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 March 31, 2010




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 May
03, 2010, the registrant had 21,943,940 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
              
              18Item  3.
              Quantitative
      and Qualitative Disclosure About Market Risk
              
              24Item  4.
              Controls
      and Procedures
              
              25Item  4T.
              Controls
      and Procedures
              
              25PART  II
              OTHER
      INFORMATIONItem  1.
              Legal
      Proceedings
              
              25Item  1A.
              Risk
      Factors
              
              25Item  2.
              Unregistered
      Sale of Equity Securities and Use of Proceeds
              
              25Item  3.
              Defaults
      Upon Senior Securities
              
              25Item  4.
              [Removed
      and Reserved]
              
              25Item  5.
              Other
      Information
              
              25Item  6.
              Exhibits
              
              26SIGNATURES
              
              27




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 2010.





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)March 31, 2010
                
                
                December 31, 2009ASSETSCurrent
      assetsCash
      and cash equivalents
                
                $
                2,073,838
                
                
                $
                2,007,860Automated
      teller machine vault cash
                
                
                250,000
                
                
                
                250,000Accounts
      receivable, net of allowance of $16,579 in 2010 and $12,616 in
      2009
                
                
                898,672
                
                
                
                845,000Inventory,
      net of allowance for obsolescence of$94,572 in 2010
      and $94,572 in 2009
                
                
                364,667
                
                
                
                308,031Deferred
      tax asset - current
                
                
                868,848
                
                
                
                868,848Prepaid
      expenses and other current assets
                
                
                328,821
                
                
                
                132,100Total
      current assets
                
                
                4,784,846
                
                
                
                4,411,839Fixed
      assets, net
                
                
                5,399,358
                
                
                
                5,299,661Other
      assetsMerchant
      contracts, net
                
                
                10,466,556
                
                
                
                10,665,613Intangible
      assets, net
                
                
                4,093,319
                
                
                
                4,095,911Deferred
      tax asset - non-current
                
                
                813,618
                
                
                
                813,618Restricted
      cash
                
                
                800,000
                
                
                
                800,000Other
      assets
                
                
                35,807
                
                
                
                30,307Total
      assets
                
                $
                26,393,504
                
                
                $
                26,116,949LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                
                $
                3,337,746
                
                
                $
                2,983,583Automated
      teller machine vault cash payable
                
                
                250,000
                
                
                
                250,000Notes
      payable - related parties  - current portion,
net
                
                
                27,447
                
                
                
                26,722Notes
      payable - current portion
                
                
                70,678
                
                
                
                19,803Senior
      lenders' notes payable - current portion, net
                
                
                1,828,572
                
                
                
                1,828,572Capital
      lease obligations - current portion
                
                
                552,706
                
                
                
                667,233Total
      current liabilities
                
                
                6,067,149
                
                
                
                5,775,913Long-term
      liabilitiesNotes
      payable - related parties - long-term portion, net
                
                
                65,745
                
                
                
                72,690Notes
      payable - long-term portion
                
                
                230,198
                
                
                
                73,120Senior
      lenders' notes payable - long-term portion, net
                
                
                2,850,840
                
                
                
                3,300,000Capital
      lease obligations - long-term portion
                
                
                247,937
                
                
                
                329,314Deferred
      tax liability- long-term portion
                
                
                -
                
                
                
                -Total
      liabilities
                
                
                9,461,869
                
                
                
                9,551,037Stockholders'
      equityPreferred
      stock; $0.001 par value; 5,000,000 shares authorized, no shares issued and
      outstanding
                
                
                -
                
                
                
                -Common
      stock; $0.001 par value; 45,000,000 shares authorized,
      22,025,536  and 21,931,786 shares issued and 21,943,940 and
      21,883,924 shares outstanding at 03/31/10 and 12/31/09,
      respectively
                
                
                21,992
                
                
                
                21,932Additional
      paid-in capital
                
                
                22,977,975
                
                
                
                22,900,880Accumulated
      deficit
                
                
                (6,026,366
                )
                
                
                (6,344,934
                )Treasury
      stock; 81,596 and 47,862 shares of common stock at cost at 03/31/10 and
      12/31/09, respectively
                
                
                (41,966
                )
                
                
                (11,966
                )Total
      stockholders' equity
                
                
                16,931,635
                
                
                
                16,565,912Total
      liabilities and stockholders' equity
                
                $
                26,393,504
                
                
                $
                26,116,949





See
Accompanying Notes to Condensed Consolidated Financial
Statements


4





GLOBAL
AXCESS CORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)




For
      the Three Months EndedMarch 31, 2010
                              
                              
                              March 31, 2009Revenues
                              
                              $
                              5,380,078
                              
                              
                              $
                              5,414,434Cost
      of revenues
                              
                              
                              2,857,934
                              
                              
                              
                              2,855,879Gross
      profit
                              
                              
                              2,522,144
                              
                              
                              
                              2,558,555Operating
      expensesDepreciation
      expense
                              
                              
                              309,895
                              
                              
                              
                              269,494Amortization
      of intangible merchant contracts
                              
                              
                              199,332
                              
                              
                              
                              193,617Selling,
      general and administrative
                              
                              
                              1,525,863
                              
                              
                              
                              1,292,963Stock
      compensation expense
                              
                              
                              47,155
                              
                              
                              
                              25,711Total
      operating expenses
                              
                              
                              2,082,245
                              
                              
                              
                              1,781,785Operating
      income from continuing operations before items shown below
                              
                              
                              439,899
                              
                              
                              
                              776,770Interest
      expense, net
                              
                              
                              (121,331
                              )
                              
                              
                              (212,617
                              )Loss
      on early extinguishment of debt
                              
                              
                              -
                              
                              
                              
                              (467,391
                              )Net
      Income
                              
                              $
                              318,568
                              
                              
                              $
                              96,762Income
      per common share - basic:Net
      Income per common share
                              
                              $
                              0.02
                              
                              
                              $
                              0.01Income
      per common share - diluted:Net
      Income per common share
                              
                              $
                              0.01
                              
                              
                              $
                              0.01Weighted
      average common shares outstanding:Basic
                              
                              
                              21,892,152
                              
                              
                              
                              20,973,924Diluted
                              
                              
                              23,758,755
                              
                              
                              
                              20,973,924




See
Accompanying Notes to Condensed Consolidated Financial Statements





5





GLOBAL
AXCESS CORP AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





For
      the Three Months EndedMarch 31, 2010
                      
                      
                      March 31, 2009Cash
      flows from operating activities:Income
      from continuing operations
                      
                      $
                      318,568
                      
                      
                      $
                      96,762Adjustments
      to reconcile net income from continuing operations to net cash provided by
      continuing operating activities:Stock
      based compensation
                      
                      
                      47,155
                      
                      
                      
                      25,711Loss
      on early extinguishment of debt
                      
                      
                      -
                      
                      
                      
                      467,391Depreciation
      expense
                      
                      
                      309,895
                      
                      
                      
                      269,494Amortization
      of intangible merchant contracts
                      
                      
                      199,332
                      
                      
                      
                      193,617Amortization
      of capitalized loan fees
                      
                      
                      6,470
                      
                      
                      
                      11,607Allowance
      for doubtful accounts
                      
                      
                      3,963
                      
                      
                      
                      410Allowance
      for inventory obsolescence
                      
                      
                      -
                      
                      
                      
                      29,718Non-cash
      interest income on swap agreement with senior lender
                      
                      
                      -
                      
                      
                      
                      (7,921
                      )Accretion
      of discount on notes payable
                      
                      
                      -
                      
                      
                      
                      41,498Changes
      in operating assets and liabilities:Change
      in accounts receivable
                      
                      
                      (57,635
                      )
                      
                      
                      (99,382
                      )Change
      in inventory
                      
                      
                      (56,636
                      )
                      
                      
                      33,012Change
      in prepaid expenses and other current assets
                      
                      
                      (196,721
                      )
                      
                      
                      21,387Change
      in other assets
                      
                      
                      (5,500
                      )
                      
                      
                      (16,975
                      )Change
      in intangible assets, net
                      
                      
                      (3,878
                      )
                      
                      
                      (70,696
                      )Change
      in accounts payable and accrued liabilities
                      
                      
                      354,163
                      
                      
                      
                      147,765Net
      cash provided by continuing operating activities
                      
                      
                      919,176
                      
                      
                      
                      1,143,398Cash
      flows from investing activities:Costs
      of acquiring merchant contracts
                      
                      
                      (275
                      )
                      
                      
                      (976
                      )Purchase
      of property and equipment
                      
                      
                      (409,592
                      )
                      
                      
                      (127,453
                      )Net
      cash used in investing activities
                      
                      
                      (409,867
                      )
                      
                      
                      (128,429
                      )Cash
      flows from financing activities:Proceeds
      from senior lenders'  notes payable
                      
                      
                      -
                      
                      
                      
                      5,000,000Proceeds
      from notes payable
                      
                      
                      225,282
                      
                      
                      
                      -Change
      in restricted cash
                      
                      
                      -
                      
                      
                      
                      (800,000
                      )Principal
      payments on senior lenders'  notes payable
                      
                      
                      (449,160
                      )
                      
                      
                      (5,101,577
                      )Principal
      payments on notes payable
                      
                      
                      (17,329
                      )
                      
                      
                      -Principal
      payments on notes payable - related parties
                      
                      
                      (6,220
                      )
                      
                      
                      (5,552
                      )Principal
      payments on capital lease obligations
                      
                      
                      (195,904
                      )
                      
                      
                      (211,027
                      )Net
      cash used in financing activities
                      
                      
                      (443,331
                      )
                      
                      
                      (1,118,156
                      )Increase
      (decrease) in cash
                      
                      
                      65,978
                      
                      
                      
                      (103,187
                      )Cash,
      beginning of period
                      
                      
                      2,007,860
                      
                      
                      
                      1,560,910Cash,
      end of the period
                      
                      $
                      2,073,838
                      
                      
                      $
                      1,457,723Cash
      paid for interest
                      
                      $
                      115,032
                      
                      
                      $
                      166,164





See
Accompanying Notes to Condensed Consolidated Financial Statements




6





Supplemental
schedule of non-cash investing and financing activities:





For
      the Three Months EndedSUPPLEMENTAL
      CASH FLOW INFORMATION
                
                March 31, 2010
                
                
                March 31, 2009The
      significant non-cash investing and financing activities of the Company
      were as follows:Financing
      activities:Settlement
      of stock option exercises through issuance of treasury
    stock:Repurchase
      of treasury stock, 33,734 shares of common stock at cost
                
                $
                (30,000
                )
                
                $
                -Total
      non-cash financing activities
                
                $
                (30,000
                )
                
                $
                -





See
Accompanying Notes to Condensed Consolidated Financial
Statements


7


GLOBAL
AXCESS CORP AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


AS
OF MARCH 31, 2010


(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, 2009 of Global Axcess Corp
and its subsidiaries (the “Company").





The
condensed consolidated financial statements present the condensed consolidated
balance sheets, 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
March 31, 2010 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 2010 adjustments are of normal recurring nature.




2.    DESCRIPTION
OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Description of
Business




Global
Axcess Corp, primarily through its wholly owned subsidiaries, Nationwide Money
Services, Inc., Nationwide Ntertainment Services, Inc. and EFT Integration Inc.,
is an independent provider of self-service kiosk
solutions.  Nationwide Ntertainment Services, Inc. was formed during
fiscal 2009.  These solutions include ATM and DVD kiosk management and
support services focused on serving the self-service kiosk needs of merchants,
grocers, retailers and financial institutions nationwide. It is a one-stop
gateway for unattended self-service kiosk management services.  The
Company currently owns, manages or operates approximately 4,500 self-service
kiosks in its national network spanning 43 states.





Significant Accounting
Policies





The
preparation of financial statements and related disclosures in conformity with
generally accepted accounting principles (“GAAP”) accepted in the United States
of America and 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.


8





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 condensed 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.





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 GAAP guidelines for 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, in accordance with
GAAP, 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 three-month period ended March 31, 2010, 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. In
accordance with GAAP, the Company has recorded such payments as a direct
reduction of revenue.





The
Company follows GAAP in reporting revenue gross as a principal versus net as an
agent for its merchant contracts. In accordance with GAAP, 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 on
merchant-owned ATM contracts 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.


9





Through
our wholly-owned subsidiary, Nationwide Ntertainment Services, Inc., we are also
engaged in the business of operating a network of DVD rental kiosks. We offer
self-service DVD rentals through kiosks where consumers can rent or purchase
movies or games. Our current DVD kiosks are installed primarily at grocery
stores. Our DVD kiosks, through our brand InstaFlix,  serve as a mini
video rental store and occupy an area of less than ten square
feet.  Consumers use a touch screen to select their DVD, swipe a valid
credit or debit card, and rent movies or games in some kiosks. The process is
designed to be fast, efficient and fully automated with no upfront or membership
fees. Typically, the DVD rental price is a flat fee plus tax for one night and
if the consumer chooses to keep the DVD for additional nights, they are
automatically charged for the additional fee. We generate revenue primarily
through fees charged to rent or purchase a DVD, and pay our retail partners a
percentage of our revenue.





Revenues
generated from our DVD rental kiosks were immaterial to our results for the
three-month period ended March 31, 2010.





Total Revenue and Total Cost
of Revenues Presentation





The
Company presents “Revenues” and “Cost of revenues” as a single line item in the
condensed 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 periods ended March 31, 2010 and
2009:





Revenues:





For
      the Three Months EndedMarch 31, 2010
                      
                      
                      March 31, 2009Surcharge
      / Convenience Fee revenue
                      
                      $
                      3,085,166
                      
                      
                      $
                      2,978,599Interchange
      revenue
                      
                      
                      1,814,160
                      
                      
                      
                      1,839,321Processing
      revenue
                      
                      
                      44,290
                      
                      
                      
                      63,791ATM
      Sales revenue
                      
                      
                      65,628
                      
                      
                      
                      101,031Other
      revenue
                      
                      
                      370,834
                      
                      
                      
                      431,692Total
      revenue
                      
                      $
                      5,380,078
                      
                      
                      $
                      5,414,434





For
      the Three Months EndedMarch 31, 2010
                  
                  
                  March 31, 2009ATM
      Operating revenue
                  
                  $
                  5,314,450
                  
                  
                  $
                  5,313,403ATM
      Sales revenue
                  
                  
                  65,628
                  
                  
                  
                  101,031Total
      revenue
                  
                  $
                  5,380,078
                  
                  
                  $
                  5,414,434




10





Cost
of Revenues:





For
      the Three Months EndedMarch 31, 2010
                    
                    
                    March 31, 2009Merchant
      residual / commission costs
                    
                    $
                    1,517,028
                    
                    
                    $
                    1,703,546Cost
      of cash
                    
                    
                    538,579
                    
                    
                    
                    412,975Processing
      costs
                    
                    
                    237,249
                    
                    
                    
                    207,754Communication
      costs
                    
                    
                    164,618
                    
                    
                    
                    131,618ATM
      Sales costs
                    
                    
                    109,303
                    
                    
                    
                    96,286Other
      cost of revenues
                    
                    
                    291,157
                    
                    
                    
                    303,700Total
      cost of revenues
                    
                    $
                    2,857,934
                    
                    
                    $
                    2,855,879





For
      the Three Months EndedMarch 31, 2010
                  
                  
                  March 31, 2009Cost
      of ATM operating revenue
                  
                  $
                  2,748,631
                  
                  
                  $
                  2,759,593ATM
      Sales costs
                  
                  
                  109,303
                  
                  
                  
                  96,286Total
      cost of revenues
                  
                  $
                  2,857,934
                  
                  
                  $
                  2,855,879





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.





Also
included in inventory is the library of DVDs in the Company’s DVD rental
kiosks.  DVDs are initially recorded at cost and are amortized into
cost of sales over an assumed useful life to their estimated salvage value and
substantially all of the amortization expense is recognized within one year of
the assumed life of the DVDs.





At March
31, 2010, the Company's inventory, net of an allowance for obsolescence of
$94,572, totaled $364,667.  Of the $459,239 of gross inventory at
March 31, 2010, $150,937 related to DVD library.





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 March 31, 2010,
the Company had bad debt reserves totaling $16,579 against gross accounts
receivable totaling $915,251.





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.


11





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
GAAP.





Depreciation
is recognized using the straight-line method over the following approximate
useful lives.





Useful LifeATMs
              10
      yearsDVD
      kiosks
              5
      yearsComputers
              5
      yearsOffice
      furniture and equipment
              5
      yearsVehicles
              5
      yearsLeasehold
      improvements
              shorter
      of lease term or usefullife
      of improvement





Intangible Assets – Goodwill
and Merchant Contracts





GAAP
requires that the Company complete a two-step goodwill impairment test annually.
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. If the carrying amount of a reporting unit exceeds its fair
value, the second step is performed to measure the amount of impairment loss.
The second step compares the implied fair value of goodwill to the carrying
value of a reporting unit's goodwill. The implied fair value of goodwill is
determined in a manner similar to accounting for a business combination with the
allocation of the assessed fair value determined in the first step to the assets
and liabilities of the reporting unit. The excess of the fair value of the
reporting unit over the amounts assigned to the assets and liabilities is the
implied fair value of goodwill. This allocation process is only performed for
purposes of evaluating goodwill impairment and does not result in an entry to
adjust the value of any assets or liabilities. An impairment loss is recognized
for any excess in the carrying value of goodwill over the implied fair value of
goodwill.





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 GAAP. 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.





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 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.





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.  In accordance with GAAP, 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.


12





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 March 31,
2010:





Gross Carrying Value
                    
                    
                    Accumulated
                      Amortization
                    
                    
                    NetGoodwill
                    
                    $
                    4,189,645
                    
                    
                    $
                    168,286
                    
                    
                    $
                    4,021,359Other
      Intangible Assets
                    
                    
                    93,579
                    
                    
                    
                    21,619
                    
                    
                    
                    71,960Merchant
      contracts
                    
                    
                    14,818,569
                    
                    
                    
                    4,352,013
                    
                    
                    
                    10,466,556Total
      Intangible assets and merchant contracts
                    
                    $
                    19,101,793
                    
                    
                    $
                    4,541,918
                    
                    
                    $
                    14,559,875





Fair Value of Financial
Instruments




The
carrying amounts of the Company’s long-term liabilities approximate the
estimated fair values at March 31, 2010, 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 condensed consolidated balance sheet with an offsetting amount reported
as automated teller machine vault cash payable.  As of March 31, 2010
and December 31, 2010, 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 233,750 shares of common stock and
stock warrants to purchase 135,000 shares of common stock that were outstanding
at March 31, 2010 were not included in the computation of diluted earnings per
share for the three months ended March 31, 2010 because the exercise prices of
these stock options and stock warrants 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 2,598,300 shares of common
stock that were outstanding at March 31, 2009 were not included in the
computation of diluted earnings per share for the three months ended March 31,
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.  No warrants outstanding at March 31,
2009 were included in the computation of diluted earnings per share because they
were anti-dilutive.




13




For
      the Three Months EndedMarch 31, 2010
                                            
                                            
                                            March 31, 2009NumeratorIncome
      from continuing operations
                                            
                                            $
                                            318,568
                                            
                                            
                                            $
                                            96,762Numerator
      for diluted income per shareavailable
      to common stockholders
                                            
                                            $
                                            318,568
                                            
                                            
                                            $
                                            96,762DenominatorWeighted
      average shares
                                            
                                            
                                            21,892,152
                                            
                                            
                                            
                                            20,973,924Effect
      of dilutive securities:Treasury
      method, effect of employee stock options & warrants
                                            
                                            
                                            1,866,603
                                            
                                            
                                            
                                            -Denominator
      for diluted income per share adjustedweighted
      shares after assumed exercises
                                            
                                            
                                            23,758,755
                                            
                                            
                                            
                                            20,973,924Income
      per common share - basic:Income
      from continuing operations
                                            
                                            $
                                            0.02
                                            
                                            
                                            $
                                            0.01Net
      Income per common share
                                            
                                            $
                                            0.02
                                            
                                            
                                            $
                                            0.01Income
      per common share - diluted:Income
      from continuing operations
                                            
                                            $
                                            0.01
                                            
                                            
                                            $
                                            0.01Net
      Income per common share
                                            
                                            $
                                            0.01
                                            
                                            
                                            $
                                            0.01




Income
Taxes





The
Company accounts for its income taxes in accordance with GAAP 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





GAAP
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, compensation expense is recognized to reflect the
remaining service period of share-based awards.  The stock-based
compensation expense is included in operating expenses in the condensed
consolidated statements of operations. During the three-month periods ended
March 31, 2010 and 2009, the Company recorded $47,155 and $25,711, respectively,
of stock compensation expenses.


14





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 March 31, 2010 and 2009, the Company recorded
$12,532 and $10,720, 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 March 31, 2010, the Company recorded $26,716 of
bonus and estimated payroll tax expenses relating to this plan.  Of
the $26,716 recorded during the three-month period ended March 31, 2010, $9,487
is held back and will be paid upon achievement of fiscal 2010 net
profits.  During the three-month period ended March 31, 2009, the
Company recorded $55,588 of expenses relating to this plan.





Recent Accounting
Pronouncements





On July
1, 2009, the FASB issued the FASB Accounting Standards Codification
(“Codification”). The Codification became the single source of authoritative
nongovernmental GAAP, superseding existing FASB, American Institute of Certified
Public Accountants (AICPA), Emerging Issues Task Force (EITF) and related
literature. The Codification eliminates the previous GAAP hierarchy and
establishes one level of authoritative GAAP. All other literature is considered
non-authoritative. The Codification changes the referencing and organization of
accounting guidance and is effective for the Company beginning the quarter ended
September 30, 2009. The Codification does not change GAAP and only affects how
specific references to GAAP literature are disclosed in the notes to the
Company’s condensed consolidated financial statements.  The adoption
of this standard did not have a material impact on the Company's financial
statements.




3.    ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES





Accounts
payable and accrued liabilities consisted of the following as of March 31, 2010
and December 31, 2009:





March 31, 2010
                      
                      
                      December 31, 2009Accounts
      payable
                      
                      $
                      873,611
                      
                      
                      $
                      624,874Accrued
      commissions/residual payments
                      
                      
                      1,389,888
                      
                      
                      
                      1,223,734Accrued
      cost of cash and cash replenishment expenses
                      
                      
                      504,292
                      
                      
                      
                      440,043Accrued
      payroll
                      
                      
                      239,043
                      
                      
                      
                      332,117Accrued
      audit fees
                      
                      
                      38,020
                      
                      
                      
                      84,000Asset
      Retirement Obligation
                      
                      
                      63,074
                      
                      
                      
                      63,074Income
      tax payable
                      
                      
                      63,778
                      
                      
                      
                      64,500Other
                      
                      
                      166,040
                      
                      
                      
                      151,241Accounts
      payable and accrued liabilities
                      
                      $
                      3,337,746
                      
                      
                      $
                      2,983,583




15





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
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 March 31, 2010, the Company was in compliance with all
applicable covenants and ratios under the Credit Agreement with SunTrust
Bank.





5.    COMMITMENTS
AND CONTINGENCIES





We lease
ATMs and back office computer equipment under capital lease agreements that
expire between 2010 and 2012 and provide for lease payments at interest rates
from 5.99% up to 12.11% per annum. See Financial Footnote #12 to the Company’s
Consolidated Financial Statements in the Annual Report on Form 10-K for fiscal
2009.





During
the three-month period ended March 31, 2010, we did not enter into any new
capital lease obligations.  As of March 31, 2010, approximately
$800,600 of capital lease obligations were included in the Company’s condensed
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 March 31,
2010 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, 2009, the Company had net operating loss carryforwards remaining of
approximately $22.7 million that may be offset against future taxable income
through 2028.  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.


16




8.  CHANGES
IN STOCKHOLDERS' EQUITY
 
 See the
table below for all the equity transactions for the three-month period ended
March 31, 2010:




Additional
                        
                        
                        
                        
                        
                        
                        
                        
                        TotalCommon
      Stock
                        
                        
                        Paid-in
                        
                        
                        Accumulated
                        
                        
                        Treasury
                        
                        
                        Stockholders'Shares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        Deficit
                        
                        
                        Stock
                        
                        
                        EquityBalances,
      December 31, 2009
                        
                        
                        21,883,924
                        
                        
                        $
                        21,932
                        
                        
                        $
                        22,900,880
                        
                        
                        $
                        (6,344,934
                        )
                        
                        $
                        (11,966
                        )
                        
                        $
                        16,565,912Stock
      compensation expense
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        47,155
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        47,155Stock
      options excercised, cashless
                        
                        
                        60,016
                        
                        
                        
                        60
                        
                        
                        
                        29,940
                        
                        
                        
                        -
                        
                        
                        
                        (30,000
                        )
                        
                        
                        -Net
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        318,568
                        
                        
                        
                        -
                        
                        
                        
                        318,568Balances,
      March 31, 2010
                        
                        
                        21,943,940
                        
                        
                        $
                        21,992
                        
                        
                        $
                        22,977,975
                        
                        
                        $
                        (6,026,366
                        )
                        
                        $
                        (41,966
                        )
                        
                        $
                        16,931,635





9.
            FAIR
      VALUE MEASUREMENT




On
January 1, 2008, we adopted FASB guidance regarding 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.  The
guidance 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.





The
guidance 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 in accordance with GAAP and include in Level 3 all of
those whose fair value is based on significant unobservable inputs.





As of
March 31, 2010, there were no financial assets and liabilities that were
accounted for at fair value on a recurring basis.





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 three-month period
ended March 31, 2009, we recorded $7,921 of income 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 the
Credit Agreement with SunTrust Bank.


17


10.  LOSS
ON EARLY EXTINGUISHMENT OF DEBT





As
discussed in Note #4 “Senior Lenders’ Notes Payable,” the Company entered into
the Credit 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 GAAP, 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 three-month period ended March 31, 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





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.





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.


18


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.





For
      the Three Months EndedMarch 31, 2010
                        
                        
                        March 31, 2009Revenues
                        
                        
                        100.0
                        %
                        
                        
                        100.0
                        %Cost
      of revenues
                        
                        
                        53.1
                        %
                        
                        
                        52.7
                        %Gross
      profit
                        
                        
                        46.9
                        %
                        
                        
                        47.3
                        %Depreciation
      expense
                        
                        
                        5.8
                        %
                        
                        
                        5.0
                        %Amortization
      of intangible merchant contracts
                        
                        
                        3.7
                        %
                        
                        
                        3.6
                        %Selling,
      general and administrative
                        
                        
                        28.4
                        %
                        
                        
                        23.9
                        %Stock
      compensation expense
                        
                        
                        0.9
                        %
                        
                        
                        0.5
                        %Total
      operating expenses
                        
                        
                        38.7
                        %
                        
                        
                        33.0
                        %Operating
      income from continuing operations before items shown below
                        
                        
                        8.2
                        %
                        
                        
                        14.3
                        %Interest
      expense, net
                        
                        
                        (2.3
                        )%
                        
                        
                        (3.9
                        )%Loss
      on early extinguishment of debt
                        
                        
                        0.0
                        %
                        
                        
                        (8.6
                        )%Net
      income
                        
                        
                        5.9
                        %
                        
                        
                        1.8
                        %EBITDA
      (1)
                        
                        
                        17.6
                        %
                        
                        
                        14.3
                        %


(1) See
“—EBITDA”


19


Comparison of Results of
Operations for the Three Months Ended March 31, 2010 and
2009:





Revenues





The
Company reported total operating revenue from continuing operations of
$5,380,078 for the three-month period ended March 31, 2010 as compared to
$5,414,434 for the three-month period ended March 31, 2009.  During
the first quarter of 2010, we saw a softening of ATM usage where severe winter
weather impacted geographic locations with dense ATM
concentration.  Additionally, we had $50,000 of lower ATM sales and
lower other non-transactional revenue during the first quarter of 2010 as
compared to the first quarter of 2009.   Despite the slight
decrease in revenue, we experienced a 2% increase in transaction volumes year
over year.





Cost of
Revenues





Our total
cost of revenues from continuing operations very slightly increased from
$2,855,879 to $2,857,934 for the three-month period ended March 31, 2009 to the
three-month period ended March 31, 2010.





Gross
Profit





Gross
profit from continuing operations as a percentage of revenue for the three-month
periods ended March 31, 2010 and 2009 were approximately 46.9%, or $2,522,144,
and approximately 47.3%, or  $2,558,555, respectively. The decreased
gross profit and gross profit percentage for the first quarter of 2010 versus
the same period in 2009 was mainly attributable to the decreased revenues
discussed above.





Operating
Expenses





Our total
operating expenses from continuing operations for the three months ended March
31, 2010 and 2009 were $2,082,245 and $1,781,785, 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 $1,525,863, or 28.4%
of revenue for the three-month period ended March 31, 2010 from $1,292,963, or
23.9% of revenue for the three-month period ended March 31,
2009.   The increase in SG&A expenses was mainly due to
expenses incurred in connection with our DVD rental kiosk initiative as we hired
consultants and employees with industry expertise to spearhead our efforts in
this line of business.  Also, investor relations expenses, expenses
relating to the hiring of an investment banking firm to evaluate possible merger
and acquisitions, increases in headcount-related expenses and increased state
sales tax accruals contributed to the increase in SG&A.





Depreciation
Expense





Depreciation
expense from continuing operations increased for the three-month period ended
March 31, 2010 to $309,895 from $269,494 for the same period in
2009.  The increase was due to increased ATM and DVD kiosks purchased
during 2009 and 2010 to support new business in both business
lines.





Amortization of Intangible
Merchant Contracts





Amortization
of intangible merchant contracts from continuing operations increased for the
three-month period ended March 31, 2010 to $199,332 from $193,617 for the same
period in 2009.  See Note #2 “Description of Business and Summary of
Significant Accounting Policies” regarding the amortization of intangible
merchant contracts.


20


Stock Compensation
Expense





During
the three-month periods ended March 31, 2010 and 2009, we recorded stock
compensation expenses of $47,155 and $25,711, respectively.  The
increase was due to increased stock option grants during fiscal
2009.





Operating Income from
Continuing Operations





We had
operating income from continuing operations for the three-month period ended
March 31, 2010 in the amount of $439,899 as compared to operating income from
continuing operations of $776,770 in the three-month period ended March 31,
2009.  The decrease in operating income was primarily due to the
increased SG&A and depreciation expenses discussed above.





Interest Expense,
Net





Interest
expense, net, decreased for the three-month period ended March 31, 2010 to
$121,331 from $212,617 for the three-month period ended March 31,
2009.  The decrease was mainly due to the Company refinancing its debt
to lower interest rates combined with  decreased debt balances at the
three-month period ended March 31, 2010, as compared to the debt balances at the
three-month period ended March 31, 2009.





For
      the Three Months EndedMarch 31, 2010
                    
                    
                    March 31, 2009Interest
      expense, net
                    
                    $
                    121,331
                    
                    
                    $
                    171,119Accretion
      of discount on notes payable
                    
                    
                    -
                    
                    
                    
                    41,498Total
      Interest expense, net
                    
                    $
                    121,331
                    
                    
                    $
                    212,617





Loss on early extinguishment
of debt





During
the three-month period ended March 31, 2009, we recorded non-cash expenses of
$467,391 relating to the payoff of debt balances with two senior lenders and
related parties notes.  See Note #10 “Loss on Early Extinguishment of
Debt” for detail of these charges.





Net
Income





We had
net income of $318,568 for the three-month period ended March 31, 2010, as
compared to net income of $96,762 for the three-month period ended March 31,
2009.  The increase in net income year over year was primarily due to
the loss on early extinguishment of debt recorded during the three-month period
ended March 31, 2009 partially offset by increased spending in SG&A and
depreciation expenses.





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 GAAP. Our
use of EBITDA should be considered within the following
context:


21


• 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 March 31, 2010 and
2009:





For
      the Three Months EndedMarch 31, 2010
                    
                    
                    March 31, 2009Net
      income from continuing operations
                    
                    $
                    318,568
                    
                    
                    $
                    96,762Interest
      expense, net
                    
                    
                    121,331
                    
                    
                    
                    212,617Depreciation
      expense
                    
                    
                    309,895
                    
                    
                    
                    269,494Amortization
      of intangible merchant contracts
                    
                    
                    199,332
                    
                    
                    
                    193,617EBITDA
      from continuing operations
                    
                    $
                    949,126
                    
                    
                    $
                    772,490





Our
EBITDA from continuing operations increased to $949,126 for the first quarter of
fiscal 2010 from $772,490 for the first quarter of fiscal 2009. EBITDA from
continuing operations as a percentage of revenues increased to 17.6% for the
first quarter of fiscal 2010 from 14.3% for the first quarter of fiscal
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
March 31, 2010 and 2009:


22





For
      the Three Months EndedMarch 31, 2010
                    
                    
                    March 31, 2009Net
      income from continuing operations
                    
                    $
                    318,568
                    
                    
                    $
                    96,762Interest
      expense, net
                    
                    
                    121,331
                    
                    
                    
                    212,617Depreciation
      expense
                    
                    
                    309,895
                    
                    
                    
                    269,494Amortization
      of intangible merchant contracts
                    
                    
                    199,332
                    
                    
                    
                    193,617Stock
      compensation expense
                    
                    
                    47,155
                    
                    
                    
                    25,711Loss
      on early extinguishment of debt
                    
                    
                    -
                    
                    
                    
                    467,391Adjusted
      EBITDA
                    
                    $
                    996,281
                    
                    
                    $
                    1,265,592





Our
Adjusted EBITDA decreased to $996,281 for the first quarter of fiscal 2010 from
$1,265,592 for the first quarter of fiscal 2009. Adjusted EBITDA as a percentage
of revenues decreased to 18.5% for the first quarter of fiscal 2010 from 23.4%
for the first quarter of fiscal 2009.





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
three-month period ended March 31, 2010 was $919,176, compared to the net cash
provided by continuing operating activities during the three-month period ended
March 31, 2009 of $1,143,398.





The
Company used $443,331 for financing activities, mainly paying back senior lender
notes and capital leases during the three-month period ended March 31,
2010.  This compared to funds used in financing activities of
$1,118,156 for the three-month period ended March 31, 2009 which included
depositing $800,000 into a restricted cash deposit account with SunTrust Bank
per the Credit Agreement signed on March 27, 2009.





Net cash
used in investing activities was $409,867 during the three-month period ended
March 31, 2010, mainly representing net purchases of DVD rental kiosks and ATMs.
This compares to net cash used in investing activities of $128,429 for the
three-month period ended March 31, 2009, representing net purchases of
ATMs.





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:


23


·
            Wilmington
      Savings Fund Society (“WSFS”). Beginning in September 2004, the
      Company has an arrangement with Wilmington Savings Fund Society 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, 2010, with a one year automatic renewal period
      unless one party gives 60 days notice of their intention not to
      renew.  As of March 31, 2010, the Company had 8 ATMs funded by
      WSFS with a vault cash outstanding balance of approximately $113,300 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, 2010, with a one year automatic renewal
      period unless one party gives 180 days notice of their intention not to
      renew.  As of March 31, 2010, the Company had 1,385 ATMs funded
      by Elan with a vault cash outstanding balance of about approximately
      $40,270,000.





·
            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 March 31, 2010, Nationwide had 52
      branded financial partners, which funded 511
  ATMs.





Working
Capital





As of
March 31, 2010, we had current assets of $4,784,846 and current liabilities of
$6,067,149, which results in a negative working capital of $1,282,302 as
compared to current assets of $3,371,582 and current liabilities of $4,830,271,
which results in a negative working capital of $1,458,689 as of March 31, 2009.
The ratio of current assets to current liabilities increased to 0.79 at March
31, 2010 from 0.70 at March 31, 2009. 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 2010.  As
of March 31, 2010, we were in compliance with all applicable covenants and
ratios under the 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.


24


ITEM  4.
Controls and Procedures





Not
applicable.





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 March 31, 2010, 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, as
amended) 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, as amended 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 March 31, 2010 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, 2009.





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





None.





ITEM  3.
Defaults upon Senior Securities





None.





ITEM  4.
[Removed and Reserved]





ITEM  5.
Other Information





None.


25


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 8-K filed with the SEC on April 6, 2010).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).10.1
                
                Net
      Enterprise Value Special Transaction Plan (Incorporated by reference to
      Form 8-K filed with the SEC on April 6, 2010).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.


26


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, as of May 5, 2010
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 5th day of
May, 2010.





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,
      Chief Executive Officer and Director/S/
      Alan RossiterAlan
      Rossiter
              
              Director


27