Electronic Game Card Inc. Reports Third Quarter 2009 Earnings

13 November 2009

IRVINE, Calif. and LONDON, Nov. 12 /PRNewswire-FirstCall/ -- Electronic Game Card, Inc. ("EGC") (OTC Bulletin Board: EGMI), today reported financial results for its third quarter ended September 30, 2009, marking the Company's eleventh consecutive quarter of both year-over-year and sequential revenue and profit growth.

The Company reported revenues of $4.2 million, a 39 percent increase over the prior year third quarter level of $3.0 million and a 38 percent increase over second quarter 2009 revenues of $3.1 million. The Company's continued revenue growth reflected repeat business as well as progress in sales within the promotions market, additional licensing and trial orders of new lines introduced at the end of last year.

The Company reported comprehensive net income applicable to common stockholders for the third quarter of $2.9 million or $0.04 per diluted share versus net income of $1.7 million or $0.03 per diluted share for the third quarter 2008 and net income of $2.0 million or $0.03 per diluted share for the second quarter 2009. Third quarter 2009 operating income was $2.5 million compared to $1.8 million in the comparable period of 2008 and a 38 percent increase over second quarter 2009.

For the three months ended September 30, 2009, Electronic Game Card's gross profit on revenue totaled $3.3 million, yielding a gross margin of 78 percent and representing the eleventh consecutive quarter of gross margin in excess of the company's target level of approximately 70 percent. The increase in gross profit reflected a continued growth in license fees, which have lower associated cost. One of the Company's primary objectives is to manage the business to maximize gross profit dollars. Consequently, as the Company takes advantage of future business opportunities, its gross margin may fluctuate due to varying percentage mix of higher margin licensing revenue versus direct sales that generates higher revenue at lower margin.

Operating expenses during third quarter 2009 totaled $798,000, an increase of approximately $274,000 or 52% over third quarter 2008 and $159,000 or 25% over second quarter 2009. The increase was attributed to the costs associated with the new management, expanded Board of Directors, expenses related to a heightened marketing effort, and costs incurred in establishing the Company's new headquarters in Irvine, California. Operating expenses as a percentage of revenues fell by 210 basis points to 19 percent over the second quarter.

For the nine months ended September 30, 2009, Electronic Game Card's revenues increased to $10.2 million, a 31 percent increase compared to revenues of $7.8 million reported during the comparable period in 2008. Comprehensive net income applicable to common shareholders significantly improved for the current nine month period to $6.6 million or $0.10 per fully diluted share, compared to net income for the previous year nine month period of $4.3 million or $0.07 per fully diluted share.

Cash and equivalents on September 30, 2009 were $12.7 million, an increase of approximately $4.5 million from year end December 31, 2008 and an increase of approximately $1.4 million for the June 30, 2009 balance. Accounts receivable increased approximately $1.0 million over the prior second quarter 2009. The majority of the other receivables increase was due to inventory prepayments. At September 30, 2009, the Company's current ratio was 17 to 1. During the third quarter of 2009, EGC increased investments by $665,000 to $8.1 million as a result of further investment in software development.

As of September 30, 2009, Electronic Game Card had approximately 68.1 million shares of common stock outstanding. The Company's weighted average number of common shares fully diluted totaled 72.2 million (inclusive of the all options, warrants and the convertible preferred debt). On September 30, 2009, the Company's stockholder's equity totaled $23.2 million, an increase of $4.7 million from June 30, 2009.

Commenting on the quarterly results, Kevin Donovan, Joint Chairman and CEO of Electronic Game Card, Inc, said, "A great deal was accomplished during the third quarter as we continued to add global distribution partners and new complementary technology platforms. We believe we are putting the pieces into place that will lead to solid top and bottom line growth in 2010 and beyond."

"We are deeply grieved by the untimely passing of our Executive Chairman, The Lord Leonard Steinberg, on November 2, 2009. We were fortunate to have the benefit of his direction over the last 16 months. The Lord Steinberg, during his extraordinary life, achieved many significant accomplishments and, due to his personal nature, took great pride and enjoyment not only through his success, but also with the many close relationships he developed. He devoted special focus over the past year to develop EGC, a business in which he saw great prospects and opportunities," stated Kevin Donovan and Eugene Christensen, Joint Chairmen of Electronic Game Card, Inc. "It is our honor to continue Leonard's fine work and build this company into an entity that would have made him proud."

    CONFERENCE CALL    Conference Call Details:    Date/Time:                    Thursday, November 12, 2009--10:00 a.m. (ET)    Telephone Number:             888-713-4217    International Dial-In Number: 617-213-4869    Participant Pass code:        21898631    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=PLLYWRJRM

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 89743451 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-K and Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission.

Financial Statements Follow

                              ELECTRONIC GAME CARD, INC.                             CONSOLIDATED BALANCE SHEETS                                       September 30,         December 31,                                           2009                 2008                                       -------------        ------------                                       (Unaudited)         ASSETS     Current assets:      Cash and cash equivalents          $12,746,691         $8,281,899      Marketable securities                        -            876,186      Accounts receivable                  4,297,209          2,757,685      Deposit on inventory                    51,833             51,833      Other receivables                    1,325,257            120,109      VAT receivable                          14,658             25,916      Deferred charges                             -             38,119                                                 ---             ------          Total current assets            18,435,648         12,151,747                                          ----------         ----------     Machinery and equipment                  70,794             68,900     Office equipment                         60,425             58,078     Furniture and fixtures                    1,118              1,017     Less accumulated depreciation          (125,088)          (106,398)                                            --------           --------          Net property, plant           and equipment                       7,249             21,597                                               -----             ------     Other Assets        Patents                              593,111            258,321        Investments                        8,087,470          6,497,470                                           ---------          ---------          Total assets                   $27,123,478        $18,929,135                                         ===========        ===========         LIABILITIES AND SHAREHOLDERS'          EQUITY/(DEFICIT)     Current liabilities:      Accounts payable                      $769,578           $749,118      Accrued liabilities                    285,264            268,748                                             -------            -------          Total current liabilities        1,054,842          1,017,866    Deferred license fees                          -            279,625                                           ---------          ---------          Total liabilities                1,054,842          1,297,491      Series A 6% convertible       redeemable preferred stock,       $.001 par value, 10,000,000       shares authorized; 2,840,163       and 4,464,628 shares issued       and outstanding at of       September 30, 2009 and       December 31, 2008,       Respectively                        2,840,163          4,464,628     Shareholders' equity/(deficit)      Common stock, $.001 par value,       100,000,000 shares authorized;       68,127,921 and 57,137,661 and       shares issued and outstanding       at September 30, 2009 and       December 31, 2008       Respectively                           68,128             57,137      Additional paid in capital          36,772,485         33,318,440      Accumulated other       comprehensive loss                 (1,116,736)        (1,015,855)      Accumulated deficit                (12,495,404)       (19,192,706)                                         -----------        ------------          Total shareholders' equity      23,228,473         13,167,016                                          ----------         ----------    Total liabilities and     shareholders' equity                $27,123,478        $18,929,135                                         ===========        ===========

                            ELECTRONIC GAME CARD, INC.                        Consolidated Statements of Operations                                   (Unaudited)                                      For the Three         For the Nine                                      Months Ended          Months Ended                                      September 30,         September 30,                                     2009      2008        2009       2008                                 ---------- ---------- ----------- ----------    Revenue                      $4,238,061 $3,043,566 $10,245,698 $7,823,870    Cost of sales                   924,799    744,000   2,163,741  1,905,589                                  ---------  ---------  ----------  ---------    Gross profit                  3,313,262  2,299,566   8,081,957  5,918,282                                  ---------  ---------  ----------  ---------    Operating expenses       Sales and marketing           94,550     13,600     165,696     54,954       General and administrative   256,276    123,639     619,751    451,237       Professional fees            358,219    282,865     936,868    560,014       Salaries and wages            89,047    104,407     245,728    277,397                                  ---------  ---------  ----------  ---------    Total operating expenses        798,092    524,511   1,968,043  1,343,602                                  ---------  ---------  ----------  ---------    Income from operations        2,515,170  1,775,055   6,113,914  4,574,679    Other income (expense)       Interest income               80,799     87,014     232,932    210,059       Interest expense             (50,228)  (147,747)   (219,313)  (443,241)    Gain on sale of investments     154,694          -     569,769          -                                  ---------  ---------  ----------  ---------    Total other income (expense)    185,265    (60,733)    583,388   (233,182)                                  ---------  ---------  ----------  ---------    Net income                   $2,700,435 $1,714,322  $6,697,302 $4,341,497    Foreign currency     translation loss              (231,331)   (28,947)   (100,881)  (148,015)    Unrealized profit on     marketable securities          388,010          -           -    122,900                                  ---------  ---------  ----------  ---------    Comprehensive income         $2,857,114 $1,685,375  $6,596,421 $4,316,382                                  =========  =========   =========  =========    Net income per common     share ( basic )                  $0.04      $0.03       $0.11      $0.08                                  ---------  ---------  ----------  ---------    Weighted average number     of shares outstanding     (basic)                     65,109,353 52,041,416  63,046,824 51,604,503                                 ---------- ----------  ---------- ----------    Net income per common     share ( diluted )                $0.04      $0.03       $0.10      $0.07                                  ---------  ---------  ----------  ---------    Weighted average number     of shares outstanding     (diluted)                   72,151,865 65,707,416  69,286,884 64,674,490                                 ---------- ----------  ---------- ----------

SOURCE Electronic Game Card, Inc.

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