United eSystems 10-Q 2010 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2010

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

Commission file number 000-49745

UNITED ESYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Nevada	91-2150635
(State or other jurisdiction	(IRS Employer Identification No.)
of incorporation or organization)

2150 North Hwy 190

Covington, LA  70433

228-832-1597

(Address and telephone number of principal executive offices and principal place of business)

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 ¨

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	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 ¨  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date:  As of May 24, 2010, 39,345,129 shares of the registrant’s common stock, $0.001 par value, were issued and outstanding.

UNITED ESYSTEMS, INC.

FORM 10-Q

March 31, 2010

INDEX

Part I – Financial Information		Page
Item 1.	Financial Statements	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Changes in Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8 – 14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative And Qualitative Disclosures About Market Risk	19
Item 4(T).	Controls And Procedures	19
Part II – Other Information
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	[Removed and Reserved]	20
Item 5.	Other Information	20
Item 6.	Exhibits	21
	Signatures	22

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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 about United eSystems, Inc. (the “Company”) and our subsidiaries, United Check Services, L.L.C. (United) and Netcom Data Southern Corp. (NDS), that are subject to risks and uncertainties.  Forward-looking statements include information concerning future financial performance, business strategy, projected plans and objectives.  Statements preceded by, followed by or that otherwise include the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “may increase,” “may fluctuate” and similar expressions of future or conditional verbs suc h as “will,” “should,” “would,” and “could” are generally forward-looking in nature and not historical facts.  Actual results may differ materially from those projected, implied, anticipated or expected in the forward-looking statements.  Readers of this quarterly report should not rely solely on the forward-looking statements and should consider all uncertainties and risks throughout this report. The statements are representative only as of the date they are made.  The Company, United, and NDS (sometimes referred to herein on a consolidated basis as the Company, we, us, or similar phrasing) undertakes no obligation to update any forward-looking statement.

These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, estimates, financial condition, results of operations, future performance and business, including management's expectations and estimates with respect to revenues, expenses, return on equity, return on assets, efficiency ratio, asset quality and other financial data and capital and performance ratios.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, these statements involve risks and uncertainties that are subject to change based on various important factors, some of which are beyond the control of the Company. The following factors, among others, could cause the Company's results or financial performance to differ materially from its goals, plans, objectives, intentions, expectations and other forward-looking statements:

· general economic and industry conditions;

· our capital requirements and dependence on the sale of our equity securities;

· the liquidity of the Company’s common stock will be affected by the lack of a trading market;

· intense industry competition;

· fluctuations in the prevailing industry prices of check processing services;

· shortages in availability of qualified personnel;

· legal and financial implications of unexpected catastrophic events;

· regulatory or legislative changes effecting check processing operations; and

· reliance on, and the ability to attract, key personnel.

For a discussion of these and other risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in Item 1A of the Company’s 2009 Annual Report filed on Form 10-K with the SEC, which is available on the SEC’s website at www.sec.gov.  All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof.  New factors emerge from time to time, and it is not possible for us to predict which factors, if any, will arise.  In addition, the Company cannot assess the impact of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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PART I.     FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

UNITED ESYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS	March 31, 2010 (Unaudited)			December 31, 2009 (Audited)
CURRENT ASSETS
Cash and Cash Equivalents	$	185,962		$	228,213
Restricted Cash		263,096			271,624
Trade Receivables, net		101,683			93,021
Deferred Tax Asset, current		240,506			206,338
Prepaid Interest		78,000			104,000
Prepaid Expenses		32,899			30,584
Total Current Assets		902,146			933,780
PROPERTY AND EQUIPMENT, NET		41,860			52,400
OTHER ASSETS
Intangible Assets, net		4,880,251			4,932,499
Deferred Tax Asset, Non-current		65,678			65,678
Other		61,631			85,250
Total Assets	$	5,951,566		$	6,069,607
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACH Settlements Payable	$	238,490		$	258,019
Current Portion Long-Term Debt		1,434,600			2,422,100
Accounts Payable and Accrued Liabilities		109,619			63,022
Customers’ Deposits		24,605			13,605
Total Current Liabilities		1,807,314			2,756,746
LONG TERM LIABILITIES
Notes Payable		2,696,800			2,610,325
Total Liabilities		4,504,114			5,367,071
STOCKHOLDERS' EQUITY
Common Stock - $.001 Par Value; 75,000,000 Shares Authorized, 39,345,129 and 34,272,629 shares Issued and Outstanding at March 31, 2010 and December 31, 2009		39,345			34,272
Additional Paid-In Capital		1,740,861			847,339
Retained Earnings		(332,754	)		(179,075	)
Total Stockholders' Equity		1,447,452			702,536
Total Liabilities and Stockholders' Equity	$	5,951,566		$	6,069,607

The accompanying notes are an integral part of these financial statements.

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UNITED ESYSTEMS, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three Months Ended March 31,
		2010			2009
Revenues
ACH Services	$	273,037		$	245,847
Verification Services		20,318			66,860
Credit Card Services		378,482			507,868
Total Revenues		671,837			820,575
Cost of Revenues		219,936			215,426
Gross Profit		451,901			605,149
Expenses:
Operating
Personnel costs		32,925			28,516
Travel expense		12,756			22,671
Amortization expense		146,328			134,568
Commissions and fees expense		46,384			51,423
Other		60,459			60,270
Total Operating Expenses		298,852			297,448
Selling, General & Administrative
Personnel costs		129,861			105,785
Legal and accounting expenses		29,268			53,798
Marketing		5,739			8,255
Consulting		--			--
Other		4,320			5,026
Total Selling, General & Administrative		169,188			172,864
Total Expenses		468,040			470,312
Income from operations		(16,139	)		134,837
Other Income (expense):
Interest Income		461			463
Interest Expense		(172,129	)		(144,791	)
Net Income (Loss) before income taxes		(187,847	)		(9,491	)
Income tax benefit (expense)		34,168			1,392
Net Income (Loss)	$	(153,679	)	$	(8,099	)
Net Income per Share	$	nm		$	nm

The accompanying notes are an integral part of these financial statements.

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UNITED ESYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

THREE MONTHS ENDED MARCH 31, 2010 AND 2009

	Common Stock				Additional Paid-In		Retained			Total Stockholders'
	Shares		Amount		Capital		Earnings			Equity
Balance at January 1, 2009		34,316,667	$	34,317	$	850,346	$	221,912		$	1,106,575
Net Loss		-		-		-		(8,099	)		(8,099	)
Balance at March 31, 2009		34,316,667	$	34,317	$	850,346	$	213,813		$	1,098,476
Balance at January 1, 2010		34,272,629	$	34,272	$	847,339	$	(179,075	)	$	702,536
Private Placement Equity Offering		5,072,500		5,073		893,522		-			898,595
Net Loss		-		-		-		(153,679	)		(153,679	)
Balance at March 31, 2010		39,345,129	$	39,345	$	1,740,861	$	(332,754	)	$	1,447,452

The accompanying notes are an integral part of these financial statements.

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UNITED ESYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Three Months Ended March 31,
		2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)	$	(153,679	)	$	(8,099	)
Adjustments to Reconcile Net (Loss) to Net
Cash Provided by Operating Activities
Depreciation and Amortization		156,824			142,954
(Increase) Decrease in Trade Receivables		(8,662	)		5,220
(Increase) Decrease in Prepaid Expenses		(2,315	)		(20,235	)
Decrease in Prepaid Interest		26,000			24,000
Decrease in Restricted Cash		8,528			278,510
Increase in Deferred Tax Asset		(34,168	)		(1,392	)
Decrease in ACH Settlements Payable		(19,529	)		(274,710	)
Increase (Decrease) in Accounts Payable and Accrued Liabilities		46,597			(36,264	)
Increase (Decrease) in Customer Deposits		11,000			(3,800	)
Net Cash Provided by Operating Activities		30,596			106,184
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Property and Equipment		--			(5,131	)
Cash paid in Conjunction with acquisition of Portfolio Asset		(94,080	)		--
Net Cash Used in Investing Activities		(94,080	)		(5,131	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds from Private Placement Stock Offering		898,595			--
Proceeds from notes payable		94,000			--
Principal paid on notes payable		(971,362	)		(69,158	)
Net Cash Provided by (Used in) Financing Activities		21,233			(69,158	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(42,251	)		31,895
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD		228,213			366,844
CASH AND CASH EQUIVALENTS – END OF PERIOD	$	185,962		$	398,739
SUPPLEMENTAL DISCLOSURES
Cash Paid During the Period for Interest	$	146,129		$	120,791

The accompanying notes are an integral part of these financial statements.

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UNITED ESYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — PLAN OF REORGANIZATION AND CONTRIBUTION AGREEMENT

On March 30, 2005, Riverbend Telecom, Inc. (Riverbend) entered into an Agreement and Plan of Reorganization (the “Spin-Off Agreement”) between Riverbend and Riverbend Holdings, Inc. (Holdings), its wholly owned subsidiary, pursuant to which Riverbend transferred all of its assets, liabilities and other obligations to Holdings in consideration for Holdings common stock.  In addition, Riverbend distributed all of Holdings common stock to the then-existing four Riverbend stockholders (the “Spin-Off”), on a pro rata basis, one share of Holdings common stock for each Riverbend share held by the stockholders.  Holdings was formed for the purpose of effecting the reorganization of Riverbend and the subsequent distribution of all of the Holdings common stock to Riverbend’s current stockh olders.  Holdings had previously filed a Form 10-SB with the Securities and Exchange Commission regarding its common stock under Section 12(g) of the Securities Exchange Act of 1934.

Upon consummation of the Spin-Off, Riverbend completed the contribution transaction with United Check Services, L.L.C. (United), a Louisiana limited liability company, according to the terms of a Contribution Agreement entered into on July 14, 2004, as amended by a Letter Agreement dated August 5, 2004 (collectively, the “Contribution Agreement”).  Pursuant to the Contribution Agreement, the equity owners of United contributed all of their limited liability membership interests in United to Riverbend in exchange for 15,315,000 shares of Riverbend’s common stock.  As a result of this transaction, United became a wholly-owned subsidiary of Riverbend, and the members of United became the majority stockholders of Riverbend, and the transaction was accounted for as a reverse acquisition .  As a result of the Spin-Off, the current telecommunications business of Riverbend is now carried on by Holdings, and the automated clearing house services business of United is now carried on by Riverbend, through its 100% ownership interest of United.

On June 13, 2005, Riverbend effected a name change from Riverbend Telecom, Inc. to United eSystems, Inc. to better reflect the change in business operations as a result of the consummation of the Plan of Reorganization and the Contribution.

NOTE B — NATURE OF RECENT ACQUISITON AND PORTFOLIO ASSET PURCHASE

Acquisition of Netcom Data Southern Corp.

On August 22, 2008, United eSystems, Inc. (“eSystems”, “Company”) entered into a Stock Purchase Agreement (“Agreement”) with Netcom Data Southern Corp. (“NDS”), in which eSystems acquired all of the common stock of NDS.  The transaction was reported on Form 8-K on August 28, 2008, and the details of the transaction together with agreement between eSystems and NDS are included therein.

The Company entered into the transaction as means to diversify its electronic payments business.  Prior to the transaction, the majority of the Company’s revenue was derived from providing ACH payment services for business merchants.  For 2009, the Company’s gross revenues are now approximately 30% from its ACH payments business and 64% from credit card merchant processing services which are provided through contracts that NDS has with several sponsor banks in the United States.  The Board of Directors and management believe that the acquisition of NDS provides the opportunity to improve operating results and the possibility of creating future value.

Pursuant to the Agreement, the Company acquired all of the outstanding stock of NDS in exchange for approximately $272,000 of cash at closing, an unsecured promissory note payable of $2,720,000, and 7,800,000 shares of the Company’s restricted common stock which had an estimated fair value at the date of the acquisition of $.05 per share.  As a result of the transaction, all of the Company’s sales and marketing activities, as well as all of the customer service duties to manage the credit card merchant accounts of NDS will be conducted through NDS, which is now a wholly owned subsidiary of the Company.

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A summary of the purchase price of NDS is as follows:
Cash paid to stockholders of NDS, net of cash acquired from NDS	$	272,099
Direct acquisition costs paid by the Company		35,329
Promissory note issued to stockholders of NDS		2,720,000
Fair value of 7,800,000 shares of stock issued		390,000
Total purchase price	$	3,417,428

The allocation of the NDS purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed are based on eSystems’ estimate of fair values and remaining economic lives as of the acquisition date and are summarized below:

Tangible assets acquired and liabilities assumed
Property and Equipment	$	14,503
Net tangible assets acquired		14,503
Identifiable intangibles
Customer relationships and contracts		3,402,925
Total purchase price	$	3,417,428

The value allocated to customer relationships and contracts created as a result of the acquisition of NDS will be amortized over its estimated useful life of ten years.  Amortization expense related to NDS for the three months ended March 31, 2010, was $78,360.

Portfolio Asset Purchases

On September 17, 2008, the Company, through its wholly owned subsidiary NDS, entered into and closed an Asset Purchase Agreement (the “Agreement”) with Netcom Data Corp. of N.Y. and American Timeshare Associates, Inc. (collectively the “Sellers”).  Under the terms of the Agreement the Company paid $2,275,000 in cash, plus 3,200,000 shares of its restricted common stock, in exchange for the assignment all of the Seller’s rights under a certain Independent Sales Organization Agreement (the “Bank Agreement”) with LaSalle Bank, N.A., a subsidiary of Bank of America (the “Bank”).  The terms of the Bank Agreement allow merchant customers of the Seller to utilize the credit card merchant processing services provided by the Bank.  As a result of the assi gnment of the Bank Agreement, NDS will perform certain services previously provided by the Sellers under the Bank Agreement and will receive all payments due therefore from the Bank.  Pursuant to the Agreement, 10% of the cash and stock paid at closing was escrowed, subject to an attrition formula applicable during the twelve months following the transaction date, whereby the Company may be reimbursed up to the amounts escrowed if the portfolio’s performance does not meet certain benchmarks during the applicable period.

The Company accounted for this transaction, the Netcom NY Asset Portfolio, as an asset purchase and the purchase price, which is based upon the total consideration paid, is included on its consolidated balance sheet as Intangible Assets.  The purchase price is amortized over a ten year period, commencing September 17, 2008.  Amortization expense related the Netcom NY Asset Portfolio for the three months ended March 31, 2010, was $56,208.

On February 5, 2010, the Company acquired a 50% interest in a portfolio of credit card merchant accounts from Mr. Leo Daboub.  The Company obtained all of Mr. Daboub’s rights pursuant to a contract between Mr. Daboub and one of the Company’s vendors, a non-bank credit card processor.  Pursuant to the purchase, the Company now receives a portion of the fees associated with the credit card processing services provided to this portfolio of merchants. The Company paid $94,080 in cash at closing.  The agreement also provides for an earn-out formula under which the Company would pay up to an additional $23,520 six months following the closing if certain revenue targets are met.  The transaction was accounted for as an asset purchase based on the total consideration paid at closing of $94,080 in cash amortized over a period of 16 months.  The Company recognized $11,760 of amortization expense for the three months ended March 31, 2010.

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NOTE C — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

As described in Notes A and B, UNITED ESYSTEMS, INC. (Company) serves as the holding company for United Check Services, L.L.C. (United) and Netcom Data Southern Corp (NDS).  United provides automated clearing house (ACH) services to businesses throughout the United States.  NDS is an independent sales organization that obtains merchant customers that utilize credit card processing services through several NDS sponsored banks.  NDS receives a portion of the fees charged for such services in exchange for acquiring the merchants and maintaining certain customer service functions.  The Company’s headquarters are in Covington, Louisiana, its ACH operations center is located in Gulfport, Mississippi, and the operations of NDS are conducted at its offices in Roswell, Georgia.

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, United and NDS.  All significant intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of financial information for the interim periods presented.  These adjustments are of a normal recurring nature and include appropriate estimated provisions.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Revenue Recognition

United charges customers a per transaction fee for its ACH services.  For these transactions, United recognizes only the fees generated as revenue.  United recognizes these fees as revenue when United has provided the service to its customers.  Fees for ACH services are based on contractually determined rates with each individual customer.  Settlements paid to customers for ACH transactions are submitted to the customer net of fees due to United.

NDS receives a portion of the fees generated from credit card merchant processing services which are provided through its contractual agreements with various sponsor banks.  Under these agreements the merchants’ transaction activity is reported and NDS’ portion of the fees are paid during the month following the month in which the transactions occurred.  Accordingly, NDS recognizes its revenue in the month in which such transactions are reported and payable, which is consistent with industry practices within the United States of America.

Basis of Accounting

The books and records of the Company are kept on the accrual basis of accounting, whereby revenues are recognized when earned and expenses are recognized when incurred.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.  Depreciation is computed using primarily straight-line methods over the estimated useful lives of the related assets, which ranges from three to seven years.

Income Taxes

The Company reports its income taxes under a consolidated Federal tax return which includes the business activity of the Company, as well as the business activity of its wholly owned subsidiaries, United and NDS.

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Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method.  Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to change in tax rates and laws.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  Tax positions taken are not offset or aggregated with other positions.  Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority.  The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized tax benefits in the consolidated balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  Interest and penalties associated with unrecognized tax benefits would be classified as additional income taxes in the statement of operations.

Advertising

Advertising costs are charged to operations when incurred.

Statement of Cash Flow Information

For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

NOTE D — RESTRICTED CASH

Restricted cash consists primarily of funds maintained in United’s primary bank account to facilitate ACH transactions.  The Company has restricted this cash from operations in order to ensure that sufficient funds are maintained to process and settle customer’s ACH transactions.

NOTE E — NOTES PAYABLE

Due to Shareholders

On September 4, 2008, and September 8, 2008, the Company entered into two notes payable with two existing shareholders of the Company for a total principal amount of $70,000.  The notes provide for interest only payments at a rate of 10% per annum payable monthly thereafter, with the entire principal balances due and payable two years from inception of the notes.  During the three months ended March 31, 2010, the Company paid $52,500 in principal, thereby reducing the outstanding balance due these shareholders from $70,000 at both December 31, 2009, to $17,500 as of March 31, 2010.

On February 5, 2010, the Company entered into an additional note payable with Mr. Leon Nowalsky, a current shareholder, for a total principal amount of $47,500, to assist with the acquisition of a credit card portfolio asset.  The note provides for interest to accrue at 6% per annum, payable in two years from inception of the note.  The note may be prepaid without penalty.  The outstanding principal balance at March 31, 2010 was $47,500.  Mr. Nowalsky currently owns approximately 10.1% of the Company’s outstanding common stock.

NDS Acquisition – Share Purchase Note

On August 22, 2008, as part of the acquisition of NDS, the Company issued an unsecured note (the “Share Purchase Note”) payable to the shareholders of NDS.  The Share Purchase Note bears interest at 5.5% for the first twelve months and 9.5% for the following twenty-four months, when the Share Purchase Note is due in full.  Pursuant to the terms of the Share Purchase Note, the Company will make interest-only payments each month and will make three principal payments of $180,000 on each anniversary date of the note with one final balloon payment representing the

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then outstanding principal and accrued interest on the third anniversary of the issue date of the Share Purchase Note. During August 2009, the Company executed an amendment to the Share Purchase Note whereby the scheduled principal payment of $180,000 due on August 22, 2009, was amended to require a $30,000 principal payment which was paid by the Company.  Mr. William Plummer, a current employee, shareholder, and director of the Company, was formerly the majority shareholder of NDS and will receive a majority of the payments on the Share Purchase Note.  As of March 31, 2010, the outstanding principal balance of the Share Purchase Note was $2,675,000.

NDS Acquisition – Sorrentino Note

On August 22, 2008, in order to facilitate the cash payment due at the closing of the acquisition of NDS, the Company issued a non-interest bearing secured promissory note (the “Sorrentino Note”) and entered into and closed a security agreement (the “Security Agreement”) with Robert J. Sorrentino.  The terms of the Sorrentino Note provide that the Company may draw up to $500,000 from Sorrentino with advanced written notice to and subject to the approval of Sorrentino for a period of up to seven months.  The Company drew $280,000 immediately upon issuance of the Sorrentino Note.  Commencing on the seven-month anniversary of the issue date of the Sorrentino Note, the Company will make twenty-four equal monthly installments in an amount sufficient to repay the entire outstanding principal balance during such twenty-four month period.  The Sorrentino Note is secured by the Security Agreement, which grants Sorrentino a security interest in all of the assets existing, owned, or hereafter acquired by the Company.  In lieu of payment of interest, the Company granted Sorrentino 4,800,000 shares of its common stock with an estimated fair value of $0.05 per share.  The Company has recognized the value of the shares issued ($240,000) as prepaid interest, and is amortizing this amount over the total life of the note of 30 months.  On May 27, 2009, the Company executed an Amendment to the Loan Agreement with Sorrentino (“Sorrentino Amendment”) which reduced the amount of monthly principal payments as provided for in the original Sorrentino Note.   Under the Sorrentino Amendment, the Company made an initial payment of $15,350 in principal and began making monthly principal payments of $7,675 thereafter, continuing through February 28, 2011, at which time all remaining principal becomes due and payable.  Under the original terms, monthly principal payments would have been approximately $17,770.  During the year ended December 31, 2009, the Company’s principal payments totaled $38,375 thereby reducing the outstanding principal balance of these notes to $357,425 as of December 31, 2009, and the related amount of prepaid interest reflected in the Company’s consolidated balance sheet totaled $104,000, which is classified as current.  During the three months ended March 31, 2010, the Company obtained an additional $47,000 under the Sorrentino Note to assist with the acquisition of a portfolio asset of credit card accounts.  The Company also made at total of $23,025 of principal payments, and amortized $26,000 of prepaid interest during the three months ended March 31, 2010.  Mr. Sorrentino currently owns  approximately 22.7% of our outstanding common stock.

Thermo Credit Note

On September 17, 2008, in order to facilitate the cash payment due at the closing of the purchase of the portfolio of credit card merchant services accounts from Netcom Data Corp. of N.Y. and American Timeshare Associates, Inc., the Company, NDS, and United (collectively the “Debtors”) borrowed $2,128,500 from Thermo Credit, LLC, a Colorado limited liability company (the “Lender”) pursuant to a Loan, Pledge, and Security Agreement (the “Loan Agreement”) and a Promissory Note (the “Note”) which provide for interest at the greater of 15% per annum or 8% in excess of the prime rate, plus other fees.  Accrued and unpaid interest on the outstanding principal balance of the Note is due and payable monthly commencing on October 31, 2008 and the Note matures and becomes due in fu ll on March 17, 2009, with the Company having the right to extend the maturity to September 17, 2009 with Lender’s approval (not to be unreasonably withheld or delayed).  In the event of such extension, the Note is payable as follows:  (a) one payment of accrued and unpaid interest on March 31, 2009;  (b) five monthly payments of principal plus accrued and unpaid interest thereon in an amount necessary to amortize the outstanding principal balance of the Note as of March 17, 2009 over a period of 24 months commencing on April 30, 2009 and continuing on the same day of each calendar month thereafter (or if no such corresponding date, on the last date of such calendar month); and (c) a final payment of all principal plus accrued and unpaid interest on September 17, 2009.  The Loan Agreement grants the Lender a security interest in all of the assets, now owned, or hereafter acquired by the Debtors, and pledges all of the outstanding common stock of NDS and all of th e outstanding membership interests of UCS to the Lender.  Two of the Company’s minority shareholders serve on the board of directors for Thermo Credit, LLC.

On March 17, 2009, the Company executed an Amendment to its Loan Agreement with Thermo Credit LLC under which the due date of the loan was extended until March 31, 2010, and the interest rate was increased by 3% APR.

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In conjunction with the Amendment, the Company paid $69,158 in principal on March 17, 2009, and $20,000 per month thereafter through September 30, 2009, reducing the outstanding principal balance by December 31, 2009, to $1,930,000.  On March 31, 2010 the Company executed an Amendment to the Agreement further extending the due date of the loan until June 30, 2010.  On March 16, 2010, the Company paid $920,000 in principal which reduced the outstanding principal balance at March 31, 2010, to $1,010,000.

NOTE F — STOCK OPTIONS

On March 30, 2005, the Company entered into a non-qualified stock option agreement, whereby the Company granted 312,000 options to its CFO.  On February 15, 2006, the Company entered into non-qualified stock option agreements with four key employees, granting a total of 90,000 options, which included 32,500 options to its CFO.  All of the options have an exercise price of $.03 per share, and were fully vested as of the date of the grant.  The option agreements terminate five years from the date they were granted.  During 2008, a total of 100,000 shares of non-qualified stock options were exercised in 2008.  All of the exercised options were options previously granted in 2005 to the CFO.

On August 20, 2008, the Board of Directors adopted the 2008 Incentive Stock Plan and granted at total of 1,157,000 options to employees of United.  All of the options have an exercise price of $.05 per share and were fully vested as of the date of the grant.  The options terminate five years from the date granted.  None of these options have been exercised.

NOTE G — SIGNIFICANT CONCENTRATIONS

Cash

At March 31, 2010, and December 31, 2009, the Company maintained balances with financial institutions in excess of FDIC insured limits.  The Company has not experienced any losses and does not believe that significant credit risk exists as a result of this practice.

Major Customers

During the three months ended March 31, 2010, the Company had no transactions with any one customer that amounted to 10% or more of the Company’s gross revenue.

NOTE H — COMMITMENTS

Operating Leases

Effective August 22, 2008, in conjunction with the acquisition of NDS, the Company entered into a thirty-six month lease with the existing Lessor of the NDS office facilities in Roswell, Georgia, at a rate of $4,000 per month.  The lease is automatically renewable for additional one year periods beyond the initial thirty-six month terms unless the Company as Lessee elects not to extend by providing written notice to the Lessor at least five days prior to the expiration of the initial term.

On October 28, 2008, United exercised an option effective November 1, 2008, to extend its leased office facilities at its present location in Gulfport, Mississippi, for an additional three year term beginning at $2,200 per month on the effective date, and increasing by $150 per month after twelve months, and an additional $150 per month after twenty four months.

Employment Contracts

In connection with the Company’s acquisition of NDS, the Company entered into employment contracts with two key employees of NDS, each having a three-year term.  The employment contracts address compensation and termination.

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ACH Processing Agreement

On August 4, 2006, United entered into an ACH processing agreement that provided for the utilization of an internet based ACH processing system, inclusive of bank and processing fees.  The term of the agreement is 60 months, and renewable for successive 12 month periods thereafter.  If management elects to terminate this agreement during its initial term without cause, the agreement provides for a liquidation fee equal to the average monthly processing volume at termination times the number of months remaining in the agreement, subject to a maximum of $66,000.

NOTE I — RELATED PARTY TRANSACTIONS

As disclosed in Note E, the Company has notes payable with minority shareholders and with an entity for which two minority shareholders serve on the board of directors.

NOTE J — EARNINGS PER SHARE

For earnings per share calculations, the weighted average common shares outstanding amounted to 35,572,195, and 34,316,667, for the three months ended March 31, 2010, and 2009, respectively.  Options to purchase 302,000 shares at $.03 per share, and options to purchase 1,157,000 shares at $.05 per share were outstanding during the three months March 31, 2010, but were not included in the computation of diluted earnings per share because the options’ weighted average exercise price was greater than the estimated market price of the common shares.

NOTE K – FINANCIAL STATEMENT PRESENTATION

Certain amounts in the 2008 financial statements have been reclassified to conform with the 2009 presentation.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Executive Summary

The Company is an electronic payments service provider headquartered in Covington, Louisiana, that caters mostly to small and medium size businesses who handle significant volumes of electronic transactions as an integral part of their business.  Since 1998, we have provided electronic ACH (Automated Clearing House) payments via our internet-based, encrypted systems, to assist merchants in the collection of their sales and accounts receivables.  Our processing systems may also be used to transmit payments such as loan proceeds, customer refunds, travel expenses, commission payments, and payroll direct deposits. We act as the merchant’s ACH processor and clear transactions electronically through the Federal Reserve Banking System.  We are paid based on a fee per each ACH transaction we process, and typically receive our fees at the time we are settling collected proceeds electronically to each of our merchants.

The ACH Network has been in use for in excess of 30 years, serving a variety of customers, including over 20,000 financial institutions, 3.5 million businesses, and 135 million individuals.  The ACH business is divided between traditional banks, large “in-house” processors, and independent processors.  We currently concentrate on independent processors service customers that utilize electronic commerce but find that outsourcing is a more cost effective solution.  The independent processors find they are able to provide custom tailored solutions and better transaction pricing than the merchants could individually obtain from traditional banks.  We have established ourselves as a quality provider of ACH processing services with proven results utilizing state of-the-art technology .

In addition, the Company, through its acquisition of NDS, now offers additional services including credit and debit card services, real-time account verification, and identity verification services.  Such services are complimentary to our ACH payment services and with their addition it allows us to provide a more comprehensive line of services to our existing and prospective business customers.

Results of Operations

In this section, we provide more detailed information about our operating results and changes in financial position.  This section should be read in conjunction with the financial statements and related notes include in this Form 10-Q, and in conjunction with our Form 10-K previously filed for the year ended December 31, 2009.

Three Months Ended March 31, 2010 compared to the Three Months Ended March 31, 2009

Revenues

Our revenue is mostly generated by providing payment services which include Automated Clearing House (ACH) processing services as well as earning residual revenue from credit card merchant services for business customers.  We also provide real-time electronic account verification services, as well as identity and age verification services.  The majority of our customers utilize our services to collect their gross receipts or accounts receivable electronically.  However, ACH processing services may also be utilized for other purposes, including direct deposit of employee payroll, employee travel advances, payments to non-employee contractors, and inter-company transfers.  We recognize our ACH revenue upon completion of the service being provided and residual credit card services revenue upo n receipt from our sponsoring banks which is consistent with industry practices within the United States of America.

For the three months ended March 31, 2010, revenues were $671,837, compared to $820,575 for the three months ended March 31, 2009, representing a decrease of $148,738, or approximately 18.1%.  This decrease is mostly related to the decrease in credit card services of $129,386, together with the decrease in verification services of $46,542, partially offset by the increase in ACH Services of $27,190.  The decrease in Credit Card Services and verification services relate to the decreases in our volume of business as a result of reductions in consumer activity associated with general economic conditions, together with voluntary reductions in pricing to some or our customers in order to maintain accounts.  The increase of $27,190 related to our ACH payments business represents increases in the volume of business conducted by several of our existing customers.

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Cost of Revenue and Gross Profit

Cost of revenues includes the costs incurred in conjunction with the items processed as well as costs associated with the residual credit card revenue we now receive through NDS, our wholly owned subsidiary.  These costs include the direct transactional costs incurred with respect to ACH processing and software as well as direct costs associated with the revenue generated from credit card merchant processing services.

The following table presents the composition of cost of revenue for the three months ended March 31, 2010 and 2009:

Cost of Revenue:	Three Months Ended March 31, 2010		Percentage			Three Months Ended March 31, 2009	Percentage		Variance Dollars
ACH Services	$	70,300	32.0	%	$	45,963	21.3	%	$	24,337
Verification Services		7,362	3.4	%		41,268	19.2	%		(33,906	)
Credit Card Services		142,274	64.6	%		128,195	59.5			14,079
Total Cost of Revenue	$	219,936	100.0	%	$	215,426	100.0	%	$	4,510

For the three months ended March 31, 2010, cost of revenues was $219,936, compared to $215,426 for the three months ended March 31, 2009, representing an increase of $4,510, or approximately 2.1%.  This increase is mostly attributable to the increase in our ACH services business resulting from increases in our volume of business with several of our existing customers, together with increases in costs associated with our credit card services business.  These increases were partially offset by decreases in our cost of revenue associated with our verification services business.

During 2009 we migrated some of our ACH accounts in conjunction with a policy decision made by one of our processing banks to discontinue processing for certain industries.  Although we established alternate services for these merchants, we only received and recognized net ACH fees associated with these accounts.  This resulted in a reduction to our ACH cost of revenues for the three months ended March 31, 2009, compared to the three months ended March 31, 2010, in which our increase in volume of ACH business is associated with services in which we receive and recognize the gross revenue, as well as separately incur and recognize the related cost of revenue.

With respect to our verification services, cost of sales is down substantially for the three months ended March 31, 2010, compared to the same period in the prior year, as a result of the discontinuation of services provided to several significant verification service customers previously engaged in the online tobacco industry.  In conjunction with recent legislation, which becomes effective June 30, 2010, these customers have wound down their operations and discontinued the use of our age verification service.

For the three months ended March 31, 2010, our credit card services cost of  revenue increased while our credit card revenue decreased.  During the three months ended March 31, 2010, as we continue to experience unfavorable economic conditions and reduced consumer activity, we had to reduce pricing in some cases in order to maintain merchants and as a result our cost of revenues has no decreased in proportion to our credit card services revenue.

For the three months ended March 31, 2010, our gross profit was $451,901, compared to $605,149 for the three months ended March 31, 2009, representing a decrease of $153,248, or approximately 25.3%.  Our gross profit stated as a percentage of revenues was 67.3% for the three months ended March 31, 2010, compared to 73.7% for the three months ended March 31, 2009.  The decrease in cost of revenues as a percentage of revenue reflects the effect of the increase in our ACH service revenue as previously described, partially offset by increases in our cost of credit card services as a result of general economic conditions as previously described.

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Operating Expenses

Operating expenses include costs of personnel, computer maintenance and expenses, supplies, internet services, delivery charges, telecommunications expenses, travel, and other costs associated with our payment services operations.  For the three months ended March 31, 2010, operating expenses were $298,852, compared to $297,448 for the three months ended March 31, 2009, representing an increase of $1,404 or approximately 0.5%.  The increases in operating costs related mostly to increases in personnel costs of $4,419, amortization expense of $11,760, partially offset by decreases in travel expense of $9,915, and commissions and fees expenses of $5,039.  Our personnel costs represented increases in costs associated with our ACH processing staff, which included cost-of-living as well as merit increases in compensation.  Our amortization expenses increased in conjunction the acquisition of a portfolio of merchant accounts during the three months ended March 31, 2010.  These increases were partially offset by decreases in travel expenses which reflected a reduced amount of travel compared to the prior year when we had recently completed the acquisition of NDS.  The decrease in commissions and fees expenses relates mostly to reductions in fees paid under our Thermo Credit, LLC loan facility, resulting from the $920,000 reduction in the outstanding principal balance of this facility.

Selling, General, and Administrative Expenses

For the three months ended March 31, 2010, our selling, general, and administrative expenses were $169,188, compared to $172,864 for the three months ended March 31, 2009, representing a decrease of $3,677, or approximately 2.1%.  This decrease is mostly due to decreases in legal and accounting expenses of $24,538, marketing expenses of $2,516, and other expenses of $706, partially offset by increases in personnel costs of $24,076.  The decrease in legal and accounting costs represents a reduction in costs associated with our annual meeting during the three months ended March 31, 2009, which was not conducted during the three months ended March 31, 2010, together with increased costs during the prior year associated with our financing efforts.  The decreases in marketing expenses relate mo stly to the continued elimination of certain duplicate or non-productive costs compared to the first quarter of 2009.  The decrease in other expenses of $706 related mostly to decreases in meals and entertainment of $968, business gifts of $221, partially offset by increases in SEC filing fees of $480.  The reduction in meals and entertainment as well as business gifts related to cost containment efforts implemented by management, while the increase in SEC filing fees was associated with the completion of our private equity offering during the three months ended March 31, 2010.

Results of Operations

We reported a net loss for the three months ended March 31, 2010, of $153,679 compared to $8,099 for the three months ended March 31, 2009, representing an increase of $145,580.  This change is mostly attributable to the decrease in revenue during the three months ended March 31, 2010, compared to the same period in the prior year as a result of general economic conditions as previously described.  We now recognize significant amortization expenses related to our intangible assets and interest expense related to our credit facility with Thermo Credit, LLC which provided the acquisition financing.  As a result, although we reported a net loss for the three months ended March 31, 2010, we continued to produce net positive cash flow from our operations.

Liquidity and Capital Resources

Per our Consolidated Statements of Cash Flows, net cash provided by operating activities for the three months ended March 31, 2010, was $30,596, compared to $106,187 for the three months ended March 31, 2009, or a decrease of $75,591.  The decrease in cash provided by operating activities is due mostly to the increase in our net loss of $145,580 together with the various adjustments necessary to reconcile net loss to net cash provided by operations for each of the respective periods presented.

For the three months ended March 31, 2010, adjustments decreasing our net loss of $153,679 included depreciation and amortization of $156,824, the decrease in prepaid interest of $26,000, the decrease in accounts payable and accrued liabilities of $46,597, and the increase in customer deposits of $11,000, offset by adjustments that increased our net loss, such as the increase in accounts receivable of $8,662, the increase in prepaid expenses of $2,315, the increase in deferred tax asset of $34,168, and the decrease in ACH settlements payable of $19,529.

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For the three months ended March 31, 2009, adjustments decreasing our net loss of $8,099 included depreciation and amortization of $142,954, the decrease in trade receivables of $5,220, the decrease in prepaid interest of $24,000, the decrease in accounts payable and accrued liabilities of $36,264, offset by adjustments that increased our net loss, such as the increase in prepaid expenses of $20,235, the increase in deferred tax asset of $1,392, and the decrease in customer deposits of $3,800.

Net cash used in investing activities was $94,080 for the three months ended March 31, 2010, and $5,131 for the three months ended March 31, 2009.  During the three moths ended March 31, 2010, we completed the purchase of an interest in a portfolio of merchant credit card processing accounts.  During the three months ended March 31, 2009, we made improvements to our telecommunications systems in order to create efficiencies between our Gulfport, Mississippi and Roswell, Georgia offices.

Net cash provided by financing activities was $21,233 for the three months ended March 31, 2010, compared to cash used in financing activities of $69,161 for the three months ended March 31, 2009.  During the three months ended March 31, 2010, we completed a private placement offering of our common stock which provided net proceeds of $898,595, and we executed notes payable with two of our existing shareholders totaling $94,000 which helped facilitate the initial purchase price of the portfolio asset previously described.  We also repaid $971,362 in outstanding principal, comprised mostly of a reduction of $920,000 in our outstanding principal balance with Thermo Credit, and the repayment of approximately $52,500 of outstanding notes payable with shareholders.  For the three months ended March 31, 2009, we made a principal payment of $69,161 in conjunction with an amendment to our credit facility with Thermo Credit, LLC, whereby we extended the due date of the loan.

On February 28, 2010, we completed a private placement of 5,072,500 shares of our common stock, at $.20 per share, to a limited number of investors, generating gross proceeds of $1,014,500.  The offer and sale was conducted on behalf of the company by a FINRA-licensed broker-dealer who served as placement agent in the offering and received a sales commission equal to 7% of the gross proceeds of the offering, or $71,015, and a financial advisory/management fee equal to 2% of the gross proceeds of the offering, or $20,290.  We also had accrued offering costs of $24,600.  As a result of the transaction we received net proceeds of $898,595.

To date we have financed our capital expenditure needs from cash flows generated from our operations.  At this time, we believe we have sufficient operations and existing non-restricted cash to fund our needs for the next twelve months.

Our future expansion is planned from two sources.  First, we plan to continue to expand our use of independent sales organizations (ISO’s) to assist in the growth of our ACH and verification service business.  While there are costs associated with this increase, the majority of additional sales costs will be funded through the additional sales produced from these selling activities.  We have and plan to continue to structure our sales compensation plans based on commissions only, and employ the use of independent sales representatives already engaged in selling financial products and/or services that are complementary to ACH services.  Accordingly, we believe we can continue to expand these sales activities from our internally generated cash flow.

Second, we believe we will also expand future operations through acquisitions which are accretive to our current earnings at the time of acquisition.  During 2008, we completed two such acquisitions, NDS and the portfolio asset purchase, as means of increasing our volume of business while at the same time expanding our payment services to include credit card services.  In February 2010 we completed the purchase of an additional portfolio of  credit card merchant accounts which supplemented our growth.  Going forward, management expects our public company status to enhance our ability to attract qualified personnel, obtain additional working capital, and facilitate acquisitions more effectively than could be accomplished by remaining a private, closely-held entity.  At this time, we have no understanding, arrangement or agreement to make any acquisitions, but continue to actively seek such opportunities as a means to accelerate revenue and earnings growth.

Recent General Economic Conditions

In light of the slowdown in the economy and challenges within the financial sector and credit markets it has become more difficult for many companies to evaluate their future operations.  Although we have been able to

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complete financing transactions which facilitated the acquisition of NDS on August 22, 2008, and the purchase of the portfolio asset on September 17, 2008, and completed a private placement in February 2010, we believe that access to future financing may continue to be difficult until such time as general economic conditions improve.  At this time we have not experienced any material negative impact from recent economic conditions, but we believe it is reasonable to expect that our payment processing business, both for ACH and for credit card transactions could be negatively impacted by these conditions.  Accordingly, we believe that the following factors should be taken into consideration:

· We may experience reductions in the amount of payments we process for merchants as a result of a downturn in consumer activity and consumer confidence.

· We may be negatively impacted in our credit card processing business if consumers are unable to maintain existing credit card limits or have credit card services terminated.

· We may experience difficulties in maintaining or re-financing our existing credit facilities at either equivalent or more favorable rates.

· New sources of borrowed capital may become more expensive or unavailable which may inhibit our ability to grow.

· Competition may become more intense and we may be required to reduce pricing to maintain the business we have and/or to obtain new business through our existing sales force.

Inflation

Inflation has not had a material effect on the operations of the Company in the past.  At the present time there is a substantial doubt that such conditions will adversely affect the Company for the foreseeable future.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, the Company is not required to provide the information required by this Item.

ITEM 4(T). CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Management is responsible for maintaining effective disclosure controls and procedures.  As of the end of the period covered by this Quarterly Report on Form 10-Q, management evaluated the effectiveness and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).  Based on that evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in reports that are filed or submitted under the Exchange Act are recorded, processed, summarized and reported to management within the time periods specified in the Securities and Exchange Commission’s rules and forms and tha t such information is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in internal controls over financial reporting during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

We are not engaged in any material legal proceedings which involve us, any of our subsidiaries or any of our properties.

ITEM 1A.  RISK FACTORS.

As a smaller reporting company, the Company is not required to provide the information required by this Item.

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

During the quarter ended March 31, 2010, we did not have any sales of securities in transactions that were not registered under the Securities Act of 1933, as amended, that have not been reported in a Form 8-K.  Please refer to our Form 8-K filed with the SEC on March 4, 2010 for information regarding our private placement of common stock that closed on February 28, 2010.

ITEM 3.  DEFAULT UPON SENIOR SECURITIES.

None.

ITEM 4.  [REMOVED AND RESERVED]

None.

ITEM 5.  OTHER INFORMATION.

On February 5, 2010, the Company acquired a 50% interest in a portfolio of credit card merchant accounts from Mr. Leo Daboub.  The Company obtained all of Mr. Daboub’s rights pursuant to a contract between Mr. Daboub and one of the Company’s vendors, a non-bank credit card processor.  Pursuant to the purchase, the Company now receives a portion of the fees associated with the credit card processing services provided to this portfolio of merchants. The Company paid $94,080 in cash at closing.  The agreement also provides for an earn-out formula under which the Company would pay up to an additional $23,520 six months following the closing if certain revenue targets are met.  The transaction was accounted for as an asset purchase based on the total consideration paid at closing of $94,080 in cash amortized over a period of 16 months.  The Company recognized $11,760 of amortization expense for the three months ended March 31, 2010.

To fund the acquisition described above, the Company obtained two loans from current shareholders .  The Company obtained $47,000 under the existing Sorrentino Note (described under Note E to our consolidated financial statements included in Item 1 of this quarterly report), which the Company uses similar to a credit facility.  The Sorrentino Note does not accrue interest and is due a payable on February 28, 2011.  As of March 31, 2010, the principal balance outstanding on the Sorrentino Note was $381,400.  Mr. Sorrentino currently owns approximately 22.7% of our outstanding common stock.  Additionally, the Company entered into a note payable with Mr. Leon Nowalsky, a current shareholder, for a total principal amount of $47,500.  The note provides for interest to accrue at 6% per annum, and the note is due and payable on February 5, 2012.  The note may be prepaid by the Company without penalty.  The outstanding principal balance at March 31, 2010 was $47,500.  Mr. Nowalsky currently owns approximately 10.1% of our outstanding common stock.

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ITEM 6.  EXHIBITS.

10.1	Third Amendment to Agreements, dated March 31, 2010, to the Thermo Credit, LLC Loan, Pledge and Security Agreement and related Promissory Note (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on April 19, 2010).
31.1	Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Principal Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.*

_______________

* Filed herewith.

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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.

	UNITED ESYSTEMS, INC.
Date:   May 24, 2010	By: /s/ Walter Reid Green, Jr.
	Walter Reid Green, Jr.
	Chief Executive Officer, President and       Chief Financial Officer
	(Principal Executive Officer and Principal Financial Officer)

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