, dated February 15, 2008, by and between the      Company and Jeffrey Porter (Incorporated by reference to Exhibit 99.2 of      the Company's Current Report on Form 8-K filed with the SEC on February      22, 2008).                                                                         |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.3                      |   | Guaranty      and Indemnification Agreement, dated February 19, 2008, by and between the      Company and Bruce E. Terker (Incorporated by reference to Exhibit 99.3 of      the Company's Current Report on Form 8-K filed with the SEC on February      22, 2008).                                                                        |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.4                      |   | Warrant      to Purchase Common Stock, dated February 19, 2008, issued by the Company      to Bruce E. Terker (Incorporated by reference to Exhibit 99.4 of the      Company's Current Report on Form 8-K filed with the SEC on February 22,      2008).                                                                                    |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.5                      |   | Form      of Securities Purchase Agreement, as executed by the Company and Bruce E.      Terker on March 21, 2008 (Incorporated by reference to Exhibit 99.1 of the      Company's Current Report on Form 8-K filed with the SEC on April 1,      2008).                                                                                    |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.6                      |   | Form      of Warrant as issued by the Company to Bruce E. Terker on March 21, 2008      (Incorporated by reference to Exhibit 99.2 of the Company's Current Report      on Form 8-K filed with the SEC on April 1, 2008).                                                                                                                   |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.7                      |   | Form      of Securities Purchase Agreement, as executed by the Company and the      investors party thereto on March 28, 2008 and March 31, 2008 (Incorporated      by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K      filed with the SEC on March 31, 2008).                                                    |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.8                      |   | Form      of Warrant as issued by the Company to certain investors on March 28, 2008      and March 31, 2008 (Incorporated by reference to Exhibit 99.2 of the      Company's Current Report on Form 8-K filed with the SEC on March 31,      2008).                                                                                        |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| *10.9                     |   | Amendment      to Securities Purchase Agreement, dated March 31, 2008, by and between the      Company and Bruce E. Terker.                                                                                                                                                                                                                 |
|  *31.1          |   | Certification      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                                                                                                                                                                                                |
|  *31.2          |   | Certification      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                                                                                                                                                                                                |
|  *32.1          |   | Certification      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of  2002                                                                                                                                                                                |
|  *32.2          |   | Certification      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of  2002                                                                                                                                                                                |

----

|                         | NFINANSE      INC. |
|------------------------------|--------------------|
|                         |               |   |
| Date: May      13, 2008 | By:                | /s/ Jerry R.      Welch |
|                         |               |   |
|                         |               | Jerry      R. Welch, Chief Executive Officer and Chairman      of the Board of Directors (Principal      Executive      Officer) |
|                         |               |   |
|                         |               |   |

|                               | NFINANSE      INC. |
|------------------------------------|--------------------|
|                               |               |   |
| Date:  May      13, 2008 | By:                | /s/ Raymond P.      Springer |
|                               |               |   |
|                               |               | Raymond      P. Springer, Chief Financial Officer (Principal      Financial Officer) |
|                               |               |   |
|                               |               |   |

|                               | NFINANSE      INC. |
|------------------------------------|--------------------|
|                               |               |   |
| Date:  May      13, 2008 | By:                | /s/      Jerome A. Kollar |
|                               |               |   |
|                               |               | Jerome      A. Kollar, Vice President Finance and      Controller      (Principal Accounting Officer) |
|                               |               |   |
|                               |               |   |

----

|  Exhibit      Number |   |  Description      of Exhibit                                                                                                                                                                                                                                                                                                           |
|---------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.1                      |   | Letter      of Credit Accommodation (together with a sample Irrevocable Letter of      Credit to be issued thereunder), dated February 14, 2008, between the      Company and National Penn Bank (Incorporated by reference to Exhibit 99.1      of the Company's Current Report on Form 8-K filed with the SEC on February      22, 2008). |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.2                      |   | Guaranty      and Indemnification Agreement, dated February 15, 2008, by and between the      Company and Jeffrey Porter (Incorporated by reference to Exhibit 99.2 of      the Company's Current Report on Form 8-K filed with the SEC on February      22, 2008).                                                                         |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.3                      |   | Guaranty      and Indemnification Agreement, dated February 19, 2008, by and between the      Company and Bruce E. Terker (Incorporated by reference to Exhibit 99.3 of      the Company's Current Report on Form 8-K filed with the SEC on February      22, 2008).                                                                        |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.4                      |   | Warrant      to Purchase Common Stock, dated February 19, 2008, issued by the Company      to Bruce E. Terker (Incorporated by reference to Exhibit 99.4 of the      Company's Current Report on Form 8-K filed with the SEC on February 22,      2008).                                                                                    |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.5                      |   | Form      of Securities Purchase Agreement, as executed by the Company and Bruce E.      Terker on March 21, 2008 (Incorporated by reference to Exhibit 99.1 of the      Company's Current Report on Form 8-K filed with the SEC on April 1,      2008).                                                                                    |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.6                      |   | Form      of Warrant as issued by the Company to Bruce E. Terker on March 21, 2008      (Incorporated by reference to Exhibit 99.2 of the Company's Current Report      on Form 8-K filed with the SEC on April 1, 2008).                                                                                                                   |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.7                      |   | Form      of Securities Purchase Agreement, as executed by the Company and the      investors party thereto on March 28, 2008 and March 31, 2008 (Incorporated      by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K      filed with the SEC on March 31, 2008).                                                    |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.8                      |   | Form      of Warrant as issued by the Company to certain investors on March 28, 2008      and March 31, 2008 (Incorporated by reference to Exhibit 99.2 of the      Company's Current Report on Form 8-K filed with the SEC on March 31,      2008).                                                                                        |
|                      |   |                                                                                                                                                                                                                                                                                                                                        |
| *10.9                     |   | Amendment      to Securities Purchase Agreement, dated March 31, 2008, by and between the      Company and Bruce E. Terker.                                                                                                                                                                                                                 |
|  *31.1          |   | Certification      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                                                                                                                                                                                                |
|  *31.2          |   | Certification      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                                                                                                                                                                                                |
|  *32.1          |   | Certification      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of  2002                                                                                                                                                                                |
|  *32.2          |   | Certification      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of  2002                                                                                                                                                                                |

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