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

                                   Form 10-QSB

(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, 2006


[ ] 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                             90-0287423
                  --------                             ----------
      (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)


                                 (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, 2006
             -----                    -----------------------------------

Common Stock, $0.00001 par value                  32,230,511

<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
                                   FORM 10-QSB
                    QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006


                                      INDEX

                                                                            Page
PART I - FINANCIAL INFORMATION

   Item 1 - Consolidated Financial Statements

   Consolidated Balance Sheet (Unaudited)
         As of September 30, 2006..........................................    3

   Consolidated Statements of Operations (Unaudited)
         For the Three and Nine Months Ended September 30, 2006 and 2005 ..    4

   Consolidated Statements of Cash Flows (Unaudited)
         For the Nine Months Ended September 30, 2006 and 2005.............    5

   Notes to Unaudited Consolidated Financial Statements.................... 6-23

   Item 2 - Management's Discussion and Analysis or Plan of
         Operation ....................................................... 24-33

   Item 3 - Controls and Procedures .......................................33-34

PART II - OTHER INFORMATION

   Item 1 - Legal Proceedings .............................................   34

   Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds ...   34

   Item 3 - Default Upon Senior Securities ................................   35

   Item 4 - Submission of Matters to a Vote of Security Holders ...........   35

   Item 5 - Other Information .............................................   35

   Item 6 - Exhibits ......................................................   35

   Signatures .............................................................   35

                                       -2-
<PAGE>

                 TRANSAX INTERNATIONAL LIMITED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               September 30, 2006
                                   (Unaudited)

                                     ASSETS

Current Assets:
  Cash ......................................................      $    221,945
  Accounts receivable (net of allowance for
   doubtful accounts of $0) .................................           413,529
  Prepaid expenses and other current assets .................           213,947
                                                                   ------------

     Total Current Assets ...................................           849,421

Software development costs, net .............................           344,657
Property and equipment, net .................................           794,771
Deferred debt offering costs ................................             9,565
Other assets ................................................             4,800
                                                                   ------------

     Total Assets ...........................................      $  2,003,214
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Current portion of loans payable ..........................      $    411,016
  Accounts payable and accrued expenses .....................         1,340,020
  Due to related parties ....................................           240,119
  Warrant liability .........................................           785,067
  Convertible feature liability .............................         2,084,876
  Loan payable - related party ..............................           149,442
  Convertible loan - related party ..........................           212,328
                                                                   ------------

     Total Current Liabilities ..............................         5,222,868

Loans payable, net of current portion .......................            39,456
Convertible debenture payable, net ..........................           172,500
Convertible feature liability ...............................           244,800
Accounts payable and accrued expenses, net
 of current portion .........................................           500,280
                                                                   ------------

     Total Liabilities ......................................         6,179,904
                                                                   ------------

Stockholders' Deficit:
  Series A convertible preferred stock, no
   par value; 16,000 shares authorized;
   16,000 shares issued and outstanding;
   liquidation preference $1,600,000 ........................         1,478,971
  Common stock $.00001 par value;
   100,000,000 shares authorized;
   32,023,996 shares issued and outstanding .................               320
  Paid-in capital ...........................................         7,943,975
  Accumulated deficit .......................................       (13,524,532)
  Deferred compensation .....................................          (155,832)
  Other comprehensive income - Cumulative
   foreign currency translation adjustment ..................            80,408
                                                                   ------------

     Total Stockholders' Deficit ............................        (4,176,690)
                                                                   ------------

     Total Liabilities and Stockholders' Deficit ............      $  2,003,214
                                                                   ============

              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
<CAPTION>
                                                     For the Three Months Ended         For the Nine Months Ended
                                                            September 30,                      September 30,
                                                    -----------------------------     -----------------------------
                                                        2006             2005             2006             2005
                                                    ------------     ------------     ------------     ------------
                                                     (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)
<S>                                                 <C>              <C>              <C>              <C>
REVENUES .......................................    $  1,115,930     $    948,993     $  3,131,832     $  2,450,424
                                                    ------------     ------------     ------------     ------------

OPERATING EXPENSES:
  Cost of product support services .............         392,002          322,478        1,210,418          892,454
  Compensation and related benefits ............         277,598          152,056          709,107          536,608
  Professional fees ............................          43,707           34,293          159,253          105,438
  Management and consulting fees -
   related parties .............................         157,502           70,923          383,088          145,888
  Investor relations ...........................          94,442           54,814          237,841           70,449
  Depreciation and amortization ................          50,817           73,050          172,745          176,654
  General and administrative ...................         306,671          251,051          812,081          627,497
                                                    ------------     ------------     ------------     ------------

     Total Operating Expenses ..................       1,322,739          958,665        3,684,533        2,554,988
                                                    ------------     ------------     ------------     ------------

LOSS FROM OPERATIONS ...........................        (206,809)          (9,672)        (552,701)        (104,564)
                                                    ------------     ------------     ------------     ------------

OTHER INCOME (EXPENSES):
  Other income (expense) .......................          15,815                -          (32,660)          10,514
  Foreign exchange gain (loss) .................          (1,576)             428          (11,044)          26,862
  Debt settlement and offering costs ...........               -                -         (153,671)               -
  Loss from derivative liabilities .............         (30,946)         (51,886)      (1,215,680)         (67,690)
  Registration rights penalty ..................        (160,000)               -         (160,000)               -
  Interest expense .............................        (231,239)        (146,646)        (464,717)        (282,482)
  Interest expense - related party .............          (8,823)        (110,004)         (27,195)        (166,281)
                                                    ------------     ------------     ------------     ------------

     Total Other Expenses ......................        (416,769)        (308,108)      (2,064,967)        (479,077)
                                                    ------------     ------------     ------------     ------------

NET LOSS .......................................        (623,578)        (317,780)      (2,617,668)        (583,641)

DEEMED AND CUMULATIVE PREFERRED STOCK DIVIDEND .         (28,230)               -       (1,662,444)               -
                                                    ------------     ------------     ------------     ------------

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS ...    $   (651,808)    $   (317,780)    $ (4,280,112)    $   (583,641)
                                                    ============     ============     ============     ============

COMPREHENSIVE LOSS:
  NET LOSS .....................................    $   (623,578)    $   (317,780)    $ (2,617,668)    $   (583,641)

  OTHER COMPREHENSIVE INCOME:
     Unrealized foreign currency translation
      gain (loss) ..............................          31,418           (4,324)          66,257            4,550
                                                    ------------     ------------     ------------     ------------

  COMPREHENSIVE LOSS ...........................    $   (592,160)    $   (322,104)    $ (2,551,411)    $   (579,091)
                                                    ============     ============     ============     ============

Net loss per Common Share:
 Basic and Diluted .............................    $      (0.02)    $      (0.01)    $      (0.08)    $      (0.02)
                                                    ============     ============     ============     ============

Weighted Average Shares Outstanding -
 Basic and Diluted .............................      31,981,702       30,296,894       31,683,345       29,596,231
                                                    ============     ============     ============     ============

                                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
<CAPTION>
                                                                    For the Nine Months
                                                                    Ended September 30,
                                                                ---------------------------
                                                                    2006           2005
                                                                -----------     -----------
                                                                (Unaudited)     (Unaudited)
<S>                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ...................................................    $(2,617,668)    $  (583,641)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
     Depreciation and amortization .........................        172,745         176,654
     Amortization of software maintenance costs ............        160,407         106,590
     Beneficial interest ...................................              -          31,250
     Stock-based compensation and consulting ...............        247,714         102,166
     Grant of warrants in connection with debt extension ...         46,686         129,745
     Amortization of deferred debt issuance costs ..........        121,334           9,566
     Amortization of debt discount .........................         93,750          62,500
     Loss from derivative liabilities ......................      1,215,680          67,690
  Changes in assets and liabilities:
     Accounts receivable ...................................        (67,269)       (209,088)
     Prepaid expenses and other current assets .............        (48,818)        (92,804)
     Other assets ..........................................         (2,400)         (2,400)
     Accounts payable and accrued expenses .................        (49,890)        391,390
     Accrued interest payable, related party ...............         16,439          17,929
     Accrued interest payable ..............................              -           5,237
     Due to related parties ................................         11,187          42,744
     Accounts payable and accrued expenses  - long-term ....        104,446          34,365
                                                                -----------     -----------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ........       (595,657)        289,893
                                                                -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capitalized software development costs ...................       (179,500)       (155,581)
  Acquisition of property and equipment ....................       (269,797)       (428,100)
                                                                -----------     -----------

NET CASH USED IN INVESTING ACTIVITIES ......................       (449,297)       (583,681)
                                                                -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from sale of Series A preferred stock .......      1,223,734               -
  Repayment of advances from related party .................              -         (35,000)
  Repayments under capital lease obligations ...............        (16,289)        (43,891)
  Proceeds from convertible debenture ......................              -         336,738
  Proceeds from loan payable ...............................        136,032         117,704
  Proceeds from loan - related party .......................              -          60,000
  Repayment of loan - related party ........................        (85,000)        (15,084)
                                                                -----------     -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES ..................      1,258,477         420,467
                                                                -----------     -----------

Effect of Exchange Rate Changes on Cash ....................            547        (118,508)
                                                                -----------     -----------

Net Increase in Cash .......................................        214,070           8,171

Cash, Beginning of Period ..................................          7,875           4,090
                                                                -----------     -----------

Cash, End of Period ........................................    $   221,945     $    12,261
                                                                ===========     ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest ...................................    $   199,111     $    20,188
                                                                ===========     ===========
  Cash paid for income taxes ...............................    $         -     $         -
                                                                ===========     ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Common stock issued for debt and accrued interest ........    $    15,000     $   256,717
                                                                ===========     ===========
  Common stock and options issued for services .............    $    82,715     $   102,166
                                                                ===========     ===========
  Grant of common stock warrants in connection with
   debt conversion .........................................    $         -     $   129,745
                                                                ===========     ===========
  Loan paid with preferred stock proceeds ..................    $   255,237     $         -
                                                                ===========     ===========
  Derivative liabilities recorded for deemed
   preferred stock dividend ................................    $ 1,600,000     $         -
                                                                ===========     ===========

                    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, 2006

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, 2005 and notes thereto
contained in the Report on Form 10-KSB/A 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, 2006 are not necessarily indicative of the results for the full
fiscal year ending December 31, 2006.

The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America. The consolidated
financial statements include the Company and its wholly-owned subsidiaries,
Transax Limited, Medlink (formerly TDS Telecommunication Data Systems Ltda.),
Transax (Australia) Pty Ltd., and Medlink Technologies, Inc. All material
intercompany balances and transactions have been eliminated in the consolidated
financial statements.

Organization
------------

Transax International Limited was incorporated in the State of Colorado in 1999.
The Company, primarily through its wholly-owned subsidiary, Medlink
Conectividade em Saude Ltda ("Medlink") (formerly TDS Telecommunication Data
Systems Ltda. through April 4, 2006), 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. Significant 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, variables used to determine stock-based
compensation, and the valuation of derivative liabilities.

Fair value of financial instruments
-----------------------------------

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

                                       -6-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

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

Revenue recognition
-------------------

The Company's 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 the Company's revenues are derived from the processing of
applications by healthcare providers for approval of patients for healthcare
services from insurance carriers. The Company's software or hardware devices
containing the Company's software are installed at the healthcare provider's
location. The Company offers transaction services to authorize and adjudicate
identity of the patient and obtains "real time" approval for any necessary
medical procedure from the insurance carrier. The Company's 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. The Company's 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.

Foreign currency translation
----------------------------

The assets and liabilities of the Company's foreign subsidiaries are translated
into U.S. dollars at the period-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 (Medlink -
Brazilian Real, Transax Australia, - Australian dollar and Transax Limited and
the Company - USD) are included in the Statement of Operations as incurred.

Comprehensive loss
------------------

Other comprehensive loss currently includes only foreign currency translation
adjustments.

Stock-based compensation
------------------------

Effective January 1, 2006, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123R (revised 2004), Share Based Payment ("SFAS No.
123R"). SFAS No. 123R establishes the financial accounting and reporting
standards for stock-based compensation plans at fair values. As required by SFAS
No. 123R, the Company recognizes the cost resulting from all stock-based payment
transactions including shares issued under its stock option plans in the
financial statements. The recognition of this cost will be made on the modified
prospective basis, which applies to new stock-based awards issued after December
31, 2005, and for awards modified, purchased or cancelled after that date.

                                       -7-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

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

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

Prior to January 1, 2006, the Company accounted for stock-based employee
compensation plans (including shares issued under its stock option plans) in
accordance with APB Opinion No. 25 and followed the pro forma net income, pro
forma income per share, and stock-based compensation plan disclosure
requirements set forth in the Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation ("SFAS No. 123"). 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 No. 123, 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:

                                                        Nine months ended
                                                        September 30, 2005
                                                        ------------------

         Net loss as reported .............................  $(583,641)
         Less: total stock-based employee compensation
           expense determined under fair value based
           method, net of related tax effect ..............    (50,871)
                                                             ---------

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

         Basic and diluted loss per share:
             As reported ..................................  $    (.02)
                                                             =========

             Pro forma ....................................  $    (.02)
                                                             =========

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 loss per share is computed by dividing net 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. Diluted loss per common share is not
presented because it is anti-dilutive, although the common stock equivalents may
dilute earnings in the future. The Company's common stock equivalents at
September 30, 2006 include the following:

         Options ........................................     3,625,000
         Warrants .......................................    16,902,500
         Preferred stock ................................    14,814,815
         Convertible loans payable -related party .......     1,400,000
         Debenture payable ..............................     2,447,917
                                                             ----------

         Total ..........................................    39,190,232
                                                             ==========

                                       -8-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

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. The Company recognizes an
allowance for doubtful accounts to ensure accounts receivable are not overstated
due to uncollectibility and are maintained for all customers based on a variety
of factors, including the length of time the receivables are past due,
significant one-time events and historical experience. An additional reserve for
individual accounts is recorded when the Company becomes aware of a customer's
inability to meet its financial obligation, such as in the case of bankruptcy
filings or deterioration in the customer's operating results or financial
position. If circumstances related to customers change, estimates of the
recoverability of receivables would be further adjusted. As of September 30,
2006, the allowance for doubtful accounts was $0.

The Company's principal business activities are located in Brazil. Although
Brazil is considered to be economically stable, it is always possible that
unanticipated events in foreign countries could disrupt the Company's
operations.

The Company had net revenues to two major customers that accounted for
approximately 91%, or $2,856,000 and 94% or $2,303,000 of the total revenues for
the nine months ended September 30, 2006 and 2005, respectively. For the nine
months ended September 30, 2006, these two major customers accounted for 52% and
39% of net revenues, respectively. At September 30, 2006, these two major
customers accounted for 51% and 39%, respectively, of the total accounts
receivable balance outstanding.

The Company maintains its cash in accounts with major financial institutions in
the United States, Australia and Brazil in the form of demand deposits and money
market accounts. Deposits in these banks may exceed the amounts of insurance
provided on such deposits. As of September 30, 2006, the Company had no deposits
subjected to such risk. We have not experienced any losses on our deposits of
cash and cash equivalents.

Accounting for conversion features and warrants issued with preferred stock
---------------------------------------------------------------------------

The Company issued $1,600,000 of convertible Series A preferred stock, which
contained an Embedded Conversion Feature ("ECF") and warrants to purchase common
stock. In accordance with the guidance in paragraph 12 of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," it was necessary
to evaluate separation of the conversion option from the debt host and account
for it separately as a derivative if the conversion option met certain criteria.
The Conversion option met all three criteria of paragraph 12: (1) the conversion
feature is not clearly and closely related to the host component, (2) the
convertible instrument is not accounted for at fair value, and (3) the embedded
conversion option meets the definition of a derivative in paragraph 6 of SFAS
No. 133.

                                       -9-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

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

Accounting for conversion features and warrants issued with preferred stock
(continued)
---------------------------------------------------------------------------

To assess whether or not the ECF would be classified as stockholders' equity if
it were freestanding, management considered the guidance in EITF 00-19,
"Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company's Own Stock." In assessing whether or not the conversion
option would be classified as equity or a liability if it were freestanding,
management determined whether or not the Series A convertible preferred stock is
considered "conventional." EITF 00-19 and EITF 05-2, "The Meaning of
Conventional Convertible Debt Instruments in issue No. 00-19," defines
conventional convertible debt as debt whereby the holder will, at the issuer's
option, receive a fixed amount of shares or the equivalent amount of cash as
proceeds when he exercises the conversion option. Management determined that
Series A convertible preferred stock was not "conventional," and the Company
considered all aspects of EITF 00-19, paragraphs 12-33.

This caused the ECF of the Series A convertible preferred stock to be classified
as a derivative financial instrument under SFAS No. 133. In addition, all
warrants to purchase common stock issued with the preferred stock were then
deemed to be classified as derivative instruments under SFAS No. 133. The
accounting treatment of derivative financial instruments requires that the
Company record the ECF and warrants at their fair values as of each reporting
date. Any change in fair value is recorded as non-operating, non-cash income or
expense at each reporting date. The derivatives were valued using the
Black-Scholes option pricing model and are classified in the consolidated
balance sheet as current liabilities at September 30, 2006.

Reclassifications
-----------------

Certain prior periods' balances have been reclassified to conform to the current
period's financial statement presentation. These reclassifications had no impact
on previously reported financial position, results of operations or cash flows.

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

In February 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 155, "Accounting for Certain Hybrid Financial Instruments - an amendment of
FASB Statements No. 133 and 140" ("SFAS 155"). SFAS 155 permits fair value
re-measurement for any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation and clarifies which
interest-only strips and principal-only strips are not subject to the
requirements of Statement 133. SFAS 155 establishes a requirement to evaluate
interests in securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that contain
an embedded derivative requiring bifurcation and clarifies that concentrations
of credit risk in the form of subordination are not embedded derivatives.
Lastly, SFAS 155 amends SFAS 140 to eliminate the prohibition on a qualifying
special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial
instrument. SFAS 155 is effective in the first fiscal year that begins after
September 15, 2006. The Company is still assessing the impact, if any, which
SFAS No. 155 will have on its consolidated financial position, results of
operations and cash flows.

                                      -10-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

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

Recent accounting pronouncements (continued)
--------------------------------------------

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This statement requires all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable, and permits for
subsequent measurement using either fair value measurement with changes in fair
value reflected in earnings or the amortization and impairment requirements of
Statement No. 140. The subsequent measurement of separately recognized servicing
assets and servicing liabilities at fair value eliminates the necessity for
entities that manage the risks inherent in servicing assets and servicing
liabilities with derivatives to qualify for hedge accounting treatment and
eliminates the characterization of declines in fair value as impairments or
direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year
beginning after September 15, 2006. The adoption of this statement is not
expected to have a significant effect on the Company's future reported financial
position or results of operations.

In July 2006, the FASB issued FASB Interpretation (FIN) No. 48, "Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109." This
interpretation provides guidance for recognizing and measuring uncertain tax
positions, as defined in SFAS No. 109, "Accounting for Income Taxes." FIN No. 48
prescribes a threshold condition that a tax position must meet for any of the
benefit of an uncertain tax position to be recognized in the financial
statements. Guidance is also provided regarding de-recognition, classification,
and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal
years beginning after December 15, 2006. The Company does not expect that this
interpretation will have a material impact on its financial position, results of
operations, or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" ("FAS 157"). This Statement defines fair
value as used in numerous accounting pronouncements, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosure related to the use of fair value measures in financial statements.
The Statement is to be effective for the Company's financial statements issued
in 2008; however, earlier application is encouraged. The Company is currently
evaluating the timing of adoption and the impact that adoption might have on its
financial position or results of operations

On June 20, 2006, the proposed FASB Staff Position EITF 00-19-b, Registration
Payment (Registration Rights) Agreements ("FSP 00-19-b"), to determine the
accounting for registration rights agreements was issued. The FASB decided to:

    o   Limit the scope of the proposed FSP EITF 00-19-b, "Accounting for
        Registration Payment Arrangements," to registration payment arrangements

    o   Separately recognize and measure, for the issuer and holder,
        registration payment arrangements using a model consistent with the
        accrual of loss contingencies under FASB Statement No. 5, Accounting for
        Contingencies, regardless of legal form

    o   Require disclosures similar to those required in paragraphs 13(a)-13(c)
        of FASB Interpretation No. 45, Guarantor's Accounting and Disclosure
        Requirements for Guarantees, including Indirect Guarantees of
        Indebtedness of Others

    o   Apply the proposed FSP using a limited retrospective approach for all
        existing arrangements and include examples of the application of such
        transition in the proposed FSP

    o   Direct the staff to prepare a ballot draft of the proposed FSP with a
        comment period of 45 days. The proposed FSP would be effective in the
        first fiscal year after issuance of the final FSP.

If the proposed FSP 00-19-b is declared effective, the Company does not
anticipate any cumulative effect as the proposal is consistent with its
accounting treatment.

                                      -11-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 2 - RELATED PARTY TRANSACTIONS

Convertible Loans Payable
-------------------------

At September 30, 2006, the Company had aggregate loans payable for $175,000 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, $75,000 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. At September 30, 2006, interest
due on these two loans amounted to $37,328 and the aggregate principal amount
due is $175,000. During the nine months ended September 30, 2006 and 2005, the
Company incurred $15,707 and $17,852, respectively, in interest expense related
to these two loans. In the 2005 period, 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. Additionally, during the nine months ended September 30, 2005, the
holder of the notes partially exercised the conversion feature. Accordingly, the
Company issued an aggregate of 1,000,000 shares and 1,000,000 warrants to
purchase common stock of the Company for the conversion of $125,000 of then
outstanding principal balance. The Company also issued an aggregate of 113,738
shares of common stock to settle $14,217 in then outstanding interest due on
these loans. The fair value of these warrant grants were estimated at $.078 to
$0.164 per warrant on the date of grant using the Black-Scholes option-pricing
model. In connection with these warrants, for the nine months ended September
30, 2005, the Company recorded interest expense of $129,745.

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

For the nine months ended September 30, 2006 and 2005, the Company incurred
$133,615 and $123,750, respectively, in management fees to an officer/director
of the Company. Effective April 2006, the Company's board of directors agreed to
increase the compensation of this officer/director from $13,750 per month to
$15,000 per month. At September 30, 2006, $217,823 in management fees and other
expenses were payable to this officer/director and is included in due to related
parties on the accompanying balance sheet. The amount due is unsecured,
non-interest bearing and is payable on demand.

For the nine months ended September 30, 2006 and 2005, the Company incurred
$40,147 and $29,673, respectively, in accounting fees to a company whose officer
is an officer of the Company. At September 30, 2006, $15,297 in these fees was
payable to this officer and is included in due to related parties on the
accompanying balance sheet. The amount due is unsecured, non-interest bearing
and is payable on demand.

For the nine months ended September 30, 2006, the Company incurred $61,600 in
consulting fees to an officer of the Company. At September 30, 2006, $7,000 in
these fees was outstanding to this officer and is included in due to related
parties on the accompanying balance sheet. The amount due is unsecured,
non-interest bearing and is payable on demand. Additionally, the Company granted
this officer 100,000 options to purchase 100,000 shares of the Company's common
stock at $0.15 per share. The options expire on February 5, 2011. The fair value
of this option grant was estimated at $12,834 on the date of grant using the
Black-Scholes option-pricing model. In connection with these options, the
Company recorded stock-based compensation expense of $12,834, which has been
included in management and consulting fees - related party on the accompanying
consolidated statement of operations (See note 4).

For the nine months ended September 30, 2006, the Company incurred $94,000 in
consulting fees to a director of the Company.

                                      -12-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 2 - RELATED PARTY TRANSACTIONS (continued)

Loan Payable - Related Party
----------------------------

On March 5, 2004, the Company borrowed Euro 115,000 ($145,912 at September 30,
2006) from an officer of the Company for working capital purposes. The loan
accrues 0.8% interest compounded monthly (9.6% per annum), had an initial term
of twelve months, and is repayable quarterly in arrears. The officer agreed to
extend this loan for an additional twelve months until March 2006. The due date
of this loan is currently being negotiated and is payable on demand.
Additionally, during 2005, the Company borrowed $85,000 from this officer, which
was repaid in 2006. For the nine months ended September 30, 2006 and 2005, the
Company incurred $10,861 and $11,197, respectively, in interest related to these
loans. At September 30, 2006, $3,530 in interest was accrued on these loans and
the aggregate principal and interest amount due is $149,442 and is included in
loan payable - related party on the accompanying balance sheet.

NOTE 3 - FINANCING ARRANGEMENTS

Loan Payable
------------

On October 25, 2004, the Company and Cornell Capital Partners ("Cornell")
entered into a Securities Purchase Agreement, pursuant to which Cornell
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 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. In January 2006, in connection with a preferred stock offering, this
note was repaid.

The Company's subsidiary, Medlink, has several loans and credit lines with
financial institutions. The loans require monthly installments, bear interest at
rates ranging from 30% to 50% per annum, are secured by certain receivables and
assets of Medlink, and are due through November 2007. At September 30, 2006,
loans payable to these financial institutions aggregated $450,472.

Convertible Debentures 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.

                                      -13-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 3 - FINANCING ARRANGEMENTS (CONTINUED)

Convertible Debentures Payable (continued)
------------------------------------------

The Company determined that the conversion feature of the convertible debentures
represents an embedded derivative since the debentures are convertible into a
variable number of shares upon conversion. 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. The Company believes that the aforementioned
embedded derivative meets the criteria of SFAS 133 and EITF 00-19, and should be
accounted for as separate derivative with a corresponding value recorded as a
liability. Accordingly, the fair value of this derivative instrument has been
recorded as a liability on the consolidated balance sheet with the corresponding
amount recorded as a discount to the debentures. Such discount will be accreted
from the date of issuance to the maturity date of the debentures. 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. On February
1, 2006, the Company and the debenture holder mutually agreed to extend the term
of the debentures until December 1, 2007. In addition, the Company granted a
warrant to purchase 400,000 shares of the Company's common stock to the
debenture holder. The warrant has a term of two years and is exercisable at
$0.20 per share. The fair value of this warrant grant was estimated at $46,686
on the date of grant using the Black-Scholes option-pricing model. In connection
with these warrants, on February 1, 2006, the Company initially recorded debt
settlement expense of $46,686 and a warrant liability of $46,686.

On July 17, 2006, in connection with the conversion of $15,000 of outstanding
principal on this convertible debenture, the Company issued 104,167 shares of
common stock.

At the end of each reporting period, the Company revalues the warrant and
convertible feature derivative liabilities. For the nine months ended September
30, 2006, after adjustment, the Company recorded a gain on valuation of the
derivative liability of $5,510 and reclassified $16,135 of the derivative
liability to paid-in capital due to the partial repayment of the debenture.
Amortization of debt discount for the nine months ended September 30, 2006 was
$93,750 and is included in interest expense. Amortization of debt offering costs
for the nine months ended September 30, 2006 was $14,348 and is included in
interest expense. At September 30, 2006, the estimated fair values of the
convertible feature derivative liabilities and warrants were $244,800 and
$48,753, and are reflected as a conversion feature liability - long-term and
warrant liability, respectively, on the accompanying consolidated balance sheet.

The Company agreed to register, on a best efforts basis, 3,571,429 shares of its
common stock underlying the conversion of the debentures and the exercise of the
warrants.

The convertible debenture liability is as follows at September 30, 2006:

         Convertible debentures payable .................    $ 235,000
         Less: unamortized discount on debentures .......      (62,500)
                                                             ---------

         Convertible debentures, net ....................    $ 172,500
                                                             =========

                                      -14-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 3 - FINANCING ARRANGEMENTS (CONTINUED)

Standby Equity Distribution Agreement
-------------------------------------

On October 25, 2004, the Company entered into a Standby Equity Distribution
Agreement with Cornell. Pursuant to the Standby Equity Distribution Agreement,
the Company could, at its discretion, periodically sell to Cornell 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, whereby the
Standby Equity Distribution Agreement, dated October 25, 2004, and the related
Registration Rights Agreement, Placement Agent Agreement and Escrow Agreement
were terminated.

Upon execution of the Termination Agreement, the Company entered into a new
Standby Equity Distribution Agreement with Cornell on May 17, 2005. On January
13, 2006, the Company entered into a Termination Agreement with Cornell (the
"SEDA Termination Agreement") pursuant to which the Parties terminated the
Standby Equity Distribution Agreement, the Registration Rights Agreement and the
Placement Agent Agreement, each dated as of May 17, 2005. In connection with the
Standby Equity Distribution Agreement, in December 2004, the Company issued to
Cornell 1,202,779 shares of the Company's Common Stock (the "Investor's Shares")
and in connection with the Placement Agent Agreement, the Company issued to
Monitor Capital, Inc., as Placement Agent, 125,000 shares of the Company's
Common Stock (the "Placement Agent's Shares").

In December 2004, the Company valued the common shares issued to Cornell at the
fair market value on the dates of grant of $0.1664 per share, or $200,000, based
on the quoted trading price for the stock. At December 31, 2005, the commitment
fee was deemed to be a deferred offering cost on the accompanying balance sheet.
Pursuant to the SEDA Termination Agreement, Cornell retained 600,889 of the
Investor's Shares and returned 601,890 of the Investor's Shares to the Company
which were cancelled. Monitor Capital, Inc. retained 62,500 of the Placement
Agent's Shares and returned the other 62,500 of the Placement's Agent's Shares
to the Company to be cancelled. In connection with the termination of the SEDA,
the Company received and cancelled 664,390 shares of its common stock with a
fair market value of $93,015 and for the nine months ended September 30, 2006,
recorded debt offering cost expense of $106,985 on the accompanying consolidated
statement of operations.

NOTE 4 - STOCKHOLDERS' DEFICIT

Preferred Stock
---------------

On January 13, 2006, the Company's Board of Directors approved the creation of
16,000 shares of Series A Convertible Preferred Stock having the following
rights, preferences and limitations:

    (a) each share has a stated value of $100 per share and no par value;

    (b) With respect to the payment of dividends and other distributions on the
        capital stock of the Company, including distribution of the assets of
        the Company upon liquidation, the Series A Preferred Shares shall be
        senior to the common stock of the Company, par value $.00001 per share
        and senior to all other series of Preferred Shares (the "Junior Stock").

                                      -15-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

Preferred Stock (continued)
---------------------------

    (c) The holders of Series A Preferred Shares shall be entitled to receive
        dividends or distributions on a pro rata basis according to their
        holdings of shares of Series A Preferred Shares in the amount of seven
        percent (7%) per year (computed on the basis of a 365-day year and the
        actual days elapsed). Dividends shall be paid in cash. Dividends shall
        be cumulative. No cash dividends or distributions shall be declared or
        paid or set apart for payment on the Common Stock in any calendar year
        unless cash dividends or distributions on the Series A Preferred Shares
        for such calendar year are likewise declared and paid or set apart for
        payment. No declared and unpaid dividends shall bear or accrue interest.

    (d) Each share of Series A Preferred Shares shall be convertible, at the
        option of the holder thereof, at any time after the date of issuance of
        such shares, into such number of fully paid and non-assessable shares of
        Common Stock equal to the sum of (i) the Liquidation Amount of the
        Series A Preferred Shares plus (ii) all accrued but unpaid dividends
        thereon, divided by the Conversion Price, as defined. The Conversion
        Price shall be equal to the lower of (i) $0.192 ( the "Fixed Conversion
        Price"), or (ii) eighty percent (80%) of the lowest daily volume
        weighted average price ("VWAP") of the Common Stock during the ten (10)
        Trading Days immediately preceding the date of conversion (the "Market
        Conversion Price"). The VWAP shall be determined using price quotations
        from Bloomberg, LP. "Trading Day" shall mean any day during which the
        Nasdaq OTC Bulletin Board shall be open for trading. Additionally, each
        share of Series A Preferred Shares shall automatically convert into
        shares of Common Stock at the Conversion Price then in effect
        immediately upon the consummation of the occurrence of a stock
        acquisition, merger, consolidation or reorganization of the Company into
        or with another entity through one or a series of related transactions,
        or the sale, transfer or lease of all or substantially all of the assets
        of the Company. Each share of Series A Preferred Shares shall
        automatically convert into shares of Common Stock at the Conversion
        Price then in effect immediately upon the third anniversary of the date
        of Investment Agreement.

    (e) The Series A Preferred Shares shall not have any voting rights except as
        provided under the laws of the state of Colorado.

    (f) The shares are not subject to redemption. However, the Company, at its
        option, shall have the right to redeem (unless otherwise prevented by
        law), with three (3) business days advance written notice (the
        "Redemption Notice"), any shares of Series A Preferred Shares provided
        that the closing bid price of the of the Company's Common Stock, as
        reported by Bloomberg, LP, is less than the Fixed Conversion Price at
        the time of the Redemption Notice. The Company shall pay an amount equal
        to One Hundred Fifteen percent (115%) of the Liquidation Amount, plus
        accrued but unpaid dividends thereon (the "Redemption Amount"). The
        Company shall deliver to the holder the Redemption Amount on the third
        (3rd) business day after the Redemption Notice. After receipt of a
        Redemption Notice, the holder shall be entitled to continue to convert
        outstanding shares of Series A Preferred Shares until the Redemption
        Price is received, subject to the conversion limitations as defined.

                                      -16-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

Preferred Stock (continued)
---------------------------

On January 13, 2006, the Company entered into an Investment Agreement with
Cornell and, together with the Company, (the "Parties"), pursuant to which the
Company shall sell to Cornell up to 16,000 shares of Series A Convertible
Preferred Stock, no par value per share, (the "Series A Preferred Shares") which
shall be convertible, at Cornell's discretion, into shares of the Company's
common stock, par value $.00001 per share (the "Common Stock") for a total price
of up to $1,600,000.

Of the 16,000 Series A Preferred Shares to be sold to Cornell, 8,000 Series A
Preferred Shares were sold to Cornell on January 13, 2006 and had a purchase
price of $800,000, which consisted of $255,237 from the surrender of a
Promissory Note (as described below) and $544,763 consisting of new funding,
from which the Company received net proceeds of $470,734 after the payment of
placement fees and expenses of $74,029. On May 8, 2006, the Company sold the
remaining 8,000 shares of Series A Preferred Shares to Cornell, at the purchase
price of $800,000 and received net proceeds of $728,000 (net of placement fees
of $72,000).

In connection with the sale of the Series A Preferred Shares, on January 13,
2006, the Parties agreed that Cornell would surrender the Promissory Note issued
by the Company to Cornell on May 17, 2005, in the principal amount of $255,237,
in exchange for $255,237 of Series A Preferred Shares. As of January 13, 2006,
the full amount outstanding under the Promissory Note was $255,237, plus accrued
and unpaid interest of $0. As a result of the Parties' agreement, the Promissory
Note was retired and canceled. The Parties also agreed to terminate the
Securities Purchase Agreement and the Investor Registration Rights Agreement,
each dated as of October 25, 2004, as well as the Pledge and Escrow Agreements,
each dated as of October 21, 2004, that were entered into by the Parties in
connection with the issuance of the Promissory Note.

On January 13, 2006, the Company also issued to Cornell warrants to purchase up
to 5,000,000 shares of Common stock. The first warrant issued to Cornell for
2,500,000 shares of Common Stock at an exercise price of $0.30 per share, shall
terminate after the five (5) year anniversary of the date of issuance. The
second warrant issued to Cornell was for 2,500,000 shares of Common Stock at an
exercise price of $0.20 per share, and shall terminate after the five (5) year
anniversary of the date of issuance.

Subject to the terms and conditions of an Investor Registration Rights
Agreement, the Company was required to prepare and file, no later than the
earlier of 30 days from the date the Company files its Form 10-KSB for the year
ended December 31, 2005 or the date that such filing is due (the "Scheduled
Filing Deadline"), with the SEC, a registration statement on Form S-1 or SB-2
under the 1933 Act (the "Initial Registration Statement") for the registration
for the resale by the Investor of the underlying common stock and warrants,
including at least 25,000,000 shares underlying the Series A Preferred Shares
and 5,000,000 Warrant Shares. The Company shall cause the Registration Statement
to remain effective until all of the Registerable Securities have been sold. The
Company shall use its best efforts (i) to have the Initial Registration
Statement declared effective by the SEC no later than ninety (90) days from the
date hereof (the "Scheduled Effective Deadline") and (ii) to insure that the
Initial Registration Statement and any subsequent Registration Statement remains
in effect until all of the Registerable Securities have been sold, subject to
the terms and conditions of this Agreement. It shall be an event of default
hereunder if the Initial Registration Statement is not declared effective by the
SEC within one hundred twenty (120) days (July 29, 2006). The Company filed its
initial registration statement on Form SB-2 on May 9, 2006.

                                      -17-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

Preferred Stock (continued)
---------------------------

In the event the Registration Statement is not declared effective by the SEC on
or before the Scheduled Effective Deadline, or if after the Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant
to the Registration Statement, the Company will pay as liquidated damages (the
"Liquidated Damages") to the holder, at the holder's option, either a cash
amount or shares of the Company's Common Stock equal to two percent (2%) of the
Liquidation Amount (as defined in the Certificate of Designation of Series A
Convertible Preferred Shares) outstanding as Liquidated Damages for each thirty
(30) day period or any part thereof after the Scheduled Filing Deadline or the
Scheduled Effective Deadline as the case may be. At September 30, 2006, the
Company recorded a registration rights penalty expense of $160,000, which has
been included in accrued expenses on the accompanying consolidated balance
sheet.

In accordance with SFAS No. 133, the Company is required to record the fair
value of the ECF and warrants as a liability. In connection with the initial
sale of the Series A Preferred Stock on January 13, 2006, the initial estimated
fair value of the ECF and warrants was $588,363 and $689,000, respectively,
which reduced the carrying value of the Series A Preferred Stock to zero. The
$477,363 excess value of the fair values of the ECF and warrants over the gross
proceeds received from the Preferred Stock was charged to other expense upon
recording. The initial fair values of the ECF and warrants were estimated using
the Black-Scholes option pricing model with the following assumptions: estimated
volatility of 222%; risk-free interest rate of 4.26%; estimated life of 5 years
and no dividends. In connection with the final sale of the Series A Preferred
Stock on May 8, 2006, the initial estimated fair value of the ECF was
$1,003,135, which reduced the carrying value of the Series A Preferred Stock to
zero. The $203,135 excess value of the fair values of the ECF over the gross
proceeds received from the Preferred Stock was charged to other expense upon
recording. The initial fair value of this ECF was estimated using the
Black-Scholes option pricing model with the following assumptions: estimated
volatility of 228%; risk-free interest rate of 5.13%; estimated life of 2.7
years and no dividends. At September 30, 2006, the Company revalued the ECF and
warrants resulting in an additional loss on derivative liability of $540,692 due
to fluctuations in the Company's stock price. At September 30, 2006, the fair
value of the ECF and warrants were estimated using the Black-Scholes option
pricing model with the following assumptions: estimated volatility of 233%;
risk-free interest rate ranging from 4.59 % to 4.71%; estimated life of 2.3 to
4.3 years and no dividends. At September 30, 2006, the estimated fair value of
the ECF and warrants was $2,084,876 and $736,314, respectively, and are
reflected as a conversion feature liability and a warrant liability,
respectively, on the accompanying consolidated balance sheet.

At September 30, 2006, cumulative and unpaid Series A preferred dividends
amounted to $62,444 and are in included in accounts payable and accrued expenses
on the accompanying consolidated balance sheet.

Common Stock
------------

In connection with the termination of the SEDA, the Company received and
cancelled 664,390 shares of its common stock with a fair market value of
$93,015.

                                      -18-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

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

On March 20, 2006, the Company entered into a one-year consulting contract for
business development services. In connection with the agreement, the Company
issued 900,000 shares of common stock. The Company valued these common shares at
the fair market value on the dates of grant or $0.12 per share based on the
quoted trading price and recorded deferred consulting expense of $108,000 to be
amortized over the service period. In addition, the Company granted a warrant to
purchase 2,000,000 shares of the Company's common stock. The warrant has a term
expiring January 31, 2009. 1,000,000 of the warrants are exercisable at $0.20
per share and 1,000,000 of the warrants are exercisable at $0.25 per share. The
fair value of this warrant grant was estimated at $221,998 or $.11 per warrant
on the date of grant using the Black-Scholes option-pricing model. In connection
with these warrants, the Company recorded deferred consulting expense, which
will be amortized over the contract period. For the nine months ended September
30, 2006, the Company recorded consulting expense of $174,166 in connection with
the issuance of these common shares and warrants.

On July 17, 2006, in connection with the conversion of $15,000 of the
convertible debenture outstanding, the Company issued 104,167 shares of common
stock.

On August 18, 2006, the Company granted 43,270 shares of common stock under the
Company's 2004 Incentive Stock Option Plan for legal services performed. The
Company valued these common shares at the fair market value on the dates of
grant or $0.15 per share based on the quoted trading price and recorded legal
fees of $6,490.

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

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

On January 26, 2006, the Company's Board of Directors, pursuant to written
unanimous consent, appointed David Sasso as the Vice President of Investor
Relations and Corporate Communications of the Company effective January 26,
2006. On January 26, 2006, the Company granted Mr. Sasso 100,000 options to
purchase 100,000 shares of the Company's common stock at $0.15 per share. The
options expire on February 5, 2011. The fair value of this option grant was
estimated at $12,834 on the date of grant using the Black-Scholes option-pricing
model. In connection with these options, the Company recorded stock-based
compensation expense of $12,834, which has been included in management and
consulting fees - related party on the accompanying consolidated statement of
operations.

On February 5, 2006, the Company granted options to purchase 100,000 shares of
common stock to a consultant for business development services rendered. The
options are exercisable at $0.15 per share and expire on February 5, 2011. The
fair value of this option grant was estimated at $13,333 on the date of grant
using the Black-Scholes option-pricing model. In connection with these options,
the Company recorded consulting expense of $13,333.

On August 18, 2005, the Company granted options to purchase an aggregate of
275,000 shares of common stock to an officer and directors of the Company. The
options are exercisable at $0.15 per share and expire on August 17, 2011. The
Company valued these warrants utilizing the Black-Scholes options pricing model
at approximately $0.149 or $40,891. For the nine months ended September 30,
2006, in connection with these options, the Company recorded non-cash
compensation expense of $40,891.

                                      -19-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

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

A summary of the status of the Company's outstanding stock options as of
September 30, 2006 and changes during the period then ended are as follows:

                                                                       Weighted
                                                                       Average
                                                       Number of       Exercise
                                                        Options         Price
                                                       ----------      --------
Balance at December 31, 2005 .....................      3,225,000      $   0.31
Granted ..........................................        475,000          0.15
Exercised ........................................              -           -
Forfeited ........................................        (75,000)        (0.50)
                                                       ----------      --------
Balance at September 30, 2006 ....................      3,625,000      $   0.29
                                                       ==========      ========

Options exercisable at end of period .............      3,625,000      $   0.29
                                                       ==========      ========

Weighted average fair value of options granted
 during the period ...............................              -      $   0.15

The following table summarizes information about employee and consultants stock
options outstanding at September 30, 2006:

                 Options Outstanding                       Options Exercisable
-----------------------------------------------------     ---------------------
              Number        Weighted                       Number
            Outstanding      Average       Weighted     Exercisable    Weighted
 Range of       at          Remaining      Average           at        Average
 Exercise    September     Contractual     Exercise      September     Exercise
  Price       30, 2006     Life (Years)     Price         30, 2006       Price
--------    -----------    ------------    --------      ---------     --------
 $ 0.50      1,350,000         1.87        $   0.50      1,350,000     $   0.50
 $ 0.20        600,000         3.25            0.20        600,000         0.20
 $ 0.15      1,675,000         3.97            0.15      1,675,000         0.15
            -----------                    --------      ---------     --------
             3,625,000                     $   0.29      3,625,000     $   0.29
            ===========                    ========      =========     ========

As of September 30, 2006, there are no unrecognized compensation costs since all
options granted under the stock option plans are completely vested.

The valuation of the option grants is estimated as of the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants during the nine months ended September 30, 2006: expected volatility
ranging from of 222% to 231%; risk free interest rate ranging from 3.75% to
4.78%; expected life of 5 years and annual dividend rate of 0%.

In utilizing the Black-Scholes, the Company calculates volatility using the
historical volatility of our stock, the expected term is based on our estimate
of when the options will be exercised, and the risk free interest rate is based
on the U.S. Treasury yield in effect at the time of the grant.

                                      -20-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)

Stock Warrants
--------------

On February 1, 2006, the Company and the debenture holder (See Note 3 -
Debenture Payable) mutually agreed to extend the term of the debentures until
December 1, 2007. In addition, the Company granted a warrant to purchase 400,000
shares of the Company's common stock to the debenture holder. The warrant has a
term of two years and is exercisable at $0.20 per share. The Company agreed to
register 3,571,429 shares of its common stock underlying the conversion of the
Debentures and the exercise of the warrant not later than thirty days after the
Company files its annual report on Form 10-KSB for the fiscal year ended
December 31, 2005. The fair value of this warrant grant was estimated at $46,686
on the date of grant using the Black-Scholes option-pricing model. In connection
with these warrants, the Company recorded debt settlement expense of $46,686.

A summary of the status of the Company's outstanding stock warrants as of
September 30, 2006 and changes during the period then ended is as follows:

                                                                       Weighted
                                                                       Average
                                                       Number of       Exercise
                                                       Warrants          Price
                                                       ----------      --------
Balance at December 31, 2005 ......................     9,502,500      $   0.57
Granted ...........................................     7,400,000          0.24
Exercised .........................................             -           -
Forfeited .........................................             -           -
                                                       ----------      --------
Balance at September 30, 2006 .....................    16,902,500      $   0.43
                                                       ==========      ========

Options exercisable at end of period ..............    16,902,500      $   0.30
                                                       ==========      ========

Weighted average fair value of options
 granted during the period ........................             -      $   0.24

The following information applies to all warrants outstanding at September 30,
2006:

                              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      4,100,000         1.87          $ 1.00       4,100,000      $ 1.00
 $ 0.30      4,500,000         2.49          $ 0.30       4,500,000      $ 0.30
 $ 0.20      6,302,500         3.30          $ 0.20       6,302,500      $ 0.20
 $ 0.25      2,000,000         1.62          $ 0.25       2,000,000      $ 0.25

                                      -21-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 5 - 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 September 30,
                                                     2006            2005
                                                 -----------     -----------
      Net revenues to unaffiliated customers:
              Brazil ........................    $ 3,131,832     $ 2,450,424
                                                 -----------     -----------
      Operating Expenses:
              Brazil ........................      2,574,663       1,955,458
              USA ...........................      1,036,568         540,164
              Australia .....................          2,408           9,131
              Mauritius .....................         70,894          50,235
                                                 -----------     -----------
                                                   3,684,533       2,554,988
                                                 -----------     -----------
      Loss from operations ..................       (552,701)       (104,564)
                                                 -----------     -----------
      Other income (expenses):
              Brazil ........................       (197,721)       (155,857)
              USA ...........................     (1,867,246)       (331,391)
              Australia .....................              -           8,171
                                                 -----------     -----------
                                                  (2,064,967)       (479,077)
                                                 -----------     -----------
      Net loss as reported ..................    $(2,617,668)    $  (583,641)
                                                 -----------     -----------

NOTE 6 - GOING CONCERN

Since inception, the Company has incurred cumulative net losses of $13,524,532,
and at September 30, 2006 has a stockholders' deficit of $4,176,690 and has a
working capital deficit of $4,673,447. Since its inception, the Company has
funded operations through 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 2006 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.
Furthermore, since fiscal 2000, the Company has been deficient in the payment of
Brazilian payroll taxes and Social Security taxes. At September 30, 2006, these
deficiencies (including interest and fines) amounted to approximately $744,000.
This payroll liability is included as part of the accounts payable and accrued
expenses (short-term and long-term) within the consolidated balance sheet. Based
upon a twelve-month work plan proposed by management, it is anticipated that
such a work plan would require approximately $1,000,000 to $3,000,000 of
financing designed to fund various commitments and business operations. 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.

                                      -22-
<PAGE>

                          TRANSAX INTERNATIONAL LIMITED
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

NOTE 7 - SUBSEQUENT EVENTS

On October 5, 2006, the Company entered into a consulting contract for investor
services. In connection with the agreement, the Company issued 55,000 shares of
common stock. The Company valued these common shares at the fair market value on
the dates of grant or $0.135 per share based on the quoted trading price and
recorded deferred consulting expense of $7,425 to be amortized over the service
period of three months.

On October 31, 2006, in connection with the conversion of $10,000 of the
convertible debentures outstanding, the Company issued 151,515 shares of common
stock.

                                      -23-
<PAGE>

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

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

GENERAL

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

Through our wholly-owned subsidiary Medlink Conectividade em Saude Ltda
("Medlink") (formerly TDS Telecommunication Data Systems Ltda.), 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 hospitals, medical 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 were previously performed manually.

RESULTS OF OPERATIONS

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006 COMPARED TO NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 2005

During the nine-month period ended September 30, 2006 we generated $3,131,832 in
revenues compared to $2,450,424 in revenues for the nine-month period ended
September 30, 2005, an increase of $681,408 or 27.8%. The significant increase
in revenues is due to the continued installation of our software and/or hardware
devices containing our software at the healthcare providers' locations in
Brazil. Upon installation, we begin the processing of applications submitted by
healthcare providers for approval of patients for healthcare services from the
insurance carrier. We charge for these services on a per transaction basis. We
undertook approximately 5.80 million "real time" transactions during the
nine-month period ended September 30, 2006 compared to 4.78 million "real time"
transactions during the period ended September 30, 2005.

During the nine-month period ended September 30, 2006, we incurred operating
expenses of $3,684,533 compared to operating expenses of $2,554,988 incurred
during the nine-month period ended September 30, 2005, an increase of $1,129,545
or 44.2%.

                                      -24-
<PAGE>

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

The increase in operating expenses during the nine-month period ended September
30, 2006 from the same period in 2005 resulted from: (i) an increase of $317,964
or 35.6% in cost of product support services resulting from the increase in
revenues; (ii) an increase of $172,499 or 32.1% in compensation and related
benefits associated with the increased operations at our Medlink operations;
(iii) an increase of $53,815 or 51.0% in professional fees relating to legal and
accounting costs associated with our financings and the filing of a registration
statement on Form SB-2; (iv) an increase of $237,200 or 162.6% in management and
consulting fees-related parties due to an increase in use of management and a
director/consultant needed to handle our increased operations; (v) an increase
of $167,392 or 237.6% in investor relations fees primarily resulting from the
issuance of common stock and warrants to a consultant for investor relations
services; (vi) a decrease of $3,909 or 2.2% in depreciation and amortization
expense as a result of an increase in property and equipment acquired for our
Medlink operations offset by a decrease in depreciation on fully depreciated
property and equipment; and (vii) an increase of $184,584 or 29.4% in general
and administrative expenses resulting from an increase in operating costs
associated with increased operations and increased travel expenses.

We reported a loss from operations of $552,701 for the nine-month period ended
September 30, 2006 as compared to a loss from operations of $104,564 for the
nine-month period ended September 30, 2005, an increase of $448,137. Although
there can be no assurances, we anticipate that during fiscal year 2006, our
ongoing marketing efforts and product roll-out will result in an increase in our
net sales from those reported during fiscal year 2005. To support these
increased sales, we anticipate that our operating expenses will also increase
during fiscal year 2006 as compared to fiscal year 2005. We are, however, unable
to predict at this time the amount of any such increase in operating expenses.

Total other expenses increased $1,585,890 or 331.0% for the nine-month period
ended September 30, 2006 as compared to the nine-month period ended September
30, 2005. Included in this change is: (i) an increase in other expense of
$43,174 from $10,514 of other income recognized during the nine-month period
ended September 30, 2005; (ii) an increase of $153,671 in debt settlement and
offering costs from $-0- during the nine-month period ended September 30, 2005,
which relates to the issuance of warrants to the debenture holder and
amortization of certain debt offering costs; (iii) an increase of $1,147,990 in
loss from derivative liabilities from $67,690 during the nine-month period ended
September 30, 2005, which relates to the classification and revaluation of the
embedded conversion feature and related warrants issued in connection with our
Series A preferred stock and debenture payable as a derivative instrument; (iv)
for the nine months ended September 30, 2006, we recorded an estimated
registrations rights penalty expense of $160,000 related to our Registration
Statement on Form SB-2 as compared to $0 for the nine months ended September 30,
2005; (v) an increase of $43,149 in interest expense from $448,763 for the
nine-month period ended September 30, 2005; and (vi) an increase of $37,906 in
foreign exchanges losses. For the nine months ended September 30, 2006, we
recorded interest expense of $117,448 from the amortization of debt discounts
and debt offering costs of as compared to $160,995 of interest expense for the
nine months ended September 30, 2005 from the valuation of warrants granted upon
conversion of debt and the valuation of a beneficial conversion feature, a
decrease of $43,547. This decrease was offset by an increase in interest expense
incurred due to an increase in our borrowings and increases in interest charges
incurred from our payroll liabilities during the nine months ended September 30,
2006.

For the nine-month period ended September 30, 2006 our net loss was $2,617,668
compared to a net loss of $583,641 for the nine-month period ended September 30,
2005.

                                      -25-
<PAGE>

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

During the nine months ended September 30, 2006, we recorded a deemed preferred
stock dividend of $1,600,000 which relates to our Series A Convertible Preferred
Stock. This non-cash item related to the embedded beneficial conversion features
of those securities and fair value of warrants of those securities.
Additionally, for the nine months ended September 30, 2006, we recorded
cumulative preferred stock dividends of $62,444.

We reported a net loss attributable to common stockholders of $4,280,112 for the
nine months ended September 30, 2006 as compared to a net loss attributable to
common stockholders of $583,641 for the nine months ended September 30, 2005.
This translates to an overall per-share loss attributable to common shareholders
of $0.08 and $0.02 for the nine months ended September 30, 2006 and 2005,
respectively.

THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2006 COMPARED TO THREE-MONTH PERIOD ENDED
SEPTEMBER 30, 2005

Our net losses during the three-month period ended September 30, 2006 were
$623,578 compared to a net loss of $317,780 during the three-month period ended
September 30, 2005, an increase of $305,798.

During the three-month period ended September 30, 2006 we generated $1,115,930
in revenues compared to $948,993 in revenues for the three-month period ended
September 30, 2005, an increase of $166,937 or 17.6%. The significant increase
in revenues is due to the continued installation of our software and/or hardware
devices containing our software at the healthcare provider's locations in
Brazil. Upon installation, we begin the processing of applications submitted by
the healthcare provider for approval of patients for healthcare services from
the insurance carrier. We charge for these services on a per transaction basis.
We undertook approximately 2.04 million "real time" transactions during the
three-month period ended September 30, 2006 compared to 1.75 million "real time"
transactions during the period ended September 30, 2005.

During the three-month period ended September 30, 2006, we incurred operating
expenses of $1,322,739 compared to operating expenses of $958,665 incurred
during the three-month period ended September 30, 2005, an increase of $364,074
or 38.0%. The increase in operating expenses during the three-month period ended
September 30, 2006 from the same period in 2005 resulted from: (i) an increase
of $69,524 or 21.6% in cost of product support services resulting from the
increase in revenues; (ii) an increase of $125,542 or 82.6% in compensation and
related benefits associated with the increased operations at our Medlink
operations; (iii) an increase of $9,414 or 27.5% in professional fees relating
to our SEC filing and registration statement filings; (iv) an increase of
$86,579 or 122.0% in management and consulting fee-related parties due to an
increase in use of management and a director/consultant needed to handle our
increased operations; (v) an increase of $39,628 or 72.3% in investor relations
fees primarily resulting from the issuance of common stock and warrants to a
consultant for investor relations services; (vi) a decrease of $22,233 or 30.4%
in depreciation and amortization expense; and (vii) an increase of $55,620 or
22.2% in general and administrative expenses resulting from a increase in
operating costs associated with increased operations and increased travel
expenses.

We reported a loss from operations of $206,809 for the three-month period ended
September 30, 2006 as compared to a loss from operations of $9,672 for the
three-month period ended September 30, 2005, an increase of $197,137. Although
there can be no assurances, we anticipate that during fiscal year 2006, our
ongoing marketing efforts and product roll-out will result in an increase in our
net sales from those reported during fiscal year 2005. To support these
increased sales, we anticipate that our operating expenses will also increase
during fiscal year 2006 as compared to fiscal year 2005. We are, however, unable
to predict at this time the amount of any such increase in operating expenses.

                                      -26-
<PAGE>

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

Total other expenses increased $108,661 or 35.3% for the three-month period
ended September 30, 2006 as compared to the three-month period ended September
30, 2005. Included in this change is: (i) an increase in other income of $15,815
from $0 of other expenses recognized during the three-month period ended
September 30, 2005 related to a settlement of a lawsuit; (ii) a decrease of
$20,940 in loss from derivative liabilities from $51,886 during the three-month
period ended September 30, 2005, which relates to the revaluation of the
embedded conversion feature and related warrants issued in connection with our
Series A preferred stock and debenture payable; (iii) for the three months ended
September 30, 2006, we recorded an estimated registrations rights penalty
expense of $160,000 related to our Registration Statement on Form SB-2 as
compared to $0 for the three months ended September 30, 2005; (iv) an increase
of $2,004 in foreign exchanges losses; and (v) a decrease of $16,588 in interest
expense from $256,650 for the three-month period ended September 30, 2005, which
reflects the recording of $98,545 of interest expense related to grant of
warrants upon conversion of related party debt during the three months ended
September 30, 2005. This decrease in the current period is offset by an increase
in interest expense due to an increase in our borrowings and interest incurred
on our payroll tax liabilities and the amortization of debt discounts and debt
offering costs during the three-month period ended September 30, 2006.

For the three-month period ended September 30, 2006 our net loss was $623,578
compared to a net loss of $317,780 for the three-month period ended September
30, 2005.

During the three months ended September 30, 2006, we recorded cumulative
preferred stock dividends of $28,230 compared to $0 in the 2005 period.

We reported a net loss attributable to common stockholders of $651,808 for the
three months ended September 30, 2006 as compared to a net loss attributable to
common shareholders of $317,780 for the three months ended September 30, 2005.
This translates to an overall per-share loss attributable to common shareholders
of $0.02 and $0.01 for the three months ended September 30, 2006 and 2005,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2006, our current assets were $849,421 and our current
liabilities were $5,222,868, which resulted in a working capital deficit of
$4,373,447. As of September 30, 2006, our total assets were $2,003,214
consisting of: (i) $221,945 in cash; (ii) $213,947 in prepaid expenses and other
current assets; (iii) $413,529 in accounts receivable; (iv) $344,657 in net
software development costs; (v) 794,771 in net property and equipment; (vi)
$9,565 in deferred debt offering costs; and (vii) $4,800 in other assets.

As of September 30, 2006, our total liabilities were $6,179,904 consisting of:
(i) $1,840,300 in long-term and current portion of accounts payable and accrued
expenses; (ii) $240,119 due to related parties; (iii) $212,328 in convertible
loans to related parties; (iv) $149,442 in loan payable to related parties; (v)
$172,500 in net convertible debenture payable; (vi) $450,472 in loans payable;
(vii) $785,067 in warrant liability; and (viii) $2,329,676 in convertible
feature liability. As at September 30, 2006, our current liabilities were
$5,222,868 compared to $2,563,200 at December 31, 2005. The increase in current
liabilities is due primarily to the recording of warrant and convertible feature
liabilities and the accrual of an estimated registration rights penalty of
$160,000 offset by the repayment of loans and related loans payable.

Stockholders' deficit increased from $1,627,640 at December 31, 2005 to
$4,176,690 at September 30, 2006.

For the nine-month period ended September 30, 2006, net cash used in operating
activities was $595,657 compared to net cash provided by operating activities of
$289,893 for the nine-month period ended September 30, 2005. The change in cash
flows used by operating activities is due to the increase in net loss for the
nine-month period ended September 30, 2006 as well as the repayment of accounts
payable.

                                      -27-
<PAGE>

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

Net cash flows used in investing activities amounted to $449,297 for the
nine-month period ended September 30, 2006 compared to $583,681 for the
nine-month period ended September 30, 2005, a decrease of $134,384. During the
nine-month period ended September 30, 2006, we capitalized software development
costs and acquired equipment for our hardware and software installations while
in the nine-month period ended September 30, 2005, these costs were higher.

Net cash flows provided by financing activities for the nine-month period ended
September 30, 2006 were $1,258,477, resulting primarily from net proceeds from
the sale of shares of Series A Preferred Stock of $1,223,734 and proceeds from
loans in the amount of $136,032, offset by repayment of capital lease
obligations of $16,289 and the repayment of related party loans of $85,000. Net
cash flows provided by financing activities were $420,467 for the nine-month
period ended September 30, 2005 resulting from proceeds from a convertible
debenture of $336,738, proceeds from loans payable of $177,704 offset by
repayment of related party advances of $35,000, repayment of capital lease
obligations of $43,891 and the repayment of related party loans of $15,084.

In summary, based upon the cash flow activities as previously discussed, for the
nine-month period ended September 30, 2006, our overall cash position increased
by $214,070.

PLAN OF OPERATION

Since our inception, we have funded operations through 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.

On January 13, 2006, we entered into an Investment Agreement with Cornell
Capital Partners ("Cornell") (the "Parties"), pursuant to which we sold to
Cornell 16,000 shares of Series A Convertible Preferred Stock, no par value per
share, (the "Series A Preferred Shares") for a total price of up to $1,600,000.
The Series A Convertible Preferred Shares shall be convertible, at Cornell's
discretion, into shares of our common stock, par value $.00001 per share.

Of the 16,000 Series A Preferred Shares to be sold to Cornell, 8,000 Series A
Preferred Shares had a purchase price of $800,000, which consisted of $255,237
from the surrender of a Promissory Note (as described below) and $544,763 in new
funding, of which we received net proceeds of $470,734 after the payment of
placement fees and expenses of $74,029. On May 8, 2006, we sold the remaining
8,000 shares of Series A Preferred Shares to Cornell, for $800,000 and received
net proceeds of $728,000 (net of placement fees of $72,000).

Certain negative covenants in the Investment Agreement could substantially
impact our ability to raise funds from alternative sources in the future. For
example, as long as any Series A Preferred Shares are outstanding, we shall not,
without the prior written consent of Cornell Capital Partners: (a) directly or
indirectly consummate any merger, reorganization, restructuring, reverse stock
split consolidation, sale of all or substantially all of our assets or any
similar transaction or related transactions; (b) incur any indebtedness for
borrowed money or become a guarantor or otherwise contingently liable for any
such indebtedness except for trade payables or purchase money obligations
incurred in the ordinary course of business; (c) file any other registration
statements on any form (including but not limited to forms S-1, SB-2, S-3 and
S-8); (d) issue or sell shares of common stock or preferred stock without
consideration or for a consideration per share less than the bid price of the
common stock determined immediately prior to its issuance or issue any preferred
stock, warrant, option, right, contract, call, or other security or instrument
granting the holder thereof the right to acquire common stock without
consideration or for a consideration per share less than the bid price of the
common stock determined immediately prior to the issuance of such convertible
security; or (e) enter into any security instrument granting the holder a
security interest in any and all of our assets.

                                      -28-
<PAGE>

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

In connection with the sale of the Series A Preferred Shares, on January 13,
2006, the Parties agreed that Cornell would surrender the Promissory Note issued
by us to them on May 17, 2005, in the principal amount of $255,237, in exchange
for $255,237 of Series A Preferred Shares. As of January 13, 2006, the full
amount outstanding under the Promissory Note was $255,237, plus accrued and
unpaid interest of $0. As a result of the Parties' agreement, the Promissory
Note was retired and canceled. The Parties also agreed to terminate the
Securities Purchase Agreement and the Investor Registration Rights Agreement,
each dated as of October 25, 2004, as well as the Pledge and Escrow Agreements,
each dated October 21, 2004, that were entered into by the Parties in connection
with the issuance of the Promissory Note.

On January 13, 2006, we also issued to Cornell warrants to purchase up to
5,000,000 shares of Common stock. The first warrant issued to Cornell, for
2,500,000 shares of Common Stock at an exercise price of $0.30 per share, shall
terminate after the five (5) year anniversary of the date of issuance. The
second warrant issued to Cornell was for 2,500,000 shares of Common Stock at an
exercise price of $0.20 per share, and shall terminate after the five (5) year
anniversary of the date of issuance.

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 $1,000,000 to $3,000,000 of
financing designed to fund various commitments and business operations.

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

On February 1, 2006, we and the debenture holder mutually agreed to extend the
term of the debentures until December 1, 2007. In addition, we granted a warrant
to purchase 400,000 shares of our common stock to the debenture holder. The
warrant has a term of 2 years and is exercisable at $0.20 per share. We agreed
to register 3,571,429 shares of our common stock underlying the conversion of
the Debentures and the exercise of the warrant on a best efforts basis.

                                      -29-
<PAGE>

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

We believe that we can satisfy our cash requirements for the next twelve months
based on our ability to enter into additional financing arrangements 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 - RELATED PARTY

A significant material liability for us for fiscal year 2006 is the aggregate
principal amount of $175,000 and $32,035 in accrued interest due and owing to a
related party in accordance with two convertible promissory notes (collectively,
the "Convertible Promissory Note(s)"). Previously, the aggregate principal
amounts of the Convertible Promissory Notes were $200,000 and $100,000,
respectively. During March 2005, we modified the terms of the Convertible
Promissory Notes: (i) $200,000 is due on March 31, 2007 and convertible into
shares of our common stock at $0.125 per share together with a warrant per share
to purchase our common stock at $0.25 per share for a period of two years; and
(ii) $100,000 is due on April 30, 2007 and convertible into shares of our common
stock at $0.125 per shares together with a warrant per share to purchase our
common stock at $0.25 per share for a period of two years. On June 28, 2005 and
September 30, 2005, the holders of the Convertible Promissory Notes partially
exercised the respective conversion rights. As of September 30, 2006, an
aggregate principal amount of $175,000 and interest in the amount of $37,328
remains due and owing under the Convertible Promissory Notes.

LOAN - RELATED PARTY

A significant material liability for us for fiscal year 2006 is the aggregate
amount of $145,912 in principal due and owing to a related party (the "Loan").
The $145,912 Loan is evidenced by a promissory note with an interest rate of
0.8% per month compounded and was repayable during March 2006. As of the date of
this Quarterly Report, the Loan due date is being negotiated. Additionally,
during 2005, we borrowed $85,000 from this officer, which amount was repaid
during the nine-month period ended September 30, 2006. At September 30, 2006,
$3,530 in interest was accrued on this loan.

CONSULTING AGREEMENT

A significant and estimated material liability for us for fiscal year 2006 is
the aggregate amount of $217,823 due and owing to Stephen Walters, our
President. In accordance with the terms of an agreement, effective April 2006,
we pay monthly to Mr. Walters an aggregate amount of $15,000 as compensation for
managerial and consulting services he provides.

CONVERTIBLE DEBENTURES

A significant material liability for us for fiscal year 2006 are the convertible
debenture payables in the amount of $235,000. On April 1, 2005, we entered into
a financing agreement with Scott and Heather Grimes, Joint Tenants with Right of
Survivorship (the "Investor"). Under the terms of the financing arrangement with
the Investor, we issued convertible debentures to the Investor in the original
principal amount of $250,000. The debentures are convertible at the Investor's
option any time up to maturity at a conversion price equal to the lower of: (i)
120% of the closing bid price of our common stock on the date of the debentures,
or (ii) 80% of the lowest closing bid price of our common stock for the five
trading days immediately preceding the conversion date. The debentures have a
two-year term and accrue interest at 5% per year. At maturity, the debentures
will automatically convert into shares of our common stock at a conversion price
equal to the lower of: (i) 120% of the closing bid price of our common stock on
the date of the debentures, or (ii) 80% of the lowest closing bid price on our
common stock for five trading days immediately preceding the conversion date. On
February 1, 2006 we agreed to extend the term of the debentures to December 1,
2007 and issued 400,000 warrants at 0.20 per share valid for two years.

                                      -30-
<PAGE>

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

ACCRUED TAXES AND RELATED EXPENSES

A significant and estimated material liability for us for fiscal year 2006 is
the aggregate amount of approximately $744,000 due and owing for Brazilian
payroll taxes and Social Security taxes.

Effective April 1, 2004, we entered into a payment program with the Brazilian
authorities whereby the Social Security ("INSS") taxes due and applicable
penalties and interests will be repaid over a period of up to sixty months. We
made the first payment as per the plan in April 2004 and have continued to make
the required payments. At September 30, 2006, approximately $464,000 of our INSS
taxes is to be repaid monthly through April 2011. During February 2006, we
entered into a payment program for $30,000 of other taxes to be repaid over a
period of sixty months. During July 2006, we repaid $188,348 of these Brazilian
payroll taxes for prior years.

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 include the useful lives of property and equipment and accounting for
stock based compensation.

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 the 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.

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.

Accounting for Stock Based Compensation - Effective January 1, 2006, we adopted
Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based
Payment ("SFAS No. 123R"). SFAS No. 123R establishes the financial accounting
and reporting standards for stock-based compensation plans. As required by SFAS
No. 123R, we recognize the cost resulting from all stock-based payment
transactions including shares issued under its stock option plans in the
financial statements. The adoption of this pronouncement may have a material
effect on our results of operations.

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.

                                      -31-
<PAGE>

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

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 on the 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.

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 February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments - an amendment of FASB Statements No. 133 and 140" ("SFAS
155"). SFAS 155 permits fair value re-measurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require
bifurcation and clarifies which interest-only strips and principal-only strips
are not subject to the requirements of Statement 133. FAS 155 establishes a
requirement to evaluate interests in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation and
clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives. Lastly, SFAS 155 amends SFAS 140 to eliminate the
prohibition on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than another
derivative financial instrument. SFAS 155 is effective in the first fiscal year
that begins after September 15, 2006. We are still assessing the impact, if any,
which SFAS No. 155 will have on our consolidated financial position, results of
operations and cash flows.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This statement requires all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable, and permits for
subsequent measurement using either fair value measurement with changes in fair
value reflected in earnings or the amortization and impairment requirements of
Statement No. 140. The subsequent measurement of separately recognized servicing
assets and servicing liabilities at fair value eliminates the necessity for
entities that manage the risks inherent in servicing assets and servicing
liabilities with derivatives to qualify for hedge accounting treatment and
eliminates the characterization of declines in fair value as impairments or
direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year
beginning after September 15, 2006. The adoption of this statement is not
expected to have a significant effect on our future reported financial position
or results of operations.

                                      -32-
<PAGE>

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

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109." This interpretation provides guidance
for recognizing and measuring uncertain tax positions, as defined in SFAS No.
109, "Accounting for Income Taxes." FIN No. 48 prescribes a threshold condition
that a tax position must meet for any of the benefit of an uncertain tax
position to be recognized in the financial statements. Guidance is also provided
regarding de-recognition, classification, and disclosure of uncertain tax
positions. FIN No. 48 is effective for fiscal years beginning after December 15,
2006. We do not expect that this interpretation will have a material impact on
our financial position, results of operations, or cash flows.

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.

During the quarter ended June 30, 2006, we implemented measures as part of our
internal controls to determine and ensure that information required to be
disclosed in reports filed under the exchange Act are recorded, processed,
summarized and reported within the time periods specified in the rules and forms
including, but not limited to, the following: (i) documentation of 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 in our
internal control over financial reporting. The costs of these additional
measures did not have a material impact on our future results or operations
liquidity.

On July 6, 2006, we announced that we were restating our Consolidated Balance
Sheets at June 30, 2005, September 30, 2005, December 31, 2005 and March 31,
2006 and our Consolidated Statements of Operations and Statements Of
Stockholders' Deficit as of and for the year ended December 31, 2005 and for the
periods ended June 30, 2005, September 30, 2005 and March 31, 2006 to properly
reflect an embedded derivative conversion liability related to our debenture
payable in accordance with SFAS No. 133 and EITF 00-19. The change in
presentation of the Company's embedded derivative feature associated with its
debenture payable had the effect of increasing assets by $19,131, increasing
liabilities by $208,117, increasing the stockholders' deficit by $188,986 as of
March 31, 2006, and increasing the Company's net loss by $30,038 for the three
months ended March 31, 2006. 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 three months ended March 31, 2006
but did not impact cash at the end of the year.

As a result of the restatement of our Consolidated Balance Sheet, Consolidated
Statement of operations and the Consolidated Statements of Stockholders'
Deficit, our management determined that there was a significant deficiency in
our internal control over financial reporting as of December 31, 2005 and March
31, 2006 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 in June 2006, our
CEO and CFO concluded that we have corrected this significant deficiency.

                                      -33-
<PAGE>

ITEM 3.  CONTROLS AND PROCEDURES (CONTINUED)

Other than the changes related to the proper presentation and recording of
derivative liabilities, there were no changes during our last fiscal quarter in
the Company's internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange
Act with respect to the period ended September 30, 2006 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, do not expect that our disclosure
controls and internal controls will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Our
disclosure controls and procedures are designed to provide reasonable assurance
of achieving our objectives 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
controls. 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").

         On August 9, 2006, we entered into a Settlement Agreement with
X-Clearing, releasing all claims and counterclaims of the complaint without any
admission of liability for an out of court settlement of $37,250.

         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 July 17, 2006, in connection with the conversion of $15,000 of the
convertible debenture outstanding, we issued 104,167 shares of common stock.

                                      -34-
<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:  November 20, 2006      By: /s/ Stephen Walters
                                           -------------------
                                           Stephen Walters
                                           Chief Executive Officer


         Date:  November 20, 2006      By: /s/ Adam Wasserman
                                           ------------------
                                           Adam Wasserman
                                           Principal Financial and
                                           Accounting Officer

                                      -35-