INTERNATIONAL CARD ESTABLISHMENT INC - FORM 10-Q

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EX-31.2 - CERTIFICATION - INTERNATIONAL CARD ESTABLISHMENT INC	ice_ex312.htm
EX-32.1 - CERTIFICATION - INTERNATIONAL CARD ESTABLISHMENT INC	ice_ex321.htm
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EX-31.1 - CERTIFICATION - INTERNATIONAL CARD ESTABLISHMENT INC	ice_ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2011.

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION FROM _______ TO ________.

COMMISSION FILE NUMBER 000-33129

INTERNATIONAL CARD ESTABLISHMENT, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		95-4581903
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

555 Airport Space Way, Suite A Camarillo, CA		93010
(Address of principal executive offices)		(Zip code)

Issuer's telephone number: (866) 423-2491

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

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

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of November 14, 2011, there were 35,873,703 outstanding shares of the Registrant's Common Stock, $.0005 par value.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1	Financial Statements	3
Item 2.	Management's Discussion and Analysis	9
Item 3	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4	Controls and Procedures	16

PART II - OTHER INFORMATION

Item 1	Legal Proceedings	17
Item1A	Risk Factors	17
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3	Defaults Upon Senior Securities	17
Item 4	Removed and Reserved	17
Item 5.	Other Information	17
Item 6	Exhibits	18

SIGNATURES		19

PART I

ITEM 1. FINANCIAL STATEMENTS

INTERNATIONAL CARD ESTABLISHMENT, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

September 30, 2011

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2011			December 31, 2010
	(Unaudited)

ASSETS

CURRENT ASSETS
Cash	$	2,791		$	31,762
Accounts receivable, net of allowance of $24,783 and $28,621 at September 30, 2011 and December 31, 2010, respectively		13,762			56,895
Note receivable, net of allowance of $50,000 at September 30, 2011 and December 31, 2010, respectively		8,500			8,500
Inventory		58,198			45,159
Other receivables		24,617			30,821
Prepaid finance charges		75,000			50,000

Total current assets		182,868			223,137

FIXED ASSETS, net of accumulated depreciation of $3,071,476 and $3,043,745 at September 30, 2011 and December 31, 2010, respectively		56,785			35,279
INTANGIBLE ASSETS		889,625			988,950
GOODWILL		87,979			87,979
OTHER NON-CURRENT ASSETS		114,606			116,367

Total assets	$	1,331,863		$	1,451,712

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	568,621		$	476,320
Line of credit, related party		386,420			291,773

Total current liabilities		955,041			768,093

COMMITMENTS		-			-
STOCKHOLDERS' EQUITY

Preferred stock; $0.01 par value; 10,000,000 shares authorized, 54,000 shares issued and outstanding at September 30, 2011, and December 31, 2010, respectively		540			540
Common stock; $0.0005 par value; 100,000,000 shares authorized, 35,873,703 shares issued and outstanding at September 30, 2011, and December 31, 2010, respectively		17,937			17,937
Common stock subscribed		30,000			30,000
Additional paid-in capital		19,628,401			19,628,401
Accumulated deficit		(19,300,056	)		(18,993,259	)

Total stockholders' equity		376,822			683,619

Total liabilities and stockholders' equity	$	1,331,863		$	1,451,712

See Accompanying Notes to Condensed Consolidated Financial Statements.

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010

Revenue:
Merchant services revenues	$	564,784		$	434,712		$	1,665,914		$	1,909,521
Equipment sales		146,128			152,967			456,402			452,727
Less: sales returns and allowances		(13,935	)		(2,583	)		(21,682	)		(19,533	)
Net revenue		696,977			585,096			2,100,634			2,342,715

Cost of revenue:
Commissions		101,949			89,421			356,680			410,785
Cost of sales		203,607			123,307			614,772			779,725
Cost of sales – equipment		13,918			14,573			28,590			45,984
Cost of revenue		319,474			227,301			1,000,042			1,236,494

Gross profit		377,503			357,795			1,100,592			1,106,221

Operating, general and administrative expenses:
General, administrative and selling expenses		400,020			443,565			1,219,388			1,493,909
Depreciation		8,569			12,350			27,731			32,982
Merchant portfolio attrition expense		47,245			57,565			142,778			177,273
Total operating, general and administrative expenses		455,834			513,480			1,389,897			1,704,164

Net operating (loss)		(78,331	)		(155,685	)		(289,305	)		(597,943	)

Non-operating income (expense):
Interest income		-			-			1			1,231
Interest (expense)		(7,043	)		(3,583	)		(17,492	)		(17,121	)
Gain on sale of fixed assets		-			-			-			538,205

Total non-operating income (expense)		(7,043	)		(3,583	)		(17,491	)		522,315

Net income/(loss) before provision for income taxes		(85,374	)		(159,268	)		(306,796	)		(75,628	)

Provision for income taxes		-			-			-			-

Net income (loss)	$	(85,374	)	$	(159,268	)	$	(306,796	)	$	(75,628	)

Earnings per share – basic	$	0.00		$	0.00		$	(0.01	)	$	0.00

Earnings per share – dilutive	$	0.00		$	0.00		$	(0.01	)	$	0.00

Weighted average shares outstanding - basic		35,873,703			35,873,703			35,873,703			35,873,703

Weighted average shares outstanding - dilutive		35,873,703			35,873,703			35,873,703			35,873,703

See Accompanying Notes to Condensed Consolidated Financial Statements.

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended
	September 30, 2011			September 30, 2010

Cash Flows from Operating Activities:
Net (Loss)	$	(306,796	)	$	(75,628	)

Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation		27,731			32,982
Gain on sale of fixed assets		-			(1,989	)
Write off of cancelled merchant accounts		95,530			119,708
Allowance for doubtful accounts, other receivables and accrued interest income, net of bad debt recoveries		(3,838	)		(844	)
Changes in assets and liabilities
Decrease (increase) in accounts receivable		46,972			(4,564	)
Decrease in inventories		274,389			338,191
Decrease in other receivables		6,204			179,561
(Increase) in prepaid expenses		(25,000	)		(50,000	)
Decrease (increase) in other non-current assets		1,761			(25,654	)
Increase/(decrease) in accounts payable		6,611			(13,475	)
Increase (decrease) in accrued expenses		137,894			(25,088	)
(Decrease) in Due to FTS – Underpayment		-			(55,697	)

Net cash provided by operating activities		261,458			417,503

Cash Flows from Investing Activities:
Acquisitions, net of attrition		3,792			806,696
Purchase of property and equipment		(49,236	)		(9,900	)
Proceeds from sale of fixed assets		-			(538,205	)

Net cash provided by (used) in investing activities		(45,444	)		258,591

Cash Flows from Financing Activities:
Payment on line of credit, related party		(696,012	)		(1,218,498	)
Proceeds from line of credit, related party		451,027			538,000

Net cash used in financing activities		(244,985	)		(680,498	)

Net (decrease) in cash		(28,971	)		(4,404	)

Cash, beginning of period		31,762			40,153

Cash, end of period	$	2,791		$	35,749

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(CONTINUED)

	Nine Months Ended
	September 30, 2011		September 30, 2010

SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	17,041	$	19,775

NON-CASH INVESTING AND FINANCING TRANSACTIONS
Noncash advances from line of credit, related party	$	2,609	$	2,957
Legal and Professional Fees paid from line of credit, related party	$	52,204	$	2,203
Inventory purchased from line of credit, related party	$	287,428	$	316,517
Inventory reclassified to fixed assets	$	21,912	$	8,441

See Accompanying Notes to Condensed Consolidated Financial Statements.

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation and Organization and Significant Accounting Policies

Basis of Presentation and Organization

The accompanying Condensed Consolidated Financial Statements of International Card Establishment, Inc. (the “Company”) should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Significant accounting policies disclosed therein have not changed except as noted below.

As used in these Notes to the Consolidated Financial Statements, the terms the “Company”, “we”, “us”, “our” and similar terms refer to International Card Establishment, Inc. and, unless the context indicates otherwise, its consolidated subsidiaries. The Company’s subsidiaries include NEOS Merchant Solutions (“NEOS”), a Nevada corporation, which provides smart card loyalty programs in an integrated vertical system for its customers, as well as other electronic payment services (merchant services); International Card Establishment (“ICE”), which provides electronic payment services (merchant services); and INetEvents, Inc. (“INET”), a Delaware Corporation, which has been dormant since 2005.

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, these interim condensed consolidated financial statements should be read in conjunction with the Company’s most recent audited financial statements and notes thereto included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2010. Operating results for the period ended September 30, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011

Reclassifications

Certain reclassifications, which have no effect on net loss or change in equity, have been made in the prior period financial statements to conform to the current presentation.

Note 2. Other Receivables

At September 30, 2011, and December 31, 2010, other receivables consisted of the following:

	September 30, 2011		December 31, 2010
Merchant residuals receivable	$	16,083	$	14,394
Other receivables		8,534		16,427
Total	$	24,617	$	30,821

December 31, 2010, merchant residuals of $14,394 were collected in January 2011. Other receivables were split between $13,127 in a funds pool flow through repayment and $3,300 in employee advances. The balance of the employee advances was collected in first quarter of 2011.

At September 30, 2011, other receivables consisted of $2,034 in a funds pool flow through repayment and $6,500 in employee advances. The employee advances remain outstanding at the time of this filing.

Note 3. Due to FTS - Underpayment

In June 2009, one of our residual sources notified us that between November 2008 and April 2009 they had undercharged us by $111,393. An agreement was reached whereby the vendor would deduct an additional $9,283 per month in fees over the next 12 months. The $111,393 was split with $72,757 being offset against the second quarter residual income and $38,636 (representing the November and December 2008 portion) was treated as Other Expense. At March 31, 2010, the outstanding balance payable was $27,848. With the sale of our merchant portfolio in April 2010 the balance was paid in full.

Note 4. Subscriptions

As of September 30, 2011, we anticipated issuing 30,000 shares of the Company’s common stock in connection with the sale of such securities pursuant to a subscription agreement dated as of April 2004 between the Company and an investor in the aggregate amount of $21,000. As of the date of filing this has not been completed

Note 5. Subsequent Events

The Company has evaluated subsequent events for recognition or disclosure in the financial statements filed on Form 10-Q with the SEC and no other events, other than those described in these notes, have occurred that require disclosure.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. References in this section to "International Card Establishment, Inc.," the "Company," "we," "us," and "our" refer to International Card Establishment, Inc. and our direct and indirect subsidiaries on a consolidated basis unless the context indicates otherwise.

This interim report contains forward looking statements relating to our Company's future economic performance, plans and objectives of management for future operations, projections of revenue mix and other financial items that are based on the beliefs of, as well as assumptions made by and information currently known to, our management. The words "expects, intends, believes, anticipates, may, could, should" and similar expressions and variations thereof are intended to identify forward-looking statements. The cautionary statements set forth in this section are intended to emphasize that actual results may differ materially from those contained in any forward looking statement.

Our Management, Discussion and Analysis ("MD&A") is provided as a supplement to our financial statements to help provide an understanding of our financial condition, changes in financial condition and results of operations. The MD&A section is organized as follows:

Ÿ	EXECUTIVE SUMMARY, OVERVIEW AND DEVELOPMENT OF OUR BUSINESS. These sections provide a general description of the Company's business, as well as recent developments that we believe are important in understanding our results of operations as well as anticipating future trends in our operations.

Ÿ	CRITICAL ACCOUNTING POLICIES. This section provides an analysis of the significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosure of contingent assets and liabilities.

RESULTS OF OPERATIONS. This section provides an analysis of our results of operations for the three and nine months ended September 30, 2011 compared to the three months and nine months ended September 30, 2010. A brief description of certain aspects, transactions and events is provided, including related-party transactions that impact the comparability of the results being analyzed.

Ÿ	LIQUIDITY AND CAPITAL RESOURCES. This section provides an analysis of our financial condition and cash flows as of September 30, 2011, and December 31, 2010.

EXECUTIVE SUMMARY

Our strategy is to grow profitably by increasing our penetration of the expanding small merchant marketplace for payment and Gift & Loyalty card based products. We find these merchants through our Independent Sales Organization ("ISO") and agent channels of distribution and intend to make additional acquisitions on an opportunistic basis in this fragmented segment of the industry.

OVERVIEW

We are provider of credit and debit card-based payment processing services and Gift & Loyalty products to small merchants. As of September 30, 2011, we provide our services to numerous ISOs and thousands of merchants located across the United States. Our payment processing services enable our merchants to process traditional card-present, or swipe transactions, as well as card-not-present transactions. A traditional card-present transaction occurs whenever a cardholder physically presents a credit or debit card to a merchant at the point-of-sale. Card-not-present transactions occur whenever the customer does not physically present a payment card at the point-of-sale and may occur over the Internet or by mail, fax or telephone.

Over the last couple of years we have been addressing the current economic climate and increased competitiveness. We are continually exploring new avenues for expanding our revenue streams; examples are the DRIVE card and “white label” licensing programs. In addition, we have cut overhead and tightened our spending.

DEVELOPMENT OF OUR BUSINESS

International Card Establishment, Inc. (formerly Summit World Ventures, Inc.) (the “Company”) was incorporated on December 18, 1986, under the laws of the State of Delaware to engage in any lawful corporate activity, including, but not limited to, selected mergers and acquisitions. Prior to July 28, 2000, we were in the developmental stage, whose sole purpose was to locate and consummate a merger or acquisition with a private entity, and we did not have any operations. On July 28, 2000, we acquired iNetEvents, Inc., a Nevada corporation and commenced operations. iNetEvents, Inc., a Nevada corporation, was incorporated on February 3, 1999, and provided Internet support and supply software for real time event/convention information management.

On September 8, 2004, Neos Merchant Solutions, Inc. became our wholly owned subsidiary.

In May 2008 we started LIFT Network, a new sales division focused on marketing for small to medium sized businesses. LIFT Network is based in our corporate offices in Camarillo, California with a small office in Tampa, Florida.

In January 2009 we began a new month-to-month “rental” (“LiftMySales”) program. The first sales under this program were booked in February 2009. Under this program, there is no long-term contract and the merchant pays an all inclusive fee for the loan of a terminal and monthly fees for all services. These services have been expanded to include assistance to the merchant in marketing their company including on-line “coupon” and sales tools. This program is being marketed under the LIFT name. A video detailing the program is available at www.liftmysales.com. Under this program, the merchant is provided a “loaner” terminal.

In April 2010 the Company sold one of its credit card portfolios to our credit card processor for net proceeds of $761,510, which were used to pay down the related party line of credit. The line of credit will be used to fund the development of a new credit card portfolio. Subsequent to the sale of this portfolio, the Company started recruiting independent sales agents to begin building a new merchant portfolio.

In 2010 the Company developed a new sales model, the DRIVE program. Under this model, ICE provides marketing services to merchants by selling cards to the public. These cards entitle the purchaser to discounts on stated products sold by the merchant. As used herein, the terms the "Company", "we", "us", "our" and similar terms refer to International Card Establishment, Inc. and, unless the context indicates otherwise its consolidated subsidiaries. The Company’s subsidiaries include NEOS Merchant Services ("NEOS"), a Nevada corporation, which provides smart card loyalty programs in an integrated vertical system for its customers, as well as other electronic payment services (merchant services); International Card Establishment ("ICE"), which provides electronic payment services (merchant services); and INetEvents, Inc. ("INET"), a Nevada corporation, which has been dormant since 2005.

In September 2011 the Company began “white label” licensing the LIFT program to some of our ISOs. Under the licensing agreement, the ISOs pay us a flat monthly fee to sell the LIFT program under their brand. The merchants these ISOs sign under the “white label” program are provided the same services we provide to merchants under the LIFT program. We are able to generate additional in-house revenues through card sales.

CRITICAL ACCOUNTING POLICIES

The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our financial statements, which we discuss under the heading "Results of Operations" following this section of our MD&A. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Our most critical accounting estimates include the assessment of recoverability of long-lived assets and intangible assets, which impacts operating expenses when we impair assets or accelerate their amortization or depreciation.

We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company estimates its accounts receivable risks and provides allowances for doubtful accounts accordingly. The Company believes that its credit risk for accounts receivable is limited because of its large number of customers and the relatively small account balances for most of its customers. Also, the Company's customers are dispersed across different business and geographic areas. The Company evaluates the adequacy of the allowance for doubtful accounts on a periodic basis. The evaluation includes historical loss experience, length of time receivables are past due, adverse situations that may affect a customer's ability to repay and prevailing economic conditions. The Company makes adjustments to its allowance if the evaluation of allowance requirements differs from the actual aggregate reserve. This evaluation is inherently subjective and estimates may be revised as more information becomes available.

REVENUE AND COST RECOGNITION

Substantially all of our revenues are generated from fees charged to merchants for card-based payment processing services and our proprietary Gift and Loyalty programs.

Merchants enrolled in the card-based payment processing services are charged a bundled rate, primarily based upon the merchant's monthly charge volume and risk profile. Our fees principally consist of discount fees, which are a percentage of the dollar amount of each credit or debit transaction. We charge all merchants higher discount rates for card-not-present transactions than for card-present transactions in order to compensate ourselves for the higher risk of underwriting these transactions. We derive the balance of our revenues in this stream from a variety of fixed transaction or service fees, including fees for monthly minimum charge volume requirements, statement fees, annual fees and fees for other miscellaneous services, such as handling charge backs. We recognize discounts and other fees related to payment transactions at the time the merchants' transactions are processed. We recognize revenues derived from service fees at the time the service is performed. Related interchange and assessment costs are also recognized at that time.

Merchants participating in the Gift and Loyalty programs are charged a flat monthly fee. Those merchants participating in the Month to Month programs may pay additional fees for text and mobile messaging. Many of these merchants are also enrolled in the Guardian program for which they are charged a monthly fee to insure their terminal in case of mechanical failure for reasons other than damage or breakage.

We follow the FASB ASC Principal Agent Considerations Topic in determining our revenue reporting. Generally, where we have merchant portability, credit risk and ultimate responsibility for the merchant, revenues are reported at the time of sale on a gross basis equal to the full amount of the discount charged to the merchant. This amount includes interchange fees paid to card-issuing banks and assessments paid to credit card associations pursuant to which such parties receive payments based primarily on processing volume for particular groups of merchants. Interchange fees are set by Visa and MasterCard and are based on transaction processing volume and are recognized at the time transactions are processed.

GOODWILL AND INTANGIBLES

Since 2005, we capitalize intangible assets such as the purchase of merchant and gift loyalty accounts from portfolio acquisitions (i.e., the right to receive future cash flows related to transactions of these applicable merchants) and, at least quarterly, amortize accounts at the time of attrition. Additionally, as required by the Intangibles – Goodwill and Other Topic of the FASB ASC on the valuation of Goodwill and Intangibles, we also hire an outside firm to complete an annual valuation to determine any impairment recognized in current earnings.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Accounting

On January 1, 2008, the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, became effective for the Company. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company reports assets and liabilities that are measured at fair value using a three-tier fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1

Quoted prices in active markets for identical assets or liabilities.

Level 2

Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

An asset’s or liability’s level within the Fair Value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, we perform a detailed analysis of our assets and liabilities that are measured at fair value. All assets and liabilities for which the fair vale measurement is based on significant unobservable inputs or instruments which trade infrequently and, therefore, have little or no price transparency are classified as Level 3.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2010

Results of operations consist of the following:

	September 30, 2011			September 30, 2010			Difference $			Difference %

Net Revenues	$	696,977		$	585,096		$	111,881			19
Cost of Revenues		319,474			227,301			92,173			41

Gross Profit		377,503			357,795			19,708			6
Operating, General, and Administrative Costs		455,834			513,480			(57,646	)		(11	)

Net Operating Gain (Loss)	$	(78,331	)	$	(155,685	)	$	77,354			(50	)

Net revenues increased by $111,881 from $585,096 for the three months ended September 30, 2010, to $696,977 for the three months ended September 30, 2011, due mainly to the development of a new credit card portfolio, additional sales in the month to month program and increased sales of the new DRIVE card program. Residuals increased by approximately $93,407 due primarily to the development of the new credit card portfolio.

The costs associated with the merchant account services increased by approximately 41% or $92,173 primarily due to increased costs associated with residual income as well as increased commissions and unrecovered chargebacks.

General and administrative costs decreased by approximately 11% or $57,646 from $513,480 for the three months ended September 30, 2010, to $455,834 for the three months ended September 30, 2011. Decreases in amortization, legal and professional fees and payroll accounted for $55,133 in reductions with an additional $15,546 of cumulative cuts achieved in bad debt, depreciation, insurance, penalties, equipment rental and travel expenses for a total reduction of $70,679. These reductions were offset by increased spending of approximately $13,033 for advertising, auto, bank fees, licenses and dues, office expense, recruiting and tax expenses.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2010

Results of operations consist of the following:

	September 30, 2011			September 30, 2010			Difference $			Difference %

Net Revenues	$	2,100,634		$	2,342,715		$	(242,081	)		(10	)
Cost of Revenues		1,000,042			1,236,494			(236,452	)		(19	)

Gross Profit		1,100,592			1,106,221			(5,629	)		(1	)
Operating, General, and Administrative Costs		1,389,897			1,704,164			(314,267	)		(18	)

Net Operating Gain (Loss)	$	(289,305	)	$	(597,943	)	$	308,638			(52	)

Net revenues decreased by $242,081 from $2,342,715 for the nine months ended September 30, 2010, to $2,100,634 for the nine months ended September 30, 2011, due mainly to the sale of one of our credit card portfolios as well as the continued attrition of merchant accounts and tighter credit policies. Residuals decreased by approximately $250,735 due primarily to the sale of one of our credit card portfolios. Other contributing factors of this decrease were the attrition of merchant accounts. The decrease in residuals was offset by a $31,390 increase in sales of our month to month program, $95,690 in sales through the new DRIVE card program that began in the third quarter of 2010 and increased card reorders. While merchant attrition, caused by better offers from competitors as well as closing businesses, is a common aspect of our industry, we believe our new marketing models have helped offset losses due to attrition to some extent.

The costs associated with the merchant account services decreased by approximately 19% or $236,452 primarily due to decreased costs associated with residual income as well as decreased commissions and equipment costs. The Month to Month and DRIVE card sales models generate continuing income using existing equipment thus lowering the overall equipment costs.

General and administrative costs decreased by approximately 18% or $314,267 from $1,704,164 for the nine months ended September 30, 2010, to $1,389,897 for the nine months ended September 30, 2011. Decreases in amortization, legal and professional fees and payroll accounted for the largest portion ($370,856) with an additional $26,464 for advertising, depreciation, insurance, office, postage, equipment rental, and telephone expenses accounted for a total reduction of $397,320. These were offset by increased bad debt and loan renewal fees of $58,406 plus an additional $24,647 of auto, consulting fees, employee benefits, licenses, dues and subscriptions, penalties, postage, rent on premises, recruiting and training, and taxes for a total increase of $83,053.

LIQUIDITY AND CAPITAL RESOURCES

We are currently seeking to expand our merchant services offerings in bankcard and gift and loyalty. In addition, we are investigating additional business opportunities and potential acquisitions; accordingly we may require additional capital to complete the expansion and to undertake any additional business opportunities.

	September 30, 2011		December 31, 2010		Difference $			Difference %

Cash	$	2,791	$	31,762	$	(28,971	)		(91	)
Accounts Receivable, net	$	13,762	$	56,895	$	(43,133	)		(76	)
Accounts Payable and Accrued Expenses	$	568,621	$	476,320	$	92,301			19

We have financed our operations during the third quarter primarily through sales, the collection of accounts receivable, the use of our line of credit, and the use of cash on hand. As of September 30, 2011, we had total current liabilities of $955,041 compared to $768,093 as of December 31, 2010. The $186,948 increase in current liabilities is due primarily to increases of a $94,647 higher balance on the Line of Credit and $79,236 in payroll expenses. This increase in payroll is due to three members of upper management receiving only a portion of their pay since November 2010 and accrual of the balance owed to them. An additional $21,915 in increases is accounted for by accounts payable, merchant chargeback reserves, customer deposits and accrued taxes. These increases were offset by decreases of $8,850 in accrued expenses and sales taxes payable.

Cash decreased 91% from $31,762 at December 31, 2010, to $2,791 at September 30, 2011 due to increased commissions due to increased sales in addition to several large merchant chargebacks which the company is in the process of recovering.

As of September 30, 2011, net our accounts receivable decreased to $13,762 compared to $56,895 at December 31, 2010. The related allowance for doubtful accounts decreased $3,838 from $28,621 at December 31, 2010, to $24,783 as of September 30, 2011, due primarily to timing on collections in the third quarter.

We had no equity issuances in the third quarter of 2011.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

N/A.

ITEM 4. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company's management, including William Lopshire, the Company's Chief Executive Officer ("CEO") and Candace Mills, the Company's Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the three months ended September 30, 2011. Based upon that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures are effective to ensure that information requiring disclosure by the Company in the reports that the Company files or submits under the Exchange Act, 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 the Company's CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROLS

Our management, with the participation our Chief Executive Officer and Chief Financial Officer, performed an evaluation to determine whether any change in our internal controls over financial reporting occurred during the three month period ended September 30, 2011. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the three months ended September 30, 2011, that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

N/A.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION

(1)	Committees and financial reviews.

The board of directors has not established an audit committee. In addition, we do not have any other compensation or executive or similar committees. We will not, in all likelihood, establish an audit committee until such time as we increase our revenues, of which there can be no assurance. We recognize that an audit committee, when established, will play a critical role in our financial reporting system by overseeing and monitoring management's and the independent auditor's participation in the financial reporting process.

Until such time as an audit committee has been established, the board of directors will undertake those tasks normally associated with an audit committee to include, but not by way of limitation, the (i) review and discussion of the audited financial statements with management, and (ii) discussions with the independent auditors with respect to the matters required to be discussed by the Statement On Auditing Standards No. 61, "Communications with Audit Committees", as may be modified or supplemented.

ITEM 6. EXHIBITS.

(a)	The following exhibits are filed with this report.

31.1		Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302.
31.2		Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302.
32.1		Certification by Chief Executive Officer pursuant to 18 U.S. C. Section 1350.
32.2		Certification by Chief Financial Officer pursuant to 18 U.S. C. Section 1350.

101**

The following materials from International Card Establishment, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Cash Flow, (iii) the Consolidated Balance Sheets, and (iv) Notes to Consolidated Financial Statements tagged as blocks of text.

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

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

	INTERNATIONAL CARD ESTABLISHMENT, INC.

Date: November 14, 2011	By:	/s/ WILLIAM LOPSHIRE
		WILLIAM LOPSHIRE
		CHIEF EXECUTIVE OFFICER
		(PRINCIPAL EXECUTIVE OFFICER),

		SECRETARY AND DIRECTOR

	By:	/s/ CANDACE MILLS
		CANDACE MILLS
		CHIEF FINANCIAL OFFICER
		(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)

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