UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 
  FORM
        10-QSB
 
 (MARK
        ONE)
 
 x
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
                  ACT OF 1934 for the quarterly period ended June 30,
                  2007
 
 OR
 
 o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
                  ACT OF 1934 for the transition period from ___________ to___________
 
 000-17874
 (Commission
        file number)
 
 
 
 GLOBAL
        AXCESS CORP
 (Name
        of
        Small Business Issuer in Its Charter)
 
 NEVADA
              88-0199674(State
                  or other jurisdiction of
              (I.R.S.
                  Employerincorporation
                  or organization)
              Identification
                  No.)
  7800
                  BELFORT PARKWAY, Suite 165JACKSONVILLE,
                  FLORIDA
              32256(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 (904)
        280-3950
 (Issuer's
        Telephone Number, Including Area Code)
 
 Securities
        registered pursuant to Section 12(b) of the Act: None
 Securities
        registered pursuant to Section 12(g) of the Act: Common Stock
 
 
 
 Check
        whether the Issuer: (1) has filed all reports required to be filed by
        Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
        9 months (or for such shorter period that the Issuer was required to file
        such
        reports), and (2) has been subject to such filing requirements for the past
        90
        days. Yes x No o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of Exchange Act). Yes o
        No x
  As
        of
        August 03, 2007, the Issuer had 20,973,924 shares outstanding of the Common
        Stock ($0.001 par value) and no shares outstanding of the Preferred Stock ($0.001
        par value).
 
 Transitional
        Small Business Disclosure Format (Check One): Yes o No x
  
 
 TABLE
        OF
        CONTENTS
 Page
                    No.PART
                    I
                FINANCIAL
                    INFORMATIONItem
                    1.
                Financial
                    Statements (unaudited)
                4Item
                    2.
                Management's
                    Discussion and Analysis or Plan of Operation
                25Item
                    3.
                Controls
                    and Procedures
                36Item
                    3A(T).
                Controls
                    and Procedures
                38PART
                    II
                OTHER
                    INFORMATIONItem
                    1.
                Legal
                    Proceedings
                38Item
                    1A.
                Risk
                    Factors
                38Item
                    2.
                Unregistered
                    Sale of Equity Securities and Use of Proceeds
                38Item
                    3.
                Defaults
                    Upon Senior Securities
                38Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                38Item
                    5.
                Other
                    Information
                39Item
                    6.
                Exhibits
                39SIGNATURES
                41
  2
 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 2007.
          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.
  3
 **PART
        I - FINANCIAL INFORMATION**
 
 **Item
        1. Financial Statements (unaudited)**
 
 GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED BALANCE SHEET
 June
        30,
        2007
 (Unaudited)
 
 ASSETSCurrent
                  assetsCash
                  and cash equivalents
              
              $
              551,428Automated
                  teller machine vault cash
              
              
              1,960Accounts
                  receivable, net of allowance for doubtful accounts of
                  $56,262
              
              
              1,231,777Note
                  receivable - current
              
              
              100,000Inventory
              
              
              453,593Prepaid
                  expenses and other current assets
              
              
              131,963Total
                  current assets
              
              
              2,470,721Fixed
                  assets, net
              
              
              5,816,972Other
                  assetsMerchant
                  contracts, net
              
              
              12,188,747Intangible
                  assets, net
              
              
              4,183,613Deferred
                  tax asset - non-current
              
              
              339,800Other
                  assets
              
              
              18,876Total
                  assets
              
              $
              25,018,729LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilitiesAccounts
                  payable and accrued liabilities
              
              $
              3,865,016Notes
                  payable - related parties - current portion, net
              
              
              8,159Note
                  payable
              
              
              50,000Senior
                  lenders' notes payable - current portion, net
              
              
              600,000Capital
                  lease obligations - current portion
              
              
              1,097,031Total
                  current liabilities
              
              
              5,620,206Long-term
                  liabilitiesNotes
                  payable - related parties - long-term portion, net
              
              
              1,333,503Senior
                  lenders' notes payable - long-term portion, net
              
              
              4,880,095Capital
                  lease obligations - long-term portion
              
              
              1,290,894Total
                  liabilities
              
              
              13,124,698Stockholders'
                  equityPreferred
                  stock; $0.001 par value; 5,000,000 shares authorized, no shares
                  issued and
                  outstanding
              
              
              -Common
                  stock; $0.001 par value; 45,000,000 shares authorized, 21,021,786
                  shares
                  issued, 20,973,924 outstanding
              
              
              21,022Additional
                  paid-in capital
              
              
              22,371,733Accumulated
                  deficit
              
              
              (10,486,758
              )Treasury
                  stock; 47,862 shares of common stock at cost
              
              
              (11,966
              )Total
                  stockholders' equity
              
              
              11,894,031Total
                  liabilities and stockholders' equity
              
              $
              25,018,729
  See
        Accompanying Notes to Condensed Consolidated Financial
        Statements
  4
 
 GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 
 For
                  the Three Months EndedJune
                  30, 2007
              
              June
                  30, 2006Revenues
              
              $
              5,596,210
              
              $
              5,478,911Cost
                  of revenues
              
              
              3,267,497
              
              
              3,097,689Gross
                  profit
              
              
              2,328,713
              
              
              2,381,222Operating
                  expensesDepreciation
                  and amortization
              
              
              558,773
              
              
              609,305Selling,
                  general and administrative
              
              
              1,378,504
              
              
              1,759,018Impairment
                  of notes receivable
              
              
              5,743
              
              
              -Recovery
                  of bad debts
              
              
              (100,000
              )
              
              -Total
                  operating expenses
              
              
              1,843,020
              
              
              2,368,323Operating
                  income from continuing operations before items shown below
              
              
              485,693
              
              
              12,899Interest
                  expense, net
              
              
              (290,909
              )
              
              (309,202
              )Loss
                  on disposal of assets
              
              
              (23,877
              )
              
              (4,056
              )Loss
                  attributed to minority interest
              
              
              -
              
              
              46,599Income
                  (loss) from continuing operations
              
              $
              170,907
              
              $
              (253,760
              )Loss
                  from discontinued operations, net of tax
              
              $
              -
              
              $
              (119,340
              )Net
                  Income (loss)
              
              $
              170,907
              
              $
              (373,100
              )Income
                  (loss) per common share - basic:Income
                  (loss) from continuing operations
              
              $
              0.01
              
              $
              (0.01
              )Loss
                  from discontinued operations
              
              $
              -
              
              $
              (0.01
              )Net
                  Income (loss) per common share
              
              $
              0.01
              
              $
              (0.02
              )Income
                  (loss) per common share - diluted:Income
                  (loss) from continuing operations
              
              $
              0.01
              
              $
              (0.01
              )Loss
                  from discontinued operations
              
              $
              -
              
              $
              (0.01
              )Net
                  Income (loss) per common share
              
              $
              0.01
              
              $
              (0.02
              )Weighted
                  average common shares outstanding:Basic
              
              
              20,984,443
              
              
              21,010,028Diluted
              
              
              20,984,443
              
              
              21,010,028
  See
        Accompanying Notes to Condensed Consolidated Financial
        Statements
  5
 
 GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 
 For
                  the Six Months EndedJune
                  30, 2007
              
              June
                  30, 2006Revenues
              
              $
              10,867,200
              
              $
              10,675,648Cost
                  of revenues
              
              
              6,362,171
              
              
              6,046,818Gross
                  profit
              
              
              4,505,029
              
              
              4,628,830Operating
                  expensesDepreciation
                  and amortization
              
              
              1,106,914
              
              
              1,213,887Selling,
                  general and administrative
              
              
              2,763,789
              
              
              3,120,837Impairment
                  of notes receivable
              
              
              5,743
              
              
              289,892Recovery
                  of bad debts
              
              
              (100,000
              )
              
              -Other
                  expense
              
              
              -
              
              
              450,000Total
                  operating expenses
              
              
              3,776,446
              
              
              5,074,616Operating
                  income (loss) from continuing operations before items shown
                  below
              
              
              728,583
              
              
              (445,786
              )Interest
                  expense, net
              
              
              (608,440
              )
              
              (640,265
              )Gain
                  (loss) on sale or disposal of assets
              
              
              (23,017
              )
              
              10,377Loss
                  attributed to minority interest
              
              
              -
              
              
              46,599Income
                  (loss) from continuing operations
              
              $
              97,126
              
              $
              (1,029,075
              )Income
                  (loss) from discontinued operations, net of tax
              
              $
              175,000
              
              $
              (221,940
              )Net
                  Income (loss)
              
              $
              272,126
              
              $
              (1,251,015
              )Income
                  (loss) per common share - basic:Income
                  (loss) from continuing operations
              
              $
              0.00
              
              $
              (0.05
              )Income
                  (loss) from discontinued operations
              
              $
              0.01
              
              $
              (0.01
              )Net
                  Income (loss) per common share
              
              $
              0.01
              
              $
              (0.06
              )Income
                  (loss) per common share - diluted:Income
                  (loss) from continuing operations
              
              $
              0.00
              
              $
              (0.05
              )Income
                  (loss) from discontinued operations
              
              $
              0.01
              
              $
              (0.01
              )Net
                  Income (loss) per common share
              
              $
              0.01
              
              $
              (0.06
              )Weighted
                  average common shares outstanding:Basic
              
              
              21,003,011
              
              
              20,990,878Diluted
              
              
              21,003,011
              
              
              20,990,878
  See
        Accompanying Notes to Condensed Consolidated Financial Statements
  6
  GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 
 For
                  the Six Months EndedJune
                  30, 2007
              
              June
                  30, 2006Cash
                  flows from operating activities:Income
                  (loss) from continuing operations
              
              $
              97,126
              
              $
              (1,029,075
              )Adjustments
                  to reconcile net income (loss) from continuing operations to net
                  cash
                  provided by continuing operating activities:Stock
                  based compensation
              
              
              5,330
              
              
              (11,698
              )Depreciation
                  and amortization
              
              
              1,106,914
              
              
              1,213,887Allowance
                  for doubtful accounts
              
              
              (14,482
              )
              
              97,899Accretion
                  of discount on notes payable
              
              
              82,993
              
              
              75,200Impairment
                  of notes receivable
              
              
              5,743
              
              
              289,892Loss
                  attributed to minority interest
              
              
              -
              
              
              (46,599
              )Loss
                  on sale or disposal of assets
              
              
              23,017
              
              
              -Changes
                  in operating assets and liabilities:Change
                  in automated teller machine vault cash
              
              
              24,260
              
              
              241,090Change
                  in accounts receivable
              
              
              (28,415
              )
              
              (325,209
              )Change
                  in note receivable
              
              
              (100,000
              )
              
              -Change
                  in other receivable
              
              
              15
              
              
              -Change
                  in inventory
              
              
              (53,115
              )
              
              (19,273
              )Change
                  in prepaid expenses and other current assets
              
              
              103,354
              
              
              (71,709
              )Change
                  in other assets and deferred revenue
              
              
              13,654
              
              
              (70,617
              )Change
                  in accounts payable and accrued liabilities
              
              
              (326,069
              )
              
              266,500Change
                  in automated teller machine vault cash payable
              
              
              (26,220
              )
              
              (241,090
              )Net
                  cash provided by continuing operating activitities
              
              
              914,105
              
              
              369,198Discontinued
                  operationsNet
                  income (loss)
              
              
              175,000
              
              
              (221,940
              )Adjustments
                  to reconcile net income (loss) to net cash used in discontinued
                  operations:Change
                  in deferred gain on sale of subsidiary
              
              
              (175,000
              )
              
              -Depreciation
              
              
              -
              
              
              39,354Change
                  in accounts receivable
              
              
              -
              
              
              (50,991
              )Change
                  in accounts payable and accrued liabilities
              
              
              -
              
              
              (12,046
              )Change
                  in inventory, prepaid expenses and other current assets
              
              
              -
              
              
              76,301Net
                  cash used in discontinued operating activities
              
              
              -
              
              
              (169,322
              )Net
                  cash provided by continuing and discontinued operating
                  activities
              
              
              914,105
              
              
              199,876Cash
                  flows from investing activities:Proceeds
                  from other receivable related to sale of subsidiary
              
              
              175,000
              
              
              -Insurance
                  proceeds on disposal of fixed assets
              
              
              35,390
              
              
              -Costs
                  of acquiring merchant contracts
              
              
              (12,301
              )
              
              -Purchase
                  of property and equipment
              
              
              (332,202
              )
              
              (422,958
              )Net
                  cash used in investing activities for continuing
                  operations
              
              
              (134,113
              )
              
              (422,958
              )Net
                  cash provided by investing activities for discontinued
                  operations
              
              
              -
              
              
              609,429Net
                  cash provided by (used in) investing activities
              
              
              (134,113
              )
              
              186,471Cash
                  flows from financing activities:Proceeds
                  from issuance of common stock
              
              
              -
              
              
              20,450Proceeds
                  from bank notes
              
              
              -
              
              
              400,000Principal
                  payments on senior lenders' notes payable
              
              
              (358,334
              )
              
              (1,272,916
              )Principal
                  payments on notes payable
              
              
              -
              
              
              (34,723
              )Principal
                  payments on notes payable - related parties
              
              
              (8,972
              )
              
              (8,009
              )Principal
                  payments on capital lease obligations
              
              
              (615,102
              )
              
              (512,716
              )Net
                  cash used in financing activities
              
              
              (982,408
              )
              
              (1,407,914
              )Effect
                  of exchange rate fluctuation on cash in discontinued
                  operations
              
              
              -
              
              
              (98,078
              )Decrease
                  in cash
              
              
              (202,416
              )
              
              (1,119,645
              )Cash,
                  beginning of period
              
              
              753,844
              
              
              2,358,119Cash,
                  end of the period
              
              $
              551,428
              
              $
              1,238,474Cash
                  paid for interest
              
              $
              489,339
              
              $
              565,064
  See
        Accompanying Notes to Condensed Consolidated Financial
        Statements
  7
 
 Supplemental
        schedule of non-cash investing and financing activities:
 
 For
                  the Six Months EndedJune
                  30, 2007
              
              June
                  30, 2006Investing
                  activities:Purchase
                  of assets under capital lease obligations
              
              $
              89,394
              
              $
              816,967Total
                  non-cash investing activities
              
              $
              89,394
              
              $
              816,967Financing
                  activitiesStock
                  issued for compensation
              
              $
              5,330
              
              $
              13,415Discount
                  of notes payable
              
              
              82,993
              
              
              75,200Total
                  non-cash financing activities
              
              $
              88,323
              
              $
              88,615Settlement
                  of note receivable through issuance of treasury stock:Note
                  receivable
              
              $
              (17,709
              )
              $
              -Impairment
                  of notes receivable
              
              
              5,743
              
              
              -Repurchase
                  of treasury stock, 47,862 shares of common stock at cost
              
              $
              (11,966
              )
              $
              -
  See
        Accompanying Notes to Condensed Consolidated Financial
        Statements
  8
  GLOBAL
        AXCESS CORP AND SUBSIDIARIES
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 AS
        OF
        June 30, 2007
 (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, 2006 of Global Axcess Corp
        and
        subsidiaries ("the Company").
 
 The
        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
        condensed consolidated statements of operations and cash flows also include
        discontinued operations from Global Axcess Corp’s former subsidiaries.
 
 The
        condensed consolidated financial information is unaudited. In the opinion
        of
        management, all adjustments necessary to present fairly the financial position
        as of June 30, 2007 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.
 
 ***Executive
        Stock Option Grants***
 
 Effective
        April 2, 2007, the Board of Directors of Global Axcess Corp granted 1,000,000
        incentive stock options to executive management of the Company. 25% of the
        stock
        options under this grant are performance based vesting upon achievement of
        aggressive financial goals (unrelated to targeted net income). Due to the
        aggressive nature of these performance based goals, management currently
        does
        not believe vesting is probable, and accordingly in accordance with Statement
        of
        Financial Accounting Standards No. 123 (Revised 2004), "Share-Based Payment,"
        (SFAS 123 (R)), no compensation cost has been accrued for these options as
        of
        June 30, 2007. During subsequent quarters, management will re-evaluate the
        performance condition and determine if it is or is not probable that the
        performance goals are likely to be achieved and if it is or is not necessary
        to
        record compensation costs for said stock option grants.
 
 In
        addition, 25% of the stock options under the above grant are based on a market
        condition, exercisable upon achievement of an aggressive Company stock price.
        In
        accordance with SFAS 123(R), the effect of the market condition has been
        reflected in the market value, and the related compensation cost, of these
        options.
 
 ***Performance
        Based Incentive Bonus Plan***
 
 Effective
        fiscal 2007, the Company implemented a performance based incentive program
        for
        several employees and management of the Company. A quarterly cash bonus pool
        is
        funded by the Company’s achievement of operating profits from continuing
        operations. During the three-month period ended June 30, 2007 the Company
        recorded an expense accrual of $21,398 relating to this plan.
  9
 
 ***Performance
        Based 401k Contribution Plan***
 
 Effective
        fiscal 2007, the Company implemented a performance based incentive program
        matching 401k contributions. For each quarter the Company achieves its Net
        Income budget, the Company will match up to 50% of the first 6% of an employee’s
        401k contributions during that respective quarter. During the three-month
        period
        ended June 30, 2007 the Company recorded an expense accrual of $7,917 relating
        to this plan.
  All
        fiscal 2007 adjustments are of normal recurring nature with the exception
        of:
 
 ·
              $100,000
                  recovery of bad debts (see Note #4 “Notes Receivable”)
 
 ·
              $175,000
                  gain on sale of assets (see Note #3 “Discontinued
                  Operations”)
 
 ·
              Settlement
                  of a note receivable on April 20, 2007 whereby the 47,862 shares
                  of
                  Company stock being held as collateral were returned as settlement
                  of the
                  note (see Note #4 “Notes Receivable”). The Company recorded the $11,966
                  market value of the returned shares as Treasury
                  stock.
  **2.**
              **DESCRIPTION
                  OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
                  POLICIES**
 
 ***Description
        of Business***
 
 Global
        Axcess Corp, through its wholly owned subsidiaries, is an independent provider
        of Automated Teller Machine ("ATM") services.
 
 ***Significant
        Accounting Policies***
 
 The
        preparation of financial statements and related disclosures in conformity
        with
        accounting principles generally accepted in the United States of America
        requires management to make judgments, assumptions and estimates that affect
        the
        amounts reported in the Company’s condensed consolidated financial statements
        and accompanying notes. The Company bases its estimates and judgments on
        historical experience and on various other assumptions that it believes are
        reasonable under the circumstances. However, future events are subject to
        change, and the best estimates and judgments routinely require adjustment.
        The
        amounts of assets and liabilities reported in its condensed consolidated
        balance
        sheet, and the amounts of revenues and expenses reported for each of its
        fiscal
        periods, are affected by estimates and assumptions which are used for, but
        not
        limited to, the accounting for allowance for doubtful accounts, goodwill
        and
        intangible asset impairments, restructurings, inventory and income taxes.
        Actual
        results could differ from these estimates. The following accounting policies
        are
        significantly affected by judgments, assumptions and estimates used in the
        preparation of the Company’s consolidated financial statements.
 
 ***Cash
        Equivalents***
 
 The
        Company considers all highly-liquid investments with a maturity of three
        months
        or less when purchased to be cash equivalents.
  10
 
 ***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., EFT Integration, Inc. (EFTI) and Cash Axcess
        Corporation (Proprietary) Limited (see Note #3 referring to subsidiaries
        included as discontinued operations). All significant intercompany transactions
        and accounts have been eliminated in consolidation.
 
 ***Reclassifications***
 
 Certain
        reclassifications were made to the 2006 condensed consolidated statements
        of
        operations to conform to 2007 presentation. These reclassifications had no
        impact on net income (loss) or stockholders’ equity for the periods
        presented.
 
 ***Use
        of Estimates***
 
 The
        preparation of the condensed consolidated financial statements in conformity
        with accounting principles generally accepted in the United States of America
        requires management to make estimates and assumptions that affect the amounts
        reported in the condensed consolidated financial statements and accompanying
        notes. Actual results could differ from these estimates.
  ***Revenue
        Recognition***
 
 Transaction
        service and processing fees are recognized in the period that the service
        is
        performed. The Company receives two types of fees: surcharge/convenience
        fees
        paid by consumers utilizing certain ATMs owned or managed by the Company;
        and
        interchange fees paid by their banks. Processing fees are generally charged
        on a
        per transaction basis, depending on the contractual arrangement with the
        customer. ATM sales revenue is recognized when the ATM is shipped and installed.
        Revenue from managing ATMs for others is recognized each month when the services
        are performed.
 
 ***Inventory***
 Inventory
            is stated at the lower of cost (first-in, first-out method) or market.
            Inventory
            consists primarily of ATMs and related parts and equipment, including
            parts
            relating to upgrading ATMs to become Triple DES compliant. Parts relating
            to
            upgrading ATMs to become Triple DES compliant are recorded to fixed assets
            when
            the part is placed into service, if the ATM is Company owned. Parts relating
            to
            upgrading ATMs to become Triple DES compliant are recorded to Merchant
            Contracts
            when the part is placed into service, if the ATM is merchant owned and
            the
            merchant signs a term extension to an existing contract. The cost of
            the part
            will subsequently be amortized over the life of the contract extension.
            Parts
            relating to upgrading ATMs to become Triple DES compliant are expensed
            when the
            part is placed into service, if the Company upgrades the merchant owned
            ATMs at
            no charge to the merchant. ATMs and parts available for sale are classified
            as
            inventory until such time as the machine or part is sold or installed
            and in
            service. Once the ATM or part is sold, it is relieved to cost of revenues.
            At
            June 30, 2007, the Company's inventory totaled $453,593, of which $316,501
            were
            parts related to upgrading ATMs to become Triple DES
            compliant.
  11
 
 ***Accounts
        Receivable and Allowance for Doubtful Accounts***
 
 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 its customers
        to
        make required payments. At each reporting period, the Company evaluates the
        adequacy of the allowance for doubtful accounts and calculates the appropriate
        allowance based on historical experience, credit evaluations, specific customer
        collection issues and the length of time a receivable is past due. The Company
        records an allowance for doubtful accounts for any billed invoice aged past
        60
        days. When the Company deems the receivable to be uncollectible, the Company
        charges the receivable against the allowance for doubtful accounts. As of
        June
        30, 2007, the Company had bad debt reserves totaling $56,262 against gross
        accounts receivable totaling $1,288,039.
  ***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, if they extend the useful life of the related asset.
        Upon the sale or other disposition of a depreciable asset, cost and accumulated
        depreciation are removed from the accounts and any gain or loss is reflected
        in
        gain (loss) on sale of assets.
 
 The
        Company periodically evaluates whether events and circumstances have occurred
        that may warrant revision of the estimated useful life of fixed assets or
        whether the remaining balance of fixed assets should be evaluated for possible
        impairment. The Company uses an estimate of the related undiscounted cash
        flows
        over the remaining life of the fixed assets in measuring their recoverability,
        as well as historical age, to estimate useful economic lives and values.
        The
        Company reviews fixed assets for impairment and if it finds impairment, the
        Company accounts for the impairment in accordance with SFAS No. 144 “Accounting
        for the Impairment or Disposal of Long-Lived Assets” (see Note #5 referring to
        impairment of long-lived assets).
 
 ***Assets
        Held for Sale***
 
 ATMs
        and
        related software components which are not currently in service are classified
        as
        assets held for sale, until such time either the machine is installed or
        reinstalled and in service, sold, or deemed to be impaired. 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. During fiscal
        year 2006, the Company reviewed the Assets Held for Sale for impairment and
        found the assets held for sale to be impaired. The Company accounted for
        the
        impairment in accordance with SFAS No. 144 ”Accounting for the Impairment or
        Disposal of Long-lived Assets”. During the fiscal year ended December 31, 2006,
        the Company recorded approximately $1.3 million of impairment of long-lived
        assets, and of that amount, $485,315 related to impairment of assets held
        for
        sale (see Note #5 referring to impairment of long-lived assets).
  12
 
 ***Intangible
        Assets - Goodwill and Merchant Contracts***
 
 In
        June
        2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets,”
which was adopted by the Company in fiscal 2002. SFAS No. 142 established
        accounting and reporting standards for goodwill and intangible assets resulting
        from business combinations. SFAS No. 142 included provisions discontinuing
        the
        periodic amortization of, and requiring the assessment of the potential
        impairments of goodwill (and intangible assets deemed to have indefinite
        lives).
        As SFAS No. 142 replaced the measurement guidelines for goodwill impairment,
        goodwill not considered impaired under previous accounting literature may
        be
        considered impaired under SFAS No. 142. SFAS No. 142 also required that the
        Company complete a two-step goodwill impairment test. The first step compares
        the fair value of each reporting unit to its carrying amount, including
        goodwill. If the fair value of a reporting unit exceeded its carrying amount,
        goodwill is not considered to be impaired and the second step is not required.
        SFAS No. 142 required completion of this first step within the first six
        months
        of initial adoption and annually thereafter. If the carrying amount of a
        reporting unit exceeded its fair value, the second step is performed to measure
        the amount of impairment loss. The second step compared the implied fair
        value
        of goodwill to the carrying value of a reporting unit's goodwill. The implied
        fair value of goodwill is determined in a manner similar to accounting for
        a
        business combination with the allocation of the assessed fair value determined
        in the first step to the assets and liabilities of the reporting unit. The
        excess of the fair value of the reporting unit over the amounts assigned
        to the
        assets and liabilities is the implied fair value of goodwill. This allocation
        process is only performed for purposes of evaluating goodwill impairment
        and
        does not result in an entry to adjust the value of any assets or liabilities.
        An
        impairment loss is recognized for any excess in the carrying value of goodwill
        over the implied fair value of goodwill.
 
 Intangible
        assets with finite lives and merchant contracts are stated at cost, net of
        accumulated amortization, and are subject to impairment testing under certain
        circumstances in accordance with SFAS No. 144 and other applicable
        pronouncements. These assets are amortized on the straight-line method over
        their estimated useful lives or period of expected benefit. These assets
        are
        subject to periodic impairment testing in accordance with SFAS No.
        142.
 
 The
        Company’s merchant contracts are made up of contracts with automatic renewable
        lives. The Company has determined after review of its contracts that the
        economic life of the contracts is extended and estimated over 21 years (or
        3
        times renewal) based on historical and expected useful lives of similar assets.
        The Company amortizes the merchant contracts over their estimated useful
        lives
        of 21 years. The Company has adopted SFAS No. 142 to reflect the fair value
        of
        the merchant contracts, and uses a two step valuation process to determine
        if
        there has been any impairment on the value of the merchant contract assets.
        The
        first step is to periodically assess the remaining contract lives, including
        expected renewals. If the periodic assessment results in a determination
        that
        the economic lives of the merchant contracts are less than 21 years, the
        Company
        adjusts the remaining amortization lives of the merchant contracts. The second
        step is to compare the estimated future undiscounted cash flows of each
        reporting unit to the carrying amount of the merchant contracts, thus testing
        the impairment of the value of the contracts. An impairment loss is recognized
        for any excess in the carrying value of merchant contracts over the assessed
        fair value of merchant contracts. To date, the Company’s testing has indicated
        that there is no impairment of its goodwill and merchant contracts.
  13
 
 As
        of
        June 30, 2007 the Company has accumulated amortization totaling $334,125
        against
        intangible assets totaling $4,517,738.
 
 As
        of
        June 30, 2007 the Company has accumulated amortization totaling $2,231,174
        against merchant contracts totaling $14,419,921.
 
 ***Fair
        Value of Financial Instruments***
  The
        carrying amounts of the Company’s long-term liabilities approximate the
        estimated fair values at June 30, 2007, based upon the Company’s ability to
        acquire similar debt at similar maturities. The carrying values of all other
        financial instruments approximate their fair value, because of the short-term
        maturities of these instruments.
 
 ***Earnings
        per Share***
  In
        calculating basic income (loss) per share, net income (loss) is divided by
        the
        weighted average number of common shares outstanding for the period. Diluted
        income (loss) per share reflects the assumed exercise or conversion of all
        dilutive securities, such as options and warrants. No such exercise or
        conversion is assumed where the effect is anti-dilutive, such as when there
        is a
        net loss from continuing operations. Stock options to purchase 1,628,425
        shares
        of common stock that were outstanding at June 30, 2007 were not included
        in the
        computation of diluted earnings per share because the exercise prices of
        these
        stock options were greater than the average share price of the Company’s common
        stock and, therefore, the effect would have been antidilutive. No warrants
        outstanding at June 30, 2007 were included in the computation of diluted
        earnings per share. The diluted earnings per share amount equals basic earnings
        per share for the three and six months ended June 30, 2006 because the Company
        had a net loss from continuing operations and the impact of the assumed exercise
        of the stock options and warrants is anti-dilutive.
  14
  For
                  the Three Months EndedJune
                  30, 2007
              
              June
                  30, 2006NumeratorIncome
                  (loss) from continuing operations
              
              $
              170,907
              
              $
              (253,760
              )Loss
                  from discontinued operations
              
              $
              -
              
              $
              (119,340
              )Numerator
                  for diluted income (loss) per share available to common
                  stockholders
              
              $
              170,907
              
              $
              (373,100
              )DenominatorWeighted
                  average shares
              
              
              20,984,443
              
              
              21,010,028Effect
                  of dilutive securities:Treasury
                  method, effect of employee stock options & warrants
              
              
              -
              
              
              -Denominator
                  for diluted income (loss) per share adjustedweighted
                  shares after assumed exercises
              
              
              20,984,443
              
              
              21,010,028**Income
                  (loss) per common share - basic:**Income
                  (loss) from continuing operations
              
              $
              0.01
              
              $
              (0.01
              )Loss
                  from discontinued operations
              
              $
              -
              
              $
              (0.01
              )Net
                  Income (loss) per common share
              
              $
              0.01
              
              $
              (0.02
              )**Income
                  (loss) per common share - diluted:**Income
                  (loss) from continuing operations
              
              $
              0.01
              
              $
              (0.01
              )Loss
                  from discontinued operations
              
              $
              -
              
              $
              (0.01
              )Net
                  Income (loss) per common share
              
              $
              0.01
              
              $
              (0.02
              )
 
 For
                  the Six Months EndedJune
                  30, 2007
              
              June
                  30, 2006NumeratorIncome
                  (loss) from continuing operations
              
              $
              97,126
              
              $
              (1,029,075
              )Income
                  (loss) from discontinued operations
              
              $
              175,000
              
              $
              (221,940
              )Numerator
                  for diluted income (loss) per share available to common
                  stockholders
              
              $
              272,126
              
              $
              (1,251,015
              )DenominatorWeighted
                  average shares
              
              
              21,003,011
              
              
              20,990,878Effect
                  of dilutive securities:Treasury
                  method, effect of employee stock options & warrants
              
              
              -
              
              
              -Denominator
                  for diluted income (loss) per share adjusted weighted shares after
                  assumed
                  exercises
              
              
              21,003,011
              
              
              20,990,878**Income
                  (loss) per common share - basic:**Income
                  (loss) from continuing operations
              
              $
              0.00
              
              $
              (0.05
              )Income
                  (loss) from discontinued operations
              
              $
              0.01
              
              $
              (0.01
              )Net
                  Income (loss) per common share
              
              $
              0.01
              
              $
              (0.06
              )
  15
  ***Income
        Taxes***
 
 The
        Company accounts for its income taxes in accordance with SFAS No. 109
“Accounting for Income Taxes”, which requires recognition of deferred tax assets
        and liabilities for future tax consequences attributable to differences between
        the financial statement carrying amounts of existing assets and liabilities
        and
        their respective tax basis and tax credit carry-forwards. Deferred tax assets
        and liabilities are measured using enacted tax rates expected to apply to
        taxable income in the years in which those temporary differences are expected
        to
        be recovered or settled. The effect on deferred tax assets and liabilities
        of a
        change in tax rates is recognized in income in the period that includes the
        enactment date.
 
 ***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. During the three-month periods ended June 30, 2007 and 2006, the amount
        of research and development costs, which were borne entirely by the Company,
        amounted to $0 and $119,340, respectively.
 
 ***Repairs
        and Maintenance Costs***
 
 Repairs
        and maintenance costs are expensed as incurred. Repairs and maintenance
        pertaining to the Company’s ATMs are recorded in cost of revenues. The Company
        records repairs and maintenance costs relating to general office and backend
        related equipment to general and administrative costs.
 
 ***Stock-based
        Compensation***
 
 Effective
        January 1, 2006, the Company adopted the fair value recognition provisions
        of
        Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004),
        "Share-Based Payment," using the modified-prospective-transition method which
        requires us to recognize compensation expense on a prospective basis. SFAS
        No.
        123(R) requires that all stock based compensation be recognized as an expense
        in
        the financial statements and that such cost be measured at the fair value
        of the
        award. Under this method, in addition to reflecting compensation for new
        share-based awards, expense is also recognized to reflect the remaining service
        period of awards that had been included in pro-forma disclosure in prior
        periods. Prior period financial statements have not been restated. The stock
        based compensation expense is included in SG&A expenses in the consolidated
        statements of operations.
  ***Recent
        Accounting Pronouncements***
 
 In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS
        No. 157 provides guidance on the definition of fair value, methods to measure
        fair value, and expanded disclosures of fair value. SFAS No. 157 is effective
        as
        of the first interim or annual reporting period that begins after November
        15,
        2007. Accordingly, the Company will adopt SFAS No. 157 in its quarter ending
        March 31, 2008. The Company is currently evaluating the provisions of SFAS
        No.
        157 and has not yet determined the impact, if any, that SFAS No. 157 will
        have
        on its financial statement presentation or disclosures.
  16
  **3.**
              **DISCONTINUED
                  OPERATIONS**
  On
        May 2,
        2006, the Company entered into a Shareholder Agreement to sell 50% of Cash
        Axcess Corporation (Proprietary) Limited (CAC), in a stock arrangement with
        Industrial Electronic Investments Limited.  Under
        the
        requirements of FASB Interpretation No. 46(R), this transaction constituted
        a
        variable interest for the Company, with the Company being determined as the
        primary beneficiary. During the quarter ended September 30, 2006, the Company
        approved plans to discontinue its South African operation which did not fit
        within management’s strategic plans. On September 30, 2006, the Company
        finalized the sale of the remaining 50% of CAC, its Variable Interest Entity.
        In
        accordance with FASB Statement No. 144, "Accounting for the Impairment or
        Disposal of Long-Lived Assets," the Company has classified CAC as discontinued
        operations and reported their operating results within discontinued operations
        in the accompanying condensed consolidated statements of income and statements
        of cash flow.
  The
        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, 2006:
 
 For
                  the Three Months
                Ended
                  June 30, 2006
              
              For
                  the Six Months
                Ended
                  June 30, 2006Revenues
              
              $
              52,712
              
              $
              101,545Cost
                  of revenues
              
              
              25,981
              
              
              45,214Gross
                  Profit
              
              
              26,731
              
              
              56,331Operating
                  ExpensesDepreciation
                  and amortization
              
              
              19,540
              
              
              39,354Selling,
                  general and administrative
              
              
              126,531
              
              
              238,917Total
                  operating expenses
              
              
              146,071
              
              
              278,271Loss
                  from operations
              
              
              (119,340
              )
              
              (221,940
              )Net
                  loss
              
              $
              (119,340
              )
              $
              (221,940
              )
  As
        part
        of the aforementioned sale of 50% of CAC on September 30, 2006, $175,000
        of the
        sales price was held in an escrow account as security to cover any claims
        made
        in connection with a breach of any of the Company's warranties in the sale
        agreement. The warranty period ended and the Company received the full escrowed
        amount of $175,000 on March 28, 2007. The Company recognized the $175,000
        deferred gain on sale as income from discontinued operations during the
        three-month period ended March 31, 2007.
  17
  **4.**
              **NOTES
                  RECEIVABLE**
 
 Notes
        receivable - current consist of the following at June 30, 2007:
 
 (a)
                  Settlement of previously fully reserved note
              
              $
              100,000(b)
                  10% promissory note due February 2007 settled on April 20, 2007
              
              
              0$
              100,000
 
 (a)
        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
        $1,540,000 in a secured promissory note covering the full amount of the sale
        price. On August 1, 2006, Electronic Payment Systems, LLC (“EPS”), the acquirer,
        failed to make its required payment and was in default of the Stock Purchase
        Agreement made and entered into as of September 30, 2005. The Company sent
        a
        default notification letter on August 2, 2006 and EPS had thirty days to
        cure
        the default. EPS has failed to make any payment to date; therefore the Company
        determined that it is unlikely that the purchaser will repay the note. The
        Company and EPS were in negotiations to amend the note to $500,000, however
        no
        agreement had been reached. Additionally, management determined that is was
        unlikely that the Company would receive financial information from EPS to
        assist
        in supporting collectibility and increased the reserve by $778,360 during
        the
        year ended December 31, 2006, which together with the previous reserve, reduced
        the carrying value to zero. On June 29, 2007, the Company settled all claims
        against EPS in exchange for a payment of $100,000. Additionally, in the event
        EPT is sold or merged into another entity within 3 years from the date of
        the
        settlement, the Company is entitled to receive an additional $200,000 payment.
        During the quarter ended June 30, 2007, the Company recorded the $100,000
        settlement as a recovery of bad debts. The $100,000 payment was received
        on July
        6, 2007.
 
 (b)
        In
        February 2004, the Company issued a note receivable in the amount of $190,000
        due within one year and requiring monthly payments of principal and interest,
        with an annual interest rate of 10%. The note was amended to extend the term
        to
        February 2007. The amount remaining on the note as of March 31, 2007 was
        $99,895. The promissory note is collateralized by the Company’s stock and during
        the fiscal year ended December 31, 2006, the Company increased the reserve
        due
        to the declining stock price of the Company. The 47,862 shares of Company
        stock
        held as collateral on this note were returned to the Company on April 20,
        2007
        as settlement of this note. The Company recorded the $11,966 market value
        of the
        returned 47,862 shares of stock as Treasury stock. The settlement of this
        note
        resulted in an impairment of notes receivable charge of $5,743 recorded during
        the quarter ended June 30, 2007.
 
 The
        Company has received no payments of interest on this loan and no interest
        income
        has been recognized in the periods presented.
  **5.**
              **IMPAIRMENT
                  OF LONG-LIVED ASSETS AND BUSINESS REORGANIZATION
                  CHARGES**
  ***Impairment
        of Long-lived assets***
 
 As
        discussed in Note #2 “Description of Business and Summary of Significant
        Accounting Policies”, the Company accounts for the impairment of long-lived
        assets in accordance with SFAS No. 144 ”Impaired Long-Lived Assets and
        Long-Lived Assets to be Disposed of”.
  18
 
 In
        July
        2006, the Company disconnected its processing switch which processed the
        transactions for its subsidiary EFT Integration, Inc. and replaced its switching
        software with a third party vendor. Accordingly, the switching software was
        evaluated for impairment and deemed to be impaired.
 
 Assets
        held for sale, consisting of ATMs and related software, were reevaluated
        for
        impairment. Of the $485,315 total assets held for sale, $125,586 worth of
        ATMs
        were determined to be useful and able to be placed back in service. In
        accordance with SFAS No. 144 ” Accounting for the Impairment or Disposal of
        Long-lived Assets”, these useful assets were to be placed back into service at
        zero book value which is their depreciated value had they not been held for
        sale. Therefore, the full balance of assets held for sale was determined
        to be
        fully impaired.
 
 Additionally,
        the Company reviewed other ATMs and software for impairment and determined
        that
        some of the Company’s other ATMs and software were impaired. The following
        summarizes the amounts charged to impairment of long-lived assets for fiscal
        year ended December 31, 2006:
 
 Long-lived
                  asset description
              
              Net
                  Book Value
              
              Estimated
                  proceeds from disposition
              
              Impairment
                  ChargeSwitching
                  software
              
              $
              610,024
              
              
              -
              
              $
              610,024Assets
                  held for sale
              
              $
              485,315
              
              
              -
              
              $
              485,315ATMs
                  and other software
              
              $
              234,057
              
              
              -
              
              $
              234,057$
              1,329,396
  ***Business
        Restructuring Costs***
 
 During
        the quarter ended September 30, 2006, the Company evaluated its business
        plan
        and developed a plan for business reorganization. Included in this
        business-reorganization plan was the decision to sell its South African Variable
        Interest Entity (Under the requirements of FASB Interpretation No. 46(R),
        the
        Company has a variable interest in this entity, with the Company being
        determined as the primary beneficiary), CAC (see Note #3 “Discontinued
        Operations”); the decision to shut down the aforementioned switching platform
        and migrate to third party vendor for processing (see above); the decision
        to
        reevaluate the plan to reinstall assets held for sale back into service (see
        above); and the decision to reevaluate other ATMs and software for impairment
        (see above). Additionally, the Company decided to restructure management
        and to
        outsource certain employee functions to third party vendors. As part of this
        decision to eliminate the positions held by the two senior officers and other
        employees, the Company incurred restructuring charges during the third quarter
        of 2006 in the amount of $757,811. As of June 30, 2007, the amount of remaining
        accrued restructuring charges was $278,944.
  19


**6.**
              **COMMITMENTS
                  AND CONTINGENCIES**
 
 We
        lease
        ATMs under capital lease agreements that expire between 2007 and 2011 and
        provide for lease payments at interest rates from 3.73% up to 18.71% per
        annum.
        The majority of the capital lease agreements, which total over 74% of our
        June
        30, 2007 balances, are at interest rates at or below 12.11%. See Financial
        Footnote #15 to the Consolidated Financial Statements in the Form 10-KSB
        Annual
        Report. Capital leases entered into during the six-month period ended June
        30,
        2007 mature in 36 months with rates varying between 9.7% and 11.2%, totaled
        $89,394. We did not enter into any capital leases during the three-month
        period
        ended June 30, 2007.
  **7.**
              **LITIGATION
                  AND CLAIMS**
 
 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 agreed to pay the
        remaining $150,000 in 12 monthly installments of $12,500 commencing July
        1, 2006
        and ending June 30, 2007. As of June 30, 2007, the Company has fulfilled
        its
        obligations and has paid this settlement in full.
 
 On
        or
        about September 23, 2005, Nationwide Money Services, Inc. (“Nationwide”) filed
        suit against ZMA Enterprise, Inc., d/b/a Citgo Food Mart (“ZMA”), a merchant
        with whom Nationwide and its successor-in-interest, Progressive Ventures
        d/b/a
        Progressive ATM, had executed an ATM Processing Agreement (the “Agreement”).
        Nationwide alleged in its complaint that ZMA had breached the Agreement by,
        among other things, failing to maintain an exclusive contractual relationship
        with Nationwide for provision of ATM processing services. ZMA answered
        Nationwide’s complaint, denied all liability, and asserted various defenses,
        including a contention that the Agreement was vague and unenforceable. Following
        discovery, this case was tried before the State Court of Dekalb County, Georgia.
        On April 6, 2007, the court entered an order holding that the Agreement was
        fully enforceable against ZMA and entering judgment in favor of Nationwide
        and
        against ZMA for the full amount of Nationwide’s contractual damages plus
        attorneys’ fees and expenses of litigation. ZMA filed a notice of appeal
        regarding the court’s judgment on or about May 7, 2007. ZMA’s appeal has yet to
        be docketed with the Georgia Court of Appeals. We express no opinion as to
        the
        likelihood of success or potential amount of recovery in this
        matter.
 
 Beginning
        in or around October, 2005, Nationwide Money Services, Inc. (“Nationwide”) has
        filed suit against various merchants located in several states, alleging
        that
        these merchants breached the terms of their ATM processing agreements with
        Nationwide or its successor-in-interest, Progressive Ventures, Inc. Many
        of
        these actions remain pending, while Nationwide has obtained settlement default
        judgments from certain merchants and has received settlement payments from
        one
        merchant but has yet to receive any other settlements. The Company recognizes
        revenue on breached contracts when cash is received and the Company has not
        recognized any revenue on these breached contracts during the quarters ended
        June 30, 2007 and 2006. The Company expresses no opinion as to the likelihood
        of
        success or potential amount of recovery in these matters.
  20
 
 On
        or
        about July 26, 2006, Nationwide Money Services, Inc. (“Nationwide”) filed suit
        against ATMs R Us, Inc. (“ATMs R Us”), a party with which Nationwide and its
        successor-in-interest, Progressive Ventures, Inc. contracted for the provision
        of certain maintenance and installation services regarding their ATM network
        and
        affiliated merchants. Nationwide alleges in its complaint claims for breach
        of
        contract, tortious interference with contractual relations, tortious
        interference with business relations, violations of the Georgia Trade Secrets
        Act, punitive damages, and attorneys’ fees and expenses of litigation. ATMs R Us
        failed to answer or otherwise respond to Nationwide’s complaint. Nationwide is
        currently taking steps to perfect a default judgment against ATMs R Us in
        accordance with Georgia law. The Company expresses no opinion as to the
        likelihood of success or potential amount of recovery, and has not recorded
        income during the quarter ended June 30, 2007 relating to this
        matter.
 
 On
        August
        1, 2006, Electronic Payment Systems, LLC (“EPS”), 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 (See Note
        #4
“Notes Receivable”). The Company subsequently brought suit against EPS and its
        principal. On June 29, 2007, the Company settled all claims against EPS and
        Mr.
        Graham in exchange for the payment of $100,000 from the defendants. In the
        event
        EPT is sold or merged into another entity within 3 years from the date of
        the
        settlement, the Company is entitled to receive an additional $200,000 payment
        from the defendants. During the quarter ended June 30, 2007, the Company
        recorded the $100,000 settlement as a recovery of bad debts. The $100,000
        payment was received on July 6, 2007.
 
 On
        August
        4, 2006, the Company was served with a demand for arbitration/mediation from
        EFMARK Service Company (“EFMARK”), a provider of maintenance services and a
        provider of cash replenishment services for automated teller machines. EFMARK
        alleged that the Company has failed to compensate EFMARK for services amounting
        to $103,000 and was seeking said amount as well as interest of $32,000. The
        Company believed the demand contained factual inaccuracies and was wholly
        without merit. However, in the spirit of its business relationship with EFMARK,
        the Company settled this claim for $40,000 on October 4, 2006. The Company
        reflected this $40,000 expense and liability in its consolidated financial
        statements ended December 31, 2006.
 
 On
        September 29, 2006, the Company was served with process by Renaissance US
        Growth
        Investment Trust PLC ("Renn") and BFS US Special Opportunities Trust PLC
        ("BFS"
        and collectively with Renn, the "Plaintiffs"), two investors and shareholders
        of
        the Company. In the Complaint, filed in the Circuit Court of the Seventh
        Judicial Circuit in and for St. John's County, Florida, Plaintiffs allege
        breach
        of contract, fraud, and negligent misrepresentation. The Plaintiffs are seeking
        monetary damages, attorney fees and rescission of their investment in the
        amount
        of $1,500,000 based on the Company's restatement of its earnings for the
        2nd and
        3rd quarters of 2005. The Company denies any and all allegations of wrongdoing
        and intends to vigorously defend such action. During fiscal year 2006, the
        Company recorded a $200,000 expense accrual for what it deemed to be probable
        legal expenses defending this claim. The Company believes that all legal
        expenses exceeding $200,000 will be covered under the Company’s Directors and
        Officers insurance policy. As of June 30, 2007 the remaining balance of that
        accrual is approximately $31,750. On June 7, 2007, the Company filed a
        Counterclaim against Renn and BFS in the Circuit Court of the Seventh Judicial
        Circuit in and for St. John's County, Florida. At all material times related
        to
        this litigation, the Renn and BFS funds have been advised and managed by
        an
        investment company called RENN Capital Group, Inc. (“RENN Cap”). In the
        Counterclaim the Company alleges Renn and BFS, separately and together with
        RENN
        Cap, conspired with a former board member, in breach of his fiduciary duties
        as
        a director of the Company, to obtain confidential information regarding the
        Company and to subsequently use and exploit such confidential information
        in
        litigation against the Company. By substantially assisting and encouraging
        the
        former board member to obtain and use such information in breach of his
        fiduciary duties, Renn and BFS aided and abetted the former board member in the
        breach of his fiduciary duty. On August 2, 2007 the Company reached a settlement
        with Renn, the terms of which are confidential. The settlement will result
        in no
        additional costs to the Company nor any recovery amounts. The Company however
        is
        responsible to outlay monies for legal fees in the amount of the aforementioned
        remaining balance of the accrual recorded as of June 30, 2007.
  21
 
 On
        October 31, 2006, EFT Integration Inc., a wholly-owned subsidiary of Global
        Axcess Corp, filed a lawsuit styled as EFT Integration, Inc., vs DELTACOM,
        Inc.,
        f/k/a ITC^DELTACOM Communications, Inc., in the Circuit Court, Fourth Judicial
        Circuit, Duval County, Florida, Case No. 16-2006-CA-007992. EFT Integration,
        Inc., has alleged that between January of 2002 and October of 2006, Deltacom,
        Inc., charged amounts in excess of the rates agreed to for long distance
        telephone service and other services, and refused to provide billing records
        for
        verification, despite demand. In the lawsuit, EFT Integration, Inc., has
        claims
        pending for an accounting and breach of contract seeking to recover amounts
        overpaid by the Company and seeking other damages. The Company expresses
        no
        opinion as to the likelihood of success or potential amount of recovery,
        and has
        not recorded income during the quarter ended June 30, 2007 relating to this
        matter.
 
 On
        December 26, 2006, the Company was served with process by Robert Colabrese
        (the
“Plaintiff), a former employee of the Company. In the Complaint, filed in
        the
        Circuit Court of the Seventh Judicial Circuit in and for St. John’s County,
        Florida, the Plaintiff alleges that the Company has breached the employment
        agreement entered between the Company and the Plaintiff in July 2003. The
        Plaintiff is seeking monetary damages for unpaid wages and commissions, attorney
        fees and an accounting of all sales generated through the Plaintiff. The
        Company
        denies any and all allegations of wrongdoing and intends to vigorously defend
        such action. The Company has a $50,000 accrual recorded at June 30, 2007
        in
        connection with this complaint.
 
 On
        or
        about January 29, 2007, Nationwide Money Services, Inc. (“Nationwide”) filed
        suit against the Atlanta Retailers Association, LLC (“ARA”) for breach of
        contract, tortious interference with contractual relations, tortious
        interference with business relations, punitive damages, and attorneys’ fees and
        expenses of litigation based upon the ARA’s alleged breach of a preferred vendor
        agreement with Progressive Ventures, Inc., Nationwide’s successor-in-interest.
        The ARA answered Nationwide’s complaint, denied all liability, and asserted
        various counterclaims. In light of pending settlement negotiations, the parties
        agreed to dismiss the litigation without prejudice and the dismissal was
        filed
        with the Court on April 18, 2007. Should settlement negotiations fail, either
        party has the right to re-institute the litigation. The Company expresses
        no
        opinion as to the likelihood of success or potential amount of recovery,
        and has
        not recorded income during the quarter ended June 30, 2007 relating to this
        matter.
  22
 
 Additionally,
        two significant investors have communicated to us a desire to re-price or
        unwind
        financial transactions that took place prior to the 2005 restatement of
        earnings. These investors seek, among other things, that convertible debt
        that
        was issued to them be re-priced or that debt that was converted into company
        stock be converted back into debt. These investors have indicated they would
        like to rescind their previous transactions.
 
 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 lawsuits, other than previously discussed
        that
        could have a material adverse impact on the Company’s consolidated results of
        operations, cash flows or financial position.
  **8.**
              **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, 2007 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.
 
 The
        Company adopted Financial Accounting Standards Board (‘FASB”) Interpretation No.
        48, “Accounting for Uncertainty in Income Taxes - an Interpretation of SFAS No.
        109”, (“FIN48”), as of the beginning of its 2007 fiscal year. This
        Interpretation clarifies the accounting for uncertainty in income taxes.
        FIN 48
        prescribes a recognition threshold and measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken on a tax return. Under FIN 48, the Company first assesses whether it
        is
        more likely than not that an individual tax position is more likely than
        not to
        be sustained, under the presumption the taxing authority has all relevant
        information. The recognized tax position is measured as the largest benefit
        that
        is greater than 50 percent likely of being realized upon ultimate settlement.
        Previously recognized tax positions that no longer meet the more likely than
        not
        recognition threshold are derecognized in the period in which that threshold
        is
        no longer met. Accordingly the unit of account under this standard is the
        individual tax position and not a higher level such as the aggregate of the
        various positions that are encompassed by the total tax return filing. As
        a
        result of the implementation of FIN 48, the Company did not recognize a change
        in its tax liabilities or assets.
  23
 
 At
        December 31, 2006, the Company has net operating loss carryforwards remaining
        of
        approximately $21,564,900 that may be offset against future taxable income
        through 2026. As part of management’s tax strategies we 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.
 
 **9.**
              **CHANGES
                  IN STOCKHOLDERS' EQUITY**
 
 See
        the
        table below for all the equity transactions for the three-month period ended
        June 30, 2007:
 Additional
                
                
                
                
                
                TotalCommon
                    Stock
                
                Paid-in
                
                Accumulated
                
                Treasury
                
                Stockholders'Shares
                
                Amount
                
                Capital
                
                Deficit
                
                Stock
                
                EquityBalances,
                    March 31, 2007
                
                
                21,021,786
                
                $
                21,022
                
                $
                22,366,403
                
                $
                (10,657,665
                )
                $
                -
                
                $
                11,729,760Settlement
                    of note receivablethrough
                    receipt of treasury stock(47,862
                    shares)
                
                
                (47,862
                )
                
                -
                
                
                -
                
                
                -
                
                
                (11,966
                )
                
                (11,966
                )Stock
                    compensation expense
                
                
                -
                
                
                -
                
                
                5,330
                
                
                -
                
                
                -
                
                
                5,330Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                170,907
                
                
                -
                
                
                170,907Balances,
                    June 30, 2007
                
                
                20,973,924
                
                
                21,022
                
                
                22,371,733
                
                
                (10,486,758
                )
                
                (11,966
                )
                
                11,894,031
 **10.**
              **STOCK
                  OPTIONS AND WARRANTS**
  Effective
        January 1, 2006, the Company adopted the fair value recognition provisions
        of
        Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004),
        "Share-Based Payment," using the modified-prospective-transition method which
        requires us to recognize compensation expense on a prospective basis. SFAS
        No.
        123(R) requires that all stock based compensation be recognized as an expense
        in
        the financial statements and that such cost be measured at the fair value
        of the
        award. Under this method, in addition to reflecting compensation for new
        share-based awards, expense is also recognized to reflect the remaining service
        period of awards that had been included in pro-forma disclosure in prior
        periods. Prior period financial statements have not been restated. The stock
        based compensation expense is included in SG&A expenses in the condensed
        consolidated statements of operations.
 
 Total
        stock compensation expenses charged against income during the three-month
        period
        ended June 30, 2007 was $5,330.
  **11.**
              **SUBSEQUENT
                  EVENTS**
 
 On
        August
        2, 2007 the Company reached a settlement with Renaissance US Growth Investment
        Trust PLC ("Renn") and BFS US Special Opportunities Trust PLC ("BFS" and
        collectively with Renn, the "Plaintiffs"). The terms of the settlement are
        confidential, however the settlement will result in no additional costs to
        the
        Company nor any recovery amounts (see Note #7 “Litigation and
        Claims”).
 
 24
  **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 2007. When
        used
        in this report, the words "expects," "anticipates," "intends," "plans,"
        "believes," "seeks," "targets," "estimates," "looks for," "looks to," and
        similar expressions are generally intended to identify forward-looking statements.
        You should not place undue reliance on these forward-looking statements,
        which speak only as of the date of this Quarterly Report on Form 10-QSB.
        We undertake no obligation to publicly release any revisions to the forward-looking
        statements or reflect events or circumstances after the date of this
        document.
  ***Summary***
 
 The
        Company, through its wholly owned subsidiaries, owns and operates Automated
        Teller Machines ("ATM"s) with locations primarily in the eastern and
        southwestern United States of America. Our revenues are principally derived
        from
        two types of fees, which we charge for processing transactions on our ATM
        network. We receive an interchange fee from the issuer of the credit or debit
        card for processing a transaction when a cardholder uses an ATM in our network.
        In addition, in most cases we receive a surcharge/convenience fee from the
        cardholder when the cardholder makes a cash withdrawal from an ATM in our
        network.
 
 Interchange
        fees are processing fees that are paid by the issuer of the credit or debit
        card
        used in a transaction. Interchange fees vary for cash withdrawals, balance
        inquiries, account transfers or uncompleted transactions, which are the primary
        types of transactions that are currently processed on ATMs in our network.
        The
        maximum amount of the interchange fees is established by the national and
        regional card organizations and credit card issuers with whom we have a
        relationship. We receive interchange fees for transactions on ATMs that we
        own,
        but sometimes we rebate a portion of the fee to the owner of the ATM location
        under the applicable lease for the ATM site. We also receive the interchange
        fee
        for transactions on ATMs owned by third party vendors included within our
        network, but we rebate all or a portion of each fee to the third party vendor
        based upon negotiations between us. The interchange fees received by us vary
        from network to network and to some extent from issuer to issuer, but generally
        range from $0.15 to $0.55 per cash withdrawal. Interchange fees for balance
        inquiries, account transfers and denied transactions are generally substantially
        less than fees for cash withdrawals. The interchange fees received by us
        from
        the card issuer are independent of the service fees charged by the card issuer
        to the cardholder in connection with ATM transactions. Service fees charged
        by
        card issuers to cardholders in connection with transactions through our network
        range from zero to $2.50 per transaction. We do not receive any portion of
        these
        service fees.
  25
 
 In
        most
        markets we impose a surcharge/convenience fee for cash withdrawals.
        Surcharge/convenience fees are a substantial additional source of revenue
        for us
        and other ATM network operators. The surcharge/convenience fee for ATMs in
        our
        network ranges between $1.50 and $2.75 per withdrawal. The surcharge/convenience
        fee for other ATMs in our network ranges between $0.50 and $7.50 per withdrawal.
        We receive the full surcharge/convenience fee for cash withdrawal transactions
        on ATMs that we own, but often we rebate a portion of the fee to the owner
        of
        the ATM location under the applicable lease for the ATM site. We also receive
        the full surcharge/convenience fee for cash withdrawal transactions on ATMs
        owned by third party vendors included within our network, but we rebate all
        or a
        portion of each fee to the third party vendor based upon a variety of factors,
        including transaction volume and the party responsible for supplying vault
        cash
        to the ATM and only record earned revenues based upon the Company’s contracts
        with the third party vendors.
 
 In
        addition to revenues derived from interchange and surcharge/convenience fees,
        we
        also derive revenues from providing network management services to third
        parties
        owning ATMs included in our ATM network. These services include 24 hour
        transaction processing, monitoring and notification of ATM status and cash
        condition, notification of ATM service interruptions, in some cases dispatch
        of
        field service personnel for necessary service calls and cash settlement and
        reporting services. The fees for these services are paid by the owners of
        the
        ATMs.
 
 Interchange
        fees are credited to us by networks and credit card issuers on a monthly
        basis
        and are paid to us in the following month between the 5th and 15th business
        day.
        Surcharge/convenience fees are charged to the cardholder and credited to
        us by
        networks and credit card issuers on a daily basis. We rebate the portion
        of
        these fees to ATM owners and owners of ATM locations as commission payments
        as
        per their contractual terms. Fees for network management services are generally
        paid to us on a monthly basis.
 
 ***Results
        of Continuing Operations***
 
 The
        following tables set forth certain consolidated statement of continuing
        operations data as a percentage of revenues for the periods
        indicated:
  26
  For
                    the Three Months EndedJune
                    30, 2007
                
                June
                    30, 2006Revenues
                
                
                100.0
                %
                
                100.0
                %Cost
                    of revenues
                
                
                58.4
                %
                
                56.5
                %Gross
                    profit
                
                
                41.6
                %
                
                43.5
                %Depreciation
                    and amortization
                
                
                10.0
                %
                
                11.1
                %Selling,
                    general and administrative
                
                
                24.6
                %
                
                32.1
                %Impairment
                    of notes receivable
                
                
                0.1
                %
                
                0.0
                %Recovery
                    of bad debts
                
                
                -1.8
                %
                
                0.0
                %Total
                    operating expenses
                
                
                32.9
                %
                
                43.2
                %Operating
                    income from continuing operationsbefore
                    items shown below
                
                
                8.7
                %
                
                0.3
                %Interest
                    expense, net
                
                
                -5.2
                %
                
                -5.6
                %Loss
                    on disposal of assets
                
                
                -0.4
                %
                
                -0.1
                %Loss
                    attributed to minority interest
                
                
                0.0
                %
                
                0.9
                %Income
                    (loss) from continuing operations beforeprovision
                    for income taxes
                
                
                3.1
                %
                
                -4.6
                %Income
                    (loss) from continuing operations
                
                
                3.1
                %
                
                -4.6
                %EBITDA
                    (1)
                
                
                18.2
                %
                
                12.1
                %
  For
                    the Six Months EndedJune
                    30, 2007
                
                June
                    30, 2006Revenues
                
                
                100.0
                %
                
                100.0
                %Cost
                    of revenues
                
                
                58.5
                %
                
                56.6
                %Gross
                    profit
                
                
                41.5
                %
                
                43.4
                %Depreciation
                    and amortization
                
                
                10.2
                %
                
                11.4
                %Selling,
                    general and administrative
                
                
                25.4
                %
                
                29.2
                %Impairment
                    of notes receivable
                
                
                0.1
                %
                
                2.7
                %Recovery
                    of bad debts
                
                
                -0.9
                %
                
                0.0
                %Other
                    expense
                
                
                0.0
                %
                
                4.2
                %Total
                    operating expenses
                
                
                34.8
                %
                
                47.5
                %Operating
                    income (loss) from continuing operationsbefore
                    items shown below
                
                
                6.7
                %
                
                -4.1
                %Interest
                    expense, net
                
                
                -5.6
                %
                
                -6.0
                %Gain
                    (loss) on sale or disposal of assets
                
                
                -0.2
                %
                
                0.1
                %Loss
                    attributed to minority interest
                
                
                0.0
                %
                
                0.4
                %Income
                    (loss) from continuing operations beforeprovision
                    for income taxes
                
                
                0.9
                %
                
                -9.6
                %Income
                    (loss) from continuing operations
                
                
                0.9
                %
                
                -9.6
                %EBITDA
                    (1)
                
                
                16.7
                %
                
                7.7
                %
  (1)
        See
“—EBITDA”
  27
 ***Comparison
          of Results of Continuing Operations for the Three Months Ended June 30,
          2007 and
          2006:***
 
 ***Revenues***
 The
        Company reported total operating revenue from continuing operations of
        $5,596,210 for the three-month period ended June 30, 2007 as compared to
        $5,478,911 for the three-month period ended June 30, 2006. There was an increase
        in the three-month revenues despite lower ATM transactions for the three-month
        period ended June 30, 2007 versus the same period in fiscal 2006. This was
        mainly due to an increase in non-transaction based revenue recorded in the
        second quarter of 2007 relating to billings to customers for cash (ongoing)
        and
        project (annual) management.
  ***Cost
        of Revenues***
 
 Our
        total
        cost of revenues from continuing operations increased from $3,097,689 to
        $3,267,497 in the three-month periods ended June 30, 2006 and 2007,
        respectively. The increase in cost of revenues period over period was due
        to
        several factors. Firstly, in a move to increase ATM uptime rates we have
        increased our first line and second line dispatch rates. These increased
        dispatch rates combined with higher fuel charges resulted in higher first
        line
        and second line maintenance costs during the quarter. Secondly, our
        residual/commission payments to customers increased from the same quarter
        in
        fiscal 2006. Thirdly, our insurance premiums in 2007 have increased and even
        though we have moved to lower cost cash providers in 2007 and have saved
        on cash
        costs, we have incurred higher insurance premiums with these vendors.
 
 ***Gross
        Profit***
 
 Gross
        profit from continuing operations as a percentage of revenue for the three-month
        period ended June 30, 2007 and 2006 were approximately 41.6%, or $2,328,713
        and
        approximately 43.5%, or $2,381,222 respectively. The decreased gross profit
        for
        the second quarter of 2007 versus the same period in 2006 was partly
        attributable to the revenues and cost of revenues factors discussed above.
        Additionally, the proportion of ownership vs. merchant ATMs increased. Ownership
        ATMs contribute a higher gross profit but a lower gross profit
        percentage.
  ***Operating
        Expenses***
 
 Our
        total
        operating expenses from continuing operations for the three months ended
        June
        30, 2007 and 2006 were $1,843,020 and $2,368,323, respectively. The principal
        components of operating expenses are general and administrative expenses
        such as
        professional and legal fees, administrative salaries and benefits, consulting
        and audit fees, occupancy costs, sales and marketing expenses and administrative
        expenses. Operating expenses also include depreciation and amortization,
        impairment charges and recovery of bad debt expenses. See explanation of
        operating expenses below:
 
 ***Selling,
        General and Administrative (SG&A) Expenses***
 
 Our
        total
        SG&A expenses from continuing operations decreased to $1,378,504 for the
        three-month period ended June 30, 2007 from $1,759,018 for the three-month
        period ended June 30, 2006. The decrease in SG&A expenses from continuing
        operations is directly attributable to the decrease in salaries and benefits,
        audit and legal fees and rent expenses resulting from the reduced headcount
        and
        cost reduction measures we have undertaken in late 2006 and in the first
        two
        quarters of 2007. Included in the SG&A expenses for the three-month period
        ending June 30, 2007 were $29,315 of expenses relating to performance based
        employee incentives.
  ***Depreciation
        and Amortization***
  28
 
 Depreciation
        and amortization from continuing operations decreased for the three-month
        period
        ended June 30, 2007 to $558,773 from $609,305 for the same period in 2006.
        This
        decrease in depreciation and amortization expense was mainly due to the
        following factor:
 
 ·
            A
                decrease in depreciable assets relating to impaired assets written
                off in
                the third quarter of 2006.  See
        Note
        #2 “Description of Business and Summary of Significant Accounting Policies”
regarding the amortization of intangible merchant contracts.
 
 ***Impairment
        of Notes Receivable***
 
 During
        the second quarter of 2007, we incurred impairment of notes receivable charges
        of $5,743 which related to the settlement of a February 2004 note (see Note
        #4
“Notes Receivable”).
 
 ***Recovery
        of Bad Debts***
 
 During
        the second quarter of 2007, we recorded a recovery of bad debts of $100,000
        which related to the settlement of a previously fully reserved note (see
        Note #4
“Notes Receivable”).
 
 ***Operating
        Income from Continuing Operations***
 
 We
        had
        operating income from continuing operations for the three-month period ended
        June 30, 2007 in the amount of $485,693 as compared to operating income from
        continuing operations of $12,899 in the three-month period ended June 30,
        2006.
 
 ***Interest
        Expense, Net***
 
 Interest
        expense, net, decreased for the three-month period ended June 30, 2007 to
        $290,909 from $309,202 for the three-month period ended June 30, 2006. The
        decrease was mainly due to decreased debt balances at the three-month period
        ended June 30, 2007 as compared to the debt balances at the three-month period
        ended June 30, 2006.
 
 ***Loss
        on Disposal of Assets***
 
 During
        the three-month period ended June 30, 2007, we recorded a loss on disposal
        of
        certain ATM assets of $23,877 as compared to a net loss on disposal of assets
        of
        $4,056 during the three months ended June 30, 2006.
 
 ***Loss
        Attributed to Minority Interest***
 
 During
        the three-month period ended June 30, 2006, we allocated $46,599 of loss
        to
        minority interest relating to the consolidation of our Variable Interest
        Entity,
        Cash Axcess Corp, prior to its sale.
  ***Income
        (loss) from Continuing Operations Before Provision for
        Tax***
 
 We
        had
        net income from continuing operations before taxes of $170,907  for
        the
        three months ended June 30, 2007 as compared to net loss from continuing
        operations before taxes of $253,760 for the three-month period ended June
        30,
        2006.
 
 ***Income
        Taxes***
 
 We
        incurred no tax expense in either of the respective periods ending June
        30,
        2007 and June 30, 2006. At December 31, 2006, the Company has an NOL
        carryforward of approximately $21.6 million available. The NOL is due to
        expire
        during fiscal years 2008-2026.
  29
 
 ***Loss
        from Discontinued Operations***
 
 We
        had a
        net loss from discontinued operations of $119,340 for the three months ended
        June 30, 2006
 
 ***Net
        Income (loss)***
 
 We
        had
        net income of $170,907 for the three months ended June 30, 2007 as compared
        to a
        net loss of $373,100 for the three-month period ended June 30,
        2006.
 
 
 ***Comparison
        of Results of Continuing Operations for the Six Months Ended June 30, 2007
        and
        2006:***
 
 ***Revenues***
 
 The
        Company reported total operating revenue from continuing operations of
        $10,867,200 for the six-month period ended June 30, 2007 as compared to
        $10,675,648 for the six-month period ended June 30, 2006. There was an increase
        in the six-month ATM transactions for the period ended June 30, 2007 versus
        the
        same period in fiscal 2006 which contributed to the increased revenue.
        Additionally, there was an increase in non-transaction based revenue recorded
        in
        the second quarter of 2007 relating to billings to customers for cash (ongoing)
        and project (annual) management.
  ***Cost
        of Revenues***
 
 Our
        total
        cost of revenues from continuing operations increased from $6,046,818 to
        $6,362,171 in the six-month periods ended June 30, 2006 and 2007, respectively.
        The increase in cost of revenues period over period was due to several factors.
        Firstly, in a move to increase ATM uptime rates we have increased our first
        line
        and second line dispatch rates. These increased dispatch rates combined with
        higher fuel charges resulted in higher first line and second line maintenance
        costs during the quarter. Secondly, our residual/commission payments to
        customers increased from the same period in fiscal 2006. Thirdly, our insurance
        premiums in 2007 have increased and even though we have moved to lower cost
        cash
        providers in 2007 and have saved on cash costs, we have incurred higher
        insurance premiums with these vendors. Additionally, in order to improve
        our
        cost structure, during the fourth quarter of 2006 we negotiated and began
        implementation of contracts with lower cost ATM vault cash providers and
        negotiated and began implementation of a contract to outsource ATM cash
        management and monitoring. While these cost improvements will show cost
        reductions in fiscal 2007, during the first quarter of 2007 we incurred some
        duplicate expenses relating to these implementations.
 
 ***Gross
        Profit***
 
 Gross
        profit from continuing operations as a percentage of revenue for the six-month
        period ended June 30, 2007 and 2006 were approximately 41.5%, or $4,505,029
        and
        approximately 43.4%, or $4,628,830 respectively. The increased gross profit
        for
        the six-month period of 2007 versus the same period in 2006 was attributable
        to
        the revenues and cost of revenues factors discussed above. Additionally,
        the
        proportion of ownership vs. merchant ATMs increased. Ownership ATMs contribute
        a
        higher gross profit but a lower gross profit percentage.
  30
 
 ***Operating
        Expenses***
 
 Our
        total
        operating expenses from continuing operations for the six months ended June
        30,
        2007 and 2006 were $3,776,446 and $5,074,616, respectively. The principal
        components of operating expenses are general and administrative expenses
        such as
        professional and legal fees, administrative salaries and benefits, consulting
        and audit fees, occupancy costs, sales and marketing expenses and administrative
        expenses. Operating expenses also include depreciation and amortization,
        impairment charges, recovery of bad debts and other operating expenses. See
        explanation of operating expenses below:
 
 ***Selling,
        General and Administrative (SG&A) Expenses***
 
 Our
        total
        SG&A expenses from continuing operations decreased to $2,763,789 for the
        six-month period ended June 30, 2007 from $3,120,837 for the six-month period
        ended June 30, 2006. The decrease in SG&A expenses from continuing
        operations is directly attributable to the decrease in salaries and benefits,
        audit and legal fees and rent expenses resulting from the reduced headcount
        and
        cost reduction measures we have undertaken in late 2006 and in the first
        two
        quarters of 2007. Included in the SG&A expenses for the three-month period
        ending June 30, 2007 were $29,315 of expenses relating to performance based
        employee incentives.
  ***Depreciation
        and Amortization***
 
 Depreciation
        and amortization from continuing operations decreased for the six-month period
        ended June 30, 2007 to $1,106,914 from $1,213,887 for the same period in
        2006.
        This decrease in depreciation and amortization expense was mainly due to
        the
        following factor:
 
 ·
            A
                decrease in depreciable assets relating to impaired assets written
                off in
                the third quarter of 2006.  See
        Note
        #2 “Description of Business and Summary of Significant Accounting Policies”
regarding the amortization of intangible merchant contracts.
 
 ***Impairment
        of Notes Receivable***
 
 During
        the six-month period ended June 30, 2007, we incurred impairment of notes
        receivable charges of $5,743 which related to the settlement of a February
        2004
        note (see Note #4 “Notes Receivable”). During the six-month period ended June
        30, 2006, we incurred impairment of notes receivable charges of $289,892
        which
        related to reserves booked on two notes (see Note #4 “Notes
        Receivable”).
 
 ***Recovery
        of Bad Debts***
 
 During
        the six-month period ended June 30, 2007, we recorded a recovery of bad debts
        of
        $100,000 which related to the settlement of a previously fully reserved note
        (see Note #4 “Notes Receivable”).
 
 ***Other
        Expense***
 
 During
        the six-month period ended June 30, 2006, we incurred other operating expenses
        of $450,000 which related to legal fee expenses and reserves in connection
        with
        the James Collins legal claim (see Note #7 “Litigation and Claims”).
 
 ***Operating
        Income (Loss) from Continuing Operations***
  31
 
 We
        had
        operating income from continuing operations for the six-month period ended
        June
        30, 2007 in the amount of $704,272 as compared to an operating loss from
        continuing operations of $445,786 in the six-month period ended June 30,
        2006.
 
 ***Interest
        Expense, Net***
 
 Interest
        expense, net, decreased for the six-month period ended June 30, 2007 to $608,440
        from $640,265 for the six-month period ended June 30, 2006. The decrease
        was
        mainly due to decreased debt balances at the six-month period ended June
        30,
        2007 as compared to the debt balances at the six-month period ended June
        30,
        2006.
 
 ***Gain
        (loss) on Sale or Disposal of Assets***
 
 During
        the six-month period ended June 30, 2007, we recorded a loss on sale or disposal
        of certain ATM assets and leasehold improvements of $23,017 as compared to
        a net
        gain on sale of certain ATM assets and automobiles of $10,377 during the
        six
        months ended June 30, 2006.
 
 ***Loss
        Attributed to Minority Interest***
 
 During
        the six-month period ended June 30, 2006, we allocated $46,599 of loss to
        minority interest relating to the consolidation of our Variable Interest
        Entity,
        Cash Axcess Corp, prior to its sale.
  ***Income
        (loss) from Continuing Operations Before Provision for
        Tax***
 
 We
        had
        net income from continuing operations before taxes of $97,126
 for
        the
        six months ended June 30, 2007 as compared to net loss from continuing
        operations before taxes of $1,029,075 for the six-month period ended June
        30,
        2006.
 
 ***Income
        Taxes***
 
 We
        incurred no tax expense in either of the respective periods ending
 June
        30,
        2007 and June 30, 2006. At December 31, 2006, the Company has an NOL
        carryforward of approximately $21.6 million available. The NOL is due to
        expire
        during fiscal years 2008-2026.
 
 ***Income
        (loss) from Discontinued Operations***
 
 We
        had
        net income from discontinued operations of $175,000 for the six months ended
        June 30, 2007 resulting from the received amounts pertaining to the escrowed
        portion of the Company’s Cash Axcess Corp sale. For the six-month period ended
        June 30, 2006, the Company had a net loss from discontinued operations of
        $221,940.
 
 ***Net
        Income (loss)***
 
 We
        had
        net income of $272,126 for the six months ended June 30, 2007 as compared
        to a
        net loss of $1,251,015 for the six-month period ended June 30,
        2006.
 
 ***EBITDA***
 
 EBITDA
        (a
        non-GAAP measure) is defined as earnings before net interest, taxes,
        depreciation and amortization. EBITDA has some inherent limitations in measuring
        operating performance due to the exclusion of certain financial elements
        such as
        depreciation and is not necessarily comparable to other similarly titled
        captions of other companies due to potential inconsistencies in the method
        of
        calculation. Furthermore, EBITDA is not intended to be a substitute for cash
        flows from operating activities, as a measure of liquidity, or an alternative
        to
        net income in determining our operating performance in accordance with
        accounting principles generally accepted in the United States of America.
        Our
        use of EBITDA should be considered within the following context:
  32
 
 •
We
        acknowledge that our depreciable assets are necessary to earn revenue based
        on
        our current business.
 
 •
Our
        use
        of EBITDA as a measure of operating performance is not based on our belief
        about
        the reasonableness of excluding depreciation when measuring financial
        performance.
 
 •
Our
        use
        of EBITDA is supported by the importance of EBITDA to the following key
        stakeholders:
 
 • Analysts —
who
        estimate our projected EBITDA and other EBITDA-based metrics in their
        independently developed financial models for investors;
 
 • Creditors —
who
        evaluate our operating performance based on compliance with certain EBITDA-based
        debt covenants;
 
 • Investment
        Bankers —
who
        use
        EBITDA and other EBITDA-based metrics in their written evaluations and
        comparisons of companies within our industry; and
 
 • Board
        of Directors and Executive Management —
who
        use
        EBITDA as an essential metric for evaluating management performance relative
        to
        our operating budget and bank covenant compliance, as well as our ability
        to
        service debt and raise capital for growth opportunities which are a critical
        component to our strategy.
 
 The
        following tables set forth a reconciliation of net income to EBITDA from
        continuing operations for each period included herein:
 For
                    the Three Months EndedJune
                    30, 2007
                
                June
                    30, 2006Net
                    income (loss) from continuing operations
                
                $
                170,907
                
                $
                (253,760
                )Provision
                    for income taxes
                
                
                -
                
                
                -Interest
                    expense, net
                
                
                290,909
                
                
                309,202Depreciation
                    and amortization
                
                
                558,773
                
                
                609,305EBITDA
                
                $
                1,020,589
                
                $
                664,747
  For
                    the Six Months EndedJune
                    30, 2007
                
                June
                    30, 2006Net
                    income (loss) from continuing operations
                
                $
                97,126
                
                $
                (1,029,075
                )Provision
                    for income taxes
                
                
                -
                
                
                -Interest
                    expense, net
                
                
                608,440
                
                
                640,265Depreciation
                    and amortization
                
                
                1,106,914
                
                
                1,213,887EBITDA
                
                $
                1,812,480
                
                $
                825,077
 33
 
 Our
        EBITDA increased to $1,020,589 for the second quarter of fiscal 2007 from
        $664,747 for the second quarter of fiscal 2006. EBITDA as a percentage of
        revenues increased to 18.2% for the second quarter of fiscal 2007 from 12.1%
        for
        the second quarter of fiscal 2006.
 
 Our
        EBITDA increased to $1,812,480 for the six months ended June 30, 2007 from
        $825,077 for six months ended June 30, 2006. EBITDA as a percentage of revenues
        increased to 16.7% for the six months ended June 30, 2007 from 7.7% for six
        months ended June 30, 2006.
  ***Seasonality***
 
 In
        our
        ATM operations, we traditionally experience higher transaction volumes per
        machine in the second and third quarters than in the first and fourth quarters.
        The increased volumes in the summer months coincide with increased vacation
        travel in the United States.
 
 ***Liquidity
        and Capital Resources***
 
 Our
        primary liquidity and capital resource needs are to finance the costs of
        our
        operations, to make capital expenditures and to service our debt.
 
 We
        have
        funded our operations and investment activities from cash flow
        generated
 by
        operations. Net
        cash
        provided by continuing operating activities
        during the six-month period ended June 30, 2007 was $914,105, compared to
        the
        net cash provided by continuing operating activities during the six-month
        period
        ended June 30, 2006 of $369,198. Net cash used in discontinued operating
        activities during the six-month period ended June 30, 2006 was $169,322.
 
 The
        Company used $982,408 for financing activities, mainly paying back senior
        lender
        notes and capital leases, during the six-month period ended June 30, 2007,
        compared to funds used in financing activities of $1,407,914 for the six-month
        period ended June 30, 2006.
 
 Net
        cash
        used in investing activities in continuing operations was $134,113 during
        the
        six-month period ended June 30, 2007, mainly representing net purchases of
        property and equipment offset by the proceeds received from sale of subsidiary.
        This compares to net cash used in investing activities in continuing operations
        of $422,958 for the six-month period ended June 30, 2006, used mainly for
        the
        purchases of property and equipment. During the six-month period ended June
        30,
        2006, net cash provided by investing activities for discontinued operations
        was
        $609,429.
 
 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*.
                Beginning in January 2003, our arrangement with Palm Desert allows
                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. The contract with Palm Desert was terminated effective
                April 2007 and the Company converted terminals from Palm Desert cash
                to
                alternate funding sources. As of June 30, 2007, the Company had 0
                ATMs
                funded by Palm Desert with a vault cash outstanding balance of
                $0.  34
  ·
            *Wilmington
                Savings Fund Society (WSFS)*.
                Beginning in September, 2004 the Company has an arrangement with
                Wilmington Savings Fund Society (“WSFS”) allowing us to obtain up to
                $20,000,000 in vault cash. The WSFS contract may be terminated by
                WSFS at
                any time upon breach by us and upon the occurrence of certain other
                events. Under this arrangement, we are required to pay a monthly
                service
                fee on the outstanding amount equal to the prime rate of interest,
                plus a
                specified percentage, and must pay monthly "bank" and insurance fees.
                We
                are also required to maintain insurance on the vault cash. The contract
                currently in place with WSFS expires on October 31, 2007 with a one
                year
                auto renewal period unless one party gives 60 days notice of their
                intention not to renew. As of June 30, 2007, the Company had 122
                ATMs
                funded by WSFS with a vault cash outstanding balance of approximately
                $2,300,000 in connection with this arrangement. 
 ·
            *First
                Charter*.
                On September 1, 2004, we entered into an arrangement with First Charter
                National Bank allowing us to obtain up to $3,000,000 in vault cash.
                We
                have since increased the line as of December 31, 2006 to $6,000,000.
                The
                First Charter contract may be terminated by First Charter at any
                time upon
                breach by us and upon the occurrence of certain other events. Under
                this
                arrangement, we are required to pay a monthly service fee on the
                outstanding amount equal to the federal funds rate of interest, plus
                a
                specific percentage, and must pay monthly bank fees. We are also
                required
                to maintain insurance on the vault cash. The contract currently in
                place
                with First Charter expires on January 31, 2009 with a two year auto
                renewal period unless one party gives 180 days notice of their intention
                not to renew. As of June 30, 2007, the Company had 178 ATMs funded
                by
                First Charter with a vault cash outstanding balance of about approximately
                $4,000,000. 
 ·
            *Food
                Lion Credit Association (FLCA)*.
                On February 1, 2002, we entered into an arrangement with Food Lion
                Credit
                Association allowing us to obtain up to $2,000,000 in vault cash.
                We have
                since increased the line as of December 31, 2006 to $6,000,000. The
                Food
                Lion Credit Association contract may be terminated by Food Lion Credit
                Association at any time upon breach by us and upon the occurrence
                of
                certain other events. Under this arrangement, we are required to
                pay a
                monthly service fee on the entire line equal to the prime rate of
                interest, minus a specific percentage, and must pay monthly bank
                fees. We
                were also required to maintain insurance on the vault cash. The contract
                was terminated effective February 2007 and the Company converted
                terminals
                from FLCA cash to alternate funding sources. As of June 30, 2007,
                the
                Company had 0 ATMs funded by FLCA with a vault cash outstanding balance
                of
                $0. 
 ·
            *Elan
                (formerly GenPass Technologies)*.
                On November 24, 2006 we signed a Cash Provisioning Agreement with
                Genpass
                Technologies allowing us to obtain up to $22,000,000 in vault cash.
                The
                Genpass contract may be terminated by Genpass Technologies at any
                time
                upon breach by us and upon the occurrence of certain other events.
                Under
                this arrangement, we are required to pay a monthly service fee on
                the
                average terminal balance plus a load factor. In addition, we are
                required
                to maintain insurance on the vault cash. The contract currently in
                place
                with Elan expires on August 11, 2008 with a one year auto renewal
                period
                unless one party gives 180 days notice of their intention not to
                renew. As
                of June 30, 2007, the Company had 592 ATMs funded by Elan with a
                vault
                cash outstanding balance of about approximately
                $13,600,000.  35
  ·
            *Various
                Branded Cash Partners*.
                Nationwide Money Services, Inc., a subsidiary of the Company, 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 maintenance by approximately 50%. Another advantage is that
                with a
                branded ATM, transactions volumes traditionally increase more than
                at
                non-branded ATMs. As of June 30, 2007, Nationwide Money had 52 branded
                financial partners, which funded 665 ATMs.  ***Working
        Capital***
 
 As
        of
        June 30, 2007, the Company had current assets of $2,470,721 and current
        liabilities of $5,620,207, which results in a negative working capital of
        $3,149,486 as compared to current assets of $4,012,778 and current liabilities
        of $5,957,378 resulting in a negative working capital of $1,944,600 as of
        June
        30, 2006. The ratio of current assets to current liabilities decreased to
        0.44
        at June 30, 2007 from 0.67 at June 30, 2006. Despite the negative working
        capital, we believe that if we achieve our 2007 business plan, we will have
        sufficient working capital to meet our remaining and current obligations
        during
        2007. We are continuing our efforts to raise additional capital lease financing.
        We currently have lease lines available for approximately $1,500,000 for
        new
        purchases, which is sufficient to cover our estimated financing
        needs.
 
 ***Impact
        of Inflation and Changing Prices***
 
 We
        were
        not impacted by inflation during the past two fiscal years in any material
        respect. Interest rate hikes have increased the rental cost of our vault
        cash.
        As the interest rates increase and vault cash costs increase, this will have
        a
        less favorable impact on the Company’s income.
  **Item
        3. Controls and Procedures**
 Management
          of the Company is responsible for establishing and maintaining  adequate
          internal control over financial reporting and for the assessment of
          the  effectiveness
          of internal controls over financial reporting. The Company's  internal
          control system over financial reporting is a process designed under
          the  supervision
          of the Company's Chief Executive Officer and Chief Financial Officer  to
          provide reasonable assurance regarding the reliability of financial
          reporting  and
          the
          preparation of the condensed consolidated financial statements in accordance
          with U.S. generally accepted accounting principles.
 
 All
          internal control systems, no matter how well designed, have inherent  limitations.
          Therefore, even those systems determined to be effective can  provide
          only reasonable assurance with respect to financial statement  preparation
          and presentation. Also, projections of any evaluation of  effectiveness
          to future periods are subject to the risk that controls may become  inadequate
          because of changes in conditions.
 
 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.
  36
  ***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,
        2007. 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, 2007.
  ***Remediation
        of Previously Stated Material Weaknesses***
 
 We
        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 review the Company’s application of accounting
        principles.
 
 In
        the
        second phase of the program, we increased our auditor's review work quarterly,
        as well as, increased the areas reviewed and discussed with the audit committee
        and auditors beforehand, on any changes in accounting principles or revenue
        or
        expense recognition. Specifically, we implemented the following remediation
        measures relating to the previously stated material weaknesses:
 
 1. *Ineffective
        controls over revenue recognition* .
        Our
        remediation measures relating to revenue recognition includes a review by
        management of revenue items other than normal fees earned such as
        surcharge/convenience and interchange including a regular review of the accounts
        receivable aging. We have also instituted an objective method of determining
        the
        collectibility of the accounts receivable as well as a strict method for
        setting
        reserves against those receivables.
 
 2. *Ineffective
        controls over depreciation* .
        Subsequent to the errors that resulted in previous audit adjustments, the
        Company has set up a tracking system to follow the final production periods
        when
        software is being developed 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 the method
        of
        software depreciation on previously capitalized assets. Additionally, during
        the
        previous fiscal year the Company 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.
  37
 
 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 being
        developed. During the year ended December 31, 2005, the Company ceased
        operations of software development subsidiaries.
 
 We
        completed our remediation program during fiscal 2006. The material weaknesses
        are considered remediated as the applicable remedial controls operated for
        a
        sufficient period of time and management has thus concluded, through testing,
        that these controls are operating effectively.
  ***Changes
        in Internal Control Over Financial Reporting***
 
 There
        were no changes during the quarter ended June 30, 2007 in our internal control
        over financial reporting or in other factors that materially affected, or
        are
        reasonably likely to materially affect, our internal controls over financial
        reporting.
 
 **Item
        3A(T). Controls and Procedures**
 
 Not
        applicable
 
 **PART
        II - OTHER INFORMATION**
 
 **Item
        1. Legal Proceedings**
 
 Information
        regarding legal proceedings is contained in Note #7 to the Condensed
        Consolidated Financial Statements contained in this Report and is incorporated
        herein by reference.
  **Item
        1A. Risk Factors**
 
 There
        were no material changes from the risk factors previously disclosed in Risk
        Factors within “Item 1. Description of Business” included in our Annual Report
        on Form 10-KSB for the year ended December 31, 2006.
  **Item
        2. Unregistered Sale of Equity Securities and Use of
        Proceeds**
 
 None
  **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; and 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,
        2007 the Company was not in compliance with all covenants and has obtained
        a
        waiver of these covenants through June 30, 2007.
  **Item
        4. Submission of Matters to a Vote of Security Holders**
 
 None
  38
  **Item
        5. Other Information**
 
 None
  **Item
        6. Exhibits**
  Exhibit
        Description
 
 3.1
              
              Articles
                  of Incorporation - Restated and Amended May 30, 2001(Incorporated
                  by
                  reference to form 10KSB filed with the SEC on March 31,
                  2003)3.2
              
              By-Laws
                  of Global Axcess Corp - As Amended(Incorporated by reference to
                  form 10KSB
                  filed with the SEC on March 31, 2003)3.3
              
              Amendment
                  to the Articles of Incorporation (Incorporated by reference to
                  Form 8-K
                  filed with the SEC on May 3, 2005)4.1
              
              Securities
                  Purchase Agreement dated March 11, 2005 of Global Axcess Corp
                  (Incorporated by reference to Form 8-K filed with the SEC on April
                  4,
                  2005)4.2
              
              Form
                  of Common Stock Purchase Warrant (Incorporated by reference to
                  Form 8-K
                  filed with the SEC on April 4, 2005)4.3
              
              Securities
                  Purchase Agreement dated October 27, 2005 entered by and between
                  the
                  Company and the Investor (1)4.4
              
              9%
                  Senior Subordinated Secured Convertible Note dated October 27,
                  2005 issued
                  by the Company to the Investor (1)4.5
              
              Common
                  Stock Purchase Warrant dated October 27, 2005 issued by the Company
                  to the
                  Investor (1)4.6
              
              Registration
                  Rights Agreement dated October 27, 2005 entered by and between
                  the Company
                  and the Investor (1)4.7
              
              Subsidiary
                  Guarantee dated October 27, 2005 (1)4.8
              
              Subordination
                  Agreement dated October 27, 2005 entered by and between the Company,
                  the
                  Investor and Wachovia (1)4.9
              
              Security
                  Agreement dated October 27, 2005 entered by and between the Company
                  and
                  the Investor (1)4.10
              
              Third
                  Amended and Restated Loan Agreement dated October 27, 2005 entered
                  by and
                  between the Company and Wachovia (1)4.11
              
              Promissory
                  Note dated October 27, 2005 issued by the Company to Wachovia
                  (1)4.12
              
              Form
                  of Subscription Agreement dated November 8, 2005
                  (2)
  39
  4.13
              
              Form
                  of Common Stock Purchase Warrant dated November 8, 2005
                  (2)10.1
              
              Agreement
                  entered into with Food Lion, LLC and Nationwide Money Services,
                  Inc dated
                  October 5, 2001 (Incorporated by reference to form 10KSB filed
                  with the
                  SEC on April 16, 2002)10.2
              
              Asset
                  Purchase Agreement dated October 28, 2005 by and between the Company
                  and
                  Amer-E-Com Digital Corporation (1)10.3
              
              Distributor
                  ATM Processing Agreement between Nationwide Money Services and
                  Genpass
                  Technologies LLC dated December 15, 2005 (3)10.4
              
              Net
                  Enterprise Value Special Transaction Plan (incorporated by reference
                  to
                  form 8-K current report filed with the SEC on June 14,
                  2007)14.1
              
              Code
                  of Ethics and Business Conduct of Officers, Directors and Employees
                  of
                  Global Axcess Corp. (Incorporated by reference to form 10KSB filed
                  with
                  the SEC on March 31, 2003)
 
 16.1
              
              Letter
                  from L.L. Bradford & Company, LLC (incorporated by reference form 8-K
                  current report filed with the SEC on July 1, 2003)21.1
              
              List
                  of Subsidiaries:Nationwide
                  Money Services Inc., a Nevada corporationEFT
                  Integration Corporation, a Florida corporationAxcess
                  Technology Corporation, a Nevada corporationAxcess
                  Technology Corporation, Pty Ltd a South African
                  corporationCash
                  Axcess Corporation, Pty Ltd a South African
                  corporation
 
 
 31.1
              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 Corppursuant
                    to Section 302 of the Sarbanes-Oxley Act of
                    2002.
 
 32.1
              Certification
                  of the Chief Executive Officer of Global Axcess Corppursuant
                  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.
  40
  SIGNATURES
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, as of August
        7,
        2007 the Issuer has duly caused this report to be signed on its behalf by
        the
        undersigned, thereunto duly authorized.
 GLOBAL
                AXCESS
                CORPBy:
              /s/ George
                A.
                McQuainGeorge
                  A. McQuain
                President
                  and Chief Executive Officer
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, this report
        has been signed below by the following persons on behalf of the Issuer and
        in
        the capacities indicated on the 7 th day of
        August, 2007.
 Signature
                
                Title/S/
                    Lock IrelandLock
                    Ireland
                
                Vice
                    Chairman, Director/S/
                    Robert LandisRobert
                    Landis
                
                Director/S/
                    Michael J. LoiaconoMichael
                    J. Loiacono
                
                Chief
                    Financial Officer, Chief Accounting Officer/S/
                    Joseph LoughryJoseph
                    Loughry
                
                Chairman,
                    Director/s/George
                    A. McQuainGeorge
                    A. McQuain
                
                President,
                    CEO and Director/S/
                    Alan RossiterAlan
                    Rossiter
                
                Director
  41