INTERNATIONAL CARD ESTABLISHMENT INC - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - INTERNATIONAL CARD ESTABLISHMENT INC	Financial_Report.xls
EX-31.2 - CERTIFICATION - INTERNATIONAL CARD ESTABLISHMENT INC	ice_ex312.htm
EX-32.1 - CERTIFICATION - INTERNATIONAL CARD ESTABLISHMENT INC	ice_ex321.htm
EX-31.1 - CERTIFICATION - INTERNATIONAL CARD ESTABLISHMENT INC	ice_ex311.htm
EX-32.2 - CERTIFICATION - INTERNATIONAL CARD ESTABLISHMENT INC	ice_ex322.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 MARCH 31, 2012.

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 May 15, 2012, 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	11
Item 4.	Controls and Procedures	11

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	12
Item1A.	Risk Factors	12
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3.	Defaults Upon Senior Securities	12
Item 4.	Mine Safety Disclosures	12
Item 5.	Other Information	12
Item 6.	Exhibits	13

SIGNATURES		14

PART I

ITEM 1. FINANCIAL STATEMENTS

INTERNATIONAL CARD ESTABLISHMENT, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

March 31, 2012

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31, 2012			December 31, 2011
	(Unaudited)

ASSETS

CURRENT ASSETS
Cash	$	8,394		$	18,848
Accounts receivable, net of allowance of $22,353 and $21,258 at March 31, 2012 and December 31, 2011, respectively		25,540			12,957
Note receivable, net of allowance of $50,000 at March 31, 2012 and December 31, 2011, respectively		28,639			32,797
Inventory		44,166			41,213
Other receivables		20,438			41,365
Prepaid finance charges		25,000			50,000

Total current assets		152,177			197,180

FIXED ASSETS, net of accumulated depreciation of $3,092,502 and $3,082,069 at March 31, 2012 and December 31, 2011, respectively		62,017			66,191
INTANGIBLE ASSETS		845,197			872,035
GOODWILL		87,979			87,979
OTHER NON-CURRENT ASSETS		114,606			114,606

Total assets	$	1,261,976		$	1,337,991

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	691,702		$	633,268
Line of credit, related party		394,017			434,971

Total current liabilities		1,085,719			1,068,239

CONTINGENCIES AND COMMITMENTS		-			-

STOCKHOLDERS' EQUITY
Preferred stock; $0.01 par value; 10,000,000 shares authorized, 54,000 shares issued and outstanding at March 31, 2012, and December 31, 2011, respectively		540			540
Common stock; $0.0005 par value; 100,000,000 shares authorized, 35,873,703 shares issued and outstanding at March 31, 2012, and December 31, 2011, respectively		17,937			17,937
Common stock subscribed		30,000			30,000
Additional paid-in capital		19,628,401			19,628,401
Accumulated deficit		(19,500,621	)		(19,407,125	)

Total stockholders' equity		176,257			269,753

Total liabilities and stockholders' equity	$	1,261,976		$	1,337,991

See Accompanying Notes to Condensed Consolidated Financial Statements.

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)

(UNAUDITED)

	Three Months Ended
	March 31, 2012			March 31, 2011

Revenue:
Merchant services revenues	$	474,886		$	571,094
Equipment sales		169,009			157,202
Less: sales returns and allowances		(3,448	)		(9,007	)

Net revenue		640,447			719,289

Cost of revenue:
Commissions		109,427			128,901
Cost of sales		184,514			207,809
Cost of sales – Depreciation		9,450			-
Cost of sales – equipment		8,818			8,249

Cost of revenue		312,209			344,959

Gross profit		328,238			374,330

Operating, general and administrative expenses:
General, administrative and selling expenses		368,041			423,768
Depreciation		1,266			10,129
Merchant portfolio attrition expense		47,354			48,883

Total operating, general and administrative expenses		416,661			482,780

Net operating loss		(88,423	)		(108,450	)

Non-operating (expense):
Interest income		671			-
Interest (expense)		(6,639	)		(4,910	)
Gain on sale of fixed assets		895			-

Total non-operating expense		(5,073	)		(4,910	)

Net loss before provision for income taxes		(93,496	)		(113,360	)

Provision for income taxes		-			-

Net loss	$	(93,496	)	$	(113,360	)

Earnings per share – basic and dilutive	$	(0.00	)	$	(0.00	)

Weighted average shares outstanding – basic and diluted		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)

	Three Months Ended
	March 31, 2012			March 31, 2011

Cash Flows from Operating Activities:
Net Loss	$	(93,496	)	$	(113,360	)

Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation		10,716			10,129
Gain on sale of fixed assets		(895	)		-
Write off of cancelled merchant accounts		47,354			48,883
Allowance for doubtful accounts, other receivables and accrued interest income, net of bad debt recoveries		1,095			12,439
Changes in assets and liabilities
Decrease (increase) in accounts receivable		(13,678	)		36,729
Decrease in inventories		54,528			63,360
Decrease in other receivables		20,927			6,265
Decrease in prepaid expenses		25,000			25,000
Decrease in other non-current assets		-			1,321
Increase in accounts payable		101			26,990
Increase in accrued expenses		64,799			90,295

Net cash provided by operating activities		116,451			208,051

Cash Flows from Investing Activities:
Acquisitions, net of attrition		(20,516	)		(17,796	)
Purchase of property and equipment		(6,542	)		(34,354	)
Proceeds from sale of fixed assets		895			-
Payments received toward notes receivable		4,158			-

Net cash used in investing activities		(22,005	)		(52,150	)

Cash Flows from Financing Activities:
Payment on line of credit, related party		(359,037	)		(140,495	)
Proceeds from line of credit, related party		254,137			33,000

Net cash used in financing activities		(104,900	)		(107,495	)

Net (decrease) increase in cash		(10,454	)		48,406

Cash, beginning of period		18,848			31,762

Cash, end of period	$	8,394		$	80,168

See Accompanying Notes to Condensed Consolidated Financial Statements.

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(CONTINUED)

	Nine Months Ended
	March 31, 2012		March 31, 2011

SUPPLEMENT DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid for interest	$	8,706	$	3,165

NON-CASH INVESTING AND FINANCING TRANSACTIONS
Noncash advances from line of credit, related party	$	637	$	1,265
Legal and Professional Fees paid from line of credit, related party	$	6,465	$	30,433
Inventory purchased from line of credit, related party	$	57,481	$	80,764
Inventory reclassified to fixed assets	$	6,259	$	10,901

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, 2011. 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”) , a Nevada corporation, 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, 2011. Operating results for the period ended March 31, 2012, are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

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 March 31, 2012, and December 31, 2011, other receivables consisted of the following:

	March 31, 2012		December 31, 2011
Merchant residuals receivable	$	18,635	$	14,315
Other receivables		1,803		27,050
Total	$	20,438	$	41,365

December 31, 2011, merchant residuals of $14,315 were collected in January 2012. Other receivables were split between $22,050 in a funds pool flow through repayment and $5,000 in employee advances. The balance of the employee advances was collected in first quarter of 2012.

At March 31, 2012, other receivables consisted of $1,194 in a funds pool flow through repayment and $609 in employee advances. The employee advances remain outstanding at the time of this filing.

Note 3. Subscriptions

As of March 31, 2012, 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 4. 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 Results Of Operations. This section provides an analysis of our results of operations for the three ended March 31, 2012 compared to the three months ended March 31, 2011. 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 March 31, 2012, and December 31, 2011.

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 March 31, 2012, we provided our services to thousands of merchants located across the United States. Our payment processing services enable 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. Our proprietary Gift and Loyalty product allows merchants to issue custom branded gift and loyalty cards.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2011

Results of operations consist of the following:

	March 31, 2012			March 31, 2011			Difference $			Difference %

Net Revenues	$	640,447		$	719,289		$	(78,842	)		(11	)
Cost of Revenues		312,209			344,959			(32,750	)		( 9	)

Gross Profit		328,238			374,330			(46,092	)		(12	)
Operating, General, and Administrative Costs		416,661			482,780			(66,119	)		(14	)

Net Operating Loss	$	(88,423	)	$	(108,450	)	$	20,027			18

Net revenues decreased by $78,842 from $719,289 for the three months ended March 31, 2011, to $640,447 for the three months ended March 31, 2012, due mainly to a decrease in credit card residuals and sales of the DRIVE card program. This decrease was offset by increased revenues under the Month To Month program and the new White Label Licensing program begun in late 2011.

The costs associated with the merchant account services increased by approximately 9% or $32,750 primarily due to decreased costs associated with residual income as well as decreased commissions.

General and administrative costs decreased by approximately 14% or $66,119 from $482,780 for the three months ended March 31, 2011, to $416,661 for the three months ended March 31, 2012. Decreases in bad debt expense, depreciation, employee benefits, payroll and rent accounted for $60,259 in reductions with an additional $14,724 of cumulative cuts achieved in amortization, auto expenses, insurance, penalties, postage, equipment rental, recruiting and travel expenses for a total reduction of $74,983. These reductions were offset by increased spending of approximately $8,864 for licenses and dues, meals and entertainment, office expense, and telephone expenses.

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.

	March 31, 2012		December 31, 2011		Difference $			Difference %

Cash	$	8,394	$	18,848	$	(10,454	)		(55	)
Accounts Receivable, net	$	25,540	$	12,957	$	12,583			97
Accounts Payable and Accrued Expenses	$	691,702	$	633,268	$	58,434			9

We have financed our operations during the first quarter of 2012 primarily through sales, the collection of accounts receivable, the use of our line of credit, and the use of cash on hand. As of March 31, 2012, we had total current liabilities of $1,085,719 compared to $1,068,239 as of December 31, 2011. The $17,480 increase in current liabilities is due to increases of $9,765 in accrued expenses, $3,683 in customer deposits, $101 in accounts payable and $47,602 in payroll expenses. The 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. These increases were offset by decreases of $40,954 to the Line of Credit, $2,067 in accrued interest, $254 to the merchant reserve and $396 in accrued taxes.

Cash decreased 55% from $18,848 at December 31, 2011, to $8,394 at March 31, 2012 due to timing of payments and receipt of income.

As of March 31, 2012, net our accounts receivable increased to $25,540 compared to $12,957 at December 31, 2011. The related allowance for doubtful accounts increased $1,095 from $21,258 at December 31, 2011, to $22,353 as of March 31, 2012, due primarily to timing on collections in the first quarter.

We had no equity issuances in the first quarter of 2012.

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 March 31, 2012. 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 March 31, 2012. 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 March 31, 2012, 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. MINE SAFETY DISCLOSURES

N/A

ITEM 5. OTHER INFORMATION

None

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 March 31, 2012 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: May 16, 2012	BY:	/s/ WILLIAM LOPSHIRE
		WILLIAM LOPSHIRE
		CHIEF EXECUTIVE OFFICER
		SECRETARY AND DIRECTOR
		(PRINCIPAL EXECUTIVE OFFICER),


Date: May 16, 2012	BY:	/s/ CANDACE MILLS
		CANDACE MILLS
		CHIEF FINANCIAL OFFICER
		(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)

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