**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-QSB**

**      __________________**

**-33389**

**nFinanSe      Inc. **

| **Nevada**                                                               | **65-1071956**                                       |
|--------------------------------------------------------------------------|------------------------------------------------------|
| (State                    or other jurisdiction of                       | (IRS                    Employer Identification No.) |
| incorporation                    or organization)                        |                                                 |
|                                                                     |                                                 |
| **6015                    31****st****Street East**                      |                                                 |
| **Bradenton,                    Florida**                                | **34203**                                            |
| (Address                    of principal executive offices)              | (Zip                    Code)                        |
|                                                                     |                                                 |
| Issuer’s                    telephone number, including area code: | **(941)                    753-2875**                |

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

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

**3,821,487        shares of $0.001 par value Common Stock outstanding as of February 12,        2007**

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

----

|  **nFinanSe                Inc.**                   |
|---------------------------------------------------------------|
|  **A                Development Stage Enterprise**  |
|  **Table                of Contents**               |
|                                                          |   | **Page                No.** |
|                                                          |   |
| PART                I - FINANCIAL INFORMATION                 |   |
|                                                          | Item                1. Financial Statements: |   |
|                                                          | Consolidated                Balance Sheet (unaudited) as of December 30, 2006 | 3 |
|                                                          | Consolidated                Statements of Operations (unaudited) for the three months ended December                30, 2006 and December 31, 2005, and the period July 10, 2000 (date                of                incorporation) to December 30, 2006 |   4 |
|                                                          | Consolidated                Statements of Cash Flows (unaudited) for the three months ended December                30, 2006 and December 31, 2005, and the period July 10, 2000 (date                of                incorporation) to December 30, 2006 |   5 |
|                                                          | Notes                to Consolidated Financial Statements                (unaudited) | 7 |
|                                                          | Item                2. Management’s Discussion and Analysis or Plan of                Operation. | 20 |
|                                                          | Item                3: Controls and Procedures. | 27 |
| PART                II - OTHER INFORMATION                    | 27 |
|                                                          | Item                1. Legal Proceedings. | 27 |
|                                                          | Item                2. Unregistered Sales of Equity Securities and Use of                Proceeds. | 28 |
|                                                          | Item                3. Defaults Upon Senior Securities. | 29 |
|                                                          | Item                4. Submission of Matters to a Vote of Security Holders. | 30 |
|                                                          | Item                5. Other Information. | 31 |
|                                                          | Item                6. Exhibits. | 31 |
|                                                          |   |   |   |
| SIGNATURES                                                    |   |

----

**PART      I - FINANCIAL INFORMATION**

**Item      1. Financial Statements. **

**nFinanSe      Inc.**

**(A      Development Stage Enterprise)**

**CONSOLIDATED      BALANCE SHEET**

**AS      OF **
**DECEMBER      30, 2006**

**(Unaudited)**

|                                                                                                                                                                                                                                   |   |          |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|
| **ASSETS**                                                                                                                                                                                                                             |   |          |
|                                                                                                                                                                                                                                   |   |          |
| CURRENT                ASSETS:                                                                                                                                                                                                         |   |          |
| Cash                and cash equivalents                                                                                                                                                                                               | $      | 4,186,623     |
| Receivables:                                                                                                                                                                                                                           |   |          |
| Accounts                (net of allowance for doubtful accounts of $0)                                                                                                                                                                 |   | 56,297        |
| Other                                                                                                                                                                                                                                  |   | 1,853         |
| Prepaid                expenses and other current assets                                                                                                                                                                               |   | 478,932       |
| Total                current assets                                                                                                                                                                                                    |   | 4,723,705     |
|                                                                                                                                                                                                                                   |   |          |
| PROPERTY                AND EQUIPMENT (net of accumulated depreciation of$354,792)                                                                                                                                                     |   |  570,180 |
|                                                                                                                                                                                                                                   |   |          |
| OTHER                ASSETS                                                                                                                                                                                                            |   | 84,262        |
|                                                                                                                                                                                                                                   |   |          |
| **TOTAL**                                                                                                                                                                                                                              | $      | 5,378,147     |
|                                                                                                                                                                                                                                   |   |          |
| **LIABILITIES                AND STOCKHOLDERS’****EQUITY**                                                                                                                                                                       |   |          |
|                                                                                                                                                                                                                                   |   |          |
| CURRENT                LIABILITIES:                                                                                                                                                                                                    |   |          |
| Accounts                payable and accrued liabilities                                                                                                                                                                                | $      | 786,055       |
| Deferred                revenues                                                                                                                                                                                                       |   | 60,000        |
| Liabilities                of discontinued operations                                                                                                                                                                                  |   | 90,411        |
| Total                current liabilities                                                                                                                                                                                               |   | 936,466       |
|                                                                                                                                                                                                                                   |   |          |
| COMMITMENTS                AND CONTINGENCIES                                                                                                                                                                                           |   |          |
|                                                                                                                                                                                                                                   |   |          |
| STOCKHOLDERS’                EQUITY:                                                                                                                                                                                             |   |          |
| Series                A Convertible Preferred Stock - $.001 par value: 25,000,000 shares                authorized; 9,327,934 issued and outstanding with a                liquidationvalue                of approximately $9,327,000 |   | 9,328         |
| Common                stock - $0.001 par value: 200,000,000 shares authorized;3,821,487                shares issued and outstanding                                                                                                   |   | 3,822         |
| Additional                paid-in capital                                                                                                                                                                                              |   | 31,008,114    |
| Deficit                accumulated during the development stage                                                                                                                                                                        |   | (26,579,583)  |
| Total                stockholders’ equity                                                                                                                                                                                        |   | 4,441,681     |
|                                                                                                                                                                                                                                   |   |          |
| **TOTAL**                                                                                                                                                                                                                              | $      | 5,378,147     |
|                                                                                                                                                                                                                                   |   |          |

----

**nFinanSe      Inc. **

**(A      Development Stage Enterprise)**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

**(Unaudited)**

|                                                             |                                                                        |        | **For                the three months ended****December                30, 2006** |        | **For                the three months ended D****ecember                31, 2005** |         | **For                the period July 10, 2000 (inception) to****December                30, 2006** |
|------------------------------------------------------------------|-----------------------------------------------------------------------------|-------------|-----------------------------------------------------------------------------------|-------------|------------------------------------------------------------------------------------|--------------|----------------------------------------------------------------------------------------------------|
|                                                             |                                                                        |        |                                                                              |        |
| Net                Sales                                         | $                                                                           | 19,518      | $                                                                                 | 39,885      | $                                                                                  | 1,173,405    |
| Cost                of Goods Sold                                |                                                                        | 24,237      |                                                                              | 37,368      |                                                                               | 1,216,291    |
|                                                             |                                                                        |        |                                                                              |        |                                                                               |         |                                                                                               |
| Gross                Margin (Deficiency)                         |                                                                        | (4,719)     |                                                                              | 2,517       |                                                                               | (42,886)     |
|                                                             |                                                                        |        |                                                                              |        |                                                                               |         |                                                                                               |
| Operating                Expenses:                               |                                                                        |        |                                                                              |        |                                                                               |         |
|                                                             | Employee                compensation and benefits:                          |        |                                                                              |        |                                                                               |         |
|                                                             | Stock                based                                                  |        | 125,056                                                                           |        | (2,532)                                                                            |         | 1,397,319                                                                                          |
|                                                             | Other                                                                       |        | 924,607                                                                           |        | 824,939                                                                            |         | 7,058,775                                                                                          |
|                                                             | Professional                and consulting fees                             |        |                                                                              |        |                                                                               |         |                                                                                               |
|                                                             | Stock                based                                                  |        | -                                                                                 |        | -                                                                                  |         | 2,780,452                                                                                          |
|                                                             | Other                                                                       |        | 340,522                                                                           |        | 524,152                                                                            |         | 3,245,211                                                                                          |
|                                                             | Selling                and marketing                                        |        | 67,601                                                                            |        | 42,414                                                                             |         | 413,857                                                                                            |
|                                                             | Occupancy                and equipment                                      |        | 167,181                                                                           |        | 155,517                                                                            |         | 1,367,713                                                                                          |
|                                                             | Travel                and entertainment                                     |        | 81,423                                                                            |        | 41,823                                                                             |         | 374,401                                                                                            |
|                                                             | Impairment                of assets                                         |        | -                                                                                 |        | -                                                                                  |         | 255,154                                                                                            |
|                                                             | Purchased                in process research and development                |        | -                                                                                 |        | -                                                                                  |         | 153,190                                                                                            |
|                                                             | Other                                                                       |        | 79,645                                                                            |        | 157,111                                                                            |         | 974,736                                                                                            |
|                                                             | Total                Operating Expenses                                     |        | 1,786,035                                                                         |        | 1,743,424                                                                          |         | 18,020,808                                                                                         |
|                                                             |                                                                        |        |                                                                              |        |                                                                               |         |                                                                                               |
| Loss                from Operations                              |                                                                        | (1,790,754) |                                                                              | (1,740,907) |                                                                               | (18,063,694) |
|                                                             |                                                                        |        |                                                                              |        |                                                                               |         |
| Other                Income (Expense):                           |                                                                        |        |                                                                              |        |                                                                               |         |
|                                                             | Interest                expense                                             |        | (169,698)                                                                         |        | (1,501)                                                                            |         | (1,686,225)                                                                                        |
|                                                             | Interest                income                                              |        | 868,540                                                                           |        | 6,009                                                                              |         | 956,771                                                                                            |
|                                                             | Gain                on derivative instruments                               |        | -                                                                                 |        | 634,911                                                                            |         | 1,845,262                                                                                          |
|                                                             | Gain                (loss) on debt extinguishment                           |        | 452,299                                                                           |        | -                                                                                  |         | (4,685,518)                                                                                        |
|                                                             | Registration                rights penalties                                |        | -                                                                                 |        | (209,718)                                                                          |         | (98,649)                                                                                           |
|                                                             | Loss                on sale of assets                                       |        | (30,001)                                                                          |        | -                                                                                  |         | (30,001)                                                                                           |
|                                                             | Other                                                                       |        | -                                                                                 |        | -                                                                                  |         | (91,098)                                                                                           |
|                                                             | Total                other income (expense)                                 |        | 1,121,140                                                                         |        | 429,701                                                                            |         | (3,789,458)                                                                                        |
|                                                             |                                                                        |        |                                                                              |        |                                                                               |         |                                                                                               |
| Loss                from continuing operations                   | (669,614)                                                                   |        | (1,311,206)                                                                       |        | (21,853,152)                                                                       |
| Loss                from discontinued operations                 |                                                                        | (47,456)    |                                                                              | (659,658)   |                                                                               | (3,726,431)  |
|                                                             |                                                                        |        |                                                                              |        |                                                                               |         |                                                                                               |
| Net                Loss                                          |                                                                        | (717,070)   |                                                                              | (1,970,864) |                                                                               | (25,579,583) |
| Dividends                on Series A Convertible Preferred Stock |                                                                        | (1,000,000) |                                                                              | -           |                                                                               | (1,000,000)  |
| Net                loss attributable to common shareholders      | $                                                                           | (1,717,000) | $                                                                                 | (1,970,864) | $                                                                                  | (26,579,583) |
|                                                             |                                                                        |        |                                                                              |        |                                                                               |         |
| Net                Loss Per Share - Basic and Diluted:           |                                                                        |        |                                                                              |        |                                                                               |         |
|                                                             | Continuing                Operations (including dividends on preferredstock | $           | (.44)                                                                             | $           | (.63)                                                                              |         |                                                                                               |
|                                                             | Discontinued                Operations                                      | $           | (.01)                                                                             | $           | (.31)                                                                              |         |                                                                                               |
| Total                Net Loss Per Share                          | $                                                                           | (.45)       | $                                                                                 | (.94)       |                                                                               |         |
| Weighted                Average Number of Shares Outstanding     | 3,826,417                                                                   |        | 2,098,058                                                                         |        |                                                                               |
|                                                             |                                                                        |        |                                                                              |        |                                                                               |

----

**nFinanSe      Inc.**

**(A      Development Stage Enterprise)**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**(Unaudited)**

|                                                                                                 |   | **For                the three months ended December 30, 2006** |   | **For                the three months ended****December                31, 2005** |   | **For                the period July 10, 2000 (inception) to December 30,                2006** |
|------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|
| **CASH                FLOWS FROM OPERATING ACTIVITIES:**                                             |   |                                                            |   |                                                                              |   |                                                                                            |
| Net                loss                                                                              | $      | (717,070)                                                       |   | (1,970,864)                                                                       | $      | (25,579,583)                                                                                    |
| **Adjustments                to reconcile net loss to net cash used in operating****activities:**    |   |                                                            |   |                                                                              |   |                                                                                            |
| Depreciation                and amortization                                                         |   | 60,501                                                          |   | 94,889                                                                            |   | 701,072                                                                                         |
| Provision                for inventory obsolescence                                                  |   | -                                                               |   | -                                                                                 |   | 494,393                                                                                         |
| Provision                for bad debts                                                               |   | 2,726                                                           |   | 125,139                                                                           |   | 461,972                                                                                         |
| Amortization                of intangible assets                                                     |   | -                                                               |   | -                                                                                 |   | 15,485                                                                                          |
| Non-cash                interest expense                                                             |   | 169,171                                                         |   | -                                                                                 |   | 1,579,020                                                                                       |
| Amortization                of premium on senior secured convertible promissory                notes |   | (863,049)                                                       |   | -                                                                                 |   | (863,049)                                                                                       |
| Stock                based compensation and consulting                                               |   | 125,056                                                         |   | (2,532)                                                                           |   | 4,177,771                                                                                       |
| Purchased                in-process research and development                                         |   | -                                                               |   | -                                                                                 |   | 153,190                                                                                         |
| Gain                on derivative financial instruments                                              |   | -                                                               |   | (634,911)                                                                         |   | (1,845,262)                                                                                     |
| Gain                (loss) on debt extinguishment                                                    |   | (452,299)                                                       |   | -                                                                                 |   | 4,685,518                                                                                       |
| Loss                on disposal of assets                                                            |   | 30,001                                                          |   | -                                                                                 |   | 30,001                                                                                          |
| Impairment                of assets                                                                  |   | -                                                               |   | -                                                                                 |   | 996,555                                                                                         |
| Forgiveness                of indebtedness as a result of litigation settlement                      |   | -                                                               |   | -                                                                                 |   | (50,000)                                                                                        |
| **Changes                in assets and liabilities, net:**                                           |   |                                                            |   |                                                                              |   |                                                                                            |
| Receivables                                                                                          |   | (46,269)                                                        |   | (16,462)                                                                          |   | (360,362)                                                                                       |
| Inventories                                                                                          |   | -                                                               |   | (198,102)                                                                         |   | (354,777)                                                                                       |
| Prepaid                expenses and other current assets                                             |   | (437,114)                                                       |   | (71,503)                                                                          |   | (478,934)                                                                                       |
| Other                assets                                                                          |   | (1,000)                                                         |   | (27,038)                                                                          |   | (29,413)                                                                                        |
| Assets                of discontinued operations                                                     |   | 106,431                                                         |   | (1,851,044)                                                                       |   | (229,060)                                                                                       |
| Accounts                payable and accrued and other liabilities                                    |   | 383,746                                                         |   | 624,443                                                                           |   | 873,475                                                                                         |
| Accrued                penalties - registration rights                                               |   | -                                                               |   | -                                                                                 |   | 98,649                                                                                          |
| Deferred                revenue                                                                      |   | 50,000                                                          |   | -                                                                                 |   | 60,000                                                                                          |
| Liabilities                of discontinued operations                                                |   | (131,431)                                                       |   | 1,768,150                                                                         |   | 87,410                                                                                          |
| **NET                CASH USED IN OPERATING ACTIVITIES**                                             |   | (1,720,600)                                                     |   | (2,159,835)                                                                       |   | (15,375,929)                                                                                    |
|                                                                                                 |   |                                                            |   |                                                                              |   |                                                                                            |
| **CASH                FLOWS FROM INVESTING ACTIVITIES:**                                             |   |                                                            |   |                                                                              |   |                                                                                            |
| Purchases                of property and equipment                                                   |   | (86,782)                                                        |   | (113,803)                                                                         |   | (1,370,538)                                                                                     |
| Investment                in Product Benefits Systems Corporation                                    |   | -                                                               |   | -                                                                                 |   | (15,737)                                                                                        |
| Note                Receivable                                                                       |   | -                                                               |   | -                                                                                 |   | (202,000)                                                                                       |
| Initial                investment in Financial Services International, Inc.                          |   | -                                                               |   | -                                                                                 |   | (10,000)                                                                                        |
| Purchase                of assets from Typhoon Voice Technologies, Inc.                              |   | -                                                               |   | -                                                                                 |   | (5,000)                                                                                         |
| Purchase                of assets by discontinued telecom operations                                 |   | -                                                               |   | (82,274)                                                                          |   | -                                                                                               |
| **NET                CASH USED IN INVESTING ACTIVITIES**                                             |   | (86,782)                                                        |   | (196,077)                                                                         |   | (1,603,275)                                                                                     |
|                                                                                                 |   |                                                            |   |                                                                              |   |                                                                                            |

----

**nFinanSe      Inc.**

**(A      Development Stage Enterprise)**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**(Unaudited)**

*(Continued)*

|                                                                                                                                                         |   | **For                the three months ended****December                30, 2006** |   |  **For                the three months ended****December                31, 2005** |   | **For                the period July 10, 2000 (inception) to December 30,                2006** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|
| **CASH                FLOWS FROM FINANCING ACTIVITIES:**                                                                                                     |   |                                                                              |   |                                                                                    |   |                                                                                            |
| Proceeds                from issuance of Series A Convertible Preferred Stock                                                                                |   | 4,000,000                                                                         |   | -                                                                                       |   | 4,000,000                                                                                       |
| Payment                for stock issuance costs                                                                                                              |   | (142.600)                                                                         |   | -                                                                                       |   | (142,600)                                                                                       |
| Proceeds                from borrowings                                                                                                                      |   | 1,200,000                                                                         |   | -                                                                                       |   | 5,365,162                                                                                       |
| Repayments                of notes payable                                                                                                                   |   | -                                                                                 |   | -                                                                                       |   | (147,912)                                                                                       |
| Collection                of note receivable from stockholder                                                                                                |   | -                                                                                 |   | -                                                                                       |   | 3,000,000                                                                                       |
| Proceeds                from the issuance of common stock (including subscribed                stock)                                                        |   | -                                                                                 |   | 1,822,500                                                                               |   | 9,091,177                                                                                       |
| **NET                CASH PROVIDED BY FINANCING ACTIVITIES**                                                                                                 |   | 5,057,400                                                                         |   | 1,822,500                                                                               |   | 21,165,827                                                                                      |
|                                                                                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |
| **NET                CHANGE IN CASH AND CASH EQUIVALENTS**                                                                                                   |   | 3,250,018                                                                         |   | (533,412)                                                                               |   | 4,186,623                                                                                       |
|                                                                                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |
| **CASH                AND CASH EQUIVALENTS, BEGINNING OF PERIOD**                                                                                            |   | 936,605                                                                           |   | 2,474,712                                                                               |   | -                                                                                               |
|                                                                                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |
| **CASH                AND CASH EQUIVALENTS, END OF PERIOD**                                                                                                  | $      | 4,186,623                                                                         | $      | 1,941,300                                                                               | $      | 4,186,623                                                                                       |
|                                                                                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |
| **SUPPLEMENTAL                DISCLOSURE OF CASH FLOW INFORMATION:**                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |
| Interest                paid                                                                                                                                 | $      | 527                                                                               | $      | 1,501                                                                                   | $      | 15,101                                                                                          |
| Income                taxes paid                                                                                                                             | $      | -                                                                                 | $      | -                                                                                       | $      | -                                                                                               |
|                                                                                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |
| **SUPPLEMENTAL                DISCLOSURE OF NON-CASH INVESTING****AND                FINANCING ACTIVITIES:**                                                 |   |                                                                              |   |                                                                                    |   |                                                                                            |
| Acquisition                of assets by issuance of stock                                                                                                    | $      | -                                                                                 | $      | -                                                                                       | $      | 818,200                                                                                         |
|                                                                                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |
| Reclassification                of proceeds from sales of common stock to derivative                financial instrument liabilities                         | $      | -                                                                                 | $      | 346,761                                                                                 | $      | 4,007,443                                                                                       |
| Dividend                on Series A Convertible Preferred Stock                                                                                              | $      | 1,000,000                                                                         | $      | -                                                                                       | $      | 1,000,000                                                                                       |
|                                                                                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |
| Issuance                of common stock for net assets of Pan American Energy Corporation                in a recapitalizations - see Note A                 | $      | -                                                                                 | $      | -                                                                                       | $      | 2,969,000                                                                                       |
|                                                                                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |
| Issuance                of common stock in lieu of cash payment of registrationPenalties                                                                     | $      | -                                                                                 | $      | -                                                                                       | $      | 652,625                                                                                         |
| Conversion                of Senior Secured Convertible Promissory Notes and Accrued interest                payable to Series A Convertible Preferred Stock | $      | 5,327,934                                                                         | $      | -                                                                                       | $      | 5,327,934                                                                                       |
|                                                                                                                                                         |   |                                                                              |   |                                                                                    |   |                                                                                            |

----

**nFinanSe      Inc.**

**(A      Development Stage Enterprise)**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**(Unaudited)**

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

**NOTE      A -**
**FORMATION,      BACKGROUND AND OPERATIONS OF THE COMPANY**

**,**

----

**Discontinued      Operations and Reclassifications **

**Revenue      Recognition **

**Accounts      Receivable and Allowance for Doubtful Accounts**

----

**Cash      and Cash Equivalents**

**Inventories**

**Use      of Estimates**

**Property      and Equipment**

----

**Long-Lived      Assets**

**Advertising      Costs**

**Research      and Development**

**Net      Loss Per Share **

**Income      Taxes**

----

**Convertible      Debt and Equity Instruments Issued with Registration Rights      Agreements**

**Financial      Instruments and Concentrations**

----

**Stock      - Based Compensation**

|  Net                loss: As                reported |   |   |      $ | (1,970,864) |
|----------------------------------------------------------------|--------|--------|---------------------------------|-------------|
|  Pro                forma                                 |   |   |      $ | (2,210,372) |
|                                                           |   |   |                            |        |
| Loss                per share from Continuing Operations:      |   |   |                            |        |
|  As                reported                               |   |   |  $                         | (.63)       |
|  Pro                forma                                 |   |   |  $                         | (.80)       |

----

**Reclassifications**

**NOTE      B - GOING CONCERN**

**NOTE      **
**C      - DISPOSAL OF PROPERTY AND EQUIPMENT**

----

**NOTE      D - **
**COMMITMENTS      AND CONTINGENCIES**

**Operating      Leases**

| Year                ending December |   |   | Amounts |   |
|-------------------------------------|--------|--------|---------|--------|
|                                |   |   |    |   |
| 2007                                |   | $      | 290,400 |   |
| 2008                                |   |   | 164,400 |   |
|                                |   |   |    |   |
| Total                               |   | $      | 454,800 |   |

**Employment      Agreements **

| §   | An                employment agreement with our Chairman of the Board of Directors                and                former chief executive officer, Clifford Wildes, which was terminated                on                January 29, 2007. As consideration for such termination, and accrued                vacation owed to Mr. Wildes of approximately $90,000, we have agreed                to                pay him a total sum of $250,000 over a period of six                months. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | An                employment agreement with our Chief Executive Officer, Jerry R. Welch,                which has a term from September 5, 2006 to December 31, 2008, pursuant                to                which he receives an annual salary of $235,000, and at the discretion                of                the Board of Directors, a bonus up to 75% of such salary. 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 “Option                Shares”), which when using Black-Scholes results in a fair value of $1.40                per share. Accordingly, we will be required to recognize stock based                compensation of approximately $845,000 over the vesting period of                these                options. The grant was equal to 4.25% of the outstanding shares of                our                total issued stock, options and warrants as of December 28, 2006                (the date                we completed the permanent financing required for the grant of such                options). The Option Shares are divided into 28 equal installments;                the                first six installments vesting on February 28, 2007, and an additional                installment vesting on the final day of each month through December                31,                2008. Notwithstanding this vesting schedule, the options will be                immediately fully vested and exercisable in the event of a change                in                control (as defined in the agreement), and/or the death or total                disability of Mr. Welch during the term of his employment. To the                extent                it is not previously exercised, the option terminates on the |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | An                employment agreement with our Chief Financial Officer, Raymond Springer,                which has a term from September 5, 2006 to December 31, 2008, pursuant                to                which he receives an annual salary of $185,000. Additionally, Mr.                Springer                received the option to purchase approximately 284,000 shares of our                common                stock at $1.50 per share (the “Option Shares”), which when using                Black-Scholes results in a fair value of $1.40 per share Accordingly,                we                will be required to recognize stock based compensation of approximately                $400,000 over the vesting period of these options. This grant was                equal to                2.0% of the outstanding shares of our total issued stock, options                and                warrants on December 28, 2006 (the date we completed the permanent                financing required for the grant of such shares). The Option Shares                are                divided into 28 equal installments; the first six installments vesting                on                February 28, 2007, and an additional installment vesting on the final                day                of each month through December 31, 2008. Notwithstanding this vesting                schedule, the options will be immediately fully vested and exercisable                in                the event of a change in control (as defined in the agreement), and/or                the                death or total disability of Mr. Springer during the term of his                employment. To the extent it is not previously exercised, the option                terminates on the earlier of (i) the date five years following the                grant                date or (ii) at the date 12 months following the cessation of Mr.                Springer’s employment with us. Mr. Springer also receives a                performance-based bonus and certain medical and other benefits. If                we                terminate Mr. Springer without cause, we will be required to pay                severance                to him in the amount of compensation and benefits he would have otherwise                earned for the shorter of the remaining term of the agreement, or                twelve                months. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Service      and Purchase Agreements**

**    Pending      or Threatened Litigation**

----

**Accrued      Registration Rights Penalties **

**NOTE      **
**E      - STOCK OPTIONS AND WARRANTS **

----

|                                                                                                                   |      | Number                of Options |     | Weighted                average exercise price per share(priced                at date of grant) |   |
|------------------------------------------------------------------------------------------------------------------------|-----------|----------------------------------|----------|--------------------------------------------------------------------------------------------------|--------|
|                                                                                                                   |      |
|                                                                                                                   |      |                             |     |                                                                                             |
| Outstanding                at September 30, 2006                                                                       |      | 654,791                          | $        | 7.44                                                                                             |   |
|                                                                                                                   | Granted   |                             | -        | $                                                                                                | -      |   |
|                                                                                                                   | Cancelled |                             | (16,166) |                                                                                             |   |   |
|                                                                                                                   |      |                             |     |                                                                                             |   |   |
| Outstanding                at December 30, 2006                                                                        |      | 638,625                          |     |                                                                                             |   |
|                                                                                                                   |      |                             |     |                                                                                             |   |   |
| Options                granted at or above market value during the three months ended December                30, 2006 |      | -                                |     |                                                                                             |   |

|                                              |    |                         |    | Options                outstanding to employees and                non-employee directors |    | Options                exercisable                           |
|--------------------------------------------------------|--------------|-----------------------------------|--------------|-------------------------------------------------------------------------------------------|--------------|--------------------------------------------------------------|
|                                                   |         |                              |         |                                                                                      |         |                                                         |
| Range                of exercise                prices |    | Number                outstanding |    | Weightedaverage                remainingcontractuallife                in years           |    | Weightedaverage                exercise                price |    | Number                Exercisable |    | Weighted                average                exercise                price                per share |
|                                                   |         |                              |         |                                                                                      |         |                                                         |   |   |   |   |
| $4.00-$                14.00                           |         | 612,375                           |         | 3.6                                                                                       | $            | 6.83                                                         |   | 538,083 | $ | 6.68 |
| $14.01-$24.00                                          |         | 20,000                            |         | 3.3                                                                                       | $            | 20.98                                                        |   | 13,750 | $ | 20.98 |
|  $24.01-$                32.00                    |    | 6,250                             |    |  1.8                                                                                 |  $      |  26.40                                                  |    | 6,250 |  $ |  26.40 |
|                                              |         | 638,625                           |    |  3.7                                                                                 |  $      |  7.63                                                   |    | 558,003 |  $ |  7.26 |

**Consultant      Options **

**Outstanding      W**
**arrants      **

----

**Subsequent      Option Grants**

**New      Stock Option Plan**

**NOTE      F - OTHER SIGNIFICANT CURRENT PERIOD EVENTS**

----

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

**End      of Financial Statements. **

----

**Item      2. Management’s Discussion and Analysis or Plan of      Operation.**

**Management’s      Discussion and Analysis of Financial Condition and Results of      Operations.**

**Overview.      **

**Historical      Summary. **

**Discontinued      Operations. **

**Results      of Operations**

----

**Lack      of Profitability of Business Operations since 2001. **

**Sales      and Revenues**

----

**Cost      of Goods Sold.**

**Operating      Expenses. **

**●      Stock based employee compensation expense.**

**●      Other professional and consulting fees.**

**●      Travel and entertainment.**

**●      Other.**

**Other      Non-Operating Income and Expense.**

**Interest      income. **

----

**Interest      expense.**

**Loss      on Derivative Financial Instruments**
** **
*Accounting      for Derivative Financial Instruments and Hedging Activities, *

**Gains      (loss) on debt extinguishment.**

**Registration      Rights penalties**

----

**Loss      from Continuing Operations.**

**Loss      from Discontinued Operations.**

**Liquidity      and Capital Resources. **
** **

**Changes      in Number of Employees and Location. **

----

**Off-Balance      Sheet Arrangements **

**Operating      Leases**

| Year                endingDecember, |   | Amounts |
|-------------------------------------|--------|---------|
| 2007                                | $      | 290,400 |
| 2008                                |   | 164,400 |
|                                |   |    |
| Total                               | $      | 454,800 |
|                                |   |    |

**Employment      Agreements**

| §   | An                employment agreement with our Chairman of the Board of Directors                and                former chief executive officer, Clifford Wildes, which was terminated                on                January 29, 2007. As consideration for such termination, and accrued                vacation owed to Mr. Wildes of approximately $90,000, we have agreed                to                pay him a total sum of $250,000 over a period of six                months. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | An                employment agreement with our Chief Executive Officer, Jerry R. Welch,                which has a term from September 5, 2006 to December 31, 2008, pursuant                to                which he receives an annual salary of $235,000, and at the discretion                of                the Board of Directors, a bonus up to 75% of such salary. 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 “Option                Shares”), which when using Black-Scholes results in a fair value of $1.40                per share. Accordingly, we will be required to recognize stock based                compensation of approximately $845,000 over the vesting period of                these                options. The grant was equal to 4.25% of the outstanding shares of                our                total issued stock, options and warrants as of December 28, 2006                (the date                we completed the permanent financing required for the grant of such                options). The Option Shares are divided into 28 equal installments;                the                first six installments vesting on February 28, 2007, and an additional                installment vesting on the final day of each month through December                31,                2008. Notwithstanding this vesting schedule, the options will be                immediately fully vested and exercisable in the event of a change                in                control (as defined in the agreement), and/or the death or total                disability of Mr. Welch during the term of his employment. To the                extent                it is not previously exercised, the option terminates on the earlier                of                (i) the date five years following the grant date or (ii) at the date                12                months following the cessation of Mr. Welch’s employment with us. Mr.                Welch also receives a performance-based bonus and certain medical                and                other benefits. If we terminate Mr. Welch without cause, we will                be                required to pay severance to him in the amount of compensation and                benefits he would have otherwise earned for the shorter of the remaining                term of the agreement, or twelve                months. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | An                employment agreement with our Chief Financial Officer, Raymond Springer,                which has a term from September 5, 2006 to December 31, 2008, pursuant                to                which he receives an annual salary of $185,000. Additionally, Mr.                Springer                received the option to purchase approximately 284,000 shares of our                common                stock at $1.50 per share (the “Option Shares”), which when using                Black-Scholes results in a fair value of $1.40 per share. Accordingly,                we                will be required to recognize stock based compensation of approximately                $400,000 over the vesting period of these options. This grant was                equal to                2.0% of the outstanding shares of our total issued stock, options                and                warrants on December 28, 2006 (the date we completed the permanent                financing required for the grant of such shares). The Option Shares                are                divided into 28 equal installments; the first six installments vesting                on                February 28, 2007, and an additional installment vesting on the final                day                of each month through December 31, 2008. Notwithstanding this vesting                schedule, the options will be immediately fully vested and exercisable                in                the event of a change in control (as defined in the agreement), and/or                the                death or total disability of Mr. Springer during the term of his                employment. To the extent it is not previously exercised, the option                terminates on the earlier of (i) the date five years following the                grant                date or (ii) at the date 12 months following the cessation of Mr.                Springer’s employment with us. Mr. Springer also receives a                performance-based bonus and certain medical and other benefits. If                we                terminate Mr. Springer without cause, we will be required to pay                severance                to him in the amount of compensation and benefits he would have otherwise                earned for the shorter of the remaining term of the agreement, or                twelve                months. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | On                January 18, 2007 our Board of Directors granted 302,500 stock options                having a strike price of $1.50 per share (market value on date of                grant)                to other personnel. When using Black Scholes, the value of these                options                is approximately $1.40 per share. Accordingly, we will be required                to                record stock based compensation expense of approximately $424,000                over the                vesting period of the options. These options will vest 12/36th                on                January 18, 2008 and 1/36th                per month thereafter. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Service      and Purchase Agreements**

**Purchase      Commitments**

----

**Critical      Accounting Estimates **

**Item      3. Controls and Procedures.**

**A.**
**Evaluation      of Disclosure Controls and Procedures**

**B.**
**Changes      in Internal Controls over Financial Reporting**

**PART      II - OTHER INFORMATION **

**Item      1. Legal Proceedings.**

----

**Item      2. Unregistered Sales of Equity Securities and Use of      Proceeds.**

----

**Item      3. Defaults upon Senior Securities.**

----

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

|       |   |        |   |        |
|------------|--------|-------------|--------|-------------|
| **For**    |   | **Against** |   | **Abstain** |
| 60,927,098 |   | 588,620     |   | 613,442     |

|       |   |        |   |        |
|------------|--------|-------------|--------|-------------|
| **For**    |   | **Against** |   | **Abstain** |
| 62,586,033 |   | 588,620     |   | 613,442     |

|       |   |        |   |        |
|------------|--------|-------------|--------|-------------|
| **For**    |   | **Against** |   | **Abstain** |
| 39,697,434 |   | 2,429,745   |   | 172,100     |

|       |   |        |   |        |
|------------|--------|-------------|--------|-------------|
| **For**    |   | **Against** |   | **Abstain** |
| 60,273,069 |   | 3,398,286   |   | 86,500      |

|       |   |        |   |        |
|------------|--------|-------------|--------|-------------|
| **For**    |   | **Against** |   | **Abstain** |
| 61,973,820 |   | 509,439     |   | 274,836     |

**Item      5. Other Information.**

----

**Item      6. Exhibits**

|                                                                  |   |                                                                                                                                                                                                          |
|-----------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  **Exhibit                Number**                          |   |  **Description                of Exhibit**                                                                                                                                                          |
|                                                                  |   |                                                                                                                                                                                                          |
|  *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 |
|                                                                  |   |                                                                                                                                                                                                          |
|     (*) Filed                herewith.  |

----

|                                        | **NFINANSE                INC.** |
|---------------------------------------------|----------------------------------|
|                                        |                             |   |
| Date: February                13, 2007 | By:                              | */s/                Jerry R. Welch* |
|                                        |                             |   |
|                                        |                             | Jerry                R. Welch, Chief Executive Officer and Chairman of the Board of                Directors |
|                                        |                             |   |
|                                        |                             |   |

|                                              | **NFINANSE                INC.** |
|---------------------------------------------------|----------------------------------|
|                                              |                             |   |
| Date:  February                13, 2007 | By:                              | */s/                Raymond P. Springer* |
|                                              |                             |   |
|                                              |                             | Raymond                P. Springer, Chief Financial Officer |
|                                              |                             |   |
|                                              |                             |   |

----

**EXHIBITS      INDEX**

|                                                      |   |                                                                                                                                                                                                          |
|-----------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  **Exhibit                Number**              |   |  **Description                of Exhibit**                                                                                                                                                          |
|                                                      |   |                                                                                                                                                                                                          |
|  *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 |
|                                                      |   |                                                                                                                                                                                                          |
|   (*) Filed                herewith.  |

----