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 SECURITIESEXCHANGE ACT OF 1934 for the quarterly
                period
                ended September 30, 2006
  OR
  o
              TRANSITION REPORT PURSUANT TO SECTION
                13 OR
                15(d) OF THE SECURITIESEXCHANGE
                  ACT OF 1934 for the transition period from ___________ to___________
  000-17874
 (Commission
        file number)
 
 
 
 GLOBAL
        AXCESS CORP
 (Name
        of
        Small Business Issuer in Its Charter)
 
 NEVADA
                88-0199674(State
                    or other jurisdiction
                    of
                (I.R.S.
                    Employerincorporation
                    or
                    organization)
                Identification
                    No.)
  224
                    PONTE VEDRA PARK DRIVEPONTE
                    VEDRA BEACH, FLORIDA
                32082(Address
                    of principal executive
                    offices)
                (Zip
                    Code)
  (904)280-3950
 (Issuer's
        Telephone Number, Including Area Code)
 
 Securities
        registered pursuant to Section 12(b) of the Act: None
 Securities
        registered pursuant to Section 12(g) of the Act: Common Stock
 
 
 
 Check
        whether
        the Issuer: (1) has filed all reports required to be filed by Section 13 or
        15(d) of the Securities Exchange Act of 1934 during the preceding 9 months
        (or for such shorter period that the Issuer was required to file such
        reports), and (2) has been subject to such filing requirements for the past
        90 days. Yes x   No o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of Exchange Act). Yes o   No x
  As
        of
        November 14, 2006, the Issuer had 21,021,786 shares outstanding of the Common
        Stock ($0.001 par value) and no shares outstanding of the Preferred Stock
        ($0.001 par value).
 
 Transitional
        Small Business Disclosure Format (Check One): Yes o   No x
 
 
  TABLE
                  OF CONTENTS
              Page
                  No.
  PART  I
              FINANCIAL
                INFORMATION
  Item 1.
              Financial
                Statements(unaudited)
              6Item 2.
              Management's Discussion and Analysis
                or Plan
                of Operation
              27Item 3.
              Controls and Procedures
              38PART  II
              OTHER INFORMATIONItem 1.
              Legal Proceedings
              40Item 2.
              Changes in Securities
              41Item 3.
              Defaults Upon Senior
                Securities
              41Item 4.
              Submission of Matters to a Vote of
                Security Holders
              41Item 5.
              Other Information
              41Item 6.
              Exhibits
              41SIGNATURES
              
              43
  Forward-Looking
        Statements
 
 In
        addition to historical information, this Quarterly Report on Form
        10-QSB contains forward-looking statements that involve risks and
        uncertainties that could cause actual results to differ materially. Factors
        that might cause or contribute to such differences include, but are not
        limited to, those discussed in the section entitled "Management's
        Discussion and Analysis or Plan of Operation." You should carefully review
        the risks described in other documents we file from time to time with the
        Securities and Exchange Commission, including the Quarterly Reports on Form
        10-QSB that have been or are to be filed in 2006. When used in this report,
        the words "expects," "anticipates," "intends," "plans," "believes,"
        "seeks," "targets," "estimates," and similar expressions are generally
        intended to identify forward-looking statements. You should not place undue
        reliance on the forward-looking statements, which speak only as of the date
        of this Quarterly Report on Form 10-QSB. We undertake no obligation
        to publicly release any revisions to the forward-looking statements or
        reflect events or circumstances after the date of this
        document.
 
 Estimates
        of future financial results are inherently unreliable.
 
 From
        time
        to time, representatives of Global Axcess Corp (the Company) may
        make public predictions or forecasts regarding the Company's future
        results, including estimates regarding future revenues, expense levels,
        earnings or earnings from operations. Any forecast regarding the Company's
        future performance reflects various assumptions. These assumptions are
        subject to significant uncertainties, and, as a matter of course, many of
        them will prove to be incorrect. Further, the achievement of any forecast
        depends on numerous factors (including those described in this discussion),
        many of which are beyond the Company's control. As a result, there can be
        no assurance that the Company's performance will be consistent with any
        management forecasts or that the variation from such forecasts will not be
        material and adverse. Investors are cautioned not to base their entire
        analysis of the Company's business and prospects upon isolated predictions,
        but instead are encouraged to utilize the entire available mix of
        historical and forward-looking information made available by the Company,
        and other information affecting the Company and its products, when
        evaluating the Company's prospective results of operations.
 
 
 In
        addition, representatives of the Company may occasionally comment publicly
        on the perceived reasonableness of published reports by independent
        analysts regarding the Company's projected future performance. Such
        comments should not be interpreted as an endorsement or adoption of any
        given estimate or range of estimates or the assumptions and methodologies
        upon which such estimates are based. Undue reliance should not be placed on
        any comments regarding the conformity, or lack thereof, of any independent
        estimates with the Company's own present expectations regarding its future
        results of operations. The methodologies employed by the Company in
        arriving at its own internal projections and the approaches taken by
        independent analysts in making their estimates are likely different in many
        significant respects. Although the Company may presently perceive a given
        estimate to be reasonable, changes in the Company's business, market
        conditions or the general economic climate may have varying effects on the
        results obtained through the use of differing analyses and assumptions. The
        Company expressly disclaims any continuing responsibility to advise
        analysts or the public markets of its view regarding the current accuracy
        of the published estimates of outside analysts. Persons relying on
        such estimates should pursue their own independent investigation and
        analysis of their accuracy and the reasonableness of the assumptions on
        which they are based.
 
 5
 **PART
        I - FINANCIAL INFORMATION**
 
 **Item
        1. Financial Statements**
 GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED BALANCE SHEET
 September
        30, 2006
 (Unaudited)
  ASSETSCurrent
                    assetsCash
                    and cash equivalents
                
                $
                603,527Automated
                    teller machine vault cash
                
                
                184,504Accounts
                    receivable, net of allowance for doubtful accounts of
                    $243,340
                
                
                1,308,438Other
                    receivable
                
                
                700,000Note
                    receivable - current
                
                
                22,560Inventory
                
                
                129,196Deferred
                    tax asset - current
                
                
                329,197Prepaid
                    expenses and other current assets
                
                
                224,057Total
                    current assets
                
                
                3,501,479Fixed
                    assets, net
                
                
                6,462,399Other
                    assetsMerchant
                    contracts, net
                
                
                12,573,673Intangible
                    assets, net
                
                
                4,240,039Deferred
                    tax asset - non-current
                
                
                322,279Other
                    assets
                
                
                23,603Total
                    assets
                
                $
                27,123,472LIABILITIES
                    AND STOCKHOLDERS' EQUITYCurrent
                    liabilitiesAccounts
                    payable and accrued liabilities
                
                $
                4,153,701Automated
                    teller machine vault cash payable
                
                
                184,504Deferred
                    gain on sale of assets - current
                
                
                175,000Notes
                    payable-related parties - current portion
                
                
                18,153Notes
                    payable - current portion
                
                
                47,808Senior
                    lenders' notes - current portion, net
                
                
                627,083Capital
                    lease obligations - current portion
                
                
                1,253,775Total
                    current liabilities
                
                
                6,460,024Long-term
                    liabilitiesNotes
                    payable-related parties - long-term portion
                
                
                1,328,212Notes
                    payable - long-term portion
                
                
                9,093Senior
                    lenders' notes - long-term portion, net
                
                
                5,447,058Capital
                    lease obligations - long-term portion
                
                
                1,952,947Deferred
                    tax liability- long-term portion
                
                
                311,676Total
                    liabilities
                
                
                15,509,010Stockholders'
                    equityPreferred
                    stock; $0.001 par value; 5,000,000 sharesauthorized, no shares issued and outstanding
                
                
                -Common
                    stock; $0.001 par value; 45,000,000 sharesauthorized, 21,021,786 shares issued and outstanding
                
                
                21,022Additional
                    paid-in capital
                
                
                22,366,402Accumulated
                    deficit
                
                
                (10,772,962
                )Total
                    stockholders' equity
                
                
                11,614,462Total
                    liabilities and stockholders' equity
                
                $
                27,123,472
 
 6
 GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
  For
                      the Three Months EndedSeptember
                      30, 2006
                  
                  
                  
                  September
                      30, 2005Revenues
                  
                  $
                  5,556,874
                  
                  
                  
                  $
                  4,815,792Cost
                      of revenues
                  
                  
                  3,188,105
                  
                  
                  
                  $
                  2,865,282Gross
                      profit
                  
                  
                  2,368,769
                  
                  
                  
                  
                  1,950,510Operating
                      expensesDepreciation
                      and amortization
                  
                  
                  610,981
                  
                  
                  
                  
                  366,300Impairment
                      of long-lived assets
                  
                  
                  1,329,396
                  
                  
                  
                  
                  -Selling,
                      general and administrative
                  
                  
                  2,384,450
                  
                  
                  
                  
                  1,167,629Restructuring
                      charges
                  
                  
                  757,811
                  
                  
                  
                  
                  -Impairment
                      of notes receivable
                  
                  
                  522,864
                  
                  
                  
                  
                  -Other
                      expense (income)
                  
                  
                  -
                  
                  
                  
                  
                  (1,866
                  )Total
                      operating expenses
                  
                  
                  5,605,502
                  
                  
                  
                  
                  1,532,063Operating
                      income (loss) from continuing operationsbefore
                      items shown below
                  
                  
                  (3,236,733
                  )
                  
                  
                  
                  418,447Interest
                      expense, net
                  
                  
                  (399,422
                  )
                  
                  
                  
                  (154,474
                  )Loss
                      attributed to minority interest
                  
                  
                  62,752
                  
                  
                  
                  
                  -Income
                      (loss) from continuing operations
                  
                  
                  (3,573,403
                  )
                  
                  
                  
                  263,973Loss
                      from discontinued operations, net of tax
                  
                  $
                  (53,997
                  )
                  
                  
                  $
                  (352,576
                  )Net
                      loss
                  
                  $
                  (3,627,400
                  )
                  
                  
                  $
                  (88,603
                  )Income
                      (loss) per common share - basic:Income
                      (loss) from continuing operations
                  
                  $
                  (0.17
                  )
                  
                  
                  $
                  0.02Loss
                      from discontinued operations
                  
                  $
                  (0.00
                  )
                  
                  
                  $
                  (0.02
                  )Net
                      loss
                  
                  $
                  (0.17
                  )
                  
                  
                  $
                  (0.00
                  )Income
                      (loss) per common share - diluted:Income
                      (loss) from continuing operations
                  
                  $
                  (0.17
                  )
                  
                  
                  $
                  0.01Loss
                      from discontinued operations
                  
                  $
                  (0.00
                  )
                  
                  
                  $
                  (0.01
                  )Net
                      loss
                  
                  $
                  (0.17
                  )
                  
                  
                  $
                  (0.00
                  )Weighted
                      average common shares outstanding:Basic
                  
                  
                  21,021,243
                  
                  
                  
                  
                  18,501,286Diluted
                  
                  
                  21,021,243
                  
                  
                  
                  
                  19,137,586
  See
            Accompanying Notes to Condensed Consolidated Financial
            Statements
 
 7
 GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
  For
                    the Nine Months EndedSeptember
                    30, 2006
                
                
                
                September
                    30, 2005Revenues
                
                $
                16,232,522
                
                
                
                $
                14,546,658Cost
                    of revenues
                
                
                9,234,923
                
                
                
                
                8,592,795Gross
                    profit
                
                
                6,997,599
                
                
                
                
                5,953,862Operating
                    expensesDepreciation
                    and amortization
                
                
                1,824,868
                
                
                
                
                976,532Impairment
                    of long-lived assets
                
                
                1,329,396
                
                
                
                
                -Selling,
                    general and administrative
                
                
                5,586,050
                
                
                
                
                3,545,036Restructuring
                    charges
                
                
                757,811Impairment
                    of notes receivable
                
                
                772,864Other
                    expense (income)
                
                
                412,406
                
                
                
                
                (5,389
                )Total
                    operating expenses
                
                
                10,683,396
                
                
                
                
                4,516,179Operating
                    income (loss) from continuing operationsbefore
                    items shown below
                
                
                (3,685,797
                )
                
                
                
                1,437,683Interest
                    expense, net
                
                
                (1,039,685
                )
                
                
                
                (429,517
                )Gain
                    on sale of assets
                
                
                13,655
                
                
                
                
                -Loss
                    attributed to minority interest
                
                
                109,351
                
                
                
                
                -Income
                    (loss) from continuing operations
                
                
                (4,602,476
                )
                
                
                
                1,008,166Loss
                    from discontinued operations, net of tax
                
                $
                (275,937
                )
                
                
                $
                (959,951
                )Net
                    income (loss)
                
                $
                (4,878,413
                )
                
                
                $
                48,214Income
                    (loss) per common share - basic:Income
                    (loss) from continuing operations
                
                $
                (0.22
                )
                
                
                $
                0.06Loss
                    from discontinued operations
                
                $
                (0.01
                )
                
                
                $
                (0.06
                )Net
                    income (loss)
                
                $
                (0.23
                )
                
                
                $
                0.00Income
                    (loss) per common share - diluted:Income
                    (loss) from continuing operations
                
                $
                (0.22
                )
                
                
                $
                0.06Loss
                    from discontinued operations
                
                $
                (0.01
                )
                
                
                $
                (0.06
                )Net
                    income (loss)
                
                $
                (0.23
                )
                
                
                $
                0.00Weighted
                    average common shares outstanding:Basic
                
                
                20,987,328
                
                
                
                
                18,141,753Diluted
                
                
                20,987,328
                
                
                
                
                18,614,811
 
 See
        Accompanying Notes to Condensed Consolidated Financial Statements
 
 8
  GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
  For
                    the Nine Months EndedSeptember
                    30, 2006
                
                September
                    30, 2005Cash
                    flows from operating activities:Income
                    (loss) from continuing operations
                
                $
                (4,602,476
                )
                $
                1,008,166Adjustments
                    to reconcile net income from continuing operationsto
                    net cash provided by continuing operating activities:Stock
                    based compensation
                
                
                (11,698
                )
                
                -Depreciation
                    and amortization
                
                
                1,824,868
                
                
                976,532Impairment
                    of long-lived assets
                
                
                1,329,396
                
                
                -Provision
                    for doubtful accounts
                
                
                171,402
                
                
                -Accretion
                    of discount on notes payable
                
                
                115,779
                
                
                -Impairment
                    of notes receivable
                
                
                812,756
                
                
                -Loss
                    attributed to minority interest
                
                
                (109,351
                )
                
                -Changes
                    in operating assets and liabilities:Change
                    in automated teller machine vault cash
                
                
                277,903
                
                
                20,577Change
                    in accounts receivable
                
                
                (55,307
                )
                
                104,196Change
                    in inventory
                
                
                (92,348
                )
                
                7,071Change
                    in prepaid expenses and other current assets
                
                
                47,533
                
                
                (351,129
                )Change
                    in other assets and deferred revenue
                
                
                (58,944
                )
                
                249,694Change
                    in accounts payable and accrued liabilities
                
                
                1,472,317
                
                
                (113,131
                )Change
                    in automated teller machine vault cash payable
                
                
                (277,903
                )
                
                (20,577
                )Net
                    cash provided by continuing operating activitities
                
                
                843,926
                
                
                1,881,398Discontinued
                    operationsNet
                    loss
                
                
                (275,937
                )
                
                (959,953
                )Adjustments
                    to reconcile loss to net cash used indiscontinued
                    operations:Depreciation
                
                
                62,162
                
                
                71,322Change
                    in accounts receivable
                
                
                (22,179
                )
                
                (26,924
                )Change
                    in accounts payable and accrued liabilities
                
                
                59,867
                
                
                230,571Deferred
                    tax asset
                
                
                -
                
                
                (159,315
                )Change
                    in prepaid expenses and other current assets
                
                
                (20,358
                )
                
                (228,264
                )Net
                    cash used in discontinued operating activities
                
                
                (196,445
                )
                
                (1,072,562
                )Net
                    cash provided by continuing and discontinued operating
                    activities
                
                
                647,481
                
                
                808,836Cash
                    flows from investing activities:Investment
                    in notes
                
                
                -
                
                
                (66,658
                )Purchase
                    of property and equipment
                
                
                (665,208
                )
                
                (925,670
                )Proceeds
                    from merchant contract escrow reimbursement
                
                
                265,160
                
                
                -Net
                    cash used in investing activities for continuing
                    operations
                
                
                (400,048
                )
                
                (992,329
                )Net
                    cash used in investing activities for discontinued
                    operations
                
                
                -
                
                
                (722,407
                )Net
                    cash used in investing activities
                
                
                (400,048
                )
                
                (1,714,736
                )Cash
                    flows from financing activities:Proceeds
                    from issuance of common stock
                
                
                23,950
                
                
                686,300Proceeds
                    from notes payable
                
                
                -
                
                
                29,642Proceeds
                    from bank notes
                
                
                400,000
                
                
                500,000Proceeds
                    from lease buybacks
                
                
                204,306
                
                
                -Principal
                    payments on senior lenders' notes
                
                
                (1,618,749
                )
                
                (493,750
                )Principal
                    payments on notes payable
                
                
                (91,855
                )
                
                -Principal
                    payments on notes payable - related parties
                
                
                (1,730
                )
                
                -Principal
                    payments on capital lease obligations
                
                
                (819,869
                )
                
                (292,034
                )Net
                    cash provided by (used in) financing activities
                
                
                (1,903,947
                )
                
                430,158Effect
                    of exchange rate fluctuation on cash in discontinued
                    operations
                
                
                (98,078
                )
                
                -Decrease
                    in cash
                
                
                (1,754,592
                )
                
                (475,741
                )Cash,
                    beginning of period
                
                
                2,358,119
                
                
                496,823Cash,
                    end of the period
                
                $
                603,527
                
                
                21,082Cash
                    paid for income taxes
                
                
                -
                
                
                -Cash
                    paid for interest
                
                $
                (923,907
                )
                $
                (429,517
                )
 
 See
        Accompanying Notes to Condensed Consolidated Financial Statements
 
 9
 
 Supplemental
        schedule of non-cash investing and financing activities:
  For
                    the Nine Months EndedSeptember
                    30, 2006
                
                September
                    30, 2005Investing
                    activities:Purchase of assets under capital lease obligations
                
                $
                1,146,284
                
                
                2,103,675Note on sale of subsidiary
                
                
                700,000
                
                
                1,540,000Total non-cash investing activities
                
                $
                1,846,284
                
                $
                3,643,675Financing
                    activitiesStock issued for compensation
                
                
                22,218
                
                
                4,542Discount of notes payable
                
                
                115,779
                
                
                -Related party notes converted to common stock
                
                
                -
                
                
                1,025,000Total non-cash financing activities
                
                $
                137,997
                
                $
                1,029,542
 
 See
        Accompanying Notes to Condensed Consolidated Financial Statements
  10
  GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 AS
        OF
        September 30, 2006
 (Unaudited)
  **1.
        BASIS OF PRESENTATION**
 
 The
        accompanying unaudited condensed consolidated financial statements  have
        been prepared in accordance with Securities and Exchange Commission 
requirements for interim financial statements. Therefore, they do not 
include all of the information and footnotes required by accounting 
principles generally accepted in the United States of America for complete 
financial statements. These condensed consolidated financial statements 
should be read in conjunction with the Form 10-KSB for the year ended 
December 31, 2005 of Global Axcess Corp and subsidiaries ("the
        Company").
 
 The
        interim condensed consolidated financial statements present the  condensed
        consolidated balance sheet, statements of operations, and cash  flows of
        Global Axcess Corp and its subsidiaries. The condensed  consolidated
        financial statements have been prepared in accordance with  accounting
        principles generally accepted in the United States of America.
 
 The
        interim condensed consolidated statements of operations and cash flows also
        include discontinued operations from Global Axcess Corp’s former subsidiaries
        and variable interest entity.
  The
          interim condensed consolidated financial information is unaudited. In  the
          opinion of management, all adjustments necessary to present fairly
          the financial position as of September 30, 2006 and the results of
          operations and cash flows presented herein have been included in the condensed
            consolidated financial statements. Interim results are not
          necessarily  indicative of results of operations for the full year.
 All
        adjustments are of normal recurring nature, with the exception of:
  ·
            $1,329,396
                impairment charges on long-lived assets (see Note 5) ·
            $757,811
                restructuring charges (see Note 5) ·
            $522,864
                impairment charges on notes receivable (see Note
                4) ·
            $200,000
                increase in legal accrual for lawsuit (see Note
                6) ·
            $71,507
                gain on sale of assets (see Note 3) ·
            $68,185
                expenses relating to strategic alternative evaluation (see Note 10) ·
            $40,000
                accrual for settlement of lawsuit (see Notes 6 and
                10)  **2.
        DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES**
 
 ***Description
        of Business***
 
 Global
        Axcess Corp, through its wholly owned subsidiaries, is an independent provider
        of Automated Teller Machine ("ATM") services.
 
 ***Cash
        Equivalents***
 
 The
        Company considers all highly-liquid investments with a maturity of three
        months
        or less when purchased to be cash equivalents.
  11
 ***Principles
        of Consolidation***
 
 The
        condensed consolidated financial statements include the accounts of Global
        Axcess Corp and its subsidiaries. The Company has the following subsidiaries:
        Nationwide Money Services, Inc. and EFT Integration, Inc., (see Note 3 referring
        to subsidiaries included as discontinued operations). All significant
        intercompany transactions and accounts have been eliminated in
        consolidation.
 
 ***Reclassifications***
 
 Certain
        reclassifications were made to the 2005 condensed consolidated statement
        of cash
        flows and condensed consolidated statement of operations to conform to 2006
        presentation. These reclassifications had no impact on net income (loss)
        or
        stockholders’ equity.
  ***Use
        of Estimates***
 
 The
        preparation of condensed consolidated financial statements in conformity
        with
        accounting principles generally accepted in the United States of America
        requires management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets and
        liabilities at the date of the condensed consolidated financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        Actual results could differ from those estimates.
  ***Revenue
        Recognition***
 
 Transaction
        service and processing fees are recognized in the period that the service
        is
        performed. The Company receives two types of fees: surcharge/convenience
        fees
        paid by consumers utilizing certain ATMs owned or managed by the Company;
        and
        interchange fees paid by their banks. Processing fees are generally charged
        on a
        per transaction basis, depending on the contractual arrangement with the
        customer. ATM sales revenue is recognized when the ATM is shipped and installed.
        Revenue from managing ATMs for others is recognized each month when the services
        are performed.
 
 ***Inventory***
  ATMs
          available for sale and replacement parts are classified as inventory until
          such
          time as the machines or replacement parts are sold, installed and in service.
          Once the ATM is sold, it is released to cost of sales. At September 30,
          2006,
          the Company’s ATM inventory totaled $129,196 .
          Inventories are valued at the lower of cost (first-in, first-out method)
          or
          market.
 ***Accounts
        Receivable***
 
 The
        Company reviews the accounts receivable on a regular basis to determine the
        collectibility of each account. The Company maintains allowances for doubtful
        accounts for estimated losses resulting from the failure of our customers
        to
        make required payments. At each reporting period, the Company evaluates the
        adequacy of the allowance for doubtful accounts and calculates the appropriate
        allowance based on historical experience, credit evaluations, specific customer
        collection issues and the length of time a receivable is past due. The Company
        records an allowance for doubtful accounts for any billed invoice aged past
        60
        days. When the Company deems the receivable to be uncollectible, the Company
        charges the receivable against the allowance for doubtful accounts. As of
        September 30, 2006 the Company has bad debt reserves totaling
        $243,340 against
        gross accounts receivable totaling $1,551,778 .
 
 12
  ***Fixed
        Assets***
 
 Fixed
        assets are stated at cost less accumulated depreciation and amortization.
        Depreciation is calculated principally on the straight-line method over the
        estimated useful lives of the assets, which generally range from 3 to 10
        years.
        Leasehold improvements are amortized on a straight-line basis over the shorter
        of the lease term or the life of the asset. The cost of repairs and maintenance
        is charged to expense as incurred. Expenditures for property improvements
        and
        renewals are capitalized. Upon the sale or other disposition of a depreciable
        asset, cost and accumulated depreciation are removed from the accounts and
        any
        gain or loss is reflected in other income (expense).
 
 The
        Company periodically evaluates whether events and circumstances have occurred
        that may warrant revision of the estimated useful life of fixed assets or
        whether the remaining balance of fixed assets should be evaluated for possible
        impairment. The Company uses an estimate of the related undiscounted cash
        flows
        over the remaining life of the fixed assets in measuring their recoverability,
        as well as historical age to estimate useful economic lives and values. The
        Company reviews fixed assets for impairment and if it finds impairment, the
        Company accounts for the impairment in accordance with SFAS No. 144 ”Impaired
        Long-Lived Assets and Long-Lived Assets to be Disposed of” (see Note 5 referring
        to impairment of long-lived assets).
 
 ***Assets
        Held for Sale***
 
 ATMs
        and
        related software components which are not currently in service are classified
        as
        assets held for sale, until such time either the machine is installed or
        reinstalled and in service or sold. Once in service, each ATM is reclassified
        as
        a fixed asset and depreciated using the remaining estimated useful life of
        the
        machine. Any ATM and related software components classified as fixed assets
        held
        for sale and then sold would be considered a disposal group and a gain or
        loss
        on the sale would be recorded. The Company reviews the assets held for sale
        for
        impairment and if it finds impairment, the Company accounts for the impairment
        in accordance with SFAS No. 144 ”Impaired Long-Lived Assets and Long-Lived
        Assets to be Disposed of” (see Note 5 referring to impairment of long-lived
        assets).
 
 ***Intangible
        Assets - Goodwill and Merchant Contracts***
 
 In
        June
        2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142,
        “Goodwill and Other Intangible Assets,” which was adopted by the Company in
        fiscal 2002. SFAS No. 142 established accounting and reporting standards
        for
        goodwill and intangible assets resulting from business combinations. SFAS
        No.
        142 included provisions discontinuing the periodic amortization of, and
        requiring the assessment of the potential impairments of goodwill (and
        intangible assets deemed to have indefinite lives). As SFAS No. 142 replaced
        the
        measurement guidelines for goodwill impairment, goodwill not considered impaired
        under previous accounting literature may be considered impaired under SFAS
        No.
        142. SFAS No. 142 also required that the Company complete a two-step goodwill
        impairment test. The first step compares the fair value of each reporting
        unit
        to its carrying amount, including goodwill. If the fair value of a reporting
        unit exceeds its carrying amount, goodwill is not considered to be impaired
        and
        the second step is not required. SFAS 142 required completion of this first
        step
        within the first six months of initial adoption and annually thereafter.
        If the
        carrying amount of a reporting unit exceeds its fair value, the second step
        is
        performed to measure the amount of impairment loss. The second step compares
        the
        implied fair value of goodwill to the carrying value of a reporting unit's
        goodwill. The implied fair value of goodwill is determined in a manner similar
        to accounting for a business combination with the allocation of the assessed
        fair value determined in the first step to the assets and liabilities of
        the
        reporting unit. The excess of the fair value of the reporting unit over the
        amounts assigned to the assets and liabilities is the implied fair value
        of
        goodwill. This allocation process is only performed for purposes of evaluating
        goodwill impairment and does not result in an entry to adjust the value of
        any
        assets or liabilities. An impairment loss is recognized for any excess in
        the
        carrying value of goodwill over the implied fair value of goodwill.
 
 13
 Intangible
        assets with finite lives are stated at cost, net of accumulated amortization,
        and are subject to impairment testing under certain circumstances in accordance
        with SFAS No. 144 and other applicable pronouncements. These assets are
        amortized on the straight-line method over their estimated useful lives or
        period of expected benefit. Intangible assets with indefinite lives are subject
        to periodic impairment testing in accordance with SFAS
        No. 142.
 
 The
        Company’s intangible assets are made up of merchant contracts with automatic
        renewable lives. The Company has determined after review of its contracts
        that
        the economic life of the contracts is extended and estimated over 21 years
        (or 3
        times renewal) based on historical and expected useful lives of similar assets.
        The Company amortizes the merchant contracts over their estimated useful
        lives
        of 21 years. The Company has adopted SFAS No. 142 to reflect the fair value
        of
        the merchant contracts, and uses a two-step valuation process to determine
        if
        there has been any impairment on the value of the merchant contract assets.
        The
        first step is to determine at each contract’s renewable period, whether they
        will actually renew and if not to amortize the cost over the remaining life
        of
        the contract. The second step is to compare the fair value of each reporting
        unit to the carrying amount of the merchant contracts, thus testing the
        impairment of the value of the contracts. An impairment loss is recognized
        for
        any excess in the carrying value of merchant contracts over the assessed
        fair
        value of merchant contracts.
 
 As
        of
        September 30, 2006 the Company has accumulated amortization totaling $277,698
        against intangible assets totaling $4,517,737.
 
 As
        of
        September 30, 2006 the Company has accumulated amortization
        totaling $1,704,335 against
        merchant contracts totaling $14,278,008.
 
 14
  ***Fair
        Value of Financial Instruments***
  The
        carrying amounts of the Company’s long-term liabilities approximate the
        estimated fair values at September 30, 2006 based upon the Company’s ability to
        acquire similar debt at similar maturities. The carrying values of all other
        financial instruments approximate their fair value, because of the short-term
        maturities of these instruments.
  ***Earnings
        per Share***
  In
        calculating basic income (loss) per share, net income (loss) is divided by
        the
        weighted average number of common shares outstanding for the period. Diluted
        income (loss) per share reflects the assumed exercise or conversion of all
        dilutive securities, such as options and warrants. No such exercise or
        conversion is assumed where the effect is anti-dilutive, such as when there
        is a
        net loss from continuing operations. The reverse stock split was applied
        retroactively to all previously disclosed share and per share amounts. The
        diluted earnings per share amount equals basic earnings per share for the
        three
        months ended September 30, 2006 because the Company had a net loss and the
        impact of the assumed exercise of the stock options and warrants is
        anti-dilutive.
  For
                    the Three Months EndedSeptember
                    30, 2006
                
                
                September
                    30, 2005NumeratorIncome (loss) from continuing operations
                
                $
                (3,573,403
                )
                
                
                $
                263,973Loss from discontinued operations
                
                $
                (53,997
                )
                
                
                
                (352,576
                )Numerator
                    for diluted income (loss) per shareavailable
                    to common stockholders
                
                
                (3,627,400
                )
                
                
                
                (88,603
                )DenominatorWeighted average shares
                
                
                21,021,243
                
                
                
                
                18,501,286Effect of dilutive securities:Employee stock options & warrants
                
                
                -
                
                
                
                
                636,300Denominator
                    for diluted income (loss) per share adjustedweighted
                    shares after assumed exercises
                
                
                21,021,243
                
                
                
                
                19,137,586**Income
                    (loss) per common share - basic:**Income
                    (loss) from continuing operations
                
                
                (0.17
                )
                
                
                
                0.02Loss
                    from discontinued operations
                
                
                (0.00
                )
                
                
                
                (0.02
                )Net
                    Income (loss) per share
                
                
                (0.17
                )
                
                
                
                0.00**Income
                    (loss) per common share - diluted:**Income
                    (loss) from continuing operations
                
                
                (0.17
                )
                
                
                
                0.01Loss
                    from discontinued operations
                
                
                (0.00
                )
                
                
                
                (0.01
                )Net
                    Income (loss) per share
                
                
                (0.17
                )
                
                
                
                (0.00
                )
 15
 ***Reverse
        Stock Split***
 
 Effective
        April 28, 2005, the Company implemented a one-for-five reverse split of its
        outstanding common stock. All information regarding share and per share amounts
        have been adjusted within the financial statements to reflect the reverse
        stock
        split.
 
 ***Income
        Taxes***
 
 The
        Company accounts for its income taxes in accordance with SFAS No. 109
“Accounting for Income Taxes”, which requires recognition of deferred tax assets
        and liabilities for future tax consequences attributable to differences between
        the financial statement carrying amounts of existing assets and liabilities
        and
        their respective tax basis and tax credit carry-forwards. Deferred tax assets
        and liabilities are measured using enacted tax rates expected to apply to
        taxable income in the years in which those temporary differences are expected
        to
        be recovered or settled. The effect on deferred tax assets and liabilities
        of a
        change in tax rates is recognized in income in the period that includes the
        enactment date.
 
 ***Segment
        Information***
  The
        Company discloses segment information in accordance with SFAS No. 131,
“Disclosures about Segments of an Enterprise and Related Information.” The
        Company operates under one segment.
  ***Research
        and Development Costs***
 
 Research
        and development costs are charged to expense when incurred. Costs incurred
        to
        internally develop software, incurred during the research and planning phase
        of
        development, are charged to expense as incurred, and direct costs incurred
        during development, testing and implementation are capitalized as incurred
        over
        the useful life of the software and amortized for an average life of three
        years. Other development costs include development of card-based business
        and
        development of foreign ATM operations. During the three-month periods ended
        September 30, 2006 and 2005, the amount of research and development costs,
        which
        were borne entirely by the Company, amounted to $125,504 and $352,576,
        respectively.
 
 ***Repairs
        and Maintenance Costs***
 
 Repairs
        and maintenance costs are expensed as incurred. Repairs and maintenance
        pertaining to the Company’s ATMs, the revenue driving equipment, are recorded in
        cost of revenues. The Company records repairs and maintenance costs relating
        to
        general office and backend related equipment to general and administrative
        costs.
 
 ***Internally
        Developed Software***
 
 Costs
        incurred related to internally developed software, including interest, are
        capitalized and amortized over the useful life of the software for an average
        life of three years. During the quarters ended September 30, 2006 and 2005,
        the
        Company capitalized $0 and approximately $252,052 of internally developed
        software, respectively.
 
 16
  ***Recent
        Accounting Pronouncements***
 
 In
        December 2004, the FASB issued SFAS No. 123 (R), “Share-Based Payment”. SFAS No.
        123 (R) revises SFAS No. 123, “Accounting for Stock-Based Compensation” which
        supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS
        No. 123 (R) focuses primarily on the accounting for transactions in which
        an
        entity obtains employee services in share-based payment transactions. SFAS
        No.
        123 (R) requires companies to recognize in the statement of income the cost
        of
        employee services received in exchange for awards of equity instruments based
        on
        the grant-date fair value of those awards (with limited exceptions). SFAS
        No.
        123 (R) is effective as of the first interim or annual reporting period that
        begins after October 1, 2005 for non-small business issuers and after December
        15, 2005 for small business issuers. Accordingly, the Company has adopted
        SFAS
        No. 123 (R) in its quarter ended March 31, 2006. During the quarter ended
        September 30, 2006, the Company did not recognize any material stock
        based compensation expense.
  In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS
        No. 157 provides guidance on the definition of fair value, methods to measure
        fair value, and expanded disclosures of fair value. SFAS No. 157 is effective
        as
        of the first interim or annual reporting period that begins after November
        15,
        2007. Accordingly, the Company will adopt SFAS No. 157 in its quarter ending
        March 31, 2008. The Company is currently evaluating the provisions of SFAS
        No.
        157 and has not yet determined the impact, if any, that SFAS No. 157 will
        have
        on its financial statement presentation or disclosures.
  ***Risk
        Factors***
 
 There
        are
        a number of factors that could cause actual results to differ materially
        from
        those discussed in the forward-looking statements, including those factors
        described below. Other factors not identified herein could also have such
        an
        effect. Among the factors that could cause actual results to differ materially
        from those discussed in the forward-looking statements are the
        following:
 
 ·  Default
        Under our Credit Agreements
 
 The
        Company has received a waiver of certain covenants from its senior lender
        during
        the 3rd quarter of 2006. There were no other covenants under debt agreements
        with lenders that were not met.
 
 ·  Our
        sales
        depend on transaction fees from our networks of ATMs. A decline in either
        transaction volume or the level of transaction fees could reduce our sales
        and
        harm our operating results **.**
 
 ·  Transaction
        fees for our network of ATMs produce substantially all of our sales.
        Consequently, our future operating results will depend on both transaction
        volume and the amount of the transaction fees we receive. Our transaction
        volume
        and fees will depend principally upon:
 
 **•**
              
              our
                  ability to find replacement sites in the event of merchant
                  turnover;**•**
              
              competition,
                  which can result in over-served markets, pressure to reduce existing
                  fee
                  structures and increase sales discounts to merchants and reduced
                  opportunities to secure merchant or other placements of our
                  machines;
  17
 **•**
              
              our
                  ability to service, maintain and repair ATMs in our network promptly
                  and
                  efficiently;**•**
              
              continued
                  market acceptance of our services; and**•**
              
              government
                  regulation and network adjustment of our
                  fees.
 
 ·  Changes
        in laws or card association rules affecting our ability to impose
        surcharge/convenience fees and continued customer willingness to pay
        surcharge/convenience fees;
 
 ·  Our
        ability to form new strategic relationships and maintain existing relationships
        with issuers of credit cards and national and regional card
        organizations;
 
 ·  Our
        ability to expand our ATM base;
 
 ·  The
        availability of financing at reasonable rates for vault cash and for other
        corporate purposes;
 
 ·  Our
        ability to maintain our existing relationships with Food Lion and Kash n’
Karry;
 
 ·  Our
        ability to keep our ATMs at other existing locations and to place additional
        ATMs in preferred locations at reasonable rental rates;
  ·  The
        extent and nature of competition from financial institutions, credit card
        processors and third party operators, many of whom have substantially greater
        resources;
 
 ·  Our
        ability to maintain our ATMs and information systems technology without
        significant system failures or breakdowns;
 
 ·  Our
        ability to develop new products and enhance existing products to be offered
        through ATMs, and our ability to successfully market these
        products;
 
 ·  Our
        ability to retain senior management and other key personnel;
  ·  Our
        ability to comply with mandated Triple DES configuration;
 
 ·  Loss
        of
        network sponsorship;
 
 ·  Our
        ability to comply with mandated customer background checks and financial
        underwriting requirements; and
  ·  Changes
        in general economic conditions.
 
 18
 **3.  DISCONTINUED
        OPERATIONS**
  During
        the quarter ended September 30, 2005, the Company approved plans to dispose
        of
        its wholly-owned subsidiary, Electronic Payment & Transfer Corporation
        ("EP&T"), and to discontinue offering prepaid debit cards and the related
        products and services that were marketed by EP&T. Subsequently, effective
        September 30, 2005, the Company completed the sale of EP&T to one former
        employee of the Company for a $1.5 million note receivable (see Note 4 -
        "Notes
        Receivable"). In accordance with FASB Statement No. 114, “Accounting by
        Creditors for Impairment of a Loan “, the Company has written the note
        receivable down to $500,000 and has set a reserve for the entire balance.
        In
        accordance with FASB Statement No. 144, "Accounting for the Impairment or
        Disposal of Long-Lived Assets," the Company has classified EP&T as a
        discontinued operation and reported its operating results within discontinued
        operations in the accompanying condensed consolidated statements of income.
        The
        Company recorded no gain or loss on this initial transaction.
  During
        the quarter ended December 31, 2005, the Company approved plans to discontinue
        two operations that did not fit within management’s strategic plans, thereby
        ceasing operations of the Company’s software development subsidiary, Axcess
        Technology Corp. (“ATC”), and ATC’s South African subsidiary Axcess Technology
        Corp, SA (“ATCSA”), as of December 31, 2005. The Company has dismissed all but
        one employee as of December 31, 2005, transferring the employee to Nationwide
        Money Services, Inc. All assets and liabilities have been transferred to
        either
        Nationwide Money Services, Inc. or Cash Axcess Corp., SA. In accordance with
        FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
        Assets," the Company has classified ATC and ATCSA as discontinued operations
        and
        reported their operating results within discontinued operations in the
        accompanying condensed consolidated statements of income and statements of
        cash
        flow.
  On
        May 2,
        2006, the Company entered into a Shareholder Agreement to sell 50% of Cash
        Axcess Corporation (Proprietary) Limited, in a stock arrangement with Industrial
        Electronic Investments Limited.  Under
        the
        requirements of FASB Interpretation No. 46(R), this transaction constituted
        a
        variable interest for the Company, with the Company being determined as the
        primary beneficiary. During the quarter ended September 30, 2006, the Company
        approved plans to discontinue its South African operation which did not fit
        within management’s strategic plans. On September 30, 2006, the Company
        finalized the sale of the remaining 50% of Cash Axcess Corporation (Proprietary)
        Limited (“CAC”), its Variable Interest Entity. In accordance with FASB Statement
        No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
        the
        Company has classified CAC as discontinued operations and reported their
        operating results within discontinued operations in the accompanying condensed
        consolidated statements of income and statements of cash flow. The resulting
        gain on the sales of assets is as follows:
  Sales
                    price (Other receivable at September 30, 2006)
                
                
                
                
                $
                700,000Cost
                    basisInvestment,
                    less minority interest
                
                $
                (812,198
                )Other
                    assets transferred
                
                $
                (196,704
                )
                $
                (1,008,902
                )Deferred
                    escrow deposit
                
                
                
                
                $
                (175,000
                )$
                (483,902
                )Deferred
                    gain on previous sale
                
                
                
                
                $
                555,409Net
                    gain on sale of assets
                
                
                
                
                $
                71,507
  19
 The
        Company has not allocated interest to discontinued operations. Operating
        results
        of these discontinued operations were as follows for the three-month and
        nine-month periods ended September 30, 2006 and September 30, 2005:
  Three
                    Months Ended
                
                Three
                    Months EndedSeptember
                    30, 2006
                
                September
                    30, 2005Revenues
                
                $
                36,593
                
                $
                12,812Cost
                    of revenues
                
                
                21,228
                
                
                8,716Gross
                    Profit
                
                
                15,365
                
                
                4,096Operating
                    ExpensesDepreciation and amortization
                
                
                22,808
                
                
                34,054Selling, general and administrative
                
                
                119,545
                
                
                480,065Other expense
                
                
                (1,484
                )
                
                1,868Total
                    operating expenses
                
                
                140,869
                
                
                515,987Loss
                    from operations
                
                
                (125,504
                )
                
                (511,891
                )Gain
                    on sale of assets
                
                
                71,507
                
                
                -Provision
                    for income tax benefit
                
                
                -
                
                
                (159,315
                )Net
                    loss
                
                $
                (53,997
                )
                $
                (352,576
                )
 
 20
  Nine
                    Months Ended
                
                Nine
                    Months EndedSeptember
                    30, 2006
                
                September
                    30, 2005Revenues
                
                $
                138,138
                
                $
                11,924Cost
                    of revenues
                
                
                66,442
                
                
                9,726Gross
                    Profit
                
                
                71,696
                
                
                2,198Operating
                    ExpensesDepreciation and amortization
                
                
                62,162
                
                
                71,322Selling, general and administrative
                
                
                355,515
                
                
                1,046,949Other expense
                
                
                1,463
                
                
                3,192Total
                    operating expenses
                
                
                419,140
                
                
                1,121,464Loss
                    from operations
                
                
                (347,444
                )
                
                (1,119,266
                )Gain
                    on sale of assets
                
                
                71,507
                
                
                -Provision
                    for income tax benefit
                
                
                -
                
                
                (159,315
                )Net
                    loss
                
                $
                (275,937
                )
                $
                (959,951
                )
 
 **4. NOTES
        RECEIVABLE**
  Notes
        receivable - current consist of the following at September 30,
        2006:
  (a)
                  9% promissory note receivable requiring monthly interest payments
                  starting
                  October 1, 2006 and quarterly principal payments starting August
                  1, 2006,
                  maturing November 1, 2010 requiring a balloon payment, fully reserved
                  due
                  to non-payment
              
              $
              0(b)
                  10% promissory note due February 2007, net of reserve of
                  $77,335
              
              
              22,560$
              22,560
 
 (a)
        During the quarter ended September 30, 2005, the Company disposed of its
        wholly-owned subsidiary, Electronic Payment & Transfer Corporation
        (“EP&T”), and discontinued offering prepaid debit cards and the related
        products and services that were marketed by EP&T. Subsequently, effective
        September 30, 2005, the Company completed the sale of EP&T to one former
        employee of the Company for $1,540,000 in a secured promissory note covering
        the
        full amount of the sale price (see Note 3 - "Discontinued Operations"). On
        August 1, 2006, Electronic Payment Systems, LLC (“EPS”), the acquirer, failed to
        make its required payment and was in default of the Stock Purchase Agreement
        made and entered into as of September 30, 2005. The Company sent a default
        notification letter on August 2, 2006 and EPS had thirty days to cure the
        default. EPS has failed to make any payment to date; therefore the Company
        has
        determined that it is unlikely that the purchaser will repay the note. The
        Company and EPS have been in negotiations to amend the note to $500,000,
        however
        no agreement has been reached. Additionally, it is unlikely that the Company
        will receive financial information from EPS which would deem even the amended
        note to be collectible. In the absence of financial information to determine
        collectibility and only having the value of the stock of EPS as security
        on the
        repayment of the note, management has determined that it is likely that the
        note
        is fully impaired and has increased the reserve of $250,000 established in
        the
        first quarter, by $490,134, which together with the previously deferred gain,
        reduced the carrying value to zero.
 
 (b)
        In
        February 2004, the Company issued a note receivable in the amount of $190,000
        due within one year and requiring monthly payments of principal and interest,
        with an annual interest rate of 10%. The note has been amended to extend
        the
        term to February 2007. The amount remaining on the note as of September 30,
        2006
        is $99,895. The promissory note is collateralized by the Company’s stock and
        during the quarter ended September 30, 2006, the Company increased the reserve
        by $32,730 due to the declining stock price of the Company.
 
 The
        Company has received no payments of interest on this loan and no interest
        income
        has been recognized in the periods presented.
 
 21
  **5. IMPAIRMENT
        OF
        LONG-LIVED ASSETS AND BUSINESS REORGANIZATION CHARGES**
  Impairment
        of Long-lived assets
 
 As
        discussed in Note 2 “Accounting Policies”, the Company accounts for the
        impairment of long-lived assets in accordance with SFAS No. 144 ”Impaired
        Long-Lived Assets and Long-Lived Assets to be Disposed of”.
 
 In
        July
        2006 the Company disconnected its processing switch which processed the
        transactions for its subsidiary EFT Integration, Inc. and replaced its switching
        software with a third party vendor. Accordingly, the switching software was
        evaluated for impairment and deemed to be impaired.
 
 Also,
        during the third quarter, assets held for sale, consisting of ATMs and related
        software, were reevaluated for impairment. Of the $485,315 total assets held
        for
        sale, $125,586 worth of ATMs were determined to be useful and able to be
        placed
        back in service. In accordance with SFAS No. 144 ”Impaired Long-Lived Assets and
        Long-Lived Assets to be Disposed of”, these assets are to be placed back into
        service at zero book value which is their depreciated value had they not
        been
        held for sale. Therefore, the full balance of assets held for sale was
        determined to be fully impaired.
 
 22
 Additionally,
        the Company reviewed other ATMs and other software for impairment and determined
        that some of the Company’s other ATMs and software was impaired. The following
        summarizes the amounts charged to impairment of long-lived assets for the
        quarter ended September 30, 2006:
  Net
                    Book Value
                    At
                      September 30, 2006
                
                Estimated
                    proceeds
                    from
                      disposition
                
                Impairment
                    ChargeLong-lived
                    asset descriptionSwitching
                    software
                
                $
                610,024
                
                
                -
                
                $
                610,024Assets
                    held for sale
                
                $
                485,315
                
                
                -
                
                $
                485,315ATMs
                    and other software
                
                $
                234,057
                
                
                -
                
                $
                234,057$
                1,329,396
  Business
        Restructuring Costs
 
 During
        the quarter ended September 30, 2006, the Company evaluated its business
        plan
        and developed a plan for business reorganization. Included in this
        business-reorganization plan was the decision to sell its South African Variable
        Interest Entity (Under the requirements of FASB Interpretation No. 46(R),
        this
        transaction constitutes a variable interest for the Company, with the Company
        being determined as the primary beneficiary), Cash Axcess Corporation
        (Proprietary) Limited (“CAC”) (see Note 3); the decision to shut down the
        aforementioned switching platform and migrate to third party vendor for
        processing (see above in Note 5); the decision to reevaluate the plan to
        reinstall assets held for sale back into service (see above in Note 5); and
        the
        decision to reevaluate other ATMs and software for impairment (see above
        in Note
        5). Additionally, the Company decided to restructure management and to outsource
        certain employee functions to third party vendors. As part of this decision
        to
        eliminate the positions held by the two senior officers and other employees,
        the
        Company incurred restructuring charges during the third quarter of 2006 in
        the
        amount of $757,811. As of September 30, 2006 the full amount of restructuring
        charges were accrued.
  **6. COMMITMENTS
        AND CONTINGENCIES**
  Capital
        leases entered into during the three-month period ended September 30, 2006
        mature in 24 months with a rate of 18.71%, totaled $329,318.
 
 23
 *Legal
        proceedings*
 
 In
        March
        2004, the Company received a claim filed by James Collins, a previous employee
        of Global Axcess Corp. The claim was filed in Superior court of California,
        County of San Diego on March 2, 2004. The claim alleged the following were
        owed
        in connection with the employment agreement: compensation, bonuses and other
        benefits of approximately $316,915; and 90,000 restricted shares and 359,700
        stock options exercisable at $3.75 per share. As of March 31, 2006, the Company
        had accrued a total of $450,000 for the potential legal claim. The claim
        filed
        by James Collins was settled for $450,000 on May 2, 2006 whereby the Company
        made a lump-sum payment of $300,000 on May 22, 2006 and has agreed to pay
        the
        remaining $150,000 in 12 monthly installments of $12,500 commencing July
        1, 2006
        and ending June 30, 2007.
 
 On
        August
        4, 2006, the Company was served with a demand for arbitration/mediation from
        EFMARK Service Company (“EFMARK”), a provider of maintenance services and a
        provider of cash replenishment services for automated teller machines. EFMARK
        alleged that the Company has failed to compensate EFMARK for services amounting
        to $103,000 and was seeking said amount as well as interest of $32,000. The
        Company believed the demand contains factual inaccuracies and was wholly
        without
        merit. In the spirit of its business relationship with EFMARK, the Company
        settled this claim for $40,000 on October 4, 2006. The Company has reflected
        this $40,000 expense and liability in its financial statements ended September
        30, 2006.
 
 On
        September 29, 2006, the Company was served with process by Renaissance US
        Growth
        Investment Trust PLC ("Renn") and BFS US Special Opportunities Trust PLC
        ("BFS"
        and collectively with Renn, the "Plaintiffs"), two investors and shareholders
        of
        the Company. In the Complaint, filed in the Circuit Court of the Seventh
        Judicial Circuit in and for St. John's County, Florida, Plaintiffs allege
        breach
        of contract, fraud, and negligent misrepresentation. The Plaintiffs are seeking
        monetary damages, attorneys’ fees and rescission of their investment in the
        amount of $1,500,000 based on the Company's restatement of its earnings for
        the
        2nd and 3rd quarters of 2005. The Company denies any and all allegations
        of
        wrongdoing and intends to vigorously defend such action. The Company has
        booked
        a $200,000 expense accrual for what it deems to be probable legal expenses
        defending this claim.
 
 From
        time
        to time, the Company and its subsidiaries may be parties to, and their property
        is subject to, ordinary, routine litigation incidental to their business.
        Claims
        may exceed insurance policy limits and the Company or any one of its
        subsidiaries may have exposure to a liability that is not covered by insurance.
        Management is not aware of any such lawsuits that could have a material adverse
        impact on the Company’s condensed consolidated results of operations, cash flows
        or financial position.
  **7. INCOME
        TAXES**
 
 In
        assessing the realizability of the deferred tax assets, management considers
        whether it is more likely than not, that some portion or all of the deferred
        tax
        assets will not be realized. The valuation allowance at September 30, 2006
        is
        related to deferred tax assets arising from net operating loss carryforwards.
        Management believes that based upon its projection of future taxable income
        for
        the foreseeable future, it is more likely than not that the Company will
        not be
        able to realize the full benefit of the net operating loss carryforwards
        before
        they expire due to the amortization and depreciation losses from the projected
        acquisition assets.
 
 24
 At
        September 30, 2006, the Company has net operating loss carryforwards remaining
        of approximately $9,800,000 that may be offset against future taxable income
        through 2025. As part of management’s tax strategies they will be reviewing the
        use of the net operating loss carryforwards. The Company is reviewing its
        tax
        depreciation methods for future utilization of the NOL.
  **8. CHANGES
        IN
        STOCKHOLDERS' EQUITY**
 
 See
        the
        table below for all the equity transactions for the three-month period ended
        September 30, 2006:
  AccumulatedAdditional
                
                Other
                
                
                
                TotalCommon
                    Stock
                
                
                
                Paid-in
                
                Comprehensive
                
                Accumulated
                
                Stockholders'Shares
                
                Amount
                
                Capital
                
                Income
                
                Deficit
                
                EquityBalances,
                    June 30, 2006
                
                
                21,011,786
                
                $
                21,012
                
                $
                22,354,109
                
                $
                (98,078
                )
                $
                (7,047,484
                )
                $
                15,229,559Stock
                    warrants exercised and issued
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                -
                
                
                -Stock
                    options issued
                
                
                10,000
                
                
                10
                
                
                3,490
                
                
                
                
                
                -
                
                
                3,500Stock
                    compensation expense
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                -
                
                
                -Foreign
                    exchange translation adjustment on sale of subsidiary
                
                
                
                
                
                
                
                
                -
                
                
                98,078
                
                
                (98,078
                )
                
                -Stock
                    warrants issued to consultants in lieu of cash
                    compensation
                
                
                
                
                
                
                
                
                8,803
                
                
                -
                
                
                
                
                
                8,803Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                (3,627,400
                )
                
                (3,627,400
                )Balances,
                    September 30, 2006
                
                
                21,021,786
                
                $
                21,022
                
                $
                22,366,402
                
                $
                -
                
                $
                (10,772,962
                )
                $
                11,614,462
  **9.** **STOCK
        OPTIONS AND WARRANTS**
  Pro
        forma disclosure - Pro
        forma information regarding net income and net earnings per share, has been
        determined as if the Company had accounted for its employee stock-based
        compensation plans and other stock options under the fair value method of
        SFAS
        123. The fair value of each option grant is estimated on the date of grant
        using
        the Black-Scholes option pricing model with the following weighted-average
        assumptions used for grants under the fixed option plans:
  September
                  30, 2005Weighted-average risk free interest
                rate
              5.25%Expected life of option
                (years)
              2.0Expected stock volatility
              90%Expected dividend yield
              0.00%
  25
 Effective
        January 1, 2006, the Company adopted provisions of Financial Accounting
        Standards Board (FASB) Statement No. 123R "Share-Based Payment" (FAS 123R)
        for
        its share-based compensation plans. The Company previously accounted for
        these
        plans under the recognition and measurement principles of Accounting Principles
        Board (APB) No. 25, "Accounting for Stock Issued to Employees," (APB 25)
        and
        related interpretations and disclosure requirements established by FAS 123,
        "Accounting for Stock-Based Compensation." Under APB 25, because the exercise
        price of the Company's employee stock options equaled the market price of
        the
        underlying stock on the date of the grant, no compensation expense was recorded
        in 2005 but pro forma effects on income were disclosed in the comparative
        quarter in 2005.
  Under
        FAS
        123R, all share-based compensation cost is measured at the grant date, based
        on
        the fair value of the award, and is recognized as an expense in the income
        statement over the vesting period. The cost for all share-based awards granted
        subsequent to January 1, 2006, represented the grant-date fair value that
        was
        estimated in accordance with the provisions of FAS 123R. Prior periods have
        not
        been restated.
 
 The
        following table illustrates the effect on net income per share if the Company
        had applied the fair value recognition provisions of FASB Statement No. 123,
        "Accounting for Stock-Based Compensation," to stock-based employee
        compensation.
  Three
                    Months EndedSeptember
                    30, 2005Net
                    loss, as reported
                
                $
                (88,603
                )Deduct:
                    Total stock-based employee compensation expense determined under
                    fair
                    value based methods for all awards, net of related tax
                    effects
                
                $
                (811,247
                )Pro
                    forma net loss
                
                $
                (899,850
                )Net
                    loss per common shareBasic
                    loss, as reported
                
                $
                (0.00
                )Basic
                    loss, pro forma
                
                $
                (0.05
                )
 **10. SUBSEQUENT
        EVENTS**
 
 On
        October 10, 2006, the Company entered into Separation Agreement and Release
        (the
        "Dodak Agreement") with Michael Dodak pursuant to which Mr. Dodak resigned
        as an
        executive officer and director of the Company effective September 30, 2006.
        Pursuant to the Dodak Agreement, Mr. Dodak agreed to not compete with the
        Company for a period of five years, solicit the Company's employees or utilize
        the Company's trade secrets in consideration of a payment $42,301 representing
        accrued paid time off, $376,776 paid in installments of $15,699 over 24 months,
        the payment of the lesser of $6,600 or the maximum permitted in matching
        dollars
        as per the Company's 401K Plan and provide healthcare benefits through March
        31,
        2008. Mr. Dodak agreed to provide up to 20 hours of consulting to the Company,
        per month, for a period of six months at no additional cost.
 
 26
 In
        addition, on October 10, 2006, the Company entered into Separation Agreement
        and
        Release (the "Fann Agreement") with David Fann pursuant to which Mr. Fann
        resigned as an executive officer and director of the Company effective September
        30, 2006. Pursuant to the Fann Agreement, Mr. Fann agreed to not compete
        with
        the Company for a period of five years, solicit the Company's employees or
        utilize the Company's trade secrets in consideration of a payment $23,692
        representing accrued paid time off, $180,552 paid in installments of $15,046
        over 12 months, the payment of the lesser of $6,600 or the maximum permitted
        in
        matching dollars as per the Company's 401K Plan and provide healthcare benefits
        through September 30, 2007. Mr. Fann agreed to provide up to 20 hours of
        consulting to the Company, per month, for a period of six months at no
        additional cost.
 
 On
        October 10, 2006, the Board of Directors appointed George A. McQuain as
        President and Chief Executive Officer of the Company and as a director of
        the
        Company to fill the vacancy created by the resignations of Messrs Dodak and
        Fann. In addition, Joseph M. Loughry and Lock Ireland, directors of the Company,
        were appointed as Chairman and Vice Chairman of the Board of Directors of
        the
        Company, respectively.
 
 On
        November 13, 2006, the Board of Directors decided that it has completed its
        evaluation of strategic alternatives and has concluded that it is in the
        best
        interests of the shareholders to not pursue a corporate transaction at this
        time. While the Company will always be receptive to evaluating opportunities
        which would give shareholders a premium over enterprise value, the Company
        has
        decided that for the foreseeable future, it will focus on its strategic
        reorganization plan by attempting to build consistent financial
        performance, returning to profitability and growing enterprise value through
        organic growth and cost reductions.
  **Item
          2. Management's
          Discussion and Analysis or Plan of Operation**
  The
          following discussion should be read in conjunction with the condensed
          consolidated financial statements and notes thereto.
 
 In
          addition to historical information, this Quarterly Report on Form
          10-QSB contains forward-looking statements that involve risks and
          uncertainties that could cause actual results to differ materially. Factors
          that might cause or contribute to such differences include, but are not
          limited to, those discussed in the section entitled "Management's
          Discussion and Analysis or Plan of Operation”. You should carefully review
          the risks described in other documents we file from time to time with the
          Securities and Exchange Commission, including the Quarterly Reports on Form
          10-QSB that have been or are to be filed in 2006. When used in this report,
          the words "expects," "anticipates," "intends," "plans," "believes,"
          "seeks," "targets," "estimates," "looks for," "looks to," and similar
          expressions are generally intended to identify forward-looking statements.
          You should not place undue reliance on these forward-looking statements,
          which speak only as of the date of this Quarterly Report on Form 10-QSB. We
          undertake no obligation to publicly release any revisions to
          the forward-looking statements or reflect events or circumstances after the
          date of this document.
 
 **Summary**
 
 The
          Company, through its wholly owned subsidiaries, owns and operates Automated
          Teller Machines ("ATM"s) with locations primarily in the eastern and
          southwestern United States of America. Our revenues are principally derived
          from
          two types of fees, which we charge for processing transactions on our ATM
          network. We receive an interchange fee from the issuer of the credit or
          debit
          card for processing a transaction when a cardholder uses an ATM in our
          network.
          In addition, in most cases we receive a surcharge/convenience fee from
          the
          cardholder when the cardholder makes a cash withdrawal from an ATM in our
          network.
 
 Interchange
          fees are processing fees that are paid by the issuer of the credit or debit
          card used in a transaction. Interchange fees vary for cash
          withdrawals, balance inquiries, account transfers or uncompleted
          transactions, the primary types of transactions that are currently
          processed on ATMs in our network. The maximum amount of the interchange
          fees is established by the national and regional card organizations and
          credit card issuers with whom we have a relationship. We receive
          interchange fees for transactions on ATMs that we own, but sometimes we
          rebate a portion of the fee to the owner of the ATM location under the
          applicable lease for the ATM site. We also receive the interchange fee for
          transactions on ATMs owned by third party vendors included within
          our network, but we rebate all or a portion of each fee to the third party
          vendor based upon the business relationship that exists between us. The
          interchange fees received by us vary from network to network and to some
          extent
          from issuer to issuer, but generally range from $0.15 to $0.55 per cash
          withdrawal. Interchange fees for balance inquiries, account transfers and
          denied
          transactions are generally substantially less than fees for cash withdrawals.
          The interchange fees received by us from the card issuer are independent
          of the
          service fees charged by the card issuer to the cardholder in connection
          with ATM
          transactions. Service fees charged by card issuers to cardholders in connection
          with transactions through our network range from zero to as much as $2.50
          per
          transaction. We do not receive any portion of these service fees.
 
 27
 In
          most
          markets, we impose a surcharge/convenience fee for cash withdrawals.
          Surcharge/convenience fees are a substantial additional source of revenue
          for us
          and other ATM network operators. The surcharge/convenience fee for ATMs
          in our
          network ranges between $1.50 and $2.50 per withdrawal. The surcharge/convenience
          fee for other ATMs in our network ranges between $0.50 and $10.00 per
          withdrawal. We receive the full surcharge/convenience fee for cash withdrawal
          transactions on ATMs that we own, but often we rebate a portion of the
          fee to
          the owner of the ATM location under the applicable lease for the ATM site.
          We
          also receive the full surcharge/convenience fee for cash withdrawal transactions
          on ATMs owned by third party vendors included within our network, but we
          rebate
          all or a portion of each fee to the third party vendor based upon a variety
          of
          factors, including transaction volume and the party responsible for supplying
          vault cash to the ATM and only record earned revenue based upon the Company
          contracts with the third party vendors.
 
 In
          addition to revenues derived from interchange and surcharge/convenience
          fees, we
          also derive revenues from providing network management services to third
          parties
          owning ATMs included in our ATM network. These services include 24
          hour transaction processing, monitoring and notification of ATM status and
          cash condition, notification of ATM service interruptions, in some cases,
          dispatch of field service personnel for necessary service calls and cash
          settlement and reporting services. The fees for these services are paid by
          the owners of the ATMs.
 
 Interchange
          fees are credited to us by networks and credit card issuers on a monthly
          basis and are paid to us in the following month between the 5th and 15th
          business day. Surcharge/convenience fees are charged to the cardholder
          and
          credited to us by networks and credit card issuers on a daily basis. We
          periodically rebate the portion of these fees owed to ATM owners and owners
          of
          ATM locations. Fees for network management services are generally paid
          to us on
          a monthly basis.
 
 **Critical
          Accounting Policies**
 
 The
          fundamental objective of financial reporting is to provide
          useful information that allows a reader to comprehend our business
          activities. To aid in that understanding, management has identified our
          "critical accounting policies." When more than one accounting principle, or
          the method of its application, is generally accepted, management selects
          the principle or method that is appropriate in the specific circumstances.
          Application of these accounting principles requires our management to make
          estimates about the future resolution of existing uncertainties. As a
          result, actual results could differ from these estimates. Accordingly,
          these policies have the potential to have a significant impact on our
          consolidated financial statements, either because of the significance of
          the consolidated financial statement item to which they relate, or because
          they require judgment and estimation due to the uncertainty involved in
          measuring, at a specific point in time, events which are continuous in
          nature.
 
 In
          preparing these condensed consolidated financial statements, management
          has made
          its best estimates and judgments of the amounts and disclosures included
          in the
          condensed consolidated financial statements. Except as separately discussed,
          we
          do not believe there is a great likelihood that materially different amounts
          would be reported under different conditions or by using different assumptions
          pertaining to the accounting policies described below.
 
 **Revenue
          Recognition Policies**
 
 We
          recognize revenues as ATM cardholders use ATMs or as services are rendered
          to
          customers. When the customer accepts the convenience fee, also known as
          surcharge/convenience fees, and performs a transaction on the ATM, revenue
          can
          then be recognized since that transaction is then captured by the Company's
          database. In connection with recording revenue, estimates and assumptions
          are
          required in determining the expected conversion of the revenue streams
          to cash
          collected. The reserve estimation process requires that management make
          assumptions based on historical results, future expectations, the industry's
          economic and competitive environment, changes in the credit-worthiness
          of our
          customers, and other relevant factors. Revenues are also adjusted with
          positive
          and negative processing accruals occurring in the operation of the Company's
          ATM
          network in the ordinary course of business. It is the policy of the Company,
          to
          book as revenue, all surcharge/convenience and interchange it receives
          and has
          earned based upon their contracts, whether for its owned ATMs or for those
          it
          manages. In the case of managed ATMs, the Company then books as a contracted
          expense a lease fee for the use of the ATM or space rent and pays this
          to the
          owners of the ATMs and/or the third party vendors. Where the Company provided
          only processing services through its wholly owned subsidiary, EFT Integration,
          the Company only records the fees it charges to its customers as revenue.
          During
          consolidation of the financial statements, the Company eliminates the revenue
          earned by EFT Integration for the processing of Company owned or managed
          ATMs.
          Surcharge/convenience fees are fees assessed directly to the consumer utilizing
          the ATM terminals owned by the Company. The surcharge/convenience fees
          assessed
          range from $1.50 to $2.50 based upon a cash withdrawal transaction from
          the ATM
          terminals. The Company records only the surcharge/convenience and interchange
          monies due to the Company because it owns the ATMs or it manages the ATM’s and
          records the management or processing income due under contracts the Company
          owns. The Company does not record surcharge/convenience or interchange
          monies
          that pass through the Company’s processor to the ATM owner.
 
 28
 Interchange
          fees are fees assessed directly to the card issuer of the consumer. The
          interchange fees are comprised of two fees: (1) an interchange fee
          ranging from approximately $0.40 to $0.55 based upon each cash withdrawal
          transaction; and (2) an interchange fee ranging from approximately $0.15 to
          $0.25 based upon an account inquiry by the consumer.
 
 Management
          fees are charged to various companies or individuals that use the services
          of Nationwide Money Services to operate their ATMs. These fees are
          for services such as cash management, project management and account
          management.  Service revenue is recorded when complete and
          invoiced.
 
 **Allowance
        of Uncollectible Accounts Receivable**
 
 Merchants
        and investors have been historically billed for reimbursable expenses of
        the
        Company as part of negotiated contracts. The accounts receivable, for these
        reimbursed expense invoices, have been historically reduced by an allowance
        for
        amounts that may become uncollectible in the future. The Company reviews
        the
        accounts receivable on a regular basis to determine the collectibility of
        the
        accounts. The Company records an allowance for doubtful accounts for any
        billed
        invoice aged past 60 days.
 
 **Inventory**
 
 ATMs
        and
        equipment available for sale are classified as inventory until such time
        as the
        machine is sold, installed and in service. Once the ATM is sold it is released
        to cost of sales. At September 30, 2006, the Company’s ATM inventory totaled
        $129,196 .
  **Equipment**
 
 ATM
        equipment comprises a significant portion of our total assets. Changes
        in technology or changes in our intended use of these assets may cause
        the
        estimated period of use or the value of these assets to change. At a minimum,
        we
        perform annual internal studies to confirm the appropriateness of estimated
        economic useful lives for each category of current equipment. Estimates and
        assumptions used in setting depreciable lives require both judgment and
        estimates. ATMs and related software components not currently in service
        are
        classified as held for sale, until such time either the machine is installed
        and
        in service or sold. Once in service, each ATM is reclassified as a fixed
        asset
        and depreciated using the remaining estimated useful life of the machine.
        Any
        ATMs classified as held for sale and then sold would be considered a disposal
        group and a gain or loss on the sale would be recorded.
 
 **Goodwill**
  In
          July
          2001, the FASB issued SFAS No. 142, 'Goodwill and Other Intangible Assets,'
          which was required to be adopted for fiscal 2002. SFAS No. 142 established
          accounting and reporting standards for goodwill and intangible assets
          resulting from business combinations. SFAS No. 142 included
          provisions discontinuing the periodic amortization of, and requiring the
          assessment of the potential impairments of, goodwill (and intangible assets
          deemed to have indefinite lives). As SFAS No. 142 replaced the measurement
          guidelines for goodwill impairment, goodwill not considered impaired under
          previous accounting literature may be considered impaired under SFAS No.
          142. SFAS No. 142 also required that the Company complete a two-step
          goodwill impairment test. The first step compared the fair value of each
          reporting unit to its carrying amount, including goodwill. If the fair
          value of a reporting unit exceeded its carrying amount, goodwill is not
          considered to be impaired and the second step was not required. SFAS 142
          required completion of this first step within the first three months of
          initial adoption and annually thereafter. If the carrying amount of a
          reporting unit exceeded its fair value, the second step is performed to
          measure the amount of impairment loss. The second step compared the
          implied fair value of goodwill to the carrying value of a reporting unit's
          goodwill. The implied fair value of goodwill is determined in a manner
          similar to accounting for a business combination with the allocation of the
          assessed fair value determined in the first step to the assets and
          liabilities of the reporting unit. The excess of the fair value of the
          reporting unit over the amounts assigned to the assets and liabilities is
          the implied fair value of goodwill. This allocation process was only
          performed for purposes of evaluating goodwill impairment and did not result
          in an entry to adjust the value of any assets or liabilities. An impairment
          loss is recognized for any excess in the carrying value of goodwill over
          the implied fair value of goodwill.
  29
 **Asset
        Impairment**
 
 The
        Company reviews long-lived assets for impairment under SFAS No. 144, "Accounting
        for the Impairment or Disposal of Long-Lived Assets." Long-lived assets to
        be
        held and used are reviewed for impairment whenever events or changes in
        circumstances indicate that the carrying amount of an asset may not be
        recoverable. The carrying amount of a long-lived asset is not recoverable
        if it
        exceeds the sum of the undiscounted cash flows expected to result from the
        use
        and eventual disposition of the asset. Long-lived assets to be disposed of
        are
        reported at the lower carrying amount or fair value less cost to sell. See
        Note
        5 for a discussion of long-lived assets that were determined to be impaired
        during the three-month period ended September 30, 2006.
  Intangible
          assets with finite lives are stated at cost, net of
          accumulated amortization, and are subject to impairment testing under
          certain circumstances in accordance with SFAS No. 144 and other applicable
          pronouncements. These assets are amortized on the straight-line and
          accelerated methods, as appropriate, over their estimated useful lives or
          period of expected benefit. Intangible assets with indefinite lives are
          subject to periodic impairment testing in accordance with SFAS No.
          142.
  **Comparison
        of Results of Continuing Operations for the Three Months Ended September
        30,
        2006 and 2005:**
 
 ***Revenues***
 
 The
        Company reported total operating revenue from continuing operations
        of $5,556,874 for the three-month period ended September 30, 2006 as
        compared to $4,815,792 for the three-month period ended September 30, 2005.
        The increase in the three month revenues is mainly due to higher
        surcharge/convenience and interchange revenue from acquired ATM merchant
        locations. Also contributing to the increased revenue is organic sales growth.
  ***Cost
        of Revenues***
 
 Our
        total
        cost of revenues from continuing operations increased from $2,865,282 to
$3,188,105in the three-month periods ended September 30, 2005 and 2006,
        respectively. The continued growth in our transactions, interest rate increases
        associated with our cash replenishment costs, network cost increases and
        the
        acquisition during fiscal year 2005 had a significant impact on the cost
        of
        revenues from continuing operations for the three months ended September
        30,
        2006.
 
 30
 ***Gross
        Profit***
 
 Gross
        profit from continuing operations as a percentage of revenue for the three-month
        period ended September 30, 2006 and 2005 were approximately 42.6%,
        or $2,368,769 and approximately 40.5% or $1,950,510, respectively.
        There was a significant increase in the number of ATMs in service, with
        approximately 4,600 in service during the three-month period ended September
        30,
        2006 , compared to 3,000 ATMs in service during the same three-month period
        ended September 30, 2005.
  ***Operating
        Expenses***
 
 Our
        total
        operating expenses from continuing operations for the three months ended
        September 30, 2006 and 2005, were $5,605,502 and $1,532,063, respectively.
        The principal components of operating expenses are general and administrative
        expenses such as professional and legal fees, administrative salaries and
        benefits, consulting and audit fees, occupancy costs, sales and marketing
        expenses and administrative expenses. Operating expenses also include
        depreciation and amortization, impairment charges and restructuring charges.
        See
        explanation of operating expenses below:
 
 ***Selling,
        General and Administrative (SG&A) Expenses***
 
 Our
        total
        SG&A expenses from continuing operations increased to $2,384,450 for
        the three-month period ended September 30, 2006 from $1,167,629 for the
        three-month period ended September 30, 2005. The majority of the increase
        in
        SG&A expenses from continuing operations is directly attributable to the
        increase in salaries and benefits, professional, legal and audit fees and
        other
        expenses related to the increase in operating revenues resulting from the
        acquisitions we completed in 2005. During the quarter ended September 30,
        2006,
        the Company recorded a $200,000 legal reserve for lawsuit discussed in Note
        6.
        Additionally, during the three month period ended September 30, 2006, the
        Company recorded an increased reserve for bad debts.
  ***Depreciation
        and Amortization***
 
 Depreciation
        and amortization from continuing operations increased for the three-month
        period
        ended September 30, 2006 to $610,981 from $366,300 for the same period
        in 2005. This increase in depreciation and amortization expense was due to
        the
        following factors:
 
 ·
            An
                increase in ATM equipment, resulting from acquisitions and developed
                software in 2005, whereby fixed assets, net, have increased from
                $7,362,469in
                September 2005 to$7,791,795
                in September 2006, exclusive of the impairment of long-lived assets
                charges for the quarter of $1,329,396;
                and  ·
            An
                increase in amortization specific to the merchant contracts we purchased
                during fiscal year 2005 for which a full quarter’s amortization expense
                was recorded during the three-month period ended September 30, 2006.  See
        Note
        2: Significant Account Policies regarding the amortization of intangible
        merchant contracts.
  31
 ***Impairment
        and Restructuring Charges***
 
 During
        the three-month period ended September 30, 2006, we incurred impairment of
        long-lived assets charges, restructuring charges and impairment of notes
        receivable charges of $1,329,396, $757,811, and $522,864, respectively. Refer
        to
        Note 5, Impairment of Long-Lived Assets and Business Reorganization Charges
        and
        Note 4, Notes Receivable for details of these charges.
  ***Operating
        Income (Loss) from Continuing Operations***
 
 We
        had an
        operating loss from continuing operations for the three-month period ended
        September 30, 2006 in the amount of $3,236,733 as compared to operating
        income from continuing operations of $418,477 in the three-month period
        ended September 30, 2005.
  ***Interest
        Expense, Net***
 
 Interest
        expense, net, increased for the three-month period ended September 30, 2006
        to
        $399,422 from $154,474 for the three-month period ended September 30, 2005.
        The
        increase was mainly due to increased debt balance at the three-month period
        ended September 30, 2006 as compared to the debt balance at the three-month
        period ended September 30, 2005.
  ***Income
        (loss) from Continuing Operations Before Provision for
        Tax***
 
 We
        had
        net loss from continuing operations before taxes of  $3,753,403 for
        the three months ended September 30, 2006 as compared to net income from
        continuing operations before taxes of $263,973 for the three-month period
        ended September 30, 2005.
  ***Income
        Taxes***
 
 We
        incurred no tax expense in either of the respective periods ending September
        30, 2006 and September 30, 2005. The Company has net operating loss carryforwards
        from 2002 of approximately $9,800,000 which expire in various periods through
        2025.
  **Comparison
        of Results of Continuing Operations for the Nine Months Ended September 30,
        2006
        and 2005:**
 
 ***Revenues***
 
 The
        Company reported total operating revenue from continuing operations
        of $16,232,522 for the nine-month period ended September 30, 2006 as
        compared to $14,546,658 for the nine-month period ended September 30, 2005.
        The increase in the nine-month revenues is due to higher surcharge/convenience
        and interchange revenue from acquired ATM merchant locations. Also contributing
        to the increased revenue is increased organic sales growth.
  32
 ***Cost
        of Revenues***
 
 Our
        total
        cost of revenues from continuing operations increased from $8,592,795
        to $9,234,923 in the nine-month periods ended September 30, 2005 and 2006,
        respectively. The growth in our transactions, year over year, interest rate
        increases associated with our cash replenishment costs, network cost increases
        and the acquisition during fiscal year 2005 had a significant impact on the
        cost
        of revenues from continuing operations for the nine months ended September
        30,
        2006.
 
 ***Gross
        Profit***
 
 Gross
        profit from continuing operations as a percentage of revenue for the nine-month
        period ended September 30, 2006 and 2005 were approximately 43.1%,
        or $6,997,599 and approximately 40.9%, or $5,953,862, respectively.
  ***Operating
        Expenses***
 
 Our
        total
        operating expenses from continuing operations for the nine months ended
        September 30, 2006 and 2005, were $10,683,396 and $4,516,179, respectively.
        The principal components of operating expenses are general and administrative
        expenses such as professional and legal fees, administrative salaries and
        benefits, consulting and audit fees, occupancy costs, sales and marketing
        expenses and administrative expenses. Operating expenses also include
        depreciation and amortization, impairment charges and restructuring charges.
        See
        explanation of operating expenses below:
  ***Selling,
        General and Administrative (SG&A) Expenses***
 
 Our
        total
        SG&A expenses from continuing operations increased to $5,586,050 for
        the nine-month period ended September 30, 2006 from $3,545,036 for the
        nine-month period ended September 30, 2005. The majority of the increase
        in
        SG&A expenses from continuing operations is directly attributable to the
        increase in salaries and benefits, professional, legal and audit fees and
        other
        expenses related to the increase in operating revenues resulting from the
        acquisitions we completed in 2005. Additionally, during the nine-month period
        ended September 30, 2006, the Company recorded an increased reserves for
        legal
        fees relating to litigation and for bad debts.
 
 ***Depreciation
        and Amortization***
 
 Depreciation
        and amortization from continuing operations increased for the nine-month
        period
        ended September 30, 2006 to $1,824,868 from $976,532 for the same
        period in 2005.
 
 33
  ***Impairment
        and Restructuring Charges***
 
 During
        the nine-month period ended September 30, 2006, we incurred impairment of
        long-lived assets charges, restructuring charges and impairment of notes
        receivable charges of $1,329,396, $757,811, and $772,864 respectively. Refer
        to
        Note 5, Impairment of Long-Lived Assets and Business Reorganization Charges
        and
        Note 4, Notes Receivable for details of these charges.
  ***Operating
        Income (Loss) from Continuing Operations***
 
 We
        had an
        operating loss from continuing operations for the nine-month period ended
        September 30, 2006 in the amount of $3,685,797 as compared to operating
        income from continuing operations of $1,437,683 in the nine-month period
        ended September 30, 2005.
 
 ***Other
        Income and Expense***
 
 During
        the nine months ended September 30, 2006 there were other expenses of $412,406
        which primarily relate to legal fee expenses and reserves in connection with
        the
        aforementioned James Collins legal claim (see Notes 6 and 10). During the
        nine
        months ended September 30, 2005 there was other income of $5,389.
 
 ***Interest
        Expense, Net***
 
 Interest
        expense, net, increased for the nine-month period ended September 30, 2006
        to $1,039,685 from $429,517 for the nine-month period ended September 30,
        2005. The increase was mainly due to increased debt balance at the three-month
        period ended September 30, 2006 as compared to the debt balance at the
        three-month period ended September 30, 2005.
  ***Income
        (loss) from Continuing Operations Before Provision for
        Tax***
 
 We
        had
        net loss from continuing operations before taxes of $4,602,476 for the nine
        months ended September 30, 2006 as compared to net income from continuing
        operations before taxes of $1,008,166 for the nine-month period ended
        September 30, 2005.
 
 ***Income
        Taxes***
 
 We
        incurred no tax expense in either of the respective periods ended September
        30, 2006 and September 30, 2005. The Company has net operating loss carryforwards
        from 2002 of approximately $9,800,000 which expire in various periods through
        2025.
  ***Seasonality***
 
 ATM
        transactions account for all of the transaction volume processed by our
        customers. The volume of these transactions on our networks generally is
        greater
        in the second and third quarter vacation seasons than during the rest of
        the
        year. Consequently, revenues and earnings from ATM transactions in the first
        and
        fourth quarter generally are lower than revenues and earnings from ATM
        transactions in the second and third quarters. We expect that our operating
        results in the foreseeable future will be affected by seasonal trends in
        the ATM
        transaction market.
 
 34
  **Liquidity
        and Capital Resources**
 
 ***Working
        Capital***
 
 As
        of
        September 30, 2006, the Company had current assets of $3,501,479 and current
        liabilities of $6,460,024, which results in a negative working capital
        of $2,958,545 as compared to current assets of $2,838,562 and current
        liabilities of $4,218,121 resulting in a negative working capital
        of $1,379,559 as of September 30, 2005. The ratio of current assets to
        current liabilities decreased to 0.54 at September 30, 2006 from 0.84 at
        December 31, 2005. It is expected that cash provided from operations will
        be
        sufficient for the next 12 months, provided we achieve our business
        plan.
 
 ***Additional
        Funding Sources***
 
 We
        have
        funded our operations and investment activities from cash flow generated
        by
        operations and financing activities. Net cash provided by continuing operating
        activities during the nine-month period ended September 30, 2006 was $843,926
        compared to the net cash provided by continuing operating activities during
        the
        nine-month period ended September 30, 2005 of $1,881,398.
 
 The
        Company used $1,903,947 for financing activities, mainly paying back senior
        lender notes and capital leases, during the nine-month period ended September
        30, 2006, compared to funds provided by financing activities of $430,158
        for the
        nine-month period ended September 30, 2005.
 
 Net
        cash
        used in investing activities in continuing operations was $400,048 during
        nine-month period ended September 30, 2006, mainly representing the net
        purchases of property and equipment. This compares to net cash used in investing
        activities in continuing operations of $992,329 for the nine-month period
        ended September 30, 2005, used mainly for the purchases of property and
        equipment.
 
 The
        Company believes its sources of cash are adequate for the next 12 months
        of
        operations, provided it achieves its business plan.
 
 The
        Company is continuing its efforts to raise additional capital through capital
        lease financing. To continue its current business the Company estimates,
        it will
        seek approximately $980,000 in additional lease lines to meet its needs for
        the
        next 12 months of new ATM purchases. There is no guarantee that the capital
        lease financing will be available to the Company or available on acceptable
        terms.
 
 35
 
 The
        Company does not use its own funds for vault cash, but rather relies upon third
        party sources. The Company in general rents the vault cash from financial institutions
        and pays a negotiated interest rate for the use of the money. The vault
        cash is never in the possession of, controlled or directed by the Company but
        rather cycles from the bank, to the armored car carrier, and to the ATM. Each
        day’s withdrawals are settled back to the owner of the vault cash on the next
        business day. Both Nationwide Money and its customers (the merchants) sign a
        document stating that the vault cash belongs to the financial institution
        and that
        neither party has any legal rights to the funds. The required vault cash
        is obtained
        under the following arrangements:
  Palm
        Desert Bank: Nationwide Money Services has been using Palm Desert
        National Bank as a vault cash provider since April of 2001. This
        relationship was limited to the funding of a specific portfolio of
        ATMs
        and as a result limited the growth potential of the relationship.
        During the third quarter of 2002, Nationwide Money and Palm
        Desert initiated discussions to expand the relationship and for Palm
        Desert to provide vault cash for additional ATMs. As of September 30, 2006,
        Nationwide Money had 40 ATMs funded by Palm Desert with a vault cash outstanding
        balance of about $1,000,000 **.** In
        January 2003, we entered into an arrangement with Palm Desert allowing us
        to
        obtain up to $10,000,000 in vault cash. The Palm Desert Bank arrangement
        has a
        term of two years and may be terminated by Palm Desert Bank upon breach by
        us
        and upon the occurrence of certain other events. Under this arrangement,
        we are
        required to pay a monthly service fee on the outstanding amount equal to
        the
        prime rate of interest, plus a specified percentage, and must pay monthly
        "bank"
        fees. Additionally the Company is required to make a deposit with Palm Desert
        Bank in an amount determined by the outstanding balance. We are also required
        to
        maintain insurance on the vault cash.
 
 WSFS:
        On
        May 15, 2000, we entered into an arrangement with Wilmington
        Savings Fund Society ("WSFS") allowing us to obtain up to $2,000,000
        in vault cash. In May 2002, we renewed the agreement with WSFS
        and
        increased the vault cash limit to $5,000,000 and the new contract
        has a month-to-month term. Due to added locations from our acquisitions
        we have increased the WSFS line as of September 30, 2006, to approximately
        $20,000,000. The Company is currently using approximately $11,500,000 of
        the
        WSFS line. The WSFS contract may be terminated by WSFS at any time upon breach
        by us and upon the occurrence of certain other events. Under this arrangement,
        we are required to pay a monthly service fee on the outstanding amount equal
        to
        the prime rate of interest, plus a specified percentage, and must pay monthly
        "bank" and insurance fees. We are also required to maintain insurance on
        the
        vault cash.
 
 First
        Charter: On September 1, 2004, we entered into an arrangement with First
        Charter
        National Bank allowing us to obtain up to $3,000,000 in vault cash. We have
        since increased the line as of September 30, 2006 to $6,000,000. The First
        Charter contract may be terminated by First Charter at any time upon breach
        by
        us and upon the occurrence of certain other events. Under this arrangement,
        we
        are required to pay a monthly service fee on the outstanding amount equal
        to the
        federal funds rate of interest, plus a specific percentage, and must pay
        monthly
        bank fees. We are also required to maintain insurance on the vault cash.
 
 Food
        Lion
        Credit Association (FLCA): On February 1, 2002, we entered into an arrangement
        with Food Lion Credit Association allowing us to obtain up to $2,000,000
        in
        vault cash. We have since increased the line as of September 30, 2006 to
        $3,000,000. The Food Lion Credit Association contract may be terminated by
        Food
        Lion Credit Association at any time upon breach by us and upon the occurrence
        of
        certain other events. Under this arrangement, we are required to pay a monthly
        service fee on the entire line equal to the prime rate of interest, minus
        a
        specific percentage, and must pay monthly bank fees. We are also required
        to
        maintain insurance on the vault cash.
 
 36
 
 Various
        Branded Cash Partners: Nationwide Money has partnered with numerous
        banks and credit unions to market specific Nationwide ATMs to
        the
        cardholders of these institutions. We add signage and marketing
        material to the ATM so that the ATM is easily identified as
        being
        associated with the bank or credit union, and the cardholders
        of these institutions receive surcharge/convenience free transactions
        at the designated ATMs. This provides the bank or credit
        union additional marketing power and another point of access to
        funds
        for their cardholders. In return for this benefit, the bank or
        credit
        union, provide and manage the vault cash in the specified ATMs,
        as
        well as provide and pay for cash replenishment and first line
        maintenance. The advantage to Nationwide Money is that this reduces
        the costs associated with vault cash, cash replenishment and first
        line maintenance. Another advantage is that with a branded
        ATM, transactions volumes traditionally increase more than at
        a
        non-branded ATM. As of September 30, 2006, Nationwide Money had 54 branded
        partners, which funded over 608 ATMs in 11 states.
 
 As
        any
        newly-placed ATMs mature, such ATMs generally experience increased activity
        and generate increased revenues. We believe that future cash flow from operations
        will be sufficient to fund operations.
 
 If
        cash
        flow from operations is not sufficient to fund our operations, we may be required
        to seek additional sources of financing. If any of our existing financing
        arrangements are terminated, or if we seek additional funding to expand
        our ATM network, additional financing may not be available when needed or may
        not
        be available on acceptable terms. In that event, our ability to maintain and
        expand our ATM network may be adversely affected. The loss of one or more sources
        of vault cash funding or the loss of additional customers could have a material
        adverse effect on our business, results of operations and financial condition.
        As always, we continue to look for new and alternative vault cash sources.
 
 ***Risks
        Related to the Restatement***
 
 On
        March
        30, 2006, the Company’s Audit Committee along with senior management determined
        that the condensed consolidated statements of income and cash flows for the
        quarters ended September 30, 2005 and June 30, 2005 contained errors, requiring
        the Company to amend its Form 10QSBs for the quarters ended June 30, 2005
        and
        September 30, 2005. The errors related to the Company's accounting for revenue
        under certain of its processing contracts; capitalization of purchased software
        costs; and the depreciation of assets at a more rapid pace than required.
        These
        errors resulted in a revenue correction for the periods ended September 30,
        2005
        and June 30, 2005 of $241,439 and $425,669, respectively, and a total reduction
        in net income during the two quarters by approximately $510,962. The correction
        resulted in a reported net loss for the quarter ended September 30, 2005,
        of
        $88,603, and a reported net loss for the quarter ended June 30, 2005 of $42,084.
  37
 In
        addition, management of the Company determined that the reasons underlying
        the
        restatement were the result of a material weakness in the Company’s internal
        controls. Management of the Company reviewed the internal control deficiency
        with the Audit Committee, discussed this deficiency with the Company’s
        independent registered public accounting firm and implemented remedial measures
        to address the identified material weakness in connection with the preparation
        of its restated financial statements.
  The
        Company believes the restatement corrected the errors caused by the material
        weakness and that the material weakness has been remediated. However, the
        Company may face potential adverse consequences as a result of the restatement
        of its historical financial statements, including shareholder litigation,
        litigation with its strategic investors and/or government investigations
        as well
        as any increased costs associated therewith and the diversion of management’s
        attention and resources to address any such litigation or
        investigations.
 
 ***Contractual
        Obligations***
 
 Our
        ability to fund our capital needs is also impacted by
        our
        overall capacity to acquire favorable financing terms in our acquisition of
        ATMs.
        We do not participate in, nor secure financings
        for, any unconsolidated, limited or special purpose entities. We anticipate
        that our capital expenditures for fiscal 2006 will total approximately
        $1,400,000, primarily for the acquisition of ATMs and
        related ATM installation costs and Triple Des upgrade kits. We lease ATMs
        under
        capital lease agreements that expire between 2006 and 2011 and provide for
        lease
        payments at interest rates up to 23% per annum. See Note 8 to the Consolidated
        Financial Statements in the Form 10-KSB Annual Report.
 
 ***Impact
        of Inflation and Changing Prices***
 
 We
        were
        not impacted by inflation during the past two fiscal years in any material
        respect. Interest rate hikes have increased the rental cost of our vault
        cash.
        As the interest rates increase and vault cash costs increase, this will have
        a
        less favorable impact on the Company’s income.
  **Item
        3. Controls and
        Procedures**
 
 Management
        of the Company is responsible for establishing and maintaining adequate
        internal control over financial reporting and for the assessment of the effectiveness
        of internal controls over financial reporting. The Company's internal
        control system over financial reporting is a process designed under the supervision
        of the Company's Chief Executive Officer and Chief Financial Officer to
        provide reasonable assurance regarding the reliability of financial reporting and
        the
        preparation of the condensed consolidated financial statements in accordance
        with U.S. generally accepted accounting principles.
 
 All
        internal control systems, no matter how well designed, have inherent limitations.
        Therefore, even those systems determined to be effective can provide
        only reasonable assurance with respect to financial statement preparation
        and presentation. Also, projections of any evaluation of effectiveness
        to future periods are subject to the risk that controls may become inadequate
        because of changes in conditions.
 
 38
 The
        Company maintains disclosure controls and procedures that are designed to
        ensure
        that information required to be disclosed in the Company’s reports under the
        Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
        and reported within the time periods specified in the SEC’s rules and forms, and
        that such information is accumulated and communicated to the Company’s
        management, including its Chief Executive Officer and Chief Financial Officer,
        as appropriate, to allow timely decisions regarding required disclosure.
        In
        designing and evaluating the disclosure controls and procedures, management
        recognized that any controls and procedures, no matter how well designed
        and
        operated, can provide only reasonable assurance of achieving the desired
        control
        objectives, and management necessarily was required to apply its judgment
        in
        evaluating the cost-benefit relationship of possible controls and
        procedures.
  ***Evaluation***
  The
        Company carried out an evaluation, under the supervision, and with the
        participation, of the Company’s management, including the Company’s Chief
        Executive Officer and the Company’s Chief Financial Officer, of the
        effectiveness of the Company’s disclosure controls and procedures as of
        September 30, 2006. Based on the foregoing, the Company’s Chief Executive
        Officer and the Company’s Chief Financial Officer concluded that the Company’s
        disclosure controls and procedures were effective as of September 30,
        2006.
  
 ***Remediation
        of Previously Stated Material Weaknesses***
 
 We
        have
        formulated a program to remedy the material weaknesses identified in the
        Form
        10QSB quarterly report for the period ended March 31, 2006. In
        the
        first phase of the program, completed as of March 31, 2006, we hired
        a
        Controller and a Senior Accountant to augment our accounting, financial
        reporting and financial control function in our finance department. Due to
        the
        subsequent departure of our previous Chief Financial Officer and subsequent
        appointment of our previous Controller into that position, we have adjusted
        the
        plan by engaging an outside consulting firm to assist in the financial reporting
        of the Company and to liaise with our outside auditors with regards to the
        Company’s application of accounting principles.
 
 In
        the
        second phase of the program, we increased our auditor's review work
        quarterly, as well as, increased the areas reviewed and discussed with the
        audit
        committee and auditors beforehand, on any changes in accounting principles
        or
        revenue or expense recognition. Specifically, we implemented the following
        remediation measures relating to the previously stated material
        weaknesses:
 
 1. *Ineffective
        controls over revenue recognition* .
        Our
        remediation measures relating
        to revenue recognition includes a review by management of revenue items other
        than normal fees earned such as surcharge/convenience and interchange including
        a regular review of the accounts receivable aging. We have also instituted
        an
        objective method of determining the collectibility of the accounts receivable
        as
        well as a strict method for setting reserves against those
        receivables.
 
 2. *Ineffective
        controls over depreciation* .
        Subsequent to the errors that resulted in previous audit adjustments, the
        Company has set up a tracking system to follow the final production periods
        when
        software is completed and will include a review by management of depreciable
        items. Also the Company has ceased its software development subsidiaries
        as of
        December 31, 2005 and does not plan to change any software depreciation.
        Additionally, during the quarter the Company has installed a new fixed asset
        management module onto its accounting platform which now automates the
        calculation of the appropriate depreciation over the selected life span of
        the
        equipment.
 
 39
 3. *Ineffective
        controls over internally developed software* .
        The
        Company has set up a tracking system to follow the development, testing,
        implementation and final production periods when the software is completed
        and
        will include a review by management of internally developed items.
 
 Although
        the Company’s Chief Executive Officer and Chief Financial Officer believe that
        its disclosure controls and procedures were effective as of September 30,
        2006,
        we plan to continue our remediation program during the fourth quarter of
        fiscal
        2006 to further improve our disclosure controls and procedures. The material
        weaknesses will not be considered remediated until the applicable remedial
        controls operate for a sufficient period of time and management
        has concluded, through testing, that these controls are operating effectively.
  ***Changes
        in Internal Control Over Financial Reporting***
 
 Except
        as
        set forth above, there have been no changes in our internal control over
        financial reporting that occurred during the three months ended September
        30,
        2006 that have materially affected, or are reasonably likely to materially
        affect, our internal control over financial reporting.
  **PART
        II - OTHER INFORMATION**
  **Item
        1. Legal
        Proceedings**
 
 In
        March
        2004, the Company received a claim filed by James Collins, a previous employee
        of Global Axcess Corp. The claim was filed in Superior court of California,
        County of San Diego on March 2, 2004. The claim alleged the following were
        owed
        in connection with the employment agreement: compensation, bonuses and other
        benefits of approximately $316,915; and 90,000 restricted shares and 359,700
        stock options exercisable at $3.75 per share. As of March 31, 2006, the Company
        had accrued a total of $450,000 for the potential legal claim. The claim
        filed
        by James Collins was settled for $450,000 on May 2, 2006 whereby the Company
        made a lump-sum payment of $300,000 on May 22, 2006 and has agreed to pay
        the
        remaining $150,000 in 12 monthly installments of $12,500 commencing July
        1, 2006
        and ending June 30, 2007.
 
 On
        August
        1, 2006, Electronic Payment Systems, LLC (“EPS”), the purchaser of the Company’s
        disposed wholly-owned subsidiary Electronic Payment & Transfer Corporation
        (“EP&T”), failed to make its required payment and is in default of the Stock
        Purchase Agreement made and entered into as of September 30, 2005. The Company
        sent a default notification letter on August 2, 2006 and EPS had thirty days
        as
        of the date of the default notification to cure the default, which it failed
        to
        do. The Company has filed suit against EPS and is seeking repayment of the
        $1,540,000 original note in full.
 
 On
        August
        4, 2006, the Company was served with a demand for arbitration/mediation from
        EFMARK Service Company (“EFMARK”), a provider of maintenance services and a
        provider of cash replenishment services for automated teller machines. EFMARK
        alleged that the Company has failed to compensate EFMARK for services amounting
        to $103,000 and was seeking said amount as well as interest of $32,000. The
        Company believed the demand contains factual inaccuracies and was wholly
        without
        merit. In the spirit of its business relationship with EFMARK, the Company
        settled this claim for $40,000 on October 4, 2006. The Company has reflected
        this $40,000 expense and liability in its financial statements ended September
        30, 2006.
 
 40
 On
        September 29, 2006, the Company was served with process by Renaissance US
        Growth
        Investment Trust PLC ("Renn") and BFS US Special Opportunities Trust PLC
        ("BFS"
        and collectively with Renn, the "Plaintiffs"), two investors and shareholders
        of
        the Company. In the Complaint, filed in the Circuit Court of the Seventh
        Judicial Circuit in and for St. John's County, Florida, Plaintiffs allege
        breach
        of contract, fraud, and negligent misrepresentation. The Plaintiffs are seeking
        monetary damages, attorneys’ fees and rescission of their investment in the
        amount of $1,500,000 based on the Company's restatement of its earnings for
        the
        2nd and 3rd quarters of 2005. The Company denies any and all allegations
        of
        wrongdoing and intends to vigorously defend such action. The Company has
        booked
        a $200,000 expense accrual for what it deems to be probable legal expenses
        defending this claim.
 
 From
        time
        to time, the Company and its subsidiaries may be parties to, and their property
        is subject to, ordinary, routine litigation incidental to their business.
        Claims
        may exceed insurance policy limits and the Company or any one of its
        subsidiaries may have exposure to a liability that is not covered by insurance.
        Management is not aware of any such lawsuits that could have a material adverse
        impact on the Company’s consolidated results of operations, cash flows or
        financial position.
  **Item
        2. Unregistered Sale of
        Equity Securities and Use of Proceeds**
 
 Not
        applicable
 
 **Item
        3. Defaults upon Senior
        Securities**
 
 The
        Wachovia loan agreement requires the Company to meet certain covenants.
        The three covenant terms are as follows: 1) Senior Liabilities
        to Effective Tangible Net Worth ratio of not more than 2.25; 2) Senior Funded
        Debt to EBITDA ratio of not more than 2.00 to 1.00; 3) EBITDA to Debt Service
        of
        not less than 1.00 to 1.00. All of the covenants are measured quarterly.
        As of
        September 30, 2006, the Company was not in compliance with any of the covenants.
        The Company has obtained waivers of these covenants for September 30,
        2006.
  **Item
        4. Submission of Matters
        to a Vote of Security Holders**
 
 None
 
 **Item
        5. Other
        Information**
 
 None
  **Item
        6. Exhibits**
  10.1
              
              Separation
                  Agreement and Release entered by and between Global Axcess Corp
                  and
                  Michael Dodak (1)
 
 10.2
              
              Separation
                  Agreement and Release entered by and between Global Axcess Corp
                  and David
                  Fann (1)
 
 10.3
              Sales
                  of Shares Agreement by and between the Company, Cash Axcess Corporation
                  (Pty) Limited and Coin Security Group (Pty) Ltd dated September
                  1, 2006
                  (2)
 
 10.4
              First
                  Revival, Restatement and Amendment of the Sale of Shares Agreement
                  by and
                  between the Company, Cash Axcess Corporation (Pty) Limited and
                  Coin
                  Security Group (Pty) Ltd dated September 25, 2006 (2)
  41
 Exhibit
        Description
 
 31.1 Certification
        of the Chief Executive Officer of Global Axcess Corp
 pursuant
        to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 31.2 Certification
        of the Chief Financial Officer of Global Axcess Corp
 pursuant
        to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 32.1 Certification
        of the Chief Executive Officer of Global Axcess Corp
 pursuant
        to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 32.2 Certification
        of the Chief Financial Officer of Global Axcess Corp
 pursuant
        to Section 906 of the Sarbanes-Oxley Act of 2002.
 ______________________________
  (1) Incorporated
        by reference to the Form 8K Current Report filed with the Securities and
        Exchange Commission on October 11, 2006
 
 (2) Incorporated
        by reference to the Form 8K Current Report filed with the Securities and
        Exchange Commission on October 17, 2006
 
 42
  SIGNATURES
 
 Pursuant
        to
        the requirements of the Securities Exchange Act of 1934, as of November
        14, 2006 the Issuer has duly caused this report to be signed on its behalf
        by
        the undersigned, thereunto duly authorized.
  GLOBAL
                AXCESS
                CORPBy:
              /s/
                George A. McQuainGeorge
                A. McQuainPresident
                and
                Chief Executive Officer
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, this report
        has been signed below by the following persons on behalf of the Issuer and
        in
        the capacities indicated on the 14 th day of
        November, 2006.
  Signature
              
              Title/S/ Lock IrelandLock Ireland
              
              Vice Chairman, Director/S/ Robert LandisRobert Landis
              
              Director/S/ Michael J. LoiaconoMichael J. Loiacono
              
              Chief Financial Officer, Chief Accounting
                Officer/S/ Joseph LoughryJoseph Loughry
              
              Chairman, Director/s/George A. McQuainGeorge A. McQuain
              
              President, CEO and Director/S/ Alan RossiterAlan Rossiter
              
              Director