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

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-QSB**

** June 30, 2007**

**-33389**

**nFinanSe      Inc.**

|   | Nevada                                                               | 65-1071956                                       |   |
|--------|----------------------------------------------------------------------|--------------------------------------------------|--------|
|   | (State                or other jurisdiction of                       | (IRS                Employer Identification No.) |   |
|   | incorporation                or organization)                        |                                             |   |
|   |                                                                 |                                             |   |
|   | 6015                31st                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 |   |
|---------|--------|------------------------------------------------|---|--------|

**5,844,688 shares of $0.001 par value      Common Stock outstanding as of August 6, 2007**

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

----

| **nFinanSe                Inc.**                            |
|------------------------------------------------------------------|
| **A                Development Stage Enterprise**           |
| **Table                of Contents**                        |
|                                                             |   | **Page                No.**  |
| SPECIAL                NOTE REGARDING FORWARD LOOKING STATEMENTS | 3 |
|                                                             |   |
| PART                I - FINANCIAL INFORMATION               |   |
|                                                             | Item                1. Financial Statements:  |   |
|                                                             | Consolidated                Balance Sheet (unaudited) as of June 30, 2007  | 4 |
|                                                             | Consolidated                Statements of Operations (unaudited) for the three and six months                ended                June 30, 2007 and June 30, 2006, and for the period July 10, 2000                (inception) to June 30, 2007  |  5 |
|                                                             | Consolidated                Statements of Cash Flows (unaudited) for the six months ended June                30,                2007 and June 30, 2006, and for the period July 10, 2000 (inception)                to                June 30, 2007  |  7 |
|                                                             | Notes                to Consolidated Financial Statements (unaudited)  | 9 |
|                                                             | Item                2. Management’s Discussion and Analysis or Plan of Operation.  | 21 |
|                                                             | Item                3. Controls and Procedures.  | 27 |
| PART                II - OTHER INFORMATION                  |   |
|                                                             | Item                1. Legal Proceedings.  | 28 |
|                                                             | 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.  | 29 |
|                                                             | Item                5. Other Information.  | 29 |
|                                                             | Item                6. Exhibits. | 30 |
|                                                             |   |   |   |
| SIGNATURES                                                       |   |

----

**SPECIAL      NOTE REGARDING FORWARD-LOOKING STATEMENTS**

*forward-looking statements*
*seek,*
*anticipate,*
*believe,*
*estimate,*
*expect,*
*intend,*
*plan,*
*budget,*
*project,*
*may      be,*
*may continue,*
*may likely result,*
* *

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

*we*
*us*
*our*
*nFinanSe*
*the Company*

----

**PART      I - FINANCIAL INFORMATION**

**Item      1. Financial Statements.**

**nFinanSe      Inc.**

**(A      Development Stage Enterprise)**

**CONSOLIDATED      BALANCE SHEET**

**AS      OF JUNE 30, 2007**

**(Unaudited)**

|                                                                                                                                                                                                                                                                                                                                                                         |                                                                   |          |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|---------------|
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                   |                                                                   |          |
|                                                                                                                                                                                                                                                                                                                                                                         |                                                                   |          |
| CURRENT                ASSETS:                                                                                                                                                                                                                                                                                                                                               |                                                                   |          |
| Cash                and cash equivalents                                                                                                                                                                                                                                                                                                                                     | $                                                                      | 9,014,652     |
| Receivables:                                                                                                                                                                                                                                                                                                                                                                 |                                                                   |          |
|                                                                                                                                                                                                                                                                                                                                                                         | Accounts                (net of allowance for doubtful accounts of $0) |          | 2,890 |
|                                                                                                                                                                                                                                                                                                                                                                         | Other                                                                  |          | 8,768 |
| Prepaid                expenses and other current assets                                                                                                                                                                                                                                                                                                                     |                                                                   | 344,351       |
| Inventory                                                                                                                                                                                                                                                                                                                                                                    |                                                                   | 365,188       |
|                Total                current assets                                                                                                                                                                                                                                                |                                                                   | 9,735,849     |
| PROPERTY                AND EQUIPMENT (net of accumulated depreciation of                $469,686)                                                                                                                                                                                                                                                                           |                                                                   |  429,680 |
|                                                                                                                                                                                                                                                                                                                                                                         |                                                                   |          |
| OTHER                ASSETS                                                                                                                                                                                                                                                                                                                                                  |                                                                   | 49,634        |
|                                                                                                                                                                                                                                                                                                                                                                         |                                                                   |          |
| **TOTAL**                                                                                                                                                                                                                                                                                                                                                                    | $                                                                      | 10,215,163    |
|                                                                                                                                                                                                                                                                                                                                                                         |                                                                   |          |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                                                                                                                                |                                                                   |          |
|                                                                                                                                                                                                                                                                                                                                                                         |                                                                   |          |
| CURRENT                LIABILITIES:                                                                                                                                                                                                                                                                                                                                          |                                                                   |          |
| Accounts                payable and accrued liabilities                                                                                                                                                                                                                                                                                                                      | $                                                                      | 1,366,917     |
| Deferred                revenues                                                                                                                                                                                                                                                                                                                                             |                                                                   | 143,750       |
|                Total                current liabilities                                                                                                                                                                                                                                           |                                                                   | 1,510,667     |
|                                                                                                                                                                                                                                                                                                                                                                         |                                                                   |          |
| STOCKHOLDERS’                EQUITY:                                                                                                                                                                                                                                                                                                                                   |                                                                   |          |
| Preferred                stock - $.001 par value:  25,000,000 shares authorized;                10,327,934  outstanding as follows:                                                                                                                                                                                                                      |                                                                   |          |
|        Series                A Convertible Preferred Stock - 9,327,934 issued and outstanding                with a                liquidation value of   approximately $9,328,000 and                undeclared accumulated dividends in arrears of approximately $233,200                at                June 30, 2007 |                                                                   | 9,328         |
|        Series                B Convertible Preferred Stock – 1,000,000 issued and outstanding with a                liquidation value of approximately $3,000,000 at June 30,                2007                                                                                                                                   |                                                                   | 1,000         |
| Common                stock - $0.001 par value: 200,000,000 shares authorized; 5,741,488                shares                issued and outstanding                                                                                                                                                                                                                         |                                                                   | 5,742         |
| Common                stock subscribed                                                                                                                                                                                                                                                                                                                                       |                                                                   | 103           |
| Subscribed                receivable – common stock                                                                                                                                                                                                                                                                                                                    |                                                                   | (309,600)     |
| Additional                paid-in capital                                                                                                                                                                                                                                                                                                                                    |                                                                   | 40,423,498    |
| Deficit                accumulated during the development stage                                                                                                                                                                                                                                                                                                              |                                                                   | (31,425,575)  |
|                Total                stockholders’ equity                                                                                                                                                                                                                                    |                                                                   | 8,704,496     |
|                                                                                                                                                                                                                                                                                                                                                                         |                                                                   |          |
| **TOTAL**                                                                                                                                                                                                                                                                                                                                                                    | $                                                                      | 10,215,163    |
|                                                                                                                                                                                                                                                                                                                                                                         |                                                                   |          |

----

**nFinanSe      Inc.**

**(A      Development Stage Enterprise)**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

**(Unaudited)**

|                                |                                                                 |        |                                                                          |        |                                                                          |        |                                                                        |        |                                                                        |         |                                                                                           |
|-------------------------------------|----------------------------------------------------------------------|-------------|-------------------------------------------------------------------------------|-------------|-------------------------------------------------------------------------------|-------------|-----------------------------------------------------------------------------|-------------|-----------------------------------------------------------------------------|--------------|------------------------------------------------------------------------------------------------|
|                                |                                                                 |        | **For                the three months ended****June                30, 2007** |        | **For                the three months ended****June                30, 2006** |        | **For                the six months ended****June                30, 2007** |        | **For                the six months ended****June                30, 2006** |         | **For                the period****July                10, 2000 (inception) to June 30, 2007** |
|                                |                                                                 |        |                                                                          |        |                                                                          |        |                                                                        |        |                                                                        |         |                                                                                           |
| REVENUES                            | $                                                                    | 12,992      | $                                                                             | 14,050      | $                                                                             | 14,760      | $                                                                           | 14,050      | $                                                                           | 1,188,165    |
|                                |                                                                 |        |                                                                          |        |                                                                          |        |                                                                        |        |                                                                        |         |                                                                                           |
| OPERATING                EXPENSES:  |                                                                 |        |                                                                          |        |                                                                          |        |                                                                        |        |                                                                        |         |
|                                | Costs                of revenues                                     |        | 36,604                                                                        |        | 77,392                                                                        |        | 100,106                                                                     |        | 324,887                                                                     |         | 1,316,397                                                                                 |
|                                | Employee                and director compensation and benefits:      |        |                                                                          |        |                                                                          |        |                                                                        |        |                                                                        |         |                                                                                           |
|                                |        Stock                based |        | 253,620                                                                       |        | 440,633                                                                       |        | 983,702                                                                     |        | 693,584                                                                     |         | 2,381,021                                                                                      |
|                                |        Other                      |        | 1,019,279                                                                     |        | 635,084                                                                       |        | 2,148,419                                                                   |        | 1,198,634                                                                   |         | 9,207,194                                                                                      |
|                                | Professional                and consulting fees                      |        |                                                                          |        |                                                                          |        |                                                                        |        |                                                                        |         |                                                                                           |
|                                |        Stock                based |        | -                                                                             |        | 628,126                                                                       |        | -                                                                           |        | 628,126                                                                     |         | 2,780,452                                                                                      |
|                                |        Other                      |        | 353,086                                                                       |        | 415,289                                                                       |        | 603,560                                                                     |        | 796,796                                                                     |         | 3,848,772                                                                                      |
|                                | Selling                and marketing                                 |        | 187,429                                                                       |        | 48,647                                                                        |        | 293,378                                                                     |        | 67,011                                                                      |         | 707,235                                                                                        |
|                                | Occupancy                and equipment                               |        | 163,276                                                                       |        | 148,121                                                                       |        | 326,211                                                                     |        | 273,318                                                                     |         | 1,693,923                                                                                      |
|                                | Travel                and entertainment                              |        | 125,650                                                                       |        | 33,732                                                                        |        | 235,715                                                                     |        | 77,205                                                                      |         | 610,116                                                                                        |
|                                | Impairment                of assets                                  |        | 10,157                                                                        |        | -                                                                             |        | 41,139                                                                      |        | -                                                                           |         | 296,293                                                                                        |
|                                | Purchased                in process research and development    |        | -                                                                             |        | -                                                                             |        | -                                                                           |        | -                                                                           |         | 153,190                                                                                        |
|                                | Other                                                                |        | 96,451                                                                        |        | 128,368                                                                       |        | 188,773                                                                     |        | 328,150                                                                     |         | 1,163,509                                                                                      |
|                                | Total                operating expenses                              |        | 2,245,552                                                                     |        | 2,555,392                                                                     |        | 4,921,003                                                                   |        | 4,387,711                                                                   |         | 24,158,102                                                                                     |
|                                |                                                                 |        |                                                                          |        |                                                                          |        |                                                                        |        |                                                                        |         |                                                                                           |
| Loss                from operations |                                                                 | (2,232,560) |                                                                          | (2,541,342) |                                                                          | (4,906,243) |                                                                        | (4,373,661) |                                                                        | (22,969,937) |

*(Continued)*

----

|                                                                                                  |                                                                          |        |                                                                          |        |                                                                          |            |                                                                        |            |                                                                        |         |                                                                                                             |
|-------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|-------------|-------------------------------------------------------------------------------|-------------|-------------------------------------------------------------------------------|-----------------|-----------------------------------------------------------------------------|-----------------|-----------------------------------------------------------------------------|--------------|------------------------------------------------------------------------------------------------------------------|
|                                                                                                  |                                                                          |        | **For                the three months ended****June                30, 2007** |        | **For                the three months ended****June                30, 2006** |            | **For                the six months ended****June                30, 2007** |            | **For                the six months ended****June                30, 2006** |         | **For                the period****July                10, 2000 (inception) to****June                30, 2007** |
| Other                income (expense):                                                                |                                                                          |        |                                                                          |        |                                                                          |            |                                                                        |            |                                                                        |         |
|                                                                                                  | Interest                expense                                               |        | -                                                                             |        | (204,349)                                                                     |            | -                                                                           |            | (205,641)                                                                   |         | (1,686,225)                                                                                                      |
|                                                                                                  | Interest                income                                                |        | 18,256                                                                        |        | 835                                                                           |            | 41,697                                                                      |            | 5,489                                                                       |         | 998,468                                                                                                          |
|                                                                                                  | Gain                (loss) on derivative instruments                          |        | -                                                                             |        | (997,603)                                                                     |            | -                                                                           |            | (1,429,441)                                                                 |         | 1,845,262                                                                                                        |
|                                                                                                  | Loss                on debt extinguishment                                    |        | -                                                                             |        | -                                                                             |            | -                                                                           |            | -                                                                           |         | (4,685,518)                                                                                                      |
|                                                                                                  | Registration                rights penalties                                  |        | -                                                                             |        | (142,277)                                                                     |            | -                                                                           |            | (284,531)                                                                   |         | (98,649)                                                                                                         |
|                                                                                                  | Gain                (loss) on sale of assets                                  |        | -                                                                             |        | -                                                                             |            | 1,633                                                                       |            | -                                                                           |         | (28,368)                                                                                                         |
|                                                                                                  | Gain                from settlement of litigation                             |        | -                                                                             |        | -                                                                             |            | -                                                                           |            | -                                                                           |         | 4,000                                                                                                            |
|                                                                                                  | Other                income (expense)                                         |        | (6,083)                                                                       |        | -                                                                             |            | 25,610                                                                      |            | -                                                                           |         | (69,488)                                                                                                         |
|                                                                                                  | Total                other income (expense)                                   |        | 12,173                                                                        |        | (1,343,394)                                                                   |            | 68,940                                                                      |            | (1,914,124)                                                                 |         | (3,720,518)                                                                                                      |
|                                                                                                  |                                                                          |        |                                                                          |        |                                                                          |            |                                                                        |            |                                                                        |         |                                                                                                             |
| Loss                from continuing operations                                                        |                                                                          | (2,220,387) |                                                                          | (3,884,736) |                                                                          | (4,837,303)     |                                                                        | (6,287,785)     |                                                                        | (26,690,455) |
|                                                                                                  |                                                                          |        |                                                                          |        |                                                                          |            |                                                                        |            |                                                                        |         |                                                                                                             |
| Loss                from discontinued operations                                                      |                                                                          | (13,629)    |                                                                          | (473,353)   |                                                                          | (8,689)         |                                                                        | (1,141,195)     |                                                                        | (3,735,120)  |
|                                                                                                  |                                                                          |        |                                                                          |        |                                                                          |            |                                                                        |            |                                                                        |         |                                                                                                             |
| Net                loss                                                                               |                                                                          | (2,234,016) |                                                                          | (4,358,089) |                                                                          | (4,845,992)     |                                                                        | (7,428,980)     |                                                                        | (30,425,575) |
| Dividends                on Series A Convertible Preferred Stock                                 |                                                                          | -           |                                                                          | -           |                                                                          | -               |                                                                        | -               |                                                                        | (1,000,000)  |
| Undeclared                and unpaid dividends on Series A Convertible Preferred                Stock |                                                                          | (116,600)   |                                                                          | -           |                                                                          | (233,200)       |                                                                        | -               |                                                                        | (233,200)    |
| Net                loss attributable to common shareholders                                           | $                                                                             | (2,350,616) | $                                                                             | (4,358,089) | $                                                                             | (5,079,192)     | $                                                                           | (7,428,980)     | $                                                                           | (31,658,775) |
|                                                                                                  |                                                                          |        |                                                                          |        |                                                                          |            |                                                                        |            |                                                                        |         |                                                                                                             |
| Net                loss per share - basic and diluted:                                                |                                                                          |        |                                                                          |        |                                                                          |            |                                                                        |            |                                                                        |         |
|                                                                                                  | Continuing                operations (including dividends on preferred stock) | $           | (0.61)                                                                        | $           | (1.04)                                                                        | $               | (1.32)                                                                      | $               | (1.72)                                                                      |         |                                                                                                             |
|                                                                                                  | Discontinued                operations                                        | $           | -                                                                             | $           | (0.13)                                                                        | $               | -                                                                           | $               | (0.31)                                                                      |         |                                                                                                             |
| Total                net loss per share                                                               | $                                                                             | (0.61)      | $                                                                             | (1.17)      | $                                                                             | (1.32)          | $                                                                           | (2.03)          |                                                                        |         |
| Weighted                average number of shares outstanding                                          |                                                                          | 3,863,685   |                                                                          | 3,738,482   |                                                                          | 3,842,586  |                                                                        | 3,663,928  |                                                                        |         |
|                                                                                                  |                                                                          |        |                                                                          |        |                                                                          |            |                                                                        |            |                                                                        |         |                                                                                                             |

----

**nFinanSe      Inc.**

**(A      Development Stage Enterprise)**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                                    |   |                                                                                             |   |                                                                                             |   |                                                                                                                                     |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                               |   | **For                the****six                months****ended****June                30, 2007** |   | **For                the****six                months****ended****June                30, 2006** |   |  **For                the period****July                10, 2000****(inception)                to****June                30, 2007** |
| **CASH                FLOWS FROM OPERATING ACTIVITIES:**                                                                                |   |                                                                                             |   |                                                                                             |   |                                                                                                                                     |
| Net                loss                                                                                                                 | $      | (4,845,992)                                                                                      |   | (7,428,980)                                                                                      | $      | (30,425,575)                                                                                                                             |
| **Adjustments                to reconcile net loss to net cash used in operating                activities:**                           |   |                                                                                             |   |                                                                                             |   |                                                                                                                                     |
| Depreciation                and amortization                                                                                            |   | 116,527                                                                                          |   | 222,402                                                                                          |   | 817,599                                                                                                                                  |
| Provision                for inventory obsolescence                                                                                     |   | 9,342                                                                                            |   | 221,734                                                                                          |   | 503,735                                                                                                                                  |
| Provision                for bad debts                                                                                                  |   | -                                                                                                |   | 167,833                                                                                          |   | 461,972                                                                                                                                  |
| Amortization                of intangible assets                                                                                        |   | -                                                                                                |   | -                                                                                                |   | 15,485                                                                                                                                   |
| Non-cash                interest expense                                                                                                |   | -                                                                                                |   | -                                                                                                |   | 1,579,020                                                                                                                                |
| Amortization                of premium on senior secured convertible      promissory                notes |   | -                                                                                                |   | 192,739                                                                                          |   | (863,049)                                                                                                                                |
| Stock                based compensation and consulting                                                                                  |   | 983,702                                                                                          |   | 1,321,710                                                                                        |   | 5,161,473                                                                                                                                |
| Purchased                in-process research and development                                                                            |   | -                                                                                                |   | -                                                                                                |   | 153,190                                                                                                                                  |
| Gain                (loss) on derivative financial instruments                                                                          |   | -                                                                                                |   | 1,429,441                                                                                        |   | (1,845,262)                                                                                                                              |
| Loss                on debt extinguishment                                                                                              |   | -                                                                                                |   | -                                                                                                |   | 4,685,518                                                                                                                                |
| (Gain)                loss on disposal of assets                                                                                        |   | (1,633)                                                                                          |   | -                                                                                                |   | 28,368                                                                                                                                   |
| Impairment                of assets                                                                                                     |   | 41,139                                                                                           |   | -                                                                                                |   | 1,037,694                                                                                                                                |
| Forgiveness                of indebtedness as a result of litigation settlement                                                         |   | -                                                                                                |   | -                                                                                                |   | (50,000)                                                                                                                                 |
| Value                of PBS warrant                                                                                                     |   | 5,600                                                                                            |   | -                                                                                                |   | 5,600                                                                                                                                    |
| **Changes                in assets and liabilities, net:**                                                                              |   |                                                                                             |   |                                                                                             |   |                                                                                                                                     |
| Receivables                                                                                                                             |   | 46,492                                                                                           |   | 153,015                                                                                          |   | (313,870)                                                                                                                                |
| Inventories                                                                                                                             |   | (362,270)                                                                                        |   | (68,823)                                                                                         |   | (717,047)                                                                                                                                |
| Prepaid                expenses and other current assets                                                                                |   | 101,746                                                                                          |   | 50,903                                                                                           |   | (377,188)                                                                                                                                |
| Other                assets                                                                                                             |   | 12,071                                                                                           |   | 54,229                                                                                           |   | (17,342)                                                                                                                                 |
| Assets                of discontinued operations                                                                                        |   | -                                                                                                |   | 1,179,107                                                                                        |   | (229,060)                                                                                                                                |
| Accounts                payable and accrued and other liabilities                                                                       |   | (75,297)                                                                                         |   | (69,374)                                                                                         |   | 798,178                                                                                                                                  |
| Accrued                penalties - registration rights                                                                                  |   | -                                                                                                |   | 284,531                                                                                          |   | 98,649                                                                                                                                   |
| Deferred                revenues – advertising participation                                                                      |   | 83,750                                                                                           |   | -                                                                                                |   | 143,750                                                                                                                                  |
| Liabilities                of discontinued operations                                                                                   |   | -                                                                                                |   | (1,215,536)                                                                                      |   | 87,411                                                                                                                                   |
| **NET                CASH USED IN OPERATING ACTIVITIES**                                                                                |   | (3,884,823)                                                                                      |   | (3,505,069)                                                                                      |   | (19,260,751)                                                                                                                             |
|                                                                                                                                    |   |                                                                                             |   |                                                                                             |   |                                                                                                                                     |
| **CASH                FLOWS FROM INVESTING ACTIVITIES:**                                                                                |   |                                                                                             |   |                                                                                             |   |                                                                                                                                     |
| Purchases                of property and equipment                                                                                      |   | (47,145)                                                                                         |   | (39,641)                                                                                         |   | (1,417,683)                                                                                                                              |
| Investment                in Product Benefits Systems Corporation                                                                       |   | -                                                                                                |   | (15,169)                                                                                         |   | (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)                                                                                                                                  |
| **NET                CASH USED IN INVESTING ACTIVITIES**                                                                                |   | (47,145)                                                                                         |   | (54,810)                                                                                         |   | (1,650,420)                                                                                                                              |
|                                                                                                                                    |   |                                                                                             |   |                                                                                             |   |                                                                                                                                     |

*(Continued)*

----

**nFinanSe      Inc.**

**(A      Development Stage Enterprise)**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                                                         |   | **For                the six months ended****June                30,****2007** |   |  **For                the six months ended****June                30,****2006** |   | **For                the period****July                10, 2000 (inception) to****June                30,****2007** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|
| **CASH                FLOWS FROM FINANCING ACTIVITIES:**                                                                                                     |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| Proceeds                from issuance of Series B Convertible Preferred Stock                                                                                |   | 3,000,000                                                                      |   |                                                                                 |   | 3,000,000                                                                                                           |
| Proceeds                from issuance of Series A Convertible Preferred Stock                                                                                |   | -                                                                              |   |                                                                                 |   | 4,000,000                                                                                                           |
| Payment                for stock issuance costs                                                                                                              |   | -                                                                              |   | -                                                                                    |   | (142,601)                                                                                                           |
| Proceeds                from borrowings                                                                                                                      |   | -                                                                              |   | 1,050,000                                                                            |   | 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                                                                                                    |   | 5,759,997                                                                      |   | 650,000                                                                              |   | 14,851,174                                                                                                          |
| **NET                CASH PROVIDED BY FINANCING ACTIVITIES**                                                                                                 |   | 8,759,997                                                                      |   | 1,700,000                                                                            |   | 29,925,823                                                                                                          |
|                                                                                                                                                         |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| **NET                CHANGE IN CASH AND CASH EQUIVALENTS**                                                                                                   |   | 4,828,029                                                                      |   | (1,859,879)                                                                          |   | 9,014,652                                                                                                           |
|                                                                                                                                                         |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| **CASH                AND CASH EQUIVALENTS, BEGINNING OF PERIOD**                                                                                            |   | 4,186,623                                                                      |   | 1,941,300                                                                            |   | -                                                                                                                   |
|                                                                                                                                                         |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| **CASH                AND CASH EQUIVALENTS, END OF PERIOD**                                                                                                  | $      | 9,014,652                                                                      | $      | 81,421                                                                               | $      | 9,014,652                                                                                                           |
|                                                                                                                                                         |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| **SUPPLEMENTAL                DISCLOSURE OF CASH FLOW INFORMATION:**                                                                                         |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| Interest                paid                                                                                                                                 | $      | -                                                                              | $      | 5,284                                                                                | $      | 15,101                                                                                                              |
| Income                taxes paid                                                                                                                             | $      | -                                                                              | $      | -                                                                                    | $      | -                                                                                                                   |
|                                                                                                                                                         |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| **SUPPLEMENTAL                DISCLOSURE OF NON-CASH INVESTING AND FINANCING                ACTIVITIES:**                                                    |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| Reduction                in additional paid in capital due to stock issuance costs included                in                accounts payable                | $      | 640,493                                                                        | $      | -                                                                                    | $      | 640,493                                                                                                             |
|                                                                                                                                                         |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| Increase                in common stock subscribed, additional paid-in capital and subscribed                receivable – common stock                 | $      | 309,600                                                                        | $      | -                                                                                    | $      | 309,600                                                                                                             |
|                                                                                                                                                         |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| Acquisition                of assets by issuance of stock                                                                                                    | $      | -                                                                              | $      | -                                                                                    | $      | 818,200                                                                                                             |
|                                                                                                                                                         |   |                                                                           |   |                                                                                 |   |                                                                                                                |
| Reclassification                of proceeds from sales of common stock to derivative financial instrument                liabilities                         | $      | -                                                                              | $      | -                                                                                    | $      | 4,007,443                                                                                                           |
| Dividend                on Series A Convertible Preferred Stock                                                                                              | $      | -                                                                              | $      | -                                                                                    | $      | 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 registration                penalties                                                     | $      | -                                                                              | $      | -                                                                                    | $      | 652,625                                                                                                             |
| Conversion                of Senior Secured Convertible Promissory Notes and accrued interest                payable to Series A Convertible Preferred Stock | $      | -                                                                              | $      | -                                                                                    | $      | 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 Securities Issued with Registration Rights      Agreements**

**Financial      Instruments and Concentrations**

----

**Stock-Based      Compensation**

**Dividends      on Preferred Stock**

**Reclassifications**

**Recently      Issued Accounting Pronouncements**

*Accounting for Uncertainty      in Income Taxes*
*Accounting for Income Taxes*

----

*Employers’ Accounting for Defined Benefit Pension and Other Postretirement      Plans, an amendment of FASB Statement Nos. 87, 88, 106, and 132(R)*
*Employers’ Accounting for Pensions*
*Employers’ Accounting for Postretirement Benefits Other Than      Pensions*

*he Fair Value Option for Financial Assets and Financial      Liabilities,*
*including an amendment of FASB Statement      No. 115,*

**NOTE      B - GOING CONCERN**

----

**NOTE      C - COMMITMENTS AND CONTINGENCIES**

**Operating      Leases**

| Twelve                months ending |   |    | Amounts |   |
|-------------------------------------|--------|---------|---------|--------|
|                                |   |    |    |
| June                30, 2008        | $      | 233,100 |    |
| June                30, 2009        |   | 76,500  |    |
|                                |   |    |    |
| Total                               | $      | 309,600 |    |
|                                |   |    |    |

**Employment      Agreements**

| ● | The                employment agreement with our Chief Executive Officer, Jerry R. Welch,                which has a term from September 5, 2006 to December 31, 2008 and                provides                him with an annual salary of $235,000. 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 an aggregate fair                value of approximately $845,000. This amount is being recognized                as stock                based compensation expense on a straight line basis as the options                vest.                The grant was equal to 4.25% of the total of our outstanding shares,                options and warrants as of December 28, 2006 (the date we completed                the                permanent financing required for the grant of such options). The                Option                Shares are divided into 28 equal installments. The first six installments                vested on February 28, 2007 and additional installments vest on the                final                day of each month through December 31, 2008. 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 in the remaining term of                the                agreement or twelve months, whichever period is                shorter. |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ● | The                employment agreement with our Chief Financial Officer, Raymond Springer,                which has a term from September 5, 2006 to December 31, 2008 and                provides                him with 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 an aggregate fair value of approximately $400,000. This                amount                is being recognized as stock based compensation expense on a straight                line                basis as the options vest. This grant was equal to 2.0% of the total                of                our outstanding shares, options and warrants on December 28, 2006                (the                date we completed the permanent financing required for the grant                of such                shares). The Option Shares are divided into 28 equal installments.                The                first six installments vested on February 28, 2007, and additional                installments vest on the final day of each month through December                31,                2008. 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 in the remaining term of                the                agreement or twelve months, whichever is shorter.  |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Service      and Purchase Agreements**

**Purchase      Commitments**

**Accrued      Registration Rights Penalties**

----

**NOTE      D - STOCK OPTIONS AND WARRANTS**

|   |                                             |                                                        |   |
|--------|--------------------------------------------------|-------------------------------------------------------------|--------|
|   |                                             | For                  the threemonths                  ended |   | For                  the sixmonths                  ended |   |
|   |                                             | June                  30, 2007                              |   | June                  30, 2007 |   |
|   | Expected                  Term in years          | 5                                                           |   | 5 |   |
|   | Expected                  stock price volatility | 1.690                                                       |   | 1.616 |   |
|   | Risk                  free interest rate         | 4.8%                                                        |   | 4.7% |   |
|   | Dividend                  yield                  | 0%                                                          |   | 0% |   |
|   |                                             |                                                        |   |   |   |

----

|                                                                                                                            |      | Number                ofOptions |      | Weighted                averageexerciseprice                per share(priced                at date of grant) |   |   |
|---------------------------------------------------------------------------------------------------------------------------------|-----------|---------------------------------|-----------|---------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                            |      |                            |      |                                                                                                          |   |   |
| Outstanding                at December  31, 2006                                                                      |      | 712,433                         | $         | 7.89                                                                                                          |   |   |
|                                                                                                                            | Granted   |                            | 1,409,902 | $                                                                                                             | 1.89   |   |   |
|                                                                                                                            | Cancelled |                            | (89,102)  | $                                                                                                             | 10.82  |   |   |
|                                                                                                                            |      |                            |      |                                                                                                          |   |   |   |
| Outstanding                at June 30, 2007                                                                                     |      | 2,033,233                       | $         | 3.60                                                                                                          |   |   |
|                                                                                                                            |      |                            |      |                                                                                                          |   |   |
| Options                granted at or above market value during the six months ended June                30,                2007 |      | 1,409,902                       |      |                                                                                                          |   |   |

|                                                      | Options                  outstanding |         | Options                  exercisable |
|-----------------------------------------------------------|--------------------------------------|-------------------|--------------------------------------|
|                                                      |                                 |              |
| Range                  ofexercise                  prices |                            | Numberoutstanding |                            | Weightedaverageremainingcontractuallife                  in years |    | Weightedaverageexerciseprice |    | NumberExercisable |    | Weightedaverageexerciseprice                  pershare |
|                                                      |                                 |              |                                 |   |   |   |   |   |   |   |
| $1.50                                                     |                                 | 1,189,902    |                                 | 9.5 |  $ | 1.50  |   | 319,602  |  $ | 1.50  |
| $3.20-$10.18                                              |                                 | 693,831      |                                 | 5.0 | $ | 4.72  |   | 504,658  | $ | 4.46  |
| $10.20-$13.80                                             |                                 | 95,750       |                                 | 3.3 | $ | 12.26  |   | 93,250  | $ | 12.25  |
| $15.60-$32.00                                             |                                 | 53,750       |                                 | 2.9 | $ | 20.34  |   | 53,750  | $ | 20.34  |
|                                                 |                                 | 2,033,233    |                            |  7.5 |  $ |  3.60  |    | 971,260  |  $ |  5.11  |

**Non      Employee Director Options**

----

**Outstanding      Warrants**

| Warrants                issued in connection with/as:                                                                                                                                                              |   | Number                outstanding |   | Exercise                price per                share |   | Expiration                date            |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|--------------------------------------------------------|--------|-------------------------------------------|
|                                                                                                                                                                                                               |   |                              |   |                                                   |   |                                      |
| Partial                compensation for our placement agent in connection with the sale                of our                Series A Convertible Preferred Stock on December 28, 2006                             |   | 320,000                           |   | $1.10                                                  |   | December                28, 2011          |
|                                                                                                                                                                                                               |   |                              |   |                                                   |   |                                      |
| Partial                compensation for our placement agent in connection with the sale                of our                Series B Convertible Preferred Stock and Common Stock on June 29,                2007 |   | 120,928                           |   | $3.30                                                  |   | June                29, 2012              |
|                                                                                                                                                                                                               |   |                              |   |                                                   |   |                                      |
| Securities                Purchase Agreements dated June 29, 2007                                                                                                                                                  |   | 1,511,600                         |   | $5.00                                                  |   | June                29, 2012              |
|                                                                                                                                                                                                               |   |                              |   |                                                   |   |                                      |
| Consulting                services agreement                                                                                                                                                                       |   | 37,500                            |   | $5.00                                                  |   | Various                dates through 2011 |
|                                                                                                                                                                                                               |   |                              |   |                                                   |   |                                      |
| Cooperation                Agreement on November 22, 2006                                                                                                                                                          |   | 5,000                             |   | $1.20                                                  |   | November                22, 2011          |
|                                                                                                                                                                                                               |   |                              |   |                                                   |   |                                      |
| Total                warrants outstanding at June 30, 2007                                                                                                                                                         |   | 1,995,028                         |   |                                                   |   |                                      |

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

----

**NOTE      F - OTHER SIGNIFICANT SUBSEQUENT 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.      **

**Discontinued      Operations. **

**Results      of Operations**

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

----

**Revenues**

**Operating      Expenses.  **

| · | **Cost                of Revenues.**Cost of revenues for the three months ended June 30,                2007 and the three months ended June 30, 2006 were $36,604 and $77,392,                respectively. The 2006 amount includes a write-down for prepaid inventory                of approximately $69,000. Exclusive of this amount, cost of revenues                increased approximately $28,000 during the six month period ended                June 30,                2007 compared to the six month ended June 30, 2006 because of certain                costs we incurred related to the distribution and maintenance of                our                cards. Cost                of revenues for the six months ended June 30, 2007 and the six months                ended June 30, 2006 were $100,106 and $324,887, respectively. The                2006                amount includes a provision for inventory obsolescence of approximately                $222,000 that resulted from a dispute with one of our vendors which                effectively made certain inventories unusable, and the $69,000 prepaid                inventory write-down previously mentioned. Exclusive of these amounts,                cost of revenues increased approximately $67,000 during the six month                period ended June 30, 2007 compared to the six month ended June 30,                2006                because of distribution and maintenance costs we incurred related                to the                distribution and maintenance of our nFinanSe Discover® Network                Cards. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | **Stock                based employee compensation expense.** Stock based compensation                decreased $187,013 to $253,620 when comparing the three month period                ending June 30, 2007 to the same period from a year ago, a 42%                decrease.  Stock based compensation increased 43% or $290,118 to                $983,702, when comparing the six month period ended June 30, 2007                to the                six month period ended June 30, 2006.   Stock based                compensation expense is a function of the number of options granted,                the                vesting period for those options, the Company’s stock price volatility,                and the rate of employee turnover.  The primary reason for the                increase in the current six month period was a result of stock-based                compensation expense of approximately $392,000 for the options issued                to                Mr. Welch and Mr. Springer and approximately $298,000 of such expense                from                options granted to our non-employee directors in the quarter ended                March                31, 2007. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | **Other                employee compensation and benefits.**Other employee compensation                and benefits increased 61% or $384,195 to $1,019,279 during the three                month period ended June 30, 2007 when compared to the three month                period                ended June 30, 2006. This increase is due to hiring more sales and                support                personnel related to the nFinanSe Discover® Network Card                program. During                the six month period ended June 30, 2007, other employee compensation                and                benefits increased 80% or $949,785 to $2,148,419 when compared to                the six                month period ended June 30, 2006. This increase is due to hiring                more                sales and support personnel related to the nFinanSe Discover® Network Card                program, and the immediate recognition of $175,701 of expense related                to                the separation agreement that was entered into between the Company                and                Clifford Wildes (our former chairman) in January 2007.  |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | **Stock                based professional and consulting                fees.**** **Stock based professional and                consulting fees decreased from $628,126 for both the three and six                month                periods ended June 30, 2006 to $0 for the same periods in                2007.  This is reflective of the Company’s improved cash                position, and its efforts to lessen its reliance on non-employee                professionals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

| · | **Other                professional and consulting fees.** During the three month period                ended June 30, 2007, other professional and consulting fees decreased                15%                from $415,289 to $353,086 when compared to the three month period                ended                June 30, 2006. During the six month period ended June 30, 2007, other                professional and consulting fees decreased 25% from $796,796 to $603,560                when compared to the six month period ended June 30, 2006. These                decreases                are primarily attributable to a reduction in fees associated with                our                Registration Statement on Form SB-2 (which became effective on June                14,                2006, a reduction in legal and consulting fees incurred in connection                with                licensing and compliance efforts, and the Company’s efforts to lessen its                reliance on non-employee                professionals. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | **Travel                and entertainment.** Travel and entertainment increased from                $33,732 for the three month period ended June 30, 2006 to $125,650                for the                three month period ended June 30, 2007, a 273% increase. When comparing                the six month period ended June 30, 2006 to the six month period                ended                June 30, 2006, travel and entertainment increased $158,510 to $235,715,                a                206% increase. This is primarily attributable to additional travel                and the                increase in the number of sales personnel in the current six month                period                versus the same period in the prior                year. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | **Impairment                of Assets.** Impairment of assets expense was $10,157 for the three                month period ended June 30, 2007, and $41,139 for the six month period                ended June 30, 2007.  This is attributable to management's                decision to write-off several deposits related to redundant processing                agreements and leases for premises and                equipment. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | **Selling                and marketing expenses.** Selling and marketing expenses increased                from $48,647 for the three month period ended June 30, 2006 to $187,429                for the three month period ended June 30, 2007, a 286% increase.                When                comparing the six month period ended June 30, 2007 to the six month                period                ended June 30, 2006, selling and marketing expenses increased $226,367                to                $293,378, a 338% increase. The increase is attributable to additional                expenses related to attending industry trade shows as well as advertising,                promoting and selling our new nFinanSe Discover® Network                Cards. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | **Occupancy                and equipment.** Occupancy and equipment expenses increased $15,155                to $163,276 for the three month period ended June 30, 2007, a 10%                increase                when compared to the same period from a year ago. For the six month                period                ended June 30, 2007, occupancy and equipment expenses increased $52,893                to                $326,211, from the six month period in the prior year.  The                increases are primarily attributable to an increase in equipment                depreciation expense and other miscellaneous occupancy and equipment                expenses arising from the growth of our staff, and an increase in                office                rental expense. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | **Other.**                Other expense decreased from $128,368 to $96,451, a 25% decrease                when                comparing the three month period ended June 30, 2006 to the three                month                period ended June 30, 2007. This decrease can be attributed to decreases                in recruiting expense of $11,000 and legal settlements of $75,000,                being                somewhat offset by increases in telecommunications expense of                approximately $12,300, dues and subscriptions expense of $13,800,                and                insurance expense of $15,100.  The increased telecommunications                expense is primarily related to the increased sales staff, and an                upgrade                in service and equipment.  The increases in dues and                subscriptions and in insurance expense are primarily attributable                to                upgraded network security and upgraded insurance protection. On                a six month basis, other expense decreased from $328,150 to $188,773,                a                43% decrease when comparing the period ended June 30, 2006 to the                period                ended June 30, 2007. This decrease can be attributed to decreases                in bad                debt expense of approximately $112,500 and legal settlements of $75,000,                being somewhat offset by increases in telecommunications expense                of                $25,500, dues and subscriptions expense of $23,900, and insurance                expense                of $28,200.  The increased telecommunications expense is                primarily related to the increased sales staff, and an upgrade in                service                and equipment.  The increases in dues and subscriptions and in                insurance expense are attributable to upgraded network security and                upgraded insurance protection.  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

| · | **Interest                income.**For the three month period ended June 30, 2007 interest                income was $18,256, a $17,421 increase from the same period in 2006.                For                the six month period ended June 30, 2007 interest income was $41,697,                a                $36,209 increase from the same period in 2006 .These increases are                primarily attributable to the interest income received on the overnight                investment of the higher bank                balances. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | **Interest                expense.** We incurred approximately $205,000 in interest expense                for both the three month and six month periods ended June 30,                2006.  We have incurred no interest expense in 2007 as we have                not had any indebtedness during the current fiscal                year.                                                                                                                                                                                                                                                                                                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · | **Loss                on Derivative Financial Instruments**. ** **We                recognized a net loss on our non-trading derivative financial instruments                of $997,603 for the three month period ended June 30, 2006, and a                loss of                $1,429,441 for the six month period ended June 30, 2006. We no longer                have                any outstanding derivative financial instrument liabilities and,                accordingly, we have no gains or losses on such instruments during                the                quarter or six month period ended June 30,                2007. |

| · | **Registration                Rights penalties**. Registration penalties incurred during both the                three month and the six month periods ended June 30, 2006 arose from                amounts due to investors because we were late in completing the                registration of certain common shares and warrants sold to investors                in                two private placements. We record registration penalties when they                are                both probable of being incurred and reasonably estimable. Registration                penalties were $142,277 and $284,531 for the three and six month                periods                ended June 30, 2006, respectively.  We have incurred no                registration rights penalties during the first six months of 2007,                nor do                we currently have any agreements for which we believe would incur                registration rights penalties.  |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | **Other                Income (Expense)****.**During the three month period                ended June 30, 2007, we incurred $6,083 in expense which was primarily                related to warrants issued to a business partner in consideration                of a                cooperation agreement.  For the six month period ended June 30,                2007, we recognized $25,610 of income which consists of the aforementioned                warrant expense being somewhat offset by $25,000 received from a                former                business partner** **as a settlement in a legal matter,                and a check recovery of $6,500.  There was no income or expense                recognized for this category in                2006.                                                                                                                                                                                                   |

| · | **Loss                from Discontinued Operations.** During the year ended September 30,                2006, we discontinued our prepaid calling card business and, accordingly,                our statements of operations for all periods presented have been                restated                to reflect the prepaid calling card business as a discontinued operation.                Loss from our discontinued operations was $13,629 for the three months                ended June 30, 2007 versus a loss of $473,353 for the prior                year.  Loss from our discontinued operations was $8,689 for the                six months ended June 30, 2007 versus a loss of $1,141,195 for the                prior                year.  Fiscal 2007 losses related to communications expenses of                fiscal 2006 that were unknown to exist at the time operations were                discontinued. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

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

**Off-Balance      Sheet Arrangements**

**Operating      Leases**

| Twelve                months ending |   |    | Amounts |   |
|-------------------------------------|--------|---------|---------|--------|
|                                |   |    |    |
| June                30, 2008        | $      | 233,100 |    |
| June                30, 2009        |   | 76,500  |    |
|                                |   |    |    |
| Total                               | $      | 309,600 |    |
|                                |   |    |    |

**Employment      Agreements**

| · | The                employment agreement with our Chief Executive Officer, Jerry R. Welch,                which has a term from September 5, 2006 to December 31, 2008 and                provides                him with an annual salary of $235,000. 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 an aggregate fair                value of approximately $845,000. This amount is being recognized                as stock                based compensation on a straight line basis as the options vest.                The grant                was equal to 4.25% of our total outstanding shares, options and warrants                as of December 28, 2006 (the date we completed the permanent financing                required for the grant of such options). The Option Shares are divided                into 28 equal installments. The first six installments vested on                February                28, 2007 and additional installments vest on the final day of each                month                through December 31, 2008. 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 in the remaining term of                the                agreement or twelve months, whichever period is shorter. On                July 12, 2007, Mr. Welch was awarded 197,855 stock options at $3.40                per                share, which when using Black-Scholes results in an aggregate fair                value                of approximately $619,000.   The grant was equal to                approximately 4.25% of the shares of our total stock and warrants                issued                under the June 29, 2007 Securities and Purchase Agreements. The Option                Shares are divided into 28 equal installments. The first eleven                installments vested on July 31, 2007 and accordingly at that time                11/28 of                the aforementioned stock based compensation was recognized as compensation                expense.  The remaining compensation expense will be recognized                on a straight line basis as additional installments vest 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| · | The                employment agreement with our Chief Financial Officer, Raymond Springer,                which has a term from September 5, 2006 to December 31, 2008 and                provides                him with 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 an aggregate fair value of approximately $400,000. This                amount                is being recognized as stock based compensation on a straight line                basis                as the options vest. This grant was equal to 2.0% of the outstanding                shares of our total outstanding shares, 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 vested on February 28, 2007,                and                additional installments vest 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 in the remaining term of                the                agreement or twelve months, whichever is shorter. On                July 12, 2007, Mr. Springer was awarded 93,108 stock options at $3.40                per                share, which when using Black-Scholes results in an aggregate fair                value                of approximately $291,000.   The grant was equal to                approximately 2.00% of the shares of our total stock and warrants                issued                under the June 29, 2007 Securities and Purchase Agreements. The Option                Shares are divided into 28 equal installments. The first eleven                installments vested on July 31, 2007 and accordingly at that time                11/28 of                the aforementioned stock based compensation was recognized as compensation                expense.  The remaining compensation expense will be recognized                on a straight line basis as additional installments vest 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.  |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Service      and Purchase Agreements**

**Purchase      Commitments**

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**Critical      Accounting Estimates**

**Item      3. Controls and Procedures.**

**Evaluation      of Disclosure Controls and Procedures**

**Change      in Internal Control over Financial Reporting**

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**PART      II - OTHER INFORMATION**

**Item      1. Legal Proceedings.**

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

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

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

**Item      5. Other Information.**

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**Item      6. Exhibits.**

|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|-----------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  **Exhibit                Number**  |   |  **Description                of Exhibit**                                                                                                                                                                                                                                                                                                                                            |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.1                                           |   | Certificate                of Designations, Rights and Preferences of Series B Convertible Preferred                Stock, as filed with the Secretary of State of the State of Nevada                on June                29, 2007 (Incorporated by reference to Exhibit 99.3 of the Company's                Current Report on Form 8-K filed with the SEC on July 5,                2007). |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.1                                          |   | Separation                Agreement and Release of Claims, dated as of January 29, 2007, by                and                between the Company and Clifford Wildes (Incorporated by reference                to                Exhibit 99.1 of the Company's Current Report on Form 8-K filed with                the                SEC on February 2, 2007).                               |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.2                                          |   | Offer                of Employment, dated April 24, 2007, by and between the Company and                Jerome                Kollar (Incorporated by reference to Exhibit 99.1 of the Company's                Current                Report on Form 8-K filed with the SEC on May 18, 2007).                                                                                                  |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.3                                          |   | Incentive                Stock Option Grant, dated May 14, 2007, by and between the Company                and                Jerome Kollar (Incorporated by reference to Exhibit 99.2 of the Company's                Current Report on Form 8-K filed with the SEC on May 18,                2007).                                                                                           |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.4                                          |   | Form                of Securities Purchase Agreement, as executed by the Company and                the                Investors on June 29, 2007 (Incorporated by reference to Exhibit                99.1 of                the Company's Current Report on Form 8-K filed with the SEC on July                5,                2007).                                                       |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.5                                          |   | Form                of Warrant, as issued by the Company to the Investors on June 29,                2007                (Incorporated by reference to Exhibit 99.2 of the Company's Current                Report                on Form 8-K filed with the SEC on July 5, 2007).                                                                                                              |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|  *31.1                              |   | Certification                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002                                                                                                                                                                                                                                                                |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|  *31.2                              |   | Certification                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002                                                                                                                                                                                                                                                                |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|  *32.1                              |   | Certification                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of                2002                                                                                                                                                                                   |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|  *32.2                              |   | Certification                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of                2002                                                                                                                                                                                   |

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|                                      | **NFINANSE                INC.** |
|-------------------------------------------|----------------------------------|
|                                      |                             |   |
| Date: August                14, 2007 | By:                              | ***/s/                Jerry R. Welch*** |
|                                      |                             |   |
|                                      |                             | Jerry                R. Welch, Chief Executive Officer and Chairman                of the Board of Directors (Principal Executive Officer) |
|                                      |                             |   |
|                                      |                             |   |

|                                            | **NFINANSE                INC.** |
|-------------------------------------------------|----------------------------------|
|                                            |                             |   |
| Date:  August                14, 2007 | By:                              | ***/s/                Raymond P. Springer*** |
|                                            |                             |   |
|                                            |                             | Raymond                P. Springer, Chief Financial Officer (Principal                Financial and Accounting Officer) |
|                                            |                             |   |
|                                            |                             |   |

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**EXHIBITS      INDEX**

|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|-----------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  **Exhibit                Number**  |   |  **Description                of Exhibit**                                                                                                                                                                                                                                                                                                                                            |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.1                                           |   | Certificate                of Designations, Rights and Preferences of Series B Convertible Preferred                Stock, as filed with the Secretary of State of the State of Nevada                on June                29, 2007 (Incorporated by reference to Exhibit 99.3 of the Company's                Current Report on Form 8-K filed with the SEC on July 5,                2007). |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.1                                          |   | Separation                Agreement and Release of Claims, dated as of January 29, 2007, by                and                between the Company and Clifford Wildes (Incorporated by reference                to                Exhibit 99.1 of the Company's Current Report on Form 8-K filed with                the                SEC on February 2, 2007).                               |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.2                                          |   | Offer                of Employment, dated April 24, 2007, by and between the Company and                Jerome                Kollar (Incorporated by reference to Exhibit 99.1 of the Company's                Current                Report on Form 8-K filed with the SEC on May 18, 2007).                                                                                                  |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.3                                          |   | Incentive                Stock Option Grant, dated May 14, 2007, by and between the Company                and                Jerome Kollar (Incorporated by reference to Exhibit 99.2 of the Company's                Current Report on Form 8-K filed with the SEC on May 18,                2007).                                                                                           |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.4                                          |   | Form                of Securities Purchase Agreement, as executed by the Company and                the                Investors on June 29, 2007 (Incorporated by reference to Exhibit                99.1 of                the Company's Current Report on Form 8-K filed with the SEC on July                5,                2007).                                                       |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.5                                          |   | Form                of Warrant, as issued by the Company to the Investors on June 29,                2007                (Incorporated by reference to Exhibit 99.2 of the Company's Current                Report                on Form 8-K filed with the SEC on July 5, 2007).                                                                                                              |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|  *31.1                              |   | Certification                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002                                                                                                                                                                                                                                                                |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|  *31.2                              |   | Certification                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002                                                                                                                                                                                                                                                                |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|  *32.1                              |   | Certification                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of                2002                                                                                                                                                                                   |
|                                          |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|  *32.2                              |   | Certification                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of                2002                                                                                                                                                                                   |

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