UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(MARK
ONE)





x   QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 2009





OR





 ̈   TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from
___________    to       ___________




000-17874
                (Commission
      file number)
                
                
                GLOBAL
      AXCESS CORP
                (Exact
      name of registrant as specified in its charter)




NEVADA
              
              88-0199674(State or other jurisdiction of incorporation or organization)
              
              (I.R.S. Employer Identification No.)7800 BELFORT PARKWAY, Suite 165JACKSONVILLE, FLORIDA
              
              32256(Address of principal executive offices)
              
              (Zip Code)





(904)
280-3950


(Registrant's
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.     Yes x No  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).     Yes  ̈ No  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large
      accelerated Filer  ̈
                
                Accelerated
      Filer  ̈Non-accelerated
      Filer  ̈
                
                Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of Exchange
Act).          Yes  ̈ No x





As of
August 03, 2009, the registrant had 21,883,924 shares outstanding of the common
stock ($0.001 par value).








TABLE
      OF CONTENTS
                                  
                                  Page
      No.PART  I
                                  
                                  FINANCIAL
      INFORMATIONItem  1.
                                  
                                  Financial
      Statements (unaudited)
                                  
                                  4Item  2.
                                  
                                  Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                  
                                  21Item  3.
                                  
                                  Quantitative
      and Qualitative Disclosure About Market Risk
                                  
                                  30Item  4.
                                  
                                  Controls
      and Procedures
                                  
                                  30Item  4T.
                                  
                                  Controls
      and Procedures
                                  
                                  31PART  II
                                  
                                  OTHER
      INFORMATIONItem  1.
                                  
                                  Legal
      Proceedings
                                  
                                  31Item  1A.
                                  
                                  Risk
      Factors
                                  
                                  31Item  2.
                                  
                                  Unregistered
      Sale of Equity Securities and Use of Proceeds
                                  
                                  31Item  3.
                                  
                                  Defaults
      Upon Senior Securities
                                  
                                  31Item  4.
                                  
                                  Submission
      of Matters to a Vote of Security Holders
                                  
                                  31Item  5.
                                  
                                  Other
      Information
                                  
                                  31Item  6.
                                  
                                  Exhibits
                                  
                                  32SIGNATURES
                                  
                                  33




2





Forward-Looking
Statements





Unless
the context indicates otherwise, all references in this document to “we,” “us”
and “our” refer to Global Axcess Corp and its subsidiaries.





In
addition to historical information, this Quarterly Report on Form 10-Q contains
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially. Factors that might cause or contribute to
such differences include, but are not limited to, those discussed in the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations." 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-Q that have been or are to be filed
in 2009.





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-Q. 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.


3


PART
I - FINANCIAL INFORMATION





ITEM
1. Financial Statements (unaudited)





GLOBAL
AXCESS CORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





(Unaudited)
                            
                            
                            (Audited)June 30, 2009
                            
                            
                            December 31, 2008ASSETSCurrent
      assetsCash
      and cash equivalents
                            
                            $
                            1,765,722
                            
                            
                            $
                            1,560,910Automated
      teller machine vault cash
                            
                            
                            250,000
                            
                            
                            
                            —Accounts
      receivable, net of allowance of $6,748 in 2009 and $9,799 in
      2008
                            
                            
                            850,832
                            
                            
                            
                            848,373Inventory,
      net of allowance for obsolescence of $98,751 in 2009 and $54,033 in
      2008
                            
                            
                            341,962
                            
                            
                            
                            276,731Deferred
      tax asset - current
                            
                            
                            615,332
                            
                            
                            
                            615,332Prepaid
      expenses and other current assets
                            
                            
                            140,685
                            
                            
                            
                            164,968Total
      current assets
                            
                            
                            3,964,533
                            
                            
                            
                            3,466,314Fixed
      assets, net
                            
                            
                            4,511,646
                            
                            
                            
                            4,723,138Other
      assetsMerchant
      contracts, net
                            
                            
                            10,972,410
                            
                            
                            
                            11,331,126Intangible
      assets, net
                            
                            
                            4,095,972
                            
                            
                            
                            4,118,426Restricted
      cash
                            
                            
                            800,000
                            
                            
                            
                            -Other
      assets
                            
                            
                            139,853
                            
                            
                            
                            9,232Total
      assets
                            
                            $
                            24,484,414
                            
                            
                            $
                            23,648,236LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                            
                            $
                            2,792,607
                            
                            
                            $
                            2,527,396Automated
      teller machine vault cash payable
                            
                            
                            250,000
                            
                            
                            
                            -Notes
      payable - related parties  - current portion,
net
                            
                            
                            25,330
                            
                            
                            
                            24,010Notes
      payable - current portion
                            
                            
                            6,698
                            
                            
                            
                            -Senior
      lenders' note payable - current portion, net
                            
                            
                            1,428,571
                            
                            
                            
                            606,705Capital
      lease obligations - current portion
                            
                            
                            630,071
                            
                            
                            
                            779,990Total
      current liabilities
                            
                            
                            5,133,277
                            
                            
                            
                            3,938,101Long-term
      liabilitiesNotes
      payable - related parties - long-term portion, net
                            
                            
                            1,297,724
                            
                            
                            
                            1,304,595Notes
      payable - long-term portion
                            
                            
                            24,972
                            
                            
                            
                            -Senior
      lenders' note payable - long-term portion, net
                            
                            
                            3,214,286
                            
                            
                            
                            4,240,086Capital
      lease obligations - long-term portion
                            
                            
                            221,226
                            
                            
                            
                            425,582Deferred
      tax liability- long-term portion
                            
                            
                            275,532
                            
                            
                            
                            275,532Total
      liabilities
                            
                            
                            10,167,017
                            
                            
                            
                            10,183,896Stockholders'
      equityPreferred
      stock; $0.001 par value; 5,000,000 sharesauthorized,
      no shares issued and outstanding
                            
                            
                            -
                            
                            
                            
                            -Common
      stock; $0.001 par value; 45,000,000 shares authorized,21,021,786
      shares issued and 21,883,924 and 20,973,924 shares
    outstanding
                            
                            
                            21,932
                            
                            
                            
                            21,022Additional
      paid-in capital
                            
                            
                            22,811,778
                            
                            
                            
                            22,613,424Accumulated
      deficit
                            
                            
                            (8,504,347
                            )
                            
                            
                            (9,158,140
                            )Treasury
      stock; 47,862 shares of common stock at cost
                            
                            
                            (11,966
                            )
                            
                            
                            (11,966
                            )Total
      stockholders' equity
                            
                            
                            14,317,397
                            
                            
                            
                            13,464,340Total
      liabilities and stockholders' equity
                            
                            $
                            24,484,414
                            
                            
                            $
                            23,648,236





See
Accompanying Notes to Condensed Consolidated Financial
Statements


4





GLOBAL
AXCESS CORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





For the Three Months EndedJune 30, 2009
                                
                                
                                June 30, 2008Revenues
                                
                                $
                                5,369,408
                                
                                
                                $
                                5,845,128Cost
      of revenues
                                
                                
                                2,813,944
                                
                                
                                
                                3,258,602Gross
      profit
                                
                                
                                2,555,464
                                
                                
                                
                                2,586,526Operating
      expensesDepreciation
      expense
                                
                                
                                289,848
                                
                                
                                
                                377,553Amortization
      of intangible merchant contracts
                                
                                
                                195,067
                                
                                
                                
                                192,538Selling,
      general and administrative
                                
                                
                                1,334,271
                                
                                
                                
                                1,307,031Stock
      compensation expense
                                
                                
                                29,374
                                
                                
                                
                                42,376Total
      operating expenses
                                
                                
                                1,848,560
                                
                                
                                
                                1,919,498Operating
      income from continuing operationsbefore
      items shown below
                                
                                
                                706,904
                                
                                
                                
                                667,028Interest
      expense, net
                                
                                
                                (149,873
                                )
                                
                                
                                (216,738
                                )Net
      Income
                                
                                $
                                557,031
                                
                                
                                $
                                450,290Income
      per common share - basic:Net
      Income per common share
                                
                                $
                                0.03
                                
                                
                                $
                                0.02Income
      per common share - diluted:Net
      Income per common share
                                
                                $
                                0.03
                                
                                
                                $
                                0.02Weighted
      average common shares outstanding:Basic
                                
                                
                                21,873,924
                                
                                
                                
                                20,973,924Diluted
                                
                                
                                22,321,389
                                
                                
                                
                                20,979,768





See
Accompanying Notes to Condensed Consolidated Financial
Statements


5


GLOBAL
AXCESS CORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





For the Six Months EndedJune 30, 2009
                              
                              
                              June 30, 2008Revenues
                              
                              $
                              10,783,842
                              
                              
                              $
                              11,373,488Cost
      of revenues
                              
                              
                              5,669,823
                              
                              
                              
                              6,378,646Gross
      profit
                              
                              
                              5,114,019
                              
                              
                              
                              4,994,842Operating
      expensesDepreciation
      expense
                              
                              
                              559,342
                              
                              
                              
                              779,257Amortization
      of intangible merchant contracts
                              
                              
                              388,684
                              
                              
                              
                              384,329Selling,
      general and administrative
                              
                              
                              2,627,234
                              
                              
                              
                              2,620,406Stock
      compensation expense
                              
                              
                              55,085
                              
                              
                              
                              122,024Total
      operating expenses
                              
                              
                              3,630,345
                              
                              
                              
                              3,906,016Operating
      income from continuing operationsbefore
      items shown below
                              
                              
                              1,483,674
                              
                              
                              
                              1,088,826Interest
      expense, net
                              
                              
                              (362,490
                              )
                              
                              
                              (526,381
                              )Loss
      on early extinguishment of debt
                              
                              
                              (467,391
                              )
                              
                              
                              -Net
      Income
                              
                              $
                              653,793
                              
                              
                              $
                              562,445Income
      per common share - basic:Net
      Income per common share
                              
                              $
                              0.03
                              
                              
                              $
                              0.03Income
      per common share - diluted:Net
      Income per common share
                              
                              $
                              0.03
                              
                              
                              $
                              0.03Weighted
      average common shares outstanding:Basic
                              
                              
                              21,428,924
                              
                              
                              
                              20,973,924Diluted
                              
                              
                              21,428,924
                              
                              
                              
                              20,973,924





See
Accompanying Notes to Condensed Consolidated Financial
Statements


6





GLOBAL
AXCESS CORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





For the Six Months EndedJune 30, 2009
                        
                        
                        June 30, 2008Cash
      flows from operating activities:Income
      from continuing operations
                        
                        $
                        653,793
                        
                        
                        $
                        562,445Adjustments
      to reconcile net income from continuing operationsto
      net cash provided by continuing operating activities:Stock
      based compensation
                        
                        
                        55,085
                        
                        
                        
                        122,024Loss
      on early extinguishment of debt
                        
                        
                        467,391
                        
                        
                        
                        -Depreciation
      expense
                        
                        
                        559,342
                        
                        
                        
                        779,257Amortization
      of intangible merchant contracts
                        
                        
                        388,684
                        
                        
                        
                        384,329Amortization
      of capitalized loan fees
                        
                        
                        16,657
                        
                        
                        
                        23,216Allowance
      for doubtful accounts
                        
                        
                        (2,984
                        )
                        
                        
                        (12,925
                        )Allowance
      for inventory obsolescence
                        
                        
                        44,718
                        
                        
                        
                        -Non-cash
      interest expense (income) on swap agreement with senior
    lender
                        
                        
                        (7,921
                        )
                        
                        
                        5,679Accretion
      of discount on notes payable
                        
                        
                        44,354
                        
                        
                        
                        82,994Changes
      in operating assets and liabilities:Change
      in automated teller machine vault cash
                        
                        
                        (250,000
                        )
                        
                        
                        -Change
      in accounts receivable
                        
                        
                        525
                        
                        
                        
                        (104,638
                        )Change
      in inventory
                        
                        
                        (165,187
                        )
                        
                        
                        (341
                        )Change
      in prepaid expenses and other current assets
                        
                        
                        17,883
                        
                        
                        
                        (40,868
                        )Change
      in other assets
                        
                        
                        (130,621
                        )
                        
                        
                        5,920Change
      in intangible assets, net
                        
                        
                        (70,696
                        )
                        
                        
                        634Change
      in accounts payable and accrued liabilities
                        
                        
                        273,132
                        
                        
                        
                        (497,615
                        )Change
      in automated teller machine vault cash payable
                        
                        
                        250,000
                        
                        
                        
                        -Net
      cash provided by continuing operating activities
                        
                        
                        2,144,155
                        
                        
                        
                        1,310,111Cash
      flows from investing activities:Costs
      of acquiring merchant contracts
                        
                        
                        (29,968
                        )
                        
                        
                        (28,578
                        )Purchase
      of property and equipment
                        
                        
                        (215,662
                        )
                        
                        
                        (79,901
                        )Net
      cash used in investing activities
                        
                        
                        (245,630
                        )
                        
                        
                        (108,479
                        )Cash
      flows from financing activities:Proceeds
      from issuance of common stock
                        
                        
                        9,100
                        
                        
                        
                        -Proceeds
      from senior lenders'  notes payable
                        
                        
                        5,000,000
                        
                        
                        
                        39,028Change
      in restricted cash
                        
                        
                        (800,000
                        )
                        
                        
                        -Principal
      payments on senior lenders'  notes payable
                        
                        
                        (5,457,143
                        )
                        
                        
                        (401,199
                        )Principal
      payments on notes payable
                        
                        
                        (3,182
                        )
                        
                        
                        (25,000
                        )Principal
      payments on notes payable - related parties
                        
                        
                        (11,263
                        )
                        
                        
                        (10,053
                        )Principal
      payments on capital lease obligations
                        
                        
                        (431,225
                        )
                        
                        
                        (556,040
                        )Net
      cash used in financing activities
                        
                        
                        (1,693,713
                        )
                        
                        
                        (953,264
                        )Increase
      in cash
                        
                        
                        204,812
                        
                        
                        
                        248,368Cash,
      beginning of period
                        
                        
                        1,560,910
                        
                        
                        
                        540,161Cash,
      end of the period
                        
                        $
                        1,765,722
                        
                        
                        $
                        788,529Cash
      paid for interest
                        
                        $
                        308,179
                        
                        
                        $
                        408,061





See
Accompanying Notes to Condensed Consolidated Financial
Statements


7





Supplemental
schedule of non-cash investing and financing activities:





For the Six Months EndedSUPPLEMENTAL CASH FLOW INFORMATION
                    
                    June 30, 2009
                    
                    
                    June 30, 2008The
      significant non-cash investing and financing activities of the Company
      were as follows:Operating
      activities:Net
      transfer of de-installed net fixed assets to (from)
    inventory
                    
                    $
                    (55,238
                    )
                    
                    $
                    124,728Total
      non-cash operating activities
                    
                    $
                    (55,238
                    )
                    
                    $
                    124,728Investing
      activities:Purchase
      of assets under capital lease obligations
                    
                    $
                    76,950
                    
                    
                    $
                    407,404Net
      transfer of de-installed net fixed assets (to) from
    inventory
                    
                    
                    55,238
                    
                    
                    
                    (124,728
                    )Total
      non-cash investing activities
                    
                    $
                    132,188
                    
                    
                    $
                    282,676





See
Accompanying Notes to Condensed Consolidated Financial
Statements


8


GLOBAL
AXCESS CORP AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JUNE 30, 2009


(Unaudited)





1.    BASIS
OF PRESENTATION





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with Securities and Exchange Commission (“the “SEC”)
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-K for the year ended December 31, 2008 of Global Axcess Corp
and its subsidiaries (the “Company").





The
condensed consolidated financial statements present the condensed consolidated
balance sheet, statements of operations, and cash flows of the Company. The
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America.





The
condensed consolidated financial information is unaudited. In the opinion of
management, all adjustments (consisting of only normal recurring
adjustments)  necessary to present fairly the financial position as of
June 30, 2009 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
fiscal 2009 adjustments are of normal recurring nature with the exception
of:





•
            $467,391
      loss on early extinguishment of debt charges;
  and


•
            $  24,600
      recovery of expense accrual.





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 self-service kiosk services in the United States.  Through its
wholly-owned subsidiary, Nationwide Money Services, Inc., the Company provides
turnkey ATM management solutions that include cash, project and account
management services. The Company currently owns, manages or operates over 4,300
ATMs in its national network spanning 43 states.





Significant Accounting
Policies





The
preparation of financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States of America
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the Company’s condensed consolidated financial statements
and accompanying notes. The Company bases its estimates and judgments on
historical experience and on various other assumptions that it believes are
reasonable under the circumstances. However, future events are subject to
change, and the best estimates and judgments routinely require adjustment. The
amounts of assets and liabilities reported in its condensed consolidated balance
sheets, and the amounts of revenues and expenses reported for each of its fiscal
periods, are affected by estimates and assumptions which are used for, but not
limited to, the accounting for allowance for doubtful accounts, goodwill and
intangible asset impairments,  inventory and income taxes. Actual
results could differ from these estimates. The following accounting policies are
significantly affected by judgments, assumptions and estimates used in the
preparation of the Company’s consolidated financial statements.


9





Cash and Cash
Equivalents





The
Company considers all highly-liquid investments with a maturity of three months
or less when purchased to be cash equivalents.





The
Company maintains $800,000 of cash on deposit with SunTrust Bank that is pledged
for a particular use and is restricted. This restricted cash balance is
classified in other assets on the Company’s consolidated balance
sheet.





Principles of
Consolidation





The
condensed consolidated financial statements include the accounts of Global
Axcess Corp and its subsidiaries. Global Axcess Corp has the following
subsidiaries:  Nationwide Money Services, Inc. (“Nationwide”),
Nationwide Ntertainment Services, Inc. and EFT Integration, Inc.
(“EFTI”).  All significant intercompany transactions and accounts have
been eliminated in consolidation.





Use
of Estimates





The
preparation of the 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 amounts
reported in the condensed consolidated financial statements and accompanying
notes. Actual results could differ from these estimates.





Revenue
Recognition





Transaction
service and processing fees are recognized in the period that the service is
performed.  The Company receives two types of
fees:  surcharge/convenience fees paid by consumers utilizing certain
ATMs owned or managed by the Company; and interchange fees paid by their
banks.    Processing fees are generally charged on a per
transaction basis, depending on the contractual arrangement with the
client.  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.





Branding
fees are generated by the Company’s bank branding arrangements, under which
financial institutions pay a fixed monthly fee per ATM to the Company to have
their brand name on selected ATMs within the Company’s ATM portfolio. In return
for such fees, the bank’s customers can use those branded ATMs without paying a
surcharge fee.  Branding fees are recognized in the period that the
service is performed. None of the branding fees are subject to escalation
clauses.  Should the Company include escalation clauses in its future
branding contracts, pursuant to the SEC’s SAB, Topic 13, Revenue Recognition,
the monthly per ATM branding fees, which would be subject to escalation clauses
within the agreements, would be recognized as revenues on a straight-line basis
over the term of the agreement. In most of its branding agreements, the Company
does not receive any one-time set-up fees in addition to the monthly branding
fees. The Company has received immaterial one-time set-up fees per ATM. This
set-up fee is separate from the recurring, monthly branding fees and is meant to
compensate the Company for the burden incurred related to the initial set-up of
a branded ATM versus the on-going monthly services provided for the actual
branding. Since any and all one-time set up fees have been immaterial to date,
the Company has recorded the fee upon contract signing.  Should any
future branding agreements contain material set-up fees, pursuant to the
guidance in Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables, and SAB No. 104, Revenue Recognition,
the Company would defer these set-up fees (as well as the corresponding costs
associated with the initial set-up) and recognize such amounts as revenue (and
expense) over the terms of the underlying bank branding agreements.





Additionally,
the Company recognizes revenue on breached contracts when cash is
received.  During the six-month period ended June 30, 2009, the
Company did not book any revenue on breached contracts.





In
connection with the Company’s merchant-owned ATM operating/processing
arrangements, the Company typically pays the surcharge fees that it earns to the
merchant as fees for providing, placing, and maintaining the ATM unit. Pursuant
to the guidance of EITF Issue No. 01-9, Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of the Vendor’s Products), the
Company has recorded such payments as a direct reduction of
revenue.


10




The
Company follows the guidance in EITF Issue 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent, for its merchant contracts. In accordance with
EITF Issue 99-19, the SEC staff concluded that if the company performs as an
agent or broker without assuming the risks and rewards of ownership of the
goods, sales should be and are reported on a net basis.





The
Company is not exposed to similar financial obligations and risks as it is on
its company-owned ATM contracts.  For example, under a merchant-owned
arrangement, the merchant is responsible for most of the operating expenses of
the ATM such as maintenance, cash management and loading, supplies, signage and
telecommunication services. As such, the Company reports the
surcharge/convenience fees relating to merchant-owned ATM arrangements on a net
basis.





Total Revenue and Total Cost
of Revenues Presentation





The
Company presents “Revenues” and “Cost of revenues” as a single line item in the
consolidated statements of operations.  The following tables set forth
the revenue and cost of revenues sources included in the single line items
presented for the three-month and six-month periods ended June 30, 2009 and
2008:





Revenues:





For the Three Months EndedJune 30, 2009
                                                
                                                
                                                June 30, 2008Surcharge
      / Convenience Fee revenue
                                                
                                                $
                                                2,999,346
                                                
                                                
                                                $
                                                3,083,583Interchange
      revenue
                                                
                                                
                                                1,841,682
                                                
                                                
                                                
                                                2,044,322Processing
      revenue
                                                
                                                
                                                52,793
                                                
                                                
                                                
                                                74,565ATM
      Sales revenue
                                                
                                                
                                                103,012
                                                
                                                
                                                
                                                171,993Other
      revenue
                                                
                                                
                                                372,575
                                                
                                                
                                                
                                                470,665Total
      revenue
                                                
                                                $
                                                5,369,408
                                                
                                                
                                                
                                                5,845,128For the Three Months EndedJune 30, 2009
                                                
                                                
                                                June 30, 2008ATM
      Operating revenue
                                                
                                                $
                                                5,266,396
                                                
                                                
                                                $
                                                5,673,135ATM
      Sales revenue
                                                
                                                
                                                103,012
                                                
                                                
                                                
                                                171,993Total
      revenue
                                                
                                                $
                                                5,369,408
                                                
                                                
                                                $
                                                5,845,128For the Six Months EndedJune 30, 2009
                                                
                                                
                                                June 30, 2008Surcharge
      / Convenience Fee revenue
                                                
                                                $
                                                5,977,945
                                                
                                                
                                                $
                                                5,973,681Interchange
      revenue
                                                
                                                
                                                3,681,002
                                                
                                                
                                                
                                                4,040,787Processing
      revenue
                                                
                                                
                                                116,584
                                                
                                                
                                                
                                                155,366ATM
      Sales revenue
                                                
                                                
                                                204,044
                                                
                                                
                                                
                                                312,340Other
      revenue
                                                
                                                
                                                804,267
                                                
                                                
                                                
                                                891,314Total
      revenue
                                                
                                                $
                                                10,783,842
                                                
                                                
                                                $
                                                11,373,488For the Six Months EndedJune 30, 2009
                                                
                                                
                                                June 30, 2008ATM
      Operating revenue
                                                
                                                $
                                                10,579,798
                                                
                                                
                                                $
                                                11,061,148ATM
      Sales revenue
                                                
                                                
                                                204,044
                                                
                                                
                                                
                                                312,340Total
      revenue
                                                
                                                $
                                                10,783,842
                                                
                                                
                                                $
                                                11,373,488


11





Cost
of Revenues:





For the Three Months EndedJune 30, 2009
                                                
                                                
                                                June 30, 2008Merchant
      residual / commission costs
                                                
                                                $
                                                1,681,502
                                                
                                                
                                                $
                                                1,889,646Cost
      of cash
                                                
                                                
                                                418,142
                                                
                                                
                                                
                                                490,000Processing
      costs
                                                
                                                
                                                217,598
                                                
                                                
                                                
                                                225,057Communication
      costs
                                                
                                                
                                                150,542
                                                
                                                
                                                
                                                140,205ATM
      Sales costs
                                                
                                                
                                                106,139
                                                
                                                
                                                
                                                143,247Other
      cost of revenues
                                                
                                                
                                                240,021
                                                
                                                
                                                
                                                370,447Total
      cost of revenues
                                                
                                                $
                                                2,813,944
                                                
                                                
                                                
                                                3,258,602For the Three Months EndedJune 30, 2009
                                                
                                                
                                                June 30, 2008Cost
      of ATM operating revenue
                                                
                                                $
                                                2,707,805
                                                
                                                
                                                $
                                                3,115,355ATM
      Sales costs
                                                
                                                
                                                106,139
                                                
                                                
                                                
                                                143,247Total
      cost of revenues
                                                
                                                $
                                                2,813,944
                                                
                                                
                                                $
                                                3,258,602For the Six Months EndedJune 30, 2009
                                                
                                                
                                                June 30, 2008Merchant
      residual / commission costs
                                                
                                                $
                                                3,385,049
                                                
                                                
                                                $
                                                3,634,282Cost
      of cash
                                                
                                                
                                                831,117
                                                
                                                
                                                
                                                1,052,760Processing
      costs
                                                
                                                
                                                425,351
                                                
                                                
                                                
                                                427,623Communication
      costs
                                                
                                                
                                                282,160
                                                
                                                
                                                
                                                285,919ATM
      Sales costs
                                                
                                                
                                                202,425
                                                
                                                
                                                
                                                282,128Other
      cost of revenues
                                                
                                                
                                                543,721
                                                
                                                
                                                
                                                695,934Total
      cost of revenues
                                                
                                                $
                                                5,669,823
                                                
                                                
                                                $
                                                6,378,646For the Six Months EndedJune 30, 2009
                                                
                                                
                                                June 30, 2008Cost
      of ATM operating revenue
                                                
                                                $
                                                5,467,398
                                                
                                                
                                                $
                                                6,096,518ATM
      Sales costs
                                                
                                                
                                                202,425
                                                
                                                
                                                
                                                282,128Total
      cost of revenues
                                                
                                                $
                                                5,669,823
                                                
                                                
                                                $
                                                6,378,646





Inventory





Inventory
      is stated at the lower of cost (first-in, first-out method) or
      market.  Inventory consists primarily of ATMs, other
      self-service kiosks and related parts and equipment.  Parts
      given to merchants for no charge are recorded to Merchant Contracts when
      the part is placed into service and the merchant signs a term extension to
      an existing contract.  The cost of the part will subsequently be
      amortized over the life of the contract extension.  ATMs and
      parts available for sale are classified as inventory until such time as
      the machine or part is sold or installed and in service. Once the ATM or
      part is sold, it is relieved to cost of revenues.  At June 30,
      2009, the Company's inventory, net of an allowance for obsolescence of
      $98,751, totaled $341,962.


12





Accounts Receivable and
Allowance for Doubtful Accounts





The
Company reviews the accounts receivable on a regular basis to determine the
collectability of each account. The Company maintains allowances for doubtful
accounts for estimated losses resulting from the failure of its clients 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 client 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 June 30, 2009, the
Company had bad debt reserves totaling $6,748 against gross accounts receivable
totaling $857,580.





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 three to 10
years. Leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or the life of the asset.  The cost of
repairs and maintenance is charged to expense as incurred. Expenditures for
property improvements and renewals are capitalized if they extend the useful
life of the related asset. Upon the sale or other disposition of a depreciable
asset, cost and accumulated depreciation are removed from the accounts and any
gain or loss is reflected in gain (loss) on sale of assets.





The
Company periodically evaluates whether events and circumstances have occurred
that may warrant revision of the estimated useful life of fixed assets or
whether the remaining balance of fixed assets should be evaluated for possible
impairment. The Company uses an estimate of the related undiscounted cash flows
over the remaining life of the fixed assets in measuring their recoverability,
as well as historical age, to estimate useful economic lives and
values.  The Company reviews fixed assets for impairment and if it
finds impairment, the Company accounts for the impairment in accordance with
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”





Intangible Assets – Goodwill
and Merchant Contracts





In June
2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets,”
which was adopted by the Company in fiscal 2002. SFAS No. 142 established
accounting and reporting standards for goodwill and intangible assets resulting
from business combinations. SFAS No. 142 included provisions discontinuing the
periodic amortization of, and requiring the assessment of, the potential
impairments of goodwill (and intangible assets deemed to have indefinite lives).
As SFAS No. 142 replaced the measurement guidelines for goodwill impairment,
goodwill not considered impaired under previous accounting literature may be
considered impaired under SFAS No. 142. SFAS No. 142 also required that the
Company complete a two-step goodwill impairment test. The first step compares
the fair value of each reporting unit to its carrying amount, including
goodwill. If the fair value of a reporting unit exceeded its carrying amount,
goodwill is not considered to be impaired and the second step is not required.
SFAS No. 142 required completion of this first step within the first nine months
of initial adoption and annually thereafter. If the carrying amount of a
reporting unit exceeded its fair value, the second step is performed to measure
the amount of impairment loss. The second step compared the implied fair value
of goodwill to the carrying value of a reporting unit's goodwill. The implied
fair value of goodwill is determined in a manner similar to accounting for a
business combination with the allocation of the assessed fair value determined
in the first step to the assets and liabilities of the reporting unit. The
excess of the fair value of the reporting unit over the amounts assigned to the
assets and liabilities is the implied fair value of goodwill. This allocation
process is only performed for purposes of evaluating goodwill impairment and
does not result in an entry to adjust the value of any assets or liabilities. An
impairment loss is recognized for any excess in the carrying value of goodwill
over the implied fair value of goodwill.





Intangible
assets with finite lives and merchant contracts are stated at cost, net of
accumulated amortization, and are subject to impairment testing under certain
circumstances in accordance with SFAS No. 144 and other applicable
pronouncements. These assets are amortized on the straight-line method over
their estimated useful lives or period of expected benefit. These assets are
subject to periodic impairment testing in accordance with SFAS No.
142.





The
Company’s merchant contracts are made up of contracts with automatic renewable
lives.  The Company has determined after review of its contracts that
the economic life of the contracts is extended and estimated over 21 years (or
three 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.  Additionally, when the Company gives
away an ATM part to induce a contract extension from the merchant, the Company
records the value of the ATM part to Merchant Contracts and amortizes the value
of the part over the life of the contract extension.


13





The first
step is to periodically assess the remaining contract lives, including expected
renewals.  If the periodic assessment results in a determination that
the economic lives of the merchant contracts are less than 21 years, the Company
adjusts the remaining amortization lives of the merchant
contracts.  The Company’s merchant contracts have an average initial
term of approximately seven years.  While the Company has historically
experienced a higher turnover rate among its merchant-owned clients than with
its company-owned portfolio, the Company is currently experiencing an average of
2.2 renewals on its current merchant-owned contracts acquired through the end of
fiscal 2005.  Pursuant to FASB Staff Position No. FAS 142-3 dated
April 25, 2008, “an entity shall consider its own historical experience” about
“renewal or extension used to determine the useful life of a recognized
intangible asset.”  Until such time when the Company’s historical
experience does not support the useful and economic life of the merchant
contracts, the Company concludes that the current economic life of 21 years is
appropriate.





The
second step is to compare the estimated future undiscounted cash flows of each
reporting unit to the carrying amount of the merchant contracts, thus testing
the impairment of the value of the contracts.  An impairment loss is
recognized for any excess in the carrying value of merchant contracts over the
assessed fair value of merchant contracts. To date, the Company’s testing has
indicated that there is no impairment of its goodwill and merchant
contracts.





The
following table summarizes Intangible Assets and Merchant Contracts at June 30,
2009:





Gross CarryingValue
                      
                      
                      Accumulated
                        Amortization
                      
                      
                      NetGoodwill
                      
                      $
                      4,189,645
                      
                      
                      $
                      168,286
                      
                      
                      $
                      4,021,359Other
      Intangible Assets
                      
                      
                      79,663
                      
                      
                      
                      5,050
                      
                      
                      
                      74,613Merchant
      contracts
                      
                      
                      14,730,556
                      
                      
                      
                      3,758,146
                      
                      
                      
                      10,972,410Total
      Intangible assets and merchant contracts
                      
                      $
                      18,999,864
                      
                      
                      $
                      3,931,482
                      
                      
                      $
                      15,068,382





Fair Value of Financial
Instruments




The
carrying amounts of the Company’s long-term liabilities approximate the
estimated fair values at June 30, 2009, 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.





Automated Teller Machine
Vault Cash and Automated Teller Machine Vault Cash Payable




Automated
teller machine vault cash consists of funds collected from a branded bank
partner to be utilized in managing the cash in a selected number of their
ATMs.  These funds are reported as automated teller machine vault cash
on the consolidated balance sheet with an offsetting amount reported as
automated teller machine vault cash payable.  As of June 30, 2009,
automated teller machine vault cash and automated teller machine vault cash
payable both totaled $250,000.





Earnings per
Share




In
calculating basic income per share, net income is divided by the weighted
average number of common shares outstanding for the period. Diluted income per
share reflects the assumed exercise or conversion of all dilutive securities,
such as options and warrants.  No such exercise or conversion is
assumed where the effect is anti-dilutive, such as when there is a net loss from
continuing operations or when the exercise price of the potentially dilutive
securities is greater than the market value of the Company’s
stock.  Stock options to purchase 364,800 shares of common stock and
stock warrants to purchase 135,000 shares of common stock that were outstanding
at June 30, 2009 were not included in the computation of diluted earnings per
share for the three months ended June 30, 2009 because the exercise prices of
these stock options were greater than the average share price of the Company’s
common stock and; therefore, the effect would have been
anti-dilutive.  Stock options to purchase 1,615,000 shares of common
stock that were outstanding at June 30, 2008 were not included in the
computation of diluted earnings per share because the exercise prices of these
stock options were greater than the average share price of the Company’s common
stock and; therefore, the effect would have been anti-dilutive.  No
stock warrants outstanding at June 30, 2008 were included in the computation of
diluted earnings per share because they were anti-dilutive.


14




For the Three Months EndedJune 30, 2009
                                        
                                        
                                        June 30, 2008NumeratorIncome
      from continuing operations
                                        
                                        $
                                        557,031
                                        
                                        
                                        $
                                        450,290Numerator
      for diluted income per share available to common
    stockholders
                                        
                                        $
                                        557,031
                                        
                                        
                                        $
                                        450,290DenominatorWeighted
      average shares
                                        
                                        
                                        21,873,924
                                        
                                        
                                        
                                        20,973,924Effect
      of dilutive securities:Treasury
      method, effect of employee stock options & warrants
                                        
                                        
                                        447,465
                                        
                                        
                                        
                                        5,844Denominator
      for diluted income per share adjusted weighted shares after assumed
      exercises
                                        
                                        
                                        22,321,389
                                        
                                        
                                        
                                        20,979,768Income
      per common share - basic:Income
      from continuing operations
                                        
                                        $
                                        0.03
                                        
                                        
                                        $
                                        0.02Net
      Income per common share
                                        
                                        $
                                        0.03
                                        
                                        
                                        $
                                        0.02Income
      per common share - diluted:Income
      from continuing operations
                                        
                                        $
                                        0.03
                                        
                                        
                                        $
                                        0.02Net
      Income per common share
                                        
                                        $
                                        0.03
                                        
                                        
                                        $
                                        0.02


15




For the Six Months EndedJune 30, 2009
                                
                                
                                June 30, 2008NumeratorIncome
      from continuing operations
                                
                                $
                                653,793
                                
                                
                                $
                                562,445Numerator
      for diluted income per share available to common
    stockholders
                                
                                $
                                653,793
                                
                                
                                $
                                562,445DenominatorWeighted
      average shares
                                
                                
                                21,428,924
                                
                                
                                
                                20,973,924Effect
      of dilutive securities:Treasury
      method, effect of employee stock options & warrants
                                
                                
                                -
                                
                                
                                
                                -Denominator
      for diluted income per share adjusted weighted shares after assumed
      exercises
                                
                                
                                21,428,924
                                
                                
                                
                                20,973,924Income
      per common share - basic:Income
      from continuing operations
                                
                                $
                                0.03
                                
                                
                                $
                                0.03Net
      Income per common share
                                
                                $
                                0.03
                                
                                
                                $
                                0.03Income
      per common share - diluted:Income
      from continuing operations
                                
                                $
                                0.03
                                
                                
                                $
                                0.03Net
      Income per common share
                                
                                $
                                0.03
                                
                                
                                $
                                0.03




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.





Repairs and Maintenance
Costs





Repairs
and maintenance costs are expensed as incurred.  Repairs and
maintenance pertaining to the Company’s ATMs are recorded in cost of
revenues.  The Company records repairs and maintenance costs relating
to general office and backend related equipment to general and administrative
costs.





Stock-based
Compensation





Effective
January 1, 2006, the Company adopted the fair value recognition provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004),
"Share-Based Payment," using the modified-prospective-transition method which
requires us to recognize compensation expense on a prospective basis. SFAS No.
123(R) requires that all stock-based compensation be recognized as an expense in
the financial statements and that such cost be measured at the fair value of the
award. Under this method, in addition to reflecting compensation for new
share-based awards, expense is also recognized to reflect the remaining service
period of awards that had been included in pro-forma disclosure in prior
periods.  The stock-based compensation expense is included in
operating expenses in the consolidated statements of operations. During the
three-month periods ended June 30, 2009 and 2008, the Company recorded $29,374
and $42,376, respectively, of stock compensation expenses.  During the
six-month periods ended June 30, 2009 and 2008, the Company recorded $55,085 and
$122,024, respectively, of stock compensation expenses.


16





Performance Based 401k
Contribution Plan





Effective
fiscal 2007, the Company implemented a performance based incentive program
matching 401k contributions.  For each quarter the Company achieves
its net income budget, the Company will match up to 50% of the first 6% of an
employee’s 401k contributions during that respective quarter.  During
the three-month periods ended June 30, 2009 and 2008, the Company recorded
$10,329 and $9,523, respectively, of expenses relating to this
plan.  During the six-month periods ended June 30, 2009 and 2008, the
Company recorded $21,050 and $20,857, respectively, of expenses relating to this
plan.





Performance Based Incentive
Bonus Plan





Effective
fiscal 2008, the Company implemented a performance based incentive program for
employees and management of the Company.  A quarterly cash bonus pool
is funded by the Company’s achievement of net profits.





During
the three-month period ended June 30, 2009, the Company recorded $51,601 of
bonus and estimated payroll tax expenses relating to this plan.  Of
the $51,601 recorded during the three-month period ended June 30, 2009, $32,976
is held back and will be paid upon achievement of fiscal 2009 net
profits.  During the three-month period ended June 30, 2008, the
Company recorded $35,728 of expenses relating to this plan.





During
the six-month period ended June 30, 2009, the Company recorded $107,189 of bonus
and estimated payroll tax expenses relating to this plan.  Of the
$107,189 recorded during the six-month period ended June 30, 2009, $68,587 is
held back and will be paid upon achievement of fiscal 2009 net
profits.  During the six-month period ended June 30, 2008, the Company
recorded $67,256 of expenses relating to this plan.





Recent Accounting
Pronouncements





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





In April
2008, the FASB issued Staff Position (“FSP”) No. FAS 142-3, “Determination of
the Useful Life of Intangible Assets” (“FSP FAS 142-3”) which amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS No. 142,
“Goodwill and Other Intangible Assets.” This FSP is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. The guidance contained in this FSP
for determining the useful life of a recognized intangible asset is applied
prospectively to intangible assets acquired after the effective date. Additional
disclosures required in this FSP are applied prospectively to all intangible
assets recognized as of, and subsequent to, the effective date.  We do
not expect the adoption of FSP to have an impact on our consolidated financial
position, results of operations or cash flows.





In May
2008, the FASB issued the Financial Accounting Standards Board SFAS No. 162,
“The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS
162 identifies the sources of accounting principles to be used in the
preparation of financial statements that are presented in conformity with
generally accepted accounting principles (“GAAP”) in the United States (the GAAP
hierarchy). The Company currently follows the hierarchy of GAAP as presented in
SFAS 162 and does not expect its adoption will have a material impact on its
consolidated results of operations and financial condition.


17





In May
2009, the FASB issued the Financial Accounting Standards Board SFAS No. 165,
“Subsequent Events” (“SFAS 165”).  While SFAS 165, does not change the
requirements of GAAP, relative to reporting and disclosure of subsequent events,
it does introduce a requirement to disclose the “date through which subsequent
events have been evaluated”.  We have adopted that disclosure
requirement.





3.    ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES





Accounts
payable and accrued liabilities consisted of the following as of June 30, 2009
and December 31, 2008:





June 30, 2009
                      
                      
                      December 31,2008Accounts
      payable
                      
                      $
                      439,753
                      
                      
                      $
                      417,874Accrued
      commissions/residual payments
                      
                      
                      1,324,783
                      
                      
                      
                      1,157,410Accrued
      cost of cash and cash replenishment expenses
                      
                      
                      386,587
                      
                      
                      
                      326,015Accrued
      payroll
                      
                      
                      335,975
                      
                      
                      
                      298,139Accrued
      audit fees
                      
                      
                      76,050
                      
                      
                      
                      83,000Accrued
      interest
                      
                      
                      4,594
                      
                      
                      
                      97,827Other
                      
                      
                      224,865
                      
                      
                      
                      147,131Accounts
      payable and accrued liabilities
                      
                      $
                      2,792,607
                      
                      
                      $
                      2,527,396





4.    SENIOR
LENDERS’ NOTES PAYABLE





On March
27, 2009, the Company entered into a credit and security agreement (the “Credit
Agreement”) with SunTrust Bank (the “Lender”).  The Credit Agreement
provides for a maximum term loan of up to $5 million.  On March 27,
2009, the Company borrowed $5 million under the Credit Agreement and issued a
promissory note (the “Promissory Note”) in such amount to the
Lender.  The Company will repay the amount borrowed over 42 months,
beginning April 30, 2009, with 41 equal monthly principal payments plus accrued
interest, with the final payment to be made on September 30,
2012.  The interest rate is fixed at 6.99% per annum.  The
proceeds were used to repay CAMOFI Master LDC (“CAMOFI”) in connection with the
settlement agreement, effective as of March 17, 2009, between the Company and
CAMOFI, and to repay the outstanding principal balance under a loan agreement
with Wachovia Bank.  Upon entering into the Credit Agreement, the
Company repaid in full all outstanding borrowings under and terminated (1) its
Fourth Amended and Restated Loan Agreement, entered into as of September 28,
2007 (the “Prior Loan Agreement”), by and between the Company and Wachovia Bank,
and (2) its Consolidated Renewal Promissory Note issued on September 28, 2007
(the “Renewal Note”) to Wachovia Bank.  See Note #10 “Loss on Early
Extinguishment of Debt” for detail of the charges relating to the extinguishment
of these debts.





The
Company also paid a termination fee of $85,312 for its interest swap agreement
in connection with the prepayment of the Prior Loan Agreement and Renewal Note,
which amount was previously accounted for as accrued interest.





The
Credit Agreement contains customary representations, warranties and covenants,
including (1) maintenance of a minimum amount of $800,000 of restricted cash in
a deposit account with the Lender, (2) maintenance of tangible net worth value
of at least $9 million, and (3) maintenance of debt service coverage of at least
1.25.  As of June 30, 2009, the Company was in compliance with all
applicable covenants and ratios under its credit agreement with SunTrust
Bank.


18





5.    COMMITMENTS
AND CONTINGENCIES





We lease
ATMs and back office computer equipment under capital lease agreements that
expire between 2009 and 2012 and provide for lease payments at interest rates
from 5.99% up to 14.37% per annum. The majority of the capital lease agreements,
which total approximately 100% of our June 30, 2009 balances, are at interest
rates at or below 12.11%. See Financial Footnote #12 to the Consolidated
Financial Statements in the Annual Report on Form 10-K for fiscal
2008.





During
the three-month period ended June 30, 2009, we entered into $76,950 of new
capital lease obligations.  These new capital lease obligations are
30-month leases at an interest rate of between 8.7% and 10.4% per
annum.    As of June 30, 2009, approximately $851,000 of
capital lease obligations were included within the Company’s consolidated
balance sheet.





6.    LITIGATION
AND CLAIMS





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. We
know of no material, active or pending legal proceedings against the Company,
nor are we involved as a plaintiff in any material proceeding or pending
litigation. There are no proceedings in which any of our directors, officers or
affiliates, or any registered or beneficial shareholder, is an adverse party or
has a material interest adverse to our interest.





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 June 30, 2009
is related to deferred tax assets arising from net operating loss
carryforwards.  Management believes that based upon its projection of
future taxable income for the foreseeable future, it is more likely than not
that the Company will not be able to realize the full benefit of the net
operating loss carryforwards before they expire due to the amortization and
depreciation losses from the projected acquisition assets.





At
December 31, 2008, the Company has net operating loss carryforwards remaining of
approximately $26 million that may be offset against future taxable income
through 2027.  As part of management’s tax strategies they will be
reviewing the use of the net operating loss carryforwards. The Company is
reviewing its tax depreciation methods for future utilization of the net
operating loss.





8.  CHANGES
IN STOCKHOLDERS' EQUITY





See the
table below for all the equity transactions for the three-month period ended
June 30, 2009:





Additional
                      
                      
                      
                      
                      
                      
                      
                      
                      TotalCommon Stock
                      
                      
                      Paid-in
                      
                      
                      Accumulated
                      
                      
                      Treasury
                      
                      
                      Stockholders'Shares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      Deficit
                      
                      
                      Stock
                      
                      
                      EquityBalances,
      March 31, 2009
                      
                      
                      20,973,924
                      
                      
                      $
                      21,022
                      
                      
                      $
                      22,774,214
                      
                      
                      $
                      (9,061,378
                      )
                      
                      $
                      (11,966
                      )
                      
                      $
                      13,721,892Stock
      compensation expense
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      29,374
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      29,374Stock
      warrants excercised
                      
                      
                      910,000
                      
                      
                      
                      910
                      
                      
                      
                      8,190
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      9,100Net
      income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      557,031
                      
                      
                      
                      -
                      
                      
                      
                      557,031Balances,
      June 30, 2009
                      
                      
                      21,883,924
                      
                      
                      $
                      21,932
                      
                      
                      $
                      22,811,778
                      
                      
                      $
                      (8,504,347
                      )
                      
                      $
                      (11,966
                      )
                      
                      $
                      14,317,397


19





9.
            FAIR
      VALUE MEASUREMENT




On
January 1, 2008, we adopted SFAS No. 157, “Fair Value Measurements,” which
defines fair value, establishes a framework for using fair value to measure
assets and liabilities, and expands disclosures about fair value
measurements.  The statement applies whenever other statements require
or permit assets or liabilities to be measured at fair value.  SFAS
157 is effective for fiscal years beginning after November 15, 2007, except for
nonfinancial assets and liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis for which application
has been deferred for one year.





SFAS 157
established the following fair value hierarchy that prioritizes the inputs used
to measure fair value:





Level 1:
Quoted prices are available in active markets for identical assets or
liabilities as of the reporting date.  Active markets are those in
which transactions for the asset or liability occur in sufficient frequency and
volume to provide pricing information on an ongoing basis.  Level 1
primarily consists of financial instruments such as exchange-traded derivatives,
listed equities and U.S. government treasury securities.





Level 2:
Pricing inputs are other than quoted prices in active markets included in Level
1, which are either directly or indirectly observable as of the reporting
date.  Level 2 includes those financial instruments that are valued
using models or other valuation methodologies.  These models are
primarily industry-standard models that consider various assumptions, including
quoted forward prices for commodities, time value, volatility factors, and
current market and contractual prices for the underlying instruments, as well as
other relevant economic measures.  Substantially all of these
assumptions are observable in the marketplace throughout the full term of the
instrument, can be derived from observable data or are supported by observable
levels at which transactions are executed in the
marketplace.  Instruments in this category include non-exchange-traded
derivatives such as over the counter forwards, options and repurchase
agreements.





Level 3:
Pricing inputs include significant inputs that are generally less observable
from objective sources.  These inputs may be used with internally
developed methodologies that result in management’s best estimate of fair
value.   At each balance sheet date, we perform an analysis of
all instruments subject to SFAS No. 157 and include in Level 3 all of those
whose fair value is based on significant unobservable inputs.





The
following table presents our financial assets and liabilities that were
accounted for at fair value on a recurring basis as of June 30, 2009 by level
within the fair value hierarchy:





Fair Value Measurements UsingTotal
                        
                        
                        Level 1
                        
                        
                        Level 2
                        
                        
                        Level 3Assets
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -Liabilities:Derivative
      financial instruments
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -





Our
derivative financial instruments are interest rate swap agreements, which are
observable at commonly quoted intervals for the full term of the derivatives and
therefore considered a level 2 input.  During the six-month period
ended June 30, 2009 and June 30, 2008, we recorded $7,921 of income and $5,679
of expense, respectively, relating to the interest rate swap which is included
in the interest expense, net in our condensed consolidated statements of
operations.  The interest rate swap agreement was terminated on March
27, 2009 upon the Company entering into a credit and security agreement with
SunTrust Bank and the subsequent repayment of the Company’s outstanding
principal balance with Wachovia Bank.  See Note #4 “Senior Lenders’
Notes Payable” for details on the agreement with SunTrust Bank.


20





In the
accompanying condensed consolidated balance sheets, we have recorded an asset
retirement obligation.  As discussed above, the application of SFAS 157 for
these non-recurring items has been deferred.





10.  LOSS
ON EARLY EXTINGUISHMENT OF DEBT





As
discussed in Note #4 “Senior Lenders’ Notes Payable,” the Company entered into a
credit and security agreement with SunTrust Bank.  The proceeds were
used to repay CAMOFI in connection with a settlement agreement, effective as of
March 17, 2009, between the Company and CAMOFI, and to repay the outstanding
principal balance under a loan agreement with Wachovia Bank.





In
accordance with Accounting Principles Board Opinion No. 26 “Early Extinguishment
of Debt,” the net
carrying amount of the extinguished debt should be recognized currently in
income of the period of extinguishment as losses or gains and identified as a
separate item.





The
following summarizes the amounts charged to loss on early extinguishment of debt
for the six-month period ended June 30, 2009:





ExtinguishmentItem description
                          
                          ChargeAccelerated
      accretion of discount on notes payable
                          
                          $
                          249,419Accelerated
      amortization of capitalized loan fees
                          
                          $
                          76,493Accelerated
      expense of prepaid loan fees
                          
                          $
                          6,400Stock
      expense relating to repriced warrants on debt settlement
                          
                          $
                          107,025Stock
      expense relating to warrants issued to subordinated note
      holders
                          
                          $
                          28,054Total
      loss on early extinguishment of debt
                          
                          $
                          467,391





11.  SUBSEQUENT
EVENTS





None.





ITEM
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations





The
following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto.





Summary





The
Company, through its wholly-owned subsidiaries, owns, manages or operates
self-service kiosks  with Automated Teller Machines ("ATMs”) 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.





21




Interchange
fees are processing fees that are paid by the issuer of the credit or debit card
used in a transaction. Interchange fees vary for cash withdrawals, balance
inquiries, account transfers or uncompleted transactions, which are the primary
types of transactions that are currently processed on ATMs in our network. The
maximum amount of the interchange fees is established by the national and
regional card organizations and credit card issuers with whom we have a
relationship. We receive interchange fees for transactions on ATMs that we own,
but sometimes we rebate a portion of the fee to the owner of the ATM location
under the applicable lease for the ATM site. We also receive the interchange fee
for transactions on ATMs owned by third party vendors included within our
network, but we rebate all or a portion of each fee to the third party vendor
based upon negotiations between us. The interchange fees received by us vary
from network to network and to some extent from issuer to issuer, but generally
range from $0.15 to $0.55 per cash withdrawal. Interchange fees for balance
inquiries, account transfers and denied transactions are generally substantially
less than fees for cash withdrawals. The interchange fees received by us from
the card issuer are independent of the service fees charged by the card issuer
to the cardholder in connection with ATM transactions. Service fees charged by
card issuers to cardholders in connection with transactions through our network
range from zero to $2.50 per transaction. We do not receive any portion of these
service fees.


In most
markets we impose a surcharge/convenience fee for cash withdrawals.
Surcharge/convenience fees are a substantial additional source of revenue for us
and other ATM network operators. The surcharge/convenience fee for most of the
ATMs in our network ranges between $1.50 and $2.75 per withdrawal. The
surcharge/convenience fee for other ATMs in our network ranges between $0.50 and
$7.50 per withdrawal. We receive the full surcharge/convenience fee for cash
withdrawal transactions on ATMs that we own, but often we rebate a portion of
the fee to the owner of the ATM location under the applicable lease for the ATM
site. We also receive the full surcharge/convenience fee for cash withdrawal
transactions on ATMs owned by third party vendors included within our network,
but we rebate all or a portion of each fee to the third party vendor based upon
a variety of factors, including transaction volume and the party responsible for
supplying vault cash to the ATM, and only record earned revenues based upon the
Company’s contracts with the third party vendors.





In
addition to revenues derived from interchange and surcharge/convenience fees, we
also derive revenues from providing network management services to third parties
owning ATMs included in our ATM network. These services include 24 hour
transaction processing, monitoring and notification of ATM status and cash
condition, notification of ATM service interruptions, in some cases dispatch of
field service personnel for necessary service calls and cash settlement and
reporting services. The fees for these services are paid by the owners of the
ATMs.





Interchange
fees are credited to us by networks and credit card issuers on a monthly basis
and are paid to us in the following month between the 5th and 15th business day.
Surcharge/convenience fees are charged to the cardholder and credited to us by
networks and credit card issuers on a daily basis. We rebate the portion of
these fees to ATM owners and owners of ATM locations as commission payments as
per their contractual terms. Fees for network management services are generally
paid to us on a monthly basis.





Results of Continuing
Operations





The
following tables set forth certain consolidated statement of continuing
operations data as a percentage of revenues for the periods
indicated.  Percentages may not add due to rounding.


22





For
      the Three Months EndedJune 30, 2009
                      
                      
                      June 30, 2008Revenues
                      
                      
                      100.0
                      %
                      
                      
                      100.0
                      %Cost
      of revenues
                      
                      
                      52.4
                      %
                      
                      
                      55.7
                      %Gross
      profit
                      
                      
                      47.6
                      %
                      
                      
                      44.3
                      %Depreciation
      expense
                      
                      
                      5.4
                      %
                      
                      
                      6.5
                      %Amortization
      of intangible merchant contracts
                      
                      
                      3.6
                      %
                      
                      
                      3.3
                      %Selling,
      general and administrative
                      
                      
                      24.8
                      %
                      
                      
                      22.4
                      %Stock
      compensation expense
                      
                      
                      0.5
                      %
                      
                      
                      0.7
                      %Total
      operating expenses
                      
                      
                      34.4
                      %
                      
                      
                      32.9
                      %Operating
      income from continuing operations before items shown below
                      
                      
                      13.2
                      %
                      
                      
                      11.4
                      %Interest
      expense, net
                      
                      
                      -2.8
                      %
                      
                      
                      -3.7
                      %Net
      income
                      
                      
                      10.4
                      %
                      
                      
                      7.7
                      %EBITDA
      (1)
                      
                      
                      22.2
                      %
                      
                      
                      21.2
                      %





For the Six Months EndedJune 30, 2009
                      
                      
                      June 30, 2008Revenues
                      
                      
                      100.0
                      %
                      
                      
                      100.0
                      %Cost
      of revenues
                      
                      
                      52.6
                      %
                      
                      
                      56.1
                      %Gross
      profit
                      
                      
                      47.4
                      %
                      
                      
                      43.9
                      %Depreciation
      expense
                      
                      
                      5.2
                      %
                      
                      
                      6.9
                      %Amortization
      of intangible merchant contracts
                      
                      
                      3.6
                      %
                      
                      
                      3.4
                      %Selling,
      general and administrative
                      
                      
                      24.4
                      %
                      
                      
                      23.0
                      %Stock
      compensation expense
                      
                      
                      0.5
                      %
                      
                      
                      1.1
                      %Total
      operating expenses
                      
                      
                      33.7
                      %
                      
                      
                      34.4
                      %Operating
      income from continuing operations before items shown below
                      
                      
                      13.8
                      %
                      
                      
                      9.5
                      %Interest
      expense, net
                      
                      
                      (3.4
                      %)
                      
                      
                      (4.6
                      %)Loss
      on early extinguishment of debt
                      
                      
                      (4.3
                      %)
                      
                      
                      0.0
                      %Net
      income
                      
                      
                      6.0
                      %
                      
                      
                      4.9
                      %EBITDA
      (1)
                      
                      
                      18.2
                      %
                      
                      
                      19.8
                      %





(1)
See “—EBITDA”





Comparison of Results of
Operations for the Three Months Ended June 30, 2009 and
2008:





Revenues





The
Company reported total operating revenue from continuing operations of
$5,369,408 for the three-month period ended June 30, 2009 as compared to
$5,845,128 for the three-month period ended June 30, 2008.  This
decrease was partly due to lower transaction volumes resulting from a lost
distributor’s client account whose 90 lost terminals contributed significant
transactions and revenue yet contributed only several thousand dollars a month
in gross profit.





Cost of
Revenues





Our total
cost of revenues from continuing operations decreased from $3,258,602 to
$2,813,944 for the three-month period ended June 30, 2008 to the three-month
period ended June 30, 2009.  The decrease in cost of revenues period
over period was achieved due mainly to lower fuel charges resulting in lower
first line and second line maintenance costs, and lower interest rates which
resulted in lower cash costs for the three-month period in
2009.  Additionally, the decrease in cost of revenues was also
attributed to the loss of a distributor’s client account, resulting in lower
residual / commission expenses.


23





Gross
Profit





Gross
profit from continuing operations as a percentage of revenue for the three-month
periods ended June 30, 2009 and 2008 were approximately 47.6%, or $2,555,464,
and approximately 44.3%, or $2,586,526, respectively. The increased gross profit
and gross profit percentage for the second quarter of 2009 versus the same
period in 2008 was mainly attributable to the decreased cost of revenues
discussed above.  Gross profit was minimally impacted due to the lost
distributor’s client account discussed above.





Operating
Expenses





Our total
operating expenses from continuing operations for the three months ended June
30, 2009 and 2008 were $1,848,560 and $1,919,498, 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, amortization
of intangible merchant contracts and stock compensation expenses. See
explanation of operating expenses below:





Selling, General and
Administrative (“SG&A”) Expenses





Our total
SG&A expenses from continuing operations increased to $1,334,271, or 24.8%
of revenue for the three-month period ended June 30, 2009 from $1,307,031, or
22.4% of revenue for the three-month period ended June 30, 2008.





Depreciation
Expense





Depreciation
expense from continuing operations decreased for the three-month period ended
June 30, 2009 to $289,848 from $377,553 for the same period in 2008. This
decrease in depreciation expense was mainly due to depreciation savings
resulting from refinancing several fair market value capital leases to bargain
price capital leases during the end of the second quarter in fiscal
2008.  This refinancing requires the Company to depreciate the assets
covered under the respective leases over a longer period of time thus reducing
depreciation expense during the three-month period.





Amortization of Intangible
Merchant Contracts





Amortization
of intangible merchant contracts from continuing operations increased for the
three-month period ended June 30, 2009 to $195,067 from $192,538 for the same
period in 2008.  See Note #2 “Description of Business and Summary of
Significant Accounting Policies” regarding the amortization of intangible
merchant contracts.





Stock Compensation
Expense





During
the three-month periods ended June 30, 2009 and 2008, we recorded stock
compensation expenses of $29,374 and $42,376, respectively.





Operating Income from
Continuing Operations





We had
operating income from continuing operations for the three-month period ended
June 30, 2009 in the amount of $706,904 as compared to operating income from
continuing operations of $667,028 in the three-month period ended June 30,
2008.





Interest Expense,
Net





Interest
expense, net, decreased for the three-month period ended June 30, 2009 to
$149,873 from $216,738 for the three-month period ended June 30,
2008.  The decrease was mainly due to the company refinancing its
senior debt from interest rates of 9% to 6.99% combined
with  decreased debt balances at the three-month period ended June 30,
2009, as compared to the debt balances at the three-month period ended June 30,
2008.


24





For the Three Months EndedJune 30, 2009
                    
                    
                    June 30, 2008Interest
      expense, net
                    
                    $
                    147,017
                    
                    
                    $
                    175,241Accretion
      of discount on notes payable
                    
                    
                    2,856
                    
                    
                    
                    41,497Total
      Interest expense, net
                    
                    $
                    149,873
                    
                    
                    $
                    216,738





Income
Taxes





We
incurred no tax expense in either of the respective periods ending June 30, 2009
and June 30, 2008. At December 31, 2008, the Company has a net operating loss
carryforward of approximately $26.0 million available.  The net
operating loss carryforward is due to expire during fiscal years 2011 through
2028.





Net
Income





We had
net income of $557,031 for the three months ended June 30, 2009, as compared to
net income of $450,290 for the three-month period ended June 30,
2008.





Comparison of Results of
Operations for the Six Months Ended June 30, 2009 and 2008:





Revenues





The
Company reported total operating revenue from continuing operations of
$10,783,842 for the six-month period ended June 30, 2009 as compared to
$11,373,488 for the six-month period ended June 30, 2008.  This
decrease was partly due to lower transaction volumes resulting from a lost
distributor’s client account whose 90 lost terminals contributed significant
transactions and revenue yet contributed only several thousand dollars a month
in gross profit.





Cost of
Revenues





Our total
cost of revenues from continuing operations decreased from $6,378,646 to
$5,669,823 for the six-month period ended June 30, 2008 to the six-month period
ended June 30, 2009.  The decrease in cost of revenues period over
period was achieved due mainly to lower fuel charges resulting in lower first
line and second line maintenance costs, and lower interest rates which resulted
in lower cash costs for the six-month period in 2009.  Also, during
the six-month period ended June 30, 2009, the Company recorded a $24,600
recovery of an expense accrual originally recorded to expense in fiscal
2008.  Additionally, the decrease in cost of revenues was also
attributed to the loss of a distributor’s client account, resulting in lower
residual / commission expenses.





Gross
Profit





Gross
profit from continuing operations as a percentage of revenue for the six-month
periods ended June 30, 2009 and 2008 were approximately 47.4%, or $5,114,019,
and approximately 43.9%, or $4,994,842, respectively. The increased gross profit
and gross profit percentage for the six-month period ended June 30, 2009 versus
the same period in 2008 was mainly attributable to the decreased cost of
revenues discussed above.  Gross profit was minimally impacted due to
the lost distributor’s client account discussed above.





Operating
Expenses





Our total
operating expenses from continuing operations for the six months ended June 30,
2009 and 2008 were $3,630,345 and $3,906,016, 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, amortization
of intangible merchant contracts and stock compensation expenses. See
explanation of operating expenses below:


25





Selling, General and
Administrative (“SG&A”) Expenses





Our total
SG&A expenses from continuing operations increased to $2,627,234, or 24.4%
of revenue for the six-month period ended June 30, 2009 from $2,620,406, or
23.0% of revenue for the six-month period ended June 30, 2008.





Depreciation
Expense





Depreciation
expense from continuing operations decreased for the six-month period ended June
30, 2009 to $559,342 from $779,257 for the same period in 2008. This decrease in
depreciation expense was mainly due to depreciation savings resulting from
refinancing several fair market value capital leases to bargain price capital
leases at the end of the second quarter of fiscal 2008.  This
refinancing requires the Company to depreciate the assets covered under the
respective leases over a longer period of time thus reducing depreciation
expense during the six-month period.





Amortization of Intangible
Merchant Contracts





Amortization
of intangible merchant contracts from continuing operations increased for the
six-month period ended June 30, 2009 to $388,684 from $384,329 for the same
period in 2008.  See Note #2 “Description of Business and Summary of
Significant Accounting Policies” regarding the amortization of intangible
merchant contracts.





Stock Compensation
Expense





During
the six-month periods ended June 30, 2009 and 2008, we recorded stock
compensation expenses of $55,085 and $122,024, respectively.





Operating Income from
Continuing Operations





We had
operating income from continuing operations for the six-month period ended June
30, 2009 in the amount of $1,483,674 as compared to operating income from
continuing operations of $1,088,826 in the six-month period ended June 30,
2008.





Interest Expense,
Net





Interest
expense, net, decreased for the six-month period ended June 30, 2009 to $362,490
from $526,381 for the six-month period ended June 30, 2008.  The
decrease was mainly due to the company refinancing its senior debt from interest
rates of 9% to 6.99% combined with decreased debt balances at the six-month
period ended June 30, 2009, as compared to the debt balances at the six-month
period ended June 30, 2008. During the six-month period ended June 30, 2009 we
recorded interest income of $7,921 relating to the interest swap agreement we
entered into with our former senior lender.





For the Six Months EndedJune 30, 2009
                    
                    
                    June 30, 2008Interest
      expense, net
                    
                    $
                    318,136
                    
                    
                    $
                    443,387Accretion
      of discount on notes payable
                    
                    
                    44,354
                    
                    
                    
                    82,994Total
      Interest expense, net
                    
                    $
                    362,490
                    
                    
                    $
                    526,381





Loss on early extinguishment
of debt





During
the six-month period ended June 30, 2009, we recorded non-cash expenses of
$467,391 relating to the payoff of debt balances with two senior
lenders.  See Note #10 “Loss on Early Extinguishment of Debt” for
detail of these charges.


26





Income
Taxes





We
incurred no tax expense in either of the respective periods ending June 30, 2009
and June 30, 2008. At December 31, 2008, the Company has a net operating loss
carryforward of approximately $26.0 million available.  The net
operating loss carryforward is due to expire during fiscal years 2011 through
2028.





Net
Income





We had
net income of $653,793 for the six months ended June 30, 2009, as compared to
net income of $562,445 for the six-month period ended June 30,
2008.





EBITDA





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





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





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





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





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





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





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





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





The following table sets
forth a reconciliation of net income from continuing operations to EBITDA from
continuing operations for the three months ended June 30, 2009 and
2008:





For the Three Months EndedJune 30, 2009
                    
                    
                    June 30, 2008Net
      income from continuing operations
                    
                    $
                    557,031
                    
                    
                    $
                    450,290Interest
      expense, net
                    
                    
                    149,873
                    
                    
                    
                    216,738Depreciation
      expense
                    
                    
                    289,848
                    
                    
                    
                    377,553Amortization
      of intangible merchant contracts
                    
                    
                    195,067
                    
                    
                    
                    192,538EBITDA
      from continuing operations
                    
                    $
                    1,191,819
                    
                    
                    $
                    1,237,119


27





Our
EBITDA from continuing operations decreased to $1,191,819 for the second quarter
of fiscal 2009 from $1,237,119 for the second quarter of fiscal 2008. EBITDA
from continuing operations as a percentage of revenues increased to 22.2% for
the second quarter of fiscal 2009 from 21.2% for the second quarter of fiscal
2008.





The following table sets
forth a reconciliation of net income from continuing operations to EBITDA from
continuing operations for the six months ended June 30, 2009 and
2008:





For the Six Months EndedJune 30, 2009
                    
                    
                    June 30, 2008Net
      income from continuing operations
                    
                    $
                    653,793
                    
                    
                    $
                    562,445Interest
      expense, net
                    
                    
                    362,490
                    
                    
                    
                    526,381Depreciation
      expense
                    
                    
                    559,342
                    
                    
                    
                    779,257Amortization
      of intangible merchant contracts
                    
                    
                    388,684
                    
                    
                    
                    384,329EBITDA
      from continuing operations
                    
                    $
                    1,964,309
                    
                    
                    $
                    2,252,412





Our
EBITDA from continuing operations decreased to $1,964,309 for the first six
months of fiscal 2009 from $2,252,412 for the first six months of fiscal 2008.
The decrease in EBITDA from continuing operations was due to the loss on early
extinguishment of debt of $467,391 recorded during the first quarter of
2009.  EBITDA from continuing operations as a percentage of revenues
decreased to 18.2% for the first six months of fiscal 2009 from 19.8% for the
first six months of fiscal 2008.  Excluding the loss on early
extinguishment of debt charges, EBITDA from continuing operations as a
percentage of revenues would have been 22.5% for the first six months of
2009.





The following table sets
forth a reconciliation of net income from continuing operations to EBITDA from
continuing operations before stock compensation expense and loss on early
extinguishment of debt (“Adjusted EBITDA”)  for the three months ended
June 30, 2009 and 2008:





For the Three Months EndedJune 30, 2009
                    
                    
                    June 30, 2008Net
      income from continuing operations
                    
                    $
                    557,031
                    
                    
                    $
                    450,290Interest
      expense, net
                    
                    
                    149,873
                    
                    
                    
                    216,738Depreciation
      expense
                    
                    
                    289,848
                    
                    
                    
                    377,553Amortization
      of intangible merchant contracts
                    
                    
                    195,067
                    
                    
                    
                    192,538Stock
      compensation expense
                    
                    
                    29,374
                    
                    
                    
                    42,376Adjusted
      EBITDA
                    
                    $
                    1,221,193
                    
                    
                    $
                    1,279,495





Our
Adjusted EBITDA decreased to $1,221,193 for the second quarter of fiscal 2009
from $1,279,495 for the second quarter of fiscal 2008. Adjusted EBITDA as a
percentage of revenues increased to 22.7% for the second quarter of fiscal 2009
from 21.9% for the second quarter of fiscal 2008.


28




The following table sets
forth a reconciliation of net income from continuing operations to EBITDA from
continuing operations before stock compensation expense and loss on early
extinguishment of debt (“Adjusted EBITDA”)  for the six months ended
June 30, 2009 and 2008:





For
      the Six Months EndedJune 30, 2009
                    
                    
                    June 30, 2008Net
      income from continuing operations
                    
                    $
                    653,793
                    
                    
                    $
                    562,445Interest
      expense, net
                    
                    
                    362,490
                    
                    
                    
                    526,381Depreciation
      expense
                    
                    
                    559,342
                    
                    
                    
                    779,257Amortization
      of intangible merchant contracts
                    
                    
                    388,684
                    
                    
                    
                    384,329Stock
      compensation expense
                    
                    
                    55,085
                    
                    
                    
                    122,024Loss
      on early extinguishment of debt
                    
                    
                    467,391
                    
                    
                    
                    -Adjusted
      EBITDA
                    
                    $
                    2,486,785
                    
                    
                    $
                    2,374,436





Our
Adjusted EBITDA increased to $2,486,785 for the first six months of fiscal 2009
from $2,374,436 for the first six months of fiscal 2008. Adjusted EBITDA as a
percentage of revenues increased to 23.1% for the first six months of fiscal
2009 from 20.9% for the first six months of fiscal 2008.





Seasonality





In our
ATM operations, we traditionally experience higher transaction volumes per
machine in the second and third quarters than in the first and fourth quarters.
The increased volumes in the summer months coincide with increased vacation
travel in the United States.





Liquidity and Capital
Resources





Our
primary liquidity and capital resource needs are to finance the costs of our
operations, to make capital expenditures and to service our debt.





We have
funded our operations and investment activities from cash flow generated by
operations. Net cash provided by continuing operating activities during the
six-month period ended June 30, 2009 was $2,144,155, compared to the net cash
provided by continuing operating activities during the six-month period ended
June 30, 2008 of $1,310,111.  This represented a 63.7% increase year
over year.





The
Company used $1,693,713 for financing activities, mainly paying back senior
lender notes and capital leases during the six-month period ended June 30, 2009
and depositing $800,000 into a restricted cash deposit account with SunTrust
Bank per the credit and security agreement signed on March 27,
2009.  This compared to funds used in financing activities of $953,264
for the six-month period ended June 30, 2008.





Net cash
used in investing activities was $245,630 during the six-month period ended June
30, 2009, mainly representing net purchases of property and equipment. This
compares to net cash used in investing activities of $108,479 for the six-month
period ended June 30, 2008, representing net purchases of property and
equipment.





Recently,
the capital and credit markets have become increasingly volatile as a result of
adverse conditions that have caused the failure and near failure of a number of
large financial service companies. If the capital and credit markets continue to
experience volatility and the availability of funds remains limited, it is
possible that our ability to access the capital and credit markets may be
limited by these factors at a time when we would like to refinance maturing
debt.  Likewise, if the financial institutions listed below experience
similar failures, we would need to find other third party sources to fund our
vault cash discussed below.





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. Other
than the $250,000 of automated teller machine vault cash discussed in Note # 2
“Description of Business and Summary of Significant Accounting Policies“, 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 and its clients, 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:


29


·
            Wilmington
      Savings Fund Society (WSFS). Beginning in September 2004, the
      Company has an arrangement with Wilmington Savings Fund Society (“WSFS”)
      allowing us to obtain up to $20,000,000 in vault
      cash.   The WSFS contract may be terminated by WSFS at any
      time upon breach by us and upon the occurrence of certain other events.
      Under this arrangement, we are required to pay a monthly service fee on
      the outstanding amount equal to the prime rate of interest, plus a
      specified percentage, and must pay monthly "bank" and insurance fees. We
      are also required to maintain insurance on the vault cash. The contract
      currently in place with WSFS expires on October 31, 2009, with a one year
      auto renewal period unless one party gives 60 days notice of their
      intention not to renew.  As of June 30, 2009, the Company had 11
      ATMs funded by WSFS with a vault cash outstanding balance of approximately
      $198,000 in connection with this
arrangement.





·
            Elan
      (formerly GenPass Technologies).  On November 24, 2006,
      we signed a Cash Provisioning Agreement with Elan allowing us to obtain up
      to $30,000,000 in vault cash.  The Elan contract may be
      terminated by Elan at any time upon breach by us and upon the occurrence
      of certain other events.  Under this arrangement, we are
      required to pay a monthly service fee on the average terminal balance plus
      a load factor.  In addition, we are required to maintain
      insurance on the vault cash.  The contract currently in place
      with Elan expires on August 11, 2009, with a one year auto renewal period
      unless one party gives 180 days notice of their intention not to
      renew.  As of June 30, 2009, the Company had 1,081 ATMs funded
      by Elan with a vault cash outstanding balance of about approximately
      $23,330,100.





·
            Various
      Branded Cash Partners.  Nationwide has partnered with
      numerous banks and credit unions to market specific Nationwide ATMs to the
      cardholders of these institutions.  We add signage and marketing
      material to the ATM so that the ATM is easily identified as being
      associated with the bank or credit union, and the cardholders of these
      institutions receive surcharge free transactions at the designated
      ATMs.  This provides the bank or credit union additional
      marketing power and another point of access to funds for their
      cardholders.  In return for this benefit, the bank or credit
      union, provide and manage the vault cash in the specified ATM(s), as well
      as provide and pay for cash replenishment and first line
      maintenance.  The advantage to Nationwide is that this reduces
      the costs associated with vault cash, cash replenishment and first line
      maintenance by approximately 50%.  Another advantage is that
      with a branded ATM, transactions volumes traditionally increase more than
      at non-branded ATMs.  As of June 30, 2009, Nationwide had 52
      branded financial partners, which funded 521
  ATMs.





Working
Capital





As of
June 30, 2009, we had current assets of $3,964,533 and current liabilities of
$5,133,277, which results in a negative working capital of $1,168,744 as
compared to current assets of $2,373,603 and current liabilities of $4,296,972,
which results in a negative working capital of $1,923,369 as of June 30, 2008.
The ratio of current assets to current liabilities increased to 0.77 at June 30,
2009 from 0.55 at June 30, 2008. Despite the negative working capital, we
believe that if we achieve our business plan, we will have sufficient working
capital to meet our remaining and current obligations during 2009.  As
of June 30, 2009, we were in compliance with all applicable covenants and ratios
under our credit agreement with SunTrust Bank.





Impact of Inflation and
Changing Prices





We were
not impacted by inflation during the past two fiscal years in any material
respect.  Interest rate decreases have decreased the rental cost of
our vault cash.  As the interest rates decrease and vault cash costs
decrease, this will have a more favorable impact on the Company’s
income.





ITEM  3.
Quantitative and Qualitative Disclosure About Market Risk





Not
applicable.





ITEM  4.
Controls and Procedures





Not
applicable.


30


ITEM  4T.
Controls and Procedures





Evaluation of Disclosure
Controls and Procedures





The
Company has established disclosure controls and procedures to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is made known on a timely basis to the officers who certify its
financial reports and to other members of senior management and the Company’s
board of directors. Based on their evaluation as of June 30, 2009, the principal
executive officer and principal financial officer of the Company have concluded
that the Company’s disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective
to ensure that the information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms.





Changes in Internal Control
Over Financial Reporting





There
were no changes to internal controls over financial reporting that occurred
during the three months ended June 30, 2009 that have materially affected, or
are reasonably likely to materially impact, our internal controls over financial
reporting.








PART
II - OTHER INFORMATION





ITEM
1. Legal Proceedings





Information
regarding legal proceedings is contained in Note #6 (“Litigation and Claims”) to
the Condensed Consolidated Financial Statements contained in this report and is
incorporated herein by reference.





ITEM
1A. Risk Factors





There
were no material changes from the risk factors previously disclosed in Risk
Factors within “Item 1. Description of Business” included in our Annual Report
on Form 10-K for the year ended December 31, 2008.





ITEM
2. Unregistered Sale of Equity Securities and Use of Proceeds





None.





ITEM  3.
Defaults upon Senior Securities





None.





ITEM  4.
Submission of Matters to a Vote of Security Holders





None.





ITEM  5.
Other Information





None.


31


ITEM  6.
Exhibits





Exhibit
Description





3.1
              
              Articles
      of Incorporation - Restated and Amended May 30, 2001(Incorporated by
      reference to form 10KSB filed with the SEC on March 31,
    2003)3.2
              
              By-Laws
      of Global Axcess Corp - As Amended  (Incorporated by reference
      to form 10KSB filed with the SEC on March 31, 2003)3.3
              
              Amendment
      to the Articles of Incorporation  (Incorporated by reference to
      Form 8-K filed with the SEC on May 3, 2005)4.1
              
              Securities
      Purchase Agreement dated March 11, 2005 of Global Axcess Corp
      (Incorporated by reference to Form 8-K filed with the SEC on April 4,
      2005)4.2
              
              Form
      of Common Stock Purchase Warrant (Incorporated by reference to Form 8-K
      filed with the SEC on April 4, 2005)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.


32





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, as of August 4, 2009
the Registrant 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 Registrant and in the
capacities indicated on the 4th day of
August, 2009.





Signature
                  
                  Title/S/
      Walter A. HowellWalter
      A. Howell
                  
                  Director/S/
      Lock IrelandLock
      Ireland
                  
                  Vice
      Chairman and Director/S/
      Robert LandisRobert
      Landis
                  
                  Director/S/
      Michael J. LoiaconoMichael
      J. Loiacono
                  
                  Chief
      Financial Officer and Chief Accounting Officer/S/
      Joseph LoughryJoseph
      Loughry
                  
                  Chairman
      and Director/s/George
      A. McQuainGeorge
      A. McQuain
                  
                  President,
      CEO and Director/S/
      Alan RossiterAlan
      Rossiter
                  
                  Director




33