mUNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549







FORM
      10-QSB





(MARK
      ONE)





xQUARTERLY
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 for the quarterly period ended June 30, 2006





OR





oTRANSITION
      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


(Name
      of
      Small Business Issuer in Its Charter)




NEVADA
            88-0199674(State
                or other jurisdiction
                of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)




224
                PONTE VEDRA PARK DRIVE
              PONTE
                VEDRA BEACH, FLORIDA
            32082(Address
                of principal executive
                offices)
            (Zip
                Code)




(904)280-3950


(Issuer's
      Telephone Number, Including Area Code)





Securities
      registered pursuant to Section 12(b) of the Act: None


Securities
      registered pursuant to Section 12(g) of the Act: Common Stock







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




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




Check
      if
      there is no disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-B is not contained herein, and will not be contained, to the best
      of
      the Issuer's knowledge, in definitive proxy or information statements incorporated
      by reference in Part II of this Form 10-QSB. x




As
      of
      August 14, 2006, the Issuer had 21,021,786 shares outstanding of the Common Stock
      ($0.001 par value) and no shares outstanding of the Preferred Stock ($0.001
      par value).











TABLE
      OF
      CONTENTS




**Page
                  No.**PART
                  I
              FINANCIAL
                  INFORMATIONItem
                  1.
              Financial
                  Statements (unaudited)
              1Item
                  2.
              Management's
                  Discussion and Analysis or Plan of Operation
              19Item
                  3.
              Controls
                  and Procedures
              30PART
                  II
              OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings
              32Item
                  2.
              Changes
                  in Securities.
              32Item
                  3.
              Defaults
                  Upon Senior Securities.
              32Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders.
              33Item
                  5.
              Other
                  Information.
              33Item
                  6.
              Exhibits.
              33SIGNATURES
              
              34





Forward-Looking
        Statements
 
 In
        addition to historical information, this Quarterly Report on Form 10-QSB
        contains forward-looking statements that involve risks and uncertainties
        that
        could cause actual results to differ materially. Factors that might cause
        or
        contribute to such differences include, but are not limited to, those discussed
        in the section entitled "Management's Discussion and Analysis or Plan of
        Operation." You should carefully review the risks described in other documents
        we file from time to time with the Securities and Exchange Commission, including
        the Quarterly Reports on Form 10-QSB that have been or are to be filed in
        2006.
        When used in this report, the words "expects," "anticipates," "intends,"
        "plans," "believes," "seeks," "targets," "estimates," and similar expressions
        are generally intended to identify forward-looking statements. You should
        not
        place undue reliance on the forward-looking statements, which speak only
        as of
        the date of this Quarterly Report on Form 10-QSB. We undertake no obligation
        to
        publicly release any revisions to the forward-looking statements or reflect
        events or circumstances after the date of this document.
 
 Estimates
        of future financial results are inherently unreliable.
 
 From
        time
        to time, representatives of Global Axcess Corp (the Company) may make public
        predictions or forecasts regarding the Company's future results, including
        estimates regarding future revenues, expense levels, earnings or earnings
        from
        operations. Any forecast regarding the Company's future performance reflects
        various assumptions. These assumptions are subject to significant uncertainties,
        and, as a matter of course, many of them will prove to be incorrect. Further,
        the achievement of any forecast depends on numerous factors (including those
        described in this discussion), many of which are beyond the Company's control.
        As a result, there can be no assurance that the Company's performance will
        be
        consistent with any management forecasts or that the variation from such
        forecasts will not be material and adverse. Investors are cautioned not to
        base
        their entire analysis of the Company's business and prospects upon isolated
        predictions, but instead are encouraged to utilize the entire available mix
        of
        historical and forward-looking information made available by the Company,
        and
        other information affecting the Company and its products, when evaluating
        the
        Company's prospective results of operations.
 
 In
        addition, representatives of the Company may occasionally comment publicly
        on
        the perceived reasonableness of published reports by independent analysts
        regarding the Company's projected future performance. Such comments should
        not
        be interpreted as an endorsement or adoption of any given estimate or range
        of
        estimates or the assumptions and methodologies upon which such estimates
        are
        based. Undue reliance should not be placed on any comments regarding the
        conformity, or lack thereof, of any independent estimates with the Company's
        own
        present expectations regarding its future results of operations. The
        methodologies employed by the Company in arriving at its own internal
        projections and the approaches taken by independent analysts in making their
        estimates are likely different in many significant respects. Although the
        Company may presently perceive a given estimate to be reasonable, changes
        in the
        Company's business, market conditions or the general economic climate may
        have
        varying effects on the results obtained through the use of differing analyses
        and assumptions. The Company expressly disclaims any continuing responsibility
        to advise analysts or the public markets of its view regarding the current
        accuracy of the published estimates of outside analysts. Persons relying
        on such
        estimates should pursue their own independent investigation and analysis
        of
        their accuracy and the reasonableness of the assumptions on which they are
        based.







**PART
      I - FINANCIAL INFORMATION**





**Item
      1. Financial Statements**




GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED BALANCE SHEET


June
      30,
      2006


(Unaudited)


ASSETSCurrent
                  assetsCash
                  and cash equivalents
              
              $
              1,238,474Automated
                  teller machine vault cash
              
              
              221,974Accounts
                  receivable, net of allowance for doubtful accounts of
                  $253,978
              
              
              1,715,105Note
                  receivable - current
              
              
              50,000Inventory
              
              
              102,820Deferred
                  tax asset - current
              
              
              329,197Prepaid
                  expenses and other current assets
              
              
              355,208Total
                  current assets
              
              
              4,012,778Assets
                  held for sale, net
              
              
              485,316Fixed
                  assets, net
              
              
              7,763,992Other
                  assetsMerchant
                  contracts, net
              
              
              13,013,163Intangible
                  assets, net
              
              
              4,255,840Notes
                  receivable - non-current, net of allowance of $804,579
              
              
              745,424Deferred
                  tax asset - non-current
              
              
              322,279Other
                  assets
              
              
              35,325Total
                  assets
              
              $
              30,634,117LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilitiesAccounts
                  payable and accrued liabilities
              
              $
              3,154,094Automated
                  teller machine vault cash payable
              
              
              221,974Deferred
                  gain on sale of assets - current
              
              
              555,409Notes
                  payable-related parties - current portion
              
              
              17,714Notes
                  payable - current portion
              
              
              95,846Senior
                  lenders' notes - current portion, net
              
              
              797,917Capital
                  lease obligations - current portion
              
              
              1,114,424Total
                  current liabilities
              
              
              5,957,378Long-term
                  liabilitiesNotes
                  payable-related parties - long-term portion
              
              
              1,322,372Notes
                  payable - long-term portion
              
              
              18,187Senior
                  lenders' notes - long term portion, net
              
              
              5,581,478Capital
                  lease obligations - long-term portion
              
              
              2,070,134Deferred
                  tax liability- long term portion
              
              
              311,676Total
                  liabilities
              
              
              15,261,225Minority
                  interest
              
              
              143,333Stockholders'
                  equityPreferred
                  stock; $0.001 par value; 5,000,000 sharesauthorized,
                  no shares issued and outstanding
              
              
              -Common
                  stock; $0.001 par value; 45,000,000 sharesauthorized,
                  21,011,786 shares issued and outstanding
              
              
              21,012Additional
                  paid-in capital
              
              
              22,354,109Accumulated
                  other comprehensive loss
              
              
              (98,078
              )Accumulated
                  deficit
              
              
              (7,047,484
              )Total
                  stockholders' equity
              
              
              15,229,559Total
                  liabilities and stockholders' equity
              
              $
              30,634,117




See
      Accompanying Notes to Condensed Consolidated Financial
      Statements


1





GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


**For
                  the Three Months Ended****June
                  30, 2006**
              ****
              ****
              ****
              **June
                  30, 2005**Revenues
              
              $
              5,531,623
              
              
              
              $
              5,012,042Cost
                  of revenues
              
              
              3,123,670
              
              
              
              
              3,023,074Gross
                  profit
              
              
              2,407,953
              
              
              
              
              1,988,968Operating
                  expensesDepreciation
                  and amortization
              
              
              628,845
              
              
              
              
              308,728Selling,
                  general and administrative
              
              
              1,883,475
              
              
              
              
              1,315,419Total
                  operating expenses
              
              
              2,512,320
              
              
              
              
              1,624,147Operating
                  income (loss) from continuing operationsbefore
                  items shown below
              
              
              (104,367
              )
              
              
              
              364,821Other
                  income (expense)Interest
                  expense, net
              
              
              (309,201
              )
              
              
              
              (153,502
              )Gain
                  on sale of assets
              
              
              (778
              )
              
              
              
              -Other
                  income (expense)
              
              
              (5,353
              )
              
              
              
              2,198Total
                  other expense
              
              
              (315,332
              )
              
              
              
              (151,304
              )Income
                  (loss) from continuing operations beforeprovision
                  for income taxes
              
              
              (419,699
              )
              
              
              
              213,517Federal
                  income tax (expense) benefit
              
              
              -
              
              
              
              
              -Loss
                  attributed to minority interest
              
              
              46,599
              
              
              
              
              -Income
                  (loss) from continuing operations
              
              
              (373,100
              )
              
              
              
              213,517Loss
                  from discontinued operations, net of tax
              
              $
              -
              
              
              
              $
              (255,601
              )Net
                  loss
              
              $
              (373,100
              )
              
              
              $
              (42,084
              )Income
                  (loss)per common share - basic:Income
                  (loss) from continuing operations
              
              $
              (0.02
              )
              
              
              $
              0.01Loss
                  from discontinued operations
              
              $
              -
              
              
              
              $
              (0.01
              )Net
                  loss
              
              $
              (0.02
              )
              
              
              $
              (0.00
              )Income
                  (loss) per common share - diluted:Income
                  (loss) from continuing operations
              
              $
              (0.02
              )
              
              
              $
              0.01Loss
                  from discontinued operations
              
              $
              -
              
              
              
              $
              (0.01
              )Net
                  loss
              
              $
              (0.02
              )
              
              
              $
              (0.00
              )Weighted
                  average common shares outstanding:Basic
              
              
              21,010,028
              
              
              
              
              18,211,986Diluted
              
              
              21,010,028
              
              
              
              
              18,211,986




See
      Accompanying Notes to Condensed Consolidated Financial Statements




2




GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


**For
                  the Six Months Ended****June
                  30, 2006**
              ****
              **June
                  30, 2005**Revenues
              
              $
              10,777,193
              
              $
              9,729,278Cost
                  of revenues
              
              
              6,092,032
              
              
              5,727,513Gross
                  profit
              
              
              4,685,161
              
              
              4,001,765Operating
                  expensesDepreciation
                  and amortization
              
              
              1,253,241
              
              
              619,836Selling,
                  general and administrative
              
              
              3,437,572
              
              
              2,486,989Total
                  operating expenses
              
              
              4,690,813
              
              
              3,106,825Operating
                  income (loss) from continuing operationsbefore
                  items shown below
              
              
              (5,652
              )
              
              894,940Other
                  income (expense)Interest
                  expense, net
              
              
              (640,264
              )
              
              (275,043
              )Gain
                  on sale of assets
              
              
              13,655
              
              
              -Other
                  income (expense)
              
              
              (665,353
              )
              
              2,198Total
                  other expense
              
              
              (1,291,962
              )
              
              (272,845
              )Income
                  (loss) from continuing operations beforeprovision
                  for income taxes
              
              
              (1,297,614
              )
              
              622,095Federal
                  income tax (expense) benefit
              
              
              -
              
              
              -Loss
                  attributed to minority interest
              
              
              46,599
              
              
              -Income
                  (loss) from continuing operations
              
              
              (1,251,015
              )
              
              622,095Loss
                  from discontinued operations, net of tax
              
              $
              -
              
              $
              (485,261
              )Net
                  income (loss)
              
              $
              (1,251,015
              )
              $
              136,834Income
                  (loss) per common share - basic:Income
                  (loss) from continuing operations
              
              $
              (0.06
              )
              $
              0.03Loss
                  from discontinued operations
              
              $
              -
              
              $
              (0.02
              )Net
                  income (loss)
              
              $
              (0.06
              )
              $
              0.01Income
                  (loss) per common share - diluted:Income
                  (loss) from continuing operations
              
              $
              (0.06
              )
              $
              0.03Loss
                  from discontinued operations
              
              $
              -
              
              $
              (0.02
              )Net
                  income (loss)
              
              $
              (0.06
              )
              $
              0.01Weighted
                  average common shares outstanding:Basic
              
              
              20,990,878
              
              
              18,211,986Diluted
              
              
              20,990,878
              
              
              18,706,275


See
      Accompanying Notes to Condensed Consolidated Financial
      Statements


3


GLOBAL
      AXCESS CORP AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


**For
                  the Six Months Ended**
              ********
              ****
              **June
                  30, 2006**
              ****
              **June
                  30, 2005**Cash
                  flows from operating activities:(Loss)
                  income from continuing operations
              
              $
              (1,251,015
              )
              $
              622,095Adjustments
                  to reconcile net income from continuing operationsto
                  net cash provided by operating activities:Stock
                  based compensation
              
              
              (11,698
              )
              
              -Depreciation
                  and amortization
              
              
              1,253,241
              
              
              619,836Provision
                  for doubtful accounts
              
              
              97,899
              
              
              -Accretion
                  of discount on notes payable
              
              
              75,200
              
              
              9,989Write-off
                  of uncollectible note receivable
              
              
              39,892
              
              
              -Loss
                  attributed to minority interest
              
              
              (46,599
              )
              
              -Changes
                  in operating assets and liabilities:Change
                  in automated teller machine vault cash
              
              
              241,090
              
              
              (533,570
              )Change
                  in accounts receivable
              
              
              (376,200
              )
              
              (117,586
              )Change
                  in inventory
              
              
              56,694
              
              
              (106,336
              )Change
                  in prepaid expenses and other current assets
              
              
              (71,375
              )
              
              (297,628
              )Change
                  in other assets and deferred revenue
              
              
              (70,617
              )
              
              160,867Change
                  in accounts payable and accrued liabilities
              
              
              504,454
              
              
              237,988Change
                  in automated teller machine vault cash payable
              
              
              (241,090
              )
              
              533,570Net
                  cash provided by continuing operating activitities
              
              
              199,876
              
              
              1,129,225Discontinued
                  operationsNet
                  loss
              
              
              -
              
              
              (485,261
              )Adjustments
                  to reconcile loss to net cash used indiscontinued
                  operations:Depreciation
              
              
              -
              
              
              27,664Change
                  in accounts receivable
              
              
              -
              
              
              15,487Change
                  in accounts payable and accrued liabilities
              
              
              -
              
              
              19,485Change
                  in prepaid expenses and other current assets
              
              
              -
              
              
              (3,916
              )Net
                  cash used in discontinued operating activities
              
              
              -
              
              
              (426,541
              )Net
                  cash provided by continuing and discontinued operating
                  activities
              
              
              199,876
              
              
              702,684Cash
                  flows from investing activities:Purchase
                  of merchant contracts
              
              
              -
              
              
              (40,858
              )Purchase
                  of property and equipment
              
              
              (558,870
              )
              
              (1,013,513
              )Proceeds
                  from sale of subsidiary
              
              
              745,341Net
                  cash provided by (used in) investing activities for continuing
                  operations
              
              
              186,471
              
              
              (1,054,371
              )Purchase
                  of property and equipment used in discontinued operating
                  activities
              
              
              -
              
              
              (106,736
              )Net
                  cash provided by (used in) investing activities
              
              
              186,471
              
              
              (1,161,107
              )Cash
                  flows from financing activities:Proceeds
                  from issuance of common stock
              
              
              20,450
              
              
              675,746Proceeds
                  from notes payable
              
              
              -
              
              
              41,809Proceeds
                  from bank notes
              
              
              400,000
              
              
              250,000Principal
                  payments on senior lenders' notes
              
              
              (1,272,916
              )
              
              (312,500
              )Principal
                  payments on notes payable
              
              
              (34,723
              )
              
              -Principal
                  payments on notes payable - related parties
              
              
              (8,009
              )
              
              -Principal
                  payments on capital lease obligations
              
              
              (512,716
              )
              
              (274,760
              )Net
                  cash provided by (used in) financing activities
              
              
              (1,407,914
              )
              
              380,295Effect
                  of exchange rate fluctuation on cash
              
              
              (98,078
              )(Decrease)
                  increase in cash
              
              
              (1,119,645
              )
              
              (78,128
              )Cash,
                  beginning of period
              
              
              2,358,119
              
              
              496,823Cash,
                  end of the period
              
              $
              1,238,474
              
              
              418,695Cash
                  paid for income taxes
              
              
              -
              
              
              -Cash
                  paid for interest
              
              $
              (565,064
              )
              $
              (265,054
              )


See
      Accompanying Notes to Condensed Consolidated Financial
      Statements





4




Supplemental
      schedule of non-cash investing and financing activities:


**For
                  the Six Months Ended**
              ********
              ****
              **June
                  30, 2006**
              ****
              **June
                  30, 2005**Investing
                  activities:Purchase
                  of assets under capital lease obligations
              
              $
              816,967
              
              
              1,179,478Financing
                  activitiesStock
                  issued for compensation
              
              
              13,415
              
              
              4,542Discount
                  of notes payable
              
              
              75,200
              
              
              9,989Total
                  non-cash financing activities
              
              $
              88,615
              
              $
              14,531


See
      Accompanying Notes to Condensed Consolidated Financial
      Statements


5


GLOBAL
      AXCESS CORP AND SUBSIDIARIES


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


AS
      OF
      June 30, 2006


(Unaudited)





**1.
      BASIS OF PRESENTATION**




The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with Securities and Exchange Commission requirements
        for
        interim financial statements. Therefore, they do not include all of the
        information and footnotes required by accounting principles generally accepted
        in the United States of America for complete financial statements. These
        condensed consolidated financial statements should be read in conjunction
        with
        the Form 10-KSB for the year ended December 31, 2005 of Global Axcess Corp
        and
        subsidiaries ("the Company").
 
 The
        interim condensed consolidated financial statements present the condensed
        consolidated balance sheet, statements of operations, and cash flows of Global
        Axcess Corp and its subsidiaries. The condensed consolidated financial
        statements have been prepared in accordance with accounting principles generally
        accepted in the United States of America.
 
 The
        interim condensed consolidated financial statements also include a variable
        interest entity, which was the result of the sale of 50% of the stock of
        Cash
        Axcess Corporation (Proprietary) Limited and which we are required by GAAP
        to
        consolidate. Because we have determined that we are the primary beneficiary
        of
        the variable interest entity, it has been included in these condensed
        consolidated financial statements.
 
 The
        interim condensed consolidated financial information is unaudited. In the
        opinion of management, all adjustments necessary to present fairly the financial
        position as of June 30, 2006 and the results of operations and cash flows
        presented herein have been included in the condensed consolidated financial
        statements. Interim results are not necessarily indicative of results of
        operations for the full year.
 
 All
        adjustments are of normal recurring nature.





**2.
      DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES**





***Description
      of Business***





Global
      Axcess Corp, through its wholly owned subsidiaries and its variable interest
      entity, is a network-based electronic commerce and transaction processing
      company; and an automated teller machine ("ATM") network and processing
      consolidator.





***Cash
      Equivalents***





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




***Principles
      of Consolidation***





The
      condensed consolidated financial statements include the accounts of Global
      Axcess Corp and its subsidiaries. The Company has the following subsidiaries:
      Nationwide Money Services, Inc. and EFT Integration, Inc., (see Footnote 3
      referring to subsidiaries included as discontinued operations). In addition,
      the
      Company consolidates Cash Axcess Corporation (Proprietary) Limited, as the
      Company is deemed to be the primary beneficiary in the variable interest entity
      (as defined by FASB Interpretation No. 46 (revised December 2003) “Consolidation
      of Variable Interest Entities” (“FIN 46(R)”)). All significant intercompany
      transactions and accounts have been eliminated in consolidation.





6




***Consolidation
      of Variable Interest Entity***





In
      December 2003, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 46, “Consolidation of Variable Interest Entities” (as
      amended, “FASB Interpretation No. 46(R)”), to clarify the application of
      Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to
      certain entities (referred to as “variable interest entities” or “VIEs”) in
      which equity investors do not have the characteristics of a controlling interest
      or do not have sufficient equity at risk for the entity to finance its
      activities without additional subordinated financial support from other parties.
      Pursuant to FASB Interpretation No. 46(R), an enterprise that absorbs a majority
      of a VIE’s expected losses, receives a majority of a VIE’s expected residual
      returns, or both, is determined to be the primary beneficiary of the VIE and
      must consolidate the entity in its financial statements. On May 2, 2006 the
      Company converted a portion of an intercompany loan with its South African
      subsidiary Cash Axcess Corporation (Proprietary) Limited, its wholly owned
      subsidiary, into additional shares of stock, bringing the total shares of stock
      to 200 shares. Also on May 2, 2006, the Company entered into a Shareholder
      Agreement to sell 50% of Cash Axcess Corporation (Proprietary) Limited, in
      a
      stock arrangement with Industrial Electronic Investments Limited.. In exchange
      for 200 additional shares, or 50% of the outstanding shares of Cash Axcess
      Corporation (Proprietary) Limited, the Company received the equivalent of
      $745,341 of cash, to be maintained in the accounts of Cash Axcess and used
      for
      their own ongoing operations. The Company will also either receive or give
      additional shares of stock and cash if certain milestones are achieved or not
      achieved, respectively in the twelve month period following the contract date.
      Both the Company and the buyer will have equal representation with regards
      to
      board positions. Under the requirements of FASB Interpretation No. 46(R), this
      transaction constitutes a variable interest for the Company, with the Company
      being determined as the primary beneficiary.





The
      consolidation of this VIE, where the Company was determined to be the primary
      beneficiary, added approximately $650,000 of cash, net of foreign currency
      translation losses, to the consolidated assets in the Company’s consolidated
      balance sheet at June 30, 2006. Additionally, the consolidation of this VIE
      for
      the period of May 2, 2006 through June 30, 2006 added $143,333 of minority
      interest liability, net of losses attributed to minority interest and a deferred
      gain on sale of $555,409.





***Reclassifications***





Certain
      reclassifications were made to the 2005 condensed consolidated statement of
      cash
      flows and condensed consolidated statement of operations to conform to 2006
      presentation. These reclassifications had no impact on net income (loss) or
      stockholders’ equity.




***Use
      of Estimates***





7




The
      preparation of condensed consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the condensed consolidated financial statements
      and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.





***Foreign
      Currency Translation***





The
      financial statements of the Company’s foreign subsidiaries have been translated
      into U.S. dollars in accordance with FASB Statement No. 52, “Foreign Currency
      Translation”. All balance sheet accounts have been translated using the exchange
      rates in effect at the balance sheet date. Income statement amounts have been
      translated using the average exchange rate for the period. The gains and losses
      resulting from the changes in exchange rates have been reported in other
      comprehensive income. As of June 30, 2006 the Company has recorded  $98,078
      of foreign currency translation losses.





***Comprehensive
      Income***





The
      component of accumulated other comprehensive income represents foreign currency
      translation adjustments.





***Revenue
      Recognition***





Transaction
      service and processing fees are recognized in the period that the service is
      performed. The Company receives service fees paid by consumers utilizing certain
      ATMs owned or managed by the Company and interchange fees paid by their banks.
      Processing fees are generally charged on a per transaction basis, depending
      on
      the contractual arrangement with the customer. Software sales and services
      revenue is recognized when complete, shipped and invoiced. ATM sales revenue
      is
      recognized when the ATM is shipped and installed. Revenue from managing ATMs
      for
      others is recognized each month when the services are performed.





***Inventory***





ATMs
                available for sale are classified as inventory until such time as
                the
                machine is sold, installed and in service. Once the ATM is sold,
                it is
                relieved to cost of sales. At June 30, 2006, the Company’s ATM inventory
                totaled $102,820. Inventories are valued at the lower of cost (first-in,
                first-out method) or market.




***Accounts
      Receivable***





The
      Company reviews the accounts receivable on a regular basis to determine the
      collectibility of each account. The Company maintains allowances for doubtful
      accounts for estimated losses resulting from the failure of our customers to
      make required payments. At each reporting period, the Company evaluates the
      adequacy of the allowance for doubtful accounts and calculates the appropriate
      allowance based on historical experience, credit evaluations, specific customer
      collection issues and the length of time a receivable is past due. The Company
      records an allowance for doubtful accounts for any billed invoice aged past
      60
      days. When the Company deems the receivable to be uncollectible, the Company
      charges the receivable against the allowance for doubtful accounts.





8




***Amortization
      of Assets***





As
      of
      June 30, 2006 the Company has accumulated amortization totaling $261,898 against
      intangible assets totaling $4,517,738.





As
      of
      June 30, 2006 the Company has accumulated amortization totaling  $1,530,004
      against merchant contracts totaling $14,543,167.





***Fixed
      Assets***





Fixed
      assets are stated at cost less accumulated depreciation and amortization.
      Depreciation is calculated principally on the straight-line method over the
      estimated useful lives of the assets, which generally range from 3 to 10 years.
      Leasehold improvements are amortized on a straight-line basis over the shorter
      of the lease term or the life of the asset. The cost of repairs and maintenance
      is charged to expense as incurred. Expenditures for property improvements and
      renewals are capitalized. Upon the sale or other disposition of a depreciable
      asset, cost and accumulated depreciation are removed from the accounts and
      any
      gain or loss is reflected in other income (expense).





The
      Company periodically evaluates whether events and circumstances have occurred
      that may warrant revision of the estimated useful life of fixed assets or
      whether the remaining balance of fixed assets should be evaluated for possible
      impairment. The Company uses an estimate of the related undiscounted cash flows
      over the remaining life of the fixed assets in measuring their recoverability,
      as well as historical age to estimate useful economic lives and
      values.





***Assets
      Held for Sale***





ATMs
      and
      related software components which are not currently in service are classified
      as
      assets held for sale, until such time either the machine is installed or
      reinstalled and in service or sold. The Company plans on having the assets
      held
      for sale at June 30, 2006 either sold or reinstalled by the end of fiscal year
      2006. Once in service, each ATM is reclassified as a fixed asset and depreciated
      using the remaining estimated useful life of the machine. Any ATM and related
      software components classified as fixed assets held for sale and then sold
      would
      be considered a disposal group and a gain or loss on the sale would be recorded.
      The Company reviews the Assets Held for Sale for impairment and if it finds
      impairment, the Company accounts for the impairment in accordance with SFAS
      No.144 ”Impaired Long-Lived Assets and Long-Lived Assets to be Disposed of”.





***Intangible
      Assets - Goodwill and Merchant Contracts***





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





9




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





The
      Company’s intangible assets are made up of merchant contracts with automatic
      renewable lives. The Company has determined after review of its contracts that
      the economic life of the contracts is extended and estimated over 21 years
      (or 3
      times renewal) based on historical and expected useful lives of similar assets.
      The Company amortizes the merchant contracts over their estimated useful lives
      of 21 years. The Company has adopted SFAS 142 to reflect the fair value of
      the
      merchant contracts, and uses a two-step valuation process to determine if there
      has been any impairment on the value of the merchant contract assets. The first
      step is to determine at each contract’s renewable period, whether they will
      actually renew and if not to amortize the cost over the remaining life of the
      contract. The second step is to compare the fair value of each reporting unit
      to
      the carrying amount of the merchant contracts, thus testing the impairment
      of
      the value of the contracts. An impairment loss is recognized for any excess
      in
      the carrying value of merchant contracts over the assessed fair value of
      merchant contracts.





***Fair
      Value of Financial Instruments***




The
      carrying amounts of the Company’s long-term liabilities approximate the
      estimated fair values at June 30, 2006 based upon the Company’s ability to
      acquire similar debt at similar maturities. The carrying values of all other
      financial instruments approximate their fair value, because of the short-term
      maturities of these instruments.




***Earnings
      per Share***




10




In
      calculating basic income (loss) per share, net income (loss) is divided by
      the
      weighted average number of common shares outstanding for the period. Diluted
      income (loss) per share reflects the assumed exercise or conversion of all
      dilutive securities, such as options and warrants. No such exercise or
      conversion is assumed where the effect is anti-dilutive, such as when there
      is a
      net loss from continuing operations. The reverse stock split was applied
      retroactively to all previously disclosed share and per share amounts. The
      diluted earnings per share amount equals basic earnings per share for the three
      months ended June 30, 2006 because the Company had a net loss and the impact
      of
      the assumed exercise of the stock options and warrants is
      anti-dilutive.


**For
                  the Three Months
                  Ended****June
                  30, 2006**
              ****
              **June
                  30, 2005**NumeratorIncome
                  (loss) from continuing operations
              
              $
              (373,100
              )
              $
              213,517Loss
                  from discontinued operations
              
              
              -
              
              
              (255,601
              )Numerator
                  for diluted income (loss) per shareavailable
                  to common stockholders
              
              
              (373,100
              )
              
              (42,084
              )DenominatorWeighted
                  average shares
              
              
              21,010,028
              
              
              18,211,986Effect
                  of dilutive securities:Employee
                  stock options & warrants
              
              
              -
              
              
              494,289Denominator
                  for diluted income (loss) per share adjustedweighted
                  shares after assumed exercises
              
              
              21,010,028
              
              
              18,706,275**Income
                  (loss) per common share - basic:**Income
                  (loss) from continuing operations
              
              
              (0.02
              )
              
              0.01Loss
                  from discontinued operations
              
              
              -
              
              
              (0.01
              )Net
                  Income (loss) per share
              
              
              (0.02
              )
              
              (0.00
              )**Income
                  (loss) per common share - diluted:**Income
                  (loss) from continuing operations
              
              
              (0.02
              )
              
              0.01Loss
                  from discontinued operations
              
              
              -
              
              
              (0.01
              )Net
                  Income (loss) per share
              
              
              (0.02
              )
              
              (0.00
              )


***Reverse
      Stock Split***





Effective
      April 28, 2005, the Company implemented a one-for-five reverse split of its
      outstanding common stock. All information regarding share and per share amounts
      have been adjusted within the financial statements to reflect the reverse stock
      split.





***Income
      Taxes***





11




The
      Company accounts for its income taxes in accordance with SFAS No. 109
“Accounting for Income Taxes”, which requires recognition of deferred tax assets
      and liabilities for future tax consequences attributable to differences between
      the financial statement carrying amounts of existing assets and liabilities
      and
      their respective tax basis and tax credit carry-forwards. Deferred tax assets
      and liabilities are measured using enacted tax rates expected to apply to
      taxable income in the years in which those temporary differences are expected
      to
      be recovered or settled. The effect on deferred tax assets and liabilities
      of a
      change in tax rates is recognized in income in the period that includes the
      enactment date.





***Segment
      Information***




The
      Company discloses segment information in accordance with SFAS No. 131,
“Disclosures about Segments of an Enterprise and Related Information.” The
      Company operates under one segment.





***Research
      and Development Costs***





Research
      and development costs are charged to expense when incurred. Costs incurred
      to
      internally develop software, incurred during the research and planning phase
      of
      development, are charged to expense as incurred, and direct costs incurred
      during development, testing and implementation are capitalized as incurred
      over
      the useful life of the software and amortized for an average life of three
      years. Other development costs include development of card-based business and
      development of foreign ATM operations. During the three-month periods ended
      June
      30, 2006 and 2005, the amount of research and development costs, which were
      borne entirely by the Company, amounted to  $119,340 and $314,322,
      respectively.





***Repairs
      and Maintenance Costs***





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





***Internally
      Developed Software***





Costs
      incurred related to internally developed software, including interest, are
      capitalized and amortized over the useful life of the software for an average
      life of three years. During the quarters ended June 30, 2006 and 2005, the
      Company capitalized $0 and approximately $323,117 of internally
      developed software, respectively.







***Recent
      Accounting Pronouncements***





In
      December 2004, the FASB issued SFAS No. 123 (R), “Share-Based Payment”. SFAS No.
      123 (R) revises SFAS No. 123, “Accounting for Stock-Based Compensation” which
      supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS
      No. 123 (R) focuses primarily on the accounting for transactions in which an
      entity obtains employee services in share-based payment transactions. SFAS
      No.
      123 (R) requires companies to recognize in the statement of income the cost
      of
      employee services received in exchange for awards of equity instruments based
      on
      the grant-date fair value of those awards (with limited exceptions). SFAS No.
      123 (R) is effective as of the first interim or annual reporting period that
      begins after October 1, 2005 for non-small business issuers and after December
      15, 2005 for small business issuers. Accordingly, the Company has adopted SFAS
      No. 123 (R) in its quarter ended March 31, 2006. During the quarter ended June
      30, 2006, the Company recorded a $25,422 reduction of stock based
      compensation expense in the accompanying condensed consolidated statement of
      operations.




12




***Risk
      Factors***





There
      are
      a number of factors that could cause actual results to differ materially from
      those discussed in the forward-looking statements, including those factors
      described below. Other factors not identified herein could also have such an
      effect. Among the factors that could cause actual results to differ materially
      from those discussed in the forward-looking statements are the
      following:





·  Default
      Under our Credit Agreements





The
      Company has received a waiver of certain covenants from its senior lender during
      the 2 nd quarter
      of 2006. There were no other covenants under debt agreements with lenders that
      were not met.





·  Our
      sales
      depend on transaction fees from our networks of ATMs. A decline in either
      transaction volume or the level of transaction fees could reduce our sales
      and
      harm our operating results **.**





·  Transaction
      fees for our network of ATMs produce substantially all of our sales.
      Consequently, our future operating results will depend on both transaction
      volume and the amount of the transaction fees we receive. Our transaction volume
      and fees will depend principally upon:





·
            our
                ability to find replacement sites in the event of merchant
                turnover;·
            competition,
                which can result in over-served markets, pressure to reduce existing
                fee
                structures and increase sales discounts to merchants and reduced
                opportunities to secure merchant or other placements of our
                machines;·
            our
                ability to service, maintain and repair ATMs in our network promptly
                and
                efficiently;·
            continued
                market acceptance of our services; and·
            government
                regulation and network adjustment of our
                fees.





·  Changes
      in laws or card association rules affecting our ability to impose surcharge
      fees
      and continued customer willingness to pay surcharge fees;





13




·  Our
      ability to form new strategic relationships and maintain existing relationships
      with issuers of credit cards and national and regional card
      organizations;





·  Our
      ability to expand our ATM base and transaction processing business;





·  The
      availability of financing at reasonable rates for vault cash and for other
      corporate purposes, including funding our expansion plans;





·  Our
      ability to maintain our existing relationships with Food Lion and Kash n’
Karry;





·  Our
      ability to keep our ATMs at other existing locations and to place additional
      ATMs in preferred locations at reasonable rental rates;




·  The
      extent and nature of competition from financial institutions, credit card
      processors and third party operators, many of whom have substantially greater
      resources;





·  Our
      ability to maintain our ATMs and information systems technology without
      significant system failures or breakdowns;





·  Our
      ability to develop new products and enhance existing products to be offered
      through ATMs, and our ability to successfully market these
      products;





·  Our
      ability to retain senior management and other key personnel;




·  Our
      ability to comply with mandated Triple DES configuration;





·  Our
      ability to comply with mandated customer background checks and financial
      underwriting requirements; and





·  Changes
      in general economic conditions.





**3.
      DISCONTINUED OPERATIONS**




During
      the quarter ended September 30, 2005, the Company approved plans to dispose
      of
      its wholly-owned subsidiary, Electronic Payment & Transfer Corporation
      ("EPT"), and to discontinue offering prepaid debit cards and the related
      products and services that were marketed by EPT. Subsequently, effective
      September 30, 2005, the Company completed the sale of EPT to one former employee
      of the Company for a $1.5 million note receivable (see Note 4 - "Notes
      Receivable - Non-current"). The Company has estimated an allowance against
      the
      note receivable of $0.8 million. In accordance with FASB Statement No. 144,
      "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company
      has classified EPT as a discontinued operation and reported its operating
      results within discontinued operations in the accompanying consolidated
      statements of income. The Company recorded no gain or loss on this
      transaction.





During
      the quarter ended December 31, 2005, the Company approved plans to discontinue
      two operations that did not fit within management’s strategic plans, thereby
      ceasing operations of the Company’s software development subsidiary, Axcess
      Technology Corp. (“ATC”), and ATC’s South African subsidiary Axcess Technology
      Corp, SA (“ATCSA”), as of December 31, 2005. The Company has dismissed all but
      one employee as of December 31, 2005, transferring the employee to Nationwide
      Money Services, Inc. All assets and liabilities have been transferred to either
      Nationwide Money Services, Inc. or Cash Axcess Corp., SA. In accordance with
      FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
      Assets," the Company has classified ATC and ATCSA as discontinued operations
      and
      reported their operating results within discontinued operations in the
      accompanying consolidated statements of income and statements of cash flow.
      The
      Company has not allocated interest to discontinued operations. Operating results
      of these discontinued operations were as follows for the three-month and
      six-month periods ended June 30, 2005:





14


**Three
                  Months**
                **Ended**
              ****
              **Six
                  Months**
                **Ended**
              ********
              ****
              **June
                  30, 2005**
              ****
              **June
                  30, 2005**Revenues
              
              $
              100
              
              $
              700Cost
                  of revenues
              
              
              1,010
              
              
              1,010Gross
                  Profit
              
              
              (910
              )
              
              (310
              )Operating
                  ExpensesDepreciation
                  and amortization
              
              
              19,305
              
              
              27,664Selling,
                  general and administrative
              
              
              235,386
              
              
              457,287Total
                  operating expenses
              
              
              254,691
              
              
              484,951Loss
                  from operations
              
              
              (255,601
              )
              
              (485,261
              )Loss
                  before provision for taxes
              
              
              (255,601
              )
              
              (485,261
              )Net
                  loss
              
              $
              (255,601
              )
              $
              (485,261
              )





**4.
      NOTES RECEIVABLE**





During
      the quarter ended September 30, 2005, the Company disposed of its wholly-owned
      subsidiary, Electronic Payment & Transfer Corporation (“EPT”), and
      discontinued offering prepaid debit cards and the related products and services
      that were marketed by EPT. Subsequently, effective September 30, 2005, the
      Company completed the sale of EPT to one former employee of the Company for
      a
      $1.5 million note receivable.





Notes
      receivable - non-current consist of the following at June 30, 2006:








(a)
                9% promissory note receivable requiring monthly interest payments
                starting
                October 1, 2006 and quarterly principal payments starting August
                1, 2006,
                maturing November 1, 2010 requiring a balloon payment, net of reserve
                of
                $761,640
            
            $
            740,134(b)
                10% promissory note due February 2007, net of reserve of
                $44,605
            
            
            55,290Less
                current portion
            
            
            (50,000
            )$
            745,424





(c)
      Effective September 30, 2005, the Company sold its wholly-owned subsidiary,
      Electronic Payment & Transfer Corporation, for $1,540,000 in a secured
      promissory note covering the full amount of the sale price (see Note 3 -
      "Discontinued Operations").





15




(d)
      In
      February 2004, the Company issued a note receivable in the amount of $190,000
      due within one year and requiring monthly payments of principal and interest,
      with an annual interest rate of 10%. The note has been amended to extend the
      term to February 2007. The amount remaining on the note as of June 30, 2006
      is
      $99,895. The promissory note is collateralized by the Company’s stock and may
      need to be further reserved should the stock price of the Company decline.





**5.
      COMMITMENTS AND CONTINGENCIES**





Capital
      leases entered into during the three-month period ended June 30, 2006 mature
      in
      36 months with various rates from 14.35% to 14.37%, totaled
      $204,306.





*Legal
      proceedings*





In
      March
      2004, the Company received a claim filed by James Collins, a previous employee
      of Global Axcess Corp. The claim was filed in Superior court of California,
      County of San Diego on March 2, 2004. The claim alleged the following were
      owed
      in connection with the employment agreement: compensation, bonuses and other
      benefits of approximately $316,915; and 90,000 restricted shares and 359,700
      stock options exercisable at $3.75 per share. As of March 31, 2006, the Company
      had accrued a total of $450,000 for the potential legal claim. The claim filed
      by James Collins was settled for $450,000 on May 2, 2006 whereby the Company
      made a lump-sum payment of $300,000 on May 22, 2006 and has agreed to pay the
      remaining $150,000 in 12 monthly installments of $12,500 commencing July 1,
      2006.





From
      time
      to time, the Company and its subsidiaries may be parties to, and their property
      is subject to, ordinary, routine litigation incidental to their business. Claims
      may exceed insurance policy limits and the Company or any one of its
      subsidiaries may have exposure to a liability that is not covered by insurance.
      Management is not aware of any such lawsuits that could have a material adverse
      impact on the Company’s consolidated results of operations, cash flows or
      financial position.





**6.
      INCOME TAXES**





In
      assessing the realizability of the deferred tax assets, management considers
      whether it is more likely than not, that some portion or all of the deferred
      tax
      assets will not be realized. The valuation allowance at June 30, 2006 is related
      to deferred tax assets arising from net operating loss carryforwards. Management
      believes that based upon its projection of future taxable income for the
      foreseeable future, it is more likely than not that the Company will not be
      able
      to realize the full benefit of the net operating loss carryforwards before
      they
      expire due to the amortization and depreciation losses from the projected
      acquisition assets.





At
      June
      30, 2006, the Company has net operating loss carryforwards remaining of
      approximately $9,800,000 that may be offset against future taxable income
      through 2025. As part of management’s tax strategies they will be reviewing the
      use of the net operating loss carryforwards. The Company is reviewing its tax
      depreciation methods for future utilization of the NOL.





16





**7.
      CHANGES IN STOCKHOLDERS' EQUITY**





See
      the
      table below for all the equity transactions for the three-month period ended
      June 30, 2006:


****
              ****
              ****
              ****
              ****
              ****
              ****
              **Accumulated**
              ****
              ****
              ****
              ****
              ********
              ****
              ****
              ****
              ****
              **Additional**
              ****
              **Common**
              ****
              **Other**
              ****
              ****
              ****
              **Total**
              ********
              ****
              **Common
                  Stock**
              ****
              **Paid-in**
              ****
              **Stock**
              ****
              **Comprehensive**
              ****
              **Accumulated**
              ****
              **Stockholders'**
              ********
              ****
              **Shares**
              ****
              **Amount**
              ****
              **Capital**
              ****
              **Payable**
              ****
              **Income**
              ****
              **Deficit**
              ****
              **Equity**Balances,
                  March 31, 2006
              
              
              20,971,786
              
              $
              20,972
              
              $
              22,359,571
              
              $
              20,000
              
              $
              -
              
              $
              (6,674,384
              )
              $
              15,726,159Stock
                  warrants issued
              
              
              40,000
              
              
              40
              
              
              19,960
              
              
              (20,000
              )
              
              
              
              
              -
              
              
              -Stock
                  Compensation Expense
              
              
              -
              
              
              -
              
              
              (25,422
              )
              
              -
              
              
              
              
              
              -
              
              
              (25,422
              )Foreign
                  exchange translation adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (98,078
              )
              
              
              
              
              (98,078
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (373,100
              )
              
              (373,100
              )Balances,
                  June 30, 2006
              
              
              21,011,786
              
              $
              21,012
              
              $
              22,354,109
              
              $
              -
              
              $
              (98,078
              )
              $
              (7,047,484
              )
              $
              15,229,559





**8.**  **** **STOCK
      OPTIONS AND WARRANTS**




Pro
      forma disclosure - Pro
      forma information regarding net income and net earnings per share, has been
      determined as if the Company had accounted for its employee stock-based
      compensation plans and other stock options under the fair value method of SFAS
      123. The fair value of each option grant is estimated on the date of grant
      using
      the Black-Scholes option pricing model with the following weighted-average
      assumptions used for grants under the fixed option plans:




**June
                30, 2005**Weighted-average
              risk free interest
              rate
            
            
            5.25
            %Expected
              life of option (years)
            
            
            2.0Expected
              stock volatility
            
            
            90
            %Expected
              dividend yield
            
            
            0.00
            %




Effective
      January 1, 2006, the Company adopted provisions of Financial Accounting
      Standards Board (FASB) Statement No. 123R "Share-Based Payment," (FAS 123R)
      for
      its share-based compensation plans. The Company previously accounted for these
      plans under the recognition and measurement principles of Accounting Principles
      Board (APB) No. 25, "Accounting for Stock Issued to Employees," (APB 25) and
      related interpretations and disclosure requirements established by FAS 123,
      "Accounting for Stock-Based Compensation." Under APB 25, because the exercise
      price of the Company's employee stock options equaled the market price of the
      underlying stock on the date of the grant, no compensation expense was recorded
      in 2005 but pro forma effects on income were disclosed in the comparative
      quarter in 2005.




Under
      FAS
      123R, all share-based compensation cost is measured at the grant date, based
      on
      the fair value of the award, and is recognized as an expense in the income
      statement over the vesting period. The cost for all share-based awards granted
      subsequent to January 1, 2006, represented the grant-date fair value that was
      estimated in accordance with the provisions of FAS 123R. Prior periods have
      not
      been restated.





17




The
      following table illustrates the effect on net income per share if the Company
      had applied the fair value recognition provisions of FASB Statement No. 123,
      "Accounting for Stock-Based Compensation," to stock-based employee
      compensation.


**Three
                  Months Ended**
              ********
              ****
              **June
                  30, 2005**Net
                  loss, as reported
              
              $
              (42,084
              )Add:
                  Stock-based employee compensation expense included in reported
                  income
                  (loss), net of related tax effectsDeduct:
                  Total stock-based employee compensation expense determined under
                  fair
                  value based methods for all awards, net of related tax
                  effects
              
              $
              (41,988
              )Pro
                  forma net loss
              
              $
              (84,072
              )Net
                  loss per common shareBasic
                  loss, as reported
              
              $
              (0.00
              )Basic
                  loss, pro forma
              
              $
              (0.00
              )


Compensation
      expense charged against income during the second quarter of 2006 for stock
      options was a reduction to expense of $25,422 .




**9.
      SUBSEQUENT EVENTS**





On
      August
      1, 2006, Electronic Payment Systems, LLC, the purchaser of the Company’s
      disposed wholly-owned subsidiary Electronic Payment & Transfer Corporation
      (“EPT”), failed to make its required payment and is in default of the Stock
      Purchase Agreement made and entered into as of September 30, 2005. The Company
      sent a default notification letter on August 2, 2006 and Electronic Payment
      Systems, LLC has thirty days as of the date of the default notification to
      cure
      the default.





On
      August
      4, 2006, the Company was served with a demand for arbitration/mediation from
      EFMARK Service Company (“EFMARK”), a provider of maintenance services and a
      provider of cash replenishment services for automated teller machines. EFMARK
      alleges that the Company has failed to compensate EFMARK for services amounting
      to $103,000 and is seeking said amount as well as interest of $32,000. The
      Company believes the demand contains factual inaccuracies and is wholly without
      merit and intends to vigorously defend the demand. On August 9, 2006 the Company
      had a conversation with EFMARK which leads the Company to believe that EFMARK
      will terminate their letter of demand and withdraw their claim without any
      obligations from the Company.





18




**Item
      2. Management's Discussion and Analysis or Plan of
      Operation**




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




In
        addition to historical information, this Quarterly Report on Form 10-QSB
        contains forward-looking statements that involve risks and uncertainties
        that
        could cause actual results to differ materially. Factors that might cause
        or
        contribute to such differences include, but are not limited to, those discussed
        in the section entitled "Management's Discussion and Analysis or Plan of
        Operation”. You should carefully review the risks described in other documents
        we file from time to time with the Securities and Exchange Commission, including
        the Quarterly Reports on Form 10-QSB that have been or are to be filed in
        2006.
        When used in this report, the words "expects," "anticipates," "intends,"
        "plans," "believes," "seeks," "targets," "estimates," "looks for," "looks
        to,"
        and similar expressions are generally intended to identify forward-looking
        statements. You should not place undue reliance on these forward-looking
        statements, which speak only as of the date of this Quarterly Report on Form
        10-QSB. We undertake no obligation to publicly release any revisions to the
        forward-looking statements or reflect events or circumstances after the date
        of
        this document.


**Summary**





Global
        Axcess Corp (the "Company"), through its wholly owned subsidiaries, owns
        and
        operates Automatic Teller Machines ("ATM") with locations primarily in the
        eastern and southwestern United States of America. Our revenues are principally
        derived from two types of fees, which we charge for processing transactions
        on
        our ATM network. We receive an interchange fee from the issuer of the credit
        or
        debit card for processing a transaction when a cardholder uses an ATM in
        our
        network. In addition, in most cases we receive a surcharge fee from the
        cardholder when the cardholder makes a cash withdrawal from an ATM in our
        network.




Interchange
        fees are processing fees that are paid by the issuer of the credit or debit
        card
        used in a transaction. Interchange fees vary for cash withdrawals, balance
        inquiries, account transfers or uncompleted transactions, the primary types
        of
        transactions that are currently processed on ATMs in our network. The maximum
        amount of the interchange fees is established by the national and regional
        card
        organizations and credit card issuers with whom we have a relationship. We
        receive interchange fees for transactions on ATMs that we own, but sometimes
        we
        rebate a portion of the fee to the owner of the ATM location under the
        applicable lease for the ATM site. We also receive the interchange fee for
        transactions on ATMs owned by third party vendors included within our network,
        but we rebate all or a portion of each fee to the third party vendor based
        upon
        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 as much as $2.50 per transaction. We do not receive any portion
        of
        these service fees.





19


In
        most
        markets, we impose a surcharge fee for cash withdrawals. Surcharge fees are
        a
        substantial additional source of revenue for us and other ATM network operators.
        The surcharge fee for ATMs in our network ranges between $1.50 and $2.50
        per
        withdrawal. The surcharge fee for other ATMs in our network ranges between
        $0.50
        and $7.50 per withdrawal. We receive the full surcharge 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 fee for cash withdrawal transactions on ATMs
        owned by third party vendors included within our network, but we rebate all
        or a
        portion of each fee to the third party vendor based upon a variety of factors,
        including transaction volume and the party responsible for supplying vault
        cash
        to the ATM and only record earned revenue based upon the Company contracts
        with
        the third party vendors.


In
        addition to revenues derived from interchange and surcharge 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 fees are charged to the cardholder and credited to us by networks
        and
        credit card issuers on a daily basis. We periodically rebate the portion
        of
        these fees owed to ATM owners and owners of ATM locations. Fees for network
        management services are generally paid to us on a monthly
        basis.


**Critical
      Accounting Policies**


The
        fundamental objective of financial reporting is to provide useful information
        that allows a reader to comprehend our business activities. To aid in that
        understanding, management has identified our "critical accounting policies."
        When more than one accounting principle, or the method of its application,
        is
        generally accepted, management selects the principle or method that is
        appropriate in the specific circumstances. Application of these accounting
        principles requires our management to make estimates about the future resolution
        of existing uncertainties. As a result, actual results could differ from
        these
        estimates. Accordingly, these policies have the potential to have a significant
        impact on our consolidated financial statements, either because of the
        significance of the consolidated financial statement item to which they relate,
        or because they require judgment and estimation due to the uncertainty involved
        in measuring, at a specific point in time, events which are continuous in
        nature.
 
 In
        preparing these consolidated financial statements, management has made its
        best
        estimates and judgments of the amounts and disclosures included in the
        consolidated financial statements. Except as separately discussed, we do
        not
        believe there is a great likelihood that materially different amounts would
        be
        reported under different conditions or by using different assumptions pertaining
        to the accounting policies described below.


**Revenue
      Recognition Policies**




We
      recognize revenues as ATM cardholders use ATMs or as services are rendered
      to
      customers. When the customer accepts the convenience fee, also known as
      surcharge fees, and performs a transaction on the ATM, revenue can then be
      recognized since that transaction is then captured by the Company's database.
      In
      connection with recording revenue, estimates and assumptions are required in
      determining the expected conversion of the revenue streams to cash collected.
      The reserve estimation process requires that management make assumptions based
      on historical results, future expectations, the industry's economic and
      competitive environment, changes in the credit-worthiness of our customers,
      and
      other relevant factors. Revenues are also adjusted with positive and negative
      processing accruals occurring in the operation of the Company's ATM network
      in
      the ordinary course of business. It is the policy of the Company, to book as
      revenue, all surcharge and interchange it receives and has earned based upon
      their contracts, whether for its owned ATMs or for those it manages. In the
      case
      of managed ATMs, the Company then books as a contracted expense a lease fee
      for
      the use of the ATM or space rent and pays this to the owners of the ATMs and/or
      the third party vendors. Where the Company provided only processing services
      through its wholly owned subsidiary, EFT Integration, the Company only records
      the fees it charges to its customers as revenue. During consolidation of the
      financial statements, the Company eliminates the revenue earned by EFT
      Integration for the processing of Company owned or managed ATMs. Surcharge
      fees
      are fees assessed directly to the consumer utilizing the ATM terminals owned
      by
      the Company. The surcharge fees assessed range from $1.50 to $2.50 based upon
      a
      cash withdrawal transaction from the ATM terminals. The Company records only
      the
      surcharge and interchange monies due to the Company because it owns the ATMs
      or
      it manages the ATM’s and records the management or processing income due under
      contracts the Company owns. The Company does not record surcharge or interchange
      monies that pass through the Company’s processor to the ATM owner.





20




Interchange
        fees are fees assessed directly to the card issuer of the consumer. The
        interchange fees are comprised of two fees: (1) an interchange fee ranging
        from
        approximately $0.40 to $0.55 based upon each cash withdrawal transaction;
        and
        (2) an interchange fee ranging from approximately $0.15 to $0.25 based upon
        an
        account inquiry by the consumer.
 
 Processing
        fees are earned by EFT Integration (EFTI), a wholly owned subsidiary of the
        Company, for the switching of transactions between the ATMs and the cardholder’s
        bank(s). The processing fees earned by EFTI for the switching of transactions
        for Nationwide Money Services, Inc.'s ATMs are eliminated at time of
        consolidation. However, EFTI switches transactions for companies other than
        Nationwide Money Services.
 
 Management
        fees are charged to various companies or individuals that use the services
        of
        Nationwide Money Services to operate their ATMs. These fees are for services
        such as cash management, project management and account management.


Software
      sales and services are recorded when complete, shipped and
      invoiced.




**Allowance
      of Uncollectible Accounts Receivable**





Merchants
      and investors have been historically billed for reimbursable expenses of the
      Company as part of negotiated contracts. The accounts receivable, for these
      reimbursed expense invoices, have been historically reduced by an allowance
      for
      amounts that may become uncollectible in the future. The Company reviews the
      accounts receivable on a regular basis to determine the collectibility of the
      accounts. The Company records an allowance for doubtful accounts for any billed
      invoice aged past 60 days.





**Inventory**





ATMs
      and
      equipment available for sale are classified as inventory until such time as
      the
      machine is sold, installed and in service. Once the ATM is sold it is relieved
      to cost of sales. At June 30, 2006, the Company’s ATM inventory totaled
      $102,820 .




21




**Equipment**
  ATM
        equipment comprises a significant portion of our total assets. Changes in
        technology or changes in our intended use of these assets may cause the
        estimated period of use or the value of these assets to change. We perform
        annual internal studies to confirm the appropriateness of estimated economic
        useful lives for each category of current equipment. Estimates and assumptions
        used in setting depreciable lives require both judgment and estimates. ATMs
        and
        related software components not currently in service are classified as held
        for
        sale, until such time either the machine is installed and in service or sold.
        Once in service, each ATM is reclassified as a fixed asset and depreciated
        using
        the remaining estimated useful life of the machine. Any ATMs classified as
        held
        for sale and then sold would be considered a disposal group and a gain or
        loss
        on the sale would be recorded.
 
 **Goodwill**
 
 In
        July
        2001, the FASB issued SFAS No. 142, 'Goodwill and Other Intangible Assets,'
        which was required to be adopted for fiscal 2002. SFAS No. 142 established
        accounting and reporting standards for goodwill and intangible assets resulting
        from business combinations. SFAS No. 142 included provisions discontinuing
        the
        periodic amortization of, and requiring the assessment of the potential
        impairments of, goodwill (and intangible assets deemed to have indefinite
        lives). As SFAS No. 142 replaced the measurement guidelines for goodwill
        impairment, goodwill not considered impaired under previous accounting
        literature may be considered impaired under SFAS No. 142. SFAS No. 142 also
        required that the Company complete a two-step goodwill impairment test. The
        first step compared the fair value of each reporting unit to its carrying
        amount, including goodwill. If the fair value of a reporting unit exceeded
        its
        carrying amount, goodwill is not considered to be impaired and the second
        step
        was not required. SFAS 142 required completion of this first step within
        the
        first three months of initial adoption and annually thereafter. If the carrying
        amount of a reporting unit exceeded its fair value, the second step is performed
        to measure the amount of impairment loss. The second step compared the implied
        fair value of goodwill to the carrying value of a reporting unit's goodwill.
        The
        implied fair value of goodwill is determined in a manner similar to accounting
        for a business combination with the allocation of the assessed fair value
        determined in the first step to the assets and liabilities of the reporting
        unit. The excess of the fair value of the reporting unit over the amounts
        assigned to the assets and liabilities is the implied fair value of goodwill.
        This allocation process was only performed for purposes of evaluating goodwill
        impairment and did not result in an entry to adjust the value of any assets
        or
        liabilities. An impairment loss is recognized for any excess in the carrying
        value of goodwill over the implied fair value of goodwill.


**Asset
      Impairment**





The
      Company reviews long-lived assets for impairment under SFAS No. 144, "Accounting
      for the Impairment or Disposal of Long-Lived Assets." Long-lived assets to
      be
      held and used are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. The carrying amount of a long-lived asset is not recoverable if
      it
      exceeds the sum of the undiscounted cash flows expected to result from the
      use
      and eventual disposition of the asset. Long-lived assets to be disposed of
      are
      reported at the lower carrying amount or fair value less cost to sell. During
      the three-month period ended June 30, 2006, the Company determined that there
      were no long-lived assets that were impaired.




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


22


**Comparison
      of Results of Continuing Operations for the Three Months Ended June 30, 2006
      and
      2005:**





***Revenues***





The
      Company reported total operating revenue from continuing operations of
      $5,531,623 for the three-month period ended June 30, 2006 as compared to
      $5,012,042 for the three-month period ended June 30, 2005. The increase in
      the
      three month revenues is mainly due to higher surcharge and interchange revenue
      from acquired ATM merchant locations and increased organic sales growth.




***Cost
      of Revenues***





Our
      total
      cost of revenues from continuing operations increased from $3,023,074 to 
$3,123,670 in the three-month periods ended June 30, 2005 and 2006,
      respectively. The continued growth in our transactions, interest costs
      increases, network cost increases and the acquisition during fiscal year 2005
      had a significant impact on the cost of revenues from continuing operations
      for
      the three months ended June 30, 2006.





***Gross
      Margin***





Gross
      profit from continuing operations as a percentage of revenue for the three-month
      period ended June 30, 2006 and 2005 were approximately 43.5%, or $2,407,953
      and approximately 39.7%, or $1,988,968 respectively. There was a
      significant increase in the number of ATMs in service, with approximately 4,600
      in service during the three-month period ended June 30, 2006 , compared to
      3,000
      ATMs in service during the same three-month period ended June 30, 2005.




***Operating
      Expenses***





Our
      total
      operating expenses from continuing operations for the three months ended June
      30, 2006 and 2005, were $2,512,320 and $1,624,147, respectively. The
      principal components of operating expenses are general and administrative
      expenses such as professional and legal fees, administrative salaries and
      benefits, consulting and audit fees, occupancy costs, sales and marketing
      expenses and administrative expenses. Operating expenses also include
      depreciation and amortization.





***Selling,
      General and Administrative (SG&A) Expenses***





Our
      total
      SG&A expenses from continuing operations increased to $1,883,475 for the
      three-month period ended June 30, 2006 from $1,315,419 for the three-month
      period ended June 30, 2005. The majority of the increase in SG&A expenses
      from continuing operations is directly attributable to the increase in salaries
      and benefits, professional, legal and audit fees and other expenses related
      to
      the increase in operating revenues resulting from the acquisitions we completed
      in 2005. Additionally, during the three month period ended June 30, 2006, the
      Company recorded an increased reserve for bad debts.




23





***Depreciation
      and Amortization***





Depreciation
      and amortization from continuing operations increased for the three-month period
      ended June 30, 2006 to $628,845 from $308,728 for the same period in 2005.
      This increase in depreciation and amortization expense was due to the following
      factors:





·
            An
                increase in ATM equipment, resulting from acquisitions and developed
                software in 2005, whereby fixed assets, net, have increased from
                $6,803,472in
                June 2005 to $7,763,992in
                June 2006; and





·
            An
                increase in amortization specific to the merchant contracts we purchased
                during fiscal year 2005 for which a full quarter’s amortization expense
                was recorded during the three-month period ended June 30, 2006.





See
      Financial Statement Footnotes #2: Significant Account Policies regarding the
      amortization of intangible merchant contracts.




***Operating
      Income (Loss) from Continuing Operations***





We
      had an
      operating loss from continuing operations for the three-month period ended
      June
      30, 2006 in the amount of $104,376  as compared to operating income
      from continuing operations of $364,821 in the three-month period ended June
      30,
      2005.




***Interest
      Expense, Net***





Interest
      expense, net, increased for the three-month period ended June 30, 2006 to
      $309,201 from $153,502 for the three-month period ended June 30, 2005. The
      increase was mainly due to increased debt during the three-month period ended
      June 30, 2006 as compared to the three-month period ended June 30, 2005.




***Income
      (loss) from Continuing Operations Before Provision for
      Tax***





We
      had
      net loss from continuing operations before taxes of $373,100 for the three
      months ended June 30, 2006 as compared to a net loss from continuing operations
      before taxes of $213,517 for the three-month period ended June 30, 2005.





***Income
      Taxes***





We
      incurred no tax expense in either of the respective periods ending June
      30,
      2006 and June 30, 2005. The Company has net operating loss carryforwards
      from 2002 of approximately $9,800,000 which expire in various periods through
      2025.




**Comparison
      of Results of Continuing Operations for the Six Months Ended June 30, 2006
      and
      2005:**




24


***Revenues***


The
      Company reported total operating revenue from continuing operations
      of $10,777,193  for the six-month period ended June 30, 2006 as
      compared to $9,729,278  for the six-month period ended June 30, 2005. The
      increase in the six month revenues is due to higher surcharge and interchange
      revenue from acquired ATM merchant locations during 2005 and increased organic
      sales growth.




***Cost
      of Revenues***





Our
      total
      cost of revenues from continuing operations increased from $5,727,513 to
      $6,092,032 in the six-month periods ended June 30, 2005 and 2006, respectively.
      The growth in our transactions, year over year, interest costs increases,
      network cost increases and the acquisition during fiscal year 2005 had a
      significant impact on the cost of revenues from continuing operations for the
      six months ended June 30, 2006.





***Gross
      Margin***





Gross
      profit from continuing operations as a percentage of revenue for the six-month
      period ended June 30, 2006 and 2005 were approximately 43.5%, or $4,685,161
      and
      approximately 41.1%, or $4,001,765 respectively.




***Operating
      Expenses***





Our
      total
      operating expenses from continuing operations for the six months ended June
      30,
      2006 and 2005, were $4,690,813 and $3,106,825 , respectively. The
      principal components of operating expenses are general and administrative
      expenses such as professional and legal fees, administrative salaries and
      benefits, consulting and audit fees, occupancy costs, sales and marketing
      expenses and administrative expenses. Operating expenses also include
      depreciation and amortization.




***Selling,
      General and Administrative (SG&A) Expenses***





Our
      total
      SG&A expenses from continuing operations increased to $3,437,572 for the
      six-month period ended June 30, 2006 from $2,486,989 for the six-month
      period ended June 30, 2005. The majority of the increase in SG&A expenses
      from continuing operations is directly attributable to the increase in salaries
      and benefits, professional, legal and audit fees and other expenses related
      to
      the increase in operating revenues resulting from the acquisitions we completed
      in 2005. Additionally, during the six-month period ended June 30, 2006, the
      Company recorded an increased reserve for bad debts.





***Depreciation
      and Amortization***





Depreciation
      and amortization from continuing operations increased for the six-month period
      ended June 30, 2006 to $1,253,241 from $619,836 for the same period in
      2005.




***Operating
      Income (Loss) from Continuing Operations***





We
      had an
      operating loss from continuing operations for the six-month period ended June
      30, 2006 in the amount of $5,652 as compared to operating income from continuing
      operations of $894,940 in the six-month period ended June 30, 2005.





25




***Other
      Income and Expense***





During
      the six months ended June 30, 2006 there were other expenses of $665,353 which
      primarily relate to legal fee expenses and reserves in connection with the
      aforementioned James Collins legal claim and other increased legal and accrued
      expenses. During the six months ended June 30, 2005 there was other income
      of
      $2,198.





***Interest
      Expense, Net***





Interest
      expense, net, increased for the six-month period ended June 30, 2006 to $640,264 from
      $275,043 for
      the
      six-month period ended June 30, 2005. The increase was mainly due to increased
      debt during the six-month period ended June 30, 2006 as compared to the
      six-month period ended June 30, 2006.





***Income
      (loss) from Continuing Operations Before Provision for
      Tax***





We
      had
      net loss from continuing operations before taxes of $1,251,015 for the six
      months ended June 30, 2006 as compared to net income from continuing perations
      before taxes of $622,095 for the six-month period ended June 30, 2005.





***Income
      Taxes***





We
      incurred no tax expense in either of the respective periods ended June
      30,
      2006 and June 30, 2005. The Company has net operating loss carryforwards
      from 2002 of approximately $9,800,000 which expire in various periods through
      2025.




***Seasonality***





ATM
      transactions account for all of the transaction volume processed by our
      customers. The volume of these transactions on our networks generally is greater
      in the second and third quarter vacation seasons than during the rest of the
      year. Consequently, revenues and earnings from ATM transactions in the first
      and
      fourth quarter generally are lower than revenues and earnings from ATM
      transactions in the second and third quarters. We expect that our operating
      results in the foreseeable future will be affected by seasonal trends in the
      ATM
      transaction market.




**Liquidity
      and Capital Resources**





***Working
      Capital***





As
      of
      June 30, 2006, the Company had current assets of $4,012,778 and current
      liabilities of $5,957,378, which results in a negative working capital of
      $1,944,600 as compared to current assets of $3,715,929 and current liabilities
      of $4,809,834 resulting in a negative working capital of $1,093,905 as of June
      30, 2005. The ratio of current assets to current liabilities decreased to 0.67
      at June 30, 2006 from 0.84 at December 31, 2005 and from 0.70 at March 31,
      2006.
      It is expected that cash provided from operations will be sufficient for the
      next 12 months.





26




***Additional
      Funding Sources***





We
      have
      funded our operations and investment activities from cash flow generated by
      operations and financing activities. Net cash provided by continuing operating
      activities during the six-month period ended June 30, 2006 was $199,876 compared
      to the net cash provided by continuing operating activities during the six-month
      period ended June 30, 2005 of $1,129,225, respectively.





The
      Company used $1,407,914 for
      financing activities, mainly paying back senior lender notes and capital leases,
      during the six-month period ended June 30, 2006, compared to funds provided
      by
      financing activities of $380,295 for
      the
      six-month period ended June 30, 2005.





Net
      cash
      provided by investing activities in continuing operations was $186,471 during
      six-month period ended June 30, 2006, mainly representing the funds received
      from the 50% sale of Cash Axcess Corporation offset by purchases of property
      and
      equipment. This compares to net cash used in investing activities in continuing
      operations of $1,054,371 for the six-month period ended June 30, 2005, used
      mainly for the purchases of property and equipment.





The
      Company believes its sources of cash are adequate for the next 12 month's of
      operations.




In
      order
      to fulfill its business plan and expand its business, the Company musthave
      access to funding sources that are prepared to make equity or debtinvestments
      in the Company's securities.


In
        order
        to address this potential for growth, the Company has taken steps to raise
        additional funds to finance its operations, including the potential for making
        strategic acquisitions, which could better position the Company for growth.
        Historically, the Company has relied primarily upon institutional investors
        for
        this purpose. There can be no guarantee that institutional funding will be
        available to the Company in the near future. The Company has conducted several
        private placement offerings with accredited investors.
 
 The
        Company's ability to attract investors depends upon a number of factors,
        some of
        which are beyond the Company's control. The key factors in this regard include
        general economic conditions, the condition of ATM markets, the availability
        of
        alternative investment opportunities and the Company's past financial
        performance affecting the Company's current reputation in the financial
        community.
 
 The
        Company is continuing its efforts to raise additional capital through equity
        or
        debt financings. To continue its current business plan and acquisition strategy
        the Company estimates, it will require approximately $1,400,000 in additional
        capital to meet its needs for the next 12 months for acquisitions and such
        items
        as new ATM leases.
 
 The
        Company will require significant additional financing in the future in order
        to
        satisfy its acquisition plan. To fund its continued growth the Company intends
        to raise additional capital through debt and equity financings, however,
        the
        Company cannot guarantee that it will be able to raise funding through these
        types of financings. The need for additional capital to finance operations
        and
        growth will be greater should, among other things, revenue or expense estimates
        prove to be incorrect, particularly if additional sources of capital are
        not
        raised in sufficient amounts or on acceptable terms when needed. Consequently,
        the Company may be required to reduce the scope of its business activities
        until
        other financing can be obtained.


27




The
      Company is also exploring other strategic alternatives. On May 4, 2006, the
      Company entered into a letter agreement with Raymond James & Associates,
      Inc. (“RJ”) pursuant to which the Company retained RJ to act as its sole,
      external investment banking advisor in helping the Company evaluate strategic
      alternatives including the sale of all or a portion of its assets or securities.
      In consideration for such services, the Company has paid RJ an initial retainer
      of $50,000 and has agreed to reimburse RJ for all reasonable out of pocket
      expenses, pay a transaction fee of $500,000 plus 2.5% of any consideration
      over
      $16 million received by the Company in connection with any transaction and
      pay
      $150,000 in connection with any fairness opinion delivered by RJ to the
      Company.




The
        Company does not use its own funds for vault cash, but rather relies upon
        third
        party sources. The Company in general rents the vault cash from financial
        institutions and pays a negotiated interest rate for the use of the money.
        The
        vault cash is never in the possession of, controlled or directed by the Company
        but rather cycles from the bank, to the armored car carrier, and to the ATM.
        Each day’s withdrawals are settled back to the owner of the vault cash on the
        next business day. Both Nationwide Money and its customers (the merchants)
        sign
        a document stating that the vault cash belongs to the financial institution
        and
        that neither party has any legal rights to the funds. The required vault
        cash is
        obtained under the following arrangements:


·
              Palm
                  Desert Bank: Nationwide Money Services has been using Palm Desert
                  National
                  Bank as a vault cash provider since April of 2001. This relationship
                  was
                  limited to the funding of a specific portfolio of ATMs and as a
                  result
                  limited the growth potential of the relationship. During the third
                  quarter
                  of 2002, Nationwide Money and Palm Desert initiated discussions
                  to expand
                  the relationship and for Palm Desert to provide vault cash for
                  additional
                  ATMs. As of June 30, 2006, Nationwide Money had 44 ATMs funded
                  by Palm
                  Desert with a vault cash outstanding balance of about
                  $1,000,000**.**In
                  January 2003, we entered into an arrangement with Palm Desert allowing
                  us
                  to obtain up to $10,000,000 in vault cash. The Palm Desert Bank
                  arrangement has a term of two years and may be terminated by Palm
                  Desert
                  Bank upon breach by us and upon the occurrence of certain other
                  events.
                  Under this arrangement, we are required to pay a monthly service
                  fee on
                  the outstanding amount equal to the prime rate of interest, plus
                  a
                  specified percentage, and must pay monthly "bank" fees. Additionally
                  the
                  Company is required to make a deposit with Palm Desert Bank in
                  an amount
                  determined by the outstanding balance. We are also required to
                  maintain
                  insurance on the vault cash.




·
              WSFS:
                  On May 15, 2000, we entered into an arrangement with Wilmington
                  Savings
                  Fund Society ("WSFS") allowing us to obtain up to $2,000,000 in
                  vault
                  cash. In May 2002, we renewed the agreement with WSFS and increased
                  the
                  vault cash limit to $5,000,000 and the new contract has a month-to-month
                  term. Due to added locations from our acquisitions we have increased
                  the
                  WSFS line as of June 30, 2006, to approximately $20,000,000. The
                  Company
                  is currently using approximately $12,000,000 of the WSFS line.
                  The WSFS
                  contract may be terminated by WSFS at any time upon breach by us
                  and upon
                  the occurrence of certain other events. Under this arrangement,
                  we are
                  required to pay a monthly service fee on the outstanding amount
                  equal to
                  the prime rate of interest, plus a specified percentage, and must
                  pay
                  monthly "bank" and insurance fees. We are also required to maintain
                  insurance on the vault cash.
 
 28
 ·
                  Various
                      Branded Cash Partners: Nationwide Money has partnered with
                      numerous banks
                      and credit unions to market specific Nationwide ATMs to the
                      cardholders of
                      these institutions. We add signage and marketing material to
                      the ATM so
                      that the ATM is easily identified as being associated with
                      the bank or
                      credit union, and the cardholders of these institutions receive
                      surcharge
                      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 Money is that this reduces the costs
                      associated
                      with vault cash, cash replenishment and first line by approximately
                      50%.
                      Another advantage is that with a branded ATM, transactions
                      volumes
                      traditionally increase more than at a non-branded ATM. As of
                      June 30,
                      2006, Nationwide Money had 55 branded partners, which funded
                      over 634 ATMs
                      in 11 states.


As
        any
        newly-placed ATMs mature, such ATMs generally experience increased activity
        and
        generate increased revenues. We believe that future cash flow from operations
        will be sufficient to fund operations and to allow us to continue to explore
        and
        pursue expansion opportunities.
 
 If
        cash
        flow from operations is not sufficient to fund our operations, we may be
        required to seek additional sources of financing. If any of our existing
        financing arrangements are terminated, or if we seek additional funding to
        expand our ATM network, additional financing may not be available when needed
        or
        may not be available on acceptable terms. In that event, our ability to maintain
        and expand our ATM network may be adversely affected. The loss of one or
        more
        sources of vault cash funding or the loss of additional customers could have
        a
        material adverse effect on our business, results of operations and financial
        condition. As always, we continue to look for new and alternative vault cash
        sources.


***Risks
      Related to the Restatement***





On
      March
      30, 2006, the Company’s Audit Committee along with senior management, determined
      that the consolidated statements of income and cash flows for the quarters
      ended
      September 30, 2005 and June 30, 2005 contained errors, requiring the Company
      to
      amend its Form 10QSBs for the quarters ended June 30, 2005 and September 30,
      2005. The errors related to the Company's accounting for revenue under certain
      of its processing contracts; capitalization of purchased software costs; and
      the
      depreciation of assets at a more rapid pace than required. These errors resulted
      in a revenue correction for the periods ended September 30, 2005 and June 30,
      2005 of $241,439 and $425,669, respectively, and a total reduction in net income
      during the two quarters by approximately $510,962. The correction resulted
      in a
      reported net loss for the quarter ended September 30, 2005, of $88,603, and
      a
      reported net loss for the quarter ended June 30, 2005 of $42,084.




In
      addition, management of the Company determined that the reasons underlying
      the
      restatement were the result of a material weakness in the Company’s internal
      controls. Management of the Company reviewed the internal control deficiency
      with the Audit Committee, discussed this deficiency with the Company’s
      independent registered public accounting firm and implemented remedial measures
      to address the identified material weakness in connection with the preparation
      of its restated financial statements.




29




The
      Company believes the restatement corrected the errors caused by the material
      weakness and that the material weakness has been remediated. However, the
      Company may face potential adverse consequences as a result of the restatement
      of its historical financial statements, including shareholder litigation,
      litigation with its strategic investors and/or government investigations as
      well
      as any increased costs associated therewith and the diversion of management’s
      attention and resources to address any such litigation or
      investigations.





***Contractual
      Obligations***




Our
        ability to fund our capital needs is also impacted by our overall capacity
        to
        acquire favorable financing terms in our acquisition of ATMs. Our contractual
        obligations, including commitments for future payments under non-cancelable
        lease arrangements and short and long-term debt arrangements, are summarized
        below. We do not participate in, nor secure financings for, any unconsolidated,
        limited or special purpose entities. We anticipate that our capital expenditures
        (outside of acquisitions) for fiscal 2006 will total approximately $1,800,000,
        primarily for the acquisition of ATMs and related ATM installation costs.
        We
        lease ATMs under capital lease agreements that expire between 2006 and 2008
        and
        provide for lease payments at interest rates up to 23% per annum. See Note
        8 to
        the Consolidated Financial Statements in the Form 10KSB Annual
        Report.





***Inflation***


Impact
        of
        Inflation and Changing Prices. While subject to inflation, we were not impacted
        by inflation during the past two fiscal years in any material respect. During
        the current year inflation, mainly through interest rate hikes have increased
        the rental cost of our vault cash. As the interest rates increase and vault
        cash
        becomes increasingly more due to acquisitions this factor will have a less
        favorable impact on the Company’s income.




**Item
      3. Controls and Procedures**


Management
        of the Company is responsible for establishing and maintaining adequate internal
        control over financial reporting and for the assessment of the effectiveness
        of
        internal controls over financial reporting. The Company's internal control
        system over financial reporting is a process designed under the supervision
        of
        the Company's Chief Executive Officer and Chief Financial Officer to provide
        reasonable assurance regarding the reliability of financial reporting and
        the
        preparation of the consolidated financial statements in accordance with U.S.
        generally accepted accounting principles.
 
 All
        internal control systems, no matter how well designed, have inherent
        limitations. Therefore, even those systems determined to be effective can
        provide only reasonable assurance with respect to financial statement
        preparation and presentation. Also, projections of any evaluation of
        effectiveness to future periods are subject to the risk that controls may
        become
        inadequate because of changes in conditions.


The
      Company maintains disclosure controls and procedures that are designed to ensure
      that information required to be disclosed in the Company’s reports under the
      Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
      and reported within the time periods specified in the SEC’s rules and forms, and
      that such information is accumulated and communicated to the Company’s
      management, including its Chief Executive Officer and Chief Financial Officer,
      as appropriate, to allow timely decisions regarding required disclosure. In
      designing and evaluating the disclosure controls and procedures, management
      recognized that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable assurance of achieving the desired control
      objectives, and management necessarily was required to apply its judgment in
      evaluating the cost-benefit relationship of possible controls and
      procedures.




30




***Evaluation***




The
      Company carried out an evaluation, under the supervision, and with the
      participation, of the Company’s management, including the Company’s Chief
      Executive Officer and the Company’s Chief Financial Officer, of the
      effectiveness of the Company’s disclosure controls and procedures as of June 30,
      2006. Based on the foregoing, the Company’s Chief Executive Officer and the
      Company’s Chief Financial Officer concluded that the Company’s disclosure
      controls and procedures were effective as of June 30, 2006.




***Remediation
      of Previously Stated Material Weaknesses***




We
        have
        formulated a program to remedy the material weaknesses identified in the
        Form
        10QSB quarterly report for the period ended March 31, 2006. In the first
        phase
        of the program, completed as of March 31, 2006, we hired a Controller and
        a
        Senior Accountant to augment our accounting, financial reporting and financial
        control function in our finance department. Due to the subsequent departure
        of
        our previous Chief Financial Officer and subsequent appointment of our previous
        Controller into that position, we have adjusted the plan by engaging an outside
        consulting firm to assist in the financial reporting of the Company and to
        liaise with our outside auditors with regards to the Company’s application of
        accounting principles.


In
        the
        second phase of the program, we increased our auditor's review work quarterly,
        as well as, increased the areas reviewed and discussed with the audit committee
        and auditors beforehand, on any changes in accounting principles or revenue
        or
        expense recognition. Specifically, we implemented the following remediation
        measures relating to the previously stated material weaknesses:
 
 1. *Ineffective
        controls over revenue recognition* .
        Our
        remediation measures relating to revenue recognition includes a review by
        management of revenue items other than normal fees earned such as surcharge
        and
        interchange including a regular review of the accounts receivable aging.
        We have
        also instituted an objective method of determining the collectibility of
        the
        accounts receivable as well as a strict method for setting reserves against
        those receivables.
 
 2. *Ineffective
        controls over depreciation* .
        Subsequent to the errors that resulted in previous audit adjustments, the
        Company has set up a tracking system to follow the final production periods
        when
        software is completed and will include a review by management of depreciable
        items. Also the Company has ceased its software development subsidiaries
        as of
        December 31, 2005 and does not plan to change any software depreciation.
        Additionally, during the quarter the Company has installed a new fixed asset
        management module onto its accounting platform which now automates the
        calculation of the appropriate depreciation over the selected life span of
        the
        equipment.


3. *Ineffective
      controls over internally developed software* .
      The
      Company has set up a tracking system to follow the development, testing,
      implementation and final production periods when the software is completed
      and
      will include a review by management of internally developed items.





31




Although
      the Company’s Chief Executive Officer and Chief Financial Officer believe that
      its disclosure controls and procedures were effective as of June 30, 2006,
      We
      plan to continue our remediation program during the third quarter of fiscal
      2006
      to further improve our disclosure controls and procedures. The material
      weaknesses will not be considered remediated until the applicable remedial
      controls operate for a sufficient period of time and management
      has concluded, through testing, that these controls are operating effectively.




***Changes
      in Internal Control Over Financial Reporting***





Except
      as
      set forth above, there have been no changes in our internal control over
      financial reporting that occurred during the three months ended June 30, 2006
      that have materially affected, or are reasonably likely to materially affect,
      our internal control over financial reporting.




**PART
      II - OTHER INFORMATION**





**Item
      1. Legal Proceedings**





In
      March
      2004, the Company received a claim filed by James Collins, a previous employee
      of Global Axcess Corp. The claim was filed in Superior court of California,
      County of San Diego on March 2, 2004. The claim alleged the following were
      owed
      in connection with the employment agreement: compensation, bonuses and other
      benefits of approximately $316,915; and 90,000 restricted shares and 359,700
      stock options exercisable at $3.75 per share. As of March 31, 2006, the Company
      had accrued a total of $450,000 for the potential legal claim. The claim filed
      by James Collins was settled for $450,000 on May 2, 2006 whereby the Company
      made a lump-sum payment of $300,000 on May 22, 2006 and has agreed to pay the
      remaining $150,000 in 12 monthly installments of $12,500 commencing July 1,
      2006.





From
      time
      to time, the Company and its subsidiaries may be parties to, and their property
      is subject to, ordinary, routine litigation incidental to their business. Claims
      may exceed insurance policy limits and the Company or any one of its
      subsidiaries may have exposure to a liability that is not covered by insurance.
      Management is not aware of any such lawsuits that could have a material adverse
      impact on the Company’s consolidated results of operations, cash flows or
      financial position.




**Item
      2. Unregistered Sale of Equity Securities and Use of
      Proceeds**





Not
      applicable





**Item
      3. Defaults upon Senior Securities**




The
        Wachovia loan agreement requires the Company to meet certain covenants. The
        three covenant terms are as follows: 1) Senior Liabilities to Effective Tangible
        Net Worth ratio of not more than 2.25; 2) Senior Funded Debt to EBITDA ratio
        of
        not more than 2.00 to 1.00; 3) EBITDA to Debt Service of not less than 1.25
        to
        1.00. All of the covenants are measured quarterly. As of June 30, 2006, the
        Company was not in compliance with the covenants described in 2 and 3 above.
        The
        Company has obtained waivers of these covenants for June 30, 2006 and through
        September 30, 2006, respectively.


32




**Item
      4. Submission of Matters to a Vote of Security Holders**





None





**Item
      5. Other Information**





On
      May 4,
      2006, the Company entered into a letter agreement with Raymond James &
Associates, Inc. (“RJ”) pursuant to which the Company retained RJ to act as its
      sole, external investment banking advisor in helping the Company evaluate
      strategic alternatives including the sale of all or a portion of its assets
      or
      securities. In consideration for such services, the Company has paid RJ an
      initial retainer of $50,000 and has agreed to reimburse RJ for all reasonable
      out of pocket expenses, pay a transaction fee of $500,000 plus 2.5% of any
      consideration over $16 million received by the Company in connection with any
      transaction and pay $150,000 in connection with any fairness opinion delivered
      by RJ to the Company.





On
      May 9,
      2006, Robert Pearson resigned from his position on the Board of Directors.





On
      May
      10, 2006, David S. Surette notified the Company of his resignation as Chief
      Financial Officer and Chief Accounting Officer effective May 31,
      2006.





**Item
      6. Exhibits**




Exhibit
            
            Description31.1
            
            Certification
                of the Chief Executive Officer of Global Axcess Corppursuant
                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 Corppursuant
              to Section 906 of the Sarbanes-Oxley Act of
              2002.


33





SIGNATURES





Pursuant
      to the requirements of the Securities Exchange Act of 1934, as of August
      14, 2006 the Issuer has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




**GLOBAL AXCESS
              CORP**By:
            /s/ MICHAEL
              DODAKMichael
                Dodak
              Chief
                Executive Officer


Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report
      has been signed below by the following persons on behalf of the Issuer and
      in
      the capacities indicated on the 14 th day of
      August, 2006.




Signature
            
            Title/s/Michael Dodak
              Michael
              Dodak
            
            CEO, Chairman/s/David Fann
              David
                Fann
            
            President, Secretary
              and
              Director/s/
                Lock IrelandLock Ireland
            
            Director/s/
                Robert LandisRobert Landis
            
            Director/s/ Joseph Loughry
              Joseph
              Loughry
            
            Director/s/ Alan RossiterAlan Rossiter
            
            Director/s/
                Michael J. LoiaconoMichael J. Loiacono
            
            Chief Financial Officer, Chief
              Accounting Officer




34