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Electronic Game Card, Inc. Reports Second Quarter 2009 Earnings

Posted on: Thursday, 6 August 2009, 15:00 CDT

NEW YORK and LONDON, Aug. 6, /PRNewswire-FirstCall/ -- Electronic Game Card, Inc. (OTC Bulletin Board: EGMI) ("EGC"), today reported financial results for the second quarter ended June 30, 2009, marking the Company's tenth sequential quarter of profitable growth.

Electronic Game Card, Inc. reported second quarter 2009 revenues of $3.1 million, an increase of approximately 23 percent from the prior year second quarter level of $2.5 million and 4 percent increase compared to revenues of $3.0 million in the first quarter of 2009. The Company's continued revenue growth reflected repeat business as well as progress in sales within promotions market, additional licensing and also trial orders of new lines introduced at the end of last year.

The Company reported a comprehensive net income applicable to common stockholders of $2.0 million or $0.03 per diluted share for the second quarter of 2009 versus $1.3 million or $0.02 per diluted share for the second quarter 2008 and a net income of $1.7 million or $0.03 per diluted share for the first quarter 2009. Second quarter 2009 operating income was $1.8 million compared to $1.4 million in the comparable period of 2008 and a 2 percent increase over first quarter 2009.

For the three months ended June 30, 2009, Electronic Game Card's gross profit on revenue totaled $2.5 million yielding a gross margin of 80 percent, representing the tenth consecutive quarter of gross margin in excess of the company's target level of approximately 70 percent. The increase in gross profit reflected the increase in license fees which have minimal associated cost.

Operating expenses during the second quarter 2009 totaled $639,000, an increase of approximately $187,000 over the second quarter 2008, and an increase of approximately $109,000 over first quarter 2009. The increase was attributed to the costs associated with the new management and expanded Board of Directors and expenses related to a heightened marketing effort as well as costs incurred in establishing the Company's new headquarters in Irvine, California. Management believes that operating expenses as a percentage of revenues have peaked this quarter at 20 percent and expects this ratio to decrease during the second half of 2009.

As a result of a partial conversion of the convertible preferred, during the quarter, interest expense incurred was reduced by approximately $83,000 to $64,000 over the previous second quarter. This compares with interest expense of $105,000 in the first quarter of 2009. Interest income totaled $84,000 compared to $67,000 earned first quarter 2009.

For the six months ended June 30, 2009, Electronic Game Card revenues increased to $6.0 million, a 25 percent increase compared to the comparable period in 2008. Comprehensive Net income applicable to common shareholder significantly improved for the current year six month period to $3.7 million or $ 0.06 per diluted share, compared to $2.6 million or $0.04 per diluted share for the comparable period in 2008.

Cash and equivalents on June 30, 2009 were $10.8 million, an increase of approximately $2.5 million from year end December 31, 2008 and an increase of approximately $1.0 million from the March 31, 2009 balance. At June 30, 2009, the Company's current ratio was 17.2. During the second quarter of 2009, EGC reduced its total liabilities by $522,000 to $869,000, excluding the 6% Convertible Redeemable Preferred due to mature on March 24, 2010. The preferred debt, which is convertible at $1.01 per share, totaled $3.3 million at second quarter end, a decrease of $1.2 million from the prior first quarter.

As of June 30, 2009, Electronic Game Card had approximately 62.7 million shares of common stock outstanding. The Company's weighted average number of common shares fully diluted totaled 68.4 million (inclusive of the all options, warrants and the convertible preferred debt), an increase of 595,000 shares from the prior first quarter 2009. As of June 30, 2009 the Company had net operating tax loss carry forwards of approximately $9.9 million in the United States and $5.7 million in the United Kingdom that may be used to offset future taxable income through 2023. On June 30, 2009, the Company's stockholder's equity totaled $18.0 million, an increase of $3.3 million from March 31, 2009.

"During this second quarter Electronic Game Card achieved record revenue and net income as well as continued improvement in the company's net cash balance.. We have made great strides this quarter to materially add to this solid financial base as we progress through the second half of this year and beyond," commented Kevin Donovan, CEO of Electronic Game Card, Inc.

"As EGC's new management team, our goal during our first 6 months was to develop enterprise and strategic new relationships to generate recurring revenues, add distribution partners and integrate additional IP and technology. To that end we have successfully opened numerous discussions, solidifying two potentially significant new partnerships within the past 6 weeks with more contracts expected to follow. In addition to our tenacious attention to growing revenues, we have also been able to focus on our internal infrastructure. During the quarter, we have taken further steps with the new EGC headquarters relocation to Irvine, California. We have made material strides in securing additional manufacturing capabilities that will significantly increase our capacity and reduce our cost to manufacture our technology by as much as 35 percent thus expanding our new market applications potential. As of today, our new website has gone live, which will enhance our overall brand value and online product sampling."

CONFERENCE CALL --------------- Conference Call Details: Date/Time: Thursday, August 6, 2009--4:30 p.m. (EDT) Telephone Number: 888-679-8038 International Dial-In Number: 617-213-4850 Participant Pass code: 42845879 Internet Access: www.electronicgamecard.com or www.earnings.com

It is recommended that participants phone-in at least 10 minutes before the call is scheduled to begin. Participants may pre-register for the call at -https://www.theconferencingservice.com/prereg/key.process?key=PN8NGP97D

Pre-registrants will be issued a pin number to use when dialing into the live call which will provide quick access to the conference by bypassing the operator upon connection. A replay of the conference call in its entirety will be available approximately one hour after its completion by dialing 888-286-8010 (U.S.), 617-801-6888 (International) and entering the pass code 91976744 and on the Internet at www.earnings.com.

Contact: Yvonne L. Zappulla Managing Director Grannus Financial Advisors, Inc. (212) 681-4108 yvonne@grannusfinancial.com or Kevin Donovan Chief Executive Officer Electronic Game Card, Inc. (888) 341-3421 investor.relations@electronicgamecard.com

About Electronic Game Card, Inc.

Electronic Game Card, Inc., (OTCBB: EGMI), develops, produces and markets innovative games to the promotional industry worldwide, toys and games, casinos and lottery. The Company's lead product is the EGC Electronic GameCard(TM), a unique credit card-sized pocket game combining patent and patent-pending proprietary technology of interactive capability with "instant win" excitement. The EGC Electronic GameCard(TM), Know-it-All QuizCard(TM), iQuizCard(TM), and ePLAYCards for Education are completely customizable and can be programmed to suit a variety of gaming, promotions, and education applications including skinned to popular licensed intellectual property brands in a variety of popular cultures in sports, music, movies, entertainment, fashion, history, geography, and many other genres.

EGMI's client base is across the $100 billion global market of, sales promotion, education, gaming and casinos, Indian gaming and state and national lotteries markets. EGMI develops sales and marketing relationships with agents and distributors globally and currently has agents and distributors in North America, United Kingdom, Ireland, Mexico, Italy, Sweden, Norway, Denmark, Finland, South Africa Australia, New Zealand and Japan. For further information please visit www.electronicgamecard.com

Certain statements in this news release may constitute "forward-looking" statements within the meaning of section 21E of the Securities and Exchange Act of 1934. The Company believes that its expectations, as expressed in these statements are based on reasonable assumptions regarding the risks and uncertainties inherent in achieving those expectations. These statements are not, however, guarantees of future performance and actual results may differ materially. Risk factors are listed in the most recent Annual Report on Form 10-KSB and Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission.

***Financial Statements Follow*** ELECTRONIC GAME CARD, INC. CONSOLIDATED BALANCE SHEETS June 30, December 31, 2009 2008 -------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $10,757,973 $8,281,899 Marketable securities 254,768 876,186 Accounts receivable 3,258,938 2,757,685 Deposit on inventory 51,833 51,833 Other receivables 125,967 120,109 VAT receivable 14,304 25,916 Deferred charges - 38,119 ------ ------ Total current assets 14,463,783 12,151,747 ---------- ---------- Machinery and equipment 71,575 68,900 Office equipment 61,392 58,078 Furniture and fixtures 1,160 1,017 Less accumulated depreciation (120,977) (106,398) -------- -------- Net property, plant and equipment 13,150 21,597 ------ ------ OTHER ASSETS Patents 268,977 258,321 Investments 7,422,470 6,497,470 --------- --------- Total assets $22,168,380 $18,929,135 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) Current liabilities: Accounts payable $624,526 $749,118 Accrued liabilities 214,753 268,748 ------- ------- Total current liabilities 839,279 1,017,866 Deferred license fees 29,625 279,625 ------ ------- Total liabilities 868,904 1,297,491 ------- --------- Series A 6% convertible redeemable preferred stock, $.001 par value, 10,000,000 shares authorized; 3,348,506 and 4,464,628 shares issued and outstanding as of June 30, 2009 and December 31, 2008, respectively 3,348,506 4,464,628 Shareholders' equity/(deficit) Common stock, $.001 par value, 100,000,000 shares authorized; 62,693,297, and 57,137,661 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively 62,693 57,137 Additional paid in capital 34,357,300 33,318,440 Accumulated deficit (15,583,618) (19,192,706) Accumulated other comprehensive loss (885,405) (1,015,855) -------- ----------- Total shareholders' equity 17,950,970 13,167,016 ---------- ---------- Total liabilities and shareholders' equity $22,168,380 $18,929,135 =========== =========== ELECTRONIC GAME CARD, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months For the Six Months Ended Ended June 30, June 30, June 30, June 30, 2009 2008 2009 2008 ----------- ----------- ----------- ----------- Revenue $3,056,542 $2,485,683 $6,007,637 $4,780,304 Cost of revenue 600,431 512,589 1,238,943 1,161,589 ----------- ----------- ----------- ----------- Gross margin 2,456,111 1,873,094 4,768,694 3,618,715 ----------- ----------- ----------- ----------- Operating expenses: Sales and marketing 101,556 40,564 164,896 41,355 General and administrative 237,770 199,449 363,026 327,598 Professional fees 216,381 125,667 484,897 277,149 Salaries and wages 83,446 86,105 156,681 172,990 ----------- ----------- ----------- ----------- Total operating expenses 639,153 451,785 1,169,502 819,092 ----------- ----------- ----------- ----------- Income from operations 1,816,958 1,421,309 3,599,192 2,799,623 Other income (expense): Interest income 84,441 61,669 151,682 123,245 Interest expense (63,996) (147,432) (169,085) (295,494) Gain on sale of investments - 122,900 411,995 122,900 Loss on re-valuation of investments 28,910 - (384,930) - ----------- ----------- ----------- ----------- Total other income (expense) 49,355 37,137 9,662 (49,349) ----------- ----------- ----------- ----------- Net income $1,866,313 $1,458,446 $3,608,854 $2,750,274 Other comprehensive (loss) gain: Foreign currency translation loss 131,623 (114,719) 130,450 (119,068) ----------- ----------- ----------- ----------- Comprehensive income $1,997,935 $1,343,727 $3,739,304 $2,631,206 ============ =========== =========== =========== Net income per common share (basic) $0.03 $0.03 $0.06 $0.05 ============ =========== =========== =========== Weighted average number of common shares outstanding (basic) 62,693,297 51,439,633 60,826,710 50,031,766 ============ =========== =========== =========== Net income per common share (diluted) $0.03 $0.02 $0.06 $0.04 ============ =========== =========== =========== Weighted average number of common shares outstanding (diluted) 68,434,707 64,871,010 67,967,077 64,091,569 ============ =========== =========== ===========

SOURCE Electronic Game Card, Inc.

Source: PR Newswire

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