Global Axcess (OTC BB:GAXC)

	Re-pricing of risk premium
	Concept stock

We are coding GAXC as GeoSpecial. We viewed GAXC with trepidation when we first took a peak a this company a few months ago due to:

• Outstanding liquidity issues regarding debt obligations.
• As of the third quarter Global Axcess is in a negative working capital position.
• Although GAXC has been profitable for the last three years its annual sales have been stagnant at about $20 million, which led us to assume that its ATM business is a mature one. Also, even though Global is profitable it appears that its quarterly EPS figures have never eclipsed $0.02

We believe that there finally may be be reason to take a slightly more positive stance on this story:

• Recently rectified its liquidity standing by:
  • Closing a financing agreement with SunTrust Bank, extending a $5 million line of credit to the Company at a fixed interest rate of 6.99%, thereby satisfying loans with Wachovia Bank and CAMOFI. which extended the maturity on one of its financial obligations while reducing interest.
  • Refinancing $1.2 million in 9% debenture notes due in October 2010, reducing the Company's working capital requirements for 2010 by extending the maturity date of the notes by 15 months without any pre-payment penalty. As a result of the early repayment, Global Axcess expects approximately $40,000 in 2010 interest savings due to the lower interest rate of the loan. Additionally, there will be the elimination of warrants for 345,000 shares of the Company's common stock which were issued in relation to these notes.
• While Global is still in a negative working capital position, the situation has been steadily improving.

• The company is targeting a new growth venue in the self service DVD kiosk market that it claims carries higher margins than its ATM business.
• Commentary from its third quarter release indicates that management is focused on jump starting growth, with a key emphasis on revenues:

The positive bottom-line results for the quarter do not reflect any material contribution from the two agreements we announced during the quarter, or any contribution from our DVD kiosk initiative, currently in a pilot program stage. The two contracts we signed during the quarter, which in aggregate we expect to generate $1.3 million annually with the potential for follow-on business, are both expected to ramp during the fourth quarter and contribute significantly to our first quarter 2010 results. In addition, we are continuing to see interest from national and regional chains in our ATM services, and had substantive traffic and information requests following our participation in the National Association of Convenience Stores conference in Las Vegas. The Company has several proposals in the final stages of discussion and we are optimistic that we will announce agreements to further expand our ATM network in the coming months. We are moving to augment our marketing and sales teams to help us grow our top line and we are currently interviewing sales personnel.

Mr. McQuain continued, "In addition to our success on the ATM side of the business, we are simultaneously focused on adding additional services to accelerate our growth. Our goal is to leverage our ability to deploy, manage, maintain and process transactions from a wider range of self-service kiosks beyond the traditional ATM. Our DVD rental kiosks pilot program has been a success operationally. We are now focused on growing the rental traffic at the kiosks and are making various adjustments to better optimize the initiative. We remain excited about this opportunity but recognize that we have work to do to effectively deploy this solution on a broader scale.:

Michael J. Loiacono, Chief Financial Officer of the Company, stated, "Global Axcess was successful in expanding our profitability and significantly increasing our cash flow from continuing operations, despite a slight decrease in revenue. We expect further increases in our profitability and growing cash flows through careful expense management and the focus on higher margin sites and agreements. The growth in our ATM network, both from contracts already announced and potential new agreements should help us to grow our top line and accelerate our profitability."

We don't think the stock is overly undervalued at its current price of $1.06; as we watched the stock double during the past few weeks.  However, while its still too early to ascertain if the DVD initiative will be successful, investors may be willing to devote some exposure to the stock just in case the new venture jump starts growth.  The improvement in its liquidity standing may also lead to a repricing of Global's risk premium.  We are banking that these two events, along with a realigned management focus, could lead to an expansion of its P/E multiple. In fact, this has already been put in motion as the stock eclipsed $1.00 last week.