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 annual 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.

EXECUTIVE SUMMARY

Our strategy is to grow profitably by increasing our penetration of the expanding small merchant marketplace for payment, Gift & Loyalty and "microticket" leasing services. We find these merchants through our 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, Gift & Loyalty products and microticket leasing services to small merchants. As of December 31, 2005, 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. Our microticket leasing services allow small merchants to finance the cost of POS equipment capable of reading a cardholder's account information from the card's magnetic stripe or computer chip and sending that information electronically for authorization and processing.

DEVELOPMENT OF OUR BUSINESS

International Card Establishment, Inc. (the "Company") (formerly Summit World Ventures, Inc.) 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. On July 18, 2003, 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 January 16, 2003, we entered into a Plan and Agreement of Reorganization with International Card Establishment, Inc., a Nevada corporation and its shareholders. International Card Establishment, Inc., a Nevada corporation, was incorporated on July 26, 2002. As part of the acquisition - a reorganization in the form of a reverse merger, International Card Establishment, Inc. became our wholly-owned subsidiary, and there was a change of our control. Following the International Card Establishment, Inc. acquisition we changed our corporate name from iNetEvents, Inc. to International Card Establishment, Inc.

On September 8, 2004, we entered into a Plan and Agreement of Reorganization with Neos Merchant Solutions, Inc., a Nevada corporation and its shareholders. On September 8, 2004, Neos Merchant Solutions, Inc. became our wholly owned subsidiary.

International Card Establishment, Inc. (the "Company"), a Nevada corporation, is a provider of diversified products and services to the electronic transaction processing industry, offering merchant accounts for the acceptance and processing of credit and debit cards, as well as a proprietary "smart card" based gift and loyalty program. The Company's Merchant Card Services division establishes "merchant accounts" for businesses that enable those businesses to accept credit cards, debit cards, and other forms of electronic payments from their customers; supplies the necessary card readers and other point-of-sale transaction systems; facilitates processing for the accounts; and, provides e-commerce solutions. Through its NEOS Subsidiary the Company also markets a proprietary "Smart Card"-based system that enables merchants to economically offer store-branded gift and loyalty cards - one of the fastest growing product categories in the industry. GlobalTech Leasing is an equipment leasing firm that specializes in financing point-of-sale transaction systems.

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); GlobalTech Leasing ("GLT"), a California corporation, which provides lease funding for equipment supplied by the Company to its customers, as well as numerous other unrelated merchant service providers (leasing services); International Card Establishment ("ICE"), which provides electronic payment services (merchant services); and INetEvents, Inc. ("INET"), a Delaware Corporation, which was dormant in 2005.

As of December 31, 2005, the Company entered into agreements to purchase merchant portfolios for approximately $485,570.

CRITICAL ACCOUNTING POLICIES

CONCENTRATIONS
The Company maintains cash balances at several financial institutions in California. Accounts at each institution are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000. At December 31, 2005 the Company had more than one account in excess of the $100,000 insured amount and only one account in excess at December 31, 2004.

Due to the number of customers that we process credit card transactions for we are not dependant on a limited number of customers for the merchant services business segment.

Gains recognized for the sale of leases is dependent on a small number of financing institutions. The loss of one or more of these financing institutions could adversely affect future operations. Two customers account 100% and 99% of total non-related lease revenues as of December 31, 2005 and 2004, respectively.

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.

FAIR VALUE
The carrying amounts reflected in the consolidated balance sheets for cash, accounts receivables, net, accounts payable, accrued expenses and current portion of notes payable approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

GOODWILL AND INTANGIBLES
Goodwill represents the excess of purchase price over tangible and other intangible assets acquired less liabilities assumed arising from business combinations. The Company's annual goodwill impairment test identified an impairment to goodwill amounting to $1,206,402 and $106,458 as of December 31, 2005 and 2004, respectively. In 2004, this amount was included within depreciation and amortization expense.

The Company capitalizes intangible assets such as the purchase of merchant accounts from portfolio acquisitions (i.e. the right to receive future cash flows related to transactions of these applicable merchants) (See Note 3). Annually, the Company performs a census of merchant accounts received in such acquisitions, analyzing the expected cash flows, and adjusts the intangible asset accordingly. In 2005, the Company purchased merchant portfolios totally $485,570 that were not related to a business combination or acquisition of an entire company. The Company recognized a direct write off in association with the merchant portfolio purchases in 2005, based on the census performed, of $18,003 as of December 31, 2005.

DERIVATIVES
The Company occasionally issues financial instruments that contain an embedded instrument. At inception, the Company assesses whether the economic characteristics of the embedded derivative instrument are clearly and closely related to the economic characteristics of the financial instrument (host contract), whether the financial instrument that embodies both the embedded derivative instrument and the host contract is currently measured at fair value with changes in fair value reported in earnings, and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument.

If the embedded derivative instrument is determined not to be clearly and closely related to the host contract, is not currently measured at fair value with changes in fair value reported in earnings, and the embedded derivative instrument would qualify as a derivative instrument, the embedded derivative instrument is recorded apart from the host contract and carried at fair value with changes recorded in current-period earnings. As of December 31, 2005 and 2004 we determined that none of our embedded financial instruments qualified for this treatment and that the embedded instruments qualified for the derivative accounting exemption as they are both indexed to our stock and classified in the stockholders' equity section of our consolidated balance sheets. We have accounted for any calculated beneficial conversion feature as either interest expense or dividends paid, based on the nature of the host contract.

REVENUES

The Company provides merchant services and customer support for merchants and other Merchant Services providers. Revenues are recognized as customer services are provided.

The Company provides merchant services to customers for acceptance and processing of electronic payments, gift and loyalty transactions, and the sales of related equipment used for the processing of electronic transactions. Credit card and gift and loyalty processing fees are recognized as incurred. Sales and cost of sales of equipment are recognized when the equipment is provided and the customer accepts responsibility for the payment of the equipment. Each month, an allowance is accrued and reconciled against collections, recording actual losses to sales allowances.

The Company, through its subsidiary GTL, acquires leases from Independent Sates Organizations (ISO) and from two of the Company's subsidiaries. GTL recognizes these purchases of leases from ISOs as a direct financing leases.

When a direct financing lease is consummated, the Company records a gross finance receivable. Due to the short term that the Company keeps these leases before selling them to other financing companies, there is no residual value recognized.

GTL sells the direct financing leases that it purchases from ISOs, NEOS, and ICE to unrelated third parties. The company follows FAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," when accounting for its sale of finance assets. The Company recognizes all assets obtained or liabilities incurred in consideration as proceeds of the sale and recognizes may gain or loss on the sale in earnings.

We have determined that our presentation for revenue for Gain on Sales of Leases is potentially better stated for financial statements readers by netting the-gross revenues, against-gross costs and adopting the reporting under FAS No. 140 as disclosed above. This adoption of FAS No. 140 presentation does not change or alter our total net loss for any period within this financial statement. See table below.

                                    2005           2004

  Gross lease revenues            10,757,697    11,329,287
  Gross cost of revenues           8,843,262    10,062,259
  Net gain on sale of leases       1,914,435     1,267,028
  Net loss                        (4,325,145)   (3,641,591)

NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment." SFAS No. 123R replaced SFAS No. 123 and superceded Accounting Principles Board Opinion No. 25. SFAS No. 123R will require compensation costs related to share-based payment transactions to be recognized in the financial statements. The effective date of SFAS No. 123R is the first reporting period beginning after December 15, 2005, for small business issues. The Company anticipates adopting SFAS 123R in the first quarter 2006. The adoption of SFAS No. 123 (revised 2004) should not have a significant impact on the Company's financial position or results of operations until such time the Company has share-based payments.

In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47 "Accounting for Conditional Asset Retirement Obligations--an Interpretation of FASB Statement No. 143" ("FIN No. 47"). FIN No. 47 clarifies the timing of liability recognition for legal obligations associated with the retirement of a tangible long-lived asset when the timing and/or method of settlement are conditional on a future event. FIN No. 47 is effective for us no later than December 31, 2005. We do not expect that the adoption of FIN No. 47 will have a material impact on our financial condition or results of operations.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections, a replacement of APB No. 20 and FASB Statement No. 3" ("SFAS No. 154"). SFAS No. 154 requires retrospective application to prior periods' financial statements of a voluntary change in accounting principle unless it is impracticable. APB Opinion No. 20 "Accounting Changes," previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This statement is effective for our Company as of January 1, 2006.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2005 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2004

Results of operations consist of the following:

------------------------------------------------ --------------------- --------------------- ------------ ------
                                                  December 31, 2005     December 31, 2004    Difference     %
------------------------------------------------ --------------------- --------------------- ------------ ------
Net Revenues                                          6,548,600             4,691,744         1,856,856    39.6
------------------------------------------------ --------------------- --------------------- ------------ ------
Cost of Revenues                                      3,810,706             2,270,229         1,540,477    67.9
------------------------------------------------ --------------------- --------------------- ------------ ------
Gross Profit                                          2,737,894             2,421,515          316,379     13.1
------------------------------------------------ --------------------- --------------------- ------------ ------
Operating, General and Administrative Costs           6,970,189             6,063,106          907,083     15.0
------------------------------------------------ --------------------- --------------------- ------------ ------
Net Operating Loss                                   (4,325,145)           (3,641,591)        (683,554)    18.8
------------------------------------------------ --------------------- --------------------- ------------ ------

The 39.6% increase in net revenues from 2004 to 2005 is mainly attributable to a full year of processing of Neos Merchant Solutions, which was acquired in September 2004.

The increase in cost of revenues is directly related to the increase in merchant account and the recording of interchange expense due to the increased volume.

General and administrative costs increased by approximately $907,000 largely due to impairment charges related to goodwill and intangible assets in the amount of $1,086,000.

The Company received $1,725,461 in net proceeds from the 2004 sale of its preferred stock during 2005 compared to $3,433,080 in net proceeds from the 2004 sale in 2004. The Company did not have any common stock transactions resulting in proceeds received in 2005; transactions as of December 31, 2004 resulted in common stock proceeds of $3,095,423 in 2004. The Company issued 929,242 common shares in 2005 compared to 15,777,900 common shares in 2004. Management believes that it will be able to fund the company through its present cash position and the continuation of revenue producing activities by its subsidiaries ICE, GTL, and NEOS. We will need to seek further capital through the sale of our capital stock and/or the issuance of debt in order to continue to grow the Company.

The change in position of cash, accounts payable and accrued expenses, and accounts receivable consist of the following:

-------------------------------------------- --------------------- --------------------- ------------- --------
                                              December 31, 2005     December 31, 2004     Difference      %
-------------------------------------------- --------------------- --------------------- ------------- --------
Cash                                           748,040             2,115,491            (1,367,451)    (64.6)
-------------------------------------------- --------------------- --------------------- ------------- --------
Accounts Payable and Accrued Expenses        1,265,606             1,297,330               (31,724)     (2.4)
-------------------------------------------- --------------------- --------------------- ------------- --------
Accounts Receivable                            495,069               429,706                65,363      15.2
-------------------------------------------- --------------------- --------------------- ------------- --------

Cash decreased 64.6% due to the acquisition costs incurred for the purchase of portfolios ($485,570, gross cash) plus payments for the Neos Merchant Solutions acquisition and preferred dividends.

Accounts payable and accrued expenses have remained relatively constant as we maximize our available cash resources and maximize payment terms from our vendors.

Management believes that it is moving toward profitability. We plan to attain profitability and meet cash flow needs going forward as follows:

1. Management believes that the increase in revenue we have experienced will continue as a result of the operations of its subsidiaries, ICE , GTL, and NEOS.

2. We are actively seeking additional financing to implement measures that Management believes will increase our operating margins and for additional acquisitions that will increase our overall revenue base. There is no assurance that we will be able to obtain additional capital as required, or obtain the capital on acceptable terms and conditions.

3. We are seeking to control overall operating expenses while increasing our gross revenue base through the integration of existing acquisitions and future acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

We are currently seeking to expand our merchant services offerings in bankcard, gift and loyalty and POS equipment leasing. 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.

We have financed our operations during the year primarily through the receipt of proceeds from preferred stock and use of cash on hand. As of December 31, 2005, we had total current liabilities of $3,413,522 compared to $1,635,459 as of December 31, 2004, which included $2,071,583 in outstanding notes payable, a portion of which was long-term in the Company's 2004 Amended Annual Report on Form 10-KSB/A.

We had $748,040 cash on hand as of December 31, 2005 compared to $2,115,491 cash on hand as of December 31, 2004. We will continue to need additional cash during the following twelve months and these needs will coincide with the cash demands resulting from our general operations and planned expansion. There is no assurance that we will be able to obtain additional capital as required, or obtain the capital on acceptable terms and conditions.