UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  Form 10-QSB/A
                                 Amendment No. 2

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                  For the quarterly period ended June 30, 2005

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

              For the transition period from ________ to __________


                         Commission File Number: 0-27845


                          TRANSAX INTERNATIONAL LIMITED
                          -----------------------------
          (Exact name of small business issuer as specified in charter)


               COLORADO                                    84-1304106
               --------                                    ----------
   (State or other jurisdiction of                 (I.R.S. Employer I.D. No.)
    incorporation or organization)


                        8th Floor, 5201 Blue Lagoon Drive
                                Miami, FL, 33126
                        ---------------------------------
               (Address of principal executive offices)(Zip Code)


                                 (305) 629-3090
                                 --------------
                (Issuer's telephone number, including area code)


Check whether the Issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes[X]  No[ ]

State the number of shares outstanding of each of the Issuer's classes of common
equity as of the latest practicable date: At August 12, 2005, there were
30,322,981 shares of the small business issuer's common stock outstanding.

<PAGE>

                   EXPLANATORY NOTE REGARDING AMENDMENT NO. 2

Transax International Limited (the "Company") is amending this Quarterly Report
on Form 10-QSB for the period ended June 30, 2005 in response to the U.S.
Securities & Exchange Commission's Comment Letter to the Company dated August
25, 2006 (the "Comment Letter"). In particular, the Company has added language
in the Section entitled "Item 3. Controls & Procedures" in accordance with the
Comment Letter as well as the disclosure of certain negative covenants in the
Section entitled "Item 2. Management's Discussion & Analysis or Plan of
Operation" with respect to the Securities Purchase Agreement, dated April 1,
2005, by and between the Company and Scott and Heather Grimes. The remaining
Items contained in this report consist of all other Items originally contained
in Amendment No. 1 to our Quarterly Report on Form 10-QSB for the period ended
June 30, 2005 as filed on July 10, 2006. This report does not reflect events
occurring after the filing of the original Quarterly Report on Form 10-QSB, nor
modify or update those disclosures in any way other than as required to reflect
the comments of the SEC in the Comment Letter.


                                       -1-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
                                  FORM 10-QSB/A
                      QUARTERLY PERIOD ENDED JUNE 30, 2005


                                      INDEX

                                                                           Page
PART I - FINANCIAL INFORMATION

         Item 1 - Consolidated Financial Statements

         Consolidated Balance Sheet (Unaudited)
            As of June 30, 2005........................................... 3

         Consolidated Statements of Operations (Unaudited)
            For the Three and Six Months Ended June 30, 2005 and 2004 .... 4

         Consolidated Statements of Cash Flows (Unaudited)
            For the Six Months Ended June 30, 2005 and 2004............... 5

         Notes to Unaudited Consolidated Financial Statements............. 6-16

         Item 2 - Management's Discussion and Analysis or Plan of
                  Operation............................................... 20-26

         Item 3 - Controls and Procedures................................. 26-28


PART II - OTHER INFORMATION

         Item 1 - Legal Proceedings....................................... 29

         Item 2 - Unregistered Sales of Equity Securities and
                  Use of Proceeds......................................... 30

         Item 3 - Default Upon Senior Securities.......................... 30

         Item 4 - Submission of Matters to a Vote of Security Holders..... 30

         Item 5 - Other Information....................................... 30

         Item 6 - Exhibits................................................ 30

         Signatures....................................................... 30


                                       -2-
<PAGE>

                 TRANSAX INTERNATIONAL LIMITED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  June 30, 2005
                           (As Restated - See Note 9)
                                   (Unaudited)

                                     ASSETS

CURRENT ASSETS:
  Cash ...........................................................  $    64,221
  Accounts receivable (Net of allowance for doubtful accounts
    of $0) .......................................................      369,726
  Prepaid expenses and other current assets ......................      100,578
                                                                    -----------

     TOTAL CURRENT ASSETS ........................................      534,525

SOFTWARE DEVELOPMENT COSTS, net ..................................      279,878
PROPERTY AND EQUIPMENT, net ......................................      720,758
DEFERRED DEBT OFFERING COSTS .....................................      233,479
OTHER ASSETS .....................................................        2,400
                                                                    -----------

     TOTAL ASSETS ................................................  $ 1,771,040
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Current portion of capital lease obligation ....................  $    71,051
  Current portion of loan payable ................................      202,893
  Accounts payable and accrued expenses ..........................    1,469,994
  Due to related parties .........................................      172,400
  Loan payable - related party ...................................      142,071
  Convertible loans from related party ...........................      274,836
                                                                    -----------

     TOTAL CURRENT LIABILITIES ...................................    2,333,245

LOAN PAYABLE .....................................................      255,237
DEBENTURE PAYABLE, NET OF UNAMORTIZED DISCOUNT OF $218,749 .......       31,251
CONVERTIBLE FEATURE LIABILITY ....................................      265,804
ACCOUNTS PAYABLE AND ACCRUED EXPENSES, net of current portion ....      404,115
                                                                    -----------

     TOTAL LIABILITIES ...........................................    3,289,652
                                                                    -----------

STOCKHOLDERS' DEFICIT:
  Preferred stock $.0001 par value; 20,000,000 shares authorized;
    No shares issued and outstanding .............................            -
  Common stock $.00001 par value; 100,000,000 shares authorized;
    30,122,981 shares issued and outstanding .....................          300
  Paid-in capital ................................................    7,290,288
  Accumulated deficit ............................................   (8,745,797)
  Deferred compensation ..........................................       (9,625)
  Other comprehensive loss - Cumulative foreign currency
    adjustment ...................................................      (53,778)
                                                                    -----------

     TOTAL STOCKHOLDERS' DEFICIT .................................   (1,518,612)
                                                                    -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT .................  $ 1,771,040
                                                                    ===========

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       -3-
<PAGE>
<TABLE>

                                 TRANSAX INTERNATIONAL LIMITED AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (As Restated - See Note 9)
                                                  (Unaudited)
<CAPTION>
                                                      FOR THE THREE MONTHS             FOR THE SIX MONTHS
                                                         ENDED JUNE 30,                  ENDED JUNE 30,
                                                      2005            2004            2005            2004
                                                  ------------    ------------    ------------    ------------
<S>                                               <C>             <C>             <C>             <C>
REVENUES .......................................  $    861,023    $    312,615    $  1,501,431    $    450,199
                                                  ------------    ------------    ------------    ------------

OPERATING EXPENSES:
  Cost of product support services .............       394,533         161,999         596,996         246,849
  Payroll and related benefits .................       103,073          83,271         207,100         165,213
  Research & development costs .................        50,690          28,616          90,022          47,981
  Professional fees ............................        58,980         (64,058)         71,145          33,581
  Management & consulting fees - related parties        41,250          78,900          74,965         157,800
  Stock based compensation .....................        26,500               -          80,042               -
  Investor relations ...........................           790           2,827          15,635          19,637
  Depreciation and amortization ................        59,027          16,754         103,604          34,751
  General & administrative .....................       181,944          83,015         356,814         184,766
                                                  ------------    ------------    ------------    ------------

     TOTAL OPERATING EXPENSES ..................       916,787         391,324       1,596,323         890,578
                                                  ------------    ------------    ------------    ------------

LOSS FROM OPERATIONS ...........................       (55,764)        (78,709)        (94,892)       (440,379)
                                                  ------------    ------------    ------------    ------------

OTHER INCOME (EXPENSES):
  Loss on derivative liability .................       (15,804)              -         (15,804)              -
  Other income (expense) .......................             -         (11,372)         10,514         (19,203)
  Foreign exchange gains (losses) ..............        23,932          18,191          26,434             881
  Interest expense .............................       (75,618)        (17,514)       (135,836)        (42,651)
  Interest expense - related party .............       (43,788)        (22,810)        (56,277)        (43,032)
                                                  ------------    ------------    ------------    ------------

     TOTAL OTHER EXPENSES ......................      (111,278)        (33,505)       (170,969)       (104,005)
                                                  ------------    ------------    ------------    ------------

NET LOSS .......................................      (167,042)       (112,214)       (265,861)       (544,384)

OTHER COMPREHENSIVE INCOME:
  Unrealized foreign currency translation
   gain (loss) .................................       (75,051)          1,496           8,874          19,054
                                                  ------------    ------------    ------------    ------------

COMPREHENSIVE LOSS .............................  $   (242,093)       (110,718)   $   (256,987)   $   (525,330)
                                                  ============    ============    ============    ============

NET LOSS PER COMMON SHARE:
BASIC AND DILUTED ..............................  $      (0.01)   $      (0.01)   $      (0.01)   $      (0.04)
                                                  ============    ============    ============    ============

WEIGHTED AVERAGE SHARES OUTSTANDING -
  BASIC AND DILUTED ............................    29,491,294      15,720,910      29,240,092      15,374,472
                                                  ============    ============    ============    ============

                              The accompanying notes are an integral part of these
                                       consolidated financial statements.

                                                      -4-
</TABLE>
<PAGE>

                 TRANSAX INTERNATIONAL LIMITED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (As Restated - See Note 9)
                                   (Unaudited)

                                                            For the Six Months
                                                              Ended June 30,
                                                          ---------------------
                                                             2005        2004
                                                          ---------   ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ...............................................  $(265,861)  $(544,384)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
     Depreciation and amortization .....................    103,604      75,651
     Amortization of development costs .................     66,524           -
     Beneficial interest ...............................     31,250           -
     Stock-based compensation ..........................     80,041           -
     Grant of warrants .................................     31,200           -
     Foreign exchange gain .............................    (18,101)          -
     Gain on sale of fixed assets ......................          -        (251)
     Amortization of deferred debt issuance costs ......      4,783           -
     Amortization of debt discount .....................     31,251           -
     Derivative liability loss .........................     15,804

Changes in assets and liabilities:
     Accounts receivable ...............................   (199,528)    (80,114)
     Prepaid expenses and other current assets .........    (49,031)    (13,899)
     Other assets ......................................     (2,400)          -
     Accounts payable and accrued expenses .............    379,254      98,250
     Accrued interest payable, related party ...........     24,777      43,032
     Accrued interest payable ..........................      5,237       7,133
     Due to related parties ............................      1,191     162,316
     Accrued payroll and related expenses ..............          -     130,660
     Other .............................................          -       7,081
     Accounts payable and accrued expenses  - long-term      11,050           -
                                                          ---------   ---------

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ....    251,045    (114,525)
                                                          ---------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capitalized software development costs ...............   (103,358)   (131,212)
  Proceeds from disposal of property and equipment .....          -       3,113
  Acquisition of property and equipment ................   (381,046)     (3,432)
                                                          ---------   ---------

NET CASH USED IN INVESTING ACTIVITIES ..................   (484,404)   (131,531)
                                                          ---------   ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Advances from related party ..........................          -      82,500
  Advances from non-related company ....................          -      24,000
  Repayment of advances from related party .............    (35,000)          -
  Repayments under capital lease obligations ...........    (20,962)    (27,131)
  Proceeds from convertible debenture ..................    336,738           -
  Proceeds from loan payable ...........................    141,982           -
  Proceeds from loan - related party ...................          -     139,500
  Repayment of from loan - related party ...............    (15,084)          -
                                                          ---------   ---------

NET CASH PROVIDED BY FINANCING ACTIVITIES ..............    407,674     218,869
                                                          ---------   ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH ................   (114,184)     23,096
                                                          ---------   ---------

NET INCREASE (DECREASE) IN CASH ........................     60,131      (4,091)

CASH, BEGINNING OF PERIOD ..............................      4,090      10,472
                                                          ---------   ---------

CASH, END OF PERIOD ....................................  $  64,221   $   6,381
                                                          =========   =========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest ...............................  $  15,084   $  31,564
                                                          =========   =========
  Cash paid for income taxes ...........................  $       -   $       -
                                                          =========   =========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Common stock issued for debt and accrued interest ....  $ 137,971   $ 112,500
                                                          =========   =========
  Common stock issued for services .....................  $  80,041   $       -
                                                          =========   =========
  Grant of common stock warrants in connection debt
   conversion ..........................................  $  31,200   $       -
                                                          =========   =========

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       -5-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, the financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary to make the interim financials not misleading
have been included and such adjustments are of a normal recurring nature. These
consolidated financial statements should be read in conjunction with the
financial statements for the year ended December 31, 2004 and notes thereto
contained in the Report on Form 10-KSB of Transax International Limited ("our
Company" or the "Company") as filed with the Securities and Exchange Commission
(the "Commission"). The results of operations for the six months ended June 30,
2005 are not necessarily indicative of the results for the full fiscal year
ending December 31, 2005.

The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America ("US GAAP"). The
consolidated financial statements of the Company include the Company and its
subsidiaries. All material intercompany balances and transactions have been
eliminated.

Organization

Transax International Limited was incorporated in the State of Colorado in 1999.
The Company, primarily through its wholly-owned subsidiary TDS Telecommunication
Data Systems Ltda. ("TDS"), is an international provider of information network
solutions specifically designed for healthcare providers and health insurance
companies. The Company's MedLink Solution (TM) enables the real time automation
of routine patient eligibility, verification, authorizations, claims processing
and payment functions. The Company has offices located in Miami, Florida and Rio
de Janeiro, Brazil.

Use of estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates. Estimates used in the
preparation of the accompanying financial statements include the allowance for
doubtful accounts receivable, the useful lives of property, equipment and
software development costs and variables used to determine stock-based
compensation.

Fair Value of Financial Instruments

The fair value of our cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate carrying values due to their short
maturities. The fair values of our debt instruments approximate their carrying
values based on rates currently available to us.

                                       -6-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations
of credit risk consist principally of cash and accounts receivable.

The Company performs certain credit evaluation procedures and does not require
collateral for financial instruments subject to credit risk. The Company
believes that credit risk is limited because the Company routinely assesses the
financial strength of its customers, and based upon factors surrounding the
credit risk of its customers, establishes an allowance for uncollectible
accounts and, as a consequence, believes that its accounts receivable credit
risk exposure beyond such allowances is limited.

Revenue recognition

Revenue from the sale of software products, which do not require any significant
production, modification or customization for the Company's targeted customers
and do not have multiple elements, is recognized when: (1) persuasive evidence
of an arrangement exists; (2) delivery has occurred; (3) the Company's fee is
fixed and determinable, and; (4) collectibility is probable.

Foreign Currency Translation

The assets and liabilities of the Company's foreign subsidiaries are translated
into U.S. dollars at the year-end exchange rates, equity is converted
historically and all revenue and expenses are translated into U.S. dollars at
the average exchange rates prevailing during the periods in which these items
arise. Translation gains and losses are deferred and accumulated as a component
of other comprehensive income or loss in stockholders' deficit. Transaction
gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency (TDS - Brazilian
Real, Transax Australia, - Australian dollar and Transax and the Company - USD)
are included in the Statement of Operations as incurred.

Stock-based compensation

The Company accounts for stock options issued to employees in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. As
such, compensation cost is measured on the date of grant as the excess of the
current market price of the underlying stock over the exercise price. Such
compensation amounts are amortized over the respective vesting periods of the
option grant. The Company adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" and SFAS 148, "Accounting for
Stock-Based Compensation -Transition and Disclosure", which permits entities to
provide pro forma net income (loss) and pro forma earnings (loss) per share
disclosures for employee stock option grants as if the fair-valued based method
defined in SFAS No. 123 had been applied. The Company accounts for stock options
and stock issued to non-employees for goods or services in accordance with the
fair value method of SFAS 123.

The exercise prices of all options granted by the Company exceeded the market
price at the dates of grant. No compensation expense has been recognized. Had
compensation cost for the stock option plan been determined based on the fair
value of the options at the grant dates consistent with the method of SFAS 123,
"Accounting for Stock Based Compensation", the Company's net income and income
per share would have been changed to the pro forma amounts indicated below for
the six months ended June 30, 2005 and 2004:

                                       -7-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)

Stock-based compensation (continued)

                                                   Six months ended June 30,
                                                   -------------------------
                                                      2005           2004
                                                   ---------      ---------
     Net loss as reported ......................   $(265,861)     $(544,384)
     Less: total stock-based employee
     compensation expense determined under
     fair value based method, net of related tax
     effect ....................................     (50,871)             -
                                                   ---------      ---------

     Pro forma net loss ........................   $(316,732)     $(544,384)
                                                   =========      =========

       Basic and diluted loss per share:
           As reported .........................   $    (.01)     $    (.04)
                                                   =========      =========
           Pro forma ...........................   $    (.01)     $    (.04)
                                                   =========      =========

The option grants are estimated as of the date of grant using the Black-Scholes
option-pricing model with the following assumptions used for grants as of June
30, 2005: expected volatility of 205%; risk free interest rate of 3.25%;
expected life of 5 years and annual dividend rate of 0%.

Loss per common share

Basic income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the period.
Diluted income per share is computed by dividing net income by the weighted
average number of shares of common stock, common stock equivalents and
potentially dilutive securities outstanding during each period. At June 30,
2005, there were options and warrants to purchase 12,926,070 shares of common
stock, which could potentially dilute future earnings per share, but which are
anti-dilutive for the periods presented above.

Comprehensive Loss

Other comprehensive loss, which currently includes only foreign currency
translation adjustments, is shown in the Statement of Changes in Stockholders'
Deficit.

Recent accounting pronouncements

In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards ("SFAS") No. 123R, "Share-Based Payment, an
Amendment of FASB Statement No. 123" ("SFAS No. 123R"). FAS No. 123R requires
companies to recognize in the statement of operations the grant- date fair value
of stock options and other equity-based compensation issued to employees. SFAS
No. 123R is effective for the first fiscal year beginning after December 15,
2005. The Company is in the process of evaluating the impact of this
pronouncement on its financial position.

In December 2004, the FASB issued SFAS Statement No. 153, "Exchanges of
Non-monetary Assets." The Statement is an amendment to APB Opinion No. 29 which
eliminates the exception for non-monetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of non-monetary assets
that do not have commercial substance. The Company believes that the adoption of
this standard will have no material impact on its financial statements.

                                       -8-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)

Recent accounting pronouncements (continued)

In May 2005, FASB issued FASB Statement 154, "Accounting Changes and Error
Corrections -- a replacement of APB Opinion No. 20 and FASB Statement No. 3"
("SFAS 154"). SFAS 154 changes the requirements for the accounting for and
reporting of a change in accounting principle. The provisions of SFAS 154
require, unless impracticable, retrospective application to prior periods'
financial statements of (1) all voluntary changes in principles and (2) changes
required by a new accounting pronouncement, if a specific transition is not
provided. SFAS 154 also requires that a change in depreciation, amortization, or
depletion method for long-lived, non-financial assets be accounted for as a
change in accounting estimate, which requires prospective application of the new
method. SFAS 154 is effective for all accounting changes made in fiscal years
beginning after December 15, 2005.

NOTE 2 - RELATED PARTY TRANSACTIONS

Convertible Loans Payable

At December 31, 2004, the Company had loans payable for $200,000 and $100,000 to
a related party whose officer is an officer of the Company. On March 23, 2005,
the Company modified the terms of its convertible loans to this related party.
Under the modified terms, $200,000 of principal due under the convertible loans
is due on March 31, 2007 and is convertible into the Company's common stock at
$.125 per share. The remaining principal of $100,000 is due on April 30, 2007
and is convertible into the Company's common stock at $.125 per share. For each
common share received upon conversion of the principal balance, the related
party is entitled to receive one warrant to purchase the Company's common stock
at $.25 per share for a period of two years from the conversion date. The
interest rate of the loan is 12% per annum compounded monthly. On June 28, 2005,
the holder of the notes partially exercised the conversion feature. Accordingly,
the Company issued 400,000 shares and 400,000 warrants to purchase common stock
of the Company for the conversion of principal balance of $50,000. The Company
also issued 35,770 shares of common stock to settle $4,471 in interest due on
these loans. At June 30, 2005, interest due on these two loans amounted to
$24,836 and the aggregate principal amount due is $250,000. During the six
months ended June 30, 2005 and 2004, the Company incurred $17,852 and $24,132,
respectively, in interest related to these two loans. The Company did not incur
beneficial conversion charges because the conversion price was equivalent to the
average offering price for equity when these loans became convertible.

                                       -9-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 2 - RELATED PARTY TRANSACTIONS (CONTINUED)

Due to Related Parties

As of June 30, 2005 the Company had $20,905 of advances payable and accrued
interest due to a related party whose officer is an officer of the Company.

For the six months ended June 30, 2005 and 2004, the Company incurred $82,500
and $66,000, respectively, in management fees to an officer/director of the
Company. On January 14, 2005, the board of directors voted to increase the
compensation paid to this officer/director from $11,000 per month to $13,750 per
month, effective January 1, 2005. On March 28, 2005, the Company issued 400,000
shares of common stock at $.126 per share to this officer/director for
settlement of $50,500 of this debt. The fair market value of these shares was
based on the average price of the Company's shares traded between March 14 and
March 27, 2005. On June 28, 2005, the Company issued 300,000 shares of common
stock at $.11 per share to this officer/director for settlement of $33,000 of
this debt. The fair market value of these shares was based on the average price
of the Company's shares traded between June 14 and June 27, 2005. At June 30,
2005, $137,343 in management fees and other expenses were outstanding to this
officer/director and are included in due to related parties on the accompanying
balance sheet. The amounts due are unsecured, non-interest bearing and are
payable on demand.

At June 30, 2005, $14,152 in management fees and expenses payable was due to a
director of the Company and is included in due to related parties on the
accompanying balance sheet. The amounts due are unsecured, non-interest bearing
and are payable on demand.

Loan Payable - Related Party

On March 5, 2004, the Company borrowed Euro 115,000 ($138,759 at June 30, 2005)
from an officer of the Company for working capital purposes. The loan accrues
0.8% compounded interest per month, has a term of twelve months, and the debt is
repayable quarterly in arrears. During the six months ended June 30, 2005 and
2004, the Company incurred $7,225 and $3,721, respectively, in interest related
to this loan. As at June 30, 2005, $3,312 in interest was accrued on this loan
and is included in loan payable - related party on the accompanying balance
sheet. The officer agreed to extend the loan for an additional twelve months
until March 2006.

NOTE 3 - FINANCING ARRANGEMENTS

Loan Payable

On October 25, 2004, the Company and Cornell Capital Partners entered into a
Securities Purchase Agreement, pursuant to which Cornell Capital Partners
purchased two 5% secured convertible debentures. The initial convertible
debenture in the original principal amount of $125,000 was dated October 25,
2004 and the second convertible debenture in the original principal amount of
$125,000 was dated January 4, 2005 (collectively, the "Original Debentures"). In
connection with the terms of the original debentures, for the six months ended
June 30, 2005, the Company recorded a beneficial conversion amount of $31,250 as
interest expense since the debentures were immediately convertible. On May 17,
2005, the Company and Cornell Capital Partners entered into a $255,237
Promissory Note (the "Note"), whereby the Original Debentures were terminated.
This Note represents the outstanding principal balance of $250,000 on the
Original Debentures, plus accrued but unpaid interest through April 30, 2005
equal to $5,237. The Note bears interest at a rate of 12% per annum and is
secured by stock pledged by certain shareholders of the Company. As of June 30,
2005, the Company has accrued interest payable of $2,552 related to this Note
which is included in accounts payable and accrued expenses on the accompanying
balance sheet.

                                      -10-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 3 - FINANCING ARRANGEMENTS (CONTINUED)

Debenture Payable

On April 1, 2005, the Company entered into a Securities Purchase Agreement with
Scott and Heather Grimes, Joint Tenants - with Rights of Survivorship (the
"Investor"). Pursuant to the Securities Purchase Agreement, the Company issued
convertible debentures to the Investor in the original principal amount of
$250,000. The debentures are convertible at the holder's option any time up to
maturity at a conversion price equal to the lower of (i) 120% of the closing bid
price of the common stock on the date of the debentures or (ii) 80% of the
lowest closing bid price of the common stock for the five trading days
immediately preceding the conversion date. The debentures have a two-year term
and accrue interest at 5% per year. At maturity, the debentures will
automatically convert into shares of common stock at a conversion price equal to
the lower of (i) 120% of the closing bid price of the common stock on the date
of the debentures or (ii) 80% of the lowest closing bid price of the common
stock for five trading days immediately preceding the conversion date.

The Company determined that the conversion feature of the convertible debentures
represents an embedded derivative since upon conversion the debentures are
convertible into a variable number of shares. Accordingly, the convertible
debentures are not considered to be conventional debt under EITF 00-19 and the
embedded conversion feature must be bifurcated from the debt host and accounted
for as a derivative liability in accordance with SFAS 133 and EITF 00-19. The
change in the fair value of the liability for derivative contracts will be
credited to other income/(expense) in the consolidated statements of operations.

The embedded derivative included in this debenture resulted in an initial debt
discount of $250,000 and an initial loss on the valuation of derivative
liabilities of $44,299. The debt discount is being amortized over the term of
the debenture. At the end of each reporting period, the Company revalues this
derivative liability. For the six months ended June 30, 2005, after adjustment,
the Company recorded a loss on valuation of derivative liability of $15,804.

The amount allocated as a discount on the debenture for the value of the
conversion option is being amortized to interest expense, using the effective
interest method, over the term of the debenture. Additionally, the Company paid
fees of $38,262 in connection with this debenture. These fees are recorded as
deferred offering costs on the balance sheet and are being amortized over the
debenture term.

Amortization expense for the six months ended June 30, 2005 for both the
discount on the debenture and the deferred offering costs was approximately
$36,000 and is included in interest expense.

At the date of inception and at the valuation date of June 30, 2005, the
following assumptions were applied to the convertible debt:

                                           At Inception    At June 30, 2005
                                           ------------    ----------------
         Market Price: ................       $ 0.140          $ 0.100
         Exercise Price: ..............       $ 0.104          $ 0.128
         Term: ........................       2 Years         1.75 Years
         Volatility: ..................         203%             206%
         Risk-free interest rate: .....        3.25%            3.64%

The convertible debenture liability is as follows at June 30, 2005:

         Convertible debenture payable ...............       $ 250,000
         Less: unamortized discount on debenture .....        (218,749)
                                                             ---------
         Convertible debenture, net ..................       $  31,251
                                                             =========

                                      -11-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 3 - FINANCING ARRANGEMENTS (CONTINUED)

Standby Equity Distribution Agreement

On October 25, 2004, the Company entered into a Standby Equity Distribution
Agreement with Cornell Capital Partners. Pursuant to the Standby Equity
Distribution Agreement, the Company could, at its discretion, periodically sell
to Cornell Capital Partners shares of common stock for a total purchase price of
up to $5.0 million.

On May 17, 2005, the Company entered into a Termination Agreement with Cornell
Capital Partners, whereby that certain Standby Equity Distribution Agreement,
dated October 25, 2004, and the related Registration Rights Agreement, Placement
Agent Agreement and Escrow Agreement of even date therewith were terminated.

Upon execution of the Termination Agreement, the Company entered into a new
Standby Equity Distribution Agreement with Cornell Capital Partners on May 17,
2005. Pursuant to the Standby Equity Distribution Agreement, the Company may, at
its discretion, periodically sell to Cornell Capital Partners shares of common
stock for a total purchase price of up to $5.0 million. For each share of common
stock purchased under the Standby Equity Distribution Agreement, Cornell Capital
Partners will pay the Company 97% of, or a 3% discount to, the lowest closing
bid price of the Company's common stock on the Over-the-Counter Bulletin Board
or other principal market on which the Company's common stock is traded for the
five days immediately following the notice date. Cornell Capital Partners will
also retain 5% of each advance under the Standby Equity Distribution Agreement.
Cornell Capital Partner's obligation to purchase shares of the Company's common
stock under the Standby Equity Distribution Agreement is subject to certain
conditions, including the Company obtaining an effective registration statement
for shares of common stock sold under the Standby Equity Distribution Agreement
and is limited to $200,000 per weekly advance and $1,000,000 per 30 days.

Under the now-terminated Standby Equity Distribution Agreement (SEDA) originally
dated October 25, 2004 and the terminated compensation debenture in December
2004, Cornell Capital Partners received a one-time commitment fee in the form of
1,201,779 shares of common stock in the amount of $200,000. In December 2004,
the Company valued the common shares issued to Cornell at the fair market value
on the dates of grant or $0.1664 per share or $200,000 based on the quoted
trading price for the stock. From December 2004 through May 27, 2005, the
Company renegotiated the terms of the SEDA and the related agreements and did
not amortize the commitment fee. At June 30, 2005, the commitment fee was deemed
to be a deferred debt offering cost on the accompanying balance sheet and will
be amortized as a financing expense over the effective period of 24 months or
less if funded earlier. Since as of June 30, 2005, the Company's registration
was not yet declared effective, the Company did not begin amortizing the
commitment fee.

NOTE 4 - STOCKHOLDERS' DEFICIT

Common Stock

On January 14, 2005, the Company entered into a six-month consulting contract
for business development services. In connection with the agreement, the Company
issued 400,000 shares of common stock. On May 10, 2005, the Company cancelled
this contract and cancelled 200,000 shares that were due on this contract. The
Company valued these common shares at the fair market value on the date of grant
of $0.16 based on the quoted trading price and recorded stock-based consulting
expense of $42,667 through the date of cancellation.

On January 14, 2005, the Company entered into a consulting contract for business
development services. In connection with the agreement, the Company issued
100,000 shares of common stock. The Company valued these common shares at the
fair market value on the date of grant of $0.16 based on the quoted trading
price and recorded stock-based compensation expense of $16,000.

                                      -12-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

Common Stock (continued)

On March 21, 2005, the Company entered into a consulting contract for business
development services. In connection with the agreement, the Company issued
150,000 shares of common stock. The Company valued these common shares at the
fair market value on the dates of grant or $0.14 or $21,000 based on the quoted
trading price and recorded stock-based consulting expense of $11,375 and
deferred consulting expense of $9,625 to be amortized over the remaining service
period.

On March 28, 2005, the Company issued 400,000 shares of common stock to settle
$50,500 in debt due to an officer/director of the Company. The Company valued
these common shares at the fair market value on the date of grant of $0.126.

On June 28, 2005, the holder of the related party loans (see note 2) exercised
the conversion feature. Accordingly, the Company issued 400,000 shares at the
conversion price of $.125 per share and 400,000 warrants to purchase common
stock of the Company at $.25 per share (see note 3) for the conversion of
principal balance of $50,000. The Company also issued 35,770 shares of common
stock to settle $4,471 in interest due on these loans.

On June 28, 2005, the Company issued 300,000 shares of common stock at $.11 per
share, the fair market value on the date of grant, to this officer/director for
settlement of $33,000 of this debt.

Stock Options

On November 28, 2004, the Company adopted a 2004 Incentive Stock Option Plan
(the "Plan"). The Plan provides options to be granted, exercisable for a maximum
of 2,500,000 shares of common stock. Both incentive and nonqualified stock
options may be granted under the Plan. The exercise price of options granted,
the expiration date, and the vesting period, pursuant to this plan is determined
by a committee.

On January 14, 2005, the board of directors elected to extend the expiration
date of 373,570 warrants from December 31, 2004 to December 31, 2005.

On May 5, 2005, the Company granted options to purchase an aggregate of
1,000,000 shares of common stock to employees, officers and directors of the
Company. The options are exercisable at $0.15 per share, which exceeds the fair
market value of the common stock at the grant date. Accordingly, under APB 25,
no compensation expense was recognized. The options expire on May 5, 2010.

A summary of the status of the Company's outstanding stock options as of June
30, 2005 and changes during the period then ended is as follows:

                                                                  Weighted
                                                                  Average
                                                                  Exercise
                                                     Shares         Price
                                                    ---------     --------
     Outstanding at December 31, 2004 ..........    2,425,000        0.41
      Granted ..................................    1,000,000        0.15
      Exercised ................................            -           -
      Forfeited ................................            -           -
                                                    ---------      ------

      Outstanding at June 30, 2005 .............    3,425,000      $ 0.33
                                                    =========      ======

      Options exercisable at end of period .....    3,425,000      $ 0.33
                                                    =========      ======
      Weighted-average fair value of options
          granted during the period ............      2005
                                                     ------
                                                     $ 0.15

                                      -13-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

Stock Options (continued)

The following information applies to options outstanding at June 30, 2005:

                              Options Outstanding          Options Exercisable
                           -------------------------     ----------------------
                             Weighted
                             Average        Weighted                   Weighted
Range of                    Remaining       Average                    Average
Exercise                   Contractual      Exercise                   Exercise
Prices        Shares       Life (Years)      Price        Shares        Price
--------     ---------     ------------     --------     ---------     --------
 $0.50       1,675,000         3.62          $ 0.50      1,675,000      $ 0.50
 $0.20         750,000         5.00          $ 0.20        750,000      $ 0.20
 $0.15       1,000,000         4.80          $ 0.15      1,000,000      $ 0.15

Stock Warrants

A summary of the status of the Company's outstanding stock warrants as of June
30, 2005 and 2004 and changes during the period then ended is as follows:

                                                                  Weighted
                                                                  Average
                                                                  Exercise
                                                     Shares         Price
                                                    ---------     --------
     Outstanding at December 31, 2004               9,101,070        0.61
      Granted                                         400,000        0.25
      Exercised                                             -           -
      Forfeited                                             -           -
                                                    ---------      ------

      Outstanding at June 30, 2005                  9,501,070      $ 0.60
                                                    =========      ======

      Warrants exercisable at end of period         9,501,070      $ 0.60
                                                    =========      ======

                                                      2005
                                                     ------
      Weighted-average fair value of warrants
          granted during the period                  $ 0.25


The following information applies to all warrants outstanding at June 30, 2005:

                             Warrants Outstanding         Warrants Exercisable
                           -------------------------     ----------------------
                             Weighted
                             Average        Weighted                   Weighted
Range of                    Remaining       Average                    Average
Exercise                   Contractual      Exercise                   Exercise
Prices        Shares       Life (Years)      Price        Shares        Price
--------     ---------     ------------     --------     ---------     --------
 $1.00       4,325,000         3.61          $ 1.00      4,325,000      $ 1.00
 $0.50         373,570         1.00          $ 0.50        373,570      $ 0.50
 $0.30       2,000,000         2.00          $ 0.30      2,000,000      $ 0.30
 $0.20       2,402,500         4.75          $ 0.20      2,402,500      $ 0.20
 $0.25         400,000         2.00          $ 0.25        400,000      $ 0.25

                                      -14-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 5 - LITIGATION

An action has been brought against the Company by its former stock transfer
agent who alleges, among other items, that the Company breached its contract
with the transfer agent. The Company has filed an answer to the action and a
portion of the action has been dismissed by the court. The Company intends to
vigorously defend itself against the remainder of the action. Counsel has
advised the Company that there is a better than fifty percent chance that a
potential loss will be incurred. Accordingly, as of December 31, 2004, an
accrual of $50,000 was recorded which, as of June 30, 2005, is included in
accounts payable and accrued expenses on the accompanying balance sheet.

NOTE 6 - FOREIGN OPERATIONS

The Company identifies its operating segments based on its business activities
and geographical locations. The Company operates within a single operating
segment, being a provider of information network solutions specifically designed
for healthcare providers and health insurance companies. The Company operates in
Brazil, Australia and Mauritius, and has a registered mailing address in
Singapore and in the USA. All of the Company's assets are located in Brazil.

                                             Six Months Ended   Six Months Ended
                                                  June 30,           June 30,
                                                    2005               2004
                                             ----------------   ----------------
Net sales to Unaffiliated Customers:
  Brazil ...............................       $ 1,501,431        $   450,199
  USA ..................................                 -                  -
  Singapore ............................                 -                  -
  Australia ............................                 -                  -
  Mauritius ............................                 -                  -
                                               -----------        -----------

     Total Sales .......................         1,501,431            450,199
                                               -----------        -----------

Operating Expenses:
  Brazil ...............................         1,216,321            662,392
  USA ..................................           336,595            206,871
  Singapore ............................                 -                  -
  Australia ............................             7,176                 85
  Mauritius ............................            36,231             21,230
                                               -----------        -----------

  Total Operating Expenses .............         1,596,323            890,578
                                               -----------        -----------

Loss from operations ...................           (94,892)          (440,379)
                                               -----------        -----------

Other income (expenses):
  Brazil ...............................           (59,242)           (54,722)
  USA ..................................          (119,677)           (49,709)
  Australia ............................             7,950                426
                                               -----------        -----------
                                                  (170,969)          (104,005)
                                               -----------        -----------

Net loss as reported in the
 accompanying statements ...............       $  (265,861)       $  (544,384)
                                               ===========        ===========

                                      -15-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 7 - GOING CONCERN

Since inception, the Company has incurred cumulative net losses of $8,745,797,
has a stockholders' deficit of $1,518,612 at June 30, 2005 and has a working
capital deficit of $1,798,720. Since its inception, the Company has funded
operations through short-term borrowings and equity investments in order to meet
its strategic objectives. The Company's future operations are dependent upon
external funding and its ability to increase revenues and reduce expenses.
Management believes that sufficient funding will be available from additional
related party borrowings and private placements to meet its business objectives,
including anticipated cash needs for working capital, for a reasonable period of
time. Additionally, under the current roll out schedules with its clients, the
Company expects to increase its revenues significantly during 2005 with the
expectation of the Company becoming a profitable entity. However, there can be
no assurance that the Company will be able to obtain sufficient funds to
continue the development of its software products and distribution networks.
Further, since fiscal 2000, the Company has been deficient in the payment of
Brazilian payroll taxes and Social Security taxes. At June 30, 2005, these
deficiencies (including interest and fines) amounted to approximately $762,000.
This payroll liability is included as part of the accounts payable and accrued
expenses (short-term and long-term) within the consolidated balance sheet.

As a result of the foregoing, there exists substantial doubt about the Company's
ability to continue as a going concern. These consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

NOTE 8 - SUBSEQUENT EVENTS

On July 15, 2005, the Company entered into a one-year consulting contract for
public relations services. For services rendered, the Company shall pay $5,000
per month payable in cash and/or free-trading common stock. In connection with
this agreement, the Company issued 200,000 shares of common stock. The Company
valued these common shares at the fair market value on the dates of grant of
$0.15 per share or $30,000 based on the quoted trading price and recorded
deferred consulting expense of $30,000 to be amortized over the service period.

NOTE 9 - RESTATEMENT

After reviewing certain accounting principles, the Company had applied in
previously issued financial statements, management has determined that the
Company's accounting for the embedded derivative option related to the Company's
debenture payable should have been classified as a liability on the accompanying
balance sheet and revalued at the end of each period in accordance with SFAS No.
133 and EITF 00-19. Consequently, management is restating its quarterly
financial statements as of June 30, 2005 and for the three and six months then
ended. The change in presentation of the Company's embedded derivative feature
associated with its debenture payable has the effect of increasing total assets
by $33,479, increasing liabilities by $80,533, increasing the stockholders'
deficit by $47,055 as of June 30, 2005, and decreasing the Company's net loss by
$15,445 for the three and six months ended June 30, 2005, respectively. This
change in presentation of the Company's embedded derivative feature affected
some of the items within the Company's consolidated statement of cash flows for
the six months ended June 30, 2005 but did not impact cash at the end of the
period. Accordingly, the adjustments to the balance sheet, statement of
operations, and statement of cash flows are summarized as follows:

                                      -16-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 9 - RESTATEMENT (CONTINUED)

                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2005
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                         INITIAL                        AS
ASSETS                                                                   FILING      RESTATEMENT     RESTATED
                                                                       -----------   -----------   -----------
<S>                                                                    <C>           <C>           <C>
CURRENT ASSETS:
  Cash ..............................................................  $    64,221             -   $    64,221
  Accounts receivable (Net of allowance for doubtful accounts of $0)       369,726             -       369,726
  Prepaid expenses and other current assets .........................      100,578             -       100,578
                                                                       -----------   -----------   -----------
     TOTAL CURRENT ASSETS ...........................................      534,525             -       534,525

SOFTWARE DEVELOPMENT COSTS, net .....................................      279,878             -       279,878
PROPERTY AND EQUIPMENT, net .........................................      720,758             -       720,758
DEFERRED DEBT OFFERING COSTS ........................................      200,000        33,479       233,479
OTHER ASSETS ........................................................        2,400             -         2,400
                                                                       -----------   -----------   -----------
     TOTAL ASSETS ...................................................  $ 1,737,561   $    33,479   $ 1,771,040
                                                                       ===========   ===========   ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
  Current portion of capital lease obligation .......................  $    71,051             -   $    71,051

  Current portion of loan payable ...................................      202,893             -       202,893
  Accounts payable and accrued expenses .............................    1,469,994             -     1,469,994
  Due to related parties ............................................      172,400             -       172,400
  Loan payable - related party ......................................      142,071             -       142,071
  Convertible loans from related party ..............................      274,836             -       274,836
                                                                       -----------   -----------   -----------
     TOTAL CURRENT LIABILITIES ......................................    2,333,245             -     2,333,245

LOAN PAYABLE ........................................................      255,237             -       255,237
DEBENTURE PAYABLE, NET ..............................................      216,521      (185,271)       31,250
CONVERSION FEATURE LIABILITY ........................................            -       265,804       265,804
ACCOUNTS PAYABLE AND ACCRUED EXPENSES, net of current portion .......      404,115             -       404,115
                                                                       -----------   -----------   -----------
     TOTAL LIABILITIES ..............................................    3,209,118        80,533     3,289,651
                                                                       -----------   -----------   -----------

STOCKHOLDERS' DEFICIT:
  Preferred stock $.0001 par value; 20,000,000 shares authorized;
    No shares issued and outstanding ................................            -             -             -
  Common stock $.00001 par value; 100,000,000 shares authorized;
    30,122,981 shares issued and outstanding ........................          300             -           300
  Paid-in capital ...................................................    7,352,788       (62,500)    7,290,288
  Accumulated deficit ...............................................   (8,761,242)       15,446     8,745,796
  Deferred compensation .............................................       (9,625)            -         9,625
  Other comprehensive loss - Cumulative foreign currency adjustment .      (53,778)            -        53,778
                                                                       -----------   -----------   -----------

     TOTAL STOCKHOLDERS' DEFICIT ....................................   (1,471,557)      (47,054)   (1,518,611)
                                                                       -----------   -----------   -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ....................  $ 1,737,561   $    33,479   $ 1,771,040
                                                                       ===========   ===========   ===========
</TABLE>
                                      -17-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 9 - RESTATEMENT (CONTINUED)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                   FOR THE THREE MONTHS ENDED JUNE 30, 2005
                                                                ----------------------------------------------
                                                                   INITIAL                             AS
                                                                   FILING         RESTATEMENT       RESTATED
                                                                ------------     ------------     ------------
<S>                                                             <C>              <C>              <C>
LOSS FROM OPERATIONS .......................................    $    (55,764)    $          -     $    (55,764)
                                                                ------------     ------------     ------------

OTHER INCOME (EXPENSES):
  Foreign exchange gains (losses) ..........................          23,932                -           23,932
  Loss on derivative liability .............................               -          (15,804)         (15,804)
  Interest expense .........................................        (106,867)          31,250          (75,617)
  Interest expense - related party .........................         (43,788)               -          (43,788)
                                                                ------------     ------------     ------------

     TOTAL OTHER EXPENSES ..................................        (126,723)          15,446         (111,277)
                                                                ------------     ------------     ------------

NET LOSS ...................................................        (182,487)          15,446         (167,041)
OTHER COMPREHENSIVE INCOME:
  Unrealized foreign currency translation loss .............         (75,051)               -          (75,051)
                                                                ------------     ------------     ------------

COMPREHENSIVE LOSS .........................................        (257,538)          15,446         (242,092)
                                                                ============     ============     ============
NET LOSS PER COMMON SHARE:
  BASIC AND DILUTED ........................................           (0.01)                            (0.01)
                                                                ============                      ============

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED ....      29,491,294                        29,491,294
                                                                ============                      ============



                                                                    FOR THE SIX MONTHS ENDED JUNE 30, 2005
                                                                ----------------------------------------------

LOSS FROM OPERATIONS .......................................    $    (94,892)            $  -     $    (94,892)
                                                                ------------     ------------     ------------

OTHER INCOME (EXPENSES):
  Other income (expense) ...................................          10,514                -           10,514
  Foreign exchange gains (losses) ..........................          26,434                -           26,434
  Loss on derivative liability .............................               -          (15,804)         (15,804)
  Interest expense .........................................        (167,085)          31,250         (135,835)
  Interest expense - related party .........................         (56,277)               -          (56,277)
                                                                ------------     ------------     ------------

     TOTAL OTHER EXPENSES ..................................        (186,414)          15,446         (170,968)
                                                                ------------     ------------     ------------

NET LOSS ...................................................        (281,306)          15,446         (265,860)
OTHER COMPREHENSIVE INCOME:

   Unrealized foreign currency translation gain ............           8,874                -            8,874
                                                                ------------     ------------     ------------

COMPREHENSIVE LOSS .........................................        (272,432)    $     15,446     $   (256,986)
                                                                ============     ============     ============
NET LOSS PER COMMON SHARE:

  BASIC AND DILUTED ........................................           (0.01)                            (0.01)
                                                                ============                      ============
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED ....      29,240,092                        29,491,294
                                                                ============                      ============
</TABLE>
                                      -18-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 9 - RESTATEMENT (CONTINUED)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                          INITIAL                        AS
                                                                          FILING      RESTATEMENT     RESTATED
                                                                         ---------    -----------    ---------
<S>                                                                      <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................    $(281,306)    $  15,446     $(265,860)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
     Depreciation and amortization ..................................      103,604             -       103,604
     Amortization of development costs ..............................       66,524             -        66,524
     Beneficial interest ............................................       93,750       (62,500)       31,250
     Stock-based compensation .......................................       80,041             -        80,041
     Grant of warrants ..............................................       31,200             -        31,200
     Foreign exchange gain ..........................................      (18,101)            -       (18,101)
     Loss on derivative liability ...................................            -        15,804        15,804
     Amortization of deferred debt issuance costs and debt discount .        4,783        31,250        36,033

Changes in assets and liabilities:
     Accounts receivable ............................................     (199,528)            -      (199,528)
     Prepaid expenses and other current assets ......................      (49,031)            -       (49,031)
     Other assets ...................................................       (2,400)            -        (2,400)
     Accounts payable and accrued expenses ..........................      379,253             -       379,253
     Accrued interest payable, related party ........................       24,777             -        24,777
     Accrued interest payable .......................................        5,237             -         5,237
     Due to related parties .........................................        1,191             -         1,191
     Accounts payable and accrued expenses  - long-term .............       11,050             -        11,050
                                                                         ---------     ---------     ---------

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES .................      251,045             -       251,045
                                                                         ---------     ---------     ---------
</TABLE>

                                      -19-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This report on Form 10-QSB contains forward-looking statements that are subject
to risks and uncertainties that could cause actual results to differ materially
from those discussed in the forward-looking statements and from historical
results of operations. Among the risks and uncertainties which could cause such
a difference are those relating to our dependence upon certain key personnel,
our ability to manage our growth, our success in implementing the business
strategy, our success in arranging financing where required, and the risk of
economic and market factors affecting us or our customers. Many of such risk
factors are beyond the control of the Company and its management.

GENERAL

Transax International Limited, a Colorado corporation (the "Company"), currently
trades on the OTC Bulletin Board under the symbol "TNSX"". Transax International
Limited is referred to in this Form 10-QSB as "we".

Through our wholly-owned subsidiary TDS Telecommunication Data Systems LTDA
("TDS"), we are an international provider of health information management
products (collectively, the "Health Information Management Products"), which are
specifically designed for the healthcare providers and health insurance
companies. We are dedicated to improving healthcare delivery by providing to
hospitals, physician practices and health insurance companies with innovative
health information management systems to manage coding, compliance, abstracting
and record management processes. We have developed a proprietary software
trademarked (Brazil only) "MedLink Solution", which was specifically designed
and developed for the healthcare and health insurance industry enabling the real
time automation of routine patient eligibility, verifications, authorizations,
claims processing and payment functions that are currently performed manually
(the "MedLink Solution").

RESULTS OF OPERATIONS

SIX-MONTH PERIOD ENDED JUNE 30, 2005 COMPARED TO SIX-MONTH PERIOD ENDED JUNE 30,
2004

Our net losses during the six-month period ended June 30, 2005 were $265,861
compared to a net loss of $544,384 during the six-month period ended June 30,
2004. During the six month period ended June 30, 2005, we generated $1,501,431
in net revenues compared to $450,199 in net revenues for the six months ended
June 30, 2004, an increase of $1,051,232 or 233.5%. The significant increase in
revenues is due to the continued rollout of software contracts in Brazil. We
undertook approximately 3.0 million "real-time" transactions during the first
and second quarter of 2005 compared to 1.1 million "real-time" transactions
during the same period in 2004. We installed a record 1043 Point of Sales (POS)
solutions during the six months ended June 30, 2005. At the end of June 2005 we
had 4,600 solutions operational in Brazil including 2345 Point of Sales
solutions.

                                      -20-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)

SIX-MONTH PERIOD ENDED JUNE 30, 2005 COMPARED TO SIX-MONTH PERIOD ENDED JUNE 30,
2004

During the six-month period ended June 30, 2005, we incurred operating expenses
of $1,596,323 compared to operating expenses of $890,578 incurred during the
six-month period ended June 30, 2004, an increase of $705,745 or 79.2%. The
increase in operating expenses during the six-month period ended June 30, 2005
from the same period in 2004 resulted from: (i) an increase of $350,147, or
approximately 141.8%, in cost of product support services resulting from the
increase in net revenues; (ii) an increase of $41,887, or approximately 25.4%,
in payroll and related benefits due to an increase in employees needed to handle
our increased operations; (iii) an increase of $172,048, or 93%, in general and
administrative expenses resulting from increased operating costs associated with
increased operations; (iv) an increase of $80,042, or 100%, in stock-based
compensation and consulting fees as a result of an increase in stock issuances
to employees, officers and consultants; (v) an increase of $68,853, or
approximately 198%, in depreciation and amortization expense as a result of an
increase in property and equipment acquired for our TDS operations, (vi) an
increase in research and development costs of $42,041 related to increased
amortization of development costs associated with our software, and (vii) an
increase in professional fees of $37,564 related to our SEC filings and filing
of a registration statement of form SB-2.

Certain operating expenses, however, decreased during the six-month period ended
June 30, 2005 from the same period in 2004 as follows: (i) a decrease of
$82,835, or 52.5%, in management and consulting fees, which is attributable to a
decrease in the use of consultants; and (ii) a decrease of $4,002, or
approximately, 20.4%, in investor relation fees attributable to a decrease in
the use of investor relations services.

We reported a loss from operations of $94,892 for the six-month period ended
June 30, 2005 as compared to a loss from operations of $440,379 for the
six-month period ended June 30, 2004. Although there can be no assurances, we
anticipate that during the fiscal year 2005, our ongoing marketing efforts and
product roll-out will result in an increase in our net sales from those reported
in the six months ended June 30, 2005. To support these increased sales, we
anticipate that our operating expenses will also increase during the fiscal year
2005 as compared to the fiscal 2004. We are, however, unable to predict at this
time the amount of any such increase in operating expenses.

Total other expenses increased $66,964, or approximately 64.4%, for the six
months ended June 30, 2005 as compared to the six months ended June 30, 2004.
Included in this change is: (i) an increase in other income of $29,717 due to
the income recognized upon settlement of accounts payable balances which were
settled for less than the original obligation.; (ii) an increase of $106,430 or
approximately 124.2%, in interest expense for the six months ended June 30, 2005
as compared to the six months ended June 30, 2004 which reflects an increase in
our borrowings during six months ended June 30, 2005, interest expense recorded
in connection with the discount on the Convertible Debenture and with the grant
of warrants upon debt conversion of $31,200; (iii) an increase of $25,553 in
foreign exchange rate gains due to a favorable fluctuation in the exchange rate
between Brazil and the United States, and (iv) $15,804 expense recognized for
the change in the valuation of the derivative liability.

For the six months ended June 30, 2005, our net loss was $265,861 or $0.01 per
common share compared to a net loss of $544,384 or $0.04 per common share for
the six month period ended June 30, 2004.

THREE-MONTH PERIOD ENDED JUNE 30, 2005 COMPARED TO THREE-MONTH PERIOD ENDED JUNE
30, 2004

Our net losses during the three-month period ended June 30, 2005 were $167,042
compared to a net loss of $112,214 during the three-month period ended June 30,
2004. During the three-month period ended June 30, 2005, we generated $861,023
in net revenues compared to $312,615 in net revenues for the three-months ended
June 30, 2004, an increase of $548,408 or 175.4%. The significant increase in
revenues is due to the continued rollout of software contracts in Brazil as
discussed above.

                                      -21-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)

During the three-month period ended June 30, 2005, we incurred operating
expenses of $916,787 compared to operating expenses of $391,324 incurred during
the three-month period ended June 30, 2004, an increase of $525,463 or 134.3%.
The increase in operating expenses during the three-month period ended June 30,
2005 from the same period in 2004 resulted from: (i) an increase of $232,534, or
approximately 143.5%, in cost of product support services resulting from the
increase in net revenues; (ii) an increase of $19,802, or approximately 23.8%,
in payroll and related benefits due to an increase in employees needed to handle
our increased operations; (iii) an increase of $98,929, or 119.2%, in general
and administrative expenses resulting from increased operating costs associated
with increased operations; (iv) an increase of $26,500, or 100%, in stock-based
compensation and consulting fees as a result of an increase in stock issuances
to employees, officers and consultants; (v) an increase of $42,273, or
approximately 252.3%, in depreciation and amortization expense as a result of an
increase in property and equipment acquired for our TDS operations, (vi) an
increase in research and development costs of $22,074 related to increased
amortization of development costs associated with our software, and (vii) an
increase in professional fees of $123,038 related to our SEC filings and the
filing of a registration statement, Form SB-2.

Certain operating expenses, however, decreased during the three-month period
ended June 30, 2005 from the same period in 2004 as follows: (i) a decrease of
$37,650, or 47.7%, in management and consulting fees, which is attributable to a
decrease in the use of consultants; and (ii) a decrease of $2,037, or
approximately, 72.1%, in investor relation fees attributable to a decrease in
the use of investor relations services.

We reported a loss from operations of $55,764 for the three-month period ended
June 30, 2005 as compared to a loss from operations of $78,709 for the
three-month period ended June 30, 2004.

Total other expenses increased $77,773, or approximately 232.1%, for three
months ended June 30, 2005 as compared to three months ended June 30, 2004.
Included in this change is: (i) a decrease in other expense of $11,372 as
reported for the three months ended June 30, 2004.; (ii) an increase of $79,082,
or approximately 196.1%, in interest expense for the three months ended June 30,
2005 as compared to the three months ended June 30, 2004, (iii) an increase of
$5,741 in foreign exchange rate gains due to a favorable fluctuation in exchange
rate between Brazil and the United States, and (iv) $15,804 expense recognized
for the change in the valuation of the derivative liability.

Therefore, our net loss during the three month period ended June 30, 2005 was
$167,042 or $0.01 per common share compared to a net loss of $112,214 or $0.01
per common share for the three month period ended June 30, 2004.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2005, our current assets were $534,525 and our current
liabilities were $2,333,245, which resulted in a working capital deficit of
$1,798,720. As of June 30, 2005, our total assets were $1,771,040 consisting of:
(i) $64,221 in cash; (ii) $100,578 in prepaid expenses and other assets; (iii)
$369,726 in accounts receivable; (iv) 279,878 in net software development costs;
(v) $720,758 in net valuation of property and equipment; (vi) deferred debt
offering costs of $233,479 which will be amortized into interest expense over
time and (vii) $2,400 of other assets.

As of June 30, 2005, our total liabilities were $3,289,652 consisting of: (i)
$1,874,109 in long-term and current portion of accounts payable and accrued
expenses; (ii) $172,400 due to related parties; (iii) $274,836 in convertible
loans to related parties; (iv) $142,071 in loan payable to related parties; (v)
$71,051 in long-term and current portion of capital lease obligation; (vi)
$31,251 in convertible debenture payable, net of unamortized discount of
$218,749; (ix) $458,130 in long-term and current portions of loan payable, and
(x) $265,804 in convertible feature liability related to the convertible
debenture.

                                      -22-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)

As at June 30, 2005, our current liabilities were $2,333,244 compared to
$2,121,551 at December 31, 2004. The increase in current liabilities is due
primarily to an increase in accounts payable and accrued expenses and additional
loans to fund operations.

For the six months ended June 30, 2005, net cash flow provided by operating
activities was $251,045 compared to net cash used in operating activities of
$114,525 for the six months ended June 30, 2004. The change in cash flows used
in operating activities is mainly due to the decrease in operating loss for the
period.

Net cash flows used in investing activities amounted to $484,404 for the six
months ended June 30, 2005 compared to $131,531 for the six months ended June
30, 2004, an increase in cash used in investing activities of $352,873. The
increase is primarily attributable to an increase in the acquisition of property
and equipment in order to facilitate our growth in revenues.

Net cash flow provided by financing activities for the six months ended June 30,
2005 was $407,674 resulting primarily from proceeds from a convertible debenture
and loans payable compared to $218,869 for the six months ended June 30, 2004
resulting from proceeds from related party loans of $139,500 and advanced from
related parties of $82,500.

In summary, based upon the cash flow activities as previously discussed, for the
six months ended June 30, 2005, our overall cash position increased by $60,131.

PLAN OF OPERATION

Since our inception, we have funded operations through short-term borrowings and
equity investments in order to meet our strategic objectives. Our future
operations are dependent upon external funding and our ability to increase
revenues and reduce expenses. Management believes that sufficient funding will
be available from additional related party borrowings and private placements to
meet our business objectives including anticipated cash needs for working
capital, for a reasonable period of time. However, there can be no assurance
that we will be able to obtain sufficient funds to continue the development of
our software products and distribution networks.

As of the date of this quarterly report, there is substantial doubt regarding
our ability to continue as a going concern as we have not generated sufficient
cash flow to fund our business operations and material commitments. Our future
success and viability, therefore, are dependent upon our ability to develop,
provide and market our information network solutions to healthcare providers,
health insurance companies and other end-users, and the continuing ability to
generate capital financing. We are optimistic that we will be successful in our
business operations and capital raising efforts; however, there can be no
assurance that we will be successful in generating revenue or raising additional
capital. The failure to generate sufficient revenues or raise additional capital
may have a material and adverse effect upon us and our shareholders.

We anticipate an increase in operating expenses over the next three years to pay
costs associated with such business operations. We may need to raise additional
funds. We may finance these expenses with further issuances of our common stock.
We believe that any anticipated private placements of equity capital and debt
financing, if successful, may be adequate to fund our operations over the next
twelve months. Thereafter, we expect we will need to raise additional capital to
meet long-term operating requirements. If we raise additional funds through the
issuance of equity or convertible debt securities other than to current
shareholders, the percentage ownership of our current shareholders would be
reduced, and such securities might have rights, preferences or privileges senior
to our existing common stock. In addition, additional financing may not be
available upon acceptable terms, or at all. If adequate funds are not available,
or are not available with acceptable terms, we may not be able to conduct our
business operations successfully. The outcome of this uncertainty could
significantly and materially restrict our overall business operations.

                                      -23-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)

Based upon a twelve-month work plan proposed by management, it is anticipated
that such a work plan would require approximately $2,000,000 to $5,000,000 of
financing designed to fund current debt commitments and business operations. As
of the date of this quarterly report, we entered into a financing agreement with
Scott and Heather Grimes, Joint Tenants with Right of Survivorship (the
"Investor"). Under the terms of the financing arrangement with the Investor, we
issued convertible debentures to the Investor in the original principal amount
of $250,000. The debentures are convertible at the Investor's option any time up
to maturity at a conversion price equal to the lower of: (i) 120% of the closing
bid price of our Common Stock on the date of the debentures, or (ii) 80% of the
lowest closing bid price of our Common Stock for the five trading days
immediately preceding the conversion date. The debentures have a two-year term
and accrue interest at 5% per year. At maturity, the debentures will
automatically convert into shares of our Common Stock at a conversion price
equal to the lower of: (i) 120% of the closing bid price of our Common Stock on
the date of the debentures, or (ii) 80% of the lowest closing bid price on our
Common Stock for five trading days immediately preceding the conversion date.
Additionally, we entered into a new Standby Equity Distribution Agreement with
Cornell Capital Partners on May 17, 2005. Pursuant to the Standby Equity
Distribution Agreement, we may, at our discretion, periodically sell to Cornell
Capital Partners shares of common stock for a total purchase price of up to $5.0
million.

We believe that we can satisfy our cash requirements for the next twelve months
based on our ability to enter into additional financing arrangement as
necessary. Our future success and viability are primarily dependent upon our
current management to generate revenues from business operations and raise
additional capital through further private offerings of our stock or loans from
private investors. There can be no assurance, however, that we will be able to
raise additional capital. Our failure to successfully raise additional capital
will have a material and adverse affect upon us and our shareholders.

Certain negative covenants in the Securities Purchase Agreement could
substantially impact our ability to raise funds from alternative sources in the
future. For example, for as long as the convertible debenture remains
outstanding and without the written consent of the debenture holder, the Company
(a) shall not directly or indirectly consummate any merger, reorganization,
restructuring, reverse stock split consolidation, sale of all or substantially
all of the Company's assets or any similar transaction or related transactions;
(b) shall not issue or sell shares of common stock or preferred stock without
consideration or for a consideration per share less than the bid price of the
common stock determined immediately prior to its issuance or issue any warrant,
option, right, contract, call, or other security or instrument granting the
holder thereof the right to acquire common stock without consideration or for a
consideration per share less than the bid price of the common stock determined
immediately prior to the issuance of such convertible security; (c) shall not
enter into any security instrument granting the holder a security interest in
any or all assets of the Company; (d) shall not file any registration statement
on Form S-8 except the Company may file one registration statement on Form S-8
for up to 2,500,000 shares of common stock and provided however, anyone
receiving shares pursuant to such permitted Form S-8 registration shall be
restricted from selling such shares for a period of ninety (90) days after the
registration statement becomes effective and (e) shall not, and shall cause each
of its subsidiaries not to, enter into, amend, modify or supplement, or permit
any subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any of its
subsidiary's officers, directors, person who were officers or directors at any
time during the previous two years, stockholders who beneficially own five
percent (5%) or more of the Company's common stock, or Affiliates (as defined in
the Securities Purchase Agreement) or with any individual related by blood,
marriage, or adoption to any such individual or with any entity in which any
such entity or individual owns a five percent (5%) or more beneficial interest,
except for (i) customary employment arrangements and benefit programs on
reasonable terms, (ii) any investment in an Affiliate of the Company, (iii) any
agreement, transaction, commitment, or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such related party and (iv) any agreement transaction,
commitment, or arrangement which is approved by a majority of the disinterested
directors of the Company.

                                      -24-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)

OFF BALANCE SHEET ARRANGEMENTS

As of the date of this quarterly report, we do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors. The term "off-balance sheet
arrangement" generally means any transaction, agreement or other contractual
arrangement to which an entity unconsolidated with us is a party, under which we
have: (i) any obligation arising under a guarantee contract, derivative
instrument or variable interest; or (ii) a retained or contingent interest in
assets transferred to such entity or similar arrangement that serves as credit,
liquidity or market risk support for such assets.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with
generally accepted accounting principles in the United States. Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and expenses. These
estimates and assumptions are affected by management's applications of
accounting policies. Critical accounting policies for Transax International
Limited includes the useful live of property and equipment and accounting for
stock based compensation.

Under the criteria set forth in SFAS No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed," capitalization of
software development costs begins upon the establishment of technological
feasibility of the software. The establishment of technological feasibility and
the ongoing assessment of the recoverability of these costs require considerable
judgment by management with respect to certain external factors, including, but
not limited to, anticipated future gross product revenues, estimated economic
life, and changes in software and hardware technology. Capitalized software
development costs are amortized utilizing the straight-line method over the
estimated economic life of the software not to exceed three years. We regularly
review the carrying value of software development assets and a loss is
recognized when the unamortized costs are deemed unrecoverable based on the
estimated cash flows to be generated from the applicable software.

                                      -25-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)

We review the carrying value of property and equipment for impairment at least
annually or whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of long-lived
assets is measured by comparison of its carrying amount to the undiscounted cash
flows that the asset or asset group is expected to generate. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the property, if any, exceeds its fair
market value.

Accounting for Stock Based Compensation - We account for stock options issued to
employees in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation cost is measured on the date of grant as
the excess of the current market price of the underlying stock over the exercise
price. Such compensation amounts are amortized over the respective vesting
periods of the option grant. The Company adopted the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation" and SFAS 148,
"Accounting for Stock-Based Compensation -Transition and Disclosure", which
permits entities to provide pro forma net income (loss) and pro forma earnings
(loss) per share disclosures for employee stock option grants as if the
fair-valued based method defined in SFAS No. 123 had been applied. The Company
accounts for stock options and stock issued to non-employees for goods or
services in accordance with the fair value method of SFAS 123. We are required
to comply with SFAS No. 123 (revised 2004) starting on the first day of our
fiscal year 2006. We are currently evaluating the effect that the adoption of
SFAS No. 123 (revised 2004) will have on our consolidated operating results and
financial condition. No stock-based compensation cost is currently reflected in
net loss for employee option grants as all options granted had an exercise price
equal to or exceeding market value of the underlying common stock on the date of
grant.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
companies to recognize, in the statement of operations, the grant-date fair
value of stock options and other equity-based compensation issued to employees.
FAS No. 123R is effective for the Company on January 1, 2006. We are in process
of evaluating the impact of this pronouncement on our financial position.

 In May 2005, FASB issued FASB Statement 154, "Accounting Changes and Error
Corrections -- a replacement of APB Opinion No. 20 and FASB Statement No. 3" ("
FAS 154"). FAS 154 changes the requirements for the accounting for and reporting
of a change in accounting principle. The provisions of FAS 154 require, unless
impracticable, retrospective application to prior periods' financial statements
of (1) all voluntary changes in principles and (2) changes required by a new
accounting pronouncement, if a specific transition is not provided. FAS 154 also
requires that a change in depreciation, amortization, or depletion method for
long-lived, non-financial assets be accounted for as a change in accounting
estimate, which requires prospective application of the new method. FAS 154 is
effective for all accounting changes made in fiscal years beginning after
December 15, 2005.

ITEM 3.  CONTROLS AND PROCEDURES

We maintain "disclosure controls and procedures," as such term is defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"),
that are designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. We
conducted an evaluation (the "Evaluation"), under the supervision and with the
participation of our Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO"), of the effectiveness of the design and operation of our disclosure
controls and procedures ("Disclosure Controls") as of the end of the period
covered by this report pursuant to Rule 13a-15 of the Exchange Act.

                                      -26-
<PAGE>

ITEM 3.  CONTROLS AND PROCEDURES (CONTINUED)

Our management, including our CEO and CFO, do not expect that our disclosure
controls and internal controls will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Our
disclosure controls and procedures are designed to provide reasonable assurance
of achieving our objectives. Our certifying officers have concluded that our
disclosure controls and procedures were ineffective as at June 30, 2005.
However, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. It is our responsibility and that of our management to identify
any deficiencies in internal controls over financial reporting. We discovered
certain deficiencies in our internal control over financial reports, which
resulted in the restatement of our financial statements as discussed below. The
restatement was undertaken to properly reflect an embedded derivative conversion
liability related to our debentures payable in accordance with SFAS No. 133 and
EITF 00-19 after further consultation with our independent auditors.

We have implemented additional measures as part of changes to our internal
controls to determine and ensure that information required to be disclosed in
reports filed under the exchange Act was recorded, processed, summarized and
reported within the time periods specified in the rules and forms including, but
not limited to, the following: (i) engagement of a third party to assist us with
documenting processes, performing testing and reviewing our internal control
over financial reporting in connection with our assessment under Section 404 of
the Sarbanes-Oxley Act; (ii) evaluation and implementation of improvements to
our accounting and management information systems; and (iii) development and
implementation of a remediation plan to address any perceived deficiencies
identified by the Securities and Exchange Commission in our internal control
over financial reporting. The costs of these additional measures did not have a
material impact on our future results or operations liquidity.

On July 6, 2006, we announced that we were restating our Consolidated Balance
Sheet at June 30, 2005 and our Consolidated Statement of Operations and
Statement of Cash Flows for the period ended June 30, 2005 to properly reflect
an embedded derivative conversion liability related to our debenture payable in
accordance with SFAS No. 133 and EITF 00-19. The change in presentation of the
Company's embedded derivative feature associated with its debenture payable has
the effect of increasing total assets by $33,479, increasing liabilities by
$80,533, increasing the stockholders' deficit by $47,054 as of June 30, 2005,
and decreasing the Company's net loss by $15,446 for the three and six months
ended June 30, 2005, respectively. This change in presentation of the Company's
embedded derivative feature affected some of the items within the Company's
consolidated statement of cash flows for the six months ended June 30, 2005 but
did not impact cash at the end of the period.

Our certifying officers have concluded that our disclosure controls and
procedures were ineffective as at June 30, 2005 related to the presentation of
derivative liabilities. However, we believe that the implementation of changes
to our internal controls and procedures as detailed above has corrected this
deficiency.

                                      -27-
<PAGE>

ITEM 3.  CONTROLS AND PROCEDURES (CONTINUED)

Other than the changes related to the proper presentation and recording of
derivative liabilities, there were no changes during our last fiscal quarter in
the Company's internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange
Act with respect to the period ended June 30, 2005 that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of a simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management or board override of the
control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.


                                      -28-
<PAGE>

                                     PART II

Item 1 - Legal Proceedings

         On March 14, 2005, X-Clearing Corp, a Colorado corporation
         ("X-Clearing"), our former transfer agent, initiated legal proceedings
         against us by filing a complaint and verified motion for replevin and
         for temporary order to preserve property in the District Court of the
         City and County of Denver, State of Colorado, civil action no. 05 CV
         1980 (the "Complaint"). During September 2001, we had entered into an
         agreement with X-Clearing Corp. regarding engagement as our transfer
         agent, registrar and disbursing agent in connection with our shares of
         Common Stock (the "Transfer Agent Agreement"). The Complaint generally
         alleges that: (i) we have breached and wrongfully attempted to
         terminate the Transfer Agent Agreement; (ii) X-Clearing has a valid and
         perfected security interest in our books and records in accordance with
         the terms of the Transfer Agent Agreement; and (iii) X-Clearing is
         entitled to an order from the District Court replevining and preventing
         us from altering, destroying or otherwise interfering with the valid
         and perfected security interest and liquidated damages.

         On April 5, 2005, we filed an answer to Complaint, counterclaims and
         jury demand (the "Answer"). The Answer generally denies that: (i) we
         breached and attempted to wrongfully terminate the Transfer Agent
         Agreement; (ii) X-Clearing Corp. has a valid and perfected security
         interest in our books and records; (iii) X-Clearing is entitled to an
         order of replevin and liquidated damages. Our Answer further states
         that: (i) X-Clearing Corp. has failed to take reasonable steps to
         minimize or mitigate its claimed damages; and (ii) X-Clearing Corp.'s
         claims are barred by the statute of frauds, doctrine of laches,
         doctrine of accord and satisfaction. Our Answer further counterclaims
         that: (i) despite X-Clearing Corp. being paid all administrative fees,
         share transfer fees and fees for new issuances, X-Clearing Corp. has
         refused to produce and provide us with our stock transfer records,
         which has caused us irreparable harm; (ii) X-Clearing Corp. has
         continued undertaking stock transfers on our behalf and illegally
         issuing fraudulent stock certificates; and (iii) X-Clearing Corp. has
         improperly and illegally used our records, which included stock
         certificates that X-Clearing Corp. has fraudulently created and issued
         to make stock transfers without notification to us.

         On April 7, 2005, we filed a stipulated motion for testimony by
         telephone and for expedited ruling by court. A hearing was set for
         April 12, 2005. X-Clearing Corp.'s replevin action was dismissed by the
         District Court. As of the date of this Quarterly Report, we intend to
         aggressively pursue all such legal actions and review further legal
         remedies against X-Clearing Corp.

         The parties through legal counsel are currently in negotiation for
         settlement by mutual agreement.

         Other than as disclosed above, we are not aware of any legal
         proceedings contemplated by any governmental authority or other party
         involving us or our subsidiaries or our properties. None of our
         directors, officers or affiliates are: (i) a party adverse to us in any
         legal proceedings; or (ii) has an adverse interest to us in any legal
         proceedings. We are not aware of any other legal proceedings pending or
         that have been threatened against us, our subsidiaries or our
         properties.

                                      -29-
<PAGE>

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

         On June 28, 2005, the holder of the related party notes partially
         exercised the conversion feature. Accordingly, we issued 400,000 shares
         at the conversion price of $.125 per share and 400,000 warrants to
         purchase common stock of the Company at $.25 per share (see note 2 to
         the unaudited consolidated financial statements included elsewhere in
         this filing) for the conversion of principal balance of $50,000. We
         also issued 35,770 shares of common stock to settle $4,471 in interest
         due on these loans.

         On June 28, 2005, we issued 300,000 shares of common stock at $.11 per
         share, the fair market value on the date of grant for settlement of
         $33,000 of this debt.

         The recipients are sophisticated investors who have such knowledge and
         experience in financial, investment and business matters that they are
         capable of evaluating the merits and risks of the prospective
         investment in our securities. The recipients are accredited investors.
         The issuance was exempt from registration under the Securities Act in
         reliance on an exemption provided by Section 4(2) of that act.

Item 3 - Defaults Upon Senior Securities

         None.

Item 4 - Submissions of Matters to a Vote of Security Holders

         None

Item 5.  Other Information

         None

Item 6.  Exhibits

31.1     Rule 13a - 14(a)/15d-14(a) Certification of the Chief Executive Officer
         pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2     Rule 13a - 14(a)/15d-14(a) Certification of the Chief Financial Officer
         pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1     Certification of Chief Executive Officer Certification pursuant to
         Section 906 of the Sarbanes-Oxley Act of 2002

32.2     Certification of Chief Financial Officer Certification pursuant to
         Section 906 of the Sarbanes-Oxley Act of 2002


                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        TRANSAX INTERNATIONAL LIMITED


         Date:  October 13, 2006        By: /s/ Stephen Walters
                                            -------------------
                                        Stephen Walters
                                        Chief Executive Officer


         Date:  October 13, 2006        By: /s/ Adam Wasserman
                                            ------------------
                                        Adam Wasserman
                                        Principal Financial and
                                        Accounting Officer

                                      -30-