UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549








FORM
      10-KSB




(MARK
      ONE)





x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
                OF 1934




For
      the
      fiscal year ended December 31, 2006




OR




o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
                ACT OF 1934




For
      the
      transition period from ___________ to ___________





000-17874


(Commission
      file number)







GLOBAL
      AXCESS CORP


(Name
      of
      Small Business Issuer in Its Charter)


NEVADA
              
              88-0199674(State
                  or other jurisdiction of
              
              (I.R.S.
                  Employerincorporation
                  or organization)
              
              Identification
                  No.)
 
 224
                  PONTE VEDRA PARK DRIVEPONTE
                  VEDRA BEACH, FLORIDA
              
              32082(Address
                  of principal executive offices)
              
              (Zip
                  Code)
  (904)-280-3950


(Issuer's
      Telephone Number, Including Area Code)





Securities
      registered pursuant to Section 12(b) of the Act: None


Securities
      registered pursuant to Section 12(g) of the Act: Common Stock







Check
        whether the Issuer: (1) has filed all reports required to be filed by Section
        13
        or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
        (or for such shorter period that the Issuer was required to file such reports),
        and (2) has been subject to such filing requirements for the past 90 days.
        Yes
x No o
 
 Check
        if
        there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
        S-B is not contained herein, and will not be contained, to the best of the
        Issuer's knowledge, in definitive proxy or information statements incorporated
        by reference in Part III of this Form 10-KSB. x
 
 Indicate
        by check mark whether the registrant is a shell company (as defined by Rule
        12-b2 of the Exchange Act).  Yes
o
        No x
  Issuer's
        Revenues for the fiscal year 2006 were: $21,437,125.
 
 The
        aggregate market value of the Common Stock held by non-affiliates of the
        Issuer
        as of March 27, 2007 was $5,255,447.
 
 As
        of
        March 27, 2007, the Issuer had 21,021,786 shares
        outstanding of the Common Stock ($0.001 par value) and no shares outstanding
        of
        the Preferred Stock ($0.001 par value).









TABLE
      OF
      CONTENTS


Page
                  No.PART
                  IItem
                  1.
              Description
                  of Business
              
              4Item
                  2.
              Description
                  of Properties
              
              26Item
                  3.
              Legal
                  Proceedings
              
              27Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              
              28PART
                  IIItem
                  5.
              Market
                  for Common Equity and Related Stockholder Matters
              
              28Item
                  6.
              Management's
                  Discussion and Analysis of Financial Condition
              
              32Item
                  7.
              Consolidated
                  Financial Statements
              
              44Item
                  8.
              Changes
                  in and Disagreements With Accountants on Accountingand
                  Financial Disclosure
              
              44PART
                  IIIItem
                  8A.
              Controls
                  and Procedures
              
              44Item
                  8A(T).
              Controls
                  and Procedures
              
              46Item
                  8B.
              Other
                  Information
              
              46Item
                  9.
              Directors
                  and Executive Officers, Promoters and ControlPersons;
                  Compliance With Section 16(a) of the Exchange Act
              
              46Item
                  10.
              Executive
                  Compensation
              
              50Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and Managementand
                  Related Stockholder Matters
              
              53Item
                  12.
              Certain
                  Relationships and Related Transactions
              
              55Item
                  13.
              Exhibits
                  and Reports on Form 8-K
              
              55Item
                  14.
              Principal
                  Accountants Fees and Services
              
              57SIGNATURES
              
              59CONSOLIDATED
                  FINANCIAL STATEMENTS
              
              60FINANCIAL
                  STATEMENT SCHEDULEEXHIBITS




Page
          2


**Forward-Looking
      Statements**





In
      addition to historical information, this Annual Report on Form 10-KSB contains
      forward-looking statements that involve risks and uncertainties that could
      cause
      actual results to differ materially. Factors that might cause or contribute
      to
      such differences include, but are not limited to, those discussed in the section
      entitled "Management's Discussion and Analysis of Financial Condition." You
      should carefully review the risks described in other documents we file from
      time
      to time with the Securities and Exchange Commission (SEC), including the
      Quarterly Reports on Form 10-QSB to be filed in 2007. When used in this report,
      the words "expects," "anticipates," "intends," "plans," "believes," "seeks,"
      "targets," "estimates," and similar expressions are generally intended to
      identify forward-looking statements. You should not place undue reliance on
      the
      forward-looking statements, which speak only as of the date of this Annual
      Report on Form 10-KSB. We undertake no obligation to publicly release any
      revisions to the forward-looking statements or reflect events or circumstances
      after the date of this document. Estimates of future financial results are
      inherently unreliable.





From
      time
      to time, representatives of Global Axcess Corp (the “Company”) may make public
      predictions or forecasts regarding the Company's future results, including
      estimates regarding future revenues, expense levels, earnings or earnings from
      operations. Any forecast regarding the Company's future performance reflects
      various assumptions. These assumptions are subject to significant uncertainties,
      and, as a matter of course, many of them will prove to be incorrect. Further,
      the achievement of any forecast depends on numerous factors (including those
      described in this discussion), many of which are beyond the Company's control.
      As a result, there can be no assurance that the Company's performance will
      be
      consistent with any of management’s forecasts or that the variation from such
      forecasts will not be material and adverse. Investors are cautioned not to
      base
      their entire analysis of the Company's business and prospects upon isolated
      predictions, but instead are encouraged to utilize the entire available mix
      of
      historical and forward-looking information made available by the Company, and
      other information affecting the Company and its products, when evaluating the
      Company's prospective results of operations.





In
      addition, representatives of the Company may occasionally comment publicly
      on
      the perceived reasonableness of published reports by independent analysts
      regarding the Company's projected future performance. Such comments should
      not
      be interpreted as an endorsement or adoption of any given estimate or range
      of
      estimates or the assumptions and methodologies upon which such estimates are
      based. Undue reliance should not be placed on any comments regarding the
      conformity, or lack thereof, of any independent estimates with the Company's
      own
      present expectations regarding its future results of operations. The
      methodologies employed by the Company in arriving at its own internal
      projections and the approaches taken by independent analysts in making their
      estimates are likely different in many significant respects. Although the
      Company may presently perceive a given estimate to be reasonable, changes in
      the
      Company's business, market conditions or the general economic climate may have
      varying effects on the results obtained through the use of differing analyses
      and assumptions. The Company expressly disclaims any continuing responsibility
      to advise analysts or the public markets of its view regarding the current
      accuracy of the published estimates of outside analysts. Persons relying on
      such
      estimates should pursue their own independent investigation and analysis of
      their accuracy and the reasonableness of the assumptions on which they are
      based.


Page
          3





PART
      I





**ITEM
              1.**
            **DESCRIPTION
                OF BUSINESS**





**History**





Headquartered
      in Ponte Vedra Beach, Florida, Global Axcess Corp (referred to herein as the
      “Company”, “we”, “our” or “us”) is a Nevada Corporation organized in 1984.
      Unless the context otherwise requires, all references to the Company include
      the
      Company’s subsidiary corporations.





Global
      Axcess Corp was reorganized in 2001 by principals with backgrounds in
      network-based electronic commerce and financial transaction processing, with
      a
      mission to emerge as one of the nation's leading network-based electronic
      commerce and financial transaction processing companies. The Company is an
      independent provider of Automated Teller Machine ("ATM") services. The Company’s
      objective is to expand through internal growth and through the offering of
      enhanced ATM products or services. The Company presently does not have
      definitive acquisition plans.





**2006
      Summary of Company Developments**





On
      April
      3, 2006, the Company received a significant payment from Genpass Technologies
      LLC, in relation to the Distributor ATM Processing Agreement for the conversion
      of network processing.





On
      May 2,
      2006, the Company entered into a Shareholder Agreement to sell 50% of its
      wholly-owned subsidiary located in South Africa, Cash Axcess Corporation
      (Proprietary) Limited in a stock arrangement with the buyer (See Financial
      Footnote # 5 “Discontinued Operations”).





On
      May 2,
      2006, the Company settled the March 2004 claim filed by James Collins, a
      previous employee of Global Axcess Corp. The claim was filed in Superior Court
      of California, County of San Diego on March 2, 2004. The claim alleged the
      following were owed in connection with the employment agreement: compensation,
      bonuses and other benefits of approximately $316,915; and 90,000 restricted
      shares and 359,700 stock options exercisable at $3.75 per share. The claim
      was
      settled for $450,000 whereby the Company made a lump-sum payment of $300,000
      on
      May 22, 2006 and has agreed to pay the remaining $150,000 in 12 monthly
      installments of $12,500 commencing July 1, 2006 and ending June 30,
      2007.





On
      May 4,
      2006, the Company entered into a letter agreement with Raymond James &
Associates, Inc. (“RJ”) pursuant to which the Company retained RJ to act as its
      sole, external investment banking advisor in helping the Company evaluate
      strategic alternatives including the sale of all or a portion of its assets
      or
      securities.





On
      May 9,
      2006, Robert Pearson resigned from his position on the Board of Directors.





On
      May
      10, 2006, David S. Surette notified the Company of his resignation as Chief
      Financial Officer and Chief Accounting Officer effective May 31,
      2006.





On
      July
      31, 2006, the Company disconnected its processing switch which processed the
      transactions for its subsidiary EFT Integration, Inc. and replaced its switching
      software with a third party vendor (See Financial Footnote # 6 “Impairment of
      Long-lived Assets and Business Reorganization Charges”).





On
      September 30, 2006, the Company finalized the sale of the remaining 50% of
      Cash
      Axcess Corporation (Proprietary) Limited (“CAC”),its Variable Interest Entity
      (See Financial Footnote # 5 “Discontinued Operations”).





On
      August
      4, 2006, the Company was served with a demand for arbitration/mediation from
      EFMARK Service Company (“EFMARK”), a provider of maintenance services and a
      provider of cash replenishment services for automated teller machines. In the
      spirit of its business relationship with EFMARK, the Company settled this claim
      for $40,000 on October 4, 2006.




Page
          4





On
      September 29, 2006, the Company was served with process by Renaissance US Growth
      Investment Trust PLC ("Renn") and BFS US Special Opportunities Trust PLC ("BFS"
      and collectively with Renn, the "Plaintiffs"), two investors and shareholders
      of
      the Company. In the Complaint, filed in the Circuit Court of the Seventh
      Judicial Circuit in and for St. John's County, Florida, Plaintiffs allege breach
      of contract, fraud, and negligent misrepresentation.





On
      October 10, 2006, the Company entered into Separation Agreement and Release
      with
      Michael Dodak pursuant to which Mr. Dodak resigned as an executive officer
      and
      director of the Company effective September 30, 2006 (See Financial Footnote
      # 6
“Impairment of Long-lived Assets and Business Reorganization Charges”).





On
      October 10, 2006, the Company entered into Separation Agreement and Release
      with
      David Fann pursuant to which Mr. Fann resigned as an executive officer and
      director of the Company effective September 30, 2006 (See Financial Footnote
      # 6
“Impairment of Long-lived Assets and Business Reorganization Charges”).





On
      October 10, 2006, the Board of Directors appointed George A. McQuain as
      President and Chief Executive Officer of the Company and as a director of the
      Company to fill the vacancy created by the resignations of Messrs. Dodak and
      Fann. In addition, Joseph M. Loughry and Lock Ireland, directors of the Company,
      were appointed as Chairman and Vice Chairman of the Board of Directors of the
      Company, respectively.





On
      November 13, 2006, the Board of Directors decided that it has completed its
      evaluation of strategic alternatives and has concluded that it is in the best
      interests of the shareholders to not pursue a corporate transaction under
      present circumstances.





On
      November 24, 2006, the Company signed a Cash Provisioning Agreement with Genpass
      Technologies, LLC ("Genpass"), which was effective August 11, 2006, pursuant
      to
      which Genpass will provide vault cash for the Company's wholly-owned
      subsidiary's ATMs as well as cash management and ATM monitoring on an outsourced
      basis.





On
      December 26, 2006, the Company was served with process by Robert Colabrese
      (the
“Plaintiff), a former employee of the Company. In the Complaint, filed in the
      Circuit Court of the Seventh Judicial Circuit in and for St. John’s County,
      Florida, Plaintiff alleges that the Company has breached the employment
      agreement entered between the Company and Plaintiff in July 2003. The Plaintiff
      is seeking monetary damages for unpaid wages and commissions, attorney fees
      and
      an accounting of all sales generated through the Plaintiff. The Company denies
      any and all allegations of wrongdoing and intends to vigorously defend such
      action.





On
      or
      about January 29, 2007, Nationwide Money Services, Inc. (“Nationwide”) filed
      suit against the Atlanta Retailers Association, LLC (“ARA”) for breach of
      contract, tortious interference with contractual relations, tortious
      interference with business relations, punitive damages, and attorneys’ fees and
      expenses of litigation based upon the ARA’s alleged breach of a preferred vendor
      agreement with Progressive Ventures, Inc., Nationwide’s successor-in-interest.
      The ARA answered Nationwide’s complaint, denied all liability, and asserted
      various counterclaims. The parties anticipate conducting discovery in the coming
      months. The Company expresses no opinion as to the likelihood of success or
      potential amount of recovery in this matter, as discovery is
      ongoing.




**Business
      Description**





As
      of
      December 31, 2006, the Company currently owns, manages and operates
      approximately 4,430 ATMs in its national network, which currently spans 42
      states. We provide proprietary ATM branding and processing services for over
      77
      financial institutions that have approximately 722 branded sites under contract
      with the Company nationwide. We provide network processing for an average of
      over 1.5 million financial transactions per month.




Page
          5





**Nationwide
      Money Services, Inc.**





Nationwide
      Money Services, Inc., a wholly owned subsidiary of the Company, is engaged
      in
      the business of operating a network of ATMs. The ATMs provide debit and credit
      cardholders with access to cash, account information and other services at
      locations and times convenient to the cardholder. Debit and credit cards are
      principally issued by banks and credit card companies.





To
      promote usage of ATMs in our network, we have relationships with national and
      regional card organizations (also referred to as networks) which enable the
      holder of a card issued by one network to use another network’s ATM to process a
      transaction. These relationships are provided through processing providers:
      Genpass Technologies, LLC, First Data Retail ATM Services (formerly Core Data
      Resources), and Columbus Data Services.





*ATMs* *.* ** We
      deploy
      and operate ATMs primarily under the following two programs:




·
            
            Full
                placement program.
                Under a full placement arrangement, the Company owns the ATM and
                is
                responsible for controlling substantially all aspects of its operation
                including maintenance, cash management and loading, supplies, signage
                and
                telecommunications services. The Company is generally responsible
                for
                almost all of the expenses related to the operation of the ATM with
                the
                exception of power and, on occasion, telecommunications. The Company
                typically uses this program for major national and regional merchants,
                as
                well as, for its Financial Institution Outsourcing
                service.·
            
            Merchant-owned
                program.
                Under a merchant-owned arrangement, the merchant (or, for a merchant
                using
                lease financing, its lease finance provider) typically buys the ATM
                through the Company and the merchant is responsible for most of the
                operating expenses such as maintenance, cash management and loading,
                supplies and telecommunication services. The Company typically provides
                all transaction processing services, and the merchants use the Company’s
                maintenance services from time to
                time.




Most
      of
      our new ATMs feature advanced functionality, diagnostics and ease of use
      including color displays, personal computer-based operating systems, thermal
      printing, dial-up and remote monitoring capabilities, and upgrade and
      capacity-expansion capability. All machines can perform basic cash dispensing
      and balance inquiry transactions, transmit on-screen marketing, dispense coupons
      and conduct marketing surveys. Most of our equipment is modular in design,
      which
      allows us to be flexible and accommodating to the needs of our clients as
      technology advances.





*ATM
      Relationships* *.* We
      purchase our ATMs from Triton Systems and to a lesser extent, from Tranax
      Corporation. We believe that the large quantity of ATMs we purchase from these
      manufacturers enables us to receive favorable pricing. In addition, we maintain
      close working relationships with these manufacturers in the course of our
      business, allowing us to stay informed regarding product updates and to minimize
      technical problems with purchased equipment. Although we currently purchase
      a
      majority of our ATMs from Triton Systems, we believe that our relationship
      with
      Tranax Corporation is good and that we would be able to purchase the ATMs we
      require from them if we were no longer able to purchase ATMs from Triton
      Systems.





*Merchant
      Customers* *.* We
      have
      contracts with national and regional merchants and with numerous independent
      store operators. For 2006, no single merchant accounted for 24% or more of
      our
      ATM sales. The terms of our merchant contracts vary as a result of negotiations
      at the time of execution. In the case of our full placement programs, the
      contract terms for contracts currently in place typically include:





·
            
            an
                initial term of at least five-seven years;·
            
            ATM
                exclusivity at locations where we install an ATM and, in many cases,
                a
                right of first refusal for all other
                locations;




Page
          6


·
            
            a
                requirement that the merchant provide a highly visible space for
                the ATM
                and signage;·
            
            protection
                for us against underperforming locations by permitting us to increase
                the
                withdrawal fee or remove ATMs; and·
            
            provisions
                making the merchant’s fee variable depending on the number of ATM
                transactions and milestones.





New
      contracts under our merchant-owned or rental arrangements typically include
      seven year terms with other terms similar to our full placement contracts,
      as
      well as the following additional terms:





·
            
            provisions
                imposing an obligation on the merchant to ensure the ATM is operational
                at
                all times its store is open to the public; and·
            
            provisions
                that require a merchant to use its best efforts to have any purchaser
                of
                the merchant’s store assume our
                contract.





**EFT
      Integration, Inc.**





EFT
      Integration, Inc. (“EFTI”), a wholly owned subsidiary of the Company, is engaged
      in the business of ATM transaction processing.





*Outsource
      of processing* *.* In late
      2005 the Company outsourced payment processing to Genpass Technologies, LLC
      ("Genpass"). Genpass is a subsidiary of U.S. Bank, N.A. Pursuant to the
      Agreement, Nationwide Money Services, Inc. ("Nationwide") agreed to engage
      Genpass to be the exclusive provider of certain electronic funds transfer
      services, which includes a seven year term for the processing of ATM
      transactions for Nationwide, a wholly owned subsidiary of the
      Company.





The
      Genpass Agreement offers the Company a substantial monetary incentive to
      transfer ATMs to Genpass. This incentive is an off-set of conversion costs
      incurred by the Company as well as a reimbursement of expenses associated with
      unwinding contracts associated with the Company’s ATM processing
      switch.





The
      Genpass Agreement provides the Company with a tiered “pick a tier” pricing
      structure. When fully implemented, we believe that the Genpass Agreement will
      lower the Company’s ATM processing and sponsorship costs by 38% to
      46%.





Additionally,
      the Genpass Agreement gives the Company access to additional value-added
      services as well as reducing its regulatory burden and costs. The Company also
      anticipates an increase in interchange revenue as a result of Genpass’ more
      optimal transaction routing tables.





As
      a
      result of this, on July 31, 2006 the Company shut down its EFTI transaction
      processing switch in Ponte Vedra Beach, Florida.





**Cash
      Axcess Corporation (Proprietary) Limited**





Cash
      Axcess Corporation (Proprietary) Limited (“Cash Axcess”) was a wholly owned
      subsidiary which provided the same services as those of Nationwide Money
      Services, Inc. and operated in South Africa. It began operations in early 2005.
      We were required to utilize a sponsor bank in order to acquire transactions
      generated from ATMs. We had one sponsor bank, Mercantile Bank. Cash Axcess
      sold
      the Tidel ATM to merchants and branded the ATM with the name of the sponsor
      bank. Surcharging is not permitted in South Africa. However, a fee is generated
      from a cash withdrawal that is paid by the customer through his financial
      institution and collected through the South African Switch “SAS” and remitted to
      the sponsoring bank. That fee was split between the bank, the owner of the
      ATM
      and Cash Axcess. Cash Axcess was sold during 2006.




Page
          7





**Axcess
      Technology Corporation**





Axcess
      Technology Corporation (“ATC”) was a wholly owned subsidiary which was
      responsible for the development of software for the Company and its
      subsidiaries, including the development of core software such as a processing
      platform for infrastructure software that is utilized to manage our vault cash
      as well as our database for the daily operation of our ATMs. ATC was also
      responsible for the maintenance and updating of all internally developed
      software. We closed ATC as of the end of 2005 and all remaining employees were
      transferred to other subsidiaries.





**Electronic
      Payment and Transfer Corp** **.**





Electronic
      Payment and Transfer Corp. (“EPT”) was a wholly owned subsidiary that developed
      and sold debit card solutions to the unbanked population of the U.S. It packaged
      its product as the EasyGreen Card and sold the card as a paycard solution so
      that unbanked employees could receive their payroll in an electronic form.
      EPT
      was sold to its management at the end of the third quarter of 2005.





**Revenue
      Sources**





*Transaction
      Fees* .
      Our
      revenues are principally derived from two types of fees, which we charge for
      processing transactions on our ATM network. We receive an interchange fee from
      the issuer of the credit or debit card for processing a transaction when a
      cardholder uses an ATM in our network. In addition, in many cases, we receive
      a
      surcharge/convenience fee from the cardholder when the cardholder makes a cash
      withdrawal from an ATM in our network. See “Overview” section in Item 6
      Management's Discussion and Analysis of Financial Condition.





*Surcharge/Convenience
      Fees* .  In April
      1996, national debit and credit card organizations changed the rules applicable
      to their members, including us, to permit the imposition of
      surcharge/convenience fees on cash withdrawals from ATMs. Our business is
      substantially dependent upon our ability to impose surcharge/convenience fees.
      Any changes in laws or card association rules materially limiting our ability
      to
      impose surcharge/convenience fees would have a material adverse effect on our
      financial results. See "Regulatory Matters - Surcharge Regulation." Since April
      1996, we have expanded the number of ATMs in our network and have expanded
      our
      practice of imposing surcharge/convenience fees on cash withdrawals from
      ATMs.





*ATM
      Network Management Services* .
      In
      addition to revenues derived from interchange and surcharge/convenience fees,
      we
      also derive revenues from providing ATM network management services to banks
      and
      other third-party owners of ATMs included in our ATM network. These services
      include 24-hour transaction processing, monitoring and notification of ATM
      status and cash condition, notification of ATM service interruptions, in some
      cases dispatch of field service personnel for necessary service calls, and
      cash
      settlement and reporting services. Banks may choose whether to limit
      transactions on their ATMs to cards issued by the bank or to permit acceptance
      of all cards accepted on our network. See “Overview” section in Item 6
      Management's Discussion and Analysis of Financial Condition.





*Seasonality* .
      In our
      ATM operations, we traditionally experience higher transaction volumes per
      machine in the second and third quarters than in the first and fourth quarters.
      The increased volumes in the summer months coincide with increased vacation
      travel in the United States.





**Recent
      Developments in Our Company**





We
      have
      continued to upgrade our ATMs to be Triple DES compliant with the newest
      technology, which we believe will increase revenues through the latest
      deployment technology for onscreen advertising. Additionally, the Company
      completed the VISA and MasterCard mandated merchant underwriting process on
      all
      but 173 of its ATMs. The reason that the Company did not complete the process
      on
      these 173 ATMs is that their owners refused to comply with the VISA/MasterCard
      mandate. As a result, on February 26, 2007 VISA and MasterCard access will
      be
      denied to these 173 ATMs. These ATM losses will not have a material impact
      on
      our future financial results.




Page
          8


Beginning
        September 30, 2006, the Company made the following changes to its
        operations:





·
            The
                appointment of a new executive management
                team;


·
            Changed
                the Company’s strategy to focus on a return to profitability and organic
                growth;


·
            Enhanced
                the Company’s sales and marketing
                efforts;


·
            Improved
                the Company’s cost structure;


·
            Completed
                various balance sheet write-offs, settled an outstanding claim by
                EFMARK;
                and set up reserves for the Renaissance Capital
                lawsuit.





To
      improve the Company’s cost structure, during 2006 the Company:





·
            Divested
                Cash Axcess Corporation and shut down switching platform utilized
                by EFT
                Integration, Inc. and outsourced all processing activities. Cash
                Axcess
                Corporation was a non-core and unprofitable
                business;


·
            Converted
                ATMs to processing at Elan (formerly
                Genpass);


·
            Implemented
                P&L performance based bonus and 401K plans for
                2007;


·
            Negotiated
                and began implementation of contracts with lower cost ATM vault cash
                providers;


·
            Renegotiated
                local phone line contracts to reduce communication costs for the
                Company’s
                ATMs;


·
            Negotiated
                and began implementation of a contract to outsource ATM cash management
                and monitoring which will also allow the Company to monitor its ATMs
                24
                hours per day 365 days per year (vs. in-house monitoring during normal
                business hours only);


·
            Reduced
                headcount and use of temporary personnel services;


·
            Renegotiated
                the lease expense of the Company’s Ponte Vedra Beach office as part of an
                arrangement to allow the building owner to sell the building.
                Additionally, the Company will relocate its offices in May 2007 to
                less
                expensive space;


·
            In-sourced
                company Investor Relations until the Company returns to
                profitability;


·
            Re-negotiated
                employee health benefits for 2007;


·
            Re-negotiated
                its business recovery contract with SunGard Availability Services;
                and


·
            Purchased
                ProfitStars ATM management software to replace its legacy in-house
                developed and maintained software.





Additionally,
      during 2006 the Company completed various balance sheet write-offs, settled
      an
      outstanding claim by EFMARK and set up various reserves. These write-offs,
      reserves and one-time charges included:





·
            Shut
                down of EFTI switching platform in the amount of
                $610,024;


·
            Write-off
                of assets held for sale in the amount of
                $485,315;


·
            Write-off
                of ATMs and other software in the amount of
                $234,057;


·
            Write-off
                of EPT note receivable and other note receivable in the amount of
                $817,607;


·
            Severance
                and restructuring in the amount of
                $757,811;


·
            James
                Collins lawsuit settlement in the amount of
                $410,000;


·
            EFMARK
                lawsuit settlement in the amount of $40,000; and


·
            Accrual
                for lawsuit defense in the amount of
                $250,000.





**Breach
      of contracts**





Although
      our merchant-owned ATM customers have multi-year contracts with us for
      transaction processing services, due to competition, some of these customers
      may
      leave us for our competitors prior to the expiration of their contracts, or
      may
      not renew their contracts upon their expiration. Additionally, some merchants
      may sell or close their stores. When these events occur, we pursue these
      customers to continue to utilize our processing services or alternatively,
      in
      the event they terminate their relationship with us prior to the expiration
      of
      their contacts, we seek payment of damages under a breach of contract clause
      in
      our contracts. The Company lost 79 ATM locations during 2006 as a result of
      these events. These ATM locations accounted for 1.8% of the Company’s total
      locations. The Company recognizes revenue on breached contracts when cash is
      received.




Page
          9





**Our
      ATM Network**





*General* .
      Our
      network ATMs are located primarily on the east coast, and our concentration
      as
      of December 31, 2006 in the 10 states is listed below:





STATE
            
            NUMBER
                OF ATMsGA
            
            843TX
            
            632NY
            
            577VA
            
            537FL
            
            382NC
            
            319NM
            
            212MD
            
            153AL
            
            112SC
            
            99





The
      operation of the network involves the performance of many complementary tasks
      and services, including principally:





·
            acquiring
                ATMs to be utilized by us and our
                customers;





·
            selecting
                ATM locations and entering into leases for access tothose
                locations;





·
            in
                the case of third party merchants, establishing relationshipswith
                these merchants for processing transactions on their
                ATMs;





·
            the
                sale of our Branded Cash services to local and regional banksor
                credit unions;





·
            establishing
                relationships with national and regional cardorganizations
                and credit card issuers to promote usage of our network
                ATMs;





·
            processing
                ATM transactions;





·
            supplying
                ATMs with cash and monitoring cash levels for re-supply;





·
            monitoring
                ATM operations and managing the service needs of ATMs;
                and





·
            managing
                the collection of fees generated by our network
                operations.





*ATM
      Locations* .  We
      believe that the profitable operation of any ATM is largely dependent upon
      the
      ATM’s location. Thus, we devote significant effort to selecting locations that
      we believe will generate high cardholder utilization. Additionally, we believe
      the availability of attractive sites is a principal factor affecting our ability
      to achieve further market penetration. We attempt to identify locations where
      pedestrian traffic is high, people need quick access to cash, and use of the
      ATM
      is convenient and secure. In addition, we believe such locations also provide
      a
      convenience to the retailer who may wish to avoid the financial exposure and
      added overhead of offering check-cashing services to their customers. Key target
      locations for our ATMs include the following:





Page
          10




·
            grocery
                stores,




·
            convenience
                stores and combination convenience stores and gas
                stations,




·
            major
                regional and national retailers,




·
            hotels,




·
            shopping
                malls,




·
            airports,




·
            colleges,




·
            amusement
                parks,




·
            sports
                arenas,




·
            bars/clubs,




·
            theaters,
                and




·
            bowling
                alleys.




Our
      goal
      is to secure key locations in advance of our competitors as we believe
      cardholders generally establish a pattern of continued usage of a particular
      ATM. Further, we believe such patterned usage will continue unless there are
      frequent problems with the location, such as a machine being out of
      service.





We
      enter
      into leases for our ATM locations, which generally provide for payment to the
      lessor of either a portion of the fees generated by use of the ATM or a fixed
      monthly rent. Most of our leases have an initial, five to seven year terms
      and
      include various renewable time periods (typically the site owner renews under
      the lease). We generally have the right to terminate a lease if the ATM does
      not
      meet certain performance standards. The lessor generally has the right to
      terminate a lease before the end of the lease term if we breach the lease
      agreement or become the debtor in a bankruptcy proceeding.





*Typical
      ATM Transaction* .
      In a
      typical ATM transaction in our network, a debit or credit cardholder inserts
      a
      credit or debit card into an ATM to withdraw funds or obtain a balance inquiry.
      The transaction is routed from the ATM to a processing center at Elan (formerly
      Genpass), First Data or Columbus Data by dedicated dial-up communication links.
      The processing center computers identify the card issuer by the bank
      identification number contained within the card's magnetic strip. The
      transaction is then switched to the local issuing bank or card organization
      (or
      its designated processor) for authorization. Once the authorization is received,
      the authorization message is routed back to the ATM and the transaction is
      completed.





*Authorization
      of ATM transactions* .
      Transactions processed on our network ATMs are the responsibility of the card
      issuer. We are not liable in the event of an error in dispensing cash if we
      receive a proper authorization message from a card issuer.





*Transaction
      Volumes* .
      We
      monitor the number of transactions that are made by cardholders on ATMs in
      our
      network. The transaction volumes processed on any given ATM are affected by
      a
      number of factors, including location of the ATM, the amount of time the ATM
      has
      been installed at that location, and market demographics. Our experience is
      that
      transaction volume on a newly installed ATM is initially very low and increases
      for a period of three to six months as consumers become familiar with the
      machine location. We processed a total of 18,865,090 transactions in fiscal
      2006
      and 15,616,794 transactions on our network in fiscal 2005.





*ATM
      transactions and revenues* .
      During
      2006, compared to 2005, the Company experienced no change in the average number
      of withdrawals and revenues per ATM.





**Acquisition
      Strategy** ****





During
      the period from February 2004 through December 2005, the Company completed
      four
      acquisitions which added more than 3,200 ATM contract locations to its network.
      While the Company will always evaluate the attractiveness of possible
      acquisitions, its current strategy is not to grow via acquisitions, but rather,
      via organic growth.




Page
          11





**Business
      Continuity**





Global
      Axcess’ business continuity plan includes the following two main components:





·
            a
                plan to ensure the continuous operation of Global Axcess’ core information
                technology infrastructure; and





·
            a
                plan to minimize disruption of the remainder of its business functions.





**Information
      Technology Infrastructure**





The
      Company maintains Universal Power Systems and diesel generators for back-up
      power in the event of temporary power outages. In the event of a longer-term
      business interruption, our Business Continuity Plan directs the process in
      which
      all core IT infrastructure needs are re-routed to the Company’s back-up site at
      SunGard Availability Services (SunGard), an international leader in business
      continuity services. The Company’s back-up site is located in Carlstadt, New
      Jersey.





**Other
      Business Functions**





The
      Company has a Business Continuity Plan for the remainder of its business
      functions consisting of 4 elements: Prevention, Event Management, Event
      Mitigation, and Event Recovery. The plan addresses events such as vendor service
      interruption, natural disasters, and issues with our internal systems. In
      the
      event of a catastrophic event, the
      Company also maintains alternate sites for office operations through an
      arrangement with SunGard. These alternate sites, which are located in Lake
      Mary,
      Florida and Atlanta, Georgia, provide immediate access to the technical and
      office facilities required for failover. In addition, we maintain copies of
      our
      software and critical business information off-site.





**Competition**





Individuals
      seeking ATM-related services have a variety of choices at banking locations
      and
      within retail establishments. The convenience cash delivery and balance inquiry
      market is, and we expect it to remain, highly competitive due to the fact that
      there are few barriers to entry into the business. Our principal competition
      arises from other independent sales organizations, or ISOs, similar to the
      Company including NetBank, Innovus, TRM Corp, IMS and Cardtronics. We also
      compete with numerous national and regional banks that operate ATMs at their
      branches and at other non-branch locations. In addition, we believe that there
      will be continued consolidation in the ATM industry in the United States.
      Accordingly, new competitors may emerge and quickly acquire significant market
      share.





Competitive
      factors in our business include network availability and response time, price
      to
      both the card issuer and to our customers, and ATM locations. Our principal
      competitors are national ATM companies that have a dominant share of the market.
      These companies have greater sales, financial, production, distribution and
      marketing resources than ours.





We
      have
      identified the following categories of ATM network operators:





·
            Financial
                Institutions.Banks
                have been traditional deployers of ATMs, which have customarily been
                located at their banking facilities. In addition, the present trend
                is for
                many banks to place ATMs in retail environments when the bank has
                an
                existing relationship with the retailer. This practice presents both
                a
                threat and an opportunity. It is a threat if the financial institution
                chooses to manage this program on its own, whereby it would limit
                the ATM
                locations available to the Company. On the other hand, it may be
                an
                opportunity if the financial institution chooses to outsource the
                management of this type of program to companies such as Global Axcess
                Corp.





Page
          12


·
            Credit
                Card Processors.Several
                credit card processors have diversified their business by taking
                advantage
                of existing relationships with merchants to place ATMs at sites with
                those
                merchants.





·
            Third
                Party Operators.This
                category includes data processing companies that have historically
                provided ATM services to financial institutions.





·
            Companies
                that have the capability to provide both back-office services and
                ATM
                management services.





·
            Consolidator
                networks.
                Consolidator networks such as TRM/E-Funds and Cardtronics/E-Trade,
                whose
                operations consist of approximately 17,957 ATMs and 25,726 ATMs,
                respectively.





Management
      believes that many of the above providers, with the exception of Cardtronics,
      deploy ATMs to diversify their operations and that the operation of the ATM
      network provides a secondary income source to a primary business.





In
      April
      1996, national debit and credit card organizations changed the rules applicable
      to their members to permit the imposition of surcharge/convenience fees. Since
      that time, we have experienced increased competition, both from existing ATM
      network operators and from new companies entering the industry. There can be
      no
      assurance that we will compete successfully with national ATM companies. A
      continued increase in competition could adversely affect our margins and may
      have a material adverse effect on our financial condition and results of
      operations.





**ATM
      Network Technology**





Most
      of
      the ATMs in our network are manufactured by Triton and Tranax. In addition,
      we
      own several other ATM brands such as Wincor, WRG, Greenlink, NCR EasyPoint
      (formerly Tidel), and others. Due to the wide range of advanced technology
      available, we are able to supply our customers with state-of-the-art ATMs
      providing electronic features and reliability through sophisticated diagnostics
      and self-testing routines. The various machine types perform functions ranging
      from the basic routines, which include dispensing cash, displaying account
      information, and providing a receipt to the user, to more sophisticated routines
      such as dispensing stamps or coupons and providing advertising revenue through
      the use of monochrome or color monitor graphics. Many of our ATMs are modular
      and upgradeable so we may adapt them to provide additional services in response
      to changing technology and consumer demand. Our field services staff tests
      each
      ATM prior to placing it in service.





**Vault
      Cash** ****





Currently,
      we rent cash (“vault cash”) for 923 of our ATMs through agreements with various
      banks, which are located throughout the United States. The vault cash is
      replenished periodically based upon cash withdrawals. In addition, our branded
      cash partners provide cash for 648 ATMs covered under our Branded Cash program.
      For the remaining 2,861 ATMs in our network, such as merchant-owned ATMs, ATMs
      owned by other third party owners and ATMs that are only processed under our
      contract with Elan (formerly Genpass), we do not supply the vault cash. See
      “Liquidity and Capital Resources” section of Item 6 Management's Discussion and
      Analysis of Financial Condition.




**Significant
      Relationships** ****





We
      have
      agreements with Food Lion and Kash n’ Karry Stores for whom approximately 665
      and 97 ATMs, respectively, have been installed at their locations as of December
      31, 2006. Each of these agreements were extended in September 2003 to run
      through April 2011 and set to automatically renew, unless terminated 60 days
      prior. In addition, the site owner has the right to terminate the lease before
      the end of the lease term under certain circumstances. Currently, there is
      no
      such breach or circumstance. The aggregate revenues from Food Lion and Kash
      n’
Karry Stores accounted for approximately 23.1% and 4.1% of our revenues from
      continuing operations in fiscal year 2006, respectively.




Page
          13




**Regulatory
      Matters**





*Surcharge
      Regulation* .  The
      imposition of surcharge fees is not currently subject to federal regulation.
      However, several states in which we currently have no operations have banned
      companies from imposing such fees, generally as a result of activities of
      consumer advocacy groups that believe that transaction fees are unfair to users.
      There have been, however, various state and local efforts in the United States
      to ban or limit transaction fees. We are not aware of any existing bans or
      limits on transaction fees applicable to us in any of the jurisdictions in
      which
      we currently do business. However, some states, particularly Tennessee,
      Nebraska, Connecticut, Delaware, New Mexico, West Virginia, Wyoming, and Iowa,
      require us to obtain a bank sponsor in order to charge withdrawal fees. As
      a
      result, in these states we must make arrangements with a local bank to act
      as a
      sponsor of our ATMs which typically involves additional documentation costs
      and
      payment of a fee to the bank. Additionally, states such as Illinois and New
      Jersey limit or ban withdrawal fees on electronic benefit card usage, which
      has
      had virtually no impact on our financial statements. Nevertheless, we cannot
      guarantee that transaction fees will not be banned or limited in the
      jurisdictions in the United States in which we operate. Such a ban or limit
      could materially limit or reduce our ATM revenues.





Our
      ATM
      business is subject to government and industry regulations, which we describe
      below. This regulatory environment is subject to change and various proposals
      have been made which, if finalized, could affect our ATM operations. Our failure
      to comply with existing or future laws and regulations pertaining to our ATM
      business could result in restrictions on our ability to provide our products
      and
      services, as well as the imposition of civil fines.




*Electronic
      Funds Transfer Act* *.* The
      United States Electronic Funds Transfer Act, while directed principally at
      banks
      and other financial institutions, also has provisions that apply to us. In
      particular, the act requires ATM operators who impose withdrawal fees to notify
      a customer of the withdrawal fee before the customer completes a withdrawal
      and
      incurs the fee. Notification must be made through signs placed at or on the
      ATM
      and by notification either on the ATM screen or through a print-out from the
      ATM. All of our ATMs provide both types of notification.




*Americans
      with Disabilities Act* *.* The
      Americans with Disabilities Act (“ADA”) currently includes provisions regulating
      the amount of clear floor space required in front of each ATM, prescribing
      the
      maximum height and reach depth of each ATM and mandating that instructions
      and
      all information for use of the ATM be made accessible to and independently
      usable by persons with vision impairments. The United States Department of
      Justice is currently drafting new accessibility guidelines under the ADA that
      will cover virtually all aspects of commercial activity relating to disabled
      persons. We expect that these new guidelines will include provisions that will
      require our ATMs to be more accessible to the disabled. Under the current
      proposals, height and reach requirements would be shortened, keypads would
      be
      required to be laid out in the manner of telephone keypads with selected Braille
      symbols, and ATMs would be required to have process speech capabilities. These
      new guidelines would affect the manufacture of ATM equipment going forward
      and
      could require us to retire or upgrade many of the ATMs we own, potentially
      at
      significant cost to us. This also applies to those merchant-owned ATMs where
      we
      are not responsible for upgrade costs. The comment period on the proposed
      guidelines ended May 31, 2005. No guidelines have yet been promulgated.
      Should the guidelines proposed become final, we anticipate an 18-month phase-in
      before new equipment in new locations must comply with new accessibility
      requirements.





*Anti-fraud
      Initiatives* .  ** Because
      of reported instances of fraudulent use of ATMs, legislation is pending that
      would require state or federal licensing and background checks of ATM operators.
      There are proposals pending in some jurisdictions, including New York and New
      Jersey, which would require merchants that are not financial institutions to
      be
      licensed in order to maintain an ATM on their premises; other jurisdictions
      currently require such licensing. New licensing requirements could increase
      our
      cost of doing business in those markets.




Page
          14





*Electronic
      Financial Transactions Network* *Regulations* . ** Electronic
      Financial Transactions Networks (“EFTN”) has adopted extensive regulations that
      are applicable to various aspects of our operations and the operations of other
      ATM operators. These regulations include the encryption standards described
      more
      fully below and limitations on the maximum amount of cash that can be withdrawn
      from each machine. As described in “Triple DES” below, we will need to convert
      our ATMs to the new encryption standards by their compliance dates. With respect
      to all other EFTN regulations, we believe that we are in material compliance
      with the regulations that are currently in effect and, if any deficiencies
      were
      discovered, we would be able to correct them before they had a material adverse
      impact on our business.





*Triple
      DES* *.*  ** The
      Digital Encryption Standard, or DES, is the encryption standard that ATMs use
      to
      encrypt the personal identification number that is transmitted to the processing
      agent during an ATM transaction. Due to concerns over the increased processing
      power of computers and their potential to decode the DES encryption, MasterCard
      International (Mastercard) and VISA have advised all ATM operators that any
      ATM
      using its network must be compliant with the more rigorous and secure Triple
      Data Encryptions Standard Compliance “Triple DES” standard.





Triple
      DES uses an enhanced encryption key pad residing in ATMs and point-of-sale
      terminals that makes it far more difficult for even the fastest computers to
      determine all the possible algorithmic combinations used to scramble the
      consumer’s personal identification number (PIN). The use of Single DES keys,
      while effective for decades without any known security breaches by computer
      hackers, is now thought to be vulnerable to today's faster computer
      processors.





The
      nation's largest PIN-based debit network, Star, which is owned by First Data
      Corp., a company based in Omaha, Nebraska, mandated that after June 30, 2003,
      all new and replacement ATMs must be capable of supporting Triple DES
      transactions. MasterCard required every new or replaced ATM to be Triple DES
      compliant by April 1, 2002 and that all ATMs that are installed or to be
      installed must be Triple DES compliant by March 31, 2005. VISA had given the
      networks until December 31, 2005 to be Triple DES compliant. The Company has
      been granted an extension by MasterCard, VISA and STAR for 100% Triple DES
      compliance by December 31, 2007. As of February 28, 2007, approximately 30%
      of
      the ATMs we own were not equipped with Triple DES encryption. We have adopted
      a
      policy that any new ATMs that we acquire from a manufacturer must be Triple
      DES
      compliant. We believe that completion of the Triple DES conversion of the ATMs
      we own will cost approximately $967,000. Because we expect to use our field
      service network to make the necessary conversions, we believe our ATMs can
      be
      compliant with Triple DES by the deadline.





All
      new
      ATMs that we purchase are Triple DES compliant. A number of solutions have
      been
      developed to upgrade legacy ATMs, such as those in our network, from DES to
      Triple DES. The Company has upgraded 2,538 ATMs to date. Additionally, the
      Company has plans to upgrade the approximately 469 legacy company-owned ATMs
      in
      our network and to work with its merchant customers to upgrade approximately
      1,203 merchant-owned legacy ATMs.




Although
      the Company believes there are solutions available which will allow us to
      complete the upgrade of our legacy ATMs, we cannot guarantee that such upgrades
      will be successful. In addition, we cannot state with any degree of certainty
      that such solutions will be affordable or that financing for these upgrades
      will
      be available on terms and conditions acceptable to us at the time needed. In
      the
      event we are not successful in upgrading our legacy ATMs, such non-compliant
      ATMs would be taken out of service, which would have a material adverse impact
      on our results of operations.





*Network
      Regulations* .
      National and regional networks are subject to extensive regulations that are
      applicable to various aspects of our operations and the operations of other
      ATM
      network operators. We believe that we are in material compliance with all such
      regulations.




Page
          15








**Employees**





At
      December 31, 2006, the Company had 51 full time employees working in the
      following subsidiaries:


Global
                  Axcess Corp
              
              
              3Nationwide
                  Money Services
              
              
              4851





Our
      business is highly automated and we outsource specialized, repetitive functions
      such as cash delivery and security. As a result, our labor requirements for
      operation of the network are relatively modest and are centered on monitoring
      activities to ensure service quality and cash reconciliation and control. None
      of our employees are represented by a labor union or covered by a collective
      bargaining agreement. We have not experienced work stoppages and consider our
      employee relations to be good.




Page
          16




**Risk
      Factors**




We
      operate in a rapidly changing business environment that involves substantial
      risk and uncertainty. The following discussion addresses some of the risks
      and
      uncertainties that could cause, or contribute to cause, actual results to differ
      materially from expectations. We caution all readers to pay particular attention
      to the descriptions of risks and uncertainties described below and in other
      sections of this report, and our other filings with the SEC.





If
      any of
      the following risks actually occur, our business, financial condition or results
      of operations could be materially adversely affected. In such case, the trading
      price of our Common Stock could decline and we may be forced to consider
      strategic alternatives with regards to current operations.





This
      Report on Form 10-KSB contains forward-looking statements that involve risks
      and
      uncertainties. Our actual results could differ materially from those anticipated
      in the forward-looking statements as a result of certain factors, including
      the
      risks described below and elsewhere in this Annual Report on Form
      10-KSB.




**Risks
      Relating to Our Business and Operations**




·
            ***Default
                Under our Credit
                Agreements.***




We
      have
      received a waiver of certain covenants from our senior lender during the 1st,
      2nd, 3rd and 4th quarters of 2006. There were no other covenants under debt
      agreements with lenders that were not met. There is no assurance that we would
      receive waivers in the future should we continue not to meet our covenant
      requirements.





·
            ***Our
                sales depend on transaction fees from our networks of
                ATMs.***A
                decline in either transaction volume or the level of transaction
                fees
                could reduce our sales and harm our operating results**.**





·
            ***Transaction
                fees for our network of ATMs produce substantially all of our
                sales.***Consequently, our future operating results will depend on both transaction
                volume and the amount of the transaction fees we receive. Our transaction
                volume and fees will depend principally upon:





·
            
            our
                ability to find replacement sites in the event of merchant
                turnover;·
            
            competition,
                which can result in over-served markets, pressure both to reduce
                existing
                fee structures and increase sales discounts to merchants and reduced
                opportunities to secure merchant or other placements of our
                machines;·
            
            our
                ability to service, maintain and repair ATMs in our network promptly
                and
                efficiently;·
            
            continued
                market acceptance of our services; and·
            
            government
                regulation and network adjustment of our
                fees.




·
            ***Changes
                in payment technologies and customer preferences could reduce the
                use of
                ATMs and, as a result, reduce our sales.***New
                technology such as RFID and other contact-less payment systems that
                eliminate the need for ATMs may result in the existing machines in
                our
                networks becoming obsolete, requiring us, or the merchants in our
                networks
                who own their machines, to either replace or upgrade our existing
                machines. Any replacement or upgrade program to machines that we
                own or
                that we must upgrade or replace under contracts with merchant owners
                would
                involve substantial expense. A failure to either replace or upgrade
                obsolete machines could result in customers using other alternative
                payment methods, thereby reducing our sales and reducing or eliminating
                any future operating margins.





Page
          17


The
      use
      of debit cards by consumers has been growing. Consumers use debit cards to
      make
      purchases from merchants, with the amount of the purchase automatically deducted
      from the consumers' checking accounts. An increasing number of merchants are
      accepting debit cards as a method of payment and are also permitting consumers
      to use the debit cards to obtain cash. The increasing use of debit cards to
      obtain cash may reduce the number of cash withdrawals from our ATMs and may
      adversely affect our revenues from surcharge/convenience fees. A continued
      increase in the use and acceptance of debit cards could have a material adverse
      effect on our business, results of operations and financial
      condition.





Additionally,
      the growth of surcharge free ATM networks by consumers may reduce the number
      of
      cash withdrawals from our ATMs and may adversely affect our revenues from
      surcharge/convenience fees. A continued increase in surcharge free ATM networks
      could have a material adverse effect on our business, results of operations
      and
      financial condition ***;***





·
            ***We
                depend on Elan (formerly Genpass) and Pendum to provide many services
                on
                which we rely.***Our ATM business requires close coordination of merchant relationships,
                service company relationships, cash management activities and
                telecommunication services. In an effort to reduce costs and improve
                our
                service levels, we entered into agreements with Elan and Pendum pursuant
                to which Elan and Pendum will provide many of these services to us.
                Elan
                also provides us with transaction processing services. As a result,
                we
                depend on Elan and Pendum to provide many services that are necessary
                to
                the operations of our ATM business. At some point, Elan and Pendum
                may be
                unable or unwilling to provide all of these services at a level that
                we
                consider necessary. In that event, if we are unable to terminate
                our
                relationship with Elan and Pendum or are unable to obtain replacement
                services in a timely manner, our transaction volume could be reduced
                and
                our relationships with our merchants or financial institutions could
                deteriorate;





·
            ***Changes
                in laws or card association rules affecting our ability to impose
                surcharge/convenience fees and continued customer willingness to
                pay
                surcharge/convenience fees***;





·
            ***Our
                ability to form new strategic relationships and maintain existing
                relationships with issuers of credit cards and national and regional
                card
                organizations***;





·
            ***Our
                ability to expand our ATM based business***;





·
            ***The
                availability of financing at reasonable rates for vault cash and
                for other
                corporate purposes, including funding our ATM expansion
                plans***;





·
            ***Our
                ability to maintain our existing relationships with Food Lion and
                Kash n’
                Karry***;





·
            ***Our
                ability to keep our ATMs at other existing locations and to place
                additional ATMs in preferred locations at reasonable rental
                rates***;




·
            ***The
                extent and nature of competition from financial institutions, credit
                card
                processors and third party operators, many of whom have substantially
                greater resources***;





Page
          18


·
            ***Our
                ability to maintain our ATMs and information systems technology without
                significant system failures or breakdowns***;





·
            ***Our
                ability to develop new products and enhance existing products to
                be
                offered through ATMs, and our ability to successfully market these
                products***;





·
            ***Our
                ability to retain senior management and other key
                personnel***;




·
            ***Our
                ability to comply with mandated Triple DES
                configuration****;
                and*





·
            ***Changes
                in general economic conditions***.




***The
      ATM markets are highly competitive, which could limit our growth or reduce
      our
      sales.*** ** While
      our
      principal competition comes from national and regional banks, we are also
      experiencing increased competition from independent ATM companies. All of these
      competitors offer services similar to or substantially the same as those
      services offered by us. We expect that competition will intensify as
      consolidation within the financial services industry continues. In addition,
      the
      majority of these competitors are larger, more established and have greater
      financial, technical, and marketing resources, greater name recognition, and
      a
      larger installed customer base than the Company. Such competition could prevent
      us from obtaining or maintaining desirable locations for our machines or could
      cause us to reduce user fees generated by our ATMs, which could cause our
      profits to decline.





In
      addition to our current competitors, we expect substantial competition from
      new
      companies. We cannot assure that the Company will be able to compete effectively
      against current and future competitors. Increased competition could result
      in
      price reductions, reduced gross profits or loss of market share.





***Our
      failure to achieve and maintain adequate internal controls, in an industry
      that
      is relatively new and complex, could result in a loss of investor confidence
      regarding our financial reports and have an adverse effect on our business,
      financial condition, results of operations and stock
      price.*** During
      the course of the evaluation of our internal controls for the second and third
      interim periods during fiscal year 2005, we identified material weaknesses
      in
      our internal control over financial reporting. For a discussion of these
      weaknesses and the steps we have taken to remedy these weaknesses, see
      Item 8A - “Controls and Procedures.” Failure to achieve and maintain an
      effective internal control environment could result in a loss of investor
      confidence regarding the accuracy and completeness of our financial reports.
      Moreover, effective internal control is necessary for us to produce reliable
      financial reports. If we cannot produce reliable financial reports or otherwise
      maintain appropriate internal control, our business, financial condition and
      results of operations could be harmed, investors could lose confidence in our
      reported financial information, and the market price for our stock could decline
      significantly.





***If
      merchant-owned ATM customers terminate their relationships with us prior to
      the
      termination of their contracts or do not renew their contracts upon their
      expiration, it could reduce our ATM sales.*** Although
      our merchant-owned ATM customers have multi-year contracts with us for
      transaction processing services, due to competition, some of these customers
      may
      leave us for our competitors prior to the expiration of their contracts, or
      may
      not renew their contracts upon their expiration. When these contracts expire,
      we
      pursue these customers to remain processing with us. In the event they terminate
      their relationship with us prior to the expiration of their contacts, we seek
      payment of damages under a breach of contract clause in our contracts. If a
      substantial number of merchant-owned ATM customers end their relationships
      with
      us, it could cause a reduction in our ATM sales.





***Increases
      in interest rates will increase our expenses.*** ** We
      have
      credit and vault cash facilities that carry variable interest rates.
      Consequently, a rise in interest rates would increase our operating costs and
      expenses.




Page
          19





***Our
      ATM business operates in a changing and unpredictable regulatory
      environment.*** ATM
      withdrawal transactions involve the electronic transfer of funds through
      Electronic Financial Transactions Networks (EFTNs). The United States Electronic
      Funds Transfer Act provides the basic framework establishing the rights,
      liabilities and responsibilities of participants in EFTNs. In addition, there
      have been various state and local efforts to ban, limit or otherwise regulate
      ATM transaction fees, which make up a large portion of our sales for our full
      placement ATMs and the principal source of ATM revenues for merchants with
      merchant-owned ATMs in our network. For example, in Tennessee, Nebraska,
      Connecticut, Delaware, New Mexico, West Virginia, Wyoming, and Iowa only
      bank-sponsored ATMs can impose withdrawal fees. As a result, in these states
      we
      must make arrangements with a local bank to act as a sponsor of ATMs in our
      networks, which typically involves additional documentation costs and payment
      of
      a fee to the bank.





Because
      of reported instances of fraudulent use of ATMs, legislation is pending that
      would require state or federal licensing and background checks of ATM operators.
      There are proposals pending in some jurisdictions, including New York and New
      Jersey, which would require merchants that are not financial institutions to
      be
      licensed in order to maintain an ATM on their premises; other jurisdictions
      currently require such licensing. New licensing requirements could increase
      our
      cost of doing business in those markets.





***New
      government and industry standards will increase our costs and, if we cannot
      meet
      compliance deadlines, could require us to remove non-compliant machines from
      service.*** ** The
      Digital Encryption Standard, or DES, is the encryption standard that ATMs use
      to
      encrypt the personal identification number that is sent to an ATM processing
      agent during an ATM transaction. As we discuss in “Regulatory Matters”, due to
      security concerns, MasterCard International (Mastercard), one of the largest
      EFTNs in the United States has required that ATMs using their networks be
      compliant with a new DES, known as “Triple DES.” Compliance was required by
      December 31, 2006 for MasterCard. As of December 31, 2006
      approximately 30% of the ATMs we own were not equipped with Triple DES
      encryption. The Company has been granted an extension by MasterCard, VISA and
      STAR for 100% Triple DES compliance by December 31, 2007. We believe that the
      remaining cost of upgrading the ATMs we own, as well as merchant-owned ATMs
      where we have or will assume upgrade costs, to comply with Triple DES will
      be
      approximately $967,000.





The
      Americans with Disabilities Act, or ADA, currently includes provisions
      regulating the amount of clear floor space required in front of each ATM,
      prescribing the maximum height and reach depth of each ATM, and mandating that
      instructions and all information for use of the ATM be made accessible to and
      independently usable by persons with vision impairments. The United States
      Department of Justice is currently drafting new accessibility guidelines under
      the ADA that will cover virtually all aspects of commercial activity relating
      to
      disabled persons. We expect that these new guidelines will include provisions
      addressing ATMs and how to make them more accessible to the disabled. Under
      the
      current proposals, height and reach requirements would be shortened, keypads
      would be required to be laid out in the manner of telephone keypads with
      selected Braille symbols and ATMs would be required to possess speech
      capabilities. These new guidelines would affect the manufacture of ATM equipment
      going forward and could require us to retire or upgrade many of the ATMs we
      own,
      as well as merchant-owned ATMs where we are responsible for upgrade costs,
      potentially at significant expense to us. The comment period on the proposed
      guidelines ended May 31, 2005. No guidelines have yet been promulgated.
      Should the guidelines proposed become final, we anticipate an 18-month phase-in
      before new equipment in new locations must comply with new accessibility
      requirements.





If
      ATMs
      in our network are not compliant with Triple DES, EMV and any applicable ADA
      guidelines by the respective deadlines and we cannot obtain compliance waivers,
      we may have to remove the non-compliant ATMs from service and, as a result,
      our
      ATM revenues could be materially reduced during the period of time necessary
      to
      become compliant.





***If
      we, our transaction processors, our EFTNs or our other service providers
      experience system failures, the ATM products and services we provide could
      be
      delayed or interrupted, which would harm our business.*** Our
      ability to provide reliable service largely depends on the efficient and
      uninterrupted operations of our transaction processors, EFTNs and other service
      providers. Any significant interruptions could severely harm our business and
      reputation and result in a loss of sales. Additionally, if we cause any such
      interruption, we could lose the affected merchants or damage our relationships
      with them. Our systems and operations, and those of our transaction processors,
      EFTNs and other service providers, could be exposed to damage or interruption
      from fire, natural disaster, unlawful acts, terrorist attacks, power loss,
      telecommunications failure, unauthorized entry and computer viruses. We cannot
      be certain that any measures we and our service providers have taken to prevent
      system failures will be successful or that we will not experience service
      interruptions.




Page
          20


***We
      rely on EFTNs and transaction processors; if we cannot renew our agreements
      with
      them, if they are unable to perform their services effectively or if they
      decrease the level of the transaction fees we receive, it could harm our
      business.*** We rely
      on several EFTNs and transaction processors to provide card authorization,
      data
      capture and settlement services to us and our merchant customers. Any inability
      on our part to renew our agreements with these or similar service providers
      or
      their failure to provide their services efficiently and effectively may damage
      our relationships with our merchants and may permit those merchants to terminate
      their agreements with us.





Our
      ATM
      revenues depend to a significant extent upon the transaction fees we receive
      through EFTNs. If one or more of the EFTNs in which we participate reduces
      the
      transaction fees it pays us, and we are unable to route transactions to other
      EFTNs to replace them, our ATM revenues would be reduced. Our ATMs do not meet
      all of the requirements for first tier status. As a means of mitigating the
      impact of the lower interchange rates paid by Visa/Plus we have had our
      processing agents adjust priority routing tables to, whenever possible, move
      transactions through EFTNs whose interchange rates are higher than those paid
      by
      the Visa/Plus EFTN.





***We
      experienced significant amounts of theft in our ATM operations in 2006. If
      theft
      continues to increase, our results of operations would be harmed.*** During
      2006, our ATM operations experienced approximately $154,700 in theft. We insure
      all ATMs and cash within the ATMs with certain deductible levels for each.
      Increasing incidents of ATM and cash theft could increase our cost of insurance
      or lead to the cancellation of insurance coverage.




**Risks
      Relating to Our Common Stock**





***The
      price of our Common Stock has been highly volatile due to factors that will
      continue to affect the price of our stock.*** Since
      January 2001, our Common Stock has traded as high as $13.75 and as low as $0.20
      per share (after giving effect to the 1-for-5 reverse stock split of our common
      stock that occurred on April 28, 2005). Historically, the over-the-counter
      markets for securities such as our Common Stock have experienced extreme price
      fluctuations. Some of the factors leading to this volatility include:





·
      fluctuations in our quarterly revenues and
      operating results;





·
      announcements of product releases or new
      services by us or our competitors;





·
      announcements of acquisitions and/or
      partnerships by us or our competitors; and





·
      increases in outstanding shares of our
      Common Stock upon exercise or conversion of convertible notes pursuant to our
      private placement transactions.





There
      is
      no assurance that the price of our Common Stock will not continue to be volatile
      in the future.





***A
      significant portion of our total outstanding shares of Common Stock may be
      sold
      in the market in the near future.*** This
      could cause the market price of our Common Stock to drop significantly, even
      if
      our business is doing well. Sales of a substantial number of shares of our
      Common Stock in the public market could occur at any time. These sales, or
      the
      perception in the market of such sales, may have a material adverse effect
      on
      the market price of our Common Stock. As of December 31, 2006, approximately
      9.7
      million or 46% of registered securities are beneficially owned by 10 persons
      or
      groups. Sales of substantial amounts of these securities, when sold, could
      reduce the market price of our Common Stock.




Page
          21





***We
      do not plan to declare dividends on our common stock.*** ** We
      do not
      plan to declare dividends on our common stock for the foreseeable future and,
      in
      any event, under the terms of our credit facility with Wachovia Bank, are
      prohibited from doing so.





**Risks
      Relating to Private Placement**





***Private
      Placement entered with CAMOFI Master LDC greatly hampers our ability to raise
      equity and debt financing without significant equity
      dilution.*** ** On
      October 27, 2005, to obtain funding for the acquisition of merchant contracts
      and equipment from Amer-E-Com Digital Corporation, we entered into a Securities
      Purchase Agreement (the "Purchase Agreement") with CAMOFI Master LDC (the
      "Investor") on October 27, 2005 for the sale of (i) a $3,500,000, 9% Senior
      Subordinated Secured Convertible Note (the "Note") and (ii) stock purchase
      warrants (the "Warrant") to purchase 910,000 shares of our common stock. The
      obligations under the Note are subordinated to Wachovia Bank. We closed the
      financing pursuant to the Amer-E-Com Purchase Agreement on October 27, 2005.





The
      Note
      bears interest at 9%, matures on October 27, 2010 and is convertible into our
      common stock, at the Investor's option, at a conversion price of $1.45. We
      may
      prepay all or part of the Note in cash at 110% of the principal amount plus
      accrued interest. The full principal amount of the Note is due upon default
      under the terms of the Note. In addition, we granted the Investor a security
      interest in substantially all of our assets and intellectual property as well
      as
      registration rights. In the event we issue common stock or a common stock
      equivalent at a price below the conversion price, the conversion price of the
      Note will be decreased to equal the price of the new common stock.





The
      Warrant is exercisable until five years from the date of issuance at an exercise
      price of $1.75 per share. In the event we issue common stock or a common stock
      equivalent at a price below the exercise price, the exercise price of the
      Warrant will be decreased to equal the price of the new common stock and the
      number of Warrants will be increased such that the aggregate exercise value
      of
      the Warrants will be equal to the aggregate exercise value of the Warrants
      prior
      to the issuance of the new common stock.





**Risk
      Relating to Our Operating Results**





Our
      business is subject to numerous factors affecting our operating results. In
      addition to the risk factors discussed above, our operating results may be
      affected by:





***We
      have an operating history which may not be an indicator of our future
      results*** **.** As a
      result of our operating history, our plan for growth, and the increasingly
      competitive nature of the markets in which we operate, the historical financial
      data may not be a good indicator of our future revenues and operating expenses.
      Our planned expense levels will be based in part on expectations concerning
      future revenues, which is difficult to forecast accurately based on current
      plans of expansion and growth. We may be unable to adjust spending in a timely
      manner to compensate for any unexpected shortfall in revenues.




***If
      we continue to incur operating losses, we may be unable to continue our current
      operations.*** ** We
      have
      incurred significant operating losses over the last two fiscal years. During
      the
      year ended December 31, 2006, the net loss applicable to common stockholders
      of
      $4.9 million contributed to an accumulated deficit of $10.8 million as of
      December 31, 2006. If we continue to incur operating losses and consistently
      fail to be a profitable company, we may be unable to continue our current
      operations. Our future profitability depends on our ability to retain current
      customers, obtain new customers, to respond to competition, to introduce new
      products and services, and to successfully market and support our products.
      We
      cannot assure you that this will be achieved.




Page
          22





***If
      we cannot raise adequate lease financing in the future, we may be unable to
      continue to expand our ATM portfolio.*** ** In
      the
      future, we will need to raise lease financing to fund new purchases of ATMs.
      Funding from lease financing sources may not be available when needed or on
      favorable terms. If we cannot raise adequate lease financing to satisfy our
      capital requirements, we may have to limit, delay, scale-back or eliminate
      future growth. **




***The
      termination of our contract with our major customers could negatively impact
      our
      results of operations and may result in a significant impact to
      revenues.*** ** In
      November 2001, we entered into new contracts with Food Lion and an affiliated
      company, Kash n’ Karry. Such contracts replaced a prior agreement we had with
      Food Lion that had expired in September 2001. The new contracts were for a
      five-year term and included approximately 550 sites then operating plus an
      additional 400 sites that we began servicing in September 2001. During fiscal
      year 2003, we renegotiated these contracts to extend the term to April 2011
      and
      as of December 31, 2006 have in service approximately 762 ATM sites. The sites
      maintained by Food Lion and Kash n’ Karry constitute approximately 17% of our
      total sites and approximately 27% of our total ongoing revenues. Historically,
      these sites have generated average revenue per site in excess of other sites.
      The loss of or any further reduction in business from this major customer could
      have a material adverse impact on our working capital and future results of
      operations.




***The
      continued growth and acceptance of debit cards as a means of payment could
      negatively impact our results of operations*** **.** The
      use
      of debit cards by consumers has been growing. Consumers use debit cards to
      make
      purchases from merchants, with the amount of the purchase automatically deducted
      from the consumers' checking accounts. An increasing number of merchants are
      accepting debit cards as a method of payment and are also permitting consumers
      to use the debit cards to obtain cash. The increasing use of debit cards to
      obtain cash may reduce the number of cash withdrawals from our ATMs and may
      adversely affect our revenues from surcharge/convenience fees. A continued
      increase in the use and acceptance of debit cards could have a material adverse
      effect on our business, results of operations and financial condition.





***Any
      regulation or elimination of surcharge/convenience or interchange fees could
      have a material adverse impact on our results of
      operations.*** ** There
      have been various efforts by both consumer groups and various legislators to
      eliminate surcharge/convenience fees, which comprised $10.7 million, or 49.9%,
      of our revenues from continuing operations in 2006. In the event that
      surcharge/convenience fees are eliminated, the revenues generated from cash
      withdrawal transactions would be significantly reduced, which would have a
      material adverse impact on our working capital and future results of operations.
      There have also been efforts by various legislators to eliminate interchange
      fees. Although this would have an immediate, negative impact, we believe,
      although we cannot guarantee, that the industry will respond by increasing
      surcharge/convenience fees to make up the loss in interchange fees. In the
      event
      that the loss of interchange fees could not be passed through via an increase
      in
      surcharge/convenience fees, the elimination of interchange fees would have
      a
      material adverse impact on our working capital and future results of
      operations.




***Mergers,
      acquisitions and personnel changes at financial institutions, Electronic Funds
      Transfer Networks, and Independent Sales Organizations may adversely affect
      our
      business, financial condition and results of
      operations*** **.** Currently,
      the banking industry is consolidating, causing the number of financial
      institutions and ATM networks to decline. This consolidation could cause us
      to
      lose:





·
            current
                and potential customers;





·
            market
                share if the combined entity determines that it is more efficient
                to
                develop in-house products and services similar to ours or use our
                competitors' products and services; and






Page
          23





·
            revenues
                if the combined institution is able to negotiate a greater volume
                discount
                for, or discontinue the use of, our products and services.





***If
      our computer network and data centers were to suffer a significant interruption,
      our business and customer reputation could be adversely impacted and result
      in a
      loss of customers.*** Our
      ability to provide reliable service largely depends on the efficient and
      uninterrupted operations of our computer network systems and third party data
      centers. Any significant interruptions could severely harm our business and
      reputation and result in a loss of customers. Our systems and operations could
      be exposed to damage or interruption from fire, natural disaster, power loss,
      telecommunications failure, unauthorized entry and computer viruses. Although
      we
      and they have taken steps to prevent a system failure, we cannot be certain
      that
      the measures will be successful and that we will not experience system failures.
      Further, our property and business interruption insurance may not be adequate
      to
      compensate us for all losses or failures that may occur.





***We
      may be unable to protect our intellectual property rights, which could have
      a
      negative impact on our results of operations*** **.** Despite
      our efforts to protect our intellectual property rights, third parties may
      infringe or misappropriate our intellectual property rights, or otherwise
      independently develop substantially equivalent products and services. The loss
      of intellectual property protection or the inability to secure or enforce
      intellectual property protection could harm our business and ability to compete.
      We rely on a combination of trademark and copyright laws, trade secret
      protection, and confidentiality and license agreements to protect our
      trademarks, software and know-how. We may find it necessary to spend significant
      resources to protect our trade secrets and monitor and police our intellectual
      property rights.





Third
      parties may assert infringement claims against us in the future. In particular,
      there has been a substantial increase in the issuance of patents for
      Internet-related business processes, which may have broad implications for
      all
      participants in Internet commerce. Claims for infringement of these patents
      are
      becoming an increasing source of litigation. If we become subject to an
      infringement claim, we may be required to modify our products, services and
      technologies or obtain a license to permit our continued use of those rights.
      We
      may not be able to do either of these things in a timely manner or upon
      reasonable terms and conditions. Failure to do so could seriously harm our
      business and operating results. In addition, future litigation relating to
      infringement claims could result in substantial costs to us and a diversion
      of
      management resources. Adverse determinations in any litigation or proceeding
      could also subject us to significant liabilities and could prevent our use
      of
      certain of our products, services or technologies.





**Risk
      Relating to Litigation or Threatened Litigation**





***If
      there is an adverse outcome in the lawsuits that have been filed against us,
      or
      if threatened lawsuits are filed and there is an adverse outcome, our business
      may be materially harmed.*** ** Two
      lawsuits seeking monetary damages were filed against us between September 29,
      2006 and December 31, 2006. The complaints seek, among other things, specified
      and unspecified damages and costs associated with the litigation.





Additionally,
      two significant investors have communicated to us a desire to re-price or unwind
      financial transactions that took place prior to the 2005 restatement of
      earnings. These investors seek, among other things, that convertible debt that
      was issued to them be re-priced or that debt that was converted into company
      stock be converted back into debt. These investors have indicated they would
      like to rescind their previous transactions.





As
      with
      any litigation proceeding, we cannot predict with certainty the eventual outcome
      of these pending lawsuits. Furthermore, we will have to incur expenses in
      connection with these lawsuits, which may be substantial. In the event of an
      adverse outcome, our business could be materially harmed. Moreover, responding
      to and defending the pending litigation could result in a significant diversion
      of management’s attention and resources and an increase in professional
      fees.





Page
          24





**Risk
      Relating to Accounting Rules**





***Changes
      in, or interpretations of, accounting rules and regulations, such as expensing
      of stock options, could result in unfavorable accounting
      charges*** **.** We
      prepare our consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America. These principles
      are subject to interpretation by the SEC and various bodies formed to interpret
      and create appropriate accounting policies. A change in these policies can
      have
      a significant effect on our reported results, and may even retroactively affect
      previously reported transactions. Our accounting policies that may be affected
      by changes in the accounting rules are as follows:




·
      accounting for share-based payments; and





·
      accounting for income taxes.





In
      particular, the Financial Accounting Standard Board ("FASB") recently enacted
      Statement of Financial Accounting ("SFAS") No. 123 (revised 2004), "Share-Based
      Payment" ("SFAS 123R") which we adopted effective January 1, 2006. SFAS 123R
      requires all share-based payments to employees, including grants of employee
      stock options, to be recognized as compensation expense in the consolidated
      financial statements based upon their fair values. Any material future grants
      of
      employee stock options may have an adverse affect on our future consolidated
      financial statements.





In
      June
      2006 the FASB issued Interpretation No. 48, "Accounting for Uncertainty in
      Income Taxes", which clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise's financial statements in accordance with SFAS
      No.
      109, "Accounting for Income Taxes." The interpretation prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      This interpretation also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure, and
      transition. This interpretation is effective for fiscal years beginning after
      December 15, 2006. The Company is currently evaluating the potential impact
      that
      the adoption of this interpretation will have on its financial position and
      results of operations.





Page
          25





**ITEM
              2.**
            **DESCRIPTION
                OF PROPERTIES**




We
      do not
      own any real property. The following table sets forth certain information about
      our leased properties as of December 31, 2006.





Location
            
            Approximate
                SquareFootage
            
            UsePonte
                Vedra Beach, Florida
            
            10,000
                sq. ft.
            
            General
                office use; operations, accounting, and related
                administration.West
                Columbia, South Carolina
            
            3,600
                sq. ft.
            
            General
                warehouse use, equipment storage, and maintenance
                operations.Jacksonville,
                Texas
            
            5,000
                sq. ft.
            
            General
                office and warehouse use, equipment storage, and maintenance
                operations.Duluth,
                Georgia
            
            250
                sq. ft.
            
            General
                office use and administration.Prospect,
                Kentucky
            
            202
                sq. ft.
            
            Sales
                office use and administration.





In
      general, all facilities are leased under operating leases and are in good
      condition.





Page
          26


**ITEM
              3.**
            **LEGAL
                PROCEEDINGS**





In
      March
      2004, the Company received a claim filed by James Collins, a previous employee
      of Global Axcess Corp. The claim was filed in Superior Court of California,
      County of San Diego on March 2, 2004. The claim alleged the following were
      owed
      in connection with the employment agreement: compensation, bonuses and other
      benefits of approximately $316,915; and 90,000 restricted shares and 359,700
      stock options exercisable at $3.75 per share. As of March 31, 2006, the Company
      had accrued a total of $450,000 for the potential legal claim. The claim filed
      by James Collins was settled for $450,000 on May 2, 2006 whereby the Company
      made a lump-sum payment of $300,000 on May 22, 2006 and has agreed to pay the
      remaining $150,000 in 12 monthly installments of $12,500 commencing July 1,
      2006
      and ending June 30, 2007.





Beginning
      in or around October 2005, Nationwide Money Services, Inc. (“Nationwide”) has
      filed suit against various merchants located in several states, alleging that
      these merchants breached the terms of their ATM processing agreements with
      Nationwide or its successor-in-interest, Progressive Ventures, Inc. Many of
      these actions remain pending, while Nationwide has obtained default judgments
      from certain merchants but has yet to receive any settlements. The Company
      recognizes revenue on breached contracts when cash is received and the Company
      has not recognized any revenue on these breached contracts during the fiscal
      years ended December 31, 2006 and 2005. The Company expresses no opinion as
      to
      the likelihood of success or potential amount of recovery in these
      matters.





On
      or
      about July 26, 2006, Nationwide Money Services, Inc. (“Nationwide”) filed suit
      against ATMs R Us, Inc. (“ATMs RUs”), a party with which Nationwide and its
      successor-in-interest, Progressive Ventures, Inc. contracted for the provision
      of certain maintenance and installation services regarding their ATM network
      and
      affiliated merchants. Nationwide alleges in its complaint claims for breach
      of
      contract, tortious interference with contractual relations, tortious
      interference with business relations, violations of the Georgia Trade Secrets
      Act, punitive damages, and attorneys’ fees and expenses of litigation. ATMs R Us
      failed to answer or otherwise respond to Nationwide’s complaint. Nationwide is
      currently taking steps to perfect a default judgment against ATMs R Us in
      accordance with Georgia law. The Company expresses no opinion as to the
      likelihood of success or potential amount of recovery, and has not recorded
      income during the year ended December 31, 2006 relating to this
      matter.





On
      August
      1, 2006, Electronic Payment Systems, LLC (“EPS”), the purchaser of the Company’s
      disposed wholly-owned subsidiary Electronic Payment & Transfer Corporation
      (“EPT”), failed to make its required payment and is in default of the Stock
      Purchase Agreement made and entered into as of September 30, 2005 (See Financial
      Footnote # 10 “Notes Receivable”). The Company sent a default notification
      letter on August 2, 2006 and EPS had thirty days as of the date of the default
      notification to cure the default, which it failed to do. The Company has filed
      suit against EPS and is seeking repayment of the $1,540,000 original note in
      full. The carrying value of this note at December 31, 2006 was zero. The Company
      expresses no opinion as to the likelihood of success or potential amount of
      recovery, and has not recorded income during the year ended December 31, 2006
      relating to this matter.





On
      August
      4, 2006, the Company was served with a demand for arbitration/mediation from
      EFMARK Service Company (“EFMARK”), a provider of maintenance services and a
      provider of cash replenishment services for automated teller machines. EFMARK
      alleged that the Company has failed to compensate EFMARK for services amounting
      to $103,000 and was seeking said amount as well as interest of $32,000. The
      Company believed the demand contained factual inaccuracies and was wholly
      without merit. However, in the spirit of its business relationship with EFMARK,
      the Company settled this claim for $40,000 on October 4, 2006. The Company
      has
      reflected this $40,000 expense in its consolidated financial statements for
      the
      year ended December 31, 2006.





On
      September 29, 2006, the Company was served with process by Renaissance US Growth
      Investment Trust PLC ("Renn") and BFS US Special Opportunities Trust PLC ("BFS"
      and collectively with Renn, the "Plaintiffs"), two investors and shareholders
      of
      the Company. In the Complaint, filed in the Circuit Court of the Seventh
      Judicial Circuit in and for St. John's County, Florida, Plaintiffs allege breach
      of contract, fraud, and negligent misrepresentation. The Plaintiffs are seeking
      monetary damages, attorney fees and rescission of their investment in the amount
      of $1,500,000 based on the Company's restatement of its earnings for the 2nd
      and
      3rd quarters of 2005. The Company denies any and all allegations of wrongdoing
      and intends to vigorously defend such action. As of December 31, 2006, the
      Company has recorded a $200,000 expense accrual for what it deems to be probable
      legal expenses defending this claim and this expense is reflected in the
      Company’s consolidated financial statements for the year ended December 31,
      2006.




Page
          27





On
      October 31, 2006, EFT Integration Inc., a wholly-owned subsidiary of Global
      Axcess Corp, filed a lawsuit styled as EFT Integration, Inc., vs DELTACOM,
      Inc.,
      f/k/a ITC^DELTACOM Communications, Inc., in the Circuit Court, Fourth Judicial
      Circuit, Duval County, Florida, Case No. 16-2006-CA-007992. EFT Integration,
      Inc., has alleged that between January of 2002 and October of 2006, Deltacom,
      Inc., charged amounts in excess of the rates agreed to for long distance
      telephone service and other services, and refused to provide billing records
      for
      verification, despite demand. In the lawsuit, EFT Integration, Inc., has
      asserted claims for an accounting, breach of contract, civil theft and fraud,
      seeking to recover amounts overpaid by the Company and seeking other damages.
      The Company expresses no opinion as to the likelihood of success or potential
      amount of recovery, and has not recorded income during the year ended December
      31, 2006 relating to this matter.





On
      December 26, 2006, the Company was served with process by Robert Colabrese
      (the
“Plaintiff), a former employee of the Company. In the Complaint, filed in the
      Circuit Court of the Seventh Judicial Circuit in and for St. John’s County,
      Florida, Plaintiff alleges that the Company has breached the employment
      agreement entered between the Company and Plaintiff in July 2003. The Plaintiff
      is seeking monetary damages for unpaid wages and commissions, attorney fees
      and
      an accounting of all sales generated through the Plaintiff. The Company denies
      any and all allegations of wrongdoing and intends to vigorously defend such
      action. The Company has a $50,000 accrual recorded on its financial statements
      at December 31, 2006 in connection with this complaint.





On
      or
      about January 29, 2007, Nationwide Money Services, Inc. (“Nationwide”) filed
      suit against the Atlanta Retailers Association, LLC (“ARA”) for breach of
      contract, tortious interference with contractual relations, tortious
      interference with business relations, punitive damages, and attorneys’ fees and
      expenses of litigation based upon the ARA’s alleged breach of a preferred vendor
      agreement with Progressive Ventures, Inc., Nationwide’s successor-in-interest.
      The ARA answered Nationwide’s complaint, denied all liability, and asserted
      various counterclaims. The parties anticipate conducting discovery in the coming
      months. The Company expresses no opinion as to the likelihood of success or
      potential amount of recovery in this matter, as discovery is
      ongoing.





From
      time
      to time, the Company and its subsidiaries may be parties to, and their property
      is subject to, ordinary, routine litigation incidental to their business. Claims
      may exceed insurance policy limits and the Company or any one of its
      subsidiaries may have exposure to a liability that is not covered by insurance.
      Management is not aware of any lawsuits, other than previously discussed that
      could have a material adverse impact on the Company’s consolidated results of
      operations, cash flows or financial position.





**ITEM
              4.**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**





None.





PART
      II




**ITEM
              5.**
            **MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER
                MATTERS**




On
      April
      28, 2005, the Company completed a one-for-five reverse split of its common
      shares outstanding as of that date at which time our trading symbol changed
      from
“GLXS” to “GAXC”. Our common stock is currently traded on the Over-the-Counter
      Bulletin Board ("OTCBB") under the symbol "GAXC". As of March 27, 2007, there
      were 21,021,786 shares
      of the Company’s Common Stock ($0.001 par value) issued and
      outstanding.




Page
          28





We
      are
      currently authorized to issue a total of 45,000,000 shares of Common Stock
      ($0.001 par value), and 5,000,000 shares of Preferred Stock ($0.001 par value).
      The Company  does
      not
      currently have any shares of its Preferred Stock outstanding.





On
      March
      27, 2007, there were  254
      registered holders of record of our common stock. Because many of such shares
      are held by brokers and other institutions on behalf of stockholders, we are
      unable to estimate the total number of stockholders represented by these record
      holders. The following table sets forth the high and low sales price per share
      of our common stock ( as
      adjusted for the one-for-five reverse split that occurred on April 28,
      2005) .





Price
                RangeHigh
            
            LowFiscal
                2007:First
                Quarter through March 27th
            
            $
            0.38
            
            
            0.24Fiscal
                2006:First
                Quarter
            
            $
            1.19
            
            
            0.76Second
                Quarter
            
            
            0.93
            
            
            0.42Third
                Quarter
            
            
            0.70
            
            
            0.38Fourth
                Quarter
            
            
            0.51
            
            
            0.32Fiscal
                Year
            
            
            1.19
            
            
            0.32Fiscal
                2005:First
                Quarter
            
            $
            1.85
            
            
            1.45Second
                Quarter
            
            
            1.60
            
            
            1.05Third
                Quarter
            
            
            1.67
            
            
            1.33Fourth
                Quarter
            
            
            1.50
            
            
            1.05Fiscal
                Year
            
            
            1.85
            
            
            1.05




We
      have
      not historically declared or paid any dividends on our common stock and we
      currently plan to retain future earnings to fund the development and growth
      of
      our business. The declaration of future dividends, whether in cash or in-kind,
      is within the discretion of the Board of Directors and will depend upon business
      conditions, our results of operations, our financial condition, and other
      factors.


Page
          29





Securities
      authorized for issuance under equity compensation plans:





As
      of
      December 31, 2006, we had the following securities authorized for issuance
      under
      the equity compensation plans (as adjusted for the one-for-five reverse split
      that occurred on April 28, 2005):





Plan
                Category
            
            Number
                of Securities to be issued upon exercise of outstanding options,
                warrants
                andrights
            
            Weighted-average
                exercise price of outstanding options, warrants andrights
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected incolumn
                (a)Equity
                compensation plans approved by security holdersStock
                Options
            
            
            974,225
            
            $
            1.35
            
            
            1,010,277Warrants
            
            
            11,817,060
            
            $
            2.68
            
            
            —Equity
                compensation plans not approved by security holders
            
            
            —
            
            
            —
            
            
            —Total
            
            
            12,791,285
            
            $
            2.58
            
            
            1,010,277




Sales
      of Unregistered Securities





On
      October 28, 2005, the Company acquired approximately 1,590 automated teller
      machine ("ATM") processing merchant contracts and ATM placement agreements
      (collectively, the "Merchant Contracts") and ATMs and ATM related equipment
      ("Equipment") from Amer-E-Com Digital Corporation, a Florida corporation
      ("AECD") pursuant to an Asset Purchase Agreement dated as of October 28, 2005
      between the Company and AECD. The purchase price for the acquisition was
      $5,527,256 in cash of which $4,775,191 was paid on closing and $752,065 was
      held
      in escrow (the "Holdback"). The transaction was funded by utilizing cash
      generated from the financing provided by Wachovia Bank and CAMOFI Master Fund
      LDC (see Financial Footnote #14 ”Senior Lender’s Notes payable” to the
      consolidated financial statements). The Holdback was to be utilized to provide
      funding in connection with the purchase of 73 additional Merchant Contracts,
      to
      cover the value of any missing and lost Merchant Contracts, and to cover any
      indemnification required to be paid by AECD to the Company with respect to
      losses incurred by the Company prior to the date of acquisition of the assets
      purchased. During fiscal 2006, it was determined that certain contract
      contingencies were not met by the seller, and $265,160 of the Holdback was
      paid
      back to the Company, with the balance being returned to AECD. On October 27,
      2005, to obtain additional funding for the acquisition of the Merchant Contracts
      and the Equipment, the Company entered into a Securities Purchase Agreement
      (the
      "Purchase Agreement") with CAMOFI Master LDC (the "Investor") for the sale
      of
      (i) a $3,500,000, 9% Senior Subordinated Secured Convertible Note (the "Note")
      and (ii) stock purchase warrants (the "Warrant") to purchase 910,000 shares
      of
      our common stock. The obligations under the Note are subordinated to Wachovia.
      The Company closed the financing pursuant to the Purchase Agreement on October
      27, 2005. The Note bears interest at 9%, matures on October 27, 2010 and is
      convertible into the Company's common stock, at the Investor's option, at a
      conversion price of $1.45. The Company is permitted to require the Investor
      to
      convert a portion of the Note subject to the attainment of certain volume and
      price targets specific to the Company's common stock. The Company is required
      to
      make cash interest payments on a monthly basis and on each conversion date,
      with
      all accrued and outstanding interest due in full as of the maturity date. All
      overdue payments of interest incur a late fee at the rate of 20% per annum.
      The
      Company may prepay all or part of the Note in cash at 110% of the principal
      amount plus accrued interest. The full principal amount of the Note is due
      upon
      default under the terms of Note. In addition, the Company granted the Investor
      a
      security interest in substantially all of its assets and intellectual property
      as well as registration rights. The Warrant is exercisable until five years
      from
      the date of issuance at an exercise price of $1.75 per share. In addition,
      the
      exercise price of the Warrant is adjusted in the event the Company issues common
      stock at a price below the exercise price. The Investor has contractually agreed
      to restrict its ability to convert the Note and exercise the Warrant and receive
      shares of the Company's common stock such that the number of shares of the
      Company common stock held by them and their affiliates after such conversion
      or
      exercise does not exceed 4.99% of the Company's then issued and outstanding
      shares of common stock. The sale of the Note was completed on October 27, 2005
      with respect to $3,500,000 of the Note. The Note is a debt obligation arising
      other than in the ordinary course of business which constitutes a direct
      financial obligation of the Company. The Note and Warrant were offered and
      sold
      to the Investor in a private placement transaction made in reliance upon
      exemptions from registration pursuant to Section 4(2) under the Securities
      Act
      of 1933 and Rule 506 promulgated thereunder. The Investor is an accredited
      investor as defined in Rule 501 of Regulation D promulgated under the Securities
      Act of 1933.





Page
          30





On
      November 8, 2005, to obtain additional funding of $1,850,000 for acquisitions
      and working capital, the Company entered into Subscription Agreements (the
      "Purchase Agreements") with Renaissance U.S. Growth Investment Trust, PLC,
      BFS
      US Special Opportunities Trust PLC, Heller Capital Investments, LLC, and Richard
      Molinsky (the "Investors") on November 8, 2005 for the aggregate sale of (i)
      1,600,000 shares of common stock (the "Shares") and (ii) common stock purchase
      warrants (the "Warrants") to purchase 640,000 shares of our common stock. The
      Company closed the financing pursuant to the Purchase Agreements on November
      8,
      2005. The Warrants are exercisable until three years from the date of issuance
      at an exercise price of $1.75 per share. In the event that the Company's closing
      bid price is equal to or greater than $2.25 for a period of five consecutive
      days, then, at the Company's election, the Warrant holder is required to
      exercise its Warrants within ten days from receipt of an automatic exercise
      notice from the Company. If the holder fails to exercise its Warrants within
      ten
      days from receipt of an automatic exercise notice from the Company, then the
      Warrants will expire. The Company agreed to register the Shares and the shares
      of common stock issuable upon exercise of the Warrants. These shares and the
      shares issuable upon exercise of the warrants were included in the Company’s
      Form SB-2 registration statement filed with the Securities and Exchange
      Commission on August 31, 2006. The Shares and Warrants were offered and sold
      to
      the Investors in a private placement transaction made in reliance upon
      exemptions from registration pursuant to Section 4(2) under the Securities
      Act
      of 1933 and Rule 506 promulgated there under. The Investors are each accredited
      investors as defined in Rule 501 of Regulation D promulgated under the
      Securities Act of 1933.





Page
          31





**ITEM
              6.**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION**




The
      following discussion should be read in conjunction with the consolidated
      financial statements and notes thereto.





In
      addition to historical information, this Annual Report on Form 10-KSB contains
      forward-looking statements that involve risks and uncertainties that could
      cause
      actual results to differ materially. Factors that might cause or contribute
      to
      such differences include, but are not limited to, those discussed below. You
      should carefully review the risks described in other documents we file from
      time
      to time with the Securities and Exchange Commission, including the Quarterly
      Reports on Form 10-QSB to be filed in 2007. When used in this report, the words
      "expects," "anticipates," "intends," "plans," "believes," "seeks," "targets,"
      "estimates," "looks for," "looks to," and similar expressions are generally
      intended to identify forward-looking statements. You should not place undue
      reliance on these forward-looking statements, which speak only as of the date
      of
      this Annual Report on Form 10-KSB. We undertake no obligation to publicly
      release any revisions to the forward-looking statements or reflect events or
      circumstances after the date of this document.





**Overview**





Global
      Axcess Corp, through its wholly owned subsidiaries, owns and operates Automated
      Teller Machines ("ATM"s) with locations primarily in the eastern and
      southwestern United States of America. Our revenues are principally derived
      from
      two types of fees, which we charge for processing transactions on our ATM
      network. We receive an interchange fee from the issuer of the credit or debit
      card for processing a transaction when a cardholder uses an ATM in our network.
      In addition, in most cases we receive a surcharge/convenience fee from the
      cardholder when the cardholder makes a cash withdrawal from an ATM in our
      network.





Interchange
      fees are processing fees that are paid by the issuer of the credit or debit
      card
      used in a transaction. Interchange fees vary for cash withdrawals, balance
      inquiries, account transfers or uncompleted transactions, which are the primary
      types of transactions that are currently processed on ATMs in our network.
      The
      maximum amount of the interchange fees is established by the national and
      regional card organizations and credit card issuers with whom we have a
      relationship. We receive interchange fees for transactions on ATMs that we
      own,
      but sometimes we rebate a portion of the fee to the owner of the ATM location
      under the applicable lease for the ATM site. We also receive the interchange
      fee
      for transactions on ATMs owned by third party vendors included within our
      network, but we rebate all or a portion of each fee to the third party vendor
      based upon negotiations between us. The interchange fees received by us vary
      from network to network and to some extent from issuer to issuer, but generally
      range from $0.15 to $0.55 per cash withdrawal. Interchange fees for balance
      inquiries, account transfers and denied transactions are generally substantially
      less than fees for cash withdrawals. The interchange fees received by us from
      the card issuer are independent of the service fees charged by the card issuer
      to the cardholder in connection with ATM transactions. Service fees charged
      by
      card issuers to cardholders in connection with transactions through our network
      range from zero to $2.50 per transaction. We do not receive any portion of
      these
      service fees.





In
      most
      markets we impose a surcharge/convenience fee for cash withdrawals.
      Surcharge/convenience fees are a substantial additional source of revenue for
      us
      and other ATM network operators. The surcharge/convenience fee for ATMs in
      our
      network ranges between $1.50 and $2.75 per withdrawal. The surcharge/convenience
      fee for other ATMs in our network ranges between $0.50 and $7.50 per withdrawal.
      We receive the full surcharge/convenience fee for cash withdrawal transactions
      on ATMs that we own, but often we rebate a portion of the fee to the owner
      of
      the ATM location under the applicable lease for the ATM site. We also receive
      the full surcharge/convenience fee for cash withdrawal transactions on ATMs
      owned by third party vendors included within our network, but we rebate all
      or a
      portion of each fee to the third party vendor based upon a variety of factors,
      including transaction volume and the party responsible for supplying vault
      cash
      to the ATM and only record earned revenues based upon the Company’s contracts
      with the third party vendors.




Page
          32





In
      addition to revenues derived from interchange and surcharge/convenience fees,
      we
      also derive revenues from providing network management services to third parties
      owning ATMs included in our ATM network. These services include 24 hour
      transaction processing, monitoring and notification of ATM status and cash
      condition, notification of ATM service interruptions, in some cases dispatch
      of
      field service personnel for necessary service calls and cash settlement and
      reporting services. The fees for these services are paid by the owners of the
      ATMs.





Interchange
      fees are credited to us by networks and credit card issuers on a monthly basis
      and are paid to us in the following month between the 5th and 15th business
      day.
      Surcharge/convenience fees are charged to the cardholder and credited to us
      by
      networks and credit card issuers on a daily basis. We rebate the portion of
      these fees to ATM owners and owners of ATM locations as commission payments
      as
      per their contractual terms. Fees for network management services are generally
      paid to us on a monthly basis.





Global
      Axcess Corp (“GLXS”) competes in a fragmented industry, in which no one firm has
      a significant market share and can strongly influence the industry outcome.
      Our
      industry is populated by a large number of financial institutions and
      Independent Sales Organizations (“ISOs”) which deploy ATMs. The industry GLXS
      competes in is also characterized by essentially undifferentiated
      services.





There
      are
      underlying economic causes as to why GLXS’ industry is fragmented. For
      example:





·  Low
      overall entry barriers;




·  Absence
      of national economies of scale;




·  Seasonal
      and geographic volume fluctuations;




·  The
      need
      for local presence in some market segments; and




·  The
      need
      for low overhead.





Additionally,
      the industry in which we compete is showing increasing signs of being an
      industry in decline. Reasons for this market decline include:





· Emergence
          of debit cards, “pay pass” machines and RFID as substitutes for cash in making
          purchases;




·  Increasing
      acceptance of debit cards by younger demographics; and




·  Market
      saturation of prime ATM locations in the U.S.





The
      demand for our ATM services is primarily a function of population growth and
      new
      business creation to serve that population growth. In addition, opportunities
      exist:





·  As
      our
      competitors seek to exit the business;




·  As
      our
      competitors encounter financial and regulatory difficulties; and


· As
          financial institutions seek to reduce their costs of managing an ATM channel
          during a period of decreasing ATM usage.





Opportunities
      may also exist to leverage GLXS’ existing customer base by selling additional
      products and services to them.





**Significant
      Developments**





(a)
      Effective September 30, 2005, the Company completed the sale of its wholly-owned
      subsidiary, Electronic Payment & Transfer Corporation ("EPT"), and to
      discontinue offering prepaid debit cards and the related products and services
      that were marketed by EPT for a $1.5 million note receivable (see Financial
      Footnote #10 “Notes Receivable”). The Company has written the note receivable
      down to $500,000 and has set a reserve for the entire balance.




Page
          33





(b)
      On
      October 28, 2005, the Company acquired approximately 1,590 automated teller
      machine ("ATM") processing merchant contracts and ATM placement agreements
      (collectively, the "Merchant Contracts") and ATMs and ATM related equipment
      ("Equipment") from Amer-E-Com Digital Corporation, a Florida corporation
      ("AECD") pursuant to an Asset Purchase Agreement dated as of October 28, 2005
      between the Company and AECD. The purchase price for the acquisition was
      $5,527,256 in cash of which $4,775,191 was paid on closing and $752,065 was
      held
      in escrow (the "Holdback"). The transaction was funded by utilizing cash
      generated from the financing provided by Wachovia Bank and CAMOFI Master Fund
      LDC (see Financial Footnote #14 Senior Lenders’ Notes Payable” to the
      consolidated financial statements). The Holdback was to be utilized to provide
      funding in connection with the purchase of 73 additional Merchant Contracts,
      to
      cover the value of any missing and lost Merchant Contracts, and to cover any
      indemnification required to be paid by AECD to the Company with respect to
      losses incurred by the Company prior to the date of acquisition of the assets
      purchased. During fiscal 2006, it was determined that certain contract
      contingencies were not met by the seller, and $265,160 of the Holdback was
      paid
      back to the Company, with the balance being returned to AECD.





(c)
      On
      October 27, 2005, to obtain funding for the acquisition of the Merchant
      Contracts and the Equipment (see (a) above), the Company entered into a Third
      Amended and Restated Loan Agreement with Wachovia Bank ("Wachovia"), the
      Company's senior lender, pursuant to which Wachovia agreed to provide a term
      loan to the Company in the amount of $3,000,000. Such term loan was evidenced
      by
      a Promissory Note (the "Wachovia Note") issued at the closing on October 27,
      2005. Under the terms of the Wachovia Note, the Company is required to make
      monthly payments of $50,000 plus accrued interest commencing in November 2005.
      All outstanding principal and interest is payable in full in October 2010.
      The
      Company has entered into an interest rate swap related to this Wachovia Note.
      The swap exchanges the variable rate of Prime plus 1%, for a fixed rate of
      interest at 9%. In addition, the Company granted Wachovia a security interest
      in
      substantially all of its assets and intellectual property. At the closing of
      the
      Wachovia Note, the Company became obligated on $3,000,000 in notes issued to
      Wachovia. The Wachovia Note is a long-term debt obligation arising other than
      in
      the ordinary course of business which constitutes a direct financial obligation
      of the Company.





(d)
      On
      October 27, 2005, to obtain additional funding for the acquisition of the
      Merchant Contracts and the Equipment (see (a) and (b) above), the Company
      entered into a Securities Purchase Agreement (the "Purchase Agreement") with
      CAMOFI Master LDC (the "Investor") for the sale of (i) a $3,500,000, 9% Senior
      Subordinated Secured Convertible Note (the "Note") and (ii) stock purchase
      warrants (the "Warrant") to purchase 910,000 shares of our common stock. The
      obligations under the Note are subordinated to Wachovia. The Company closed
      the
      financing pursuant to the Purchase Agreement on October 27, 2005. The Note
      bears
      interest at 9%, matures on October 27, 2010 and is convertible into the
      Company's common stock, at the Investor's option, at a conversion price of
      $1.45. The Company is permitted to require the Investor to convert a portion
      of
      the Note subject to the attainment of certain volume and price targets specific
      to the Company's common stock. The Company is required to make cash interest
      payments on a monthly basis and on each conversion date, with all accrued and
      outstanding interest due in full as of the maturity date. All overdue payments
      of interest incur a late fee at the rate of 20% per annum. The Company may
      prepay all or part of the Note in cash at 110% of the principal amount plus
      accrued interest. The full principal amount of the Note is due upon default
      under the terms of Note. In addition, the Company granted the Investor a junior
      security interest, subordinate to Wachovia, in substantially all of its assets
      and intellectual property as well as registration rights. The Warrant is
      exercisable until five years from the date of issuance at an exercise price
      of
      $1.75 per share. In addition, the exercise price of the Warrant is adjusted
      in
      the event the Company issues common stock at a price below the exercise price.
      The Investor has contractually agreed to restrict its ability to convert the
      Note and exercise the Warrant and receive shares of the Company's common stock
      such that the number of shares of the Company’s common stock held by them and
      their affiliates after such conversion or exercise does not exceed 4.99% of
      the
      Company's then issued and outstanding shares of common stock. The sale of the
      Note was completed on October 27, 2005 with respect to $3,500,000 of the Note.
      The Note is a debt obligation arising other than in the ordinary course of
      business which constitutes a direct financial obligation of the Company. The
      Note and Warrant were offered and sold to the Investor in a private placement
      transaction made in reliance upon exemptions from registration pursuant to
      Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated
      thereunder. The Investor is an accredited investor as defined in Rule 501 of
      Regulation D promulgated under the Securities Act of 1933.




Page
          34





(e)
      During October 2005, a lawsuit previously filed by the Company to have 750,000
      shares of our common stock and 500,000 common stock purchase warrants returned
      and cancelled was finalized in favor of the Company.





(f)
      The
      Company completed a private placement on November 8, 2005, primarily with
      institutional investors. The offering was priced at $6.25 per Unit. Each Unit
      is
      comprised of 5 shares of common stock and 40% common stock purchase warrants.
      The terms of the private offering, which netted cash proceeds of $1,850,000,
      required the Company to issue 1,600,000 shares of common stock and 640,000
      common stock purchase warrants (Warrants). The Warrants are exercisable at
      a
      price of $1.75.





(g)
      Effective December 31, 2005, the Company discontinued two operations that did
      not fit within its strategic plans, thereby ceasing operations of the Company’s
      software development subsidiary, Axcess Technology Corporation, and its South
      African subsidiary, Axcess Technology Corporation, SA (Pty) Ltd, as of December
      31, 2005.





(h)
      On
      May 2, 2006, the Company entered into a Shareholder Agreement to sell 50% of
      its
      wholly-owned subsidiary located in South Africa, Cash Axcess Corporation
      (Proprietary) Limited in a stock arrangement with the buyer (See Financial
      Footnote # 5 “Discontinued Operations”).





(i)
      On
      May 2, 2006, the Company settled the March 2004 claim filed by James Collins,
      a
      previous employee of Global Axcess Corp. The claim was filed in Superior Court
      of California, County of San Diego on March 2, 2004. The claim alleged the
      following were owed in connection with the employment agreement: compensation,
      bonuses and other benefits of approximately $316,915; and 90,000 restricted
      shares and 359,700 stock options exercisable at $3.75 per share. The claim
      was
      settled for $450,000 whereby the Company made a lump-sum payment of $300,000
      on
      May 22, 2006 and has agreed to pay the remaining $150,000 in 12 monthly
      installments of $12,500 commencing July 1, 2006 and ending June 30,
      2007.





(j)
      On
      May 9, 2006, Robert Pearson resigned from his position on the Board of
      Directors.





(k)
      On
      May 10, 2006, David S. Surette notified the Company of his resignation as Chief
      Financial Officer and Chief Accounting Officer effective May 31,
      2006.





(l)
      On
      July 31, 2006, the Company disconnected its processing switch which processed
      the transactions for its subsidiary EFT Integration, Inc. and replaced its
      switching software with a third party vendor (See Financial Footnote # 6
“Impairment of Long-lived Assets and Business Reorganization
      Charges”).





(m)
      On
      September 30, 2006, the Company finalized the sale of the remaining 50% of
      Cash
      Axcess Corporation (Proprietary) Limited (“CAC”), its Variable Interest Entity
      (See Financial Footnote # 5 “Discontinued Operations”).





(n)
      On
      August 4, 2006, the Company was served with a demand for arbitration/mediation
      from EFMARK Service Company (“EFMARK”), a provider of maintenance services and a
      provider of cash replenishment services for automated teller machines. In the
      spirit of its business relationship with EFMARK, the Company settled this claim
      for $40,000 on October 4, 2006.





(o)
      On
      September 29, 2006, the Company was served with process by Renaissance US Growth
      Investment Trust PLC ("Renn") and BFS US Special Opportunities Trust PLC ("BFS"
      and collectively with Renn, the "Plaintiffs"), two investors and shareholders
      of
      the Company. In the Complaint, filed in the Circuit Court of the Seventh
      Judicial Circuit in and for St. John's County, Florida, Plaintiffs allege breach
      of contract, fraud, and negligent misrepresentation.




Page
          35





(p)
      On
      October 10, 2006, the Company entered into Separation Agreement and Release
      with
      Michael Dodak pursuant to which Mr. Dodak resigned as an executive officer
      and
      director of the Company effective September 30, 2006 (See Financial Footnote
      # 6
“Impairment of Long-lived Assets and Business Reorganization
      Charges”).





(q)
      On
      October 10, 2006, the Company entered into Separation Agreement and Release
      with
      David Fann pursuant to which Mr. Fann resigned as an executive officer and
      director of the Company effective September 30, 2006 (See Financial Footnote
      # 6
“Impairment of Long-lived Assets and Business Reorganization
      Charges”).





(r)
      On
      October 10, 2006, the Board of Directors appointed George A. McQuain as
      President and Chief Executive Officer of the Company and as a director of the
      Company to fill the vacancy created by the resignations of Messrs. Dodak and
      Fann. In addition, Joseph M. Loughry and Lock Ireland, directors of the Company,
      were appointed as Chairman and Vice Chairman of the Board of Directors of the
      Company, respectively.





(s)
      On
      November 24, 2006, Global Axcess Corp (the "Company") signed a Cash Provisioning
      Agreement with Genpass Technologies, LLC ("Genpass"), which was effective August
      11, 2006, pursuant to which Genpass will provide vault cash for the Company's
      wholly-owned subsidiary's ATMs as well as cash management and ATM monitoring
      on
      an outsourced basis.





(t)
      On
      December 26, 2006, the Company was served with process by Robert Colabrese
      (the
“Plaintiff), a former employee of the Company. In the Complaint, filed in the
      Circuit Court of the Seventh Judicial Circuit in and for St. John’s County,
      Florida, Plaintiff alleges that the Company has breached the employment
      agreement entered between the Company and Plaintiff in July 2003. The Plaintiff
      is seeking monetary damages for unpaid wages and commissions, attorney fees
      and
      an accounting of all sales generated through the Plaintiff. The Company denies
      any and all allegations of wrongdoing and intends to vigorously defend such
      action. The Company has a $50,000 accrual recorded at December 31, 2006 in
      connection with this complaint.





(u)
      On or
      about January 29, 2007, Nationwide Money Services, Inc. (“Nationwide”) filed
      suit against the Atlanta Retailers Association, LLC (“ARA”) for breach of
      contract, tortious interference with contractual relations, tortious
      interference with business relations, punitive damages, and attorneys’ fees and
      expenses of litigation based upon the ARA’s alleged breach of a preferred vendor
      agreement with Progressive Ventures, Inc., Nationwide’s successor-in-interest.
      The ARA answered Nationwide’s complaint, denied all liability, and asserted
      various counterclaims. The parties anticipate conducting discovery in the coming
      months. The Company expresses no opinion as to the likelihood of success or
      potential amount of recovery in this matter, as discovery is
      ongoing.





**Comparison
      of Results of Operations for the Fiscal Years Ended December 31, 2006 and
      2005**




**Revenues** .
      Our
      revenues from continuing operations increased 9.8% to $21,437,125 for the fiscal
      year ended December 31, 2006 ("fiscal 2006") from $19,526,136 for the fiscal
      year ended December 31, 2005 ("fiscal 2005"). This increase is due to a number
      of factors, but is mainly due to added revenues generated from the acquisition
      during fiscal 2005.





**Cost
      of Revenues** .
      Our
      total cost of revenues from continuing operations increased by approximately
      7.7% to $12,405,270 in fiscal 2006 from $11,522,555 in fiscal 2005. Total cost
      of revenues as a percentage of revenues from continuing operations was
      approximately 57.9% in fiscal 2006 and 59.0% in fiscal 2005. The principal
      components of cost of revenues are cost of cash, cash replenishment,
      maintenance, telecommunication services and transaction processing charges,
      interchange and surcharge commission rebates and ATM costs from ATM sales.
      The
      overall increase in cost of revenues from continuing operations is directly
      attributable to the increase in revenues from continuing operations.




Page
          36





**Gross
      Profit** .
      Gross
      profit from continuing operations as a percentage of revenues was approximately
      42.1% in fiscal 2006 and approximately 41.0% in fiscal 2005.





**Operating
      Expenses** .
      Our
      total operating expenses from continuing operations increased to $12,541,574,
      or
      approximately 58.5% of revenues in fiscal 2006 from $6,719,196, or approximately
      34.4% of revenues in fiscal 2005. The principal components of operating expenses
      are general and administrative expenses such as professional and legal fees,
      administrative salaries and benefits, consulting and audit fees, occupancy
      costs, sales and marketing expenses and administrative expenses. Operating
      expenses also include depreciation and amortization, impairment charges and
      restructuring charges. See explanation of operating expenses below:





**Depreciation
      and Amortization** . Depreciation and amortization from continuing operations increased in fiscal
      2006 to $2,359,455 from $1,417,554 in fiscal 2005. This increase in depreciation
      and amortization expense was due to the following factors:





·
            An
                increase in ATM equipment, resulting from acquisitions and developed
                software in 2005 and purchases in 2006.





·
            An
                increase in amortization specific to the merchant contracts we purchased
                during fiscal year 2005 for which a full year’s amortization expense was
                recorded during 2006.





The
      Company amortized $509,315 and $454,177 of developed software in fiscal years
      2006 and 2005, respectively.





See
      Financial Statement Footnotes #2 “Summary of Significant Accounting Policies”
and #9 “Intangible Assets and Merchant Contracts”, regarding the amortization of
      intangible merchant contracts.





**Impairment
      and Restructuring Charges** .
      During
      fiscal 2006, we incurred impairment of long-lived assets charges, restructuring
      charges and impairment of notes receivable charges of $1,329,396, $757,811,
      and
      $817,607, respectively. See Financial Statement Footnotes #6 “Impairment of
      Long-Lived Assets and Business Reorganization Charges” and #10 “Notes
      Receivable” regarding the details of these charges. During fiscal 2005, we
      incurred impairment of notes receivable charges of $42,939.




**Selling,
      General and Administrative (SG&A) Expenses** .
      Our
      total SG&A expenses from continuing operations increased 29.8% to $6,827,305
      in fiscal 2006 from $5,258,703 in fiscal 2005. SG&A expenses represented
      31.8% of revenues for the year ended December 31, 2006, compared to 26.9% of
      revenues for the year ended December 31, 2005. Selling, general and
      administrative expense increased primarily from the incremental costs necessary
      to operate as a public company and to a lesser extent, the expenses required
      to
      support our revenue growth resulting from the acquisition we completed in the
      4 th quarter
      of 2005. Additionally, we incurred increased legal expenses relating to
      litigation.





**Other
      Expense/Income** .
      In
      fiscal year 2006, we incurred other operating expenses of $450,000 which
      primarily related to legal fee expenses and reserves in connection with the
      James Collins legal claim and EFMARK claim settlement (See Financial Statement
      Footnote #18 “Legal Proceedings”).





**Interest
      Expense** .
      Interest expense from continuing operations increased to $1,356,407, or 6.3%
      of
      revenues, for the fiscal year ended December 31, 2006 compared to $524,574,
      or
      2.7% of revenues, in fiscal 2005. This was primarily due to the significant
      increase in our senior lender’s loans and notes needed to complete our
      acquisition in October 2005 as well as the increase in capital lease purchases.
      Such notes payable were $5,761,148 at December 31, 2006 compared to $7,177,111
      at December 31, 2005. In fiscal 2006, we recorded a full years’ interest on the
      senior lender’s notes relating to the October 2005 acquisition. In addition, our
      capital lease obligations, increased from $2,880,307 at December 31, 2005 to
      $2,913,633 at December 31, 2006.




Page
          37





**Gain
      on Sale of Assets** .
      In
      fiscal year 2006, we recorded a gain on sale of certain ATM assets and
      automobiles of $21,672.





**Other
      non-operating income** .
      In
      fiscal year 2006, we recorded other non-operating income relating to previous
      periods’ unrecorded fees.





**Loss
      Attributed to Minority Interest** .
      In
      fiscal year 2006, we allocated $109,351 of loss to minority interest relating
      to
      the consolidation of our Variable Interest Entity, Cash Axcess Corp, prior
      to
      its sale.





**Income
      (loss) from Continuing Operations before Provision for Income
      Taxes** .
      We had
      a loss from continuing operations before income taxes of $4,588,400 during
      the
      fiscal year ended December 31, 2006 compared to income of $759,811 for the
      fiscal year ended December 31, 2005 as a result of the factors discussed
      above.





**Income
      Tax Expense** . Since
      the Company incurred net losses in fiscals 2006 and 2005, it has not been able
      to utilize any of its Net Operating Loss carryforward (NOL) in fiscal year
      2006.
      At December 31, 2006, the Company has an NOL carryforward of approximately
      $21.6
      million available. The NOL is due to expire during fiscal years 2008-2026.
      The
      income tax expense from continuing operations decreased to an expense of $0
      from
      $209,418, for fiscal years 2006 and 2005, respectively.





**Discontinued
      Operations** .
      Discontinued operations, resulting from the disposal and ceased operations
      of
      one subsidiary in fiscal 2006 and two subsidiaries during fiscal year 2005,
      were
      losses from operations of $275,937 and $1,273,237, respectively.





**Net
      loss** .
      We had
      a net loss of $4,864,337 during the fiscal year ended December 31, 2006 compared
      to a net loss of $722,844 for the fiscal year ended December 31,
      2005.




**LIQUIDITY
      AND CAPITAL RESOURCES**





**Working
      Capital** .
      During
      fiscal 2006, we funded our continuing operations through operating activities.
      Net cash provided by continuing operations amounted to $1,486,672 and net cash
      used by discontinued operations was $418,708. In addition, net cash of $317,609
      was provided by investing activities from continuing operations. Proceeds from
      the sale of Cash Axcess Corporation and proceeds from reimbursements of merchant
      contract escrow arrangements from previous acquisitions were offset by cash
      used
      to acquire fixed assets. Net cash used in financing activities for continuing
      operations amounted to $2,805,014, mainly relating to principal payments on
      senior lenders’ notes payable and capital lease obligations. As of December 31,
      2006, the Company had current assets of $2,797,463 and current liabilities
      of
      $6,343,313, which results in negative working capital of $3,545,850. This
      compares to a working capital deficit of $968,540 that existed at December
      31,
      2005. Despite the negative working capital, we believe that if we achieve our
      2007 business plan, we will have sufficient working capital to meet our current
      obligations during 2007. However, we do anticipate the need to raise capital
      lease financing to meet our capital needs of $2,300,000 to expand our ATM
      portfolio and fund new back office equipment during 2007.




**Additional
      Funding Sources**





We
      are
      continuing our efforts to raise additional capital lease financing. We estimate
      the Company will require approximately $2,300,000 of new lease financing to
      fund
      new purchases of ATMs and back office equipment. We currently have lease lines
      available for approximately $1,500,000 for these new purchases.





The
      Company does not use its own funds for vault cash, but rather relies upon third
      party sources. The Company in general rents the vault cash from financial institutions
      and pays a negotiated interest rate for the use of the money. The vault
      cash is never in the possession of, controlled or directed by the Company but
      rather cycles from the bank, to the armored car carrier, and to the ATM. Each
      day’s withdrawals are settled back to the owner of the vault cash on the next
      business day. Both Nationwide Money and its customers (the merchants) sign a
      document stating that the vault cash belongs to the financial institution and that
      neither party has any legal rights to the funds. The required vault cash is obtained
      under the following arrangements:




Page
          38





·
            Palm
                Desert Bank.
                Beginning in January 2003, our arrangement with Palm Desert allows
                us to
                obtain up to $10,000,000 in vault cash. The Palm Desert Bank arrangement
                has a term of two years and may be terminated by Palm Desert Bank
                upon
                breach by us and upon the occurrence of certain other events. Under
                this
                arrangement, we are required to pay a monthly service fee on the
                outstanding amount equal to the prime rate of interest, plus a specified
                percentage, and must pay monthly "bank" fees. Additionally the Company
                is
                required to make a deposit with Palm Desert Bank in an amount determined
                by the outstanding balance. We are also required to maintain insurance
                on
                the vault cash. The contract currently in place with Palm Desert
                will be
                terminated effective April 2007. As a result, the Company began converting
                terminals in December 2006 from Palm Desert cash to alternate funding
                sources. As of December 31, 2006, the Company had 5 ATMs funded by
                Palm
                Desert with a vault cash outstanding balance of approximately
                $600,000.





·
            WSFS.
                Beginning in September, 2004 the Company has an arrangement with
                Wilmington Savings Fund Society (“WSFS”) allowing us to obtain up to
                $20,000,000 in vault cash. The WSFS contract may be terminated by
                WSFS at
                any time upon breach by us and upon the occurrence of certain other
                events. Under this arrangement, we are required to pay a monthly
                service
                fee on the outstanding amount equal to the prime rate of interest,
                plus a
                specified percentage, and must pay monthly "bank" and insurance fees.
                We
                are also required to maintain insurance on the vault cash. The contract
                currently in place with WSFS expires on October 31, 2007 with a one
                year
                auto renewal period unless one party gives 60 days notice of their
                intention not to renew. As of December 31, 2006, the Company had
                153 ATMs
                with a vault cash outstanding balance of approximately $6,600,000
                in
                connection with this arrangement.





·
            First
                Charter.
                On September 1, 2004, we entered into an arrangement with First Charter
                National Bank allowing us to obtain up to $3,000,000 in vault cash.
                We
                have since increased the line as of December 31, 2006 to $6,000,000.
                The
                First Charter contract may be terminated by First Charter at any
                time upon
                breach by us and upon the occurrence of certain other events. Under
                this
                arrangement, we are required to pay a monthly service fee on the
                outstanding amount equal to the federal funds rate of interest, plus
                a
                specific percentage, and must pay monthly bank fees. We are also
                required
                to maintain insurance on the vault cash. The contract currently in
                place
                with First Charter expires on January 31, 2009 with a two year auto
                renewal period unless one party gives 180 days notice of their intention
                not to renew. As of December 31, 2006, the Company had 230 ATMs funded
                by
                First Charter with a vault cash outstanding balance of about approximately
                $6,600,000.





·
            Food
                Lion Credit Association (FLCA).
                On February 1, 2002, we entered into an arrangement with Food Lion
                Credit
                Association allowing us to obtain up to $2,000,000 in vault cash.
                We have
                since increased the line as of December 31, 2006 to $6,000,000. The
                Food
                Lion Credit Association contract may be terminated by Food Lion Credit
                Association at any time upon breach by us and upon the occurrence
                of
                certain other events. Under this arrangement, we are required to
                pay a
                monthly service fee on the entire line equal to the prime rate of
                interest, minus a specific percentage, and must pay monthly bank
                fees. We
                are also required to maintain insurance on the vault cash. The contract
                currently in place with FLCA will be terminated effective February
                2007.
                As a result, the Company began converting terminals in December 2006
                from
                FLCA cash to alternate funding sources. As of December 31, 2006,
                the
                Company had 97 ATMs funded by FLCA with a vault cash outstanding
                balance
                of about approximately $3,000,000.






Page
          39





·
            Elan
                (formerly GenPass Technologies).
                On November 24, 2006 we signed a Cash Provisioning Agreement with
                Genpass
                Technologies allowing us to obtain up to $22,000,000 in vault cash.
                The
                Genpass contract may be terminated by Genpass Technologies at any
                time
                upon breach by us and upon the occurrence of certain other events.
                Under
                this arrangement, we are required to pay a monthly service fee on
                the
                average terminal balance plus a load factor. In addition, we are
                required
                to maintain insurance on the vault cash. The contract currently in
                place
                with Elan expires on August 11, 2008 with a one year auto renewal
                period
                unless one party gives 180 days notice of their intention not to
                renew. As
                of December 31, 2006, the Company had 397 ATMs funded by Elan with
                a vault
                cash outstanding balance of about approximately
                $9,100,000.





·
            Various
                Branded Cash Partners.
                Nationwide Money Services, Inc., a subsidiary of the Company, has
                partnered with numerous banks and credit unions to market specific
                Nationwide ATMs to the cardholders of these institutions. We add
                signage
                and marketing material to the ATM so that the ATM is easily identified
                as
                being associated with the bank or credit union, and the cardholders
                of
                these institutions receive surcharge free transactions at the designated
                ATMs. This provides the bank or credit union additional marketing
                power
                and another point of access to funds for their cardholders. In return
                for
                this benefit, the bank or credit union, provide and manage the vault
                cash
                in the specified ATM(s), as well as provide and pay for cash replenishment
                and first line maintenance. The advantage to Nationwide Money is
                that this
                reduces the costs associated with vault cash, cash replenishment
                and first
                line maintenance by approximately 50%. Another advantage is that
                with a
                branded ATM, transactions volumes traditionally increase more than
                at
                non-branded ATMs. As of December 31, 2006, Nationwide Money had 56
                branded
                financial partners, which funded 648 ATMs.




**Contractual
      Obligations** .
      Our
      ability to fund our capital needs is also impacted by our overall capacity
      to
      acquire favorable financing terms in our acquisition of ATMs. Our contractual
      obligations, including commitments for future payments under non-cancelable
      lease arrangements and short and long-term debt arrangements, are summarized
      below and are fully disclosed in Financial Footnotes #12 “Notes Payable -
      Related Parties”, #13 “Note Payable”, #14 “Senior Lenders’ Notes Payable”, #15
“Capital Lease Obligations” and #17 “Commitments and Contingencies” to our
      consolidated financial statements. We do not participate in, nor secure
      financings for, any unconsolidated, limited or special purpose entities.





We
      anticipate that our capital expenditures for fiscal 2007 will total
      approximately $3,200,000, primarily for the acquisition and/or upgrade of ATMs
      and related ATM installation costs, as well as funding our Triple DES
      requirements. We lease our ATMs under capital lease agreements that expire
      by
      the end of 2011 and provide for lease payments at interest rates averaging
      approximately 12.0% per annum. In 2006, we acquired approximately $1,176,200
      of
      new lease financing for ATMs. See Financial Footnote #15 “Capital Lease
      Obligations” to the Consolidated Financial Statements. We have the following
      payment obligations under current financing and leasing arrangements:




Page
          40




Total
              
              Less
                  than 1 year
              
              1-2
                  Years
              
              2-9
                  YearsNotes
                  payable- related parties (*)
              
              $
              1,797,893
              
              $
              134,716
              
              $
              134,703
              
              $
              1,528,474Notes
                  payable (*)
              
              
              51,500
              
              
              51,500
              
              
              -
              
              
              -Senior
                  lender notes (*)
              
              
              8,015,395
              
              
              1,175,958
              
              
              1,061,000
              
              
              5,778,437Capital
                  lease obligations (*)
              
              
              3,353,098
              
              
              1,467,382
              
              
              1,045,158
              
              
              840,558Operating
                  leases
              
              
              339,304
              
              
              153,672
              
              
              148,222
              
              
              37,410Total
                  contractual cash obligations
              
              $
              13,557,190
              
              $
              2,983,228
              
              $
              2,389,083
              
              $
              8,184,879





(*)
      Includes interest in future periods




**Critical
      Accounting Policies**





The
      preparation of financial statements and related disclosures in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make judgments, assumptions and estimates that affect
      the
      amounts reported in our consolidated financial statements and accompanying
      notes. We base our estimates and judgments on historical experience and on
      various other assumptions that we believe are reasonable under the
      circumstances. However, future events are subject to change, and the best
      estimates and judgments routinely require adjustment. The amounts of assets
      and
      liabilities reported in our consolidated balance sheet, and the amounts of
      revenues and expenses reported for each of our fiscal periods, are affected
      by
      estimates and assumptions which are used for, but not limited to, the accounting
      for allowance for doubtful accounts, goodwill and intangible asset impairments,
      restructurings, inventory and income taxes. Actual results could differ from
      these estimates. The following critical accounting policies are significantly
      affected by judgments, assumptions and estimates used in the preparation of
      our
      consolidated financial statements.





**Revenue
      Recognition Policies** .
      We
      recognize revenues as ATM card holders use ATMs or as services are rendered
      to
      customers. Revenues are adjusted with positive and negative processing accruals
      occurring in the operation of the Company's ATM network in the ordinary course
      of business. It is the policy of the Company to book as revenue all surcharge
      and interchange fees it receives and has earned based on contracts, whether
      for
      its owned ATMs or for those it manages. In the case of managed ATMs, the Company
      then books as commission expense all monies paid to the owners of the ATMs.
      Where the Company provided only processing services through its wholly owned
      subsidiary, EFTI, the Company only records the fees it charges to its customers
      as revenue. During consolidation of the financial statements, the Company
      eliminates the revenues earned by EFTI for the processing of Company owned
      or
      managed ATMs. Surcharge/convenience fees are fees assessed directly to the
      consumer utilizing the ATM terminals owned by the Company. The
      surcharge/convenience fees assessed range from $1.50 to $2.75 based upon a
      cash
      withdrawal transaction from the ATM terminals.





Interchange
      fees are fees assessed directly to the card issuer of the consumer. The
      interchange fees are comprised of two fees: (1) an interchange fee ranging
      from
      approximately $0.40 to $0.55 based upon each cash withdrawal transaction; and
      (2) an interchange fee ranging from approximately $0.15 to $0.25 based upon
      an
      account inquiry by the consumer.





Management
      fees are charged and recognized monthly to various companies or individuals
      that
      use the services of Nationwide Money Services to operate their ATMs. These
      fees
      are for services such as cash management, project management and account
      management.





The
      Company recognizes revenues on breached contracts when cash is
      received.





**Allowance
      of Uncollectible Accounts Receivable** .
      Accounts receivable have been reduced by an allowance for amounts that may
      become uncollectible in the future. This estimated allowance is based on
      historical experience, credit evaluations, specific customer collection issues
      and the length of time a receivable is past due.




Page
          41





**Fixed
      assets** .
      ATM and
      computer equipment comprises a significant portion of our total assets. Changes
      in technology or changes in our intended use of these assets may cause the
      estimated period of use or the value of these assets to change. We perform
      annual internal studies to confirm the appropriateness of estimated economic
      useful lives for each category of current equipment. Estimates and assumptions
      used in setting depreciable lives require both judgment and estimates.





**Stock-based
      compensation** . Effective January 1, 2006, the Company adopted the fair value recognition
      provisions of Statement of Financial Accounting Standards ("SFAS") No. 123
      (Revised 2004), "Share-Based Payment," using the modified-prospective-transition
      method which requires us to recognize compensation expense on a prospective
      basis. SFAS No. 123(R) requires that all stock based compensation be recognized
      as an expense in the financial statements and that such cost be measured at
      the
      fair value of the award. Under this method, in addition to reflecting
      compensation for new share-based awards, expense is also recognized to reflect
      the remaining service period of awards that had been included in pro-forma
      disclosure in prior periods. Prior period financial statements have not been
      restated. The stock based compensation expense is included in SG&A expenses
      in the consolidated statements of income.





Prior
      to
      January 1, 2006, the Company's stock-based employee compensation plans were
      accounted for under the recognition and measurement provisions of Accounting
      Principle Board Opinion ("APB") No. 25 "Accounting for Stock Issued to
      Employees.", as permitted by FASB Statement No. 123, "Accounting for Stock-Based
      Compensation." The Company did not recognize stock-based compensation cost
      in
      its statement of income for periods prior to January 1, 2006. However,
      compensation expense was recognized for certain options and warrants granted
      to
      non employees of the Company based upon fair value.





As
      was
      permitted under SFAS No. 148, "Accounting for Stock-Based Compensation -
      Transition and Disclosure," which amended SFAS No. 123, prior to January 1,
      2006
      the Company elected to continue to follow the intrinsic value method in
      accounting for its stock-based employee compensation arrangements as defined
      by
      APB No. 25, and related interpretations including FASB Interpretation No. 44,
      "Accounting for Certain Transactions Involving Stock Compensation," an
      interpretation of APB No. 25. No stock-based employee compensation cost is
      reflected in operations, as all options granted under those plans had an
      exercise price equal to the market value of the underlying common stock on
      the
      date of grant.




**Impairment
      of Long-Lived Assets** .
      The
      Company reviews long-lived assets for impairment under SFAS No. 144, “Accounting
      for the Impairment or Disposal of Long-Lived Assets.” Long-lived assets to be
      held and used are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. The carrying amount of a long-lived asset is not recoverable if
      it
      exceeds the estimated sum of the undiscounted cash flows expected to result
      from
      the use and eventual disposition of the asset. Long-lived assets to be disposed
      of are reported at the lower carrying amount or fair value less cost to sell.





**Recent
      Accounting Pronouncements**





In
      June
      2006 the FASB issued Interpretation No. 48, "Accounting for Uncertainty in
      Income Taxes", which clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise's financial statements in accordance with SFAS
      No.
      109, "Accounting for Income Taxes." The interpretation prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      This interpretation also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure, and
      transition. This interpretation is effective for fiscal years beginning after
      December 15, 2006. The Company is currently evaluating the potential impact
      that
      the adoption of this interpretation will have on its financial position and
      results of operations.




Page
          42





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS
      No. 157 provides guidance on the definition of fair value, methods to measure
      fair value, and expanded disclosures of fair value. SFAS No. 157 is effective
      as
      of the first interim or annual reporting period that begins after November
      15,
      2007. Accordingly, the Company will adopt SFAS No. 157 in its quarter ending
      March 31, 2008. The Company is currently evaluating the provisions of SFAS
      No.
      157 and has not yet determined the impact, if any, that SFAS No. 157 will have
      on its financial statement presentation or disclosures.





**Quantitative
      and Qualitative Disclosure About Market Risk**





*Impact
      of Inflation and Changing Prices* .
      During
      2006, our results of operations were impacted by increasing interest rates
      as
      noted below:





Increases
      in interest rates will increase our cost of cash expenses. We have vault cash
      agreements with various financial institutions that supply cash to our ATMs
      for
      fees based on variable interest rates. Vault cash obtained under these programs
      remains the property of the financial institution and, as such, is not reflected
      on our consolidated balance sheet. During 2005, amounts we accessed each month
      ranged from $17.5 million to $21.4 million and we paid cash fees totaling
      approximately $1.4 million for use of the cash. During 2006, the amounts we
      accessed each month ranged from $21.4 million to $24.8 million and we paid
      a total of approximately $1.6 million in cash fees for use of the cash. Such
      fees are related to the bank’s interest rates. If such rates were to increase by
      100 basis points, our gross profit would decline by $200,000 on a pre-tax basis.
      Decreased interest rates will have an opposite effect to gross
      profit.





*Interest
      Rate Impact* .
      We paid
      an average interest rate of 6.19% for our vault cash fees in 2005 compared
      to an
      average interest rate of 7.36% in 2006. Specific to this increase in interest
      rates, our gross profit declined in 2006 by approximately $200,000.





Page
          43





**ITEM
              7.**
            **CONSOLIDATED
                FINANCIAL STATEMENTS**





Our
      consolidated financial statements required by this item are incorporated herein
      by reference to the consolidated financial statements beginning on Page F-1
      immediately following the signature page.




**ITEM
              8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND****FINANCIAL
                DISCLOSURE**





On
      June
      20, 2005, Global Axcess Corp notified Weinberg & Company, P.A. ("Weinberg"),
      its Independent Registered Public Accounting Firm, that it was dismissing its
      services, effective as of that date. Further, on June 23, 2005, the Company
      engaged Kirkland, Russ, Murphy & Tapp, P.A. ("KRMT") as its Independent
      Registered Public Accounting Firm. This decision to engage KRMT was taken upon
      the unanimous approval of the Board of Directors of the Company.





During
      the two fiscal years ended December 31, 2004 and December 31, 2003 and through
      June 20, 2005, (i) there were no disagreements between the Company and Weinberg
      on any matter of accounting principles or practices, financial statement
      disclosure or auditing scope or procedure which, if not resolved to the
      satisfaction of Weinberg would have caused Weinberg to make reference to the
      matter in its reports on the Company's consolidated financial statements, and
      (ii) Weinberg's report on the Company's consolidated financial statements did
      not contain any adverse opinion, disclaimer of opinion, or modification or
      qualification of opinion. During the two fiscal years ended December 31, 2004
      and December 31, 2003 and through June 20, 2005, there were no reportable events
      as the term described in Item 304(a)(1)(iv) of Regulation S-B.





During
      the two fiscal years ended December 31, 2004 and 2003, the Company did not
      consult with KRMT regarding either:





1.
            the
                application of accounting principles to any specifiedtransaction,
                either completed or proposed, or the type of auditopinion
                that might be rendered on the Company's consolidated financialstatements,
                and neither a written report was provided to the Companynor
                oral advice was provided that KRMT concluded was an importantfactor
                considered by the Company in reaching a decision as to theaccounting,
                auditing or financial reporting issue;
                or





2.
            any
                matter that was either subject of disagreement or event, asdefined
                in Item 304(a)(1)(iv)(A) of Regulation S-B and the relatedinstruction
                to Item 304 of Regulation S-B, or a reportable event, asthat
                term is explained in Item 304(a)(1)(iv)(A) of Regulation
                S-B.





The
      Company requested that Weinberg furnish it with a letter addressed to the
      Securities and Exchange Commission stating whether it agreed with the above
      statements. A copy of this letter was filed as Exhibit 16.1 to the Company’s
      Form 8-K/A1, which was filed with the Securities and Exchange Commission on
      June
      29, 2005.




PART
      III





**ITEM
              8A.**
            **CONTROLS
                AND PROCEDURES**





Management
      of the Company is responsible for establishing and maintaining adequate internal
      control over financial reporting and for the assessment of the effectiveness
      of
      internal controls over financial reporting. The Company's internal control
      system over financial reporting is a process designed under the supervision
      of
      the Company's chief executive officer and chief financial officer to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of the consolidated financial statements in accordance with U.S.
      generally accepted accounting principles.




Page
          44





All
      internal control systems, no matter how well designed, have inherent
      limitations. Therefore, even those systems determined to be effective can
      provide only reasonable assurance with respect to financial statement
      preparation and presentation. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions.





Our
      management, with the participation of our chief executive officer and chief
      financial officer, evaluated the effectiveness of our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
      Act)
      as of December 31, 2006. Based on this evaluation, our chief executive officer
      and chief financial officer concluded that, as of December 31, 2006, our
      disclosure controls and procedures were functioning effectively to provide
      reasonable assurance that the information required to be disclosed by us in
      reports filed under the Securities Exchange Act of 1934 is (i) recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms and (ii) accumulated and communicated to our management,
      including our chief executive officer and chief financial officer, as
      appropriate to allow timely decision regarding disclosures.




**Remediation
      of Previously Stated Material Weaknesses**





We
      formulated a program to remedy the material weaknesses identified in the Form
      10KSB annual report for the fiscal period ended December 31, 2005.





In
      the
      first phase of the program, completed as of March 31, 2006, we hired a
      Controller and a Senior Accountant to augment our accounting, financial
      reporting and financial control function in our finance department. Due to
      the
      subsequent departure of our previous Chief Financial Officer and subsequent
      appointment of our previous Controller into that position, we have adjusted
      the
      plan by engaging an outside consulting firm to assist in the financial reporting
      of the Company and to review the Company’s application of accounting
      principles.





In
      the
      second phase of the program, we increased our auditor's review work quarterly,
      as well as, increased the areas reviewed and discussed with the audit committee
      and auditors beforehand, on any changes in accounting principles or revenue
      or
      expense recognition. Specifically, we implemented the following remediation
      measures relating to the previously stated material weaknesses:





1. *Ineffective
      controls over revenue recognition* .
      Our
      remediation measures relating to revenue recognition includes a review by
      management of revenue items other than normal fees earned such as
      surcharge/convenience and interchange including a regular review of the accounts
      receivable aging. We have also instituted an objective method of determining
      the
      collectibility of the accounts receivable as well as a strict method for setting
      reserves against those receivables.





2. *Ineffective
      controls over depreciation* .
      Subsequent to the errors that resulted in previous audit adjustments, the
      Company has set up a tracking system to follow the final production periods
      when
      software is being developed and will include a review by management of
      depreciable items. Also, the Company has ceased its software development
      subsidiaries as of December 31, 2005 and does not plan to change the method
      of
      software depreciation on previously capitalized assets. Additionally, during
      the
      fiscal year the Company installed a new fixed asset management module onto
      its
      accounting platform which now automates the calculation of the appropriate
      depreciation over the selected life span of the equipment.





3. *Ineffective
      controls over internally developed software* .
      The
      Company has set up a tracking system to follow the development, testing,
      implementation and final production periods when the software is being
      developed. During the year ended December 31, 2005, the Company ceased
      operations of software development subsidiaries.





Page
          45





We
      completed our remediation program during fiscal 2006. The material weaknesses
      are considered remediated as the applicable remedial controls operated for
      a
      sufficient period of time and management has thus concluded, through testing,
      that these controls are operating effectively.





**Changes
      in Internal Control Over Financial Reporting**





There
      were no changes during the quarter ended December 31, 2006 in our internal
      control over financial reporting or in other factors that materially affected,
      or are reasonably likely to materially affect, our internal controls over
      financial reporting.




**Item
              8A(T).**
            **CONTROLS
                AND PROCEDURES**





Not
      applicable.




**Item
              8B.**
            **OTHER
                INFORMATION**





None.




**ITEM
              9.**
            **DIRECTORS
                AND EXECUTIVE OFFICERS OF THE
                ISSUER**




The
      Company's executive officers, directors and key employees and their ages and
      positions as of December 31, 2006 are as follows:


Name
              
              Age
              
              PositionsLock
                  Ireland
              
              63
              
              Vice
                  Chairman, DirectorSharon
                  Jackson
              
              49
              
              SecretaryRobert
                  Landis
              
              47
              
              DirectorMichael
                  J. Loiacono
              
              41
              
              Chief
                  Financial Officer, Chief Accounting OfficerJoseph
                  M. Loughry, III
              
              61
              
              Chairman,
                  DirectorGeorge
                  A. McQuain
              
              51
              
              President,
                  CEO and DirectorJohn
                  C. Rawlins, Jr.
              
              59
              
              Executive
                  Vice-President of SalesAlan
                  Rossiter
              
              61
              
              Director
  The
      following is a brief description of each officer and director listed
      above:





Lock
      Ireland, Vice Chairman, Director





Currently
      a consultant and Director with NHB Holdings, Inc. and Proficio Bank, Mr. Ireland
      has over 30 years experience in the Banking industry. Prior to this he was
      the
      President and CEO for Resource Corporate Management, Inc. (RCMI) from 1994
      to
      2002, RCMI is a company that promotes new products and services with community
      banks via the Bankers' Banks across the United States. Mr. Ireland has held
      numerous positions from Vice-President to CEO with the following banks: Bankers
      Trust of South Carolina, 1st Performance Bank, Republic National Bank and
      Resource Bancshares. His current affiliations include being a Board Member
      of
      the Jacksonville Economic Company and previous Board Governor for the
      Jacksonville Chamber of Commerce. Mr. Ireland brings many affiliations and
      much
      experience in the banking and financial industries to the Company. Mr. Ireland
      originally joined Global Axcess as a Director in July 2003 and his current
      term
      expires on June 1, 2007.




Page
          46





Sharon
      Jackson, Secretary





Ms.
      Jackson has served as the Company’s Director of Corporate Development and
      Assistant Secretary from 2004 to 2006 and then as the Director of Corporate
      Operations and Corporate Secretary from 2006 to present. Prior to 2004, Ms.
      Jackson served as the Director of Marketing and Client Services for Nationwide
      Money Services, Inc.





Robert
      Landis, Director





Mr.
      Landis is currently the Chairman, Chief Financial Officer and Treasurer of
      Comprehensive Care Corporation, a publicly traded company that provides managed
      behavioral healthcare services. He has been with Comprehensive Care for over
      5
      years, working directly with all operations, financial and SEC filings. Prior
      to
      this, Mr. Landis was with Maxicare Health Plans, Inc., a health maintenance
      organization, as its Treasurer from 1983-1998. Mr. Landis, a Certified Public
      Accountant, received a Bachelor’s Degree in Business Administration from the
      University of Southern California and a Master’s Degree in Business
      Administration from California State University at Northridge. Mr. Landis brings
      strong financial, operational and SEC experience to the Company, and is Chairman
      of the Audit Committee for the Company. Mr. Landis originally joined Global
      Axcess Corp as a Director in July 2003 and his current term expires on June
      1,
      2007.





Michael
      J. Loiacono, Chief Financial Officer and Chief Accounting
      Officer





Mr.
      Loiacono brings more than 18 years of professional experience working with
      both
      public and private companies within the telecommunications and software
      industries. Prior to joining Global Axcess Corp, Mr. Loiacono served as Vice
      President of Finance for InfiniRoute Networks Inc., which was acquired by TNS,
      Inc. At InfiniRoute, Mr. Loiacono managed their financial strategies to support
      the company's growth, and oversaw the day-to-day financial operations, including
      budget planning, accounting, billing, and financial reporting. Before his role
      at InfiniRoute, Mr. Loiacono served roles as VP Finance at Reach Services,
      USA.
      and Controller and Director of Finance for ITXC Corp, which was acquired by
      Teleglobe, Inc. He has also held financial management positions at Voxware,
      Inc.
      and Dendrite International, Inc., two publicly traded companies. Mr. Loiacono
      holds a Bachelor of Science degree from Rutgers University. Mr. Loiacono is
      responsible for: financing the operations of the Company and its subsidiaries;
      financing the internal growth of the Company; strategic, legal and risk analysis
      for the Company; and SEC filings of the Company.





Joseph
      M. Loughry, III, Chairman, Director





Mr.
      Loughry has had successful hands-on experience in creating shareholder value
      in
      public and privately held processing services and software companies with sales
      ranging from $15 million to $300 million annually. Most recently, as President
      and CEO of HTE, Inc. (listed on Nasdaq) he engineered the turnaround of a public
      software company that provides integrated application solutions to mid-tier
      county and city governments throughout the nation. HTE, Inc. was eventually
      sold
      to SunGard Data Systems. His background includes almost a decade at General
      Electric Information Services where he was involved in general management,
      sales
& marketing, product management and product development. He also served as
      President and CEO of QuestPoint Holdings, Inc., a financial transaction
      processing services business and as CEO of Nationwide Remittance Centers, Inc.
      a
      venture funded lock-box services business, which was acquired by CoreStates
      Bank. Mr. Loughry graduated from the University of Maryland with a degree in
      Business Administration in 1967. Mr. Loughry originally joined Global Axcess
      Corp as a Director in December 2005 and his current term expires on June 1,
      2007.




Page
          47





George
      A. McQuain, President, CEO and Director





Mr.
      McQuain was Chief Executive Officer for Nationwide Money Services, Inc ("NMS"),
      a Global Axcess Corp subsidiary, prior to his appointment as CEO and President
      of Global Axcess Corp. He joined Global Axcess Corp as a Vice President of
      Operations in July 2002. Prior to his association with NMS, Mr. McQuain served
      as President and Chief Executive Officer of Ntercept Communications, where
      he
      decisively improved sales, marketing and product implementation. Prior to
      Ntercept, Mr. McQuain led First Union National Bank’s nationwide lockbox
      operations. Prior to First Union, Mr. McQuain was Chief Operating Officer of
      QuestPoint Holdings, a subsidiary of CoreStates Financial Corporation. Mr.
      McQuain received his MBA in Finance and Management from George Mason University
      in Fairfax, Virginia. Mr McQuain became a director of the Company in September
      2006 and his current term expires on June 1, 2007.





John
      C. Rawlins, Jr, Executive Vice President of Sales





Over
      the
      past fourteen years, Mr. Rawlins has joined privately held corporations that
      wanted to turn their sales departments around and improve the revenue growth
      with the ultimate objective to either take the company public or sell it. Before
      joining Nationwide Money Services, Mr. Rawlins was President and Chief Executive
      Officer of The Rawlins Sales Group, a company that provides sales/management
      consulting services and contracts as an independent sales and marketing
      organization to national and international based companies. Prior to starting
      The Rawlins Sales Group, Mr. Rawlins was Executive Vice President of Sales,
      Marketing and Alliances at Regulus Group LLC., a $220 million bill presentment
      and remittance processing organization. Mr. Rawlins has twenty-five years
      experience in the financial services industry in sales and marketing management.
      He received a B.S. degree in business administration from Salisbury
      University.





Alan
      W. Rossiter, Director





Since
      July of 2002, Mr. Rossiter has served as President of Springboard Capital
      Management, Inc., based in Jacksonville, Florida. Springboard Capital Management
      manages the activities of two early-stage venture capital investment funds,
      Springboard Capital I, LLC and Springboard Capital II, LLC. Additionally, since
      1996 has served as the President and CEO of Enterprise North Florida
      Corporation, which provides emerging technology companies with extensive
      business, technical and financial services. Mr. Rossiter served for 27 years
      as
      a career Officer in the United States Navy specializing in the field of aviation
      logistics management and maintenance. Mr. Rossiter received a Bachelors degree
      in History from Denison University in 1967, graduated from the Naval Aviation
      Candidate School at Pensacola, Florida in 1969 and graduated from National
      University of San Diego with a Masters of Business Administration in Financial
      Management and Information Systems in 1983. Mr. Rossiter originally joined
      Global Axcess Corp as a Director in December 2005 and his current term expires
      on June 1, 2007.





The
      Board
      of Directors has established the following committees:





*Compensation
      Committee*





The
      Compensation Committee consists of Lock Ireland, who serves as Chairman of
      this
      committee, Robert Landis, and Alan Rossiter. The Compensation Committee met
      five
      times during fiscal 2006. The function of the Compensation Committee is to
      approve stock plans and option grants and review and make recommendations to
      the
      Board of Directors regarding executive compensation and benefits.





*Audit
      Committee*





The
      Audit
      Committee consists of Lock Ireland, Robert Landis, and Joseph M. Loughry III.
      The Board of Directors has determined that Mr. Landis, who serves as Chairman
      of
      the Audit Committee, qualifies as an “audit committee financial expert,” as
      defined in the rules of the Securities and Exchange Commission. The Audit
      Committee met eleven times in fiscal year 2006. Responsibilities of the
      Committee include (1) reviewing the Company’s consolidated financial statements
      and consulting with the independent auditors concerning the Company's
      consolidated financial statements, accounting and financial policies, and
      internal controls, (2) reviewing the scope of the independent auditors'
      activities and the fees of the independent auditors, and (3) reviewing the
      independence of the auditors. The Board has determined that each of Messrs.
      Ireland, Landis, and Loughry meet the independence standards established by
      the
      National Association of Securities Dealers.




Page
          48





*Mergers
      and Acquisitions Committee*





The
      Mergers and Acquisitions Committee consists of Lock Ireland, Robert Landis,
      Joseph M. Loughry III and Alan Rossiter, who serves as Chairman of this
      committee. The Mergers and Acquisitions Committee met three times during fiscal
      2006. The function of the Mergers and Acquisitions Committee is to explore
      alternative ways to enhance shareholder value including joint ventures, mergers,
      stock sale or a potential sale of company assets and make recommendations to
      the
      Board of Directors.





*Nominating
      & Corporate Governance Committee*





The
      primary function of the Nominating & Corporate Governance Committee is to
      (a) identify individuals qualified to become members of the Board, (b) approve
      and recommend to the Board director candidates, (c) develop, recommend to the
      Board and update as necessary corporate governance principles and policies
      applicable to the Company, and (d) monitor compliance with such principles
      and
      policies. Robert Landis is the Chairman of this committee. The Nominating &
Corporate Governance Committee did not meet during fiscal 2006.





In
      2006,
      the Board met seventeen times. The Board adopted various resolutions pursuant
      to
      five (5) unanimous written consents in lieu of a meeting adopted during the
      year
      ended December 31, 2006. Three of the incumbent directors attended 100% of
      the
      aggregate of (i) the meetings of the Board during the year and (ii) the total
      number of meetings of all committees of the Board on which the incumbent
      directors served. Of the two remaining incumbent directors, one attended 83%
      and
      the other 72% of the aggregate of (i) the meetings of the Board during the
      year
      and (ii) the total number of meetings of all committees of the Board on which
      the incumbent directors served.





At
      the
      end of 2006, there were four non-employee directors and one employee director.
      The Board held seventeen (17) meetings in person or by telephone. In addition,
      the Board of Directors took action by written consent on five (5) occasions.
      Non-employee Directors received cash compensation for their service as Director
      and as Chair of a Board Committee when applicable during fiscal 2006. The cash
      compensation was paid as follows: Chairman of the Board - four thousand dollars
      ($4,000) per month and no additional compensation for Chairing or membership
      on
      a Board Committee, Vice Chairman of the Board - twenty-eight hundred dollars
      ($2,800) per month and no additional compensation for Chairing or membership
      on
      a Board Committee, Chairman of the Audit Committee - five hundred dollars ($500)
      per month, Chairman of the Compensation Committee - two hundred fifty dollars
      ($250) per month, All Other Non-Employee Directors - with the exception of
      the
      Chairman and Vice Chairman of the Board all other non-employee Directors receive
      five hundred dollars ($500) per month. Each non-employee director is also
      compensated with stock options in accordance with the terms of the Company’s
      Stock Option Plan. Such plan provides for an initial grant of 20,000 stock
      options upon acceptance to the Board. Additionally, annual grants of 10,000
      stock options are awarded for each year of service thereafter. All non-employee
      directors are reimbursed for expenses incurred in attending meetings of the
      Board of Directors and any committee(s) thereof.





During
      2006, a total of 40,000 stock options were granted to non-employee directors
      as
      follows:





Director
            
            Number
                of OptionsIreland,
                Lock
            
            
            10,000Landis,
                Robert
            
            
            10,000Loughry,
                Joseph
            
            
            10,000Rossiter,
                Alan
            
            
            10,000






Page
          49


*Corporate
      Governance*




The
      role
      of the Board of Directors (the “Board”) of Global Axcess Corp is to oversee the
      business and affairs of the Company for the benefit of its stockholders. In
      addition, the Board considers the interests of its other interested parties,
      including its employees, customers, suppliers, creditors and the communities
      in
      which the Company does business. The Board has adopted corporate governance
      guidelines, as well as committee charters, to provide a framework for the
      functioning of the Board and Board Committees.





*Code
      of Ethics*





The
      Company has adopted a Code of Ethics and Business Conduct that applies to all
      officers, directors and employees of the Company. The document has been posted
      on the Company’s website at www.GlobalAxcess.biz





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Exchange Act requires the Company's executive officers and
      directors and persons who own more than 10% of a registered class of the
      Company's equity securities to file reports of their ownership thereof and
      changes in that ownership with the Securities and Exchange Commission ("SEC")
      and the National Association of Securities Dealers, Inc. Executive officers,
      directors and greater than 10% stockholders are required by SEC regulations
      to
      furnish the Company with copies of all such reports they file.





Based
      solely upon a review of Forms 3, 4 and 5, and amendments thereto, furnished
      to
      the Company during fiscal year 2006, the Company is not aware of any director,
      officer or beneficial owner of more than ten percent of the Company's Common
      Stock that, during fiscal year 2006, failed to file on a timely basis, reports
      required by Section 16(a) of the Securities Exchange Act of 1934.





**ITEM
              10.**
            **EXECUTIVE
                COMPENSATION**





The
      following table summarizes all compensation paid by the Company with respect
      to
      the fiscal years ended December 31, 2006 and 2005 for the Chief Executive
      Officer and all other executive officers whose total cash compensation exceeds
      $100,000 in the fiscal years ended December 31, 2006 and 2005.





Page
          50


**SUMMARY
        COMPENSATION TABLE**


**Name
                    & Principal Position**
                
                **Year**
                
                **Salary**
                  **($)**
                
                **Bonus**
                  **($)**
                
                **Stock
                    Awards**
                  **($)**
                
                **Option
                    Awards**
                  **($)**
                
                
                
                **Non-Equity
                    Incentive Plan Compensation**
                  **($)**
                
                **Change
                    in Pension Value and Non-Qualified Deferred Compensation Earnings**
                  **($)**
                
                **All
                    Other Compensation ($)**
                
                **Total**
                  **($)**George
                    McQuain - President and CEO, COO
                
                
                2006
                
                $
                168,476
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                168,476
                (
                (1)2005
                
                $
                146,673
                
                $
                6,430
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                153,103Michael
                    J. Loiacono - CFO and CAO
                
                
                2006
                
                $
                93,370
                
                
                -
                
                
                -
                
                $
                431
                (
                2)
                
                
                -
                
                
                -
                
                
                -
                
                $
                93,801
                (
                3)Michael
                    Dodak - CEO and Chairman
                
                
                2006
                
                $
                356,591
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                356,591
                (
                4)2005
                
                $
                275,000
                
                $
                12,185
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                287,185David
                    Fann - President
                
                
                2006
                
                $
                239,244
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                239,244
                (
                5)2005
                
                $
                200,000
                
                $
                6,360
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                206,360David
                    Surette - CFO and CAO
                
                
                2006
                
                $
                80,262
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                80,262
                (
                6)2005
                
                $
                137,935
                
                $
                7,335
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                145,270Robert
                    Colabrese - Executive VP Sales
                
                
                2006
                
                $
                215,052
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                215,052
                (
                7)2005
                
                $
                217,554
                
                $
                3,025
                
                
                -
                
                
                -
                
                
                
                
                -
                
                
                -
                
                
                -
                
                $
                220,579


(1)
              On
                  October 10, 2006, the Board of Directors appointed George A. McQuain
                  as
                  President and Chief Executive Officer of the Company and as a director
                  of
                  the Company to fill the
                  vacancy created by the resignations of Messrs. Dodak and
                  Fann.(2)
              The
                  option is exercisable during the term of Michael Loiacono's employment
                  with respect to 25% of the shares six months from the option grant
                  date
                  and the remaining shares thereafter
                  in three equal installments on the anniversary of the option grant
                  date.(3)
              On
                  May 10, 2006 the Board of Directors appointed Michael J. Loiacono
                  as Chief
                  Financial Officer of the Company effective June 1, 2006.(4)
              On
                  October 10, 2006, the Company entered into Separation Agreement
                  and
                  Release with Michael Dodak pursuant to which Mr. Dodak resigned
                  as an
                  executive officer and director
                  of the Company effective September 30, 2006.(5)
              On
                  October 10, 2006, the Company entered into Separation Agreement and
                  Release with David Fann pursuant to which Mr. Fann resigned as
                  an
                  executive officer and director of
                  the Company effective September 30, 2006.(6)
              On
                  May 10, 2006, David S. Surette notified the Company of his resignation
                  as
                  Chief Financial Officer and Chief Accounting Officer effective
                  May 31,
                  2006.(7)
              On
                  September 15, 2006, Robert Colabrese ceased serving as an executive
                  officer.




The
      option award was valued using the Black Scholes option pricing model assuming
      a
      5 year life, no expected dividend payments, volatility of 145%, forfeiture
      rate
      of 87.5% and a risk free rate of 5%.





Page
          51




**OUTSTANDING
        EQUITY AWARDS**
  **Option
                  Awards**
              
              **Stock
                  Awards****Name**
              
              **Year**
              
              **Number**
                            **of**
                            **Securities**
                            **Underlying**
                            **Unexercised**
                            **Options**
                            **(#)**
                            **Exercisable**
              
              **Number**
                              **of**
                              **Securities**
                              **Underlying**
                              **Unexercised**
                              **Options**
                              **(#)**
                              **Unexercisable**
              
              
              
              **Equity**
                                **Incentive**
                                **Plan**
                                **Awards:**
                                **Number**
                                **of**
                                **Securities
                                  Underlying**
                                **Unexercised**
                                **Unearned**
                                **Options**
                                **(#)**
              
              **Option**
                      **Exercise**
                      **Price**
                      **($)**
              
              **Option**
                    **Expiration**
                    **Date**
              
              **********Number**********
                **of
                          Shares**
                        **or
                          Units**
                        **of
                          Stock**
                        **That
                          Have**
                        **Not**
                        **Vested**
                        **(#)**
              
              **Market**
                              **Value
                                of**
                              **Shares
                                or**
                              **Units
                                of**
                              **Stock**
                              **That
                                Have**
                              **Not**
                              **Vested**
                              **($)**
              
              **Equity**
                                  **Incentive**
                                  **Plan
                                    Awards:**
                                  **Number**
                                  **of**
                                  **Unearned**
                                  **Shares,**
                                  **Units
                                    or**
                                  **Other
                                    Rights**
                                  **That
                                    Have Not**
                                  **Vested**
                                  **(#)**
              
              **Equity
                      Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                      Units or
                      Other Rights That Have Not**
                    **Vested**
                    **($)******George
                  McQuain - President and CEO, COO
              
              
              2006
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2005
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2004
              
              
              -
              
              
              28,200
              
              
              (1)
              
              
              -
              
              $
              1.30
              
              
              12/1/2009
              
              
              -
              
              
              -
              
              
              -
              
              
              -2003
              
              
              -
              
              
              54,000
              
              
              (2)
              
              
              -
              
              $
              1.70
              
              
              10/24/2008
              
              
              -
              
              
              -
              
              
              -
              
              
              -2002
              
              
              -
              
              
              40,000
              
              
              (3)
              
              
              -
              
              $
              0.90
              
              
              6/18/2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -Michael
                  J. Loiacono - CFO and CAO
              
              
              2006
              
              
              -
              
              
              5,000
              
              
              (4)
              
              
              15,000
              
              $
              0.76
              
              
              3/31/2011
              
              
              -
              
              
              -
              
              
              -
              
              
              -Michael
                  Dodak - CEO and Chairman
              
              
              2006
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2005
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2004
              
              
              -
              
              
              -
              
              
              (5)
              
              
              -
              
              $
              1.30
              
              
              12/15/2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -2003
              
              
              -
              
              
              150,000
              
              
              (6)
              
              
              -
              
              $
              1.70
              
              
              12/30/2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -2002
              
              
              -
              
              
              60,000
              
              
              (7)
              
              
              -
              
              $
              0.90
              
              
              12/30/2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -2001
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -David
                  Fann - President
              
              
              2006
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2005
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2004
              
              
              -
              
              
              -
              
              
              (8)
              
              
              -
              
              $
              1.30
              
              
              12/15/2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -2003
              
              
              -
              
              
              150,000
              
              
              (9)
              
              
              -
              
              $
              1.70
              
              
              12/30/2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -2002
              
              
              -
              
              
              60,000
              
              
              (10)
              
              
              -
              
              $
              0.90
              
              
              12/30/2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -2001
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -David
                  Surette - CFO and CAO
              
              
              2006
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2005
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2004
              
              
              -
              
              
              13,950
              
              
              (11)
              
              
              -
              
              $
              1.30
              
              
              2/28/2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -2003
              
              
              -
              
              
              55,500
              
              
              (12)
              
              
              -
              
              $
              1.70
              
              
              2/28/2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -2003
              
              
              40,000
              
              
              -
              
              
              (13)
              
              
              -
              
              $
              0.35
              
              
              2/28/2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -Robert
                  Colabrese - Executive VP Sales
              
              
              2006
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2005
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2004
              
              
              -
              
              
              -
              
              
              (14)
              
              
              -
              
              $
              1.30
              
              
              12/15/2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -2003
              
              
              -
              
              
              54,000
              
              
              (15)
              
              
              -
              
              $
              1.70
              
              
              12/15/2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -2002
              
              
              -
              
              
              40,000
              
              
              (16)
              
              
              -
              
              $
              0.90
              
              
              12/15/2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -2001
              
              
              -
              
              
              5,000
              
              
              (17)
              
              
              -
              
              $
              0.675
              
              
              10/23/2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
 Except
          as
          set forth above, no other named executive officer has received an equity
          award.
 (1)
              On
                  December 1, 2004, George McQuain received a stock option to purchase
                  60,000 shares of common stock, which vested based on performance
                  criteria.
                  On December 15, 2005, 44,700 shares of common stock vested under
                  the stock
                  option and the remaining 15,300 terminated. Due to the restatement
                  of the
                  Company's operating results, the number of shares vested decreased
                  from
                  60,000 to 28,200.(2)
              On
                  October 24, 2003, George McQuain received a stock option to purchase
                  60,000 shares of common stock, which vested based on performance
                  criteria.
                  On December 31, 2004, 54,000 shares of common stock vested and
                  the
                  remaining 6,000 terminated.(3)
              Option
                  is exercisable during the term of George McQuain's employment in
                  four (4)
                  installments of twenty-five percent (25%) of the Shares covered
                  by this
                  Option, the first installment to be exercisable on the six (6)
                  month
                  anniversary of the date of this Option (the "Initial Vesting Date"),
                  with
                  an additional twenty-five percent (25%) of such Shares becoming
                  exercisable on each of the three (3) successive twelve (12) month
                  periods
                  following the Initial Vesting Date. The installments are cumulative
                  (i.e.,
                  this option may be exercised, as to any or all Shares covered by
                  an
                  installment, at any time or times after an installment becomes
                  exercisable
                  and until expiration or termination of this option).(4)
              The
                  option is exercisable during the term of Michael Loiacono's employment
                  with respect to 25% of the shares six months from the option grant
                  date
                  and the remaining shares thereafter in three equal installments
                  on the
                  anniversary of the option grant date.(5)
              On
                  December 1, 2004, Michael Dodak received a stock option to purchase
                  120,000 shares of common stock, which vested based on performance
                  criteria. On December 15, 2005, 66,000 shares of common stock vested
under
                  the stock option and the remaining 54,000 terminated. Due to the
                  restatement of the Company's operating results, the number of shares
                  vested decreased from 66,000 to 0.(6)
              On
                  October 24, 2003, Michael Dodak received a stock option to purchase
                  150,000 shares of common stock, which vested based on performance
                  criteria. On December 31, 2004, 150,000 shares of common stock
                  vested.(7)
              Option
                  is exercisable during the term of Michael Dodak's employment in
                  four (4)
                  installments of twenty-five percent (25%) of the Shares covered
                  by this
                  Option, the first installment to be exercisable on 6/18/2002 (the
                  "Initial Vesting Date"), with an additional twenty-five percent
                  (25%) of
                  such Shares becoming exercisable on each of the three (3) successive
                  twelve (12) month periods following the Initial Vesting Date. The
installments
                  are cumulative (i.e., this option may be exercised, as to any or
                  all
                  Shares covered by an installment, at any time or times after an
                  installment becomes exercisable and until expiration of termination
                  of
                  this option).(8)
              On
                  December 1, 2004, David Fann received a stock option to purchase
                  120,000
                  shares of common stock, which vested based on performance criteria.
                  On
                  December 15, 2005, 66,000 shares of common stock vested under
                  the stock option and the remaining 54,000 terminated. Due to the
                  restatement of the Company's operating results, the number of shares
                  vested decreased from 66,000 to 0.(9)
              On
                  October 24, 2003, David Fann received a stock option to purchase
                  150,000
                  shares of common stock, which vested based on performance criteria.
                  On
                  December 31, 2004, 150,000 shares of common stock
                  vested.(10)
              Option
                  is exercisable during the term of David Fann's employment in four
                  (4)
                  installments of twenty-five percent (25%) of the Shares covered
                  by this
                  Option, the first installment to be exercisable on 6/18/2002 (the
                  "Initial Vesting Date"), with an additional twenty-five percent
                  (25%) of
                  such Shares becoming exercisable on each of the three (3) successive
                  twelve (12) month periods following the Initial Vesting Date. The
installments
                  are cumulative (i.e., this option may be exercised, as to any or
                  all
                  Shares covered by an installment, at any time or times after an
                  installment becomes exercisable and until expiration of termination
                  of
                  this option).(11)
              On
                  December 1, 2004, David J. Surette received a stock option to purchase
                  60,000 shares of common stock, which vested based on performance
                  criteria.
                  On December 15, 2005, 30,450 shares of common stock vested and
                  the remaining 29,550 terminated. Due to the restatement of the
                  Company's
                  operating results, the number of shares vested decreased from 30,450
                  to
                  13,950.(12)
              On
                  October 24, 2003, David J. Surette received a stock option to purchase
                  60,000 shares of common stock, which vested based on performance
                  criteria.
                  On December 31, 2004, 55,500 shares of common stock vested and
                  the remaining 4,500 terminated.(13)
              Option
                  is exercisable during the term of David J. Surette's employment
                  in four
                  (4) installments of twenty-five percent (25%) of the Shares covered
                  by
                  this Option, the first installment to be exercisable on 3/3/03
                  (the "Initial
                  Vesting Date"), with an additional twenty-five percent (25%) of
                  such
                  Shares becoming exercisable on each of the three (3) successive
                  twelve
                  (12) month periods following the Initial Vesting Date. The installments
                  are
                  cumulative (i.e., this option may be exercised, as to any or all
                  Shares
                  covered by an installment, at any time or times after an installment
                  becomes exercisable and until expiration or termination of this
                  option.(14)
              On
                  December 1, 2004, Robert Colabrese received a stock option to purchase
                  60,000 shares of common stock, which vested based on performance
                  criteria.
                  On December 15, 2005, 16,500 shares of common stock vested and
                  the remaining 43,500 terminated. Due to the restatement of the
                  Company's
                  operating results, the number of shares vested decreased from 60,000
                  to
                  0.(15)
              On
                  October 24, 2003, Robert Colabrese received a stock option to purchase
                  60,000 shares of common stock, which vested based on performance
                  criteria.
                  On December 31, 2004, 54,000 shares of common stock vested and
                  the remaining 6,000 terminated.(16)
              Option
                  is exercisable during the term of Robert Colabrese's employment
                  in four
                  (4) installments of twenty-five percent (25%) of the Shares covered
                  by
                  this Option, the first installment to be exercisable on 6/18/02
                  (the "Initial
                  Vesting Date"), with an additional twenty-five percent (25%) of
                  such
                  Shares becoming exercisable on each of the three (3) successive
                  twelve
                  (12) month periods following the Initial Vesting Date. The installments
                  are
                  cumulative (i.e., this option may be exercised, as to any or all
                  Shares
                  covered by an installment, at any time or times after an installment
                  becomes exercisable and until expiration or termination of this
                  option.(17)
              Option
                  is exercisable during the term of Robert Colabrese's employment
                  in four
                  (4) installments of twenty-five percent (25%) of the Shares covered
                  by
                  this Option, the first installment to be exercisable on 10/23/01
                  (the
                  "Initial
                  Vesting Date"), with an additional twenty-five percent (25%) of
                  such
                  Shares becoming exercisable on each of the three (3) successive
                  twelve
                  (12) month periods following the Initial Vesting Date. The installments
                  are
                  cumulative (i.e., this option may be exercised, as to any or all
                  Shares
                  covered by an installment, at any time or times after an installment
                  becomes exercisable and until expiration or termination of this
                  option.
   Page
            52


**DIRECTOR
        COMPENSATION**


The
        following table sets forth with respect to the named director, compensation
        information inclusive of equity awards and payments made in the year end
        December 31, 2006.
  **Name**
              
              **Year**
              
              **Fees
                  Earned or Paid in Cash ($)**
              
              **Stock
                  Awards ($)**
              
              **Option
                  Awards ($)**
              
              
              
              **Option
                  Exercise Price ($)**
              
              **Option
                  Expiration Date**
              
              **Non-Equity
                  Incentive Plan Compensation ($)**
              
              **Change
                  in Pension Value and Nonqualified Deferred Compensation Earnings**
              
              **All
                  Other Compensation ($)**
              
              **Total
                  ($)**Lock
                  Ireland
              
              
              2006
              
              $
              15,150
              
              
              -
              
              $
              301
              
              
              (1
              )
              $
              0.53
              
              
              7/10/2011
              
              
              -
              
              
              -
              
              
              -
              
              $
              15,4512005
              
              
              -
              
              
              -
              
              $
              847
              
              
              (2
              )
              $
              1.45
              
              
              7/10/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              8472005
              
              
              -
              
              
              -
              
              
              -
              
              
              (3
              )
              $
              1.40
              
              
              4/8/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              -2004
              
              
              -
              
              
              -
              
              $
              709
              
              
              (4
              )
              $
              2.50
              
              
              7/11/2009
              
              
              -
              
              
              -
              
              
              -
              
              $
              7092003
              
              
              -
              
              
              -
              
              $
              624
              
              
              (5
              )
              $
              1.10
              
              
              7/10/2008
              
              
              -
              
              
              -
              
              
              -
              
              $
              624Robert
                  Landis
              
              
              2006
              
              $
              12,000
              
              
              -
              
              $
              301
              
              
              (1
              )
              $
              0.53
              
              
              7/10/2011
              
              
              -
              
              
              -
              
              
              -
              
              $
              12,3012005
              
              
              -
              
              
              -
              
              $
              847
              
              
              (2
              )
              $
              1.45
              
              
              7/10/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              8472004
              
              
              -
              
              
              -
              
              $
              709
              
              
              (4
              )
              $
              2.50
              
              
              7/10/2009
              
              
              -
              
              
              -
              
              
              -
              
              $
              7092003
              
              
              -
              
              
              -
              
              $
              624
              
              
              (5
              )
              $
              1.10
              
              
              7/10/2008
              
              
              -
              
              
              -
              
              
              -
              
              $
              624Joseph
                  Loughry, III
              
              
              2006
              
              $
              16,500
              
              
              -
              
              
              -
              
              
              (6
              )
              $
              0.35
              
              
              12/16/2011
              
              
              -
              
              
              -
              
              $
              10,000
              
              $
              26,5002005
              
              
              -
              
              
              -
              
              $
              1,873
              
              
              (7
              )
              $
              1.10
              
              
              12/16/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              1,873George
                  McQuain
              
              
              2006
              
              
              -
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -Robert
                  Pearson
              
              
              2006
              
              
              -
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -2005
              
              
              -
              
              
              -
              
              $
              1,362
              
              
              (8
              )
              $
              1.20
              
              
              5/12/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              1,362Alan
                  Rossiter
              
              
              2006
              
              $
              6,000
              
              
              -
              
              
              -
              
              
              (6
              )
              $
              0.35
              
              
              12/16/2011
              
              
              -
              
              
              -
              
              
              -
              
              $
              6,0002005
              
              
              -
              
              
              -
              
              $
              1,873
              
              
              (7
              )
              $
              1.10
              
              
              12/16/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              1,873
  (1)
              2,500
                  shares vest under this option on July 10, 2006, November 10, 2006,
                  March
                  10, 2007 and July 10, 2007.(2)
              2,500
                  shares vest under this option on July 10, 2005, November 10, 2005,
                  March
                  10, 2006 and July 10, 2006.(3)
              12,500
                  shares vest under this option on April 8, 2005, July 8, 2005, October
                  8,
                  2005 and December 15, 2005.(4)
              2,500
                  shares vest under this option on July 10, 2004, November 10, 2004,
                  March
                  10, 2005 and July 10, 2005.(5)
              12,500
                  shares vest under this option on July 10, 2003, November 10, 2003,
                  March
                  10, 2004 and July 10, 2004.(6)
              2,500
                  shares vest under this option on December 16, 2006, April 16, 2007,
                  August
                  16, 2007 and December 16, 2007.(7)
              12,500
                  shares vest under this option on December 16, 2005, April 16, 2006,
                  August
                  16, 2006 and December 16, 2006.(8)
              12,500
                  shares vest under this option on May 12, 2005,September 12, 2005,
                  January
                  12, 2006 and May 12, 2006.


The
      option awards were valued using the Black Scholes option pricing model assuming
      up to 5 year lives, no expected dividend payments, volatility of 145%,
      forfeiture rate of 87.5% and a risk free rate of 5%.





*Employment
      Agreements*





There
      were no employment agreements as of December 31, 2006.




**ITEM
              11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT**




The
      following table sets forth certain information regarding beneficial ownership
      of
      our common stock as of December 31, 2006:




Page
          53





·
            by
                each person who is known by us to beneficially own more than 5% of
                our
                common stock;





·
            by
                each of our officers and directors; and





·
            by
                all of our officers and directors as a group.




**Name**
              
              **Number**
              
              **Percent
                  (1)**George
                  A. McQuain
              
              
              132,200
              
              
              0.63
              %
                  (2)Michael
                  Loiacono
              
              
              5,000
              
              
              0.02
              %
                  (3)Sharon
                  Jackson
              
              
              47,600
              
              
              0.23
              %
                  (4)Lock
                  Ireland
              
              
              300,007
              
              
              1.43
              %
                  (5)Robert
                  Landis
              
              
              85,000
              
              
              0.40
              %
                  (6)Joe
                  Loughry
              
              
              52,500
              
              
              0.25
              %
                  (7)Al
                  Rossiter
              
              
              22,500
              
              
              0.11
              %
                  (8)All
                  executive officers and directors as a group (7 persons)
              
              
              644,807
              
              
              3.07
              %Other
                  5% owners:BFS
                  U.S. Special Opportunities Trust PLC
              
              
              3,340,000
              
              
              15.89
              %
                  (9)Rennaissance
                  U.S. Growth Investment Trust PLC
              
              
              3,280,000
              
              
              15.60
              %
                  (10)Rennaissance
                  Capital Growth & Income Fund III, Inc.
              
              
              2,440,000
              
              
              11.61
              %
                  (11)Total
              
              
              9,704,807
              
              
              46.17
              %
  The
      securities "beneficially owned" by a person are determined in accordance with
      the
      definition of "beneficial ownership" set forth in the rules and regulations
      promulgated under the Securities Exchange Act of 1934. Beneficially owned
      securities may include securities owned by and for, among others, the spouse
      and/or minor children of an individual and any other relative who has the same
      home
      as such individual. Beneficially owned securities may also include other
      securities as to which the individual has or shares voting or investment power
      or
      which such person has the right to acquire within 60 days of January 15, 2007
      pursuant to the conversion of convertible equity, exercise of options, or otherwise.
      Beneficial ownership may be disclaimed as to certain rights of the securities.





(1)
      Based
      on 21,021,786 shares of common stock outstanding as of March 27,
      2007.





(2)
      included are 10,000 common shares, 40,000 stock purchase options exercisable
      at $0.90 per share, 28,200 exercisable at $1.30 per share, and 54,000
      exercisable at $1.70 per share.





(3)
      included are 5,000 stock purchase options exercisable at $0.76 per
      share.





(4)
      included are 14,200 common shares, 15,000 stock purchase options exercisable
      at
      $0.90 per share, 10,000 stock purchase options exercisable at $1.30 per share,
      and 8,400 stock purchase options exercisable at $1.70 per share.





(5)
      included are 184,007 common shares, 20,000 stock purchase options exercisable
      at $1.10 per share, 10,000 stock purchase options exercisable at $2.50
      per
      share, 50,000 stock purchase options exercisable at $1.40 per share, 10,000
      stock purchase options exercisable at $1.45 per share, 5,000 stock purchase
      options exercisable at $0.53 per share, 6,000 stock purchase warrants
      exercisable at $1.75 per share, 6,000 stock purchase warrants exercisable at
      $2.50 per share, 6,000 stock purchase warrants exercisable at $5.00 per share,
      and 3,000 stock purchase warrants exercisable at $1.25 per share.




Page
          54





(6)
      included are 40,000 common shares, 20,000 stock purchase options exercisable at
      $1.10
      per share, 10,000 stock purchase options exercisable at $2.50 per share, 10,000
      stock purchase options exercisable at $1.45 per share, and 5,000 stock purchase
      options exercisable at $0.53 per share.





(7)
      included are 30,000 common shares, 20,000 stock purchase options exercisable
      at
      $1.10 per share and 2,500 stock purchase options exercisable at $0.35 per
      share.





(8)
      included are 20,000 stock purchase options exercisable at $1.10 per share and
      2,500 stock purchase options exercisable at $0.35 per share.





(9)
      included are 1,553,332 common shares and 1,786,668 stock purchase warrants exercisable
      at prices ranging from $1.25 to $5.00.





(10)
      included are 1,553,332 common shares and 1,726,668 stock purchase warrants exercisable
      at prices ranging from $1.75 to $5.00.





(11)
      included are 953,332 common shares and 1,486,668 stock purchase warrants exercisable
      at prices ranging from $1.75 to $5.00.




**ITEM
              12.**
            **CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS**





In
      October 2005, we reduced the exercise price from $1.75 to $1.25 and extended the
      expiration date by five years on 66,000 warrants held by BFS US Special Opportunities
      Trust PLC, a stockholder and beneficial owner of our company, in return
      for a five year extension on $1,000,000 in debt financing. The change in fair
      value of the warrants was recorded as additional paid in capital.





In
      October 2005, we reduced the exercise price from $1.75 to $1.25 and extended the
      expiration date by five years on 3,000 warrants held by Lock Ireland, a stockholder
      and director of our company, in return for a five year extension on $50,000
      in debt financing. The change in fair value of the warrants was recorded as
      additional paid in capital.





In
      October 2005, the Company converted $993,772 in debentures, net of related discounts,
      issued in September 2004 to equity at a conversion price of $1.25 or 820,000
      shares, and reduced the exercise price of the warrants attached to the debentures
      from $1.75 to $1.25 and extended the expiration of the warrant term from
      September 9, 2007 to October 21, 2010. The fair value of equity approximates
      the fair value of the debt converted and the fair value of the warrant
      repricing.





As
      of
      November 2005, we issued 600,000 shares of common stock to BFS US Special Opportunities
      Trust PLC, a stockholder and beneficial owner of our company, through
      a
      Private Placement Offering for $750,000 and we issued 240,000 Warrants exercisable
      for $1.75.





As
      of
      November 2005, we issued 600,000 shares of common stock to Renaissance US Growth
      Investment Trust PLC, a stockholder and beneficial owner of our company, through
      a
      Private Placement Offering for $750,000 and we issued 240,000 Warrants exercisable
      for $1.75.




**ITEM
              13.**
            **EXHIBITS**





(a)
      INDEX
      TO EXHIBITS





Page
          55




ExhibitNumber
              
              Exhibit
                  Description Herewith3.1
              
              Articles
                  of Incorporation - Restated and Amended May 30, 2001(Incorporated
                  by
                  reference to form 10KSB filed with the SEC on March 31,
                  2003)3.2
              
              ByLaws
                  of Global Axcess Corp - As Amended(Incorporated by reference to
                  form 10KSB
                  filed with the SEC on March 31, 2003)3.3
              
              Amendment
                  to the Articles of Incorporation (Incorporated by reference to
                  Form 8-K
                  filed with the SEC on May 3, 2005)4.1
              
              Securities
                  Purchase Agreement dated March 11, 2005 of Global Axcess Corp
                  (Incorporated by reference to Form 8-K filed with the SEC on April
                  4,
                  2005)4.2
              
              Form
                  of Common Stock Purchase Warrant (Incorporated by reference to
                  Form 8-K
                  filed with the SEC on April 4, 2005)4.3
              
              Securities
                  Purchase Agreement dated October 27, 2005 entered by and between
                  the
                  Company and the Investor (1)4.4
              
              9%
                  Senior Subordinated Secured Convertible Note dated October 27,
                  2005 issued
                  by the Company to the Investor (1)4.5
              
              Common
                  Stock Purchase Warrant dated October 27, 2005 issued by the Company
                  to the
                  Investor (1)4.6
              
              Registration
                  Rights Agreement dated October 27, 2005 entered by and between
                  the Company
                  and the Investor (1)4.7
              
              Subsidiary
                  Guarantee dated October 27, 2005 (1)4.8
              
              Subordination
                  Agreement dated October 27, 2005 entered by and between the Company,
                  the
                  Investor and Wachovia (1)4.9
              
              Security
                  Agreement dated October 27, 2005 entered by and between the Company
                  and
                  the Investor (1)4.10
              
              Third
                  Amended and Restated Loan Agreement dated October 27, 2005 entered
                  by and
                  between the Company and Wachovia (1)4.11
              
              Promissory
                  Note dated October 27, 2005 issued by the Company to Wachovia
                  (1)4.12
              
              Form
                  of Subscription Agreement dated November 8, 2005 (2)4.13
              
              Form
                  of Common Stock Purchase Warrant dated November 8, 2005
                  (2)10.1
              
              Agreement
                  entered into with Food Lion, LLC and Nationwide Money Services,
                  Inc dated
                  October 5, 2001 (Incorporated by reference to form 10KSB filed
                  with the
                  SEC on April 16, 2002)10.2
              
              Asset
                  Purchase Agreement dated October 28, 2005 by and between the Company
                  and
                  Amer-E-Com Digital Corporation (1)10.3
              
              Distributor
                  ATM Processing Agreement between Nationwide Money Services and
                  Genpass
                  Technologies LLC dated December 15, 2005 (3)14.1
              
              Code
                  of Ethics and Business Conduct of Officers, Directors and Employees
                  of
                  Global Axcess Corp. (Incorporated by reference to form 10KSB filed
                  with
                  the SEC on March 31, 2003)
   Page
            56
   16.1
              
              Letter
                  from L.L. Bradford & Company, LLC (incorporated by reference form 8-K
                  current report filed with the SEC on July 1, 2003)21.1
              
              List
                  of Subsidiaries:Nationwide
                  Money Services Inc., a Nevada corporationEFT
                  Integration Corporation, a Florida corporationAxcess
                  Technology Corporation, a Nevada corporationAxcess
                  Technology Corporation, Pty Ltd a South African
                  corporationCash
                  Axcess Corporation, Pty Ltd a South African corporation31.1
              
              Certification
                  of the Chief Executive Officer of Global Axcess Corp pursuant to
                  Section
                  302 of the Sarbanes-Oxley Act of 2002.31.2
              
              Certification
                  of the Chief Financial Officer of Global Axcess Corp pursuant to
                  Section
                  302 of the Sarbanes-Oxley Act of 2002.32.1
              
              Certification
                  of the Chief Executive Officer of Global Axcess, Inc. 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 the Chief Financial Officer of Global Axcess, Inc., Pursuant
                  to 18
                  U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.99.3
              
              Code
                  of Ethics and Business Conduct of Officers, Directors and Employees
                  of
                  Global Axcess Corp. (Incorporated by reference to form 10KSB filed
                  with
                  the SEC on March 31, 2003)99.4
              
              Press
                  Release dated April 18, 2006 (Incorporated by reference to form
                  8-K filed
                  with the SEC on April 19, 2006)99.5
              
              Press
                  Release dated May 2, 2006 (Incorporated by reference to form 8-K
                  filed
                  with the SEC on May 3, 2006)99.6
              
              Press
                  Release dated August 15, 2006 (Incorporated by reference to form
                  8-K filed
                  with the SEC on August 15, 2006)99.7
              
              Press
                  Release dated October 3, 2006 (Incorporated by reference to form
                  8-K filed
                  with the SEC on October 17, 2006)99.8
              
              Press
                  Release dated November 14, 2006(Incorporated
                  by reference to form 8-K filed with the SEC on November 15,
                  2006)99.9
              
              Press
                  Release dated November 14, 2006(Incorporated
                  by reference to form 8-K filed with the SEC on November 15,
                  2006)




**ITEM
              14.**
            **PRINCIPAL
                ACCOUNTANT’S FEES AND
                SERVICES**




Page
          57





*Audit
      Fees* .
      The
      aggregate fees billed by Kirkland, Russ, Murphy & Tapp, P.A. (“KRMT”) for
      professional services rendered for the audit of the Company's consolidated
      financial statements for the year ended December 31, 2006 and for the reviews
      of
      the consolidated financial statements included in the Company's Quarterly
      Reports on Form 10-QSB during the fiscal year 2006 were $103,221. Total unbilled
      fees by Kirkland, Russ, Murphy & Tapp, P.A. (“KRMT”) for professional
      services rendered for the audit of the Company's consolidated financial
      statements for the year ended December 31, 2006 were $60,000. The aggregate
      fees
      billed by KRMT for professional services rendered for the audit of the Company's
      consolidated financial statements for the year ended December 31, 2005 and
      for
      the reviews of the consolidated financial statements included in the Company's
      Quarterly Reports on Form 10-QSB during the fiscal year ended December 31,
      2005
      were $260,392. The aggregate fees billed by Weinberg & Company, P.A.
      (“Weinberg”) for professional services rendered for the reviews of the financial
      statements included in the Company's Quarterly Reports on Form 10-QSB during
      the
      fiscal year ended December 31, 2005 were $14,042.





*Audit
      Related Fees* .
      The
      Company did engage KRMT and Weinberg to provide professional services to the
      Company regarding audit related fees during the fiscal year ended December
      31,
      2006. The aggregate fees billed by KRMT and Weinberg for professional services
      rendered to the Company regarding audit related fees during the fiscal year
      ended December 31, 2006 were $11,200 and $19,500, respectively. The aggregate
      fees billed by KRMT and Weinberg for professional services rendered to the
      Company regarding audit related fees during the fiscal year ended December
      31,
      2005 were $13,000.





*Tax
      Related Fees* .
      During
      the fiscal years ended December 31, 2006 and 2005, there were no fees billed
      by
      KRMT or Weinberg for tax related services.





*All
      Other Fees* .
      There
      were $1,435 of fees billed by KRMT for services rendered to the Company during
      the fiscal year ended December 31, 2006 for work preformed related to providing
      information to attorneys on litigation matters. During the fiscal year ended
      December 31, 2005, there were no other fees billed than for the services
      described under "Audit Fees" and “Audit Related Fees” above.




The
      Board
      of Directors has considered whether the provision of non-audit services is
      compatible with maintaining the principal accountant's
      independence.





Page
          58




SIGNATURES





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Issuer
      has duly caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




GLOBAL AXCESS CORPBy:
            /s/ GEORGE A. MCQUAINGeorge
              A. McQuainPresident and Chief Executive
              Officer




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report
      has been signed below by the following persons on behalf of the Issuer and
      in
      the capacities indicated on the 28th day of March, 2007.


Signature
              
              Title/S/
                  Lock IrelandLock
                  Ireland
              
              Vice
                  Chairman, Director/S/
                  Robert LandisRobert
                  Landis
              
              Director/S/
                  Michael J. LoiaconoMichael
                  J. Loiacono
              
              Chief
                  Financial Officer, Chief Accounting Officer/S/
                  Joseph Loughry, IIIJoseph
                  Loughry, III
              
              Chairman,
                  Director/s/George
                  A. McQuainGeorge
                  A. McQuain
              
              President,
                  CEO and Director/S/
                  Alan RossiterAlan
                  Rossiter
              
              Director


Page
          59




GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      FINANCIAL STATEMENTS




TABLE
      OF
      CONTENTS




PAGE
                NO.Report
                of Independent Registered Public Accounting Firm
            
            F-1Consolidated
                financial statementsConsolidated
                balance sheet as of December 31, 2006
            
            F-2Consolidated
                statements of income for the years endedDecember
                31, 2006 and 2005
            
            F-3Consolidated
                statements of stockholders’ equityfor
                the years ended December 31, 2006 and 2005
            
            F-4Consolidated
                statements of cash flows for the years endedDecember
                31, 2006 and 2005
            
            F-5Notes
                to consolidated financial statementsas
                of December 31, 2006
            
            F-7




Page
            60




Report
      Of
      Independent Registered Public Accounting Firm




Board
      of
      Directors and Stockholders of


Global
      Axcess Corp:




We
      have
      audited the accompanying consolidated balance sheet of Global Axcess Corp and
      Subsidiaries as of December 31, 2006 and the related consolidated statements
      of
      income, stockholders’ equity and cash flows for the years ended December 31,
      2006 and 2005. These consolidated financial statements are the responsibility
      of
      the Company’s management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management, as well as evaluating the overall financial statement presentation.
      We believe that our audits provide a reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Global Axcess
      Corp and Subsidiaries as of December 31, 2006 and the results of its operations
      and its cash flows for the years ended December 31, 2006 and 2005 in conformity
      with accounting principles generally accepted in the United States of America.




/s/
      KIRKLAND, RUSS, MURPHY & TAPP, P.A.


Certified
      Public Accountants


Clearwater,
      Florida


March
      23,
      2007




F-1





GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEET


DECEMBER
      31, 2006


ASSETSCurrent
                  assetsCash
                  and cash equivalents
              
              $
              753,844Automated
                  teller machine vault cash
              
              
              26,220Accounts
                  receivable, net of allowance for doubtful accounts of
                  $113,824
              
              
              1,188,880Other
                  receivable
              
              
              175,015Note
                  receivable - current
              
              
              17,709Inventory
              
              
              400,478Prepaid
                  expenses and other current assets
              
              
              235,317Total
                  current assets
              
              
              2,797,463Fixed
                  assets, net
              
              
              6,206,756Other
                  assetsMerchant
                  contracts, net
              
              
              12,509,944Intangible
                  assets, net
              
              
              4,221,831Deferred
                  tax asset - non-current
              
              
              339,800Other
                  assets
              
              
              14,756Total
                  assets
              
              $
              26,090,550LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilitiesAccounts
                  payable and accrued liabilities
              
              $
              4,191,086Automated
                  teller machine vault cash payable
              
              
              26,220Deferred
                  gain on sale of subsidiary
              
              
              175,000Notes
                  payable - related parties - current portion, net
              
              
              18,471Note
                  payable
              
              
              50,000Senior
                  lenders' notes payable - current portion, net
              
              
              658,333Capital
                  lease obligations - current portion
              
              
              1,224,203Total
                  current liabilities
              
              
              6,343,313Long-term
                  liabilitiesNotes
                  payable - related parties - long-term portion, net
              
              
              1,326,451Senior
                  lenders' notes payable - long-term portion, net
              
              
              5,102,815Capital
                  lease obligations - long-term portion
              
              
              1,689,430Total
                  liabilities
              
              
              14,462,009Stockholders'
                  equityPreferred
                  stock; $0.001 par value; 5,000,000 sharesauthorized,
                  no shares issued and outstanding
              
              
              -Common
                  stock; $0.001 par value; 45,000,000 sharesauthorized,
                  21,021,786 shares issued and outstanding
              
              
              21,022Additional
                  paid-in capital
              
              
              22,366,403Accumulated
                  deficit
              
              
              (10,758,884
              )Total
                  stockholders' equity
              
              
              11,628,541Total
                  liabilities and stockholders' equity
              
              $
              26,090,550




See
      Accompanying Independent Registered Public Accounting Firm’s Report and Notes to
      Consolidated Financial Statements




F-2




GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF INCOME




For
                    the year ended
                
                For
                    the year endedDecember
                    31, 2006
                
                December
                    31, 2005Revenues
                
                $
                21,437,125
                
                $
                19,526,136Cost
                    of revenues
                
                
                12,405,270
                
                
                11,522,555Gross
                    profit
                
                
                9,031,855
                
                
                8,003,581Operating
                    expensesDepreciation
                    and amortization
                
                
                2,359,455
                
                
                1,417,554Impairment
                    of long-lived assets
                
                
                1,329,396
                
                
                -Selling,
                    general and administrative
                
                
                6,827,305
                
                
                5,258,703Restructuring
                    charges
                
                
                757,811
                
                
                -Impairment
                    of notes receivable
                
                
                817,607
                
                
                42,939Other
                    expense
                
                
                450,000
                
                
                -Total
                    operating expenses
                
                
                12,541,574
                
                
                6,719,196Operating
                    income (loss) from continuing operationsbefore
                    items shown below
                
                
                (3,509,719
                )
                
                1,284,385Interest
                    expense, net
                
                
                (1,356,407
                )
                
                (524,574
                )Gain
                    on sale of assets
                
                
                21,672
                
                
                -Other
                    non-operating income
                
                
                146,703
                
                
                -Loss
                    attributed to minority interest
                
                
                109,351
                
                
                -Income
                    (loss) from continuing operations before provisionfor
                    income taxes
                
                
                (4,588,400
                )
                
                759,811Federal
                    income tax expense
                
                
                -
                
                
                (209,418
                )Income
                    (loss) from continuing operations
                
                $
                (4,588,400
                )
                $
                550,393Loss
                    from discontinued operations, net of tax
                
                $
                (275,937
                )
                $
                (1,273,237
                )Net
                    loss
                
                $
                (4,864,337
                )
                $
                (722,844
                )Income
                    (loss) per common share - basic:Income
                    (loss) from continuing operations
                
                $
                (0.22
                )
                $
                0.03Loss
                    from discontinued operations
                
                $
                (0.01
                )
                $
                (0.07
                )Net
                    loss
                
                $
                (0.23
                )
                $
                (0.04
                )Income
                    (loss) per common share - diluted:Income
                    (loss) from continuing operations
                
                $
                (0.22
                )
                $
                0.03Loss
                    from discontinued operations
                
                $
                (0.01
                )
                $
                (0.07
                )Net
                    loss
                
                $
                (0.23
                )
                $
                (0.04
                )Weighted
                    average common shares outstanding:Basic
                
                
                20,996,013
                
                
                18,858,947Diluted
                
                
                20,996,013
                
                
                19,416,107





See
      Accompanying Independent Registered Public Accounting Firm’s Report and Notes to
      Consolidated Financial Statements




F-3


GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY


FOR
      THE
      YEARS ENDED DECEMBER 31, 2006 AND 2005


Additional
              
              
              
              TotalCommon
                  Stock
              
              Paid-in
              
              Accumulated
              
              Stockholders'Shares
              
              Amount
              
              Capital
              
              Deficit
              
              EquityBalances,
                  December 31, 2004
              
              
              17,579,345
              
              $
              17,579
              
              $
              18,274,521
              
              $
              (5,073,625)
                  $
              
              
              13,218,475Shares
                  issued in connection with privatetransactions,
                  net
              
              
              2,052,858
              
              
              2,053
              
              
              2,377,760
              
              
              -
              
              
              2,379,813Stock
                  warrants exercised
              
              
              468,100
              
              
              468
              
              
              234,015
              
              
              -
              
              
              234,483Exercise
                  of stock options
              
              
              46,500
              
              
              46
              
              
              51,216
              
              
              -
              
              
              51,262Stock
                  and stock warrants issued toconsultants
                  and employees in lieu ofcash
                  compensation
              
              
              4,248
              
              
              5
              
              
              24,760
              
              
              -
              
              
              24,765Reacquired
                  and issued treasury shares inconnection
                  with 1 for 5 reverse split
              
              
              (165
              )
              
              -
              
              
              (279
              )
              
              -
              
              
              (279
              )Conversion
                  of related party notes
              
              
              820,000
              
              
              820
              
              
              992,952
              
              
              -
              
              
              993,772Cancellation
                  of Docutel contract
              
              
              -
              
              
              -
              
              
              (425,334
              )
              
              -
              
              
              (425,334
              )Stock
                  warrants issued with debt
              
              
              -
              
              
              -
              
              
              772,816
              
              
              -
              
              
              772,816Modification
                  of debt and warrantrepricing
              
              
              -
              
              
              -
              
              
              42,971
              
              
              -
              
              
              42,971Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (722,844
              )
              
              (722,844
              )Balances,
                  December 31, 2005
              
              
              20,970,886
              
              $
              20,971
              
              $
              22,345,398
              
              $
              (5,796,469)
                  $
              
              
              16,569,900Stock
                  warrants exercised
              
              
              40,900
              
              
              41
              
              
              20,409
              
              
              -
              
              
              20,450Exercise
                  of stock options
              
              
              10,000
              
              
              10
              
              
              3,490
              
              
              -
              
              
              3,500Warrant
                  repricing
              
              
              -
              
              
              -
              
              
              8,803
              
              
              -
              
              
              8,803Other
              
              
              -
              
              
              -
              
              
              -
              
              
              (98,078
              )
              
              (98,078
              )Stock
                  compensation expense
              
              
              -
              
              
              -
              
              
              (11,697
              )
              
              -
              
              
              (11,697
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,864,337
              )
              
              (4,864,337
              )Balances,
                  December 31, 2006
              
              
              21,021,786
              
              $
              21,022
              
              $
              22,366,403
              
              $
              (10,758,884)
                  $
              
              
              11,628,541


See
      Accompanying Independent Registered Public Accounting Firm’s Report and Notes to
      Consolidated Financial Statements


F-4


GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


For
                  the Year ended December 312006
              
              2005Cash
                  flows from operating activities:Income
                  (loss) from continuing operations
              
              $
              (4,588,400
              )
              $
              550,393Adjustments
                  to reconcile net income (loss) from continuing operationsto
                  net cash provided by continuing operating activities:Stock
                  based compensation
              
              
              (2,894
              )
              
              24,765Depreciation
                  and amortization
              
              
              2,359,455
              
              
              1,417,554Impairment
                  of long-lived assets
              
              
              1,329,396
              
              
              -Allowance
                  for doubtful accounts
              
              
              162,489
              
              
              -Accretion
                  of discount on notes payable
              
              
              168,182
              
              
              50,896Impairment
                  of notes receivable
              
              
              817,607
              
              
              42,939Deferred
                  tax asset
              
              
              -
              
              
              198,496Changes
                  in operating assets and liabilities:Change
                  in automated teller machine vault cash
              
              
              436,187
              
              
              (6,672
              )Change
                  in accounts receivable
              
              
              73,164
              
              
              (200,039
              )Change
                  in other receivable
              
              
              (15
              )Change
                  in inventory
              
              
              (383,578
              )
              
              131Change
                  in prepaid expenses and other current assets
              
              
              59,868
              
              
              (71,459
              )Change
                  in other assets
              
              
              39,452
              
              
              106,659Change
                  in deferred revenue
              
              
              (89,500
              )
              
              -Change
                  in accounts payable and accrued liabilities
              
              
              1,541,446
              
              
              753,549Change
                  in automated teller machine vault cash payable
              
              
              (436,187
              )
              
              6,672Net
                  cash provided by continuing operating activitities
              
              
              1,486,672
              
              
              2,873,884Discontinued
                  operationsNet
                  loss
              
              
              (275,937
              )
              
              (1,273,237
              )Gain
                  on sale of subsidiary
              
              
              (71,507
              )
              
              -Adjustments
                  to reconcile loss to net cash used indiscontinued
                  operations:Depreciation
              
              
              62,162
              
              
              86,310Loss
                  attributed to minority interest
              
              
              (109,351
              )
              
              -Change
                  in accounts receivable
              
              
              (38,822
              )
              
              8,045Change
                  in accounts payable and accrued liabilities
              
              
              35,105
              
              
              19,817Change
                  in inventory, prepaid expenses and other current assets
              
              
              (20,358
              )
              
              (184,100
              )Net
                  cash used in discontinued operating activities
              
              
              (418,708
              )
              
              (1,343,165
              )Net
                  cash provided by continuing and discontinued operating
                  activities
              
              
              1,067,964
              
              
              1,530,719Cash
                  flows from investing activities:Proceeds
                  from sale of subsidiary
              
              
              951,223
              
              
              -Purchase
                  of merchant contracts
              
              
              -
              
              
              (5,609,972
              )Costs
                  of acquiring merchant contracts
              
              
              (72,327
              )
              
              -Purchase
                  of property and equipment
              
              
              (826,447
              )
              
              (1,329,156
              )Proceeds
                  from merchant contract escrow reimbursement
              
              
              265,160
              
              
              -Net
                  cash provided by (used in) investing activities for continuing
                  operations
              
              
              317,609
              
              
              (6,939,128
              )Net
                  cash used in investing activities for discontinued
                  operations
              
              
              (86,756
              )
              
              (739,956
              )Net
                  cash used in investing activities
              
              
              230,853
              
              
              (7,679,084
              )Cash
                  flows from financing activities:Proceeds
                  from issuance of common stock
              
              
              23,950
              
              
              2,665,558Purchase
                  of treasury shares
              
              
              -
              
              
              (279
              )Proceeds
                  from notes payable
              
              
              -
              
              
              93,407Proceeds
                  from senior lenders' notes payable
              
              
              500,000
              
              
              6,725,533Principal
                  payments on senior lenders' notes payable
              
              
              (2,070,832
              )
              
              (656,250
              )Principal
                  payments on notes payable
              
              
              (98,756
              )
              
              (97,830
              )Principal
                  payments on notes payable - related parties
              
              
              (16,486
              )
              
              (14,715
              )Principal
                  payments on capital lease obligations
              
              
              (1,142,890
              )
              
              (705,762
              )Net
                  cash provided by (used in) financing activities
              
              
              (2,805,014
              )
              
              8,009,662Effect
                  of exchange rate fluctuation on cash in discontinued
                  operations
              
              
              (98,078
              )
              
              -Increase
                  (decrease) in cash
              
              
              (1,604,275
              )
              
              1,861,297Cash,
                  beginning of period
              
              
              2,358,119
              
              
              496,822Cash,
                  end of the period
              
              $
              753,844
              
              
              2,358,119Cash
                  paid for interest
              
              $
              1,134,406
              
              $
              588,500





See
      Accompanying Independent Registered Public Accounting Firm’s Report and Notes to
      Consolidated Financial Statements




F-5




GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS




For
                  the Year ended December 312006
              
              2005SUPPLEMENTAL
                  CASH FLOW INFORMATIONThe
                  significant non-cash investing and financing activities of the
                  Company
                  were as follows:Investing
                activities:Purchases
                  of assets under capital lease obligations
              
              $
              1,176,216
              
              $
              2,417,633Assets
                  removed from service, classified as held for sale
              
              
              -
              
              
              285,702Sale
                  of subsidiary, see schedule below:
              
              
              1,445,341
              
              
              778,359Total
                  non-cash investing activities
              
              $
              2,621,557
              
              $
              3,481,694Financing
                  activities:Discount
                  of notes payable
              
              $
              168,182
              
              $
              772,816Cancellation
                  of contract, paid in stock and options
              
              
              -
              
              
              425,334Conversion
                  of debt to equity by related party
              
              
              -
              
              
              993,772Modification
                  of debt and warrant repricing
              
              
              8,803
              
              
              42,971Stock
                  issued for compensation
              
              
              (2,894
              )
              
              24,765Total
                  non-cash financing activities
              
              $
              174,091
              
              $
              2,259,658Sale
                  of subsidiary in 2006:Cash
                  proceeds from sale of 50% ownership in subsidiary
              
              $
              745,341
              
              $
              -Total
                  purchase price
              
              $
              745,341
              
              $
              -Minority
                  interest
              
              
              189,932
              
              
              -Deferred
                  gain on sale
              
              
              555,409
              
              
              -$
              745,341
              
              $
              -Cash
                  proceeds from sale of remaining 50% ownership in
                  subsidiary
              
              $
              525,000
              
              $
              -Note
                  received
              
              
              175,000
              
              
              -Total
                  purchase price
              
              $
              700,000
              
              $
              -Balance
                  sheet at time of saleCash
              
              $
              319,118
              
              $
              -Automated
                  teller machine vault cash
              
              
              657
              
              
              -Accounts
                  receivable
              
              
              51,093
              
              
              -Prepaid
                  expenses and other current assets
              
              
              9,006
              
              
              -Fixed
                  assets
              
              
              602,757
              
              
              -Inventory
              
              
              142,614
              
              
              -Minority
                  interest
              
              
              (80,581
              )
              
              -Accounts
                  payable
              
              
              (35,105
              )
              
              -Automated
                  teller machine vault cash payable
              
              
              (657
              )
              
              -Deferred
                  gain on sale
              
              
              (555,409
              )
              
              -453,493
              
              
              -Deferred
                  gain on sale of subsidiary
              
              
              175,000
              
              
              -Gain
                  on sale of subsidiary
              
              
              71,507
              
              
              -$
              700,000
              
              $
              -Sale
                  of subsidiary in 2005:Note
                  received, net of valuation
              
              $
              -
              
              $
              778,359Prepaids
                  and other current assets sold
              
              
              -
              
              
              49,313Fixed
                  assets sold
              
              
              -
              
              
              632,202Intangible
                  assets sold
              
              
              -
              
              
              2,250Accounts
                  payable sold
              
              
              -
              
              
              (45,406
              )-
              
              
              638,359Liabilities
                  assumed
              
              
              -
              
              
              140,000$
              -
              
              $
              778,359


See
      Accompanying Independent Registered Public Accounting Firm’s Report and Notes to
      Consolidated Financial Statements




F-6


GLOBAL
      AXCESS CORP AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


AS
      OF
      DECEMBER 31, 2006




**1.**
            **DESCRIPTION
                OF THE COMPANY’S BUSINESS AND BASIS OF
                PRESENTATION**





Global
      Axcess Corp (the “Company”), is a Nevada corporation organized in 1984. The
      Company, primarily through its wholly owned subsidiaries, Nationwide Money
      Services, Inc. and EFT Integration Inc., is an independent provider of Automated
      Teller Machine ("ATM") services. The Company was also involved in software
      development through its wholly owned subsidiary, Axcess Technology Corporation
      and debit cards through its wholly owned subsidiary, Electronic Payment and
      Transfer Corp. These two subsidiaries were either closed or sold during fiscal
      year 2005. The Company also had a wholly owned subsidiary, Cash Axcess
      Corporation (Proprietary) Limited, which provided ATM services in South Africa.
      This subsidiary was sold in fiscal year 2006. The Company’s fiscal year ended
      December 31, 2006.




**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





**Cash
      Equivalents** - The
      Company considers all highly-liquid investments with a maturity of three months
      or less when purchased to be cash equivalents.





**Concentration
      of Credit Risk** -
      Financial instruments that potentially subject the Company to concentration
      of
      credit risk consist primarily of temporary cash investments. The Company has
      several bank accounts maintained with one financial institution and amounts
      on
      deposit may, at times, exceed federally insurable amounts.





**Principles
      of consolidation** - The
      consolidated financial statements include the accounts of Global Axcess Corp
      and
      its subsidiaries. The Company has the following subsidiaries: Nationwide Money
      Services, Inc., EFT Integration, Inc., Cash Axcess Corporation (Proprietary)
      Limited, Axcess Technology Corporation, and Electronic Payment and Transfer
      Corp. See Financial Footnote #5 “Discontinued Operations” referring to
      subsidiaries included as discontinued operations. All significant inter-company
      balances and transactions have been eliminated in consolidation.





**Reclassifications** -
      Certain reclassifications were made to the 2005 consolidated statement of income
      to conform to 2006 presentation. These reclassifications had no impact on net
      income (loss) or stockholders’ equity.





**Merchant
      contract concentration** - The
      Company contracts the locations for its ATMs with various merchants. As of
      December 31, 2006, the Company has approximately 4,430 active ATMs, of which
      approximately 665 machines are contracted through a single merchant. Revenues
      from this merchant were approximately 23.1% and 25.6% of total fees from
      continuing operations for the fiscal year ended December 31, 2006 and 2005,
      respectively.





**Use
      of estimates** - The
      preparation of the consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the amounts
      reported in the consolidated financial statements and accompanying notes. Actual
      results could differ from these estimates.





**Revenue
      recognition** -
      Transaction service and processing fees are recognized in the period that the
      service is performed. The Company receives two types of fees:
      surcharge/convenience fees paid by consumers utilizing certain ATMs owned or
      managed by the Company; and interchange fees paid by their banks. Processing
      fees are generally charged on a per transaction basis, depending on the
      contractual arrangement with the customer. ATM sales revenue is recognized
      when
      the ATM is shipped and installed. Revenue from managing ATMs for others is
      recognized each month when the services are performed.





**Inventory** -
      Inventory is stated at the lower of cost (first-in, first-out method) or market.
      Inventory consists primarily of ATMs and related parts and equipment, including
      parts relating to upgrade ATMs to become Triple DES compliant. Parts relating
      to
      upgrading ATMs to become Triple DES compliant are recorded to fixed assets
      when
      the part is placed into service, if the ATM is Company owned. Parts relating
      to
      upgrading ATMs to become Triple DES compliant are recorded to Merchant Contracts
      when the part is placed into service, if the ATM is merchant owned and the
      merchant signs a term extension to an existing contract. The cost of the part
      will subsequently be amortized over the life of the contract extension. Parts
      relating to upgrading ATMs to become Triple DES compliant are expensed when
      the
      part is placed into service, if the Company upgrades the merchant owned ATMs
      at
      no charge to the merchant. ATMs and parts available for sale are classified
      as
      inventory until such time as the machine or part is sold or installed and in
      service. Once the ATM or part is sold, it is relieved to cost of revenues.
      At
      December 31, 2006, the Company's inventory totaled $400,478, of which $312,413
      were parts related to upgrade ATMs to become Triple DES compliant.




F-7





**Accounts
      Receivable** - The
      Company reviews the accounts receivable on a regular basis to determine the
      collectibility of each account. The Company maintains allowances for doubtful
      accounts for estimated losses resulting from the failure of its customers to
      make required payments. At each reporting period, the Company evaluates the
      adequacy of the allowance for doubtful accounts and calculates the appropriate
      allowance based on historical experience, credit evaluations, specific customer
      collection issues and the length of time a receivable is past due. The Company
      records an allowance for doubtful accounts for any billed invoice aged past
      60
      days. When the Company deems the receivable to be uncollectible, the Company
      charges the receivable against the allowance for doubtful accounts. As of
      December 31, 2006, the Company reserved $113,824 as an allowance for doubtful
      accounts against the accounts receivable of $1,302,704.





**Fixed
      assets** - Fixed
      assets are stated at cost, less accumulated depreciation and amortization.
      Depreciation is calculated principally on the straight-line method over the
      estimated useful lives of the assets, which generally range from 3 to 10 years.
      Leasehold improvements are amortized on a straight-line basis over the shorter
      of the lease term or the life of the asset. The cost of repairs and maintenance
      is charged to expense as incurred. Expenditures for property improvements and
      renewals are capitalized, if they extend the useful life of the related asset.
      Upon the sale or other disposition of a depreciable asset, cost and accumulated
      depreciation are removed from the accounts and any gain or loss is reflected
      in
      gain (loss) on sale of assets.





The
      Company periodically evaluates whether events and circumstances have occurred
      that may warrant revision of the estimated useful life of fixed assets or
      whether the remaining balance of fixed assets should be evaluated for possible
      impairment. The Company uses an estimate of the related undiscounted cash flows
      over the remaining life of the fixed assets in measuring their recoverability,
      as well as historical age, to estimate useful economic lives and
      values.





**Assets
      Held for Sale** **** -
      ATMs
      and related software components which are not currently in service are
      classified as assets held for sale, until such time either the machine is
      installed or reinstalled and in service, sold, or deemed to be impaired. Once
      in
      service, each ATM is reclassified as a fixed asset and depreciated using the
      remaining estimated useful life of the machine. Any ATM and related software
      components classified as fixed assets held for sale and then sold would be
      considered a disposal group and a gain or loss on the sale would be recorded.
      During fiscal year 2006, the Company reviewed the Assets Held for Sale for
      impairment and found the assets held for sale to be impaired. The Company
      accounted for the impairment in accordance with SFAS No. 144 ”Accounting for the
      Impairment or Disposal of Long-lived Assets”. During the fiscal year ended
      December 31, 2006, the Company recorded approximately $1.3 million of impairment
      of long-lived assets, and of that amount, $485,315 related to impairment of
      assets held for sale.





**Lease
      Committments** - The
      Company is party to various operating leases relating to office facilities
      and
      certain other equipment with various expiration dates. All leasing arrangements
      contain normal leasing terms without unusual purchase options or escalation
      clauses. Rental expense under operating leases aggregated $323,735 and $297,981
      for the years ended December 31, 2006 and 2005, respectively. The Company is
      also party to various capital leases for ATMs and related components. The assets
      associated with these capital leases are recorded as fixed assets and
      depreciated accordingly. The capital lease obligation is recorded and amortized
      over the life the of the lease.





**Merchant
      Contracts and Intangible Assets, including Goodwill** - In
      June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets,”
which was adopted by the Company in fiscal 2002. SFAS No. 142 established
      accounting and reporting standards for goodwill and intangible assets resulting
      from business combinations. SFAS No. 142 included provisions discontinuing
      the
      periodic amortization of, and requiring the assessment of the potential
      impairments of goodwill (and intangible assets deemed to have indefinite lives).
      As SFAS No. 142 replaced the measurement guidelines for goodwill impairment,
      goodwill not considered impaired under previous accounting literature may be
      considered impaired under SFAS No. 142. SFAS No. 142 also required that the
      Company complete a two-step goodwill impairment test. The first step compares
      the fair value of each reporting unit to its carrying amount, including
      goodwill. If the fair value of a reporting unit exceeded its carrying amount,
      goodwill is not considered to be impaired and the second step is not required.
      SFAS No. 142 required completion of this first step within the first six months
      of initial adoption and annually thereafter. If the carrying amount of a
      reporting unit exceeded its fair value, the second step is performed to measure
      the amount of impairment loss. The second step compared the implied fair value
      of goodwill to the carrying value of a reporting unit's goodwill. The implied
      fair value of goodwill is determined in a manner similar to accounting for
      a
      business combination with the allocation of the assessed fair value determined
      in the first step to the assets and liabilities of the reporting unit. The
      excess of the fair value of the reporting unit over the amounts assigned to
      the
      assets and liabilities is the implied fair value of goodwill. This allocation
      process is only performed for purposes of evaluating goodwill impairment and
      does not result in an entry to adjust the value of any assets or liabilities.
      An
      impairment loss is recognized for any excess in the carrying value of goodwill
      over the implied fair value of goodwill.




F-8





Intangible
      assets with finite lives and merchant contracts are stated at cost, net of
      accumulated amortization, and are subject to impairment testing under certain
      circumstances in accordance with SFAS No. 144 and other applicable
      pronouncements. These assets are amortized on the straight-line method over
      their estimated useful lives or period of expected benefit. These assets are
      subject to periodic impairment testing in accordance with SFAS
      No. 142.





The
      Company’s merchant contracts are made up of contracts with automatic renewable
      lives. The Company has determined after review of its contracts that the
      economic life of the contracts is extended and estimated over 21 years (or
      3
      times renewal) based on historical and expected useful lives of similar assets.
      The Company amortizes the merchant contracts over their estimated useful lives
      of 21 years. The Company has adopted SFAS No. 142 to reflect the fair value
      of
      the merchant contracts, and uses a two step valuation process to determine
      if
      there has been any impairment on the value of the merchant contract assets.
      The
      first step is to periodically assess the remaining contract lives, including
      expected renewals. If the periodic assessment resulted in a determination that
      the economic lives of the merchant contracts are less than 21 years, the Company
      would adjust the remaining amortization lives of the merchant contracts. The
      second step is to compare the estimated future undiscounted cash flows of each
      reporting unit to the carrying amount of the merchant contracts, thus testing
      the impairment of the value of the contracts. An impairment loss is recognized
      for any excess in the carrying value of merchant contracts over the assessed
      fair value of merchant contracts. To date, the Company’s testing has indicated
      that there is no impairment of its goodwill and merchant contracts.





**Impairment
      of Long-Lived Assets** - In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets,” the Company reviews its long-lived assets, including
      property and equipment and capitalized software development, for impairment
      whenever events or changes in circumstances indicate that the carrying amount
      of
      the assets may not be fully recoverable. To determine recoverability of its
      long-lived assets, the Company evaluates the probability that future
      undiscounted net cash flows will be less than the carrying amount of the assets.
      If future estimated undiscounted cash flows are less than the carrying amount
      of
      long-lived assets, then such assets are written down to their estimated fair
      value. During the fiscal years ended December 31, 2006 and 2005, the Company
      recorded impairment charges of long-lived assets of approximately $1.3 million
      and $0, respectively.





**Fair
      value of financial instruments** - The
      carrying amounts of the Company’s long-term liabilities approximate the
      estimated fair values at December 31, 2006, based upon the Company’s ability to
      acquire similar debt at similar maturities. The carrying values of all other
      financial instruments approximate their fair value, because of the short-term
      maturities of these instruments.





**Automated
      Teller Machine Vault Cash Payable** -
      Automated teller machine vault cash payable consisted of funds collected through
      providing network and switching services for ATMs. These funds had been reported
      as automated teller machine vault cash payable on the consolidated balance
      sheet
      with offsetting automated teller machine vault cash. During fiscal 2006, the
      Company determined that $146,703 of prior period fees had accumulated which
      had
      not been recognized as revenue, and as such, this amount was recorded as other
      non-operating income during the fourth quarter ended December 31, 2006. As
      of
      December 31, 2006, automated teller machine vault cash payable of $26,220
      consists of cash collected through the previous network and switching services
      believed to be payable to various third-parties.





**Earnings
      per share** - In
      calculating basic (loss) income per share, net (loss) income is
      divided by the weighted average number of common shares outstanding for the
      period. Diluted (loss) income per share reflects the assumed exercise or
      conversion of all dilutive securities, such as options and warrants. No such
      exercise or conversion is assumed where the effect is anti-dilutive, such as
      when there is a net loss from continuing operations. All earnings per share
      calculations for fiscal 2005 reflect the reverse stock split which was effective
      on April 28, 2005. The reverse stock split was applied retroactively to all
      previously disclosed share and per share amounts.





**Reverse
      Stock Split** -
      Effective April 28, 2005, the Company implemented a one-for-five reverse split
      of its outstanding common stock. All information regarding share and per share
      amounts have been adjusted within the consolidated financial statements to
      reflect the reverse stock split.





**Income
      taxes** - The
      Company accounts for its income taxes in accordance with SFAS No. 109
“Accounting for Income Taxes”, which requires recognition of deferred tax assets
      and liabilities for future tax consequences attributable to differences between
      the financial statement carrying amounts of existing assets and liabilities
      and
      their respective tax basis and tax credit carry-forwards. Deferred tax assets
      and liabilities are measured using enacted tax rates expected to apply to
      taxable income in the years in which those temporary differences are expected
      to
      be recovered or settled. The effect on deferred tax assets and liabilities
      of a
      change in tax rates is recognized in income in the period that includes the
      enactment date.




F-9





**Research
      and development costs** -
      Research and development costs are charged to expense when incurred. Costs
      incurred to internally develop software, incurred during the research and
      planning phase of development, are charged to expense as incurred, and direct
      costs incurred during development, testing and implementation are capitalized
      as
      incurred over the useful life of the software and amortized for an average
      life
      of three years. During the past two fiscal years ending December 31, 2006 and
      2005, the amount of research and development costs, which were borne entirely
      by
      the Company, amounted to $275,937 and $1,273,237, respectively.





**Repairs
      and maintenance costs** -
      Repairs and maintenance costs are expensed as incurred. Repairs and maintenance
      pertaining to the Company’s ATMs are recorded in cost of revenues. The Company
      records repairs and maintenance costs relating to general office and backend
      related equipment to general and administrative costs.





**Developed
      Software** - Costs
      incurred to purchase external software and internally developed software,
      including interest, are capitalized and amortized over the useful life of the
      software for an average life of three years. During the fiscal year ended
      December 31, 2006, the Company capitalized $0 of developed software and during
      the fiscal year ended December 31, 2005, the Company capitalized $1,022,907
      of
      developed software, of which $184,487 pertained to capitalized
      interest.





**Stock-based
      compensation** -
      Effective January 1, 2006, the Company adopted the fair value recognition
      provisions of Statement of Financial Accounting Standards ("SFAS") No. 123
      (Revised 2004), "Share-Based Payment," using the modified-prospective-transition
      method which requires us to recognize compensation expense on a prospective
      basis. SFAS No. 123(R) requires that all stock based compensation be recognized
      as an expense in the financial statements and that such cost be measured at
      the
      fair value of the award. Under this method, in addition to reflecting
      compensation for new share-based awards, expense is also recognized to reflect
      the remaining service period of awards that had been included in pro-forma
      disclosure in prior periods. Prior period financial statements have not been
      restated. The stock based compensation expense is included in SG&A expenses
      in the consolidated statements of income.





Prior
      to
      January 1, 2006, the Company's stock-based employee compensation plans were
      accounted for under the recognition and measurement provisions of Accounting
      Principle Board Opinion ("APB") No. 25 "Accounting for Stock Issued to
      Employees", as permitted by FASB Statement No. 123, "Accounting for Stock-Based
      Compensation." The Company did not recognize stock-based compensation cost
      in
      its statement of income for periods prior to January 1, 2006. However,
      compensation expense was recognized for certain options and warrants granted
      to
      non employees of the Company based upon fair value.





As
      was
      permitted under SFAS No. 148, "Accounting for Stock-Based Compensation -
      Transition and Disclosure," which amended SFAS No. 123 prior to January 1,
      2006,
      the Company elected to continue to follow the intrinsic value method in
      accounting for its stock-based employee compensation arrangements as defined
      by
      APB No. 25, and related interpretations including FASB Interpretation No. 44,
      "Accounting for Certain Transactions Involving Stock Compensation," an
      interpretation of APB No. 25. No stock-based employee compensation cost is
      reflected in operations, as all options granted under those plans had an
      exercise price equal to the market value of the underlying common stock on
      the
      date of grant.





The
      following table represents the effect on net income/(loss) and earnings per
      share for fiscal 2005 if the Company had applied the fair value based method
      and
      recognition provisions of SFAS No. 123(R), "Accounting for Stock-Based
      Compensation", to stock-based employee compensation:


2005Net
                  income/(loss), as reported
              
              $
              (722,844
              )Deduct:
                  Total stock-based employeecompensation
                  expense determined underfair
                  value based methods for all awards,net
                  of related tax effects
              
              
              (88,858
              )Pro
                  forma net income (loss)
              
              $
              (811,702
              )Net
                  income/(loss) per common share:Basic
                  - as reported
              
              $
              (0.04
              )Basic
                  - pro forma
              
              $
              (0.04
              )Diluted
                  - as reported
              
              $
              (0.04
              )Diluted
                  - pro forma
              
              $
              (0.04
              )




F-10








The
      fair
      value of each option grant in the fiscal year 2005 pro forma is estimated on
      the
      date of grant using the Black-Scholes option pricing model with the following
      weighted-average assumptions used for grants under the fixed option plans:


2005Weighted-average
                  risk free interest rate
              
              
              4.75%Expected
                  life of option (years)
              
              
              1.0Expected
                  stock volatility
              
              
              115%Expected
                  dividend yield
              
              
              0.00%




**Recent
      accounting pronouncements** -





In
      June
      2006 the FASB issued Interpretation No. 48, "Accounting for Uncertainty in
      Income Taxes", which clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise's financial statements in accordance with SFAS
      No.
      109, "Accounting for Income Taxes." The interpretation prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      This interpretation also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure, and
      transition. This interpretation is effective for fiscal years beginning after
      December 15, 2006. The Company is currently evaluating the potential impact
      that
      the adoption of this interpretation will have on its financial position and
      results of operations.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS
      No. 157 provides guidance on the definition of fair value, methods to measure
      fair value, and expanded disclosures of fair value. SFAS No. 157 is effective
      as
      of the first interim or annual reporting period that begins after November
      15,
      2007. Accordingly, the Company will adopt SFAS No. 157 in its quarter ending
      March 31, 2008. The Company is currently evaluating the provisions of SFAS
      No.
      157 and has not yet determined the impact, if any, that SFAS No. 157 will have
      on its financial statement presentation or disclosures.








**3.**
            **ACQUISITIONS
                OF ASSETS**





When
      the
      Company acquires the assets of another company, accounting principles generally
      accepted in the United States of America require the Company to estimate the
      fair value of the other company’s tangible assets and identifiable intangible
      assets. Based upon these estimates, the purchase price is allocated to the
      assets of the acquired company for the purpose of recording these items in
      the
      Company’s financial records. Any unallocated purchase price is recorded as
      goodwill. The distinction between the amount of the purchase price allocated
      either to tangible assets and liabilities or identifiable intangible assets
      and
      goodwill is significant because goodwill is not amortized to the Company’s
      statements of income but is instead subject to the annual impairment test
      discussed in Financial Footnote #2 “Summary of Significant Accounting Policies”.
      Estimates inherent in the process of this purchase price allocation include
      assumptions regarding the timing and amounts of future cash inflows and
      outflows, the salability of inventories, selection of discount rates, contract
      renewal rates and general market conditions.





On
      October 28, 2005, the Company acquired approximately 1,590 automated teller
      machines ("ATM") processing merchant contracts, ATM placement agreements, ATMs
      and ATM related equipment from Amer-E-Com Digital Corporation, a Florida
      corporation ("AECD") pursuant to the Asset Purchase Agreement dated as of
      October 28, 2005 between the Company and AECD. The purchase price for the
      acquisition was $5,527,256 in cash of which $4,775,191 was paid on closing
      and
      $752,065 was held in escrow (the "Holdback"). The transaction was funded from
      the financing provided by Wachovia Bank and CAMOFI Master Fund LDC (see
      Financial Footnote #14 “Senior Lenders’ Notes Payable”). As of December 31,
      2005, all of the Holdback was in escrow. During fiscal 2006, it was determined
      that certain contract contingencies were not met by the seller, and $265,160
      of
      the Holdback was paid back to the Company, with the balance being returned
      to
      AECD.





F-11





As
      of
      December 31, 2005, the Company concluded that $28,000 was allocated to equipment
      and the remaining purchase price should be allocated to merchant contracts,
      based on the Company’s assessment of fair values. The Company has concluded
      there is no impairment on the fair value of the purchased assets as of December
      31, 2006 and 2005.




**4.**
            **AMENDMENT
                TO PREVIOUSLY REPORTED QUARTERLY FINANCIAL
                STATEMENTS**





On
      March
      30, 2006, Global Axcess Corp (the "Company") announced in a press release that
      on March 30, 2006, the Company determined that the statements of income and
      cash
      flows for the quarters ended June 30, 2005 and September 30, 2005 contained
      errors, which when corrected, would result in a material impact on results
      of
      operations for the quarters then ended. The Company therefore determined that
      the consolidated statements of income and cash flows for the quarters ended
      June
      30, 2005 and September 30, 2005 required amendment. The errors related to the
      Company's accounting for revenue under certain of its processing contracts;
      capitalization of purchased software costs; and assets depreciated faster than
      they should have been.





The
      revenue correction totaled approximately $667,108. The Company determined that
      the revenues under those certain contracts may be recognized in future quarters
      as cash is collected.




The
      next
      error related to the Company's accounting for costs associated with purchased
      software and related development costs not being fully capitalized. The software
      correction totaled approximately $52,059. The Company determined that the costs
      should have been capitalized in the current interim quarters and expensed in
      future periods.




The
      last
      error related to the Company's accounting for depreciation during the interim
      quarters related to assets that were depreciated prior to being placed in
      service. The depreciation correction totaled approximately $104,087. The Company
      determined that the depreciation expense taken during those interim quarters
      should be recognized in future periods.




The
      net
      effects of these adjustments total a reduction in net income during the two
      quarters by approximately $510,962. The correction will cause a reported net
      loss for the quarter ended June 30, 2005 of $42,084, and a reported net loss
      for
      the quarter ended September 30, 2005 of $88,603.





See
      the
      effects of the restatements in the following schedules:




F-12




Three
                  Months ended
                June
                  30, 2005
              
              Six
                  Months ended
                June
                  30, 2005As
                  previously reported
              
              Restated
              
              As
                  previously reported
              
              RestatedRevenues
              
              $
              5,437,811
              
              $
              5,012,142
              
              $
              10,155,647
              
              $
              9,729,978Cost
                  of revenues
              
              
              3,024,084
              
              
              3,024,084
              
              
              5,728,523
              
              
              5,728,523Gross
                  profit
              
              
              2,413,727
              
              
              1,988,058
              
              
              4,427,124
              
              
              4,001,455Operating
                  expensesDepreciation
                  and amortization
              
              
              381,841
              
              
              328,033
              
              
              701,308
              
              
              647,500Selling,
                  general and administrative
              
              
              1,584,671
              
              
              1,550,805
              
              
              2,978,142
              
              
              2,944,276Total
                  operating expenses
              
              
              1,966,512
              
              
              1,878,838
              
              
              3,679,450
              
              
              3,591,776Operating
                  income from continuing operationsbefore
                  items shown below
              
              
              447,215
              
              
              109,220
              
              
              747,674
              
              
              409,679Other
                  income (expense)Interest
                  expense, net
              
              
              (153,502
              )
              
              (153,502
              )
              
              (275,044
              )
              
              (275,044
              )Other
                  income
              
              
              2,198
              
              
              2,198
              
              
              2,198
              
              
              2,198Total
                  other expenses, net
              
              
              (151,304
              )
              
              (151,304
              )
              
              (272,846
              )
              
              (272,846
              )Income
                  (loss) from continuing operations beforeprovision
                  for income taxes
              
              
              295,911
              
              
              (42,084
              )
              
              474,828
              
              
              136,833Income
                  (loss) from continuing operations
              
              
              295,911
              
              
              (42,084
              )
              
              474,828
              
              
              136,833Loss
                  from discontinued operations, net of tax
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Net
                  income (loss)
              
              $
              295,911
              
              $
              (42,084
              )
              $
              474,828
              
              $
              136,833Income
                  (loss) per common share - basic:Income
                  from continuing operations
              
              $
              0.02
              
              $
              (0.00
              )
              $
              0.03
              
              $
              0.01Loss
                  from discontinued operations
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Net
                  income (loss)
              
              $
              0.02
              
              $
              (0.00
              )
              $
              0.03
              
              $
              0.01Income
                  (loss) per common share - diluted:Income
                  from continuing operations
              
              $
              0.02
              
              $
              (0.00
              )
              $
              0.03
              
              $
              0.01Loss
                  from discontinued operations
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Net
                  income (loss)
              
              $
              0.02
              
              $
              (0.00
              )
              $
              0.03
              
              $
              0.01Weighted
                  average common shares outstanding:Basic
              
              
              18,211,986
              
              
              18,211,986
              
              
              18,211,986
              
              
              18,211,986Diluted
              
              
              18,706,275
              
              
              18,706,275
              
              
              18,706,275
              
              
              18,706,275




F-13




Three
                  Months ended
                September
                  30, 2005
              
              
              Nine
                  Months ended
                September
                  30, 2005As
                  previously reported
              
              
              Restated
              
              
              As
                  previously reported
              
              
              RestatedRevenues
              
              $
              5,069,320
              
              $
              4,827,881
              
              $
              15,224,267
              
              $
              14,557,159Cost
                  of revenues
              
              
              2,866,998
              
              
              2,866,998
              
              
              8,594,511
              
              
              8,594,511Gross
                  profit
              
              
              2,202,322
              
              
              1,960,883
              
              
              6,629,756
              
              
              5,962,648Operating
                  expensesDepreciation
                  and amortization
              
              
              431,430
              
              
              381,151
              
              
              1,105,074
              
              
              1,000,987Selling,
                  general and administrative
              
              
              1,457,107
              
              
              1,438,914
              
              
              4,228,494
              
              
              4,176,435Total
                  operating expenses
              
              
              1,888,537
              
              
              1,820,065
              
              
              5,333,568
              
              
              5,177,422Operating
                  income from continuing operationsbefore
                  items shown below
              
              
              313,785
              
              
              140,818
              
              
              1,296,188
              
              
              785,226Other
                  income (expense)Interest
                  expense, net
              
              
              (154,474
              )
              
              (154,474
              )
              
              (429,518
              )
              
              (429,518
              )Other
                  income
              
              
              -
              
              
              -
              
              
              1,762
              
              
              1,762Total
                  other expenses, net
              
              
              (154,474
              )
              
              (154,474
              )
              
              (427,756
              )
              
              (427,756
              )Income
                  (loss) from continuing operations beforeprovision
                  for income taxes
              
              
              159,311
              
              
              (13,656
              )
              
              868,432
              
              
              357,470Income
                  (loss) from continuing operations
              
              
              159,311
              
              
              (13,656
              )
              
              868,432
              
              
              357,470Loss
                  from discontinued operations, net of tax
              
              $
              (74,947
              )
              $
              (74,947
              )
              $
              (309,256
              )
              $
              (309,256
              )Net
                  income (loss)
              
              $
              84,364
              
              $
              (88,603
              )
              $
              559,176
              
              $
              48,214Income
                  (loss) per common share - basic:Income
                  from continuing operations
              
              $
              0.01
              
              $
              (0.00
              )
              $
              0.05
              
              $
              0.02Loss
                  from discontinued operations
              
              $
              (0.00
              )
              $
              (0.00
              )
              $
              (0.02
              )
              $
              (0.02
              )Net
                  income (loss)
              
              $
              0.01
              
              $
              (0.00
              )
              $
              0.03
              
              $
              0.00Income
                  (loss) per common share - diluted:Income
                  from continuing operations
              
              $
              0.00
              
              $
              (0.00
              )
              $
              0.05
              
              $
              0.02Loss
                  from discontinued operations
              
              $
              (0.00
              )
              $
              (0.00
              )
              $
              (0.02
              )
              $
              (0.02
              )Net
                  income (loss)
              
              $
              0.00
              
              $
              (0.00
              )
              $
              0.03
              
              $
              0.00Weighted
                  average common shares outstanding:Basic
              
              
              18,501,286
              
              
              18,501,286
              
              
              18,141,753
              
              
              18,141,753Diluted
              
              
              19,137,586
              
              
              19,137,586
              
              
              18,614,811
              
              
              18,614,811




**5.**
            **DISCONTINUED
                OPERATIONS**





During
      the quarter ended September 30, 2005, the Company approved plans to dispose
      of
      its wholly-owned subsidiary, Electronic Payment & Transfer Corporation
      ("EPT"), and to discontinue offering prepaid debit cards and the related
      products and services that were marketed by EPT. Subsequently, effective
      September 30, 2005, the Company completed the sale of EPT to one former employee
      of the Company for a $1.5 million note receivable (see Financial Footnote #10
      “Notes Receivable”). The Company had originally estimated an allowance against
      the note receivable of $0.8 million. The Company recorded no gain or loss on
      this transaction. During fiscal 2006, in accordance with FASB Statement No.
      114,
“Accounting by Creditors for Impairment of a Loan “, the Company has written the
      note receivable down to $500,000 and has set a reserve for the entire balance.
      In accordance with FASB Statement No. 144, "Accounting for the Impairment or
      Disposal of Long-Lived Assets," the Company has classified EPT as a discontinued
      operation and reported its operating results within discontinued operations
      in
      the accompanying consolidated statements of income.




F-14





During
      the quarter ended December 31, 2005, the Company approved plans to discontinue
      two operations that did not fit within management’s strategic plans, thereby
      ceasing operations of the Company’s software development subsidiary, Axcess
      Technology Corp. (“ATC”), and ATC’s South African subsidiary Axcess Technology
      Corp, SA (“ATCSA”), as of December 31, 2005. The Company had dismissed all but
      one employee as of December 31, 2005, transferring him to Nationwide Money
      Services, Inc. All assets and liabilities were transferred during the year
      ended
      December 31, 2005 to either Nationwide Money Services, Inc. or Cash Axcess
      Corp., SA. In accordance with FASB Statement No. 144, "Accounting for the
      Impairment or Disposal of Long-Lived Assets," the Company has classified ATC
      and
      ATCSA as discontinued operations and reported their operating results within
      discontinued operations in the accompanying consolidated statements of
      income.





On
      May 2,
      2006, the Company entered into a Shareholder Agreement to sell 50% of Cash
      Axcess Corporation (Proprietary) Limited, in a stock arrangement with Industrial
      Electronic Investments Limited. Under the requirements of FASB Interpretation
      No. 46(R), this transaction constituted a variable interest for the Company,
      with the Company being determined as the primary beneficiary. In exchange for
      200 additional shares, or 50% of the outstanding shares of Cash Axcess
      Corporation (Proprietary) Limited, the Company received the equivalent of
      $745,341 of cash before exchange losses, to be maintained in the accounts of
      Cash Axcess and used for their own ongoing operations. This sale resulted in
      the
      Company recording a $555,409 gain deferral on the sale which was subsequently
      recorded to the Company’s statement of income upon the sale of the remaining 50%
      of Cash Axcess Corporation. During the quarter ended September 30, 2006, the
      Company approved plans to discontinue its South African operation which did
      not
      fit within management’s strategic plans. On September 30, 2006, the Company
      finalized the sale of the remaining 50% of Cash Axcess Corporation (Proprietary)
      Limited (“CAC”), its Variable Interest Entity for $700,000. As of December 31,
      2006 $175,000 of this amount was held in an escrow account as security to cover
      any claims made in connection with a breach of any of the Company's warranties
      in the sale agreement for a period of six months. Upon the expiration of the
      six-month escrow period, the remaining balance in the escrow account shall
      be
      paid to the Company. The Company will recognize the $175,000 deferred gain
      on
      sale upon expiration of the six-month escrow period. In accordance with FASB
      Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
      Assets," the Company has classified CAC as discontinued operations and reported
      their operating results within discontinued operations in the accompanying
      condensed consolidated statements of income and statements of cash flows. The
      resulting gain on the sale is as follows:


Sales
                    price
                
                
                
                
                $
                700,000Cost
                    basisInvestment,
                    less minority interest
                
                $
                (812,198
                )Other
                    assets transferred
                
                $
                (196,704
                )
                $
                (1,008,902
                )Deferred
                    escrow deposit
                
                
                
                
                $
                (175,000
                )$
                (483,902
                )Deferred
                    gain on previous sale
                
                
                
                
                $
                555,409Net
                    gain on sale of assets
                
                
                
                
                $
                71,507




The
      Company has not allocated interest to discontinued operations. Operating
      results, of these discontinued operations were as follows:




F-15




For
                  the year ended
              
              For
                  the year endedDecember
                  31, 2006
              
              December
                  31, 2005Revenues
              
              $
              138,138
              
              $
              70,630Cost
                  of revenues
              
              
              66,442
              
              
              36,202Gross
                  Profit
              
              
              71,696
              
              
              34,428Operating
                  ExpensesDepreciation
                  and amortization
              
              
              62,162
              
              
              86,310Selling,
                  general and administrative
              
              
              356,978
              
              
              1,221,354Total
                  operating expenses
              
              
              419,140
              
              
              1,307,665Loss
                  from operations
              
              
              (347,444
              )
              
              (1,273,237
              )Gain
                  on sale of assets
              
              
              71,507
              
              
              -Net
                  loss
              
              $
              (275,937
              )
              $
              (1,273,237
              )




A
      summary
      of both sales is as follows:


Sale
                  of subsidiary in 2006:Cash
                  proceeds from sale of 50% ownership in subsidiary
              
              $
              745,341Total
                  purchase price
              
              $
              745,341Minority
                  interest
              
              
              189,932Deferred
                  gain on sale
              
              
              555,409$
              745,341Cash
                  proceeds from sale of remaining 50% ownership in
                  subsidiary
              
              $
              525,000Note
                  received
              
              
              175,000Total
                  purchase price
              
              $
              700,000Balance
                  sheet at time of saleCash
              
              $
              319,118Automated
                  teller machine vault cash
              
              
              657Accounts
                  receivable
              
              
              51,093Prepaid
                  expenses and other current assets
              
              
              9,006Fixed
                  assets
              
              
              602,757Inventory
              
              
              142,614Minority
                  interest
              
              
              (80,581
              )Accounts
                  payable
              
              
              (35,105
              )Automated
                  teller machine vault cash payable
              
              
              (657
              )Deferred
                  gain on sale
              
              
              (555,409
              )453,493Deferred
                  gain on sale of subsidiary
              
              
              175,000Gain
                  on sale of subsidiary
              
              
              71,507$
              700,000





F-16




**6.**
            **IMPAIRMENT
                OF LONG-LIVED ASSETS AND BUSINESS REORGANIZATION
                CHARGES**




**Impairment
      of Long-lived assets**





As
      discussed in Financial Footnote #2 “Summary of Significant Accounting Policies”,
      the Company accounts for the impairment of long-lived assets in accordance
      with
      SFAS No. 144 ”Accounting for the Impairment or Disposal of Long-lived Assets”.
      The following impairments were recognized during the third quarter of
      2006.





In
      July
      2006, the Company disconnected its processing switch which processed the
      transactions for its subsidiary EFT Integration, Inc. and replaced its switching
      software with a third party vendor. Accordingly, the switching software was
      evaluated for impairment and deemed to be impaired.





Assets
      held for sale, consisting of ATMs and related software, were reevaluated for
      impairment. Of the $485,315 total assets held for sale, $125,586 worth of ATMs
      were determined to be useful and able to be placed back in service. In
      accordance with SFAS No. 144 ”  Accounting
      for the Impairment or Disposal of Long-lived Assets”, these useful assets were
      to be placed back into service at zero book value which is their depreciated
      value had they not been held for sale. Therefore, the full balance of assets
      held for sale was determined to be fully impaired.





Additionally,
      the Company reviewed other ATMs and software for impairment and determined
      that
      some of the Company’s other ATMs and software were impaired. The following
      summarizes the amounts charged to impairment of long-lived assets for fiscal
      year ended December 31, 2006:


Net
                  Book
              
              Estimated
                  proceeds
              
              ImpairmentLong-lived
                  asset description
              
              Value
              
              from
                  disposition
              
              ChargeSwitching
                  software
              
              $
              610,024
              
              
              -
              
              $
              610,024Assets
                  held for sale
              
              $
              485,315
              
              
              -
              
              $
              485,315ATMs
                  and other software
              
              $
              234,057
              
              
              -
              
              $
              234,057$
              1,329,396


**Business
      Restructuring Costs**





During
      the quarter ended September 30, 2006, the Company evaluated its business plan
      and developed a plan for business reorganization. Included in this
      business-reorganization plan was the decision to sell its South African Variable
      Interest Entity (Under the requirements of FASB Interpretation No. 46(R), the
      Company has a variable interest in this entity, with the Company being
      determined as the primary beneficiary), Cash Axcess Corporation (Proprietary)
      Limited (“CAC”) (see Financial Footnote #5 “Discontinued Operations”); the
      decision to shut down the aforementioned switching platform and migrate to
      third
      party vendor for processing (see above); the decision to reevaluate the plan
      to
      reinstall assets held for sale back into service (see above); and the decision
      to reevaluate other ATMs and software for impairment (see above). Additionally,
      the Company decided to restructure management and to outsource certain employee
      functions to third party vendors. As part of this decision to eliminate the
      positions held by the two senior officers and other employees, the Company
      incurred restructuring charges during the third quarter of 2006 in the amount
      of
      $757,811. As of December 31, 2006 the amount of restructuring charges accrued
      was $484,345.




**7.**
            **INVENTORY**





Inventory
      consists of the following as of December 31, 2006:


Parts
                  and supplies
              
              $
              15,053Automated
                  teller machines
              
              
              73,012Triple
                  DES Upgrades
              
              
              312,413Inventory
              
              $
              400,478




F-17




**8.**
            **FIXED
                ASSETS**





Fixed
      assets consist of the following as of December 31, 2006:


Automated
                  teller machines (A)
              
              $
              8,017,024Furniture
                  and fixtures
              
              
              439,336Computers,
                  equipment and software (A)
              
              
              1,848,718Automobiles
              
              
              275,679Leasehold
                  improvements
              
              
              84,78810,665,545Less:
                  accumulated depreciation and amortization (B)
              
              
              4,458,789Fixed
                  assets, net
              
              $
              6,206,756




(A)
            See
                Financial Footnote #15 “Capital Lease Obligations” for ATMs and computers
                held under capital leases.





(B)
            Depreciation
                expense from continuing operations for the years ended December 31,
                2006
                and 2005 was: $1,653,862 and $901,438,
                respectively.




**9.**
            **INTANGIBLE****ASSETS AND MERCHANT
                CONTRACTS**





The
      following table summarizes Intangible assets and merchant contracts at December
      31, 2006:


Gross
                Carrying
                  Value
              
              
              Accumulated
                  Amortization
              
              
              NetGoodwill
              
              $
              4,189,645
              
              $
              168,286
              
              $
              4,021,359Other
                  Intangible Assets
              
              $
              328,092
              
              $
              127,620
              
              $
              200,472Merchant
                  contracts
              
              $
              14,388,965
              
              $
              1,879,021
              
              $
              12,509,944Total
                  Intangible assets and merchant contracts
              
              $
              18,906,702
              
              $
              2,174,927
              
              $
              16,731,775





The
      Company recorded amortization expense of $705,593 and $469,248, for the years
      ended December 31, 2006 and 2005, respectively. The Company records the
      amortization of loan costs in interest expense.




Aggregate
      amortization over the next five years, assuming a useful life of 21 years for
      merchant contracts, is expected to be as follows:


2007
              
              $
              702,0072008
              
              $
              702,0072009
              
              $
              702,0072010
              
              $
              686,6602011
              
              $
              686,660





The
      Company has no intangible assets, other than goodwill, that are not subject
      to
      amortization.




**10.**
            **NOTES
                RECEIVABLE**





Notes
      receivable consist of the following at December 31, 2006:


(a)
                  9% promissory note receivable requiring monthly interest payments
                  starting
                  October 1, 2006 and quarterly principal payments starting August
                  1, 2006,
                  maturing November 1, 2010 requiring a balloon payment, fully reserved
                  due
                  to non-payment
              
              $
              0(b)
                  10% promissory note due February 2007, net of reserve of
                  $82,186
              
              
              17,709$
              17,709




F-18





a)
            During
                the quarter ended September 30, 2005, the Company disposed of its
                wholly-owned subsidiary, Electronic Payment & Transfer Corporation
                (“EPT”), and discontinued offering prepaid debit cards and the related
                products and services that were marketed by EPT. Subsequently, effective
                September 30, 2005, the Company completed the sale of EPT to one
                former
                employee of the Company for $1,540,000 in a secured promissory note
                covering the full amount of the sale price (see Financial Footnote
                #5
                "Discontinued Operations”). On August 1, 2006, Electronic Payment Systems,
                LLC (“EPS”), the acquirer, failed to make its required payment and was in
                default of the Stock Purchase Agreement made and entered into as
                of
                September 30, 2005. The Company sent a default notification letter
                on
                August 2, 2006 and EPS had thirty days to cure the default. EPS has
                failed
                to make any payment to date; therefore the Company has determined
                that it
                is unlikely that the purchaser will repay the note. The Company and
                EPS
                were in negotiations to amend the note to $500,000, however no agreement
                had been reached. Additionally, it is unlikely that the Company will
                receive financial information from EPS to assist in supporting
                collectibility. In the absence of financial information to determine
                collectibility and only having the value of the stock of EPS as security
                on the repayment of the note, management has determined that it is
                likely
                that the note is fully impaired and has increased the reserve by
                $778,360
                during the year ended December 31, 2006, which together with the
                previous
                reserve, reduced the carrying value to zero.





b)
            In
                February 2004, the Company issued a note receivable in the amount
                of
                $190,000 due within one year and requiring monthly payments of principal
                and interest, with an annual interest rate of 10%. The note has been
                amended to extend the term to February 2007. The amount remaining
                on the
                note as of December 31, 2006 is $99,895. The promissory note is
                collateralized by the Company’s stock and during the fiscal year ended
                December 31, 2006, the Company increased the reserve by $39,247 due
                to the
                declining stock price of the Company.





The
      Company has received no payments of interest on this loan and no interest income
      has been recognized in the periods presented.




**11.**
            **ACCOUNTS
                PAYABLE AND ACCRUED
                LIABILITIES**





Accounts
      payable and accrued liabilities at December 31, 2006 are as
      follows:


Accounts
                  payable
              
              $
              1,262,611Accrued
                  commissions
              
              
              1,060,932Accrued
                  severance
              
              
              484,345Accrued
                  legal fees
              
              
              287,189Accrued
                  payroll
              
              
              260,271Accrued
                  audit fees
              
              
              139,286Other
              
              
              696,452Accounts
                  payable and accrued liabilities
              
              $
              4,191,086




**12.**
            **NOTES
                PAYABLE - RELATED PARTIES**





As
      of
      December 31, 2006, notes payable - related parties consist of the
      following:


Promissory
                  note in the amount of $243,981 to a stockholder, unsecured, payable
                  in
                  monthly principal and interest installments of $3,000, bearing
                  an annual
                  interest rate of 11%, and due June 2013
              
              $
              161,765Subordinated
                  unsecured debentures of $1,225,000 provided by certain stockholders
                  with
                  interest only payments made quarterly at a rate of 9%, with balloon
                  payments due October 28, 2010, net of discounts and fees of
                  $41,843
              
              
              1,183,1571,344,922Less:
                  current portion
              
              
              18,471Long-term
                  portion of notes payable - related parties
              
              $
              1,326,451




F-19




As
      of
      December 31, 2006, principal payments due on the notes payable - related parties
      are as follows:


2007
              
              $
              18,4712008
              
              
              20,6952009
              
              
              23,1862010
              
              
              1,250,9782011
              
              
              25,978Thereafter
              
              
              47,457$
              1,386,765Less
                  discount
              
              
              (41,843
              )Total
              
              $
              1,344,922





**13.**
            **NOTE
                PAYABLE**




As
      of
      December 31, 2006, note payable consists of the following:


The
                  Company entered into a promissory note with a non-related party.
                  Payments
                  of interest only are due until the note matures on September 30,
                  2007.
                  Interest rate on the note is 4%.
              
              $
              50,000





**14.**
            **SENIOR
                LENDERS’ NOTES PAYABLE**





Senior
      lenders’ notes payable consist of the following at December 31,
      2006:


(a)
                  Wachovia Bank
              
              $
              558,333(b)
                  Wachovia Bank - Third Amended and Restated Loan Agreement
              
              
              2,300,000(c)
                  CAMOFI Master LDC, net of warrant valuation discounts of
                  $597,185
              
              
              2,902,815$
              5,761,148Less:
                  current portion
              
              $
              658,333Senior
                  lenders’ notes - long term portion, net
              
              $
              5,102,815





(a)
            In
                September 2004, the Company entered into a senior secured term loan
                with a
                bank in the amount of $1,250,000, and a working capital line of credit
                in
                the amount of $500,000. In June 2005 the term loan was increased
                by
                $500,000 and the line of credit was renewed. The Company drew down
                $500,000 from the line of credit during fiscal year 2006 and at December
                31, 2006 the full $500,000 was outstanding. The loan and credit line
                are
                secured by all the assets of the Company. Principal and interest
                is due
                monthly on the loan, and the loan matures at the end of 2 years.
                The line
                of credit is due to be paid off by October 2010. Interest, on both
                the
                loan and line of credit, is at an annual rate of Bank Prime plus
                .25 basis
                points, which at December 31, 2006 was 8.50%.





(b)
            On
                October 27, 2005, to obtain funding for the acquisition of the Merchant
                Contracts and the Equipment (see Financial Footnote #3 “Acquisition of
                Assets” above), the Company entered into a Third Amended and Restated Loan
                Agreement with Wachovia Bank ("Wachovia"), the Company's senior lender,
                pursuant to which Wachovia agreed to provide a term loan to the Company
                in
                the amount of $3,000,000. Such term loan was evidenced by a Promissory
                Note (the "Wachovia Note") issued at the closing on October 27, 2005.
                Under the terms of the Wachovia Note, the Company is required to
                make
                monthly payments of $50,000 plus accrued interest, which commenced
                in
                November 2005. All outstanding principal and interest is payable
                in full
                in October 2010. The Company has entered into an interest rate swap
                related to this senior lender notes payable. The swap exchanges the
                variable rate of Prime plus 1%, for a fixed rate of interest at 9%.





F-20





The
                Company’s interest rate swap has not been designated as a hedging
                instrument. The Company’s policy is to record the change in fair value as
                an increase or decrease to interest expense in the accompanying
                consolidated statements of income. The change in fair value of the
                hedge
                for fiscal year ending December 31, 2006 resulted in interest expense
                of
                $3,705.





In
                addition, the Company granted Wachovia a security interest in
                substantially all of its assets and intellectual property. The Wachovia
                Note is a long-term debt obligation arising other than in the ordinary
                course of business which constitutes a direct financial obligation
                of the
                Company. The loan agreement requires the Company to meet certain
                covenants. The three (3) covenant terms are as follows: 1) Senior
                Liabilities to Effective Tangible Net Worth ratio of not more than
                2.25;
                2) Senior Funded Debt to EBITDA ratio of not more than 2.00 to 1.00;
                3)
                EBITDA to Debt Service of not less than 1.25 to 1.00. All of the
                covenants
                are measured quarterly. As of December 31, 2006 the Company was not
                in
                compliance with all covenants and has obtained a waiver of these
                covenants
                through March 31, 2007.





(c)
            On
                October 27, 2005, to obtain additional funding for the acquisition
                of the
                Merchant Contracts and the Equipment (see (b) above), the Company
                entered
                into a Securities Purchase Agreement (the "Purchase Agreement") with
                CAMOFI Master LDC (the "Investor") for the sale of (i) a $3,500,000,
                9%
                Senior Subordinated Secured Convertible Note (the "Note") and (ii)
                stock
                purchase warrants (the "Warrant") to purchase 910,000 shares of its
                common
                stock. The obligations under the Note are subordinated to Wachovia.
                The
                Company closed the financing pursuant to the Purchase Agreement on
                October
                27, 2005. The Note matures on October 27, 2010 and is convertible
                into the
                Company's common stock, at the Investor's option, at a conversion
                price of
                $1.45. The Company is permitted to require the Investor to convert
                a
                portion of the Note subject to the attainment of certain volume and
                price
                targets specific to the Company's common stock. The Company is required
                to
                make cash interest payments on a monthly basis and on each conversion
                date, with all accrued and outstanding interest due in full as of
                the
                maturity date. All overdue payments of interest incur a late fee
                at the
                rate of 20% per annum. The Company may prepay all or part of the
                Note in
                cash at 110% of the principal amount plus accrued interest. The full
                principal amount of the Note is due upon default under the terms
                of Note.
                In addition, the Company granted the Investor a junior security interest,
                subordinated to Wachovia, in substantially all of its assets and
                intellectual property as well as registration rights. The Warrant
                is
                exercisable until five years from the date of issuance at an exercise
                price of $1.75 per share. In addition, the exercise price of the
                Warrant
                is adjusted in the event the Company issues common stock at a price
                below
                the exercise price. The Investor has contractually agreed to restrict
                its
                ability to convert the Note and exercise the Warrant and receive
                shares of
                the Company's common stock such that the number of shares of the
                Company’s
                common stock held by them and their affiliates after such conversion
                or
                exercise does not exceed 4.99% of the Company's then issued and
                outstanding shares of common stock. The allocation of the proceeds
                between
                the Note and the Warrant was based upon the relative fair value of
                each
                security. The Black-Scholes Model was used to determine the fair
                value of
                the Warrant. The Warrant was assigned a fair value of $772,816 which
                has
                been recorded as a discount to the Note. Due to the terms and value
                of the
                excercise and convertible prices there is no significant beneficial
                conversion.




As
      of
      December 31, 2006, principal payments due on the senior lenders’ notes payable
      are as follows:


2007
              
              $
              658,3332008
              
              
              600,0002009
              
              
              600,0002010
              
              
              4,500,0002011
                  and thereafter
              
              
              -$
              6,358,333Less
                  discount
              
              
              (597,185
              )Total
              
              $
              5,761,148





**15.**
            **CAPITAL
                LEASE OBLIGATIONS**





The
      Company is obligated under various capital leases for automated teller machines
      and computer equipment. For financial reporting purposes, minimum lease payments
      relating to this equipment have been capitalized. Capital lease obligations,
      excluding interest, totaling $2,913,633 require minimum monthly lease payments
      ranging from $30 to $15,637 with interest rates ranging between 3.73% and
      23.00%. The future minimum lease payments required under capital lease
      obligations as of December 31, 2006, are as follows:


2007
              
              $
              1,467,3822008
              
              
              1,045,1582009
              
              
              572,8142010
              
              
              251,8712011
              
              
              15,8733,353,098Less:
                  amount representing interest
              
              
              439,465Present
                  value of minimum lease payments
              
              
              2,913,633Less:
                  current portion of capital lease obligations
              
              
              1,224,203Total
              
              $
              1,689,430




F-21




Equipment
      leased under capital leases as of December 31, 2006, totals $2,837,167, which
      is
      net of accumulated depreciation of $782,949.




**16.**
            **OTHER
                OPERATING EXPENSE AND OTHER NON-OPERATING
                INCOME**





In
      fiscal
      year 2006, the Company incurred other operating expenses of $450,000 which
      related to legal fee expenses and reserves in connection with the James Collins
      legal claim and EFMARK claim settlement (See Financial Statement Footnote #18
      “Legal Proceedings”).





Also,
      in
      fiscal 2006, the Company recorded other non-operating income of $146,703. During
      fiscal 2006, the Company determined that $146,703 of prior period fees had
      accumulated which had not been recognized as revenue, and as such, the amount
      was recognized as other non-operating income during the fourth quarter ended
      December 31, 2006.




**17.**
            **COMMITMENTS
                AND CONTINGENCIES**





Leased
      facilities - The
      Company entered into a new office lease in Texas which commenced February 1,
      2005, and has a term of two years, at which time it becomes a month to month
      lease. The agreement provides for minimum monthly base rental payments of
      approximately $4,406. The Company also leases a warehouse facility in South
      Carolina which is a month to month lease through 2007 and a facility in Georgia
      which has a lease through October 2007. Effective January 2007, the Company
      renegotiated the operating lease for its Florida office under a cancelable
      operating lease with a monthly base rental payment of $9,540. On February 28,
      2007, the Company received a notice to vacate premises within 90 - 120 days.
      This notification was expected and the Company plans on moving into new office
      space at a reduced monthly base rent. On March 26, 2007, the Company signed
      a
      lease agreement for new corporate headquarters. Additionally, in 2006 the
      Company opened a small sales office in Kentucky which has a lease through
      September 2007.  The
      Company also has various operating leases for computers and equipment. Rental
      expense under operating leases aggregated $323,735 and $297,981 for the years
      ended December 31, 2006 and 2005, respectively.





The
      following is a schedule by years of future minimum rental payments required
      under operating leases that have initial or remaining non-cancelable lease
      terms
      in excess of one year as of December 31, 2006:


2007
              
              $
              153,6722008
              
              
              148,2222009
              
              
              34,5012010
              
              
              2,909Total
              
              $
              339,304




**18.**
            **LEGAL
                PROCEEDINGS**





In
      March
      2004, the Company received a claim filed by James Collins, a previous employee
      of Global Axcess Corp. The claim was filed in Superior Court of California,
      County of San Diego on March 2, 2004. The claim alleged the following were
      owed
      in connection with the employment agreement: compensation, bonuses and other
      benefits of approximately $316,915; and 90,000 restricted shares and 359,700
      stock options exercisable at $3.75 per share. As of March 31, 2006, the Company
      had accrued a total of $450,000 for the potential legal claim. The claim filed
      by James Collins was settled for $450,000 on May 2, 2006 whereby the Company
      made a lump-sum payment of $300,000 on May 22, 2006 and has agreed to pay the
      remaining $150,000 in 12 monthly installments of $12,500 commencing July 1,
      2006
      and ending June 30, 2007.




F-22





Beginning
      in or around October, 2005, Nationwide Money Services, Inc. (“Nationwide”) has
      filed suit against various merchants located in several states, alleging that
      these merchants breached the terms of their ATM processing agreements with
      Nationwide or its successor-in-interest, Progressive Ventures, Inc. Many of
      these actions remain pending, while Nationwide has obtained settlement default
      judgments from certain merchants but has yet to receive any settlements. and
      default judgment against others. The Company recognizes revenue on breached
      contracts when cash is received and the Company has not recognized any revenue
      on these breached contracts during the fiscal years ended December 31, 2006
      and
      2005. The Company expresses no opinion as to the likelihood of success or
      potential amount of recovery in these matters





On
      or
      about July 26, 2006, Nationwide Money Services, Inc. (“Nationwide”) filed suit
      against ATMs R Us, Inc. (“ATMs RUs”), a party with which Nationwide and its
      successor-in-interest, Progressive Ventures, Inc. contracted for the provision
      of certain maintenance and installation services regarding their ATM network
      and
      affiliated merchants. Nationwide alleges in its complaint claims for breach
      of
      contract, tortious interference with contractual relations, tortious
      interference with business relations, violations of the Georgia Trade Secrets
      Act, punitive damages, and attorneys’ fees and expenses of litigation. ATMs R Us
      failed to answer or otherwise respond to Nationwide’s complaint. Nationwide is
      currently taking steps to perfect a default judgment against ATMs R Us in
      accordance with Georgia law. The Company expresses no opinion as to the
      likelihood of success or potential amount of recovery, and has not recorded
      income during the year ended December 31, 2006 relating to this
      matter.





On
      August
      1, 2006, Electronic Payment Systems, LLC (“EPS”), the purchaser of the Company’s
      disposed wholly-owned subsidiary Electronic Payment & Transfer Corporation
      (“EPT”), failed to make its required payment and is in default of the Stock
      Purchase Agreement made and entered into as of September 30, 2005 (See Financial
      Footnote # 10 “Notes Receivable”). The Company sent a default notification
      letter on August 2, 2006 and EPS had thirty days as of the date of the default
      notification to cure the default, which it failed to do. The Company has filed
      suit against EPS and is seeking repayment of the $1,540,000 original note in
      full. The carrying value of this note at December 31, 2006 was zero. The Company
      expresses no opinion as to the likelihood of success or potential amount of
      recovery, and has not recorded income during the year ended December 31, 2006
      relating to this matter.





On
      August
      4, 2006, the Company was served with a demand for arbitration/mediation from
      EFMARK Service Company (“EFMARK”), a provider of maintenance services and a
      provider of cash replenishment services for automated teller machines. EFMARK
      alleged that the Company has failed to compensate EFMARK for services amounting
      to $103,000 and was seeking said amount as well as interest of $32,000. The
      Company believed the demand contained factual inaccuracies and was wholly
      without merit. However, in the spirit of its business relationship with EFMARK,
      the Company settled this claim for $40,000 on October 4, 2006. The Company
      has
      reflected this $40,000 expense and liability in its consolidated financial
      statements ended December 31, 2006.





On
      September 29, 2006, the Company was served with process by Renaissance US Growth
      Investment Trust PLC ("Renn") and BFS US Special Opportunities Trust PLC ("BFS"
      and collectively with Renn, the "Plaintiffs"), two investors and shareholders
      of
      the Company. In the Complaint, filed in the Circuit Court of the Seventh
      Judicial Circuit in and for St. John's County, Florida, Plaintiffs allege breach
      of contract, fraud, and negligent misrepresentation. The Plaintiffs are seeking
      monetary damages, attorney fees and rescission of their investment in the amount
      of $1,500,000 based on the Company's restatement of its earnings for the 2nd
      and
      3rd quarters of 2005. The Company denies any and all allegations of wrongdoing
      and intends to vigorously defend such action. As of December 31, 2006 the
      Company has recorded a $200,000 expense accrual for what it deems to be probable
      legal expenses defending this claim.





On
      October 31, 2006, EFT Integration Inc., a wholly-owned subsidiary of Global
      Axcess Corp, filed a lawsuit styled as EFT Integration, Inc., vs DELTACOM,
      Inc.,
      f/k/a ITC^DELTACOM Communications, Inc., in the Circuit Court, Fourth Judicial
      Circuit, Duval County, Florida, Case No. 16-2006-CA-007992. EFT Integration,
      Inc., has alleged that between January of 2002 and October of 2006, Deltacom,
      Inc., charged amounts in excess of the rates agreed to for long distance
      telephone service and other services, and refused to provide billing records
      for
      verification, despite demand. In the lawsuit, EFT Integration, Inc., has
      asserted claims for an accounting, breach of contract, civil theft and fraud,
      seeking to recover amounts overpaid by the Company and seeking other
      damages.  The
      Company expresses no opinion as to the likelihood of success or potential amount
      of recovery, and has not recorded income during the year ended December 31,
      2006
      relating to this matter.




F-23





On
      December 26, 2006, the Company was served with process by Robert Colabrese
      (the
“Plaintiff), a former employee of the Company. In the Complaint, filed in the
      Circuit Court of the Seventh Judicial Circuit in and for St. John’s County,
      Florida, the Plaintiff alleges that the Company has breached the employment
      agreement entered between the Company and the Plaintiff in July 2003. The
      Plaintiff is seeking monetary damages for unpaid wages and commissions, attorney
      fees and an accounting of all sales generated through the Plaintiff. The Company
      denies any and all allegations of wrongdoing and intends to vigorously defend
      such action. The Company has a $50,000 accrual recorded at December 31, 2006
      in
      connection with this complaint.





On
      or
      about January 29, 2007, Nationwide Money Services, Inc. (“Nationwide”) filed
      suit against the Atlanta Retailers Association, LLC (“ARA”) for breach of
      contract, tortious interference with contractual relations, tortious
      interference with business relations, punitive damages, and attorneys’ fees and
      expenses of litigation based upon the ARA’s alleged breach of a preferred vendor
      agreement with Progressive Ventures, Inc., Nationwide’s successor-in-interest.
      The ARA answered Nationwide’s complaint, denied all liability, and asserted
      various counterclaims. The parties anticipate conducting discovery in the coming
      months. The Company expresses no opinion as to the likelihood of success or
      potential amount of recovery in this matter, as discovery is
      ongoing.





From
      time
      to time, the Company and its subsidiaries may be parties to, and their property
      is subject to, ordinary, routine litigation incidental to their business. Claims
      may exceed insurance policy limits and the Company or any one of its
      subsidiaries may have exposure to a liability that is not covered by insurance.
      Management is not aware of any lawsuits, other than previously discussed that
      could have a material adverse impact on the Company’s consolidated results of
      operations, cash flows or financial position.




**19.**
            **CONSULTING
                AND EMPLOYMENT
                AGREEMENTS**





As
      of
      December 31, 2006, the Company has no significant employment contracts with
      executive officers of the Company.





The
      Company had the following significant employment contracts with two executive
      officers of the Company whose positions were eliminated as part of the Company’s
      management restructuring during the year ended December 31, 2006 (See Financial
      Footnote # 6 “Impairment of Long-lived Assets and Business Reorganization
      Charges”):





The
      former Chairman and CEO had a five year employment contract from June 30, 2004
      to June 30, 2009. The agreement provided him with the following compensation:
      an
      annual salary of $275,000; an annual bonus to be determined and awarded by
      the
      Compensation Committee; and an 18 month severance agreement. Pursuant to the
      terms of his severance agreement, the former Chairman and CEO agreed to not
      compete with the Company for a period of five years, solicit the Company’s
      employees, or utilize the Company’s trade secrets, and as consideration received
      a payment of $42,301 representing accrued paid time off, $376,776 paid in
      installments of $15,699 over 24 months, the payment of the lesser of $6,600
      or
      the maximum permitted in matching dollars as per the Company’s 401K Plan and
      healthcare benefits through March 31, 2008.





The
      former President had a two year employment contract from April 29, 2002 to
      April
      29, 2004, which had been extended under Board and the former President’s
      approval. The agreement provided him with the following compensation: an annual
      salary of $200,000; an annual bonus to be determined and awarded by the
      Compensation Committee; and a 12 month severance agreement. Pursuant to the
      terms of his severance agreement, the former President agreed to not compete
      with the Company for a period of five years, solicit the Company’s employees, or
      utilize the Company’s trade secrets, and as consideration received a payment of
      $23,692 representing accrued paid time off, $180,552 paid in installments of
      $15,046 over 12 months, the payment of the lesser of $6,600 or the maximum
      permitted in matching dollars as per the Company’s 401K Plan and healthcare
      benefits through September 30, 2007.





**20.**
            **CONVERSION
                OF NETWORK PROCESSING**





In
      December 2005, the Company, entered into a Distributor ATM Processing Agreement
      (the "Agreement") with Genpass Technologies LLC ("Genpass"). Pursuant to the
      Agreement, the Company agreed to engage Genpass to be the exclusive provider
      (with certain exceptions) of certain electronic funds transfer services
      including the processing of ATM transactions for the Company. The term of the
      Agreement is seven years and is automatically renewed for periods of two years
      unless notice to terminate is provided 180 days prior to the end of the
      applicable period.




F-24





On
      November 24, 2006, Global Axcess Corp (the “Company”) signed a Cash Provisioning
      Agreement with Genpass Technologies, LLC (“Genpass”), which was effective August
      11, 2006, pursuant to which Genpass will provide vault cash for the Company’s
      wholly-owned subsidiary’s ATMs as well as cash management and ATM monitoring on
      an outsourced basis.




**21.**
            **COMMON
                STOCK**





All
      share
      and per share amounts, in this Financial Footnote #21 give retroactive effect
      to
      the 1-for-5 reverse stock split of the


Company’s
      common stock that occurred on April 28, 2005.





During
      2005, the Company issued 4,248 shares of its common stock to employees and
      consultants in lieu of cash compensation.





During
      2005, the Company issued an aggregate of 46,500 shares of its commons stock
      upon
      the exercise of stock options previously granted by the Company to various
      employees and consultants with exercise prices ranging from $0.35 to
      $1.30.





During
      March 2005, the Company issued 452,855 shares of common stock in connection
      with
      one private placement transaction. Units offered consisted of four shares of
      common stock and two common stock purchase warrants exercisable at $1.75 per
      share for three years. The price per unit was $5.60.





During
      April 2005, in connection with the 5 for 1 reverse stock split, the Company
      reacquired 186 shares of its common stock.





During
      April 2005, in connection with the 5 for 1 reverse stock split, the Company
      issued an additional 21 shares of its common stock to Cede &
Co.





During
      2005, shareholders exercised stock purchase warrants for an aggregate of 460,000
      shares of common stock. These stock purchase warrants were exercised at $0.50
      per share resulting in proceeds to the Company of $230,433.





In
      October 2005, the Company reduced the warrant exercise price from $1.75 to
      $1.25
      and extended the expiration of the warrant term from September 9, 2007 to
      October 21, 2010 for 73,500 stock purchase warrants attached to debt issued
      in
      September 2004 in return for extending the debenture term to at least October
      31, 2010. The change in fair value of the warrants was recorded as additional
      paid in capital.





In
      October 2005, the Company converted $993,772 in debentures, net of related
      discounts, issued in September 2004 to equity at a conversion price of $1.25
      or
      820,000 shares, and reduced the exercise price of the warrants attached to
      the
      debentures from $1.75 to $1.25 and extended the expiration of the warrant term
      from September 9, 2007 to October 21, 2010. The fair value of equity
      approximates the fair value of the debt converted and the fair value of the
      warrant repricing.





In
      October 2005, the Company reduced the warrant exercise price from $1.75 to
      $1.25
      for 452,855 shares of common stock issued in connection with one private
      placement transaction in March 2005 in return for subscribers extending the
      warrant registration filing deadline from September 30, 2005 to December 31,
      2005. The change in fair value of the warrants was recorded as additional paid
      in capital.





During
      November 2005, in connection with one private placement transaction, the Company
      issued 1,600,000 shares of common stock at $1.25 per share.





During
      2006, a shareholder exercised stock purchase warrants for 40,900 shares of
      common stock. These stock purchase warrants were exercised at $0.50 per share
      resulting in proceeds to the Company of $20,450.





During
      2006, the Company issued 10,000 shares of its common stock upon the exercise
      of
      stock options previously granted by the Company to an employee with exercise
      price of $0.35.





In
      July
      2006, the Company reduced the warrant exercise price from $1.65 to $0.75 for
      80,000 shares of common stock in connection with warrants issued to a consultant
      in lieu of cash compensation. The change in fair value of the warrants was
      recorded as additional paid in capital.




F-25




**22.**
            **INCOME
                TAXES**





The
      components of the provision for income taxes are as follows:


2006
              
              2005Deferred:Federal
              
              
              -
              
              
              182,487State
              
              
              -
              
              
              26,931Income
                  tax expense:
              
              $
              -
              
              $
              209,418




Deferred
      income taxes arise from the temporary differences in reporting assets and
      liabilities for income tax and financial reporting purposes. These temporary
      differences primarily resulted from net operating losses and different
      amortization and depreciation methods used for financial and tax
      purposes.


2006
              
              2005Deferred
                  tax assets:Arising
                  from operating loss and credit carryforwards
              
              $
              8,186,023
              
              $
              3,793,443Valuation
                  allowance
              
              
              (4,992,473
              )
              
              (2,412,000
              )Deferred
                  tax assets
              
              $
              3,193,550
              
              $
              1,381,443Deferred
                  tax liability:Arising
                  from accumulated depreciation and amortization
              
              
              2,853,750
              
              
              1,041,643Deferred
                  tax liability
              
              
              2,853,750
              
              
              1,041,643Net
                  deferred tax asset
              
              
              339,800
              
              
              339,800Current
                  portion
              
              
              -
              
              
              -Non-current
                  portion
              
              
              339,800
              
              
              339,800Net
                  deferred tax asset
              
              $
              339,800
              
              $
              339,800The
                  provision (benefit) for income taxes shown above varies from statutory
                  federalincome
                  tax rates for those periods as follows:Federal
                  Income Tax Rate
              
              
              -34.00
              %
              
              -34.00
              %State
                  Income Tax Rate, net offederal
                  tax effect
              
              
              0.07
              %
              
              0.17
              %Non-taxable
                  losses from foreign jurisdictions
              
              
              0.00
              %
              
              34.36
              %Permanent
                  items
              
              
              -12.32
              %
              
              1.25
              %Change
                  in valuation allowance
              
              
              44.00
              %
              
              39.00
              %Effective
                  tax rate
              
              
              0.00
              %
              
              40.78
              %





F-26




In
      assessing the realizability of the deferred tax assets, management considers
      whether it is more likely than not, that some portion or all of the deferred
      tax
      assets will not be realized. The valuation allowance at December 31, 2006 is
      related to deferred tax assets arising from net operating loss carryforwards.
      Management believes that based upon its projection of future taxable income
      for
      the foreseeable future, it is more likely than not that the Company will not
      be
      able to realize the full benefit of the net operating loss carryforwards before
      they expire due to the amortization and depreciation losses from the projected
      acquisition assets.





At
      December 31, 2006, the Company has net operating loss carryforwards remaining
      of
      approximately $21,564,900 that may be offset against future taxable income
      through 2026. As part of management’s tax strategies they will be reviewing the
      use of the net operating loss carryforwards. The Company is reviewing its tax
      depreciation methods for future utilization of the NOL.




**23.**
            **NET
                INCOME PER COMMON
                SHARE**





Basic
      net
      income per share is computed based on the weighted average number of common
      shares outstanding during the period. Diluted net income per common share is
      computed based on the weighted average number of common shares outstanding
      during the period increased by the effect of dilutive stock options and stock
      purchase warrants using the treasury stock method. No such conversion is assumed
      where the effect is anti-dilutive, such as when there is a net loss from
      continuing operations. The following table sets forth the computation of basic
      and diluted net income per common share:


Fiscal
                  Year Ended
                December
                  31, 2006
              
              Fiscal
                  Year Ended
                December
                  31, 2005NumeratorIncome
                  (loss) from continuing operations
              
              $
              (4,588,400
              )
              $
              550,393Loss
                  from discontinued operations
              
              
              (275,937
              )
              
              (1,273,237
              )Numerator
                  for diluted income (loss) per shareavailable
                  to common stockholders
              
              $
              (4,864,337
              )
              $
              (722,844
              )DenominatorWeighted
                  average shares
              
              
              20,996,013
              
              
              18,858,947Effect
                  of dilutive securities:Employee
                  stock options & warrants
              
              
              -
              
              
              518,907Warrants
              
              
              
              
              
              38,253Denominator
                  for diluted income (loss) per share adjustedweighted
                  shares after assumed exercises
              
              
              20,996,013
              
              
              19,416,107**Income
                  (loss) per common share - basic:**Income
                  (loss) from continuing operations
              
              
              (0.22
              )
              
              0.03Loss
                  from discontinued operations
              
              
              (0.01
              )
              
              (0.07
              )Net
                  Income (loss) per share
              
              
              (0.23
              )
              
              (0.04
              )**Income
                  (loss) per common share - diluted:**Income
                  (loss) from continuing operations
              
              
              (0.22
              )
              
              0.03Loss
                  from discontinued operations
              
              
              (0.01
              )
              
              (0.07
              )Net
                  Income (loss) per share
              
              
              (0.23
              )
              
              (0.04
              )




F-27




**24.**
            **STOCK
                OPTIONS AND WARRANTS**





Stock
      options - During
      the years ended December 31, 2006 and 2005, the Company granted stock options
      totaling 60,000 and 277,200 shares of its common stock, with a weighted average
      strike price of $0.55 and $1.42 per share, respectively. Certain stock options
      were exercisable upon grant and have a life ranging from 4 months to 5 years.
      The following table summarizes the Company’s stock options activity under
      compensation plans:


Number
                Of
                Options
              
              
              Weighted
                Average
                Exercise
                  PriceBalance,
                  December 31, 2004
              
              
              2,541,400
              
              $
              1.90Options
                  granted
              
              
              277,200
              
              
              1.42Options
                  cancelled
              
              
              (610,700
              )
              
              1.40Options
                  expired
              
              
              (228,050
              )
              
              1.51Options
                  exercised
              
              
              (46,500
              )
              
              0.90Balance,
                  December 31, 2005
              
              
              1,933,350
              
              $
              1.43Options
                  granted
              
              
              60,000
              
              
              0.55Options
                  cancelled
              
              
              —
              
              
              —Options
                  expired
              
              
              (1,009,125
              )
              
              1.46Options
                  exercised
              
              
              (10,000
              )
              
              0.35Balance,
                  December 31, 2006
              
              
              974,225
              
              $
              1.35





The
      weighted average grant date fair value of stock options was $0.17 and $0.07
      in
      fiscal years 2005 and 2006, respectively.





The
      following table summarizes information about options outstanding and exercisable
      at December 31, 2006:


Exercise
                  Price
              
              
              Shares
                  Underlying
                Options
                  Outstanding
              
              
              Weighted
                  Average Remaining
                Contractual
                  Life Years
              
              
              Weighted
                  Average Exercise Price
              
              
              Shares
                  Underlying
                Options
                  Excercisible
              
              
              Weighted
                  Average Exercise Price$0.15-
                  $0.36
              
              
              91,750
              
              
              1
                  year
              
              $
              0.33
              
              
              76,750
              
              $
              0.32$0.37
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -$0.38-$20.00
              
              
              882,475
              
              
              1
                  year
              
              $
              1.47
              
              
              852,775
              
              $
              1.48Totals
              
              
              974,225
              
              
              
              
              $
              1.35
              
              
              929,525
              
              $
              1.39


Number
                  of Remaining
                Options
                  Granted
              
              
              Exercise
                  Price Equals,
                Exceeds
                  or is Less than
                MarketValue
                  as of 12/31/06
              
              
              Weighted
                  Average
                Exercise
                  Price
              
              
              Range
                  of
                Exercise
                  Price
              
              
              Weighted
                  Average
                Fair
                  Value91,750
              
              
              Less
                  than
              
              $
              0.33
              
              $
              0.25
                  - $0.35
              
              $
              30,113-
              
              
              Equals
              
              $
              -
              
              $
              -
              
              $
              -882,475
              
              
              Exceeds
              
              $
              1.47
              
              $
              0.53
                  - $5.70
              
              $
              1,293,668974,225


F-28




Stock
      warrants .
      The
      following table summarizes the Company’s stock warrant activity:


Number
                Of
                Warrants
              
              
              Weighted
                Average
                Exercise
                  PriceBalance,
                  December 31, 2004
              
              
              10,938,204
              
              $
              2.70Warrants
                  granted
              
              
              1,877,856
              
              
              1.68Warrants
                  cancelled
              
              
              —
              
              
              —Warrants
                  expired
              
              
              (470,000
              )
              
              1.48Warrants
                  exercised
              
              
              (468,100
              )
              
              0.51Balance,
                  December 31, 2005
              
              
              11,877,960
              
              $
              2.67Warrants
                  granted
              
              
              —
              
              
              —Warrants
                  cancelled
              
              
              —
              
              
              —Warrants
                  expired
              
              
              (20,000
              )
              
              0.50Warrants
                  exercised
              
              
              (40,900
              )
              
              0.50Balance,
                  December 31, 2006
              
              
              11,817,060
              
              $
              2.68





The
      following table summarizes information about warrants outstanding and
      exercisable at December 31, 2006:


Exercise
                  Price
              
              
              Shares
                  Underlying Warrants Outstanding
              
              
              Weighted
                  Average Remaining
                Contractual
                  Life Years
              
              
              Weighted
                  Average Exercise Price
              
              
              Shares
                  Underlying Warrants Excercisible
              
              
              Weighted
                  Average Exercise Price$0.75
              
              
              80,000
              
              
              0.5
              
              $
              0.75
              
              
              80,000
              
              $
              0.75$1.25
              
              
              382,856
              
              
              2.2
              
              $
              1.25
              
              
              382,856
              
              $
              1.25$1.75
              
              
              5,751,402
              
              
              1.8
              
              $
              1.75
              
              
              5,751,402
              
              $
              1.75$2.50
              
              
              2,801,401
              
              
              1.1
              
              $
              2.50
              
              
              2,801,401
              
              $
              2.50$5.00
              
              
              2,801,401
              
              
              1.1
              
              $
              5.00
              
              
              2,801,401
              
              $
              5.0011,817,060
              
              
              
              
              $
              2.68
              
              
              11,817,060
              
              $
              2.68




Total
      compensation cost related to non-vested awards not yet recognized as of December
      31, 2006 is not significant to the consolidated financial
      statements.





**25.**
            **RELATED
                PARTY TRANSACTIONS**





In
      October 2005, the Company reduced the exercise price from $1.75 to $1.25 and
      extended the expiration date by five years on 66,000 warrants held by BFS US
      Special Opportunities Trust PLC, a stockholder and beneficial owner of the
      Company, in return for a five year extension on $1,000,000 in debt financing.
      The change in fair value of the warrants was recorded as additional paid in
      capital.





In
      October 2005, the Company converted $993,772 in debentures, net of related
      discounts, issued in September 2004 to a stockholder, for equity at a conversion
      price of $1.25 and reduced the exercise price of the warrants attached to the
      debentures from $1.75 to $1.25 and extended the expiration of the warrant term
      from September 9, 2007 to October 21, 2010. The fair value of equity
      approximates the fair value of the debt converted and the fair value of the
      warrant re-pricing.





In
      October 2005, the Company reduced the exercise price from $1.75 to $1.25 and
      extended the expiration date by five years on 3,000 warrants held by Lock
      Ireland, a stockholder and director of the Company, in return for a five year
      extension on $50,000 in debt financing. The change in fair value of the warrants
      was recorded as additional paid in capital.





As
      of
      November 2005, the Company issued 600,000 shares of common stock to BFS US
      Special Opportunities Trust PLC, a stockholder and beneficial owner of the
      Company, through a Private Placement Offering for $750,000 and the Company
      issued 240,000 Warrants exercisable for $1.75.




F-29





As
      of
      November 2005, the Company issued 600,000 shares of common stock to Renaissance
      US Growth Investment Trust PLC, a stockholder and beneficial owner of the
      Company, through a Private Placement Offering for $750,000 and the Company
      issued 240,000 Warrants exercisable for $1.75.




**26.**
            **SUBSEQUENT
                EVENTS**





On
      or
      about January 29, 2007, Nationwide Money Services, Inc. (“Nationwide”) filed
      suit against the Atlanta Retailers Association, LLC (“ARA”) for breach of
      contract, tortious interference with contractual relations, tortious
      interference with business relations, punitive damages, and attorneys’ fees and
      expenses of litigation based upon the ARA’s alleged breach of a preferred vendor
      agreement with Progressive Ventures, Inc., Nationwide’s successor-in-interest.
      The ARA answered Nationwide’s complaint, denied all liability, and asserted
      various counterclaims. The parties anticipate conducting discovery in the coming
      months. The Company expresses no opinion as to the likelihood of success or
      potential amount of recovery in this matter, as discovery is
      ongoing.





On
      March
      26, 2007, the Company entered into an office lease to lease new corporate
      facilities in Jacksonville, FL. The term of the lease is for a period of 62
      months and the rent expense on a monthly basis for the first year is $7,545,
      for
      the second year is $7,773, for the third year is $8,007, for the fourth year
      is
      $8,246 and for the fifth year through the end of lease term is
      $8,494.




F-30