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 September 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)


         Indicate by checkmark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).

                               Yes _____ No __X__


         Applicable only to issuers involved in bankruptcy proceedings during
the preceding five years.

                                       N/A


         Check whether the Registrant filed all documents required to be filed
by Section 12, 13 and 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.

                               Yes _____ No _____


                      Applicable only to corporate issuers

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

Class                                        Outstanding as of November 10, 2005
--------                                     -----------------------------------
Common Stock, $0.00001 par value             31,200,949

<PAGE>

                   EXPLANATORY NOTE REGARDING AMENDMENT NO. 2

We are amending this Form 10-QSB for the periods ended September 30, 2005 to
restate our unaudited financial statements at September 30, 2005 and for the
three and nine month ended September 30, 2005. After reviewing certain
accounting principles we have 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 September 30,
2005 and for the three and nine-month period 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 $28,697,
increasing liabilities by $158,888, increasing the stockholders' deficit by
$130,191 as of September 30, 2005, and increasing the Company's net loss by
$83,136 and $67,691 for the three and nine months ended September 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 nine months ended September 30, 2005 but did not impact
cash at the end of the period.

Please see Note 8 - Restatement contained in the Notes to Consolidated Financial
Statements (Unaudited) appearing later in this Form 10-QSB/A which further
describes the effect of this restatement.

The Items of this Form 10-QSB/A for the period ended September 30, 2005 which
are amended and restated are as follows: Part I Financial Information, Item 1
Financial Statements, Consolidated Balance Sheet as of September 30, 2005
(Unaudited), Statement of Operations for the three and nine-month period ended
September 30, 2005 (Unaudited), Statement of Cash Flows for the nine-month
period ended September 30, 2005 (Unaudited), and Notes to Consolidated Financial
Statements as of September 30, 2005 (Unaudited), Part 2. Management's Discussion
and Analysis or Plan of Operation, and Part 3. Controls and Procedures. Further,
Part II Other Information, Item 6. Exhibits of this 10-QSB/A includes currently
dated certificates from the Company's President and acting Chief Financial
Officer in Exhibits 31.1, 31.2, 32.1 and 32.2.

The remaining Items contained in this Form 10-QSB/A consist of all other Items
originally contained in our Form 10-QSB for the period ended September 30, 2005
as filed on November 15, 2005. This Form 10-QSB/A does not reflect events
occurring after the filing of the original Form 10-QSB, nor modify or update
those disclosures in any way other than as required to reflect the effects of
the restatement.

<PAGE>

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


                                      INDEX


                                                                           Page

PART I - FINANCIAL INFORMATION

         Item 1 - Consolidated Financial Statements

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

         Consolidated Statements of Operations (Unaudited)
            For the Three and Nine Months Ended September 30, 2005 and 2004    4

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

         Notes to Unaudited Consolidated Financial Statements.............. 6-20

         Item 2 - Management's Discussion and Analysis or Plan of
                  Operation................................................21-28

         Item 3 - Controls and Procedures..................................28-29


PART II - OTHER INFORMATION

         Item 1 - Legal Proceedings........................................29-30

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

         Item 3 - Default Upon Senior Securities...........................   31

         Item 4 - Submission of Matters to a Vote of Security Holders......   31

         Item 5 - Other Information........................................   31

         Item 6 - Exhibits.................................................   31

         Signatures........................................................   31

                                       -2-
<PAGE>

                 TRANSAX INTERNATIONAL LIMITED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               September 30, 2005
                           (As Restated - See Note 8)
                                   (Unaudited)

                                     ASSETS

CURRENT ASSETS:
  Cash ............................................................ $    12,261
  Accounts receivable (Net of allowance for doubtful accounts
   of $0) .........................................................     379,286
  Prepaid expenses and other current assets .......................     144,351
                                                                    -----------

     TOTAL CURRENT ASSETS .........................................     535,898

SOFTWARE DEVELOPMENT COSTS, net ...................................     292,035
PROPERTY AND EQUIPMENT, net .......................................     694,762
DEFERRED DEBT OFFERING COSTS ......................................     228,697
OTHER ASSETS ......................................................       2,400
                                                                    -----------

     TOTAL ASSETS ................................................. $ 1,753,792
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Current portion of capital lease obligation ..................... $    48,122
  Current portion of loan payable .................................     433,852
  Accounts payable and accrued expenses ...........................   1,482,131
  Due to related parties ..........................................     179,953
  Loan payable - related party ....................................     205,836
  Convertible loans from related party ............................     197,578
                                                                    -----------

     TOTAL CURRENT LIABILITIES ....................................   2,547,470

DEBENTURE PAYABLE, NET OF UNAMORTISED DISCOUNT OF $187,500 ........      62,500
CONVERSION FEATURE LIABILITY ......................................     317,690
ACCOUNTS PAYABLE AND ACCRUED EXPENSES, net of current portion .....     427,430
                                                                    -----------

     TOTAL LIABILITIES ............................................   3,355,092
                                                                    -----------

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;
   31,200,949 shares issued and outstanding .......................         312
  Paid-in capital .................................................   7,537,567
  Accumulated deficit .............................................  (9,063,577)
  Deferred compensation ...........................................     (17,500)
  Other comprehensive loss - Cumulative foreign currency adjustment     (58,102)
                                                                    -----------

     TOTAL STOCKHOLDERS' DEFICIT ..................................  (1,601,300)
                                                                    -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT .................. $ 1,753,792
                                                                    ===========

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

                                       -3-
<PAGE>
<TABLE>
                                 TRANSAX INTERNATIONAL LIMITED AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (As Restated - See Note 8)
                                                  (Unaudited)
<CAPTION>
                                                     FOR THE THREE MONTHS ENDED     FOR THE NINE MONTHS ENDED
                                                            SEPTEMBER 30,                 SEPTEMBER 30,
                                                         2005           2004           2005           2004
                                                     ------------   ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>            <C>
REVENUES ..........................................  $    948,993   $    322,377   $  2,450,424   $    772,576
                                                     ------------   ------------   ------------   ------------

OPERATING EXPENSES:
  Cost of product support services ................       298,251        145,412        895,247        392,261
  Payroll and related benefits ....................       111,797        104,638        318,897        269,851
  Software maintenance costs ......................        47,704         29,846        137,726         77,827
  Professional fees ...............................        63,966        108,647        135,111        142,228
  Management and consulting fees - related parties         41,250         99,058        116,215        256,858
  Stock based compensation and consulting .........             -        265,011         80,042        265,011
  Investor relations ..............................        54,815         90,660         70,449        110,297
  Depreciation and amortization ...................        73,050          8,280        176,654         43,031
  General & administrative ........................       267,832        113,259        624,646        298,025
                                                     ------------   ------------   ------------   ------------

     TOTAL OPERATING EXPENSES .....................       958,665        964,811      2,554,987      1,855,389
                                                     ------------   ------------   ------------   ------------

LOSS FROM OPERATIONS ..............................        (9,672)      (642,434)      (104,563)    (1,082,813)
                                                     ------------   ------------   ------------   ------------

OTHER INCOME (EXPENSES):
  Other income (expense) ..........................             -        (10,424)        10,514        (29,627)
  Foreign exchange gains ..........................           428            197         26,862          1,078
  Loss on derivative liability ....................       (51,886)             -        (67,690)             -
  Interest expense ................................      (146,646)       (31,176)      (282,482)       (73,827)
  Interest expense - related party ................      (110,004)       (24,727)      (166,281)       (67,759)
                                                     ------------   ------------   ------------   ------------

     TOTAL OTHER EXPENSES .........................      (308,108)       (66,130)      (479,077)      (170,135)
                                                     ------------   ------------   ------------   ------------

NET LOSS ..........................................      (317,780)      (708,564)      (583,641)    (1,252,948)

OTHER COMPREHENSIVE INCOME:
  Unrealized foreign currency translation gain
   (loss) .........................................        (4,324)             -          4,550              -
                                                     ------------   ------------   ------------   ------------

COMPREHENSIVE LOSS ................................  $   (322,104)      (708,564)  $   (579,091)  $ (1,252,948)
                                                     ============   ============   ============   ============

NET LOSS PER COMMON SHARE:
BASIC AND DILUTED .................................  $      (0.01)  $      (0.04)  $      (0.02)  $      (0.08)
                                                     ============   ============   ============   ============

WEIGHTED AVERAGE SHARES OUTSTANDING -
  BASIC AND DILUTED ...............................    30,296,894     16,665,608     29,596,231     15,807,994
                                                     ============   ============   ============   ============

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

                                                      -4-
</TABLE>
<PAGE>
<TABLE>
                                 TRANSAX INTERNATIONAL LIMITED AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (As Restated - See Note 8)
                                                  (Unaudited)
<CAPTION>
                                                                                   FOR THE NINE MONTHS ENDED
                                                                                         SEPTEMBER 30,
                                                                                 -----------------------------
                                                                                     2005              2004
                                                                                 -----------       -----------
<S>                                                                              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..................................................................      $  (583,641)      $(1,252,948)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
     Depreciation and amortization ........................................          176,654           106,641
     Amortization of software maintenance costs ...........................          106,590                 -
     Beneficial interest ..................................................           31,250                 -
     Stock-based compensation and consulting ..............................          102,166           186,311
     Grant of warrants ....................................................          129,745            78,700
     Gain on sale of fixed assets .........................................                -              (251)
     Amortization of deferred debt issuance costs .........................            9,566                 -
     Amortization of debt discount.........................................           62,500                 -
     Derivative loss.......................................................           67,690                 -

Changes in assets and liabilities:
     Accounts receivable ..................................................         (209,088)         (142,125)
     Prepaid expenses and other current assets ............................          (92,804)          (23,009)
     Other assets .........................................................           (2,400)                -
     Accounts payable and accrued expenses ................................          391,390           136,523
     Accrued interest payable, related party ..............................           17,929            67,759
     Accrued interest payable .............................................            5,237            73,827
     Due to related parties ...............................................           42,744           324,699
     Accrued payroll and related expenses .................................                -           304,563
     Debt settlement by issuance of shares and exercise of options ........                -           154,418
     Accounts payable and accrued expenses  - long-term ...................           34,365                 -
                                                                                 -----------       -----------

NET CASH PROVIDED BY OPERATING ACTIVITIES .................................          289,893            15,108
                                                                                 -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capitalized software development costs ..................................         (155,581)         (236,353)
  Proceeds from disposal of property and equipment ........................                -             3,113
  Acquisition of property and equipment ...................................         (428,100)           (3,852)
                                                                                 -----------       -----------

NET CASH USED IN INVESTING ACTIVITIES .....................................         (583,681)         (237,092)
                                                                                 -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Advances from related party .............................................                -            10,000
  Advances from non-related company .......................................                -           114,000
  Repayment of advances from related party ................................          (35,000)                -
  Repayments under capital lease obligations ..............................          (43,891)          (37,483)
  Proceeds from convertible debenture .....................................          336,738                 -
  Proceeds from loan payable ..............................................          117,704                 -
  Proceeds from loan - related party ......................................           60,000           141,806
  Repayment of from loan - related party ..................................          (15,084)                -
                                                                                 -----------       -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES .................................          420,467           228,323
                                                                                 -----------       -----------

EFFECT OF EXCHANGE RATE CHANGES ON CASH ...................................         (118,508)          (11,149)
                                                                                 -----------       -----------

NET INCREASE (DECREASE) IN CASH ...........................................            8,171            (4,810)

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

CASH, END OF PERIOD .......................................................      $    12,261       $     5,662
                                                                                 ===========       ===========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest ..................................................      $    20,188       $   141,583
                                                                                 ===========       ===========
  Cash paid for income taxes ..............................................      $         -       $         -
                                                                                 ===========       ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Common stock issued for debt and accrued interest .......................      $   256,717       $   148,500
                                                                                 ===========       ===========
  Common stock issued for services ........................................      $   102,166       $   265,011
                                                                                 ===========       ===========
  Grant of common stock warrants in connection debt conversion ............      $   129,745       $    78,700
                                                                                 ===========       ===========

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

                                                      -5-
</TABLE>
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 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 nine months ended
September 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
                               SEPTEMBER 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.

Comprehensive Loss
------------------

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

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 Statement of
Accounting Standards ("SFAS") No. 123,"Accounting for Stock-Based Compensation"
and SFAS 148, "Accounting for Stock-Based Compensation -Transition and
Disclosure", which permits entities toprovide 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.

                                       -7-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005

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

Stock-based compensation (continued)
------------------------------------

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 nine months ended September 30, 2005 and 2004:

                                                 Nine months ended September 30,
                                                 -------------------------------
                                                     2005               2004
                                                 ------------       ------------
Net loss as reported ......................      $  (583,641)       $(1,252,948)
Less: total stock-based employee
compensation expense determined under
fair value based method, net of related tax
effect ....................................          (50,871)          (265,011)
                                                 -----------        -----------

Pro forma net loss ........................      $  (634,512)       $(1,517,959)
                                                 ===========        ===========

  Basic and diluted loss per share:
      As reported .........................      $      (.02)       $      (.08)
                                                 ===========        ===========
      Pro forma ...........................      $      (.02)       $      (.09)
                                                 ===========        ===========

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
September 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 September 30,
2005, there were options and warrants to purchase 13,526,070 shares of common
stock, which could potentially dilute future earnings per share, but which are
anti-dilutive for the periods presented above.

Recent accounting pronouncements
--------------------------------

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("SFAS
No. 123R"). SFAS 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.

                                       -8-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 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.

Management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.

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 at $.25 per share 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. The fair value of these
warrant grants were estimated at $0.078 per warrant on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions: dividend yield of -0- percent; expected volatility of 206%;
risk-free interest rate of 3.25% and an expected holding period of 2 years. In
connection with these warrants, the Company recorded interest expense of
$31,200.

On September 30, 2005, the holder of the notes partially exercised the
conversion feature. Accordingly, the Company issued 600,000 shares and 600,000
warrants to purchase common stock of the Company for the conversion of principal
balance of $75,000. The Company also issued 77,968 shares of common stock to
settle $9,746 in interest due on these loans. The fair value of these warrant
grants were estimated at $0.164 per warrant on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: dividend yield of -0- percent; expected volatility of 218%;
risk-free interest rate of 3.75% and an expected holding period of 2 years. In
connection with these warrants, the Company recorded interest expense of
$98,545.

                                       -9-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005

NOTE 2 - RELATED PARTY TRANSACTIONS (CONTINUED)

Convertible Loans Payable (continued)
-------------------------------------

At September 30, 2005, interest due on these two loans amounted to $22,578 and
the aggregate principal amount due is $175,000. During the nine months ended
September 30, 2005 and 2004, the Company incurred $155,084 (including the fair
value of warrants granted upon conversion of $129,745) and $60,052,
respectively, in interest expense related to these two loans. In 2005, the
Company did not incur beneficial conversion charges on these convertible loans
because the conversion price was equivalent to the average offering price for
equity when these loans became convertible.

Due to Related Parties
----------------------

As of September 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 nine months ended September 30, 2005 and 2004, the Company incurred
$123,750 and $99,000, 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. On September
27, 2005, the Company issued 200,000 shares of common stock at $.17 per share to
this officer/director for settlement of $34,000 of this debt. The fair market
value of these shares was based on the average price of the Company's shares
traded between August 29 and September 26, 2005. At September 30, 2005, $152,928
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 September 30, 2005, $6,121 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 ($138,552 at September 30,
2005) from an officer of the Company for working capital purposes. The loan
accrues 0.8% compounded interest per month, had an initial term of twelve
months, and the debt is repayable quarterly in arrears. The officer agreed to
extend this loan for an additional twelve months until March 2006. Additionally,
on August 23, 2005, the Company borrowed $60,000 from this officer. This loan
accrues interest at 9.6% per annum and is payable on demand. During the nine
months ended September 30, 2005 and 2004, the Company incurred $11,197 and
$7,707, respectively, in interest related to these loans. As at September 30,
2005, $7,284 in interest was accrued on these loans and the aggregate principal
amount due is $198,552 and is included in loan payable - related party on the
accompanying balance sheet.

                                      -10-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005

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 nine months ended
September 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 September
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.

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 nine months ended September 30, 2005, after
adjustment, the Company recorded a loss on valuation of derivative liability of
$67,690.

                                      -11-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005

NOTE 3 - FINANCING ARRANGEMENTS (CONTINUED)

Debenture Payable (continued)
-----------------------------

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 nine months ended September 30, 2005 for both the
discount on the debenture and the deferred offering costs was approximately
$72,100 and is included in interest expense.

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

                                       At Inception        At September 30, 2005
                                       ------------        ---------------------
Market Price: .................           $ 0.140                 $ 0.190
Exercise Price: ...............           $ 0.104                 $ 0.128
Term: .........................           2 Years                1.5 Years
Volatility: ...................            203%                     218%
Risk-free interest rate: ......            3.25%                   3.75%

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

Convertible debentures payable .............   $ 250,000

Less: unamortized discount on debentures ...    (187,500)
                                               ---------

Convertible debentures, net ................   $  62,500
                                               =========

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.

                                      -12-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005

NOTE 3 - FINANCING ARRANGEMENTS (CONTINUED)

Standby Equity Distribution Agreement (continued)
-------------------------------------------------

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 September 30, 2005, the commitment fee was
deemed to be a deferred debt offering cost on the accompanying balance sheet to
be amortized as a financing expense over the effective period of 24 months or
less if funded earlier. Since as of September 30, 2005, the Company's
registration was not yet declared effective, the Company has not begun to
amortize the commitment fee. In October 2005, the Company's registration was
withdrawn. The Company and Cornell Capital Partners are in discussions regarding
a restructuring of this arrangement.

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 consulting expense of $16,000.

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 (see note 2). 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 exercised the conversion
feature. Accordingly, the Company issued 400,000 shares and 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) 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 an officer/director for
settlement of $33,000 of this debt.

                                      -13-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

Common Stock (continued)
------------------------

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 date of grant of
$0.15 per share or $30,000 based on the quoted trading price and recorded
stock-based consulting expense of $12,500 and deferred consulting expense of
$17,500 to be amortized over the service period.

On September 27, 2005, the Company issued 200,000 shares of common stock at $.17
per share, the average fair market value on the date of grant, to an
officer/director for settlement of $34,000 of debt.

On September 30, 2005, the holder of the related party loans (see note 2)
exercised the conversion feature. Accordingly, the Company issued 600,000 shares
and the conversion price of $.125 per share and 600,000 warrants to purchase
common stock of the Company at $.25 per share for the conversion of principal
balance of $75,000. The Company also issued 77,968 shares of common stock to
settle $9,746 in interest due on these loans.

Stock Options
-------------

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 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 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
September 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 September 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

                                      -14-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

Stock Options (continued)
-------------------------

The following information applies to options outstanding at September 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
September 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 ......................................   1,000,000     0.25
      Exercised ....................................           -        -
      Forfeited ....................................           -        -
                                                      ----------  --------

      Outstanding at September 30, 2005 ............  10,101,070   $ 0.58
                                                      ==========  ========

         Warrants exercisable at end of period .....  10,101,070   $ 0.58
                                                      ==========  ========

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

The following information applies to all warrants outstanding at September 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         2.90          $ 1.00      4,325,000       1.00
 $0.50         373,570         0.25          $ 0.50        373,570       0.50
 $0.30       2,000,000         1.25          $ 0.30      2,000,000       0.30
 $0.20       2,402,500         4.00          $ 0.20      2,402,500       0.20
 $0.25       1,000,000         1.90          $ 0.25      1,000,000       0.25

                                      -15-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 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 September 30, 2005, an
accrual of $50,000 is recorded and 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.

                                           Nine Months Ended   Nine Months Ended
                                             September 30,        September 30,
                                                 2005                 2004
                                           -----------------   -----------------
Net sales to Unaffiliated Customers:
  Brazil .............................        $ 2,450,424         $   772,576
  USA ................................                  -                   -
  Singapore ..........................                  -                   -
  Australia ..........................                  -                   -
  Mauritius ..........................                  -                   -
                                              -----------         -----------

     Total Sales .....................          2,450,424             772,576
                                              -----------         -----------

Operating Expenses:
  Brazil .............................          1,955,458           1,049,166
  USA ................................            540,163             739,435
  Singapore ..........................                  -                   -
  Australia ..........................              9,131              32,429
  Mauritius ..........................             50,235              34,359
                                              -----------         -----------

  Total Operating Expenses ...........          2,554,987           1,855,389
                                              -----------         -----------

Loss from operations .................           (104,563)         (1,082,813)
                                              -----------         -----------

Other income (expenses):
  Brazil .............................           (155,857)            (90,763)
  USA ................................           (331,391)            (82,808)
  Australia ..........................              8,171               3,436
                                              -----------         -----------
                                                 (479,077)           (170,135)
                                              -----------         -----------

Net loss as reported in the
 accompanying statements .............        $  (583,641)        $(1,252,948)
                                              ===========         ===========

                                      -16-
<PAGE>
                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005

NOTE 7 - GOING CONCERN

Since inception, the Company has incurred cumulative net losses of $9,063,577,
has a stockholders' deficit of $1,601,300 at September 30, 2005 and has a
working capital deficit of $2,011,574. 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 September 30, 2005, these
deficiencies (including interest and fines) amounted to approximately $620,800.
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 - RESTATEMENT

After reviewing certain accounting principles the Company has 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 September 30, 2005 and for the three and nine 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 $28,697, increasing liabilities by $158,888, increasing the
stockholders' deficit by $130,191 as of September 30, 2005, and increasing the
Company's net loss by $83,136 and $67,691 for the three and nine months ended
September 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 nine months ended September 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:

                                      -17-
<PAGE>

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

NOTE 8 - RESTATEMENT (CONTINUED)

                           CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2005
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                         INITIAL                        AS
                                                                         FILING      RESTATEMENT     RESTATED
                                                                       -----------   -----------   -----------
                                     ASSETS
<S>                                                                    <C>           <C>           <C>
CURRENT ASSETS:
  Cash ..............................................................  $    12,261   $         -   $    12,261
  Accounts receivable (Net of allowance for doubtful accounts of $0)       379,286             -       379,286
  Prepaid expenses and other current assets .........................      144,351             -       144,351
                                                                       -----------   -----------   -----------

     TOTAL CURRENT ASSETS ...........................................      535,898             -       535,898

SOFTWARE DEVELOPMENT COSTS, net .....................................      292,035             -       292,035
PROPERTY AND EQUIPMENT, net .........................................      694,762             -       694,762
DEFERRED DEBT OFFERING COSTS ........................................      200,000        28,697       228,697
OTHER ASSETS ........................................................        2,400             -         2,400
                                                                       -----------   -----------   -----------
     TOTAL ASSETS ...................................................  $ 1,725,095   $    28,697   $ 1,753,792
                                                                       ===========   ===========   ===========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Current portion of capital lease obligation .......................  $    48,122   $         -   $    48,122
  Current portion of loan payable ...................................      433,852             -       433,852
  Accounts payable and accrued expenses .............................    1,482,129             2     1,482,131
  Due to related parties ............................................      179,953             -       179,953
  Loan payable - related party ......................................      205,836             -       205,836
  Convertible loans from related party ..............................      197,578             -       197,578
                                                                       -----------   -----------   -----------

     TOTAL CURRENT LIABILITIES ......................................    2,547,470             2     2,547,472

DEBENTURE PAYABLE, NET ..............................................      221,304      (158,804)       62,500
Conversion feature on convertible debenture .........................            -       317,690       317,690
ACCOUNTS PAYABLE AND ACCRUED EXPENSES, net of current portion .......      427,430             -       427,430
                                                                       -----------   -----------   -----------

     TOTAL LIABILITIES ..............................................    3,196,204       158,888     3,355,092
                                                                       -----------   -----------   -----------

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;
    31,200,949 shares issued and outstanding ........................          312             -           312
  Paid-in capital ...................................................    7,600,067       (62,500)    7,537,567
  Accumulated deficit ...............................................   (8,995,886)      (67,691)   (9,063,577)
  Deferred compensation .............................................      (17,500)            -       (17,500)
  Other comprehensive loss - Cumulative foreign currency adjustment .      (58,102)            -       (58,102)
                                                                       -----------   -----------   -----------
     TOTAL STOCKHOLDERS' DEFICIT ....................................   (1,471,109)     (130,191)   (1,601,300)
                                                                       -----------   -----------   -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ....................  $ 1,725,095   $    28,697   $ 1,753,792
                                                                       ===========   ===========   ===========
</TABLE>
                                      -18-
<PAGE>

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

NOTE 8 - RESTATEMENT (continued)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                For the Three Months ended September 30, 2005
                                                                ----------------------------------------------
                                                                   INITIAL                             AS
                                                                   FILING        RESTATEMENT        RESTATED
                                                                ------------     ------------     ------------
<S>                                                             <C>              <C>              <C>
LOSS FROM OPERATIONS .......................................    $     (9,671)    $         (1)    $     (9,672)
                                                                ------------     ------------     ------------

OTHER INCOME (EXPENSES):
  Foreign exchange gains ...................................             428                -              428
  Loss on derivative liability .............................               -          (51,886)         (51,886)

  Interest expense .........................................        (115,397)         (31,249)        (146,646)
  Interest expense - related party .........................        (110,004)               -         (110,004)
                                                                ------------     ------------     ------------

     TOTAL OTHER EXPENSES ..................................        (224,973)         (83,135)        (308,108)
                                                                ------------     ------------     ------------

NET LOSS ...................................................        (234,644)         (83,136)        (317,780)

OTHER COMPREHENSIVE INCOME:
   Unrealized foreign currency translation gain (loss) .....          (4,324)               -           (4,324)
                                                                ------------     ------------     ------------

COMPREHENSIVE LOSS .........................................    $   (238,968)    $    (83,136)        (322,104)
                                                                ============     ============     ============

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

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED ....      30,296,894                        30,296,894
                                                                ============                      ============


                                                                 For the Nine Months ended September 30, 2005
                                                                ----------------------------------------------
LOSS FROM OPERATIONS .......................................    $   (104,563)    $         (1)    $   (104,564)
                                                                ------------     ------------     ------------

OTHER INCOME (EXPENSES):
  Other income (expense) ...................................          10,514                -           10,514
  Foreign exchange gains ...................................          26,862                -           26,862
  Loss on derivative liability .............................               -          (67,690)         (67,690)
  Interest expense .........................................        (282,482)               -         (282,482)
  Interest expense - related party .........................        (166,281)               -         (166,281)
                                                                ------------     ------------     ------------

     TOTAL OTHER EXPENSES ..................................        (411,387)         (67,690)        (479,077)
                                                                ------------     ------------     ------------

NET LOSS ...................................................        (515,950)         (67,691)        (583,641)

OTHER COMPREHENSIVE INCOME:
   Unrealized foreign currency translation gain (loss) .....           4,550                -            4,550
                                                                ------------     ------------     ------------

COMPREHENSIVE LOSS .........................................    $   (511,400)    $    (67,691)    $   (579,091)
                                                                ============     ============     ============

NET LOSS PER COMMON SHARE: BASIC AND DILUTED ...............    $      (0.02)                     $      (0.02)
                                                                ============                      ============

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED ....      29,596,231                        29,596,231
                                                                ============                      ============
</TABLE>
                                      -19-
<PAGE>

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

NOTE 8 - 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 ...................................................    $   (515,950)    $    (67,691)    $   (583,641)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
     Depreciation and amortization .........................         176,654                -          176,654
     Amortization of software maintenance costs ............         106,590                -          106,590
     Beneficial interest ...................................          93,750          (62,500)          31,250
     Stock-based compensation and consulting ...............         102,166                -          102,166
     Grant of warrants .....................................         129,745                -          129,745
     Loss on derivative liability ..........................               -           67,690           67,690
     Amortization of deferred debt issuance costs ..........           9,566           62,500           72,066

Changes in assets and liabilities:
     Accounts receivable ...................................        (209,088)               -         (209,088)
     Prepaid expenses and other current assets .............         (92,804)               -          (92,804)
     Other assets ..........................................          (2,400)               -           (2,400)
     Accounts payable and accrued expenses .................         391,388                1          391,389
     Accrued interest payable, related party ...............          17,929                -           17,929
     Accrued interest payable ..............................           5,237                -            5,237
     Due to related parties ................................          42,744                -           42,744
     Accounts payable and accrued expenses  - long-term ....          34,365                -           34,365
                                                                ------------     ------------     ------------

NET CASH PROVIDED BY OPERATING ACTIVITIES ..................         289,893                -          289,893
                                                                ------------     ------------     ------------
</TABLE>
                                      -20-
<PAGE>

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

This report on Form 10-QSB/A 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/A 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

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2005 COMPARED TO NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 2004

Our net losses during the nine-month period ended September 30, 2005 were
$583,641 compared to a net loss of $1,252,948 during the nine-month period ended
September 30, 2004. During the nine month period ended September 30, 2005, we
generated $2,450,424 in net revenues compared to $772,576 in net revenues for
the nine months ended September 30, 2004, an increase of $1,677,848, or 217.2%.
The significant increase in revenues is due to the continued rollout of software
contracts in Brazil. We undertook approximately 4.75 million "real-time"
transactions during the nine month period ended September 30, 2005 compared to
3.1 million "real-time" transactions during the same period in 2004. We
installed a record 1393 Point of Sales (POS) solutions during the nine months
ended September 30, 2005. At the end of September 2005 we had 5,000 solutions
operational in Brazil, including 2,500 Point of Sales solutions.

During the nine-month period ended September 30, 2005, we incurred operating
expenses of $2,554,988 compared to operating expenses of $1,855,389 incurred
during the nine-month period ended September 30, 2004, an increase of $699,599
or 37.7%. The increase in operating expenses during the nine-month period ended
September 30, 2005 from the same period in 2004 resulted from: (i) an increase
of $502,986, or approximately 128.2%, in cost of product support services
resulting from the increase in net revenues; (ii) an increase of $49,046, or
approximately 18.2%, in payroll and related benefits due to an increase in
employees needed to handle our increased operations; (iii) an increase of
$326,621, or 109.6%, in general and administrative expenses resulting from
increased operating costs associated with increased operations; (iv) an increase
of $133,623, or approximately 310.5%, in depreciation and amortization expense
as a result of an increase in property and equipment acquired for our TDS
operations, and (v) an increase in software maintenance costs of $59,899, or
77%, related to increased amortization of software maintenance costs associated
with our software.

                                      -21-
<PAGE>

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

Certain operating expenses, however, decreased during the nine-month period
ended September 30, 2005 from the same period in 2004 as follows: (i) a decrease
of $140,643, or 54.8%, in management and consulting fees, which is attributable
to a decrease in the use of consultants; (ii) a decrease of $184,969, or 69.8%,
in stock-based compensation and consulting fees as a result of a decrease in
stock issuances to employees, officers and consultants; (iii) a decrease of
$39,847, or approximately, 36.1%, in investor relation fees attributable to a
decrease in the use of investor relations services, and (vi) a decrease in
professional fees of $7,117 related to our SEC filings and filing of a
registration statement of form SB-2.

We reported a loss from operations of $104,564 for the nine-month period ended
September 30, 2005 as compared to a loss from operations of $1,082,813 for the
nine-month period ended September 30, 2004.

Total other expenses increased $308,942, or approximately 181.6%, for nine
months ended September 30, 2005 as compared to the nine months ended September
30, 2004. Included in this change is: (i) an increase in other income of $40,141
due to the income recognized upon settlement of accounts payable balances which
were settled for less than the original obligation.; (ii) an increase of
$307,177 or approximately 217%, in interest expense for the nine months ended
September 30, 2005 as compared to the nine months ended September 30, 2004,
which reflects an increase in our borrowings during nine months ended September
30, 2005, the recording of beneficial interest of $31,250 and interest expense
recorded in connection with the grant of warrants upon debt conversion of
$129,745, (iii) an increase of $25,784 in foreign exchange rate gains due to a
favorable fluctuation in the exchange rate between Brazil and the United States
and (iv) a $67,690 loss on the valuation of the derivative liability.

For the nine months ended September 30, 2005, our net loss was $583,641 or $0.02
per common share compared to a net loss of $1,252,948 or $0.08 per common share
for the nine month period ended September 30, 2004.

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

Our net losses during the three-month period ended September 30, 2005 were
$317,780 compared to a net loss of $708,564 during the three-month period ended
September 30, 2004. During the three-month period ended September 30, 2005, we
generated $948,993 in net revenues compared to $322,377 in net revenues for the
three-months ended September 30, 2004, an increase of $626,616, or 194.3%. The
significant increase in revenues is due to the continued rollout of software
contracts in Brazil as discussed above.

During the three-month period ended September 30, 2005, we incurred operating
expenses of $958,665 compared to operating expenses of $964,811 incurred during
the three-month period ended September 30, 2004, a decrease of $6,146, or 1%.
The decrease in operating expenses during the three-month period ended September
30, 2005 from the same period in 2004 resulted from: (i) an increase of
$152,839, or approximately 105%, in cost of product support services resulting
from the increase in net revenues; (ii) an increase of $7,159, or approximately
6.8%, in payroll and related benefits due to an increase in employees needed to
handle our increased operations; (iii) an increase of $154,573, or 136.5%, in
general and administrative expenses resulting from increased operating costs
associated with increased operations; (iv) an increase of $64,770, or
approximately 782.2%, in depreciation and amortization expense as a result of an
increase in property and equipment acquired for our TDS operations, and (v) an
increase in software maintenance costs of $17,858 related to increased
amortization of software maintenance costs associated with our software.

                                      -22-
<PAGE>

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

Certain operating expenses, however, decreased during the three-month period
ended September 30, 2005 from the same period in 2004 as follows: (i) a decrease
of $57,808, or 58.4%, in management and consulting fees, which is attributable
to a decrease in the use of consultants; (ii) a decrease of $35,845, or
approximately 39.5%, in investor relation fees attributable to a decrease in the
use of investor relations services. (iii) a decrease 265,011, or 100%, in
stock-based compensation and consulting fees as a result of a decrease in stock
issuances to employees, officers and consultants; and (iv) a decrease in
professional fees of $44,681, or 41%, related to a decrease in fees associated
with our SEC filings and the filing of a registration statement, Form SB-2.

We reported a loss from operations of $9,672 for the three-month period ended
September 30, 2005 as compared to a loss from operations of $642,434 for the
three-month period ended September 30, 2004.

Total other expenses increased $241,978, or approximately 365.9%, for three
months ended September 30, 2005 as compared to three months ended September 30,
2004. Included in this change is: (i) a decrease in other expense of $10,424 as
reported for the three months ended September 30, 2004.; (ii) an increase of
$200,747, or approximately 359.1%, in interest expense for the three months
ended September 30, 2005 as compared to the three months ended September 30,
2004 which reflects an increase in our borrowings during three months ended
September 30, 2005 and interest expense recorded in connection with the grant of
warrants upon debt conversion of $98,545 and $31,249 of amortized debt discount;
(iii) an increase of $231 in foreign exchange rate gains due to a favorable
fluctuation in exchange rate between Brazil and the United States and (iv) a
$51,886 loss on the valuation of the derivative liability.

Therefore, our net loss during the three month period ended September 30, 2005
was $317,780 or $0.01 per common share compared to a net loss of $708,564 or
$0.04 per common share for the three month period ended September 30, 2004.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2005, our current assets were $535,898 and our current
liabilities were $2,547,472, which resulted in a working capital deficit of
$2,011,574. As of September 30, 2005, our total assets were $1,753,792
consisting of: (i) $12,261 in cash; (ii) $144,351 in prepaid expenses and other
assets; (iii) $379,286 in accounts receivable; (iv) $292,035 in net software
development costs; (v) $694,762 in net valuation of property and equipment; (vi)
deferred debt offering costs of $228,697 which will be amortized into interest
expense over time and (vii) $2,400 in other assets.

As of September 30, 2005, our total liabilities were $3,355,092 consisting of:
(i) $1,909,561 in long-term and current portion of accounts payable and accrued
expenses; (ii) $179,953 due to related parties; (iii) $197,578 in convertible
loans to related parties; (iv) $205,836 in loan payable to related parties; (v)
$48,122 in current portion of capital lease obligation; (vi) $62,500 in net
convertible debenture payable; (ix) $433,852 in of loans payable and (x)
$317,690 in conversion feature liability related to the convertible debenture,.
As at September 30, 2005, our current liabilities were $2,865,162 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, additional
loans to fund operations and the recording of a conversion feature liability on
our convertible debenture.

Stockholders' deficit decreased from $1,742,087 for fiscal year ended December
31, 2004 to $1,601,300 for the nine-month period ended September 30, 2005.

For the nine months ended September 30, 2005, net cash flow provided by
operating activities was $289,893 compared to net cash provided by operating
activities of $15,108 for the nine months ended September 30, 2004. The change
in cash flows provided by operating activities is mainly due to the decrease in
operating loss for the period.

                                      -23-
<PAGE>

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

Net cash flows used in investing activities amounted to $583,681 for the nine
months ended September 30, 2005 compared to $237,092 for the nine months ended
September 30, 2004, an increase in cash used in investing activities of
$346,589. 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 nine months ended
September 30, 2005 was $420,467 resulting primarily from net proceeds from a
convertible debenture, loans payable, and related party loans of $464,358 offset
by the payment of capital lease obligations of $43,891 compared to $228,323 for
the nine months ended September 30, 2004 resulting from proceeds from related
party loans of $141,806 and net advances from related and non-related parties of
$124,000 offset by the payment of capital lease obligations of $37,483.

In summary, based upon the cash flow activities as previously discussed, for the
nine months ended September 30, 2005, our overall cash position increased by
$8,171.

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. This eventuality could significantly and
materially restrict our overall business operations.

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. 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

                                      -24-
<PAGE>

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

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 were, at our discretion, to periodically sell
to Cornell Capital Partners shares of common stock for a total purchase price of
up to $5.0 million. In October 2005, we withdrew our registration statement to
register shares issuable under the Standby Equity Distribution Agreement and are
seeking alternative funding sources and a restructuring of current arrangements
with Cornell Capital Partners. Since we withdrew the Standby Equity Distribution
Agreement, we will need to raise additional capital from other sources to
provide funds for repayment of debt and working capital. There are no assurances
that such capital will be available to us when needed or upon terms and
conditions which are acceptable to us. If we are able to secure additional
working capital through the sale of equity securities, the ownership interests
of our current stockholders will be diluted. If we raise additional working
capital through the issuance of debt or additional dividend paying securities,
our future interest and dividend expenses will increase. If we are unable to
secure additional working capital as needed, our ability to grow our sales, meet
our operating and financing obligations as they become due and continue our
business and operations could be in jeopardy.

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.

MATERIAL COMMITMENTS

CONVERTIBLE LOANS

A significant and estimated material liability for us for fiscal year 2005 is
the aggregate amount of loans payable for $200,000 and $100,000, respectively,
to a related party whose officer is one of our officers (collectively, the
"Convertible Loans"). On March 23, 2005, we modified the terms of Convertible
Loans. Under the modified terms, $200,000 of principal is due on March 31, 2007
and is convertible into shares of our restricted common stock at $.0125 per
share. The remaining principal amount of $100,000 is due on April 30, 2007 and
is convertible into our shares of restricted common stock at $0.125 per share.
In addition, for each share of common stock received upon conversion, the
related party is entitled to receive one warrant to purchase our common stock at
$0.25 per share for a period of two years from the conversion date. The interest
rate of the Convertible Loans is 12% per annum compounded monthly.

On June 28, 2005, we issued 400,000 shares of our restricted common stock and
400,000 warrants to the related party in accordance with the exercise of the
conversion right relating to $50,000 of the principal amount due and owing. We
also issued 35,770 shares of our common stock to settle $4,471 in interest due
on the Convertible Loans. On September 30, 2005, we issued an additional 600,000
shares of our restricted common stock and 600,000 warrants to the related party
in accordance with the exercise of the conversion right relating to $75,000 of
the principal amount due and owing. We also issued 77,968 shares of our common
stock to settle $9,746 in interest due on the Convertible Loans.

As of September 30, 2005, interest due and owing on the Convertible Loans is
$22,578 and the aggregate principal amount due and owing is $175,000. See "Part
II. Other Information. Item 2. Change in Securities and Use of Proceeds."

                                      -25-
<PAGE>

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

LOAN

A significant and estimated material liability for us for fiscal year 2005 is
the aggregate principal amount of $198,552 and accrued interest in the amount of
$7,284 due and owing to an officer who loaned us the money for working capital
purposes (the "Loan"). The Loan accrues 0.8% compounded interest per month and
has a term of twelve months with repayable quarterly in arrears. As of September
30, 2005, interest due and owing on the Loan is $7,284 and the aggregate
principal amount due and owing is $198,552. The term of the Loan has been
extended for an additional twelve months until March 2006.

PROMISSORY NOTE

A significant and estimated material liability for us for fiscal year 2005 is
the aggregate amount of $255,237, which amount represents the outstanding
principal balance of $250,000 due and owing on certain debentures plus accrued
interest (the "Promissory Note"). On October 25, 2004, we entered into a
securities purchase agreement with Cornell Capital Partners (the "CCP
Agreement"), pursuant to which we issued certain debentures. On May 17, 2005, we
issued the Promissory Note to Cornell Capital Partners pursuant to which these
certain debentures were terminated. The Promissory Note bears interest at a rate
of 12% per annum and is secured by stock pledged by certain of our shareholders.

SECURITIES PURCHASE AGREEMENT

A significant and estimated material liability for us for fiscal year 2005 is
the aggregate amount of $250,000, which amount represents certain debentures
issued to Scott and Heather Grimes (collectively, the "Investor"). On April 1,
2005, we entered into a securities purchase agreement with the Investor (the
"Agreement"), pursuant to which we issued convertible debentures to the Investor
in the 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 tw0-year term and accrue interest at 5% per year.

CONSULTING AGREEMENT

A significant and estimated material liability for us for fiscal year 2005 is
the aggregate amount of $152,928 due and owing to Stephen Walters, our
President. In accordance with the terms of an agreement, we pay monthly to Mr.
Walters an aggregate amount of $13,750 as compensation for managerial and
consulting services provided by Mr. Walters. On March 28, 2005, we issued
400,000 shares of our restricted common stock at $0.126 per share to Mr. Walters
in settlement of $50,500 due and owing. On June 28, 2005, we issued an
additional 300,000 shares of our restricted common stock at $0.11 per share to
Mr. Walters in settlement of $33,000 due and owing. On September 27, 2005, we
issued an additional 200,000 shares of our restricted common stock at $0.17 per
share to Mr. Walters for settlement of $34,000 due and owing. Therefore, as of
September 25, 2005, we owe an aggregate of $152,928 to Mr. Walters in management
fees.

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.

                                      -26-
<PAGE>

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

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.

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 for stock options issued to employees. 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.

Revenue Recognition

Our revenues, 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.

Substantially all of our revenues are derived from the processing of
applications by healthcare providers for approval of patients for healthcare
services from insurance carriers. Our software or hardware devices containing
our software are installed at the healthcare provider's location. We offer
transaction services to authorize and adjudicate identity of the patient and
obtain "real time" approval for any necessary medical procedure from the
insurance carrier. Our transaction-based solutions provide remote access for
healthcare providers to connect with contracted insurance carriers. Transaction
services are provided through contracts with insurance carriers and others,
which specify the services to be utilized and the markets to be served. Our
clients are charged for these services on a per transaction basis. Pricing
varies depending type of transactions being processed under the terms of the
contract for which services are provided. Transaction revenues are recognized in
the period in which the transactions are performed.

                                      -27-
<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.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
an Amendment of FASB Statement No. 123" ("SFAS No. 123R"). SFAS 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" ("
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.

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.

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.

                                      -28-
<PAGE>

ITEM 3.  CONTROLS AND PROCEDURES (CONTINUED)

On July 7, 2006, we announced that we were restating our Consolidated Balance
Sheet at September 30, 2005 and our Consolidated Statement of Operation and
Statement of Cash Flows as of and for the period ended September 30, 2005 to
properly reflect a embedded derivative conversion liability related to our
debenture payable in accordance with SFAS No. 133 and EITF 00-19.

As a result of the restatement of our Consolidated Balance Sheet, Consolidated
Statement of operations and the Consolidated Statements of Cash Flows, our
management determined that there was a significant deficiency in our internal
control over financial reporting as of September 30, 2005 related to the
presentation of derivative liabilities. We determined that such significant
deficiency did not rise to the level of a material weakness in our internal
control over financial reporting. Because we corrected our presentation and
recording of the derivative liabilities, our management believes that we have
corrected this significant deficiency.

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 September 30, 2005 that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

Our management, including our CEO and CFO, does 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 reasonably assurance
of achieving our objectives and our certifying officers have concluded that our
disclosure controls and procedures are effective at a reasonable assurance
level. Further, 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. 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.

                           PART II - OTHER INFORMATION

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.

                                      -29-
<PAGE>

Item 1 - Legal Proceedings (continued)

         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, at which 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.

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

         On September 26, 2005, we entered into a settlement agreement with
         Stephen Walters (the "Settlement Agreement"), regarding the settlement
         of an aggregate amount of $34,000 due and owing to Mr. Walters pursuant
         to managerial services performed. Pursuant to the terms and provisions
         of the Settlement Agreement: (i) we agreed to settle $34,000
         representing a partial amount of the aggregate amount due and owing to
         Mr. Walters by issuing 200,000 shares of our restricted common stock at
         $0.17 per share (which amount is based upon the average of the open and
         close bid of our shares of common stock traded on the OTC Bulletin
         Board between September 15, 2005 and September 26, 2005); and (ii) Mr.
         Walters agreed to accept the issuance of an aggregate of 200,000 shares
         of our restricted common stock as full and complete satisfaction of the
         aggregate amount of $34,000.

         On September 30, 2005, the holder of the Convertible Loans exercised a
         conversion right. Accordingly, we issued 600,000 shares of our
         restricted common stock at the conversion price of $.125 per share and
         600,000 warrants to purchase shares of our restricted common stock at
         $.25 per share for the conversion of principal balance of $75,000. We
         also issued 77,968 shares of common stock to settle $9,746 in interest
         due on the Convertible Loans.

         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.

                                      -30-
<PAGE>

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     Certification of the Chief Executive Officer pursuant to Section 302 of
         the Sarbanes-Oxley Act of 2002

31.2     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: July 7, 2006             By: /s/Stephen Walters
                                            ------------------
                                        Stephen Walters
                                        Chief Executive Officer

         Date: July 7, 2006             By: /s/Adam Wasserman
                                            -----------------
                                        Adam Wasserman
                                        Principal Financial and
                                        Accounting Officer

                                      -31-