- Quarterly Report (10-Q)

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 June 30, 2010.

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 o 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 August 16, 2010, 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			10
Item 3. Quantitative and Qualitative Disclosures About Market Risk			15
Item 4. Controls and Procedures			14

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			16
Item1A. Risk Factors			16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			16
Item 3. Defaults Upon Senior Securities			16
Item 4. Removed and Reserved			16
Item 5. Other Information			16
Item 6. Exhibits			17

SIGNATURES			18

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERNATIONAL CARD ESTABLISHMENT, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 2010

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30, 2010			December 31, 2009
	(Unaudited)			(Audited)

ASSETS

CURRENT ASSETS
Cash	$	75,859		$	40,153
Accounts receivable, net of allowance of $14,463 and $17,721 at June 30, 2010 and Decem ber 31, 2009, respectively		3,554			5,296
Note receivable, net of allowance of $50,000 at June 30, 2010 and December 31, 2009, respectively		-			-
Inventory		56,708			57,529
Other receivables		9,709			194,422
Prepaid financial charges		100,000			25,000

Total current assets		245,830			322,400

FIXED ASSETS, net of accumulated depreciation of $3,020,355and $2,999,836 at June 30, 2010 and December 31, 2009, respectively		43,226			42,719
INTANGIBLE ASSETS		1,054,843			1,405,026
GOODWILL		87,979			87,979
OTHER NON-CURRENT ASSETS		143,230			117,576

Total assets	$	1,575,108		$	1,975,700

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	30,462		$	39,141
Accrued expenses		591,697			531,677
Due to FTS – Underpayment		-			55,697
Line of credit, related party		148,278			628,154

Total current liabilities		770,437			1,254,669

COMMITMENTS & CONTINGENCIES		-			-
STOCKHOLDERS' EQUITY
Preferred stock; $0.01 par value; 10,000,000 shares authorized, 54,000 shares issued and outstanding at June 30, 2010, and December 31, 2009, respectively		540			540
Common stock; $0.0005 par value; 100,000,000 shares authorized, 35,873,703 shares issued and outstanding at June 30, 2010, and December 31, 2009, respectively		17,937			17,937
Common stock subscribed		30,000			30,000
Additional paid-in capital		19,628,401			19,628,401
Accumulated deficit		(18,872,207	)		(18,955,847	)

Total stockholders' equity		804,671			721,031

Total liabilities and stockholders' equity	$	1,575,108		$	1,975,700

See Accompanying Notes to Condensed Consolidated Financial Statements.

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)

(UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009

Revenue:
Merchant services revenues	$	402,928		$	1,290,452		$	1,474,809		$	2,717,833
Equipment sales		153,813			124,521			299,760			223,586
Less: sales returns and allowances		(7,615	)		(6,399	)		(16,950	)		(15,131	)
Net revenue		549,126			1,408,574			1,757,619			2,926,288

Cost of revenue:
Commissions		217,924			179,229			321,364			319,535
Cost of sales		99,639			742,917			656,418			1,477,328
Cost of sales – equipment		11,123			30,202			31,411			55,667
Cost of revenue		328,686			952,348			1,009,193			1,852,530

Gross profit		220,440			456,226			748,426			1,073,758

Operating, general and administrative expenses:
General, administrative and selling expenses		543,421			535,272			1,050,344			1,113,903
Depreciation		10,524			2,649			20,632			3,294
Merchant portfolio attrition expense		54,258			66,150			119,708			161,700
Total operating, general and administrative expenses		608,203			604,071			1,190,684			1,278,897

Net operating (loss)		(387,763	)		(147,845	)		(442,258	)		(205,139	)

Non-operating income (expense):
Interest income		1,219			-			1,231			-
Interest (expense)		(3,767	)		(9,665	)		(13,538	)		(19,905	)
Gain on sale of fixed assets		536,215						538,205
Other Expense – FTS		-			(38,636	)		-			(38,636	)

Total non-operating income (expense)		533,667			(48,301	)		525,898			(58,541	)

Net income/(loss) before provision for income taxes		145,904			(196,146	)		83,640			(263,680	)

Provision for income taxes		-			-			-			-

Net income (loss)	$	145,904		$	(196,146	)	$	83,640		$	(263,680	)

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

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

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)

	Six Months Ended
	June 30, 2010			June 30, 2009

Cash Flows from Operating Activities:
Net income/(loss)	$	83,640		$	(263,680	)
Depreciation		20,632			3,294
Write off of cancelled merchant accounts		119,708			161,700
Allowance for doubtful accounts, other receivables and accrued interest income, net of bad debt recoveries		(3,258	)		2,784
Gain on sale of fixed assets		(1,989	)		-
Adjustments to reconcile net loss to cash provided by operating activities:
Changes in assets and liabilities
Decrease in accounts receivable		5,001			11,994
Decrease in inventories		272,635			210,976
Decrease in other receivables		184,714			154,657
(Increase) in prepaid expenses		(75,000	)		(35,325	)
(Increase) in other non-current assets		(25,654	)		(891	)
(Decrease) in accounts payable		(8,679	)		(1,023	)
Increase/(decrease) in accrued expenses		60,017			(133,771	)
Increase/(decrease) in Due to FTS – Underpayment		(55,697	)		111,393

Net cash provided by operating activities		576,070			222,108

Cash Flows from Investing Activities:
Acquisitions of merchant accounts, net of attrition		230,476			(40,050	)
Purchase of property and equipment		(15,347	)		(23,046	)
Proceeds received from sale of equipment		2,685			-

Net cash provided (used) in investing activities		217,814			(63,096	)

Cash Flows from Financing Activities:
Noncash advances from line of credit, related party		(2,653	)		52,101
Payment on line of credit, related party		(1,033,524	)		(656,579	)
Proceeds from line of credit, related party		278,000			470,000

Net cash used in financing activities		(758,177	)		(134,478	)

Net increase in cash		35,707			24,534

Cash, beginning of period		40,153			91,404

Cash, end of period	$	75,860		$	115,938

See Accompanying Notes to Condensed Consolidated Financial Statements.

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(CONTINUED)

	Three Months Ended
	June 30, 2010		June 30, 2009

SUPPLEMENT DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid for interest	$	19,775	$	19,905

NON-CASH INVESTING AND FINANCING TRANSACTIONS
Inventory purchased from line of credit, related party	$	278.301	$	211,817

See Accompanying Notes to Condensed Consolidated Financial Statements.

INTERNATIONAL CARD ESTABLISHMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2009. 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 December 31, 2009, Annual Report on Form 10-K. Operating results for the period ended June 30, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

Accounting Policies

Fair Value Accounting

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2

Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Recently Adopted and Recently Issued Accounting Guidance

In June 2009, the Financial Accounting Standards Board ("FASB") issued authoritative guidance for "Accounting for Transfers of Financial Assets," which eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity's continuing involvement in and exposure to the risks related to transferred financial assets. This guidance is effective for fiscal years beginning after November 15, 2009. The Company adopted this guidance for the period ended June 30, 2010, and determined that it does not have a material impact on the consolidated financial statements.

In June 2009, the FASB issued authoritative guidance amending existing guidance. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. This guidance is effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period. The Company adopted this guidance for the period ended June 30, 2010. It does not have a material impact on the consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06 to amend the disclosure requirements related to recurring and nonrecurring fair value measurements found in ASC Topic 820 “Fair Value Measurements and Disclosure” . The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. The guidance became effective for the Company beginning January 1, 2010. The adoption of this guidance does not have a material impact on the Company’s consolidated financial statements.

In February 2010, the FASB issued ASU 2010-09 which amends guidance on ASC Topic 855 “Subsequent Events”. This guidance alleviates potential conflicts between FASB guidance and SEC requirements. Under this amended guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. This guidance was effective immediately and we adopted these new requirements for the period ended June 30, 2010. The adoption of this guidance did not have a material impact on our financial statements.

Issued

In October 2009 the FASB issued ASU 2009-13 which changes ASC Topic 506 “Revenue Recognition” for revenue recognition for multiple-deliverable arrangements. These changes require separation of consideration received in such arrangements by establishing a selling price hierarchy (not the same as fair value) for determining the selling price of a deliverable, which will be based on available information in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; eliminate the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the arrangement to each deliverable on the basis of each deliverable’s selling price; require that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis; and expand the disclosures related to multiple-deliverable revenue arrangements. These changes become effective on January 1, 2011. The Company has determined that the adoption of these changes will not have an impact on the consolidated financial statements, as the Company does not currently have any such arrangements with its customers.

In January 2010, the FASB issued ASU 2010-06 to amend the disclosure requirements related to recurring and nonrecurring fair value measurements found in ASC Topic 820 “Fair Value Measurements and Disclosures” . The guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance will become effective for the Company with the reporting period beginning July 1, 2011. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future consolidated financial statements.

Note 2. Sale of Merchant Portfolio

In April 2010 management negotiated the sale of one of its merchant card portfolios to the Company’s bank card processor in a third party transaction. The Company received net proceeds of $761,510 from the transaction with a net gain of $536,215. The Company used the net proceeds from the sale of one of its merchant card portfolios to pay down its related party line of credit in the amount of $503,344.

Note 3. Other Receivables

At June 30, 2010, and December 31, 2009, other receivables consisted of the following:

	June 30, 2010		December 31, 2009
Merchant residuals receivable	$	3,841	$	163,118
Other receivables		5,868		31,304
Total	$	9,709	$	194,422

December 31, 2009, merchant residuals of $159,277 were collected in January 2010. Other receivables are split between $5,416 in funds pool transactions for one client and $452 in employee advances for a total of $5,868.

Note 4. 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. With the sale of our merchant portfolio in April 2010 the balance was paid in full.

Note 5. Subscriptions

As of June 30, 2010, we anticipate issuing shares to satisfy a $30,000 2004 common stock subscription.

Note 5. Fair Value Accounting

In accordance with authoritative guidance, the table below sets forth the Company's financial assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Fair Value at June 30, 2010
	Total		Level 1		Level 2		Level 3

Assets:
Intangibles – Merchant Portfolios	$	619,843	$	-	$	619,843	$	-

	$	619,843	$	-	$	619,843	$	-

Liabilities:
Line of Credit, related party	$	148,278	$	-	$	148,278	$	-

	$	148,278	$	-	$	148,278	$	-

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.

Ÿ RESULTS OF OPERATIONS. This section provides an analysis of our results of operations for the three months and six months ended June 30, 2010 compared to the three months and six months ended June 30, 2009. 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 June 30, 2010, and December 31, 2009.

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 a rapidly growing provider of credit and debit card-based payment processing services and Gift & Loyalty products to small merchants. As of June 30, 2010, we provided 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.

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.

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 Companies 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.

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. We typically charge these merchants 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 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.

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

The three levels of the fair value hierarchy are described below:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2

Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2009

Results of operations consist of the following:

	June 30, 2010			June 30, 2009			Difference $			Difference%
Net Revenues	$	549,126		$	1,408,574		$	(859,448	)		(61	)

Cost of Revenues		328,686			952,348			(623,662	)		(65	)
Gross Profit		220,440			456,226			(235,786	)		(52	)
Operating, General,
and Administrative Costs		608,203			604,071			4,132			(1	)
Net Operating Gain/(Loss)	$	(387,763	)	$	(147,845	)	$	(239,918	)		(162	)

Net revenues decreased by $859,448 from $1,408,574 for the three months ended June 30, 2009, to $549,126 for the three months ended June 30, 2010, due mainly the sale of one of our credit card portfolios, to the poor economy as well as continued attrition of merchant accounts and tighter credit policies. Residuals decreased by approximately $887,497, with $814,089 being directly attributable to the sale of one of our credit card portfolios. The balance of the decrease was due in part to the attrition of merchant accounts but the primary factor was the faltering economy which affected us in two ways. First, reduced merchant sales led directly to reduced residuals. Secondly, many small businesses closed shop last year due to the lagging economy. A number of merchants simply closed their doors and bank accounts, precluding us from even collecting their early termination fees. Equipment sales rose by $29,292. Merchant attrition, caused by better offers from competitors as well as closing businesses, is a common aspect of our industry. However, 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 65% or $623,662 primarily due decreased costs associated with residual income as well as decreased commissions and equipment costs due to lower sales. Again, both residuals and sales were lower than in prior periods due to the sluggish economy.

General and administrative costs increased by approximately 1% or $4,132from $604,071 for the three months ended June 30, 2009, to $608,203 for the three months ended June 30, 2010. While there was cumulative decrease of approximately $77,691 for advertising, amortization, bad debt, insurance, legal & professional fees, premises rental, recruiting and taxes, these were offset by an $81,822 combined increase in depreciation, payroll and travel expenses.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2010 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2009

Results of operations consist of the following:

	June 30, 2010			June 30, 2009			Difference $			Difference%
Net Revenues	$	1,757,619		$	2,926,288		$	(1,168,669	)		(40	)
Cost of Revenues		1,009,193			1,852,530			(843,337	)		(46	)
Gross Profit		(748,426	)		1,073,758			(325,332	)		(30	)
Operating, General,
and Administrative Costs		1,190,684			1,278,897			(88,213	)		(7	)
Net Operating Gain/(Loss)	$	(442,258	)	$	(205,139	)	$	(237,119	)		(116	)

Net revenues decreased by $1,168,669 from $2,926,288 for the six months ended June 30, 2009, to $1,757,619 for the six months ended June 30, 2010, due mainly the sale of one of our credit card portfolios, to the poor economy as well as continued attrition of merchant accounts and tighter credit policies. Residuals decreased by approximately $1,243,024, with $814,089 being directly attributable to the sale of one of our credit card portfolios. The balance of the decrease was due in part to the attrition of merchant accounts but the primary factor was the faltering economy which affected us in two ways. First, reduced merchant sales led directly to reduced residuals. Secondly, many small businesses closed shop last year due to the lagging economy. A number of merchants simply closed their doors and bank accounts, precluding us from even collecting their early termination fees. Equipment sales rose by $76,174. Merchant attrition, caused by better offers from competitors as well as closing businesses, is a common aspect of our industry. However, 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 46% or $843,337 primarily due to decreased costs associated with residual income as well as decreased commissions and equipment costs due to lower sales. Again, both residuals and sales were lower than in prior periods due to the sluggish economy.

General and administrative costs decreased by approximately 7% or $88,213 from $1,278,897 for the six months ended June 30, 2009, to $1,190,684 for the six months ended June 30, 2010. While there was cumulative decrease of approximately $151,158 for advertising, amortization, auto, bad debt, legal & professional fees, premises and equipment rental, and recruiting & training expense, these were offset by a $62,945 combined increase in depreciation, insurance, payroll and travel 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 will require additional capital to complete the expansion and to undertake any additional business opportunities.

	June 30, 2010		December 31, 2009		Difference $			Difference%
Cash	$	75,859	$	40,153	$	35,706			89
Accounts Payable and
Accrued Expenses	$	622,159	$	570,818	$	51,341			(9	)
Accounts Receivable, net	$	3,554	$	5,296	$	(1,742	)		33

We have financed our operations during the second 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 June 30, 2010, we had total current liabilities of $770,437compared to $1,254,669 as of December 31, 2009. The decrease in current liabilities is due to pay down on the Line of Credit of $503,344, repayment of $27,849 of the FTS fee underpayment and payment of $23,405 of accounts payable. This decrease was offset by an increase in payroll expenses of $142,104 represented by bonus accruals which were unpaid at June 30, 2010.

Cash increased 89% from $40,153 at December 31, 2009, to $75,859 at June 30, 2010, due to decreased interest and salaries expenses.

As of June 30, 2010, our accounts receivable, net decreased to $3,554 compared to $5,296 at December 31, 2009. The related allowance for doubtful accounts decreased $3,258from $17,721 at December 31, 2009, to $14,463 as of June 30, 2010, due primarily to timing on collections in the second quarter.

The Company used the net proceeds from the sale of one of its merchant card portfolios to pay down its related party line of credit in the amount of $503,344. The Company intends to use its line of credit to develop additional merchant card portfolios in the future. To this end, the Company renewed the line of credit effective June 10, 2010, to accommodate the acquisition of additional merchant accounts.

We had no equity issuances in the second quarter of 2010.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

N/A.

ITEM 4T. 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 June 30, 2010. 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 June 30, 2010. 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 June 30, 2010, 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.

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.



Date: August 16, 2010	INTERNATIONAL CARD ESTABLISHMENT, INC.
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)