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 1934For
                  the fiscal year ended December 31, 2007ORo
              
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF 1934For
                  the transition period from ___________ to
                  ___________




000-17874


(Commission
      file number)









GLOBAL
      AXCESS CORP


(Name
      of
      small business issuer in its charter)


NEVADA
              
              88-0199674State
                  or other jurisdiction of
              
              (I.R.S.
                  Employerincorporation
                  or organization)
              
              Identification
                  No.)7800
                  BELFORT PARKWAY, Suite 165JACKSONVILLE,
                  FLORIDA
              
              32256(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 Exchange Act: None


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







Check
      whether the Issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Securities Exchange Act of 1934. o


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 in response to Item 405 of
      Regulation S-B not contained in this form, and no disclosure will be contained,
      to the best of the registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o


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 2007 were: $21,750,897.





The
      aggregate market value of the Common Stock held by non-affiliates of the Issuer was
      $3,648,593 based upon closing sales price of Common Stock on OTC Bulletin
      Board on March 3, 2008 of $.25 per share.





As
      of
      March 3, 2008, the Issuer had 20,973,924 shares
      outstanding of the Common Stock
      ($0.001 par value) and no shares outstanding of the Preferred Stock ($0.001
      par value).









TABLE
                OF CONTENTSPage
                No.PART
                IItem
                1.
            Description
                of Business
            4Item
                2.
            Description
                of Properties
            25Item
                3.
            Legal
                Proceedings
            26Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            26PART
                IIItem
                5.
            Market
                for Common Equity, Related Stockholder Matters and Small Business Issuer
                Purchases of Equity Securities
            26Item
                6.
            Management's
                Discussion and Analysis of Financial Condition
            28Item
                7.
            Consolidated
                Financial Statements
            42Item
                8.
            Changes
                in and Disagreements With Accountants on Accounting and
                Financial Disclosure
            42Item
                8A.
            Controls
                and Procedures
            42Item 8A(T).
            Controls
                and Procedures
            42Item
                8B.
            Other
                Information
            43PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and
                Corporate Governance; Compliance With Section 16(a) of the Exchange
                Act
            43Item
                10.
            Executive
                Compensation
            48Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and
                Related Stockholder Matters
            52Item
                12.
            Certain
                Relationships and Related Transactions, and Director Independence
            54Item
                13.
            Exhibits
            55Item
                14.
            Principal
                Accountants Fees and Services
            56SIGNATURES
            58CONSOLIDATED
                FINANCIAL STATEMENTS
            63FINANCIAL
                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 (the “SEC”), including the
      Quarterly Reports on Form 10-QSB to be filed in 2008. 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 Jacksonville, 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.




**Business
      Description**





Global
      Axcess operates one of the U.S.’s largest networks of ATMs. Our network
      currently includes approximately 4,335 ATMs, principally in regional and
      individual merchant locations. Approximately 1,564 of the ATMs we operate are
      Company-owned (full placement) and 2,771 are merchant-owned. Our high-traffic
      retail locations and national footprint make us an attractive partner for
      regional and national financial institutions that are seeking to increase their
      market penetration. We provide proprietary ATM branding and processing services
      for over 55 financial institutions that have approximately 579 branded sites
      under contract with the Company nationwide. We provide network processing for
      an
      average of over 1.5 million financial transactions per month.





**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:
      Elan
      Financial Services (Elan), formerly Genpass Technologies, LLC, First Data Retail
      ATM Services (First Data), and Columbus Data Services (Columbus
      Data).





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




**•**
            
            Full
                placement program.
                Under a full placement arrangement, the Company owns or leases 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.




Page
          4




**•**
            
            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, Tranax Corporation and Hyosung (America),
      Inc. 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.





*Merchant
      Customers* *.* We
      have
      contracts with national and regional merchants and with numerous independent
      store operators. 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;**•**
            
            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 Elan Financial Services
      ("Elan") formerly Genpass Technologies, LLC. Elan is a subsidiary of U.S. Bank,
      N.A. Pursuant to the Agreement, Nationwide Money Services, Inc. ("Nationwide"),
      a wholly-owned subsidiary of the Company, agreed to engage Elan 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.




Page
          5




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





Additionally,
      the Elan 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 Elan’s 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.





**Revenue
      Sources**





*Transaction
      Fees* .
      Our
      revenue is recurring in nature and is 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.




Page
          6




**Our
      Strategy**




Our
      strategy is to enhance our position as a leading independent provider of ATM
      services in the United States and to position the Company as a preferred service
      provider to financial institutions. We are currently a “return-and-profit”
driven company whose current primary focus is on the achievement of increased
      profitability and increased positive cash flow. Key objectives of our strategy
      include:





*Expanding
      our existing customer base.* We
      believe our experience combined with our dedication to enhance our existing
      customer relationships will enable us to expand our customer base. We believe
      in
      creating loyal customers by providing a superior experience at a great value.
      We
      are committed to providing “hassle-free” consistent products and services based
      on standards-based technology and processes, and outperforming the competition
      with value and with a superior customer experience, particularly in the
      financial services markets.





*Expanding
      our existing product offerings.* We
      believe we can achieve distribution leverage by acquiring distribution rights
      to
      complimentary products and services which can be sold to our existing
      customers.





*Attaining
      operational excellence.* We
      believe we can attain operational excellence along with a corresponding market
      identity by standardizing product offerings and delivery processes.





*Increasing
      and expanding our geographic presences.* We
      believe we can achieve economies of scale by increasing and expanding our
      geographic market concentration. By achieving economies of scale, we can reduce
      our cost basis on expenses such as maintenance, vault cash, telecommunications,
      replenishment, ATMs and ATM supplies.




**Our
      Strengths**




*Leading
      Market Position.* We
      operate one of the largest network of ATMs in the U.S. Our network currently
      includes approximately 4,335 ATMs located throughout the United States. Our
      size
      and diversity of products and services give us significant economies of scale
      and the ability to provide attractive and efficient solutions to national,
      regional and local financial institutions and retailers.




*Diverse
      Network of Retail Merchants Under Multi-Year Contracts.* We have
      developed significant relationships with regional and local merchants within
      the
      United States. These merchants typically operate high-traffic locations, which
      we have found to result in increased ATM activity and profitability. Our
      contracts with our merchant customers are typically multi-year arrangements
      with
      initial terms of five to seven years. These long-term relationships can provide
      opportunities to deploy additional ATMs in new locations.




*Recurring
      and Stable Revenue and Operating Cash Flow.* The
      long-term contracts that we enter into with our merchant customers provide
      us
      with access to customer traffic and relatively stable, recurring revenue. Our
      recurring and stable revenue base, relatively low and predictable maintenance
      capital expenditure requirements, and minimal working capital requirements
      allow
      us to generate relatively predictable and consistent operating cash flows.




*Low-Cost
      Provider.* We
      believe the size of our network combined with our operating infrastructure
      allows us to be among the low-cost providers in our industry. We believe our
      operating costs per ATM are significantly lower than the operating costs
      incurred by bank ATM operators. Our scale provides us with a competitive
      advantage both in operating our ATM fleet and the potential to offer cost
      effective outsourcing services to financial institutions.




Page
          7




**Fiscal
      Year 2007 and Recent Developments in Our Company**





We
      completed the project to upgrade our ATMs to be Triple DES compliant. See Triple
      DES below for a description of this standand. All but 112 ATMs were upgraded
      at
      the completion of the project. These ATMs were not upgraded due to low
      transaction volume and/or merchant refusal to pay for the upgrade. As a result,
      in January 2008 network access was denied to these 112 ATMs. These ATM losses
      will not have a material impact on our future financial results.





Additionally,
      we completed the U.S. Patriot Act mandated merchant underwriting process on
      all
      but 43 of our ATMs. The reason that the Company did not complete the process
      on
      these 43 ATMs is that their owners refused to comply with the VISA/MasterCard
      mandate. As a result, in January 2008 network access was denied to these 43
      ATMs. These ATM losses will not have a material impact on our future financial
      results.





Also,
      during fiscal 2007 we removed 101 additional ATMs which we deemed as low volume
      or low profitable sites. These removed ATMs were unrelated to the Triple DES
      initiatives, and these ATM losses will not have a material impact on our future
      financial results.





To
      improve our cost structure, during 2007 we:





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





•
            Implemented
                ProfitStars ATM management software to replace our legacy in-house
                developed and maintained software;





•
            Implemented
                a contract to outsource ATM cash management and monitoring which
                will also
                allow us to monitor our ATMs 24 hours per day 365 days per year (vs.
                in-house monitoring during normal business hours
                only);





•
            Reduced
                headcount;





•
            Implemented
                an ATM monitoring program which allows us to automatically dispatch
                service when a terminal produces a fault condition or stops transacting,
                thus improving ATM uptime;





•
            Relocated
                our corporate offices in May to less expensive
                space;





•
            Renegotiated
                and implemented less expensive contracts for First and Second Line
                ATM
                maintenance;





•
            Implemented
                improved controls on company parts and equipment
                inventories;





•
            Renegotiated
                and implemented less expensive contracts for Armored Car Services
                for our
                ATMs;





•
            Increased
                the Company’s vault cash line with U.S. Bank from $20 million to $30
                million;





•
            Signed
                distribution-rights contracts enabling us to offer ancillary products
                and
                services to our existing customers;
                and





•
            Reached
                an agreement with First Data to extend our current contract and decrease
                the cost of processing under this
                contract.





During
      2007 we entered into a settlement agreement with Renaissance US Growth
      Investment Trust PLC ("RUSGIT"), BFS US Special Opportunities Trust PLC ("BFS"),
      and RENN Capital Group ("RENN") to settle the lawsuit that RUSGIT, BFS and
      RENN
      commenced on September 29, 2006.




Page
          8




During
      2007 we entered into a settlement agreement with EPS to settle a lawsuit that
      the Company commenced in 2006.





During
      2007 we hired an outside firm to work with our Finance and IT teams to work
      on
      becoming compliant with Section 404 of the Sarbanes-Oxley Act of 2002.
      Management’s assessment of our compliance is included in this filing.





On
      January 31, 2008, we settled the lawsuit that Robert Colabrese, a former
      employee of the Company ("Colabrese"), commenced on December 26, 2006. In
      connection with the settlement, the Company entered into a settlement agreement
      with Colabrese and a limited release with Cardtronics, LP., Colabrese's current
      employer.





**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 125 ATM locations during 2007 as a result of
      these events. These ATM locations accounted for 2.9% of the Company’s total
      locations as of the end of fiscal 2007. The Company recognizes revenue on
      breached contracts when cash is received.





**Our
      ATM Network**





*General* .
      Our
      network ATMs are located primarily in the south and on the east coast, and
      our
      concentration as of December 31, 2007 in the 10 states is listed below:





STATE
            
            NUMBER
                OF ATMsGA
            
            837NY
            
            625TX
            
            594VA
            
            569FL
            
            362NC
            
            255NM
            
            212MD
            
            147AL
            
            92SC
            
            82





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





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





o
            selecting
                ATM locations and entering into leases for access to those
                locations;




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





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





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




Page
          9




o
            processing
                ATM transactions;





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





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





o
            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:





·
            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 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, 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.




Page
          10




*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, seasonality 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 18,727,105
      transactions in fiscal 2007 and 18,865,090 transactions on our network in fiscal
      2006.





*ATM
      transactions* .
      During
      2007, compared to 2006, the Company experienced an approximate 4% increase
      in
      the average number of transactions and withdrawals per ATM. The increase in
      the
      average number of transactions from 2006 to 2007 is mainly due to the number
      of
      low volume ATMs removed from the Company’s network.





**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.





**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 hosts the IT infrastructure at Peak 10, the largest independent data
      center operator and managed services provider in the U.S., to utilize Peak
      10’s
      managed collocation, communications, and security services out of its
      Jacksonville, Florida data center facility. The Company and Peak 10 maintain
      Universal Power Systems and diesel generators for back-up power in the event
      of
      temporary and extended 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.





**Intellectual
      Property**





Our
      success depends in part on our proprietary rights and technology. We rely on
      a
      combination of patent, copyright, trademark and trade secret laws, employee
      and
      third-party non-disclosure agreements and other methods to protect our
      proprietary rights.





**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 Innovus, TRM Corporation, IMS and Cardtronics, Inc. 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.




Page
          11




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:





o
            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.





o
            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.





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





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





o
            Consolidator
                networks.
                Consolidator networks such as TRM and Cardtronics, whose U.S. operations
                consist of approximately 8,000 ATMs and 28,600 ATMs,
                respectively.





Management
      believes that many of the above providers, with the exception of Cardtronics
      and
      TRM, 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/Hyosung. 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.




Page
          12




**Vault
      Cash** ****





Currently,
      we rent cash (“vault cash”) for 985 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 579 ATMs covered under our Branded Cash program.
      For the remaining 2,771 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, 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 612
      and 107 ATMs, respectively, have been installed at their locations as of
      December 31, 2007. 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 21.4% and 4.1% of our revenues from
      continuing operations in fiscal year 2007, respectively.




**Regulatory
      Matters**





Our
      business is generally not subject to significant government regulation, though
      we are subject to certain industry regulations. Our failure to comply with
      applicable regulations could result in restrictions on our ability to provide
      our services.





*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, commonly known as “Regulation E”,
      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.




Page
          13




*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 was passed that
      required state or federal licensing and background checks of ATM
      operators.  We
      completed the U.S. Patriot Act mandated merchant underwriting process on all
      but
      43 of our ATMs. Additionally, 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.





*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 needed 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 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.




Page
          14




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 have been Triple DES compliant by March 31, 2005. VISA had given
      the networks until December 31, 2005 to be Triple DES compliant. The Company
      had
      been granted an extension by MasterCard, VISA and STAR for 100% Triple DES
      compliance by December 31, 2007. As of December 31, 2007, the Company had
      completed its project to upgrade all of its ATMs to comply with the Triple
      DES
      requirement. All but 112 ATMs were upgraded at the completion of the project.
      These machines went offline as of January 1, 2008. All new ATMs that we purchase
      are Triple DES compliant.




*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.




**Employees**





At
      December 31, 2007, the Company had 47 full time employees working in the
      following subsidiaries:




Global
                  Axcess Corp
              
              
              3Nationwide
                  Money Services
              
              
              4447




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
          15




**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 and 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
      renegotiated our covenants from our senior lender during the third quarter
      of
      2007. There is no assurance that we will be in compliance with those covenants
      in the future nor is there assurance that we would receive waivers should we
      not
      meet our covenant requirements. See Financial Footnote # 13 “Senior Lenders’
Notes Payable” for a detail of these covenants.





·
            ***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 Radio Frequency Identification (“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
          16




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 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***;





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




Page
          17




·
            ***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***;
                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.*** Pursuant
      to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish
      a
      report of management’s assessment of the design and effectiveness of our
      internal control over financial reporting as part of our Annual Report on Form
      10-KSB filed with the SEC. Our independent auditors are not required to attest
      to, and report on, management’s assessment and the effectiveness of internal
      control over financial reporting until fiscal 2009. Our management is also
      required to report on the effectiveness of our disclosure controls and
      procedures. As disclosed in our Annual Report on Form 10-KSB for the fiscal
      year
      ended December 31, 2005 our management identified a material weakness in
      internal control over financial reporting and, accordingly, determined that
      internal control over financial reporting was not effective at December 31,
      2005. Even though these material weaknesses were remediated during fiscal year
      2006, such material weakness and deficiencies in the effectiveness of internal
      control over financial reporting could result in inaccurate financial statements
      or other disclosures or fail to prevent fraud, which could have an adverse
      effect on our business, financial condition or results of operations. Further,
      if we do not remediate any material weakness, we could be subject to sanctions
      or investigation by regulatory authorities, such as the SEC, we could fail
      to
      timely meet our regulatory reporting obligations, or investor perceptions could
      be negatively affected; each of these potential consequences could have an
      adverse effect on our business, financial condition or results of operations.





***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.




Page
          18




***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.





***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
      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 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
          19




***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.








**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 $0.17
      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;





•
      litigation against the Company;





•
      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 February 13, 2008, approximately
      13.0 million or 62.1% of registered securities are beneficially owned by 15
      persons or groups. Sales of substantial amounts of these securities, when sold,
      could reduce the market price of our Common Stock.





***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.




Page
          20




**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.





On
      December 13, 2007, the Company received a declaration of default and
      acceleration (the "Notice") from the Investor relating to the Company's 9%
      Senior Subordinated Secured Convertible Note due October 27, 2010 in the
      principal amount of $3,500,000.





The
      Notice claims that an event of default has occurred under Section 8(a)(iv)
      of
      the Note. An event of default under Section 8(a)(iv) of the Note occurs if
      any
      representation or warranty made in (i) the Note, (ii) any transaction document
      related to the Note, (iii) any written statement pursuant to the Note, or (iv)
      any other report, financial statement or certificate made or delivered to the
      Investor was untrue or incorrect in any material respect as of the date of
      the
      Note. The description of the Investor's specific claims and lawsuit relating
      to
      the event of default contained in the Company's Current Report on Form 8-K
      filed
      with the Commission on October 25, 2007 is hereby incorporated by reference.





The
      Notice demands immediate payment of an amount equal to the sum of (i) 110%
      of
      the principal amount of the Note, plus all accrued and unpaid interest, and
      (ii)
      all other amounts, costs, expenses and liquidated damages due in respect to
      the
      Note. Pursuant to the terms of the Note, any overdue and unpaid interest must
      be
      paid at the rate of 20% per annum from the date such interest was due through
      the date of payment. The Company disagrees with all claims that an event of
      default has occurred under Section 8(a)(iv) of the Note and is vigorously
      defending its position. The Complaint seeks damages of "not less than
      $4,679,500", however in the event that a court determines that there has been
      an
      event of default under the Note, the Company estimates that, as of the date
      hereof, a payment of approximately $3,876,250 would be due and
      payable.





**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.


Page
          21




***If
      we incur operating losses, we may be unable to continue our current
      operations.*** ** We
      incurred significant operating losses during the two fiscal years of 2005 and
      2006. Even though we reported net income during fiscal 2007, we have reported
      an
      accumulated deficit of $10.3 million as of December 31, 2007. If we incur
      operating losses in the future, 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 that this will be achieved.





***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, 2007 have in service approximately 719 ATM sites. The sites
      maintained by Food Lion and Kash n’ Karry constitute approximately 16.6% of our
      total sites and approximately 27.2% 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 $10.8 million, or 49.7%,
      of our revenues from continuing operations in 2007. 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:


Page
          22





·
            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





·
            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.*** ** A
      lawsuit
      seeking monetary damages was filed against us on October 19, 2007 (see Financial
      Footnote # 17 “Legal Proceedings”). The complaints seek, among other things,
      specified and unspecified damages and costs associated with the litigation.





Additionally,
      a significant investor has communicated to us a desire to re-price or unwind
      financial transactions that took place prior to the 2005 restatement of
      earnings. This investor seeks, among other things, that debt that was converted
      into company stock be converted back into debt. This investor has indicated
      that
      he would like to rescind his previous transactions.


Page
          23





As
      with
      any litigation proceeding, we cannot predict with certainty the eventual outcome
      of this pending lawsuit. Furthermore, we may have to incur expenses in
      connection with this lawsuit, 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.




**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. Any material changes in the Company’s tax liabilities or assets may
      have an adverse affect on our future consolidated financial
      statements.


Page
          24





**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, 2007.





Location
            
            ApproximateSquare
              Footage
            
            UseJacksonville,Florida
            
            5,841 sq.ft.
            
            General
                office use; operations, accounting, sales, 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, customer service, and
                maintenance operations.Duluth,Georgia
            
            250sq.ft.
            
            General
                office use and administration.Prospect,Kentucky
            
            202sq.ft.
            
            Sales
                office use and administration.





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


Page
          25


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





Information
      regarding legal proceedings is contained in Financial Footnote #17 ”Legal
      Proceedings” to the consolidated financial statements contained in this Report
      and is incorporated herein by reference.





**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 quoted on the Over-the-Counter
      Bulletin Board ("OTCBB") under the symbol "GAXC". As of March 3, 2008, there
      were 21,021,786 shares
      of the Company’s Common Stock ($0.001 par value) issued and 20,973,924 shares
      outstanding.





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
      3, 2008, there were  242
      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) .
      The
      quotations reflect inter-dealer prices, without mark-up, mark-down or
      commission, and may not represent actual transactions.




Price
                RangeHigh
            
            LowFiscal
                2008:First
                Quarter through March 3rd
            
            $
            0.31
            
            $
            0.20Fiscal
                2007:First
                Quarter
            
            $
            0.38
            
            $
            0.23Second
                Quarter
            
            
            0.32
            
            
            0.25Third
                Quarter
            
            
            0.31
            
            
            0.25Fourth
                Quarter
            
            
            0.34
            
            
            0.17Fiscal
                Year
            
            
            0.38
            
            
            0.17Fiscal
                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
            
            
            0.32




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
          26





Securities
      authorized for issuance under equity compensation plans:





As
      of
      December 31, 2007, 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):





PlanCategory
            
            Numberof
              Securitiesto
              beissued
              uponexercise
              of
              outstanding
              options,
              warrantsand
              rights
            
            Weighted-
              average
              exercise
              priceof
              outstanding
              options,
              warrantsand
              rights
            
            Numberof
              securities
              remaining
              available
              forfuture
              issuance
              underequity
              compensation
              plans
              (excluding
              securities
              reflectedin
              column(a)Equity
                compensation plans approved by security holdersStock
                Options
            
            
            1,660,900
            
            $
            0.75
            
            
            1,493,227Warrants
            
            
            7,532,860
            
            $
            2.48
            
            
            —Equity
                compensation plans not approved by security holders
            
            
            —
            
            
            —
            
            
            —Total
            
            
            9,193,760
            
            $
            2.17
            
            
            1,493,227




Recent
      Sales of Unregistered Securities





None.




Page
          27





**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 2008. 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 or leases 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 most of
      the
      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
          28





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 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 we compete in is also
      characterized by essentially undifferentiated services.





There
      are
      underlying economic causes as to why our 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 our existing customer base by selling additional
      products and services to them.





**2006
      and 2007 Significant Developments**





(a)
      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 # 4 “Discontinued Operations”).


Page
          29


(b)
      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. All
      claims pursuant to this settlement have been paid by the Company.





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





(d)
      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. The
      Board
      of Directors appointed Michael J. Loiacono as Chief Financial Officer effective
      June 1, 2006.





(e)
      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 # 5
“Impairment of Long-lived Assets and Business Reorganization
      Charges”).





(f)
      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 # 4 “Discontinued Operations”).





(g)
      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.





(h)
      On
      September 29, 2006, the Company was served with process by Renaissance US Growth
      Investment Trust PLC ("RUSGIT") and BFS US Special Opportunities Trust PLC
      ("BFS" and collectively with RUSGIT, 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 lawsuit
      was settled on August 1, 2007 (see “(r)” in this section below).





(i)
      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
      # 5
“Impairment of Long-lived Assets and Business Reorganization
      Charges”).





(j)
      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
      # 5
“Impairment of Long-lived Assets and Business Reorganization
      Charges”).





(k)
      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.





(l)
      On
      November 24, 2006, Global Axcess Corp (the "Company") signed a Cash Provisioning
      Agreement with Elan Financial Services, formerly Genpass Technologies, LLC,
      ("Elan"), which was effective August 11, 2006, pursuant to which Elan 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.


Page
          30





(m)
      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 alleged that the Company had breached the employment
      agreement entered between the Company and Plaintiff in July 2003. The Plaintiff
      was seeking monetary damages for unpaid wages and commissions, attorney fees
      and
      an accounting of all sales generated through the Plaintiff. The Company denied
      any and all allegations of wrongdoing and intended to vigorously defend such
      action. The Company has a $50,000 accrual recorded at December 31, 2007 in
      connection with this complaint. The lawsuit was settled on January 31, 2008
      (see
      Financial Footnote #25 “Subsequent Events”).





(n)
      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. In light of pending settlement negotiations, the parties
      agreed to dismiss the litigation without prejudice and the dismissal was filed
      with the Court on April 18, 2007. Should settlement negotiations fail, either
      party has the right to re-institute the litigation. The Company expresses no
      opinion as to the likelihood of success or potential amount of recovery, and
      has
      not recorded income during the fiscal year ended December 31, 2007 relating
      to
      this matter.





(o)
      On
      March 23, 2007, Global Axcess Corp (the “Company”) entered into an Office Lease
      with Suburban Owner LLC (“Suburban”) to lease facilities located at 7800 Belfort
      Parkway, Suite 165, Jacksonville, FL, 32256. 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 $7,544.63, for the second year is $7,773.40, for the third year is $8,007.04,
      for the fourth year is $8,245.55 and for the final period through the end of
      the
      term is $8,493.79.





(p)
      On
      April 4, 2007, the Company received $175,000 of the escrowed proceeds held
      in
      connection with the September 1, 2006 sale of the Company’s interest in its
      subsidiary Cash Axcess Corporation.





(q)
      Effective April 2, 2007, the Board of Directors of Global Axcess Corp granted
      1,000,000 incentive stock options to executive management of the Company. 25%
      of
      the stock options under this grant are performance based vesting upon
      achievement of aggressive financial goals (unrelated to targeted net
      income).





(r)
      On
      August 1, 2007, Global Axcess Corp. (the “Company”), entered into an agreement
      (the “Mediation Settlement Agreement”) with Renaissance US Growth Investment
      Trust PLC (“RUSGIT”), BFS US Special Opportunities Trust PLC (“BFS”), and RENN
      Capital Group (“RENN”) to settle the lawsuit that RUSGIT, BFS and RENN commenced
      on September 29, 2006.





Although
      the specific terms of the settlement are strictly confidential, there was no
      additional cost to the Company, other than the retention provided in the
      Company’s directors and officer’s insurance policy which was previously accrued
      and reserved for in the fiscal year 2006. As a result of the settlement, all
      claims and counterclaims were dismissed with prejudice, with each side were
      to
      bear its own attorneys fees and costs.





(s)
      On
      August 22, 2007, the Board of Directors voted to approve extending an offer
      letter to Walter Howell to join the Company’s Board and fill a current vacancy
      on the Board and on August 30, 2007 Walter Howell accepted. Mr. Howell’s term as
      a director shall endure until the stockholders elect a new Board at the next
      annual shareholder meeting.


Page
          31


(t)
      On
      September 28, 2007, the Company entered into a Fourth Amended and Restated
      Loan
      Agreement with Wachovia Bank. Concurrent with the execution of the Fourth
      Restated Loan Agreement, the Company issued a Consolidated Renewal Promissory
      Note on September 28, 2007. The Renewal Promissory Note consolidated the
      promissory note dated October 27, 2005 in the original principal amount of
      $3,000,000 and with a September 28, 2007 balance of $1,850,000 and the revolving
      line of credit dated June 22, 2005 with a September 28, 2007 principal amount
      of
      $500,000.





Pursuant
      to the terms of the Fourth Restated Loan Agreement certain required financial
      covenants have been modified from the Third Amended and Restated Loan Agreement.
      The Company is now required to maintain a debt service coverage ratio of 1.00
      to
      1.00 on or before December 31, 2007, and of not less than 1.25 to 1.00 at all
      times thereafter. Further, the Company is now required to maintain a senior
      funded debt to EBITDA ratio of not more than 1.50 to 1.00 on or before December
      31, 2007, and of not more than 1.25 to 1.00 at all times thereafter. In
      addition, the Company is now required to maintain a senior liabilities to
      effective net worth ratio of not more than 2.75 to 1.00 on or before September
      30, 2007, of not more than 2.50 to 1.00 after September 30, 2007, and on or
      before December 31, 2007, of not more than 2.25 to 1.00 after December 31,
      2007,
      and on or before June 30, 2008, and of not more than 2.00 to 1.00 at all times
      thereafter.





(u)
      On
      October 19, 2007, the Company was served with process by Camofi Master LDC
      ("Camofi"), a debt holder of the Company. In the Complaint, filed in the United
      States District Court in and for the Southern District of New York, Camofi
      alleges material and negligent misrepresentation of Global Axcess’ financial
      results relating to the restatement of 2005 earnings that occurred in 2006
      and
      seeks not less than $2,000,000 in damages (actual amount to be calculated at
      trial) plus all costs and expenses. The Company denies any and all allegations
      of wrongdoing and intended to vigorously defend such action and did not
      anticipate a material financial impact due to this matter. In the face of a
      Motion to Dismiss that the Company filed, Camofi withdrew their negligent
      misrepresentation claim and sent the below default notification on December
      13,
      2007.





(v)
      On
      December 13, 2007, the Company received a declaration of default and
      acceleration from CAMOFI Master LDC ("Camofi") relating to the Company's 9%
      Senior Subordinated Secured Convertible Note due October 27, 2010 in the
      principal amount of $3,500,000 (the "Note"). The description of the Note and
      related transaction contained in the Company's Current Report on Form 8-K filed
      with the Securities and Exchange Commission (the "Commission") on November
      1,
      2005 is hereby incorporated by reference.





The
      Notice claims that an event of default has occurred under Section 8(a)(iv)
      of
      the Note. An event of default under Section 8(a)(iv) of the Note occurs if
      any
      representation or warranty made in (i) the Note, (ii) any transaction document
      related to the Note, (iii) any written statement pursuant to the Note, or (iv)
      any other report, financial statement or certificate made or delivered to the
      Investor was untrue or incorrect in any material respect as of the date of
      the
      Note.





The
      Notice demands immediate payment of an amount equal to the sum of (i) 110%
      of
      the principal amount of the Note, plus all accrued and unpaid interest, and
      (ii)
      all other amounts, costs, expenses and liquidated damages due in respect to
      the
      Note. Pursuant to the terms of the Note, any overdue and unpaid interest must
      be
      paid at the rate of 20% per annum from the date such interest was due through
      the date of payment. The Company disagrees with all claims that an event of
      default has occurred under Section 8(a)(iv) of the Note and is vigorously
      defending its position. The Complaint seeks damages of "not less than
      $4,679,500", however in the event that a court determines that there has been
      an
      event of default under the Note, the Company estimates that, as of the date
      hereof, a payment of approximately $3,876,250 would be due and
      payable.





***Comparison
      of Results of Operations for the Fiscal Years Ended December 31, 2007 and
      2006***




***Revenues***





Our
      revenues from continuing operations increased 1.5% to $21,750,897 for the fiscal
      year ended December 31, 2007 ("fiscal 2007") from $21,437,125 for the fiscal
      year ended December 31, 2006 ("fiscal 2006"). We achieved increased revenues
      from fiscal 2006 despite slightly lower transaction volumes. This increase
      was
      mainly due to increased revenues relating to cash management and project
      management services provided to customers during 2007.


Page
          32


***Cost
      of Revenues***





Our
      total
      cost of revenues from continuing operations increased by approximately 2.4%
      to
      $12,705,636 in fiscal 2007 from $12,405,270 in fiscal 2006. Total cost of
      revenues as a percentage of revenues from continuing operations was
      approximately 58.4% in fiscal 2007 and 57.9% in fiscal 2006. The principal
      components of cost of revenues are merchant and distributor commissions, cost
      of
      cash, cash replenishment, maintenance, transaction processing charges,
      telecommunication costs and equipment costs on related equipment sales. The
      increase in cost of revenues period over period was due to several factors.
      First, in a move to increase ATM uptime rates we have increased our first line
      and second line dispatch rates. These increased dispatch rates combined with
      higher fuel charges resulted in higher first line and second line maintenance
      costs during fiscal 2007. Second, our residual/commission payments to customers
      increased from fiscal 2006. Third, our insurance premiums in 2007 have increased
      and even though we have moved to lower cost cash providers in 2007 and have
      saved on cash costs, we have incurred higher insurance premiums with these
      vendors.





***Gross
      Profit***





Gross
      profit from continuing operations as a percentage of revenues was approximately
      41.61% in fiscal 2007 and approximately 42.1% in fiscal 2006. The decrease
      of
      gross profit percentage during fiscal 2007 was due to the increased cost of
      revenues discussed above. While gross profit percentage decreased for fiscal
      2007, we saw increased percentages during the second half of 2007.





***Operating
      Expenses***





Our
      total
      operating expenses from continuing operations decreased to $7,534,576, or
      approximately 34.6% of revenues in fiscal 2007 from $12,541,574, or
      approximately 58.5% of revenues in fiscal 2006. 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, recovery of bad debts, stock compensation
      expenses and other expenses. See explanation of operating expenses below:





***Depreciation
      and Amortization***





Depreciation
      and amortization from continuing operations decreased in fiscal 2007 to
      $2,262,551 from $2,359,455 in fiscal 2006.





This
      decrease in depreciation and amortization expense was mainly due to a decrease
      in depreciable assets relating to impaired assets written off in the third
      quarter of 2006.





The
      Company amortized $174,726 and $509,315 of developed software in fiscal years
      2007 and 2006, respectively.





See
      Financial Statement Footnotes #2 “Summary of Significant Accounting Policies”
and #8 “Intangible Assets and Merchant Contracts”, regarding the amortization of
      intangible merchant contracts.





***Impairment
      and Restructuring Charges***





During
      fiscal 2007, we incurred impairment of notes receivable charges of $5,743.
      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 #5
      “Impairment of Long-Lived Assets and Business Reorganization Charges” and #9
“Notes Receivable” regarding the details of these charges.


Page
          33





***Selling,
      General and Administrative (SG&A) Expenses***





Our
      total
      SG&A expenses from continuing operations decreased 22.8% to $5,279,101 in
      fiscal 2007 from $6,839,003 in fiscal 2006. SG&A expenses represented 24.3%
      of revenues for the year ended December 31, 2007, compared to 31.9% of revenues
      for the year ended December 31, 2006. The decrease in selling, general and
      administrative from continuing operations was directly attributable to the
      decrease in salaries and benefits, audit and legal fees and rent expenses
      resulting from the reduced headcount and cost reduction measures we have
      undertaken in late 2006 and in 2007. Included in the fiscal 2007 SG&A
      expenses are approximately $77,700 of expenses related to the Company becoming
      compliant with Sarbanes-Oxley regulations. Also included in the SG&A
      expenses for the period ending December 31, 2007 were $23,710 of expenses
      relating to performance based employee incentives.





***Recovery
      of Bad Debts***





In
      fiscal
      year 2007, we recorded a recovery of bad debts of $100,000 which related to
      the
      settlement of a previously fully reserved note (see Financial Footnote #9 “Notes
      Receivable”).





***Stock
      Compensation Expense***





In
      fiscal
      year 2007, we recorded stock compensation expenses of $87,181 mainly relating
      to
      executive stock option grants (see Financial Footnote #1 “Basis of
      Presentation”, Financial Footnote #2 “Description Of Business and Summary of
      Significant Accounting Policies” and Financial Footnote # 23 “Stock Options and
      Warrants” ). During the fiscal year ended December 31, 2006 we recorded a stock
      compensation expense credit of $11,698.





***Other
      Expense***





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 #17
      “Legal Proceedings”).





***Interest
      Expense***





Interest
      expense from continuing operations decreased to $1,232,661, or 5.7% of revenues,
      for the fiscal year ended December 31, 2007 compared to $1,356,407, or 6.3%
      of
      revenues, in fiscal 2006. The decrease was mainly due to decreased debt balances
      in fiscal 2007 as compared to the debt balances in fiscal 2006. During the
      fiscal period ended December 31, 2007 we recorded interest expense of $48,551
      relating to the interest swap agreement we entered into with our senior lender.
      The interest rate swap has not been designated as a hedging instrument and
      our
      policy is to record the change in fair value as an increase or decrease to
      interest expense in our consolidated statements of income. The decrease in
      interest rates during 2007 caused us to have a $48,551 unfavorable market value
      of the swap. During the fiscal period ended December 31, 2006 we recorded
      interest expense of $3,705 relating to the interest swap agreement.





***Gain
      (loss) on Sale or Disposal of Assets***





In
      fiscal
      year 2007, we recorded a loss on sale or disposal of certain ATM assets and
      leasehold improvements of $22,517 as compared to a net gain on sale of certain
      ATM assets and automobiles of $21,672 during the fiscal year 2006.





***Other
      Non-Operating income***





In
      fiscal
      year 2006, we recorded other non-operating income of $146,703 relating to
      previous periods’ unrecorded fees.


Page
          34





***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
      income from continuing operations before income taxes of $255,507 during the
      fiscal year ended December 31, 2007 compared to a loss of $4,588,400 for the
      fiscal year ended December 31, 2006 as a result of the factors discussed
      above.





***Income
      Tax Expense***





The
      income tax expense from continuing operations was $0 for fiscal years 2006
      and
      2005, respectively. At December 31, 2007, the Company has a Net Operating Loss
      (NOL) carryforward of approximately $23.0 million available. The NOL is due
      to
      expire during fiscal years 2008-2027.





***Discontinued
      Operations***





Discontinued
      operations, resulting from the sale and ceased operations of one subsidiary
      in
      fiscal 2006, was income of $175,000 in fiscal 2007 and a loss of $275,937 in
      fiscal 2006.





**Net
      Income (loss)**





We
      had
      net income of $430,507 during the fiscal year ended December 31, 2007 compared
      to a net loss of $4,864,337 for the fiscal year ended December 31,
      2006.





***EBITDA***





EBITDA
      (a
      non-GAAP measure) is defined as earnings before net interest, taxes,
      depreciation and amortization. EBITDA has some inherent limitations in measuring
      operating performance due to the exclusion of certain financial elements such
      as
      depreciation and is not necessarily comparable to other similarly titled
      captions of other companies due to potential inconsistencies in the method
      of
      calculation. Furthermore, EBITDA is not intended to be a substitute for cash
      flows from operating activities, as a measure of liquidity, or an alternative
      to
      net income in determining our operating performance in accordance with
      accounting principles generally accepted in the United States of America. Our
      use of EBITDA should be considered within the following context:





•
We
      acknowledge that our depreciable assets are necessary to earn revenue based
      on
      our current business.





•
Our
      use
      of EBITDA as a measure of operating performance is not based on our belief
      about
      the reasonableness of excluding depreciation when measuring financial
      performance.





•
Our
      use
      of EBITDA is supported by the importance of EBITDA to the following key
      stakeholders:





• Analysts —
who
      estimate our projected EBITDA and other EBITDA-based metrics in their
      independently developed financial models for investors;





• Creditors —
who
      evaluate our operating performance based on compliance with certain EBITDA-based
      debt covenants;





• Investment
      Bankers —
who
      use
      EBITDA and other EBITDA-based metrics in their written evaluations and
      comparisons of companies within our industry; and


Page
          35





• Board
      of Directors and Executive Management —
who
      use
      EBITDA as an essential metric for evaluating management performance relative
      to
      our operating budget and bank covenant compliance, as well as our ability to
      service debt and raise capital for growth opportunities which are a critical
      component to our strategy.





The
      following table sets forth a reconciliation of net income (loss) to EBITDA
      for
      each period included herein:




For the year ended
            
            For the year endedDecember 31, 2007
            
            December 31, 2006Net
                income (loss)
            
            $
            430,507
            
            $
            (4,864,337
            )Interest
                expense, net
            
            
            1,232,661
            
            
            1,356,407Depreciation
                and amortization
            
            
            2,262,551
            
            
            2,359,455EBITDA
            
            $
            3,925,719
            
            $
            (1,148,475
            )





Our EBITDA increased to $3,925,719 for fiscal 2007 from ($1,148,475) for fiscal
      2006. EBITDA as a percentage of revenues increased to 18.0% for fiscal 2007
      from
      (5.4%) for fiscal 2006.





The
      following table sets forth a reconciliation of net income (loss) to EBITDA
      before stock compensation expense for each period included herein:




For the year ended
            
            
            For the year endedDecember 31, 2007
            
            
            December 31, 2006Net
                income (loss)
            
            $
            430,507
            
            $
            (4,864,337
            )Interest
                expense, net
            
            
            1,232,661
            
            
            1,356,407Depreciation
                and amortization
            
            
            2,262,551
            
            
            2,359,455Stock
                compensation expense
            
            
            87,181
            
            
            (11,698
            )EBITDA
                before stock compensation expense
            
            $
            4,012,900
            
            $
            (1,160,173
            )






The
      following table sets forth a reconciliation of net income (loss) from continuing
      operations to EBITDA from continuing operations for each period included herein:


Fortheyearended
              
              
              FortheyearendedDecember31,2007
              
              
              December31,2006Net
                  income (loss) from continuing operations
              
              $
              255,507
              
              $
              (4,588,400
              )Interest
                  expense, net
              
              
              1,232,661
              
              
              1,356,407Depreciation
                  and amortization
              
              
              2,262,551
              
              
              2,359,455EBITDA
                  from continuing operations
              
              $
              3,750,719
              
              $
              (872,538
              )





The
      following table sets forth a reconciliation of net income (loss) from continuing
      operations to EBITDA from continuing operations before stock compensation for
      each period included herein:


Page
          36


For the year ended
            
            For the year endedDecember 31, 2007
            
            December 31, 2006Net
                income (loss) from continuing operations
            
            $
            255,507
            
            $
            (4,588,400
            )Interest
                expense, net
            
            
            1,232,661
            
            
            1,356,407Depreciation
                and amortization
            
            
            2,262,551
            
            
            2,359,455Stock
                compensation expense
            
            
            87,181
            
            
            (11,698
            )EBITDA
                from continuing operations before stock compensation
                expense
            
            $
            3,837,900
            
            $
            (884,236
            )




**LIQUIDITY
      AND CAPITAL RESOURCES**





**Working
      Capital**




During
      fiscal 2007, we funded our continuing operations through operating activities.
      Net cash provided by continuing operations amounted to $2,549,108. In addition,
      net cash of $921,383 was used in investing activities from continuing
      operations. Escrow proceeds from the sale of Cash Axcess Corporation and
      insurance proceeds from disposal on fixed assets were offset by cash used to
      acquire fixed assets and to acquire merchant contracts. Net cash used in
      financing activities for continuing operations amounted to $1,841,408, mainly
      relating to principal payments on senior lenders’ notes payable and capital
      lease obligations, offset by $100,000 drawdown on a line of credit from a new
      lender. As of December 31, 2007, the Company had current assets of $1,841,735
      and current liabilities of $4,968,376, which results in negative working capital
      of $3,126,641. This compares to a working capital deficit of $3,545,850 that
      existed at December 31, 2006. Despite the negative working capital, we believe
      that if we achieve our 2008 business plan, we will have sufficient working
      capital to meet our current obligations during 2008. However, we do anticipate
      the need to raise capital lease financing to meet our capital needs of
      approximately $1,000,000 to expand our ATM portfolio and fund new back office
      equipment during 2008.





**Additional
      Funding Sources**





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





·
            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 with Palm Desert was terminated effective
                April 2007 and the Company converted terminals from Palm Desert cash
                to
                alternate funding sources. As of December 31, 2007, the Company had
                0 ATMs
                funded by Palm Desert with a vault cash outstanding balance of
                $0.


Page
          37





·
            Wilmington
                Savings Fund Society (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, 2008 with a one year auto
                renewal period unless one party gives 60 days notice of their intention
                not to renew. As of December 31, 2007, the Company had 76 ATMs funded
                by
                WSFS with a vault cash outstanding balance of approximately $1,100,000
                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, 2007, the Company had 191 ATMs funded
                by
                First Charter with a vault cash outstanding balance of about approximately
                $4,400,000.





·
            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
                were also required to maintain insurance on the vault cash. The contract
                was terminated effective February 2007 and the Company converted
                terminals
                from FLCA cash to alternate funding sources. As of December 31, 2007,
                the
                Company had 0 ATMs funded by FLCA with a vault cash outstanding balance
                of
                $0.





·
            Elan
                Financial Services (Elan).
                On November 24, 2006 we signed a Cash Provisioning Agreement with
                Elan
                allowing us to obtain up to $22,000,000 in vault cash. The Elan contract
                may be terminated by Elan 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, 2007,
                the
                Company had 711 ATMs funded by Elan with a vault cash outstanding
                balance
                of about approximately $16,000,000.





·
            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, 2007, Nationwide Money had 53
                branded
                financial partners, which funded 579 ATMs.


Page
          38




**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 #11 “Notes Payable -
      Related Parties”, #12 “Note Payable”, #13 “Senior Lenders’ Notes Payable”, #14
“Capital Lease Obligations” and #16 “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 2008 will total
      approximately $1,000,000, primarily for the acquisition and/or upgrade of ATMs
      and related ATM installation costs. 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 2007, we acquired
      approximately $110,505 of new lease financing for back office software. See
      Financial Footnote #14 “Capital Lease Obligations” to the Consolidated Financial
      Statements. We have the following payment obligations under current financing
      and leasing arrangements:


Total
              
              Less than 1 year
              
              1-2 Years
              
              2-9 YearsNotes
                  payable- related parties (*)
              
              $
              1,672,425
              
              $
              134,825
              
              $
              1,429,600
              
              $
              107,999Notes
                  payable (*)
              
              
              27,000
              
              
              27,000
              
              
              -
              
              
              -Senior
                  lender notes (*)
              
              
              7,047,250
              
              
              1,090,000
              
              
              5,528,750
              
              
              428,500Capital
                  lease obligations (*)
              
              
              1,991,480
              
              
              1,094,561
              
              
              883,123
              
              
              13,797Operating
                  leases
              
              
              473,976
              
              
              141,604
              
              
              224,512
              
              
              107,861Total
                  contractual cash obligations
              
              $
              11,212,132
              
              $
              2,487,990
              
              $
              8,065,985
              
              $
              658,157
 
 (*)
        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, depreciation and amortization, fixed
      assets, goodwill and intangible asset impairments, stock-based compensation,
      restructurings 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.


Page
          39





**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.
      Surcharge/convenience fees are fees assessed directly to the consumer utilizing
      the ATM terminals owned by the Company. The surcharge/convenience fees assessed
      mostly 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. 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.





**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. The stock based compensation expense is included in
      operating expenses in the consolidated statements of income.





**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 of carrying amount or fair value less cost to
      sell.


Page
          40


**Recent
      Accounting Pronouncements**





In
      June
      2006 the FASB issued Interpretation No. 48 (“FIN 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. The Company adopted FIN 48 as of the beginning
      of
      its 2007 fiscal year. Under FIN 48, the Company first assesses whether it is
      more likely than not that an individual tax position will be sustained upon
      examination based on its technical merits. If the tax position is more than
      likely not to be sustained, under the presumption the taxing authority has
      all
      relevant information, it is recognized. The recognized tax position is measured
      as the largest benefit that is greater than 50 percent likely of being realized
      upon ultimate settlement. Previously recognized tax positions that no longer
      meet the more likely than not recognition threshold are derecognized in the
      period in which that threshold is no longer met. Accordingly the unit of account
      under this standard is the individual tax position and not a higher level such
      as the aggregate of the various positions that are encompassed by the total
      tax
      return filing. As a result of the implementation of FIN 48, the Company did
      not
      recognize a change in its tax liabilities or assets for the 2007 fiscal
      year..





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.





In
      June
      2003, the United States Securities and Exchange Commission (“SEC”) adopted final
      rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as
      amended by SEC Release No. 33-8760 on December 15, 2006. Commencing with the
      Company’s Annual Report for the year ending December 31, 2007, the Company is
      required to include a report of management on the Company’s internal control
      over financial reporting. The internal control report must include a statement
      of management’s responsibility for establishing and maintaining adequate
      internal control over financial reporting for the Company; of management’s
      assessment of the effectiveness of the Company’s internal control over financial
      reporting as of year-end; and of the framework used by management to evaluate
      the effectiveness of the Company’s internal control over financial reporting.
      Furthermore, beginning in fiscal year 2009, it is required to file the auditor’s
      attestation report separately on the Company’s internal control over financial
      reporting on whether it believes that the Company has maintained, in all
      material respects, effective internal control over financial
      reporting.





**Quantitative
      and Qualitative Disclosure About Market Risk**





*Impact
      of Inflation and Changing Prices* .
      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 2006, amounts we accessed each month
      ranged from $21.4 million to $24.8  million
      and we paid cash fees totaling approximately $1.6 million for use of the cash.
      During 2007, the amounts we accessed each month ranged from $18.5  million
      to $22.4 million and we paid a total of approximately $1.4 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 6.73% for our vault cash fees in 2007 compared
      to an
      average interest rate of 7.36% in 2006. Specific to this decrease in interest
      rates, our gross profit increased in 2007 by approximately $126,000.


Page
          41







**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**





None.





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





Not
      applicable.





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





**Evaluation
      of Disclosure Controls and Procedures and Changes in Internal Control over
      Financial Reporting**





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 Securities
      Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2007.
      In designing and evaluating our disclosure controls and procedures, management
      recognized that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable assurance of achieving their objectives
      and management necessarily applied its judgment in evaluating the cost-benefit
      relationship of possible controls and procedures. Based on this evaluation,
      our
      chief executive officer and chief financial officer concluded that, as of
      December 31, 2007, our disclosure controls and procedures were (1) effective
      in
      that they were designed to ensure that material information relating to us
      is
      made known to our chief executive officer and chief financial officer by others
      within the Company, as appropriate to allow timely decisions regarding required
      disclosures, and (2) effective in that they provide that information required
      to
      be disclosed by us in our reports that we file or submit under the Exchange
      Act
      is recorded, processed, summarized and reported within the time periods
      specified in the Securities and Exchange Commission’s rules and
      forms.





**Management’s
      Responsibility for Financial Statements**





Our
      management is responsible for the integrity and objectivity of all information
      presented in this Annual Report on Form 10-KSB. The consolidated financial
      statements were prepared in conformity with accounting principles generally
      accepted in the United States of America and include amounts based on
      management’s best estimates and judgments. Management believes the consolidated
      financial statements fairly reflect the form and substance of transactions
      and
      that the financial statements fairly represent the Company’s financial position
      and results of operations.





The
      Audit
      Committee of the Board of Directors, which is composed solely of independent
      directors, meets regularly with the Company’s independent registered public
      accounting firm and representatives of management to review accounting,
      financial reporting, internal control and audit matters, as well as the nature
      and extent of the audit effort. The Audit Committee is responsible for the
      engagement of the independent registered public accounting firm. The independent
      registered public accounting firm has free access to the Audit
      Committee.




Page
          42




**Management’s
      Report on Internal Control Over Financial Reporting**





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.





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.





This
      annual report does not include an attestation report of the company's registered
      public accounting firm regarding internal control over financial reporting.
      Management's report was not subject to attestation by the company's registered
      public accounting firm pursuant to temporary rules of the SEC that permit the
      company to provide only management's report in this annual report.





**Changes
      in Internal Control Over Financial Reporting**





There
      were no changes during the quarter ended December 31, 2007 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
              8B.**
            **OTHER
                INFORMATION**





None.





PART
      III




**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, 2007 are as follows:





Name
            
            Age
            
            PositionsWalter
                A. Howell
            
            57
            
            DirectorLock
                Ireland
            
            64
            
            Vice
                Chairman, DirectorSharon
                Jackson
            
            50
            
            SecretaryRobert
                Landis
            
            48
            
            DirectorMichael
                J. Loiacono
            
            42
            
            Chief
                Financial Officer, Chief Accounting OfficerJoseph
                M. Loughry, III
            
            62
            
            Chairman,
                DirectorGeorge
                A. McQuain
            
            52
            
            President,
                CEO and DirectorJohn
                C. Rawlins, Jr.
            
            60
            
            Executive
                Vice-President of SalesAlan
                Rossiter
            
            62
            
            DirectorHeather
                Webb
            
            30
            
            Vice
                President of Operations




Page
          43




The
      following is a brief description of each officer and director listed
      above:





Walter
      A. Howell, Director





Mr.
      Howell is currently Senior Vice President of CA, Inc., a leading management
      software company. Previously, he spent 11 years as an executive in technology
      services supporting the banking industry with IBM and American Management
      Systems and 20 years in commercial banking with Riggs Bank NA. Mr. Howell
      originally joined Global Axcess as a Director in September 2007 and his current
      term expires on the date of the next shareholder meeting which has not yet
      been
      scheduled.





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 the date of the next shareholder meeting which has not yet been
      scheduled.





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 the
      date
      of the next shareholder meeting which has not yet been scheduled.




Page
          44




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





Mr.
      Loiacono brings more than 19 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 of 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. In September 2007, Mr.
      Loughry was named President and Chief Executive Officer of Persystent
      Technologies Corporation, a privately-owned Tampa, Florida software company
      which provides enterprise laptop and desktop standard configuration management
      and desired state enforcement capabilities to corporations and government
      agencies. Previously, 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 the date of the next shareholder meeting which has
      not
      yet been scheduled.





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 the date of the next shareholder meeting
      which has not yet been scheduled.





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





Over
      the
      past fifteen 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.




Page
          45




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 the 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 the date of the next shareholder meeting which has not yet been
      scheduled.





Heather
      Webb, Vice President of Operations





Heather
      Webb joined the company in April 2002 as a Software Engineer. Heather gained
      in-depth knowledge of our business processes while developing many of our custom
      in-house software solutions. Heather’s knowledge of the business process led her
      into the roles of Director of ATM Operations followed by Vice President of
      Operations. Heather obtained her BS in Computer Science from North Carolina
      State University.




**The
      Board of Directors has established the following committees:**





*Compensation
      Committee*





The
      Compensation Committee  of
      the
      Board of Directors, which is composed solely of independent directors, consists
      of Lock Ireland, who serves as Chairman of this committee, Robert Landis, and
      Alan Rossiter. The Compensation Committee met six times during fiscal 2007.
      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  of
      the
      Board of Directors, which is composed solely of independent directors, 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 five
      times in fiscal year 2007. 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.





*Mergers
      and Acquisitions Committee*





The
      Mergers and Acquisitions Committee  of
      the
      Board of Directors, which is composed solely of independent directors, consists
      of Lock Ireland, Robert Landis, Alan Rossiter, and Joseph M. Loughry III ,
      who
      serves as Chairman of this committee. The Mergers and Acquisitions Committee
      did
      not meet during fiscal 2007. 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.




Page
          46




*Nominating
      & Corporate Governance Committee*





The
      primary function of the Nominating & Corporate Governance
      Committee  of
      the
      Board of Directors, which is composed solely of independent directors, 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 met one time during fiscal 2007.





In
      2007,
      the Board met twelve times. The Board adopted various resolutions pursuant
      to
      four (4) unanimous written consents in lieu of a meeting adopted during the
      year
      ended December 31, 2007. Four 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 96%
      and
      the other 94% 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 2007, there were five non-employee directors and one employee director.
      The board of directors has determined that the five non-employee directors
      are
“independent” based on the NASDAQ definition of independent director. The Board
      held twelve (12) meetings in person or by telephone. In addition, the Board
      of
      Directors took action by written consent on four (4) occasions. Non-employee
      Directors received cash compensation for their service as Director and as Chair
      of a Board Committee when applicable during fiscal 2007. 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
      2007, a total of 60,000 stock options were granted to non-employee directors
      as
      follows:





Director
            
            Number of OptionsHowell,
                Walter A.
            
            
            20,000Ireland,
                Lock
            
            
            10,000Landis,
                Robert
            
            
            10,000Loughry,
                Joseph
            
            
            10,000Rossiter,
                Alan
            
            
            10,000





*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. The Corporate Governance
      Guidelines document has been posted on the Company’s website at
      www.GlobalAxcess.biz.




Page
          47




*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.





*Whistleblower
      Policy*





The
      Company has adopted a Whistleblower Policy 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 2007, other than as discussed below, 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 2007, failed
      to
      file on a timely basis, reports required by Section 16(a) of the Securities
      Exchange Act of 1934.





During
      fiscal year 2007, there were Form 4s filed late by John C. Rawlins, Jr.
      (reporting one transaction), Michael J. Loiacono (reporting two transactions)
      and George A. McQuain (reporting four transactions).





During
      fiscal year 2007, there were Form 3s filed late by Walter A. Howell and Heather
      Webb.




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





The
      following table summarizes all compensation paid by the Company with respect
      to
      the fiscal years ended December 31, 2007 and 2006 for the Chief Executive
      Officer and all other executive officers whose total cash compensation exceeds
      $100,000 in the fiscal years ended December 31, 2007 and 2006:




Page
          48




**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
                  A. McQuain - President and CEO, COO
              
              
              2007
              
              $
              200,013
              
              $
              5,815
              
              
              -
              
              $
              30,117
              (1)
              
              -
              
              
              -
              
              
              -
              
              $
              235,9452006
              
              $
              168,476
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              168,476
              (2)Michael
                  J. Loiacono - CFO and CAO
              
              
              2007
              
              $
              145,018
              
              $
              3,614
              
              
              -
              
              $
              17,764
              (1)
              
              -
              
              
              -
              
              
              -
              
              $
              166,3962006
              
              $
              93,370
              
              
              -
              
              
              -
              
              $
              431
              (3)
              
              -
              
              
              -
              
              
              -
              
              $
              93,801
              (4)John
                  C. Rawlins, Jr. - Executive VP Sales
              
              
              2007
              
              $
              150,010
              
              
              -
              
              
              -
              
              $
              15,059
              (1)
              
              -
              
              
              -
              
              
              -
              
              $
              165,0692006
              
              $
              17,309
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              17,309Heather
                  Webb - VP Operations
              
              
              2007
              
              $
              104,694
              
              $
              2,285
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              106,9792006
              
              $
              75,254
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              75,254




(1)
              On
                  April 2, 2007, the Board of Directors approved Executive Stock
                  Option
                  grants with respect to 25% of the shares are based on a performance
                  based
                  vesting, 25% are based on a market condition, 12.5% vest on October
                  2,
                  2007, 12.5% vest on April 2, 2008, 12.5% vest on April 2, 2009
                  and 12.5%
                  vest on April 2, 2010.
 (2)
              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.
 (3)
              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.
 (4)
              On
                  May 10, 2006 the Board of Directors appointed Michael J. Loiacono
                  as Chief
                  Financial Officer of the Company effective June 1,
                  2006.




The
      option awards were valued using the Black Scholes option pricing model assuming
      a 5 year life, no expected dividend payments, volatility of 140%, forfeiture
      rate of 0% and a risk free rate of 5%.




Page
          49




**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR END DECEMBER 31, 2007**





**Option Awards**
            
            **Stock Awards****Equity Incentive****Equity**
            
            **Plan Awards:****Equity**
            
            
            
            
            
            
            
            
            
            **Incentive**
            
            **Market or Payout****Incentive**
            
            
            
            
            
            
            
            
            
            **Plan Awards:**
            
            **Value****Plan**
            
            
            
            
            
            
            
            
            
            **Number**
            
            **of****Awards:**
            
            
            
            
            
            
            
            **Market**
            
            **of**
            
            **Unearned****Number**
            
            **Number**
            
            **Number**
            
            
            
            
            
            **Number**
            
            **Value of**
            
            **Unearned**
            
            **Shares,****of**
            
            **of**
            
            **of**
            
            
            
            
            
            **of Shares**
            
            **Shares or**
            
            **Shares,**
            
            **Units or****Securities**
            
            **Securities**
            
            **Securities**
            
            
            
            
            
            **or Units**
            
            **Units of**
            
            **Units or**
            
            **Other****Underlying**
            
            **Underlying**
            
            **Underlying**
            
            
            
            
            
            **of Stock**
            
            **Stock**
            
            **Other Rights**
            
            **Rights****Unexercised**
            
            **Unexercised**
            
            **Unexercised**
            
            **Option**
            
            
            
            **That Have**
            
            **That Have**
            
            **That Have**
            
            **That Have****Options**
            
            **Options**
            
            **Unearned**
            
            **Exercise**
            
            **Option**
            
            **Not**
            
            **Not**
            
            **Not**
            
            **Not****(#)**
            
            **(#)**
            
            **Options**
            
            **Price**
            
            **Expiration**
            
            **Vested**
            
            **Vested**
            
            **Vested**
            
            **Vested****Name**
            
            **Year**
            
            **Exercisable**
            
            **Unexercisable**
            
            **(#)**
            
            **($)**
            
            **Date**
            
            **(#)**
            
            **($)**
            
            **(#)**
            
            **($)**George A. McQuain - President and CEO, COO
            
            
            2007
            
            
            62,500
            
            
            -
            (4)
            
            437,500
            
            $
            0.32
            
            
            (4
            )
            
            -
            
            
            -
            
            
            -
            
            
            -2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -2005
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -2004
            
            
            -
            
            
            28,200
            (1)
            
            -
            
            $
            1.30
            
            
            12/1/2009
            
            
            -
            
            
            -
            
            
            -
            
            
            -2003
            
            
            -
            
            
            54,000
            (2)
            
            -
            
            $
            1.70
            
            
            10/24/2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -Michael J. Loiacono - CFO and CAO
            
            
            2007
            
            
            31,250
            
            
            -
            (5)
            
            218,750
            
            $
            0.32
            
            
            (5
            )
            
            -
            
            
            -
            
            
            -
            
            
            -2006
            
            
            -
            
            
            10,000
            (3)
            
            10,000
            
            $
            0.76
            
            
            3/31/2011
            
            
            -
            
            
            -
            
            
            -
            
            
            -John C. Rawlins, Jr. - Executive VP Sales
            
            
            2007
            
            
            31,250
            
            
            -
            (6)
            
            218,750
            
            $
            0.32
            
            
            (6
            )
            
            -
            
            
            -
            
            
            -
            
            
            -2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Heather Webb - VP Operations
            
            
            2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -2005
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -2004
            
            
            -
            
            
            6,200
            (7)
            
            -
            
            $
            1.30
            
            
            12/1/2009
            
            
            -
            
            
            -
            
            
            -
            
            
            -2003
            
            
            -
            
            
            3,000
            (8)
            
            -
            
            $
            1.70
            
            
            10/24/2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -





(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)
            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.


(4)
            On
                April 2, 2007, George McQuain received a stock option to purchase
                500,000
                shares of common stock, which vest based on employment and performance
                criteria. On October 10, 2007, 62,500 shares of common stock vested
                under
                the stock option and expire on April 2, 2010. The remaining 437,500
                vest
                as follows if employment and performance criteria are met: 62,500
                on April
                2, 2008 and expire on April 2, 2011; 62,500 on April 2, 2009 and
                expire on
                April 2, 2012; 62,500 on April 2, 2010 and expire on April 2, 2013;
                125,000 on May 15, 2008 and expire on April 2, 2011; 125,000 on April
                2,
                2011 and expire on April 2, 2015.


(5)
            On
                April 2, 2007, Michael Loiacono received a stock option to purchase
                250,000 shares of common stock, which vest based on employment and
                performance criteria. On October 10, 2007, 31,250 shares of common
                stock
                vested under the stock option and expire on April 2, 2010. The remaining
                218,750 vest as follows if employment and performance criteria are
                met:
                31,250 on April 2, 2008 and expire on April 2, 2011; 31,250 on April
                2,
                2009 and expire on April 2, 2012; 31,250 on April 2, 2010 and expire
                on
                April 2, 2013; 62,500 on May 15, 2008 and expire on April 2, 2011;
                62,500
                on April 2, 2011 and expire on April 2,
                2015.


(6)
            On
                April 2, 2007, John Rawlins received a stock option to purchase 250,000
                shares of common stock, which vest based on employment and performance
                criteria. On October 10, 2007, 31,250 shares of common stock vested
                under
                the stock option and expire on April 2, 2010. The remaining 218,750
                vest
                as follows if employment and performance criteria are met: 31,250
                on April
                2, 2008 and expire on April 2, 2011; 31,250 on April 2, 2009 and
                expire on
                April 2, 2012; 31,250 on April 2, 2010 and expire on April 2, 2013;
                62,500
                on May 15, 2008 and expire on April 2, 2011; 62,500 on April 2, 2011
                and
                expire on April 2, 2015.


(7)
            Option
                is exercisable during the term of Heather Webb'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 12/1/04 (the "Initial
                Vesting Date"), with an additional twenty-five percent (25%) of such
                Shares becoming exercisable on each of these dates following the
                Initial
                Vesting Date: February 20, 2005, July 20, 2005, and December 15,
                2005. 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.


(8)
            Option
                is exercisable during the term of Heather Webb'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 10/24/2003 (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).




Page
          50




**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, 2007.


**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 ($)**Walter
                  A. Howell
              
              
              2007
              
              $
              2,000
              
              
              -
              
              $
              2,577
              (10)
              $
              0.29
              
              
              8/30/2012
              
              
              -
              
              
              -
              
              
              -
              
              $
              4,577Lock
                  Ireland
              
              
              2007
              
              $
              33,600
              
              
              -
              
              $
              6,109
              (1)
              $
              0.28
              
              
              7/10/2012
              
              
              -
              
              
              -
              
              
              -
              
              $
              39,7092006
              
              $
              15,150
              
              
              -
              
              $
              301
              (2)
              $
              0.53
              
              
              7/10/2011
              
              
              -
              
              
              -
              
              
              -
              
              $
              15,4512005
              
              
              -
              
              
              -
              
              $
              847
              (3)
              $
              1.45
              
              
              7/10/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              8472005
              
              
              -
              
              
              -
              
              
              -
              (4)
              $
              1.40
              
              
              4/8/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              02004
              
              
              -
              
              
              -
              
              $
              709
              (5)
              $
              2.50
              
              
              7/11/2009
              
              
              -
              
              
              -
              
              
              -
              
              $
              7092003
              
              
              -
              
              
              -
              
              $
              624
              (6)
              $
              1.10
              
              
              7/10/2008
              
              
              -
              
              
              -
              
              
              -
              
              $
              624Robert
                  Landis
              
              
              2007
              
              $
              12,000
              
              
              -
              
              $
              6,109
              (1)
              $
              0.28
              
              
              7/10/2012
              
              
              -
              
              
              -
              
              
              -
              
              $
              18,1092006
              
              $
              12,000
              
              
              -
              
              $
              301
              (2)
              $
              0.53
              
              
              7/10/2011
              
              
              -
              
              
              -
              
              
              -
              
              $
              12,3012005
              
              
              -
              
              
              -
              
              $
              847
              (3)
              $
              1.45
              
              
              7/10/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              8472004
              
              
              -
              
              
              -
              
              $
              709
              (5)
              $
              2.50
              
              
              7/10/2009
              
              
              -
              
              
              -
              
              
              -
              
              $
              7092003
              
              
              -
              
              
              -
              
              $
              624
              (6)
              $
              1.10
              
              
              7/10/2008
              
              
              -
              
              
              -
              
              
              -
              
              $
              624Joseph
                  Loughry, III
              
              
              2007
              
              $
              48,000
              
              
              -
              
              $
              3,728
              (7)
              $
              0.25
              
              
              12/16/2012
              
              
              -
              
              
              -
              
              
              -
              
              $
              51,7282006
              
              $
              16,500
              
              
              -
              
              
              -
              (8)
              $
              0.35
              
              
              12/16/2011
              
              
              -
              
              
              -
              
              $
              10,000
              
              $
              26,5002005
              
              
              -
              
              
              -
              
              $
              1,873
              (9)
              $
              1.10
              
              
              12/16/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              1,873George
                  A. McQuain
              
              
              2007
              
              
              -
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -2006
              
              
              -
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -Alan
                  Rossiter
              
              
              2007
              
              $
              6,000
              
              
              -
              
              $
              3,728
              (7)
              $
              0.25
              
              
              12/16/2012
              
              
              -
              
              
              -
              
              
              -
              
              $
              9,7282006
              
              $
              6,000
              
              
              -
              
              
              -
              (8)
              $
              0.35
              
              
              12/16/2011
              
              
              -
              
              
              -
              
              
              -
              
              $
              6,0002005
              
              
              -
              
              
              -
              
              $
              1,873
              (9)
              $
              1.10
              
              
              12/16/2010
              
              
              -
              
              
              -
              
              
              -
              
              $
              1,873
  (1)
              2,500
                  shares vest under this option on July 10, 2007, November 10, 2007,
                  March
                  10, 2008 and July 10, 2008.
 (2)
              2,500
                  shares vest under this option on July 10, 2006, November 10, 2006,
                  March
                  10, 2007 and July 10, 2007.
 (3)
              2,500
                  shares vest under this option on July 10, 2005, November 10, 2005,
                  March
                  10, 2006 and July 10, 2006.
 (4)
              12,500
                  shares vest under this option on April 8, 2005, July 8, 2005, October
                  8,
                  2005 and December 15, 2005.
 (5)
              2,500
                  shares vest under this option on July 10, 2004, November 10, 2004,
                  March
                  10, 2005 and July 10, 2005.
 (6)
              12,500
                  shares vest under this option on July 10, 2003, November 10, 2003,
                  March
                  10, 2004 and July 10, 2004.
 (7)
              2,500
                  shares vest under this option on December 16, 2007, April 16, 2008,
                  August
                  16, 2008 and December 16, 2008.
 (8)
              2,500
                  shares vest under this option on December 16, 2006, April 16, 2007,
                  August
                  16, 2007 and December 16, 2007.
 (9)
              12,500
                  shares vest under this option on December 16, 2005, April 16, 2006,
                  August
                  16, 2006 and December 16, 2006.
 (10)
              5,000
                  shares vest under this option on August 30, 2007, December 30,
                  2007, April
                  30, 2008 and August 30, 2008.





The
      following list sets forth with respect to the named director, the aggregate
      number of options outstanding at year end December 31, 2007:




Name
            
            OptionsWalter
                A. Howell
            
            
            10,000Lock
                Ireland
            
            
            105,000Robert
                Landis
            
            
            55,000Joseph
                Loughry, III
            
            
            32,500George
                A. McQuain
            
            
            144,700Alan
                Rossiter
            
            
            32,500




Page
          51




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 0% and a risk free rate of 5%.





*Executive
      Stock Option Grants*





Effective
      April 2, 2007, the Board of Directors of the Company granted 1,000,000 incentive
      stock options to executive management of the Company. 25% of the stock options
      under this grant are performance based vesting upon achievement of aggressive
      financial goals (unrelated to targeted net income). As of December 31, 2007,
      management does not believe vesting is probable, and accordingly in accordance
      with Statement of Financial Accounting Standards No. 123 (Revised 2004),
      "Share-Based Payment," (SFAS 123 (R)), compensation costs have not been accrued
      for these options as of December 31, 2007.





In
      addition, 25% of the stock options under the above grant are based on a market
      condition, exercisable upon achievement of an aggressive Company stock price.
      In
      accordance with SFAS 123(R), the effect of the market condition has been
      reflected in the market value, and the related compensation cost, of these
      options.




*Performance
      Based Incentive Bonus Plan*





Effective
      fiscal 2007, the Company implemented a performance based incentive program
      for
      several employees and management of the Company. A quarterly cash bonus pool
      is
      funded by the Company’s achievement of operating profits from continuing
      operations. During the fiscal period ended December 31, 2007 the Company
      recorded $15,793 of expenses relating to this plan.





*Employment
      Agreements*





There
      were no employment agreements as of December 31, 2007.




**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 February 13, 2008:





·
            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.





Page
          52


**Name**
              
              **Number**
              
              **Percent
                  (1)**Walter
                  A. Howell
              
              
              10,000
              
              
              0.05
              %
                  (2)Lock
                  Ireland
              
              
              310,007
              
              
              1.48
              %
                  (3)Sharon
                  Jackson
              
              
              32,600
              
              
              0.16
              %
                  (4)Robert
                  Landis
              
              
              95,000
              
              
              0.45
              %
                  (5)Michael
                  Loiacono
              
              
              61,250
              
              
              0.29
              %
                  (6)Joseph
                  M. Loughry, III
              
              
              153,640
              
              
              0.73
              %
                  (7)George
                  A. McQuain
              
              
              164,700
              
              
              0.79
              %
                  (8)John
                  C. Rawlins, Jr.
              
              
              41,250
              
              
              0.20
              %
                  (9)Alan
                  Rossiter
              
              
              35,000
              
              
              0.17
              %
                  (10)Heather
                  Webb
              
              
              11,422
              
              
              0.05
              %
                  (11)All
                  executive officers and directors as a group (10 persons)
              
              
              914,869
              
              
              4.36
              %Other
                  5% owners:BFS
                  U.S. Special Opportunities Trust PLC
              
              
              2,920,000
              
              
              13.92
              %
                  (12)Rennaissance
                  U.S. Growth Investment Trust PLC
              
              
              2,860,000
              
              
              13.64
              %
                  (13)Barron
                  Partners, LP
              
              
              2,400,000
              
              
              11.44
              %
                  (14)Rennaissance
                  Capital Growth & Income Fund III, Inc.
              
              
              2,020,000
              
              
              9.63
              %
                  (15)Doucet
                  Capital, LLC
              
              
              1,905,489
              
              
              9.09
              %
                  (16)Total
              
              
              13,020,358
              
              
              62.08
              %


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,
        2008
        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 20,973,924 shares of common stock outstanding as of February 13,
                2008.





(2)
            Included
                are 10,000 stock purchase options exercisable at $0.29 per
                share.





(3)
            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, 10,000
                stock
                purchase options exercisable at $0.53 per share, 5,000 stock purchase
                options exercisable at $0.28 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.





(4)
            Included
                are 14,200 common shares, 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 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,
                10,000 stock purchase options exercisable at $0.53 per share and
                5,000
                stock purchase options exercisable at $0.28 per
                share.




Page
          53




(6)
            Included
                are 20,000 common shares, 10,000 stock purchase options exercisable
                at
                $0.76 per share and 31,250 stock purchase options exercisable at
                $0.32 per
                share.





(7)
            Included
                are 121,140 common shares, 20,000 stock purchase options exercisable
                at
                $1.10 per share, 10,000 stock purchase options exercisable at $0.35
                per
                share and 2,500 stock purchase options exercisable at $0.25 per
                share.





(8)
            Included
                are 20,000 common shares, 28,200 stock purchase options exercisable
                at
                $1.30 per share, 54,000 stock purchase options exercisable at $1.70
                per
                share and 62,500 stock purchase options exercisable at $0.32 per
                share.





(9)
            Included
                are 10,000 common shares, 31,250 stock purchase options exercisable
                at
                $0.32 per share.





(10)
            Included
                are 2,500 common shares, 20,000 stock purchase options exercisable
                at
                $1.10 per share, 10,000 stock purchase options exercisable at $0.35
                per
                share and 2,500 stock purchase options exercisable at $0.25 per
                share.





(11)
            Included
                are 2,222 common shares, 6,200 stock purchase options exercisable
                at $1.30
                per share and 3,000 stock purchase options exercisable at $1.70 per
                share.





(12)
            Included
                are 1,553,332 common shares and 1,366,668 stock purchase warrants
                exercisable at prices ranging from $1.25 to $5.00. The principal
                business
                address of BFS U.S. Special Opportunities Trust PLC is 8080 North
                Central
                Expressway, Suite 210-LB 59, Dallas, TX
                75206-1857.





(13)
            Included
                are 1,553,332 common shares and 1,306,668 stock purchase warrants
                exercisable at prices ranging from $1.75 to $5.00. The principal
                business
                address of Rennaissance U.S. Growth Investment Trust PLC is 8080
                North
                Central Expressway, Suite 210-LB 59, Dallas, TX
                75206-1857.





(14)
            Included
                are 2,400,000 stock purchase warrants exercisable at prices ranging
                from
                $1.75 to $5.00. The principal business address of Barron Partners,
                LP is
                730 Fifth Avenue, 25thfloor, New York, NY 10019.





(15)
            Included
                are 953,332 common shares and 1,066,668 stock purchase warrants
                exercisable at prices ranging from $1.75 to $5.00. The principal
                business
                address of Rennaissance Capital Growth & Income Fund III, Inc. is 8080
                North Central Expressway, Suite 210-LB 59, Dallas, TX
                75206-1857.





(16)
            Included
                are 1,905,489 common shares. The principal business address of Doucet
                Capital, LLC is 2204 Lakeshore Drive, Suite 218, Birmingham, Alabama
                35209.




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





None.




Page
          54




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





(a)
            INDEX
                TO EXHIBITS





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
                10-KSB 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).4.14
            
            Consolidated
                Renewal Promissory Note dated September 28, 2007 issued by the Company
                to
                Wachovia (incorporated by reference to Form 8-K filed October 1,
                2007).4.15
            
            Fourth
                Amended and Restated Loan Agreement entered by and between the Company
                and
                Wachovia (incorporated by reference to Form 8-K filed October 1,
                2007).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).




Page
          55




10.4
            
            Cash
                Provisioning Agreement, dated November 24, 2006, by and between Genpass
                Technologies, LLC and Nationwide Money Services, Inc. (incorporated
                by
                reference to Form 8-K filed February 1, 2007).10.5
            
            Office
                Lease with Surburban Owner LLC (incorporated by reference to Form
                8-K
                filed March 27, 2007).10.6
            
            Net
                Enterprise Value Special Transaction Plan (incorporated by reference
                to
                Form 8-K filed June 14, 2007).10.7
            
            Shareholder
                Agreement with Industrial Electronic Investments Limited for sale
                of Cash
                Axcess Corporations (Proprietary) Limited.10.8
            
            Separation
                Agreement and Release by and between the Company and Michael Dodak
                (incorporated by reference to Form 8-K filed October 11,
                2006).10.9
            
            Separation
                Agreement and Release by and between the Company and David Fann
                (incorporated by reference to Form 8-K filed October 11,
                2006).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.





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





*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, 2007 and for the reviews
      of
      the consolidated financial statements included in the Company's Quarterly
      Reports on Form 10-QSB during the fiscal year 2007 were $38,680. 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, 2007 were $66,520. 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, 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 ended December 31,
      2006
      were $163,221.




Page
          56




*Audit
      Related Fees* .
      The
      Company did not engage KRMT to provide professional services to the Company
      regarding audit related fees during the fiscal year ended December 31, 2007.
      The
      aggregate fees billed by KRMT and Weinberg & Company, P.A., the Company’s
      previous Independent Registered Public Accounting Firm, for professional
      services rendered to the Company regarding audit related fees during the fiscal
      year ended December 31, 2006 were $11,200.





*Tax
      Related Fees* .
      During
      the fiscal years ended December 31, 2007 and 2006, there were no fees billed
      by
      KRMT for tax related services.





*All
      Other Fees* .
      During
      the fiscal year ended December 31, 2007, there were $5,542 of fees billed by
      KRMT for work related to Sarbanes-Oxley and for review of the Company’s SB-2
      filing. 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.




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





The
      Audit
      Committee’s policy is to pre-approve all audit and permissible non-audit
      services provided by the independent registered public accounting firm. These
      services may include audit services, audit-related services, tax services and
      other services. Pre-approval is generally provided for up to one year and any
      pre-approval is detailed as to the particular service or category of services
      and is generally subject to a specific budget. The independent auditor and
      management are required to report periodically to the Audit Committee regarding
      the extent of services provided by the independent auditor in accordance with
      this pre-approval, and the fees for the services performed to date. The Audit
      Committee may also pre-approve particular services on a case-by-case basis.
      The
      audit committee approved all fees incurred by the Company from KRMT in 2007
      and
      2006.




Page
          57




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 4th day of March, 2008.





Signature
            
            Title/S/
                Walter A. HowellWalter
                A. Howell
            
            Director/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 LoughryJoseph
                Loughry
            
            Chairman,
                Director/s/George
                A. McQuainGeorge
                A. McQuain
            
            President,
                CEO and Director/S/
                Alan RossiterAlan
                Rossiter
            
            Director





Page
          58


GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      FINANCIAL STATEMENTS





TABLE
      OF
      CONTENTS





PAGE
                NO.Report
                of Independent Registered Public Accounting Firm
            1Consolidated
                financial statementsConsolidated
                balance sheet as of December 31, 2007
            2Consolidated
                statements of income for the years endedDecember
                31, 2007 and 2006
            3Consolidated
                statements of stockholders’ equityfor
                the years ended December 31, 2007 and 2006
            4Consolidated
                statements of cash flows for the years endedDecember
                31, 2007 and 2006
            5Notes
                to consolidated financial statementsas
                of December 31, 2007
            7




Page
          59




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, 2007 and the related consolidated statements
      of
      income, stockholders’ equity and cash flows for the years ended December 31,
      2007 and 2006. 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, 2007 and the results of its operations
      and its cash flows for the years ended December 31, 2007 and 2006 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
      5,
      2008


1




GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEET


DECEMBER
      31, 2007


ASSETSCurrent
                  assetsCash
                  and cash equivalents
              
              $
              540,161Accounts
                  receivable, net of allowance for doubtful accounts of $23,797
              
              
              924,629Inventory
              
              
              235,597Prepaid
                  expenses and other current assets
              
              
              141,348Total
                  current assets
              
              
              1,841,735Fixed
                  assets, net
              
              
              5,580,882Other
                  assetsMerchant
                  contracts, net
              
              
              12,057,638Intangible
                  assets, net
              
              
              4,165,491Deferred
                  tax asset - non-current
              
              
              339,800Other
                  assets
              
              
              15,139Total
                  assets
              
              $
              24,000,685LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilitiesAccounts
                  payable and accrued liabilities
              
              $
              3,361,635Notes
                  payable - related parties - current portion, net
              
              
              20,695Note
                  payable
              
              
              25,000Senior
                  lenders' notes payable -current portion, net
              
              
              600,000Capital
                  lease obligations - current portion
              
              
              961,046Total
                  current liabilities
              
              
              4,968,376Long-term
                  liabilitiesNotes
                  payable - related parties - long-term portion, net
              
              
              1,317,180Senior
                  lenders' notes payable -long-term portion, net
              
              
              4,757,377Capital
                  lease obligations - long-term portion
              
              
              823,489Total
                  liabilities
              
              
              11,866,422Stockholders'
                  equityPreferred
                  stock; $0.001 par value; 5,000,000 shares authorized, no shares
                  issued and
                  outstanding
              
              
              -Common
                  stock; $0.001 par value; 45,000,000 shares authorized, 21,021,786
                  shares
                  issued, 20,973,924 outstanding
              
              
              21,022Additional
                  paid-in capital
              
              
              22,453,584Accumulated
                  deficit
              
              
              (10,328,377
              )Treasury
                  stock; 47,862 shares of common stock at cost
              
              
              (11,966
              )Total
                  stockholders' equity
              
              
              12,134,263Total
                  liabilities and stockholders' equity
              
              $
              24,000,685




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


2




GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF INCOME





For the year ended
            
            For the year endedDecember 31, 2007
            
            December 31, 2006Revenues
            
            $
            21,750,897
            
            $
            21,437,125Cost
                of revenues
            
            
            12,705,636
            
            
            12,405,270Gross
                profit
            
            
            9,045,261
            
            
            9,031,855Operating
              expensesDepreciation
                and amortization
            
            
            2,262,551
            
            
            2,359,455Impairment
                of long-lived assets
            
            
            -
            
            
            1,329,396Selling,
                general and administrative
            
            
            5,279,101
            
            
            6,839,003Restructuring
                charges
            
            
            -
            
            
            757,811Impairment
                of notes receivable
            
            
            5,743
            
            
            817,607Recovery
                of bad debts
            
            
            (100,000
            )
            
            -Stock
                compensation expense
            
            
            87,181
            
            
            (11,698
            )Other
                expense
            
            
            -
            
            
            450,000Total
                operating expenses
            
            
            7,534,576
            
            
            12,541,574Operating
                income (loss) from continuing operations before items shown below
            
            
            1,510,685
            
            
            (3,509,719
            )Interest
                expense, net
            
            
            (1,232,661
            )
            
            (1,356,407
            )Gain
                (loss) on sale or disposal of assets
            
            
            (22,517
            )
            
            21,672Other
                non-operating income
            
            
            -
            
            
            146,703Loss
                attributed to minority interest
            
            
            -
            
            
            109,351Income
                (loss) from continuing operations
            
            $
            255,507
            
            $
            (4,588,400
            )Income
                (loss) from discontinued operations, net of tax
            
            $
            175,000
            
            $
            (275,937
            )Net
                Income (loss)
            
            $
            430,507
            
            $
            (4,864,337
            )Income
                (loss) per common share - basic:Income
                (loss) from continuing operations
            
            $
            0.01
            
            $
            (0.22
            )Income
                (loss) from discontinued operations
            
            $
            0.01
            
            $
            (0.01
            )Net
                Income (loss) per common share
            
            $
            0.02
            
            $
            (0.23
            )Income
                (loss) per common share - diluted:Income
                (loss) from continuing operations
            
            $
            0.01
            
            $
            (0.22
            )Income
                (loss) from discontinued operations
            
            $
            0.01
            
            $
            (0.01
            )Net
                Income (loss) per common share
            
            $
            0.02
            
            $
            (0.23
            )Weighted
                average common shares outstanding:Basic
            
            
            20,988,348
            
            
            20,996,013Diluted
            
            
            20,988,348
            
            
            20,996,013




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


3


GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY


FOR
      THE
      YEARS ENDED DECEMBER 31, 2007 AND 2006





Additional
            
            
            
            
            
            TotalCommon Stock
            
            Paid-in
            
            Accumulated
            
            Treasury
            
            Stockholders'Shares
            
            Amount
            
            Capital
            
            Deficit
            
            Stock
            
            EquityBalances,
                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
            )
            $
            -
            
            $
            11,628,541Settlement
                of note receivable through receipt of treasury stock (47,862 shares)
            
            
            (47,862
            )
            
            -
            
            
            -
            
            
            -
            
            
            (11,966
            )
            
            (11,966
            )Stock
                compensation expense
            
            
            -
            
            
            -
            
            
            87,181
            
            
            -
            
            
            -
            
            
            87,181Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            430,507
            
            
            -
            
            
            430,507Balances,
              December 31, 2007
            
            
            20,973,924
            
            $
            21,022
            
            $
            22,453,584
            
            $
            (10,328,377
            )
            $
            (11,966
            )
            $
            12,134,263




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


4


GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


For the Year ended December 312007
              
              2006Cash
                  flows from operating activities:Income
                  (loss) from continuing operations
              
              $
              255,507
              
              $
              (4,588,400
              )Adjustments
                  to reconcile net income (loss) from continuing operationsto net cash
                  provided by continuing operating activities:Stock
                  based compensation
              
              
              87,181
              
              
              (2,894
              )Depreciation
                  and amortization
              
              
              2,262,551
              
              
              2,359,455Amortization
                  of capitalized loan fees
              
              
              66,975
              
              
              73,786Impairment
                  of long-lived assets
              
              
              -
              
              
              1,329,396Allowance
                  for doubtful accounts
              
              
              (36,240
              )
              
              162,489Non-cash
                  interest expense on swap agreement with senior lender
              
              
              48,551
              
              
              3,705Accretion
                  of discount on notes payable
              
              
              165,987
              
              
              168,182Impairment
                  of notes receivable
              
              
              5,743
              
              
              817,607Loss
                  on sale or disposal of assets
              
              
              22,517
              
              
              -Changes
                  in operating assets and liabilities:Change
                  in automated teller machine vault cash
              
              
              26,220
              
              
              436,187Change
                  in accounts receivable
              
              
              300,491
              
              
              73,164Change
                  in other receivable
              
              
              15
              
              
              (15
              )Change
                  in inventory
              
              
              164,881
              
              
              (383,578
              )Change
                  in prepaid expenses and other current assets
              
              
              93,969
              
              
              59,868Change
                  in other assets and deferred revenue
              
              
              (383
              )
              
              (50,048
              )Change
                  in intangible assets, net
              
              
              (10,635
              )
              
              (11,450
              )Change
                  in accounts payable and accrued liabilities
              
              
              (878,002
              )
              
              1,537,741Change
                  in automated teller machine vault cash payable
              
              
              (26,220
              )
              
              (436,187
              )Net
                  cash provided by continuing operating activitities
              
              
              2,549,108
              
              
              1,549,008Discontinued
                  operationsNet
                  income (loss)
              
              
              175,000
              
              
              (275,937
              )Gain
                  on sale of subsidiary
              
              
              -
              
              
              (71,507
              )Adjustments
                  to reconcile net income (loss) to net cash used indiscontinued
                  operations:Change
                  in deferred gain on sale of subsidiary
              
              
              (175,000
              )
              
              -Depreciation
              
              
              -
              
              
              62,162Loss
                  attributed to minority interest
              
              
              
              
              
              (109,351
              )Change
                  in accounts receivable
              
              
              -
              
              
              (38,822
              )Change
                  in accounts payable and accrued liabilities
              
              
              -
              
              
              35,105Change
                  in inventory, prepaid expenses and other current assets
              
              
              -
              
              
              (20,358
              )Net
                  cash used in discontinued operating activities
              
              
              -
              
              
              (418,708
              )Net
                  cash provided by continuing and discontinued operating
                  activities
              
              
              2,549,108
              
              
              1,130,300Cash
                  flows from investing activities:Proceeds
                  from sale of subsidiary
              
              
              -
              
              
              951,223Proceeds
                  from other receivable related to sale of subsidiary
              
              
              175,000
              
              
              -Insurance
                  proceeds on disposal of fixed assets
              
              
              47,180
              
              
              -Costs
                  of acquiring merchant contracts
              
              
              (273,628
              )
              
              (134,663
              )Purchase
                  of property and equipment
              
              
              (869,935
              )
              
              (826,447
              )Proceeds
                  from merchant contract escrow reimbursement
              
              
              -
              
              
              265,160Net
                  cash provided by (used in) investing activities for continuing
                  operations
              
              
              (921,383
              )
              
              255,273Net
                  cash used in investing activities for discontinued
                  operations
              
              
              -
              
              
              (86,756
              )Net
                  cash provided by (used in) investing activities
              
              
              (921,383
              )
              
              168,517Cash
                  flows from financing activities:Proceeds
                  from issuance of common stock
              
              
              -
              
              
              23,950Proceeds
                  from senior lenders' notes payable
              
              
              100,000
              
              
              500,000Principal
                  payments on senior lenders' notes payable
              
              
              (658,333
              )
              
              (2,070,832
              )Principal
                  payments on notes payable
              
              
              (25,000
              )
              
              (98,756
              )Principal
                  payments on notes payable - related parties
              
              
              (18,472
              )
              
              (16,486
              )Principal
                  payments on capital lease obligations
              
              
              (1,239,603
              )
              
              (1,142,890
              )Net
                  cash used in financing activities
              
              
              (1,841,408
              )
              
              (2,805,014
              )Effect
                  of exchange rate fluctuation on cash in discontinued
                  operations
              
              
              -
              
              
              (98,078
              )Decrease
                  in cash
              
              
              (213,683
              )
              
              (1,604,275
              )Cash,
                  beginning of period
              
              
              753,844
              
              
              2,358,119Cash,
                  end of the period
              
              $
              540,161
              
              $
              753,844Cash
                  paid for interest
              
              $
              931,357
              
              $
              1,134,406




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





5




GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS




For the Year ended December 312007
            
            2006SUPPLEMENTAL
                CASH FLOW INFORMATIONThe
                significant non-cash investing and financing activities of the Company
                were as follows:Investing
                activities:Purchase
                of assets under capital lease obligations
            
            $
            110,505
            
            $
            1,176,216Sale
                of subsidiary, see schedule below:
            
            
            -
            
            
            1,445,341Total
                non-cash investing activities
            
            $
            110,505
            
            $
            2,621,557Financing
                activitiesStock
                issued for compensation
            
            $
            87,181
            
            $
            (2,894
            )Modification
                of debt and warrant repricing
            
            
            -
            
            
            8,803Discount
                of notes payable
            
            
            165,987
            
            
            168,182Total
                non-cash financing activities
            
            $
            253,168
            
            $
            174,091Settlement
                of note receivable through issuance of treasury stock:Note
                receivable
            
            $
            (17,709
            )
            $
            -Impairment
                of notes receivable
            
            
            5,743
            
            
            -Repurchase
                of treasury stock, 47,862 shares of common stock at cost
            
            $
            (11,966
            )
            $
            -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




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


6


GLOBAL
      AXCESS CORP AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


AS
      OF
      DECEMBER 31, 2007





**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 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, 2007.





**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., and Cash Axcess Corporation (Proprietary)
      Limited. See Financial Footnote #4 “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 2006 consolidated statement of income
      to conform to 2007 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, 2007, the Company has approximately 4,335 active ATMs, of which
      approximately 612 machines are contracted through a single merchant. Revenues
      from this merchant were approximately 21.4% and 23.1% of total fees from
      continuing operations for the fiscal year ended December 31, 2007 and 2006,
      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, 2007, the Company's inventory totaled $235,597.


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, 2007, the Company reserved $23,797 as an allowance for doubtful
      accounts against the accounts receivable of $948,426.





**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 $237,639
      and $323,735 for the years ended December 31, 2007 and 2006, 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.


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, 2007 and 2006, the Company
      recorded impairment charges of long-lived assets of approximately $0 and $1.3
      million, respectively.





**Fair
      value of financial instruments** - The
      carrying amounts of the Company’s long-term liabilities approximate the
      estimated fair values at December 31, 2007, 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.





**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 or when the exercise price
      of the potentially dilutive securities is less than the market value of the
      Company’s stock.





**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.





**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, 2007 and
      2006, the amount of research and development costs, which were borne entirely
      by
      the Company, amounted to $0 and $275,937, respectively.


9





**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.





**Performance
      Based 401k Contribution Plan** –
      Effective fiscal 2007, the Company implemented a performance based incentive
      program matching 401k contributions. For each quarter the Company achieves
      its
      Net Income budget, the Company will match up to 50% of the first 6% of an
      employee’s 401k contributions during that respective quarter. During the fiscal
      year ended December 31, 2007 the Company recorded $7,917 of expenses relating
      to
      this plan.





**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. The stock based compensation expense is included
      in
      operating expenses in the consolidated statements of income.





**Off
      Balance Sheet Arrangements** –
      We have no off balance sheet arrangements, obligations under any guarantee
      contracts or contingent obligations.





**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. The Company adopted FIN 48 as of the beginning of its 2007 fiscal
      year. Under FIN 48, the Company first assesses whether it is more likely than
      not that an individual tax position will be sustained upon examination based
      on
      its technical merits. If the tax position is more than likely not to be
      sustained, under the presumption the taxing authority has all relevant
      information, it is recognized. The recognized tax position is measured as the
      largest benefit that is greater than 50 percent likely of being realized upon
      ultimate settlement. Previously recognized tax positions that no longer meet
      the
      more likely than not recognition threshold are derecognized in the period in
      which that threshold is no longer met. Accordingly the unit of account under
      this standard is the individual tax position and not a higher level such as
      the
      aggregate of the various positions that are encompassed by the total tax return
      filing. As a result of the implementation of FIN 48, the Company did not
      recognize a change in its tax liabilities or assets for the 2007 fiscal
      year.





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.





In
      June
      2003, the United States Securities and Exchange Commission (“SEC”) adopted final
      rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as
      amended by SEC Release No. 33-8760 on December 15, 2006. Commencing with the
      Company’s Annual Report for the year ending December 31, 2007, the Company is
      required to include a report of management on the Company’s internal control
      over financial reporting. The internal control report must include a statement
      of management’s responsibility for establishing and maintaining adequate
      internal control over financial reporting for the Company; of management’s
      assessment of the effectiveness of the Company’s internal control over financial
      reporting as of year-end; and of the framework used by management to evaluate
      the effectiveness of the Company’s internal control over financial reporting.
      Furthermore, beginning in fiscal year 2009, it is required to file the auditor’s
      attestation report separately on the Company’s internal control over financial
      reporting on whether it believes that the Company has maintained, in all
      material respects, effective internal control over financial
      reporting.


10




**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 #13 “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.





**4.**
            **DISCONTINUED
                OPERATIONS**





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 was paid
      to
      the Company. The Company recognized the $175,000 deferred gain on sale upon
      receipt of the escrowed amounts and the $175,000 is reflected in the Company’s
      fiscal 2007 financial statements. 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 was 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





11


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




For the year endedDecember 31, 2006Revenues
            
            $
            138,138Cost
                of revenues
            
            
            66,442Gross
                Profit
            
            
            71,696Operating
                ExpensesDepreciation
                and amortization
            
            
            62,162Selling,
                general and administrative
            
            
            356,978Total
                operating expenses
            
            
            419,140Loss
                from operations
            
            
            (347,444
            )Gain
                on sale of assets
            
            
            71,507Net
                loss
            
            $
            (275,937
            )




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
            
            $
            71,507700,000




12




**5.**
            **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 #4 “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. As of December 31, 2007 the amount of restructuring charges
      accrued was $141,313.


13




**6.**
            **INVENTORY**





Inventory
      consists of the following as of December 31, 2007:





Parts
                and supplies
            
            $
            34,661Automated
                teller machines
            
            
            113,200Triple
                DES Upgrades
            
            
            87,737Inventory
            
            $
            235,597




**7.**
            **FIXED
                ASSETS**





Fixed
      assets consist of the following as of December 31, 2007:




Automated
                teller machines (A)
            
            $
            8,725,288Furniture
                and fixtures
            
            
            443,109Computers,
                equipment and software (A)
            
            
            2,022,375Automobiles
            
            
            275,679Leasehold
                improvements
            
            
            72,53311,538,984Less:
                accumulated depreciation and amortization (B)
            
            
            5,958,101Fixed
                assets, net
            
            $
            5,580,882





(A)
            See
                Financial Footnote #14 “Capital Lease Obligations” for ATMs and computers
                held under capital leases.


(B)
            Depreciation
                expense from continuing operations for the years ended December 31,
                2007
                and 2006 was: $1,536,617 and $1,653,862,
                respectively.




**8.**
            **INTANGIBLE****ASSETS AND MERCHANT
                CONTRACTS**





The
      following table summarizes Intangible assets and merchant contracts at December
      31, 2007:





AccumulatedGross Carrying Value
            
            Amortization
            
            NetGoodwill
            
            $
            4,189,645
            
            $
            168,286
            
            $
            4,021,359Other
                Intangible Assets
            
            $
            338,727
            
            $
            194,595
            
            $
            144,132Merchant
                contracts
            
            $
            14,656,831
            
            $
            2,599,193
            
            $
            12,057,638Total
                Intangible assets and merchant contracts
            
            $
            19,185,203
            
            $
            2,962,074
            
            $
            16,223,129




The
      Company recorded amortization expense of $725,934 and $705,593, for the years
      ended December 31, 2007 and 2006, 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:




2008
            
            $
            765,5212009
            
            $
            765,5212010
            
            $
            765,5212011
            
            $
            743,1012012
            
            $
            678,929





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


14





**9.**
            **NOTES
                RECEIVABLE**





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. 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 failed to make any payment , therefore the Company determined
      that it was unlikely that the purchaser would repay the note and 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. On June 29, 2007,
      the
      Company settled all claims against EPS in exchange for a payment of $100,000.
      Additionally, in the event EPT is sold or merged into another entity within
      3
      years from the date of the settlement, the Company is entitled to receive an
      additional $200,000 payment. During the fiscal period ended December 31, 2007,
      the Company recorded the $100,000 settlement as a recovery of bad debts. The
      $100,000 payment was received on July 6, 2007.





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 was amended to extend the term
      to
      February 2007. The amount remaining on the note as of March 31, 2007 was
      $99,895. The promissory note was collateralized by the Company’s stock and
      during the fiscal year ended December 31, 2006, the Company increased the
      reserve due to the declining stock price of the Company. The 47,862 shares
      of
      Company stock held as collateral on this note were returned to the Company
      on
      April 20, 2007 as settlement of this note. The Company recorded the $11,966
      market value of the returned 47,862 shares of stock as Treasury stock. The
      settlement of this note resulted in an impairment of notes receivable charge
      of
      $5,743 recorded during the fiscal year ended December 31, 2007.




**10.**
            **ACCOUNTS
                PAYABLE AND ACCRUED
                LIABILITIES**





Accounts
      payable and accrued liabilities at December 31, 2007 are as
      follows:




Accounts
                payable
            
            $
            901,894Accrued
                commissions/residual payments
            
            
            1,157,608Accrued
                cost of cash and cash replenishment expenses
            
            
            431,302Accrued
                payroll
            
            
            303,545Accrued
                severance
            
            
            141,313Accrued
                audit fees
            
            
            89,269Accrued
                interest
            
            
            56,852Accrued
                legal fees
            
            
            15,000Other
            
            
            264,853Accounts
                payable and accrued liabilities
            
            $
            3,361,635




**11.**
            **NOTES
                PAYABLE – RELATED PARTIES**





As
      of
      December 31, 2007, 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
            
            $
            143,293Subordinated
                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
                $30,418
            
            
            1,194,5821,337,875Less:
                current portion
            
            
            20,695Long-term
                portion of notes payable - related parties
            
            $
            1,317,180





As
      of
      December 31, 2007, principal payments due on the notes payable – related
      parties are as follows:




2008
            
            $
            20,6952009
            
            
            23,1862010
            
            
            1,250,9782011
            
            
            23,1862012
            
            
            25,978Thereafter
            
            
            24,270$
            1,368,293Less
                discount
            
            
            (30,418
            )Total
            
            $
            1,337,875




**12.**
            **NOTE
                PAYABLE**




As
      of
      December 31, 2007, note payable consists of the following:





The
                Company entered into a promissory note with a non-related
                party.
              The
                note originally matured on September 30, 2007
              but
                was extended to January 2008. Interest rate on the note is
                4%.
            
            $
            25,000




**13.**
            **SENIOR
                LENDERS’ NOTES PAYABLE**





Senior
      lenders’ notes payable consist of the following at December 31,
      2007:





(a)
                Wachovia Bank – Fourth Amended and Restated Loan
                Agreement
            
            
            2,200,000(b)
                CAMOFI Master LDC, net of warrant valuation discounts of
                $442,623
            
            
            3,057,377(c)
                Haven Trust Bank
            
            
            100,000$
            5,357,377Less:
                current portion
            
            $
            600,000Senior
                lenders’ notes – long term portion, net
            
            $
            4,757,377




(a) 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. In addition, the Company
      granted Wachovia a security interest in substantially all of its assets and
      intellectual property. On September 28, 2007, the Company entered into a Fourth
      Amended and Restated Loan Agreement with Wachovia Bank. Concurrent with the
      execution of the Fourth Restated Loan Agreement, the Company issued a
      Consolidated Renewal Promissory Note on September 28, 2007. The Renewal
      Promissory Note consolidated the promissory note dated October 27, 2005 in
      the
      original principal amount of $3,000,000 and with a September 28, 2007 balance
      of
      $1,850,000 and the revolving line of credit dated June 22, 2005 with a September
      28, 2007 principal amount of $500,000. Pursuant to the terms of the Fourth
      Restated Loan Agreement certain required financial covenants have been modified
      from the Third Amended and Restated Loan Agreement. The Company is now required
      to maintain a debt service coverage ratio of 1.00 to 1.00 on or before December
      31, 2007, and of not less than 1.25 to 1.00 at all times thereafter. Further,
      the Company is now required to maintain a senior funded debt to EBITDA ratio
      of
      not more than 1.50 to 1.00 on or before December 31, 2007, and of not more
      than
      1.25 to 1.00 at all times thereafter. In addition, the Company is now required
      to maintain a senior liabilities to effective net worth ratio of not more than
      2.75 to 1.00 on or before September 30, 2007, of not more than 2.50 to 1.00
      after September 30, 2007, and on or before December 31, 2007, of not more than
      2.25 to 1.00 after December 31, 2007, and on or before June 30, 2008, and of
      not
      more than 2.00 to 1.00 at all times thereafter. As of December 31, 2007 the
      Company was in compliance with all covenants. All outstanding principal and
      interest is payable in full in August 2011.




15





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%. 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 swap resulted
      in interest expense of $48,551 and $3,705 for fiscal years ending December
      31,
      2007 and 2006, respectively.





(b)
            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" and ”CAMOFI”) 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 feature. On December 13,
                2007, the
                Company received a declaration of default from CAMOFI relating to
                this
                note. See Financial Footnote # 17 ”Legal Proceedings” for further detail
                of this declaration of default.




(c)
            On
                December 27, 2007, the Company entered into a line of credit loan
                from
                Haven Trust Bank in Ponte Vedra Beach, Florida. The loan is an interest
                only loan at an interest rate of 8.25%. In addition, the Company
                granted
                Haven Trust security interest in certain of its assets. All outstanding
                principal and interest is payable in full on January 27,
                2009.




As
      of
      December 31, 2007, principal payments due on the senior lenders’ notes payable
      are as follows:




2008
            $
            600,0002009
            
            700,0002010
            
            4,100,0002011
            
            400,0002012
                and thereafter
            
            -$
            5,800,000Less
                discount
            
            (442,623
            )Total
            $
            5,357,377




16




**14.**
            **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 $1,784,535 require minimum monthly lease payments
      ranging from $30 to $15,637 with interest rates ranging between 3.73% and
      23.00%. The majority of the capital lease agreements, which total approximately
      75% of our December 31, 2007 balances, are at interest rates at or below 12.11%.
      The future minimum lease payments required under capital lease obligations
      as of
      December 31, 2007, are as follows:





2008
            
            $
            1,094,5612009
            
            
            564,2562010
            
            
            318,8662011
            
            
            13,7972012
            
            
            -1,991,480Less:
                amount representing interest
            
            
            206,945Present
                value of minimum lease payments
            
            
            1,784,535Less:
                current portion of capital lease obligations
            
            
            961,046Total
            
            $
            823,489





Equipment
      leased under capital leases as of December 31, 2007, totals $2,311,412, which
      is
      net of accumulated depreciation of $1,453,733.




**15.**
            **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 #17
      “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.




**16.**
            **COMMITMENTS
                AND CONTINGENCIES**





Leased
      facilities -
      Commencing May 2007, the Company entered into an Office Lease with Suburban
      Owner LLC to lease facilities located at 7800 Belfort Parkway, Suite 165,
      Jacksonville, FL, 32256. 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 final period through the end of the term is $8,494. The Company entered
      into a new office lease in Texas which commenced February 1, 2005, and had
      a
      term of two years, at which time it became 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 had a lease through
      October 2007 and which is also now on a month to month term. Additionally,
      in
      2006 the Company opened a small sales office in Kentucky which had a lease
      through September 2007 which has been renewed through September
      2008.  The
      Company also has various operating leases for computers and equipment. Rental
      expense under operating leases aggregated $237,639 and $323,735 for the years
      ended December 31, 2007 and 2006, 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, 2007:




2008
            $
            141,6042009
            
            113,7422010
            
            110,7702011
            
            107,8612012
            
            59,652Total
            $
            473,976




17




**17.**
            **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 agreed to pay the
      remaining $150,000 in 12 monthly installments of $12,500 commencing July 1,
      2006
      and ending June 30, 2007. As of June 30, 2007, the Company has fulfilled its
      obligations and has paid this settlement in full.





On
      or
      about September 23, 2005, Nationwide Money Services, Inc. (“Nationwide”) filed
      suit against ZMA Enterprise, Inc., d/b/a Citgo Food Mart (“ZMA”), a merchant
      with whom Nationwide and its successor-in-interest, Progressive Ventures d/b/a
      Progressive ATM, had executed an ATM Processing Agreement (the “Agreement”).
      Nationwide alleged in its complaint that ZMA had breached the Agreement by,
      among other things, failing to maintain an exclusive contractual relationship
      with Nationwide for provision of ATM processing services. ZMA answered
      Nationwide’s complaint, denied all liability, and asserted various defenses,
      including a contention that the Agreement was vague and unenforceable. Following
      discovery, this case was tried before the State Court of Dekalb County, Georgia.
      On April 6, 2007, the court entered an order holding that the Agreement was
      fully enforceable against ZMA and entering judgment in favor of Nationwide
      and
      against ZMA for the full amount of Nationwide’s contractual damages plus
      attorneys’ fees and expenses of litigation. ZMA filed a notice of appeal
      regarding the court’s judgment on or about May 7, 2007. ZMA’s appeal has now
      been dismissed based on its failure to pay the costs of preparing the appellate
      record. We express no opinion as to the likelihood of success or potential
      amount of recovery in this matter.





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 and has received settlement payments from
      one
      merchant but has yet to receive any other 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, 2007 and 2006. 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 R Us”), 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 fiscal periods ended December 31, 2007 and 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 #9 “Notes Receivable”). The Company subsequently brought suit against
      EPS and its principal. On June 29, 2007, the Company settled all claims against
      EPS and Mr. Graham in exchange for the payment of $100,000 from the defendants.
      In the event EPT is sold or merged into another entity within 3 years from
      the
      date of the settlement, the Company is entitled to receive an additional
      $200,000 payment from the defendants. During the fiscal period ended December
      31, 2007, the Company recorded the $100,000 settlement as a recovery of bad
      debts. The $100,000 payment was received on July 6, 2007.





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
      reflected this $40,000 expense and liability in its consolidated financial
      statements ended December 31, 2006.


18





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 sought
      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 denied any and all allegations of wrongdoing
      and vigorously defended such action. During fiscal year 2006, the Company
      recorded a $200,000 expense accrual for what it deemed to be probable legal
      expenses defending this claim. The Company believed that all legal expenses
      exceeding $200,000 would be covered under the Company’s Directors and Officers
      insurance policy. As of June 30, 2007 the remaining balance of that accrual
      was
      approximately $31,750. On June 7, 2007, the Company filed a Counterclaim against
      Renn and BFS in the Circuit Court of the Seventh Judicial Circuit in and for
      St.
      John's County, Florida. At all material times related to this litigation, the
      Renn and BFS funds were advised and managed by an investment company called
      RENN
      Capital Group, Inc. (“RENN Cap”). In the Counterclaim the Company alleged Renn
      and BFS, separately and together with RENN Cap, conspired with a former board
      member, in breach of his fiduciary duties as a director of the Company, to
      obtain confidential information regarding the Company and subsequently used
      and
      exploited such confidential information in litigation against the Company.
      By
      substantially assisting and encouraging the former board member to obtain and
      use such information in breach of his fiduciary duties, Renn and BFS aided
      and
      abetted the former board member in the breach of his fiduciary duty. On August
      2, 2007 the Company reached a settlement with Renn, the terms of which are
      confidential. The settlement resulted in no additional costs to the Company
      nor
      any recovery amounts. The total legal fees paid in connection with this claim
      amounted to $200,000.





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 claims
      pending for an accounting and breach of contract seeking to recover amounts
      overpaid by the Company and seeking other damages. On July 3, 2007, Deltacom,
      Inc. filed a counterclaim in this lawsuit against EFT Integration, Inc.,
      asserting claims for breach of contract and for open account seeking payment
      of
      amounts they claim remain unpaid for communications services provided and to
      recover credits previously given to EFT Integration, Inc. The Company expresses
      no opinion as to the likelihood of success or potential amount of recovery,
      and
      has not recorded income during the fiscal year ended December 31, 2007 and
      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, the Plaintiff alleges that the Company 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. On August 30, 2007, the Company filed a Counterclaim against the
      Plaintiff in which it asserted claims for breach of contract, breach of
      fiduciary duty, and tortious interference. The Company has a $50,000 accrual
      recorded at December 31, 2007 in connection with this complaint. The lawsuit
      was
      settled on January 31, 2008 (see Financial Footnote #25 “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. In light of pending settlement negotiations, the parties
      agreed to dismiss the litigation without prejudice and the dismissal was filed
      with the Court on April 18, 2007. Should settlement negotiations fail, either
      party has the right to re-institute the litigation. The Company expresses no
      opinion as to the likelihood of success or potential amount of recovery, and
      has
      not recorded income during the fiscal year ended December 31, 2007 and 2006
      relating to this matter.


19




On
      August
      23, 2007, Nationwide Money Services, Inc. filed suit against Resource Express,
      Inc., in the Circuit Court, Seventh Judicial Circuit, St. Johns County, Florida,
      Case No. CA 071120 for breach of contract. Nationwide Money Services, Inc.
      alleges that the Defendant breached the terms of its Distributor Agreement
      with
      Nationwide which was entered into to resolve previous litigation between the
      parties. Nationwide seeks $40,000 in liquidated damages. The Company expresses
      no opinion as to the likelihood of success or potential amount of recovery
      relating to this matter, and has not recorded income during the fiscal year
      ended December 31, 2007 relating to this matter.





On
      October 19, 2007, the Company was served with process by Camofi Master LDC
      ("Camofi"), a debt holder of the Company. In the Complaint, filed in the United
      States District Court in and for the Southern District of New York, Camofi
      alleges material and negligent misrepresentation of Global Axcess’ financial
      results relating to the restatement of 2005 earnings that occurred in 2006
      and
      seeks not less than $2,000,000 in damages (actual amount to be calculated at
      trial) plus all costs and expenses. The Company denied any and all allegations
      of wrongdoing and intended to vigorously defend such action and did not
      anticipate a material financial impact due to this matter . In
      the
      face of a Motion to Dismiss that the Company filed, Camofi withdrew their
      negligent misrepresentation claim and sent the below default notification on
      December 13, 2007.





On
      December 13, 2007, the Company received a declaration of default and
      acceleration from CAMOFI Master LDC ("Camofi") relating to the Company's 9%
      Senior Subordinated Secured Convertible Note due October 27, 2010 in the
      principal amount of $3,500,000 (the "Note"). The description of the Note and
      related transaction contained in the Company's Current Report on Form 8-K filed
      with the Securities and Exchange Commission (the "Commission") on November
      1,
      2005 is hereby incorporated by reference.





The
      Notice claims that an event of default has occurred under Section 8(a)(iv)
      of
      the Note. An event of default under Section 8(a)(iv) of the Note occurs if
      any
      representation or warranty made in (i) the Note, (ii) any transaction document
      related to the Note, (iii) any written statement pursuant to the Note, or (iv)
      any other report, financial statement or certificate made or delivered to the
      Investor was untrue or incorrect in any material respect as of the date of
      the
      Note.





The
      Notice demands immediate payment of an amount equal to the sum of (i) 110%
      of
      the principal amount of the Note, plus all accrued and unpaid interest, and
      (ii)
      all other amounts, costs, expenses and liquidated damages due in respect to
      the
      Note. Pursuant to the terms of the Note, any overdue and unpaid interest must
      be
      paid at the rate of 20% per annum from the date such interest was due through
      the date of payment. The Company disagrees with all claims that an event of
      default has occurred under Section 8(a)(iv) of the Note and is vigorously
      defending its position. The Complaint seeks damages of "not less than
      $4,679,500", however in the event that a court determines that there has been
      an
      event of default under the Note, the Company estimates that, as of the date
      hereof, a payment of approximately $3,876,250 would be due and payable. A
      February 1, 2009 non-jury trial date has been set in The United States District
      Court, Southern District of New York. Even though the court date is scheduled
      for February 2009, the Company is actively seeking to refinance the CAMOFI
      debt.
      Since the court date is scheduled for 2009, the Company believes it is unlikely
      that any resolution of this suit will occur during fiscal 2008, and as such
      believes that the debt, net of warrant valuation discounts, should continue
      to
      be categorized as long-term debt as of December 31, 2007. The Company believes
      that all legal expenses relating to this litigation will be covered under the
      Company’s Directors and Officers insurance policy.





Additionally,
      one significant investor has communicated to us a desire to unwind a financial
      transaction that took place prior to the 2005 restatement of earnings which
      would convert company stock back into debt. The Company does not anticipate
      a
      material financial impact due to this investor's desire to unwind the
      transaction.





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.




**18.**
            **CONSULTING
                AND EMPLOYMENT
                AGREEMENTS**





As
      of
      December 31, 2007, the Company has no significant employment contracts with
      executive officers of the Company.


20




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 # 5 “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. All severance obligations to the former
      President have been satisfied.




**19.**
            **CONVERSION
                OF NETWORK PROCESSING**





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.




**20.**
            **COMMON
                STOCK**





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.




**21.**
            **INCOME
                TAXES**





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.


21






2007
            
            2006Deferred
                tax assets:Arising
                from operating loss and credit carryforwards
            
            $
            8,719,407
            
            $
            8,186,023Valuation
                allowance
            
            
            (5,413,703
            )
            
            (4,992,474
            )Deferred
                tax assets
            
            $
            3,305,704
            
            
            3,193,550Deferred
                tax liability:Arising
                from accumulated depreciation and amortization
            
            
            2,965,904
            
            
            2,853,750Deferred
                tax liability
            
            
            2,965,904
            
            
            2,853,750Net
                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 of  federal tax effect
            
            
            -0.78
            %
            
            0.07
            %Non-taxable
                losses from foreign jurisdictions
            
            
            0.00
            %
            
            0.00
            %Permanent
                items
            
            
            -2.35
            %
            
            -12.32
            %Change
                in valuation allowance
            
            
            37.13
            %
            
            46.25
            %Effective
                tax rate
            
            
            0.00
            %
            
            0.00
            %





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, 2007 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, 2007, the Company has net operating loss carryforwards remaining
      of
      approximately $22,969,986 that may be offset against future taxable income
      through 2027. 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.




**22.**
            **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 or when the exercise price of the potentially dilutive
      securities is less than the market value of the Company’s stock. The following
      table sets forth the computation of basic and diluted net income per common
      share:




22




Fiscal Year Ended
            
            Fiscal Year EndedDecember 31, 2007
            
            December 31, 2006NumeratorIncome
                (loss) from continuing operations
            
            $
            255,507
            
            $
            (4,588,400
            )Income
                (loss) from discontinued operations
            
            $
            175,000
            
            $
            (275,937
            )Numerator
                for diluted income (loss) per share available to common
                stockholders
            
            $
            430,507
            
            $
            (4,864,337
            )DenominatorWeighted
                average shares
            
            
            20,988,348
            
            
            20,996,013Effect
                of dilutive securities:Treasury
                method, effect of employee stock options & warrants
            
            
            -
            
            
            -Denominator
                for diluted income (loss) per share adjusted weighted shares after
                assumed
                exercises
            
            
            20,988,348
            
            
            20,996,013**Income
                (loss) per common share - basic:**Income
                (loss) from continuing operations
            
            $
            0.01
            
            $
            (0.22
            )Income
                (loss) from discontinued operations
            
            $
            0.01
            
            $
            (0.01
            )Net
              Income (loss) per common share
            
            $
            0.02
            
            $
            (0.23
            )**Income
                (loss) per common share - diluted:**Income
                (loss) from continuing operations
            
            $
            0.01
            
            $
            (0.22
            )Income
                (loss) from discontinued operations Net Income (loss) per common
                share
            
            $
            0.01
            
            
            (0.01
            )$
            0.02
            
            $
            (0.23
            )




**23.**
            **STOCK
                OPTIONS AND WARRANTS**





Stock
      options





The
      Company established a 2002 Stock Incentive Plan (the “2002 Plan”) and 2004 Stock
      Incentive Plan (the “2004 Plan”), which provides the granting of options to
      officers, employees, directors, and consultants of the Company. As of December
      31, 2007, options to purchase 770,677 shares of common stock were available
      for
      future grants under the 2002 Plan and 722,550 shares of common stock were
      available for future grants under the 2004 Plan. As of December 31, 2007,
      1,493,227 shares of common stock were reserved for stock options granted and
      0
      shares were reserved for warrants to purchase common stock.





Options
      granted under our 2002 and 2004 plans generally have a three-year vesting period
      and expire five years after grant. Most of our stock options vest ratably during
      the vesting period, as opposed to awards that vest at the end of the vesting
      period. We recognize compensation expense for options using the straight-line
      basis, reduced by estimated forfeitures. Upon exercise of stock options, we
      issue new shares of our common stock (as opposed to using treasury shares).
      All
      options granted pursuant to the plans shall be exercisable at a price not less
      than the fair market value of the common stock on the date of
      grant.





The
      Plan
      is administered by the Company's Board of Directors. The Board of Directors
      has
      the authority to select individuals to receive awards, to determine the time
      and
      type of awards, the number of shares covered by the awards, and the terms and
      conditions of such awards in accordance with the terms of the plans. In making
      such determinations, the Board of Directors may take into account the
      recipient's current and potential contributions and any other factors the Board
      of Directors considers relevant. The Board of Directors is authorized to
      establish rules and regulations and make all other determinations that may
      be
      necessary or advisable for the administration of the Plan




23




During
      the years ended December 31, 2007 and 2006, the Company granted stock options
      totaling 1,060,000 and 60,000 shares of its common stock, with a weighted
      average strike price of $0.32 and $0.55 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
            
            WeightedOf
            
            AverageOptions
            
            Exercise
                PriceBalance,
                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
            
            $
            1.35Options
                granted
            
            
            1,060,000
            
            
            0.32Options
                cancelled
            
            
            —
            
            
            —Options
                expired
            
            
            (373,325
            )
            
            1.08Options
                exercised
            
            
            —
            
            
            —Balance,
                December 31, 2007
            
            
            1,660,900
            
            $
            0.75




The
      following table summarizes information about options outstanding and exercisable
      at December 31, 2007:




Weighted AverageShares
                Underlying
            
            Remaining
            
            Weighted Average
            
            Shares Underlying
            
            Weighted AverageExercise
                Price
            
            Options
                Outstanding
            
            Contractual
                Life Years
            
            Exercise
                Price
            
            Options
                Excercisible
            
            Exercise
                Price$0.25-
                $0.33
            
            
            1,060,000
            
            
            4.28
                years
            
            $
            0.32
            
            
            150,000
            
            $
            0.31$0.34
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -$0.35-$5.70
            
            
            600,900
            
            
            1
                year
            
            $
            1.44
            
            
            580,800
            
            $
            1.45Totals
            
            
            1,660,900
            
            
            
            
            $
            0.75
            
            
            730,800
            
            $
            1.22




Exercise Price Equals,Number of Remaining
              
              Exceeds or is Less than
              
              Weighted Average
              
              Range of
              
              Weighted AverageOptions Granted
              
              Market Value as of 12/31/07
              
              Exercise Price
              
              Exercise Price
              
              Fair Value1,060,000
              
              
              Less
                  than
              
              $
              0.32
              
              
              $0.25
                      - $0.32
              
              $
              336,400-
              
              
              Equals
              
              $
              -
              
              
              $-
              
              $
              -600,900
              
              
              Exceeds
              
              $
              1.44
              
              
              $0.53
                    - $5.70
              
              $
              866,2751,660,900




24




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





Number
            
            WeightedOf
            
            AverageWarrants
            
            Exercise
                PriceBalance,
                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
            
            $
            2.68Warrants
                granted
            
            
            —
            
            
            —Warrants
                cancelled
            
            
            —
            
            
            —Warrants
                expired
            
            
            (4,284,200
            )
            
            3.04Warrants
                exercised
            
            
            —
            
            
            —Balance,
                December 31, 2007
            
            
            7,532,860
            
            $
            2.48




The
      following table summarizes information about warrants outstanding and
      exercisable at December 31, 2007:




Weighted
                  AverageShares Underlying
              
              Remaining
              
              Weighted Average
              
              Shares Underlying
              
              Weighted AverageExercise Price
              
              Warrants Outstanding
              
              Contractual Life Years
              
              Exercise Price
              
              Warrants Excercisible
              
              Exercise Price$
              1.25
              
              
              382,856
              
              
              1.2
              
              $
              1.25
              
              
              382,856
              
              $
              1.25$
              1.75
              
              
              4,350,002
              
              
              1.4
              
              $
              1.75
              
              
              4,350,002
              
              $
              1.75$
              2.50
              
              
              1,400,001
              
              
              1.1
              
              $
              2.50
              
              
              1,400,001
              
              $
              2.50$
              5.00
              
              
              1,400,001
              
              
              1.1
              
              $
              5.00
              
              
              1,400,001
              
              $
              5.007,532,860
              
              
              
              
              $
              2.48
              
              
              7,532,860
              
              $
              2.48





**24.**
            **RELATED
                PARTY TRANSACTIONS**





None.




**25.**
            **SUBSEQUENT
                EVENTS**





On
      January 31, 2008, Global Axcess Corp, a Nevada corporation (the "Company"),
      settled the lawsuit that Robert Colabrese, a former employee of the Company
      ("Colabrese"), commenced on December 26, 2006. In connection with the
      settlement, the Company entered into a settlement agreement with Colabrese
      and a
      limited release with Cardtronics, LP., Colabrese's current employer. The Company
      does not believe that the obligations of the Company pursuant to either of
      the
      agreements are material to the Company. As a result of the settlement, all
      claims and counterclaims will be dismissed with prejudice, with each side to
      bear its own attorneys' fees and costs.




25