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.

Our Management, Discussion and Analysis ("MD&A") is provided as a supplement to our audited 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:

o OVERVIEW. This 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.

o 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.

o RESULTS OF OPERATIONS. This section provides an analysis of our results of operations for the year ended December 31, 2008 ("Fiscal 2008") compared to the year ended December 31, 2007 ("Fiscal 2007"). A brief description of certain aspects, transactions and events is provided, including related-party transactions that impact the comparability of the results being analyzed.

o LIQUIDITY AND CAPITAL RESOURCES. This section provides an analysis of our financial condition and cash flows as of and for the year ended December 31, 2008.

OVERVIEW

We are in the business of providing merchant payment processing services and custom branded gift and loyalty card products to the SME segment of the merchant marketplace. As of December 31, 2008, 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.

Most of our SME merchants are traditional physical "brick-and-mortar" businesses. Our merchants represent a diverse range of industries including restaurants, spas and salons, automotive repair and service, golf courses, home decor, sporting goods, car washes, gas stations, clothing stores and general retail.

In May 2008 we formed our LIFT Network division to focus on expanding our proprietary gift and loyalty product offerings. The LIFT Network division emphasizes the promotion and marketing capabilities of our gift and loyalty products. In August 2008 we completed the development of our virtual terminal application which allows merchants to offer our gift and loyalty solution using an internet protocol without the need for a physical terminal.

Management believes that a majority of the Company's new sales will come from the gift and loyalty segment of our business.

CRITICAL ACCOUNTING POLICIES

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

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

ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

REVENUE AND COST RECOGNITION

Substantially all of our revenues are generated from fees charged to merchants for card-based payment processing services and monthly gift and loyalty program fees. 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 chargebacks. 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 requirements of EITF 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent", 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 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, under the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets", at least annually, the Company performs a census of merchant accounts received in such acquisitions, analyzing the expected cash flows, and adjusts the intangible asset accordingly to the lower of cost or market.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2007

Results of operations consist of the following:

                                 December 31, 2008     December 31, 2007           Difference      Difference
                                                                                        $               %
                                 ____________________________________________________________________________

Net Revenues                        $ 7,599,558          $  9,222,659             $ (1,623,101)        (18)
Cost of Revenues                      4,722,399             6,014,944               (1,292,545)        (21)
                                 ____________________________________________________________________________
Gross Profit                          2,877,159             3,207,715                 (330,556)        (10)
Operating, General,
  and Administrative Costs            2,743,514             6,972,565               (4,229,051)        (61)
                                 ____________________________________________________________________________
Net Operating Gain/(Loss)           $   133,645          $ (3,764,850)            $  3,898,495        (104)
                                 ============================================================================

Net revenues decreased by $1,623,101 or 18% from $9,222,659 to $7,599,558 due mainly to the poor economy as well as continued attrition of merchant accounts and tighter credit policies. Residuals decreased by approximately $1.2 million. This decrease was due in part to the attrition of merchant accounts but the primary factor was the faltering economy which effected 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. Sales dropped by approximately $440,000 the major portion of this drop being equipment sales which decreased approximately $300,000. Again, this decline was due primarily to the economy. Merchants were unwilling to sign three and four year contracts in such a drastic economic climate. In 2009, we will be working on new marketing models to counter this reluctance on the part of merchants. 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 will help stop attrition to some extent. The decrease in cost of revenues of $1,292,545 or 21% from $6,014,944 to $4,722,399 is directly related to a comparable decrease in revenues.

Operating, general and administrative costs decreased by approximately $4,229,000 or 61% from $6,972,565 to $2,743,514 while incurring the startup expense of a new marketing and sales division with additional staff and office facilities totaling $113,035. The larger portion of this is payroll expense for the head of the division which amounted to approximately $77,000. This reduction was mainly due to lowered amortization expense of our portfolio (down $3.33 million) and depreciation in full of our fixed assets as of the end of 2007. The amortization expense was reduced at December 31, 2007, by adjustment of our portfolio to lower of cost or market. We do not expect future write-downs of our merchant portfolio. An additional factor was the reduction of bad debt expense due to the tightening of credit policies.

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

                             December 31, 2008     December 31, 2007     Difference     Difference
                                                                              $              %
                             _____________________________________________________________________

Cash                             $  91,404             $ 126,149         $ (34,745)        (28)
Accounts Payable and
     Accrued Expenses            $ 616,229             $ 619,375         $  (3,146)         (1)
Accounts Receivable, net         $  22,572             $  27,060         $  (4,488)        (17)

Cash decreased by approximately $34,745 or 28% from $126,149 to $91,404 due to the paying down of outstanding debt obligations and accounts payable. An additional contributing factor to lower cash was reduced residual income.

Accounts Payable and Accrued Expenses decreased by approximately $3,146 or 1% from $619,375 to $616,229. This came about primarily due to the payoff of outstanding debts and a decrease in accrued interest due to the pay down of the related party note payable This decrease was offset by an increase in customer deposits which fluctuate based on timing of cash receipts and shipment of orders and accrued expenses due to higher accruals for audit fees.

Accounts Receivable fell by approximately $4,488 or 17% from $27,060 to $22,572 due primarily to tighter credit policies and adherence to a cash collection policy of cash received prior to shipping. This is also accounted for by standard fluctuation of outstanding lease invoices where we have been guaranteed payment by the lease company upon installation at the merchant's location.

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

o Management believes that the increase in income we have experienced will continue as a result of the operations of its subsidiaries ICE and NEOS. We feel this is possible by pursuing external growth by constantly expanding our independent agent base and utilizing our proprietary Gift & Loyalty platform to reach an even greater number of merchants through value-added products.

o Continued cost control through tight credit policies.

LIQUIDITY AND CAPITAL RESOURCES

We are currently seeking to expand our merchant services offerings in gift and loyalty. In addition, we are investigating additional business opportunities and potential acquisitions of either additional portfolios or businesses; accordingly we will require additional capital to complete the expansion and to undertake any additional business opportunities. We are currently investigating potential sources of financing.

We have financed our operations during the year primarily through the receipt of proceeds of $650,000 from our line of credit with a related party and use of cash on hand. In 2008 we paid down all outstanding debt and the related party note payable. At this time our only outstanding debt consists of our related party line of credit and we have no capital purchases planned at this time. We believe that we will be able to meet all cash needs with the use of cash on hand during 2009.

We had $91,404 cash on hand as of December 31, 2008 compared to $126,149 cash on hand as of December 31, 2007. 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.