UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q







x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
      ACT OF 1934





For
the quarterly period ended March 31, 2009





OR





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
      ACT OF 1934





For
the transition period
from             to





Commission
file number 000-25853








ELECTRONIC
GAME CARD, INC.


(Exact
Name of Registrant as Specified in Its Charter)










Nevada
              (State
      or Other Jurisdiction of
              Incorporation
      or Organization)
              
              318
      N Carson Street, Suite 208,Carson City, Nevada
              (Address
      of Principal Executive Offices)
            87-0570975
              (I.R.S.
      Employer
              Identification
      No.)
              
              NV
      89701
              (Zip
      Code)





(888)
341-3421


(Registrant’s
Telephone Number, Including Area Code)





(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)








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 xNo  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange
Act.





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 by 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 latest practicable date.




Class
                
                Outstanding
      at May 4th, 2009Common
      Stock, $0.001 par value
                
                59,358,702














NOTE
REGARDING FORWARD-LOOKING STATEMENTS





This
Quarterly Report on Form 10-Q contains forward-looking statements, including
statements regarding future revenues, research and development programs,
clinical trials and collaborations and our future cash
requirements.  The words or phrases “will”, “will likely result”, “are
expected to”, “will continue”, “estimate”, “project”, “potential”, “believe”,
“plan”, “anticipate”, “expect”, “intend”, or similar expressions and variations
of such words are intended to identify forward-looking
statements.  Statements that are not historical facts are based on our
current expectations, beliefs, assumptions, estimates, forecasts and projections
for our business and the industry and markets related to our
business.  The statements contained in this report are not guarantees
of future performance and involve certain risks, uncertainties and assumptions
which are difficult to predict.  Therefore, actual outcomes and
results may differ materially from what is expressed in such forward-looking
statements.





The
forward-looking statements in this Quarterly Report on Form 10-Q speaks as of
the date of this report.  We expressly disclaim any obligations or
undertaking to disseminate any updates or revisions to any forward-looking
statement contained in this Quarterly Report to reflect any change in our
expectations with regard thereto or any change in events, conditions or
circumstances on which any forward-looking statement is based, except as may be
required by law.





2





ELECTRONIC
GAME CARD, INC.


TABLE
OF CONTENTS





PAGE #PART
      I.
                  FINANCIAL
      INFORMATIONITEM 1 – Financial
      StatementsConsolidated
      Balance Sheets as of March 31, 2009 (Unaudited), and December 31,
      2008
                  4Consolidated
      Statements of Operations and Comprehensive Loss for the Fiscal Three
      Months Ended March 31, 2009 and March 31, 2009 (Unaudited)
                  5Consolidated
      Statements of Cash Flows for the Fiscal Three Months Ended March 31, 2009
      and March 31, 2008 (Unaudited)
                  6Notes
      to Unaudited Consolidated Financial Statements
                  7ITEM 2 – Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  15ITEM 3 – Quantitative
      and Qualitative Disclosures About Market Risk
                  18ITEM 4 – Controls and
      Procedures
                  19PART
      II.
                  OTHER
      INFORMATIONITEM 1 – Legal
      Proceedings
                  20ITEM 2 – Changes in
      Securities
                  20ITEM 3 – Defaults Upon
      Senior Securities
                  20ITEM 4 – Submission of
      Matters to a Vote of Security Holders
                  20ITEM 5 – Other
      Information
                  20ITEM 6 –
      Exhibits
                  20SIGNATURES
                  21





3





PART I–FINANCIAL
INFORMATION





ITEM
1.  FINANCIAL STATEMENTS





ELECTRONIC
GAME CARD, INC.


CONSOLIDATED
BALANCE SHEETS





March 31, 2009
                
                
                December 31, 2008ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                9,687,299
                
                
                $
                8,281,899Marketable
      securities
                
                
                225,858
                
                
                
                876,186Accounts
      receivable
                
                
                2,457,050
                
                
                
                2,757,685Deposit
      on inventory
                
                
                51,833
                
                
                
                51,833Other
      receivables
                
                
                342,840
                
                
                
                120,109VAT
      receivable
                
                
                4,571
                
                
                
                25,916Deferred
      charges
                
                
                -
                
                
                
                38,119Total
      current assets
                
                
                12,769,451
                
                
                
                12,151,747Machinery
      and equipment
                
                
                68,900
                
                
                
                68,900Office
      equipment
                
                
                58,078
                
                
                
                58,078Furniture
      and fixtures
                
                
                1,017
                
                
                
                1,017Less
      accumulated depreciation
                
                
                (110,563
                )
                
                
                (106,398
                )Net
      property, plant and equipment
                
                
                17,432
                
                
                
                21,597OTHER
      ASSETSPatents
                
                
                256,952
                
                
                
                258,321Investments
                
                
                7,422,470
                
                
                
                6,497,470Total
      assets
                
                $
                20,466,305
                
                
                $
                18,929,135LIABILITIES
      AND SHAREHOLDERS’ EQUITY/(DEFICIT)Current
      liabilities:Accounts
      payable
                
                $
                1,000,408
                
                
                $
                749,118Accrued
      liabilities
                
                
                235,940
                
                
                
                268,748Total
      current liabilities
                
                
                1,236,348
                
                
                
                1,017,866Deferred
      license fees
                
                
                154,625
                
                
                
                279,625Total
      liabilities
                
                
                1,390,973
                
                
                
                1,297,491Series
      A 6% convertible redeemable preferred stock, $.001 par value, 10,000,000 shares authorized;
      4,464,628 and 4,420,404 shares issued andoutstanding at of March
      31, 2009 and December 31, 2008, respectively
                
                
                4,464,628
                
                
                
                4,464,628Shareholders’
      equity/(deficit)Common
      stock, $.001 par value, 100,000,000 shares authorized; 59,358,702, and
      57,137,661 shares issued and outstanding at March 31, 2009 and December
      31, 2008, respectively
                
                
                59,358
                
                
                
                57,137Additional
      paid in capital
                
                
                33,018,537
                
                
                
                33,318,440Accumulated
      deficit
                
                
                (17,033,244
                )
                
                
                (19,192,706
                )Accumulated
      other comprehensive loss
                
                
                (1,433,947
                )
                
                
                (1,015,855
                )Total
      shareholders’ equity
                
                
                14,610,704
                
                
                
                13,167,016Total
      liabilities and shareholders’ equity
                
                $
                20,466,305
                
                
                $
                18,929,135





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





4





ELECTRONIC
GAME CARD, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS




(Unaudited)




Three months endedMarch 31, 2009
                    
                    
                    March 31, 2008Revenue
                    
                    $
                    2,951,095
                    
                    
                    $
                    2,294,621Cost
      of revenue
                    
                    
                    638,511
                    
                    
                    
                    549,000Gross
      margin
                    
                    
                    2,312,584
                    
                    
                    
                    1,745,621Operating
      expenses:Sales
      and marketing
                    
                    
                    63,340
                    
                    
                    
                    791General
      and administrative
                    
                    
                    125,257
                    
                    
                    
                    128,149Professional
      fees
                    
                    
                    268,516
                    
                    
                    
                    151,482Salaries
      and wages
                    
                    
                    73,235
                    
                    
                    
                    86,886Total
      operating expenses
                    
                    
                    530,348
                    
                    
                    
                    367,308Income
      from operations
                    
                    
                    1,782,236
                    
                    
                    
                    1,378,313Other
      income (expense):Interest
      income
                    
                    
                    67,241
                    
                    
                    
                    61,577Interest
      expense
                    
                    
                    (105,089
                    )
                    
                    
                    (148,062
                    )Gain
      on sale of investments
                    
                    
                    415,075Net
      income
                    
                    $
                    2,159,463
                    
                    
                    $
                    1,291,828Other
      comprehensive (loss) gain:Foreign
      currency translation loss
                    
                    
                    (1,172
                    )
                    
                    
                    (4,349
                    )Unrealized
      loss on marketable securities
                    
                    
                    (416,920
                    )
                    
                    
                    -Comprehensive
      income
                    
                    $
                    1,741,371
                    
                    
                    $
                    1,287,479Net
      income per common share (basic)
                    
                    $
                    0.04
                    
                    
                    $
                    0.03Weighted
      average number of common shares outstanding (basic)
                    
                    
                    60,265,654
                    
                    
                    
                    50,031,766Net
      income per common share (diluted)
                    
                    $
                    0.03
                    
                    
                    $
                    0.02Weighted
      average number of common shares outstanding (diluted)
                    
                    
                    67,840,154
                    
                    
                    
                    62,487,058




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





5





ELECTRONIC
GAME CARD, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS




(Unaudited)





Three months endedMarch 31, 2009
                
                
                March 31, 2008Cash
      flows from operating activities:Net
      income
                
                $
                2,159,463
                
                
                $
                1,291,828Adjustments
      to reconcile net income from continuing operations to net cash used in
      operating activitiesDepreciation
      and amortization
                
                
                4,165
                
                
                
                9,321Amortization
      of deferred charges
                
                
                38,119
                
                
                
                38,119Deferred
      license fees
                
                
                (125,000
                )
                
                
                (125,000
                )Gain
      on sale of investments
                
                
                (415,075
                )
                
                
                -Stock
      issued for services
                
                
                -
                
                
                
                23,200Change
      in assets and liabilities:Accounts
      receivable
                
                
                300,635
                
                
                
                (299,473
                )Value
      Added Tax receivable
                
                
                21,345
                
                
                
                6,638Other
      receivables
                
                
                10,676
                
                
                
                110Accounts
      payable
                
                
                251,290
                
                
                
                (34,196
                )Accrued
      liabilities and interest payable
                
                
                (32,808
                )
                
                
                101,210Net
      cash provided by (used in) operating activities
                
                
                2,202,885
                
                
                
                1,011,757Cash
      flows from investing activities:Purchase
      of property and equipment
                
                
                -
                
                
                
                -Purchase
      of investments
                
                
                (675,000
                )
                
                
                (53,542
                )Proceeds
      from sale of investments
                
                
                675,000
                
                
                
                -Net
      cash provided by (used in) investing activities
                
                
                -
                
                
                
                (53,542
                )Cash
      flows from financing activities:Cash
      paid for share buy back
                
                
                (798,472
                )
                
                
                -Net
      cash provided by financing activities
                
                
                (798,472
                )
                
                
                -Foreign
      currency exchange effect on cash
                
                
                986
                
                
                
                (4,349
                )Net
      increase in cash and cash equivalents
                
                
                1,405,399
                
                
                
                953,866Cash
      and cash equivalents at beginning of period
                
                
                8,281,899
                
                
                
                4,753,040Cash
      and cash equivalents at end of period
                
                $
                9,687,298
                
                
                $
                5,706,906Supplemental
      disclosure of cash flow information:Cash
      paid during the period for :Interest
                
                $
                -
                
                
                $
                -Income
      Taxes
                
                $
                -
                
                
                $
                -Supplemental
      disclosure of cash flow information:Shares
      issued for investments
                
                $
                500,000
                
                
                $
                556,210Shares
      issued for redeemable preference shares
                
                $
                
                
                
                $
                1,032,884Receivable
      issued on sale of investments
                
                $
                233,407
                
                
                $




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





6











ELECTRONIC GAME CARD,
INC.


NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS





1.           Organization and Basis of
Presentation





Organization





The
      Company was incorporated under the laws of the England on April 6, 2000,
      under the name of Electronic Game Card, Ltd. Until 2002, the Company
      remained dormant and had no operations until August 8 2002.  On
      May 5, 2003, the Company entered into an agreement whereby it acquired
      100% of the outstanding stock of Electronic Game Card Marketing, a
      Delaware Company.





On
      December 5, 2003, the Company acquired 100% of the outstanding stock of
      the Electronic Game Card, Inc. (Nevada) in a reverse
      acquisition.  At this time, a new reporting entity was created
      and the name of the Company was changed to Electronic Game Card,
      Inc.





The
Company is engaged in the development, marketing, sale and distribution of
recreational electronic software which is primarily targeted towards the global
sales promotion, gaming and lottery markets.  The Company’s patent
protected technology was originally conceived for the global sales promotion and
lottery industries and marketed under the name of Electronic
GameCardTM.  The shape of a pocket GameCard is flexible to clients’
needs but is currently approximately the size of a credit card, operated
electronically by touch and incorporating a microchip and LCD screen showing
numbers or icons.  Additional markets with considerable potential for
the Company's reward based games products are Indian Gaming, general gaming
outlets like bingo halls and casinos and private and social
lotteries.  The Company is launching its technology into new market
sectors such as Education, Sports/Hobbies and Celebrations.  The
Company designs its GameCards to play game types, formats and prize structures
as required by its customers.  The Company is building a software
library of generic game formats of popular, widely recognized and understood
themes.  The current software library stands at 35 unique
games.





Basis
of Presentation





The
unaudited consolidated financial statements included herein have been prepared
with accounting principles generally accepted in the United States for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission.  They do not include all
information and notes required by generally accepted accounting principles for
complete financial statements.  However, except as disclosed herein,
there have been no material changes in the information disclosed in the notes to
the consolidated financial statements included in the Annual Report on Form 10-K
of Electronic Game Card, Inc. for the year ended December 31, 2008.





In the
opinion of management, all adjustments (including normal recurring accruals)
considered necessary for a fair presentation have been
included.  Operating results for the three months ended March 31, 2009
are not necessarily indicative of the results that may be expected for any other
interim period or the entire year.  For further information, these
unaudited consolidated financial statements and the related notes should be read
in conjunction with the Company’s audited consolidated financial statements for
the year ended December 31, 2008 included in the Company’s Annual Report on Form
10-K.





Principles
of Consolidation





The
consolidated financial statements include the accounts of the following
companies:





·
            Electronic
      Game Card, Inc. (Nevada
Corporation)


·
            Electronic
      Game Card, Ltd. (English
Corporation)


·
            Electronic
      Game Card Marketing (A Delaware
Corporation)





7








The
results of subsidiaries acquired during the year are consolidated from their
effective dates of acquisition.  All significant inter-company
accounts and transactions have been eliminated.





Certain
amounts in the prior periods consolidated financial statements and notes have
been reclassified to conform to the current period’s presentation.





Foreign
Currency Translation





The
Company's functional currency for its foreign subsidiary, Electronic Game Card
Ltd., is the British (UK) Pound and the reporting currency is the U.S.
Dollar.  All elements of financial statements are translated using a
current exchange rate.  For assets and liabilities, the exchange rate
at the balance sheet date is used.  Stockholders’ Equity is translated
using the historical rate.  For revenues, expenses, gains and losses
the weighted average exchange rate for the period is
used.  Translation gains and losses are included as a separate
component of stockholders’ equity as other comprehensive income or
loss.  Gain and losses resulting from foreign currency transactions
are included in net income or loss from operations.





Pervasiveness of Estimates





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





The
Company’s unaudited consolidated financial statements are based on a number of
estimates, including accruals for accounts payable and interest expense,
amortization of deferred charges, allowance for doubtful accounts, estimated
useful lives of property and equipment, and fair value of
investments.





Recent
Accounting Pronouncements





In
April 2009, the Financial Accounting Standards Board (FASB) issued FASB
Staff Position (FSP) Financial Accounting Standard (FAS) 157-4 Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. Based on the
guidance, if an entity determines that the level of activity for an asset or
liability has significantly decreased and that a transaction is not orderly,
further analysis of transactions or quoted prices is needed, and a significant
adjustment to the transaction or quoted prices may be necessary to estimate fair
value in accordance with Statement of Financial Accounting Standards (SFAS)
No. 157 “Fair Value Measurements”. This FSP is to be applied prospectively
and is effective for interim and annual periods ending after June 15, 2009
with early adoption permitted for periods ending after March 15, 2009. The
company will adopt this FSP for its quarter ending June 30, 2009. There is
no expected impact on the Consolidated Financial Statements.





In
April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2 Recognition and Presentation of
Other-Than-Temporary Impairments. The guidance applies to investments in
debt securities for which other-than-temporary impairments may be recorded. If
an entity’s management asserts that it does not have the intent to sell a debt
security and it is more likely than not that it will not have to sell the
security before recovery of its cost basis, then an entity may separate
other-than-temporary impairments into two components: 1) the amount related to
credit losses (recorded in earnings), and 2) all other amounts (recorded in
other comprehensive income). This FSP is to be applied prospectively and is
effective for interim and annual periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15, 2009. The
company will adopt this FSP for its quarter ending June 30, 2009. There is
no expected impact on the Consolidated Financial Statements.





8





In
April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board
(APB) 28-1 Interim Disclosures
about Fair Value of Financial Instruments. The FSP amends SFAS
No. 107 Disclosures about
Fair Value of Financial Instruments to require an entity to provide
disclosures about fair value of financial instruments in interim financial
information. This FSP is to be applied prospectively and is effective for
interim and annual periods ending after June 15, 2009 with early adoption
permitted for periods ending after March 15, 2009. The company will include
the required disclosures in its quarter ending June 30, 2009.





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations” which
became effective January 1, 2009 via prospective application to business
combinations. This Statement requires that the acquisition method of accounting
be applied to a broader set of business combinations, amends the definition of a
business combination, provides a definition of a business, requires an acquirer
to recognize an acquired business at its fair value at the acquisition date and
requires the assets and liabilities assumed in a business combination to be
measured and recognized at their fair values as of the acquisition date (with
limited exceptions). The company adopted this Statement on January 1, 2009.
There was no impact upon adoption, and its effects on future periods will depend
on the nature and significance of business combinations subject to this
statement.





In
April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies. This FSP requires that assets acquired and liabilities
assumed in a business combination that arise from contingencies be recognized at
fair value if fair value can be reasonably estimated. Iffair value cannot be
reasonably estimated, the asset or liability would generally be recognized in
accordance with SFAS No. 5, Accounting for Contingencies
and FASB Interpretation No. 14, Reasonable Estimation of the Amount
of a Loss. Further, the FASB removed the subsequent accounting guidance
for assets and liabilities arising from contingencies from SFAS No. 141(R).
The requirements of this FSP carry forward without significant revision the
guidance on contingencies of SFAS No. 141, “Business Combinations”, which
was superseded by SFAS No. 141(R) (see previous paragraph). The FSP
also eliminates the requirement to disclose an estimate of the range of possible
outcomes of recognized contingencies at the acquisition date. For unrecognized
contingencies, the FASB requires that entities include only the disclosures
required by SFAS No. 5. This FSP was adopted effective January 1,
2009. There was no impact upon adoption, and its effects on future periods will
depend on the nature and significance of business combinations subject to this
statement.





In
April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of
Intangible Assets. The FSP states that in developing assumptions about
renewal or extension options used to determine the useful life of an intangible
asset, an entity needs to consider its own historical experience adjusted for
entity-specific factors. In the absence of that experience, an entity shall
consider the assumptions that market participants would use about renewal or
extension options. This FSP is to be applied to intangible assets acquired after
January 1, 2009. The adoption of this FSP did not have an impact on the
consolidated financial statements.





In
November 2008, the FASB ratified EITF Issue 08-7, Accounting for Defensive Intangible
Assets. A defensive intangible asset is an asset acquired in a business
combination or in an asset acquisition that an entity does not intend to
actively use. According to the guidance, defensive intangible assets are
considered to be a separate unit of account and valued based on their highest
and best use from the perspective of an external market participant. The company
adopted EITF 08-7 on January 1, 2009. There was no impact upon adoption,
and its effects on future periods will depend on the nature and significance of
the business combinations subject to this statement.





9





2.           Income
Taxes





The
Company is subject to income taxes in the United States of America, United
Kingdom, and the state of New York.  As of March 31, 2009, the Company
had a net operating loss carry forward for income tax reporting purposes of
approximately $10,038,097 in the United States and $7,411,842 in the United
Kingdom that may be offset against future taxable income through
2023.  Current tax laws limit the amount of loss available to be
offset against future taxable income when a substantial change in ownership
occurs.  Therefore, the amount available to offset future taxable
income may be limited.  In establishing a provision for income tax
expense, the Company must make judgments and interpretations about the
application of these inherently complex tax laws. The Company must also make
estimates about when in the future certain items will affect taxable income in
the various tax jurisdictions, both domestic and foreign.  Disputes
over interpretations of the tax laws may be subject to review/adjudication by
the court systems of the various tax jurisdictions or may be settled with the
taxing authority upon examination or audit.





A tax
benefit has been reported in the financial statements to the extent that it can
be utilized to offset current income tax.  The remaining potential tax
benefits of the loss carry-forwards are offset by a valuation
allowance.





For the
three months ended March 31, 2009 and 2008 income tax expense was $0 and $0,
respectively.





As
      at March 31,:
                        
                        2009
                        
                        
                        2008Income
      Tax Provision at Statutory rates
                        
                        
                        889,000
                        
                        
                        $
                        659,000Adjustment
      to reconcile to the Income tax provision:Valuation
      allowances
                        
                        
                        -Benefit
      of Net Operating loss carry forward
                        
                        
                        (889,000
                        )
                        
                        
                        (659,000
                        )Provision
      for Income Tax
                        
                        
                        -
                        
                        
                        
                        -





SFAS
No.109 requires recognition of deferred income tax assets and liabilities for
the expected future income tax consequences, based on enacted tax laws, of
temporary differences between the financial reporting and tax bases of assets
and liabilities.





The
Company implemented FASB Interpretation No. 48, “Accounting for Uncertainty
in Income Taxes” (FIN 48) which sets out a consistent framework to determine the
appropriate level of tax reserves to maintain for uncertain tax
positions.  For the years ended December 31, 2008 and 2007, the
Company’s uncertain tax position includes the informational return filing for
certain foreign corporations pursuant to IRC §6038 and §6046. The Company
does not expect this uncertainty to have a material impact on its consolidated
financial statements.





4.           Related Party
Transactions





During
the three months ended March 31, 2009 2008 the Company incurred rent expense of
$18,750 and $17,797 for the London office, respectively, which it rents from an
affiliate of the Company.





5.           Fair Value of Financial
Instruments




Fair
Value Measurements





On
January 1, 2008, the Company adopted SFAS No. 157 (SFAS 157), Fair Value
Measurements.  SFAS 157 relates to financial assets and
financial liabilities. In February 2008, the FASB issued FASB Staff Position
(FSP) No. FAS 157-2, Effective
Date of FASB Statement No. 157, which delayed the effective date of
SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial statements on at
least an annual basis, until January 1, 2009 for calendar year-end
entities.





10





SFAS 157
defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (GAAP),
and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair
value measurements and are to be applied prospectively with limited
exceptions.





SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. This standard is now the single source in GAAP for the
definition of fair value, except for the fair value of leased property as
defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on
market data obtained from independent sources (observable inputs) and
(2) an entity’s own assumptions, about market participant assumptions, that
are developed based on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy
under SFAS 157 are described below:





•
            Level 1 - Unadjusted quoted
      prices in active markets that are accessible at the measurement date for
      identical, unrestricted assets or
  liabilities.


•
              Level 2 - Inputs other than
      quoted prices included within Level 1 that are observable for the asset or
      liability, either directly or indirectly, including quoted prices for
      similar assets or liabilities in active markets; quoted prices for
      identical or similar assets or liabilities in markets that are not active;
      inputs other than quoted prices that are observable for the asset or
      liability (e.g., interest rates); and inputs that are derived principally
      from or corroborated by observable market data by correlation or other
      means.


•
              Level 3 - Inputs that are both
      significant to the fair value measurement and unobservable. These inputs
      rely on management's own assumptions about the assumptions that market
      participants would use in pricing the asset or liability. (The
      unobservable inputs are developed based on the best information available
      in the circumstances and may include the Company's own
      data.)





The
following table presents the Company's fair value hierarchy for those financial
assets and liabilities measured at fair value on a recurring basis as of March
31, 2009 and December 31, 2008:





March 31, 2009
                        
                        
                        December 31, 2008Level
                        
                        
                        Fair
                          Value
                        
                        
                        Carrying
                          Amount
                        
                        
                        Fair
                          Value
                        
                        
                        Carrying
                          AmountAssetsCash
      and cash equivalents
                        
                        
                        2
                        
                        
                        $
                        9,687,299
                        
                        
                        $
                        9,687,299
                        
                        
                        $
                        8,281,899
                        
                        
                        $
                        8,281,899Marketable
      securities
                        
                        
                        1
                        
                        
                        
                        225,858
                        
                        
                        
                        225,858
                        
                        
                        
                        876,186
                        
                        
                        
                        876,186Accounts
      receivable
                        
                        
                        2
                        
                        
                        
                        2,457,050
                        
                        
                        
                        2,457,050
                        
                        
                        
                        2,757,685
                        
                        
                        
                        2,757,685Other
      receivables
                        
                        
                        3
                        
                        
                        
                        347,411
                        
                        
                        
                        347,411
                        
                        
                        
                        146,025
                        
                        
                        
                        146,025Investments
                        
                        
                        3
                        
                        
                        
                        7,422,470
                        
                        
                        
                        7,422,470
                        
                        
                        
                        6,497,470
                        
                        
                        
                        6,497,470LiabilitiesAccounts
      payable
                        
                        
                        3
                        
                        
                        
                        1,000,408
                        
                        
                        
                        1,000,408
                        
                        
                        
                        749,118
                        
                        
                        
                        749,118Accrued
      expenses
                        
                        
                        3
                        
                        
                        
                        235,940
                        
                        
                        
                        235,940
                        
                        
                        
                        268,748
                        
                        
                        
                        268,748





Fair
Value Option





On
January 1, 2008, the Company adopted SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities.  SFAS 159 provides a fair
value option election that allows entities to irrevocably elect fair value as
the initial and subsequent measurement attribute for certain financial assets
and liabilities. Changes in fair value are recognized in earnings as they occur
for those assets and liabilities for which the election is made. The election is
made on an instrument by instrument basis at initial recognition of an asset or
liability or upon an event that gives rise to a new basis of accounting for that
instrument. The adoption of SFAS 159 did not have a material impact on the
Company’s financial statements as the Company did not elect the fair value
option for any of its financial assets or liabilities.





11





6.           Stock Options /
Warrants





In
accordance with the fair value recognition provisions of SFAS 123(R), we
estimate the stock-based compensation cost at the grant date based on the fair
value of the award and recognize it as an expense on a graded vesting
schedule over the requisite service period of the award.





The
      Company has adopted two stock compensation plans entitled the 2007 Equity
      Compensation Plan and 2008 Equity Compensation Plan.  Pursuant
      to these Equity Compensation Plans, grants of shares can be made
      to:





(i)
            designated
      employees of Electronic Game Card Inc. (the “Company”) and its
      subsidiaries including Electronic Game Card
Ltd,





(ii)
            certain
      advisors who perform services for the Company or its subsidiaries,
      and





(iii)
            non-employee
      members of the Board of Directors of the Company (the “Board”) with the
      opportunity to receive grants of incentive stock options, nonqualified
      options, share appreciation rights, restricted shares, dividend equivalent
      rights and cash awards.  The Company believes that the Plan will
      encourage the participants to contribute materially to the growth of the
      Company, thereby benefiting the Company’s shareholders, and will align the
      economic interests of the participants with those of the
      shareholders.  The both Equity Compensation Plans provide for
      options equivalent up to 10% of the issued share capital of the company to
      be offered to those qualifying under the scheme.  On February 6,
      2007 the Company issued 2,000,000 options to management and staff at an
      exercise price of 17.5c per share and 2,000,000 at an exercise price of
      25c per share.  In September and October 2008 the company issued
      3,000,000 options at an exercise price of $0.52 and in March 2009,
      3,000,000 options at an exercise price of
  $0.335.





The
      company has a total of 7,383,368 options and warrants outstanding at March
      31, 2009.





The
      following table sets forth the options outstanding as of December 31, 2007
      and 2008 :





Options
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Weighted
                  Average
                  Fair ValueOptions
      outstanding, December 31, 2006
                
                
                566,000
                
                
                $
                0.52
                
                
                
                -Granted,
      Exercise price more than fair value
                
                
                4,000,000
                
                
                $
                0.215
                
                
                
                -Granted,
      Exercise price less than fair value-
      Expired
                
                
                -
                
                
                
                -
                
                
                
                --
      Exercised
                
                
                -
                
                
                
                -
                
                
                
                --
      Cancelled
                
                
                (816,000
                )
                
                $
                0.427
                
                
                
                -Options
      outstanding, December 31, 2007
                
                
                3,750,000
                
                
                $
                0.215
                
                
                
                -Exercised
                
                
                950,000
                
                
                $
                0.215
                
                
                
                -Options
      outstanding, March31, 2008
                
                
                0
                
                
                
                0
                
                
                
                -





A summary
of the options outstanding as of December 31, 2008 by range of exercise prices
is shown as follows:





Exercise
                      Price
                    
                    Shares /
                      Warrants
                      Outstanding
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Shares /
                      Warrants
                      Currently
                      Exercisable
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                      Currently
                      Exercisable
                    
                    Weighted
                      Average
                      Contractual
                      Remaining
                      Life$0.215
                    
                    
                    2,800,000
                    
                    
                    $
                    0.215
                    
                    
                    
                    2,800,000
                    
                    
                    $
                    0.215
                    
                    3
      years$0.52
                    
                    
                    3,000,000
                    
                    
                    $
                    0.52
                    
                    
                    
                    3,000,000
                    
                    
                    $
                    0
                    
                    4.75
      years




A summary
of the options outstanding as of March 31, 2009 by range of exercise prices
is shown as follows:
 
 Exercise
                        Price
                      
                      Shares /
                        Warrants
                        Outstanding
                      
                      
                      Weighted
                        Average
                        Exercise
                        Price
                      
                      
                      Shares /
                        Warrants
                        Currently
                        Exercisable
                      
                      
                      Weighted
                        Average
                        Exercise
                        Price
                        Currently
                        Exercisable
                      
                      Weighted
                        Average
                        Contractual
                        Remaining
                        Life$0.52
                      
                      
                      3,000,000
                      
                      
                      $
                      0.52
                      
                      
                      
                      3,000,000
                      
                      
                      $
                      0
                      
                      4.5 years$0.335
                      
                      
                      3,000,000
                      
                      
                      $
                      0.335
                      
                      
                      
                      3,000,000
                      
                      
                      $
                      0
                      
                      2.9 years


12





The
following table sets forth the warrants outstanding as of December 31, 2008
:





Options /
                  Warrants
                  Shares
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Weighted
                  Average
                  Fair ValueWarrants
      outstanding, December 31, 2008
                
                
                2,888,667
                
                
                $
                0.5
                
                
                $
                0.5Granted,
      Exercise price more than fair value
                
                
                375,000
                
                
                $
                0.52
                
                
                $
                0.52Granted,
      Cashless Exercise price more than fair value
                
                
                477,723
                
                
                $
                1.85
                
                
                $
                1.85Expired
                
                
                3,066,978Warrants
      outstanding, December 31, 2008
                
                
                3,741,390
                
                
                $
                1.06
                
                
                
                1.06





The
following table sets forth the summary of warrants outstanding as of December
31, 2008 by range of exercise price :





Exercise
                                                Price
                                              
                                              
                                              Warrants
                                                Outstanding
                                              
                                              
                                              Weighted
                                                Average
                                                Exercise
                                                Price
                                              
                                              
                                              Warrants
                                                Currently
                                                Exercisable
                                              
                                              
                                              Weighted
                                                Average
                                                Exercise
                                                Price
                                                Currently
                                                Exercisable
                                              
                                              Weighted
                                                Average
                                                Contractual
                                                Remaining
                                                Life
                                              
                                              
                                              $Issued
                                              
                                              $
                                              1.00
                                              
                                              
                                              
                                              3,066,978
                                              
                                              
                                              $
                                              1.00
                                              
                                              
                                              
                                              3,066,978
                                              
                                              
                                              $
                                              1.00
                                              
                                              0.25
      years
                                              
                                              
                                              3,066,978Issued
                                              
                                              $
                                              0.50
                                              
                                              
                                              
                                              2,888,667
                                              
                                              
                                              $
                                              0.50
                                              
                                              
                                              
                                              2,888,667
                                              
                                              
                                              $
                                              0.50
                                              
                                              2.25
      years
                                              
                                              
                                              1,444,333Issued
                                              
                                              $
                                              1.85
                                              
                                              
                                              
                                              477,723
                                              
                                              
                                              $
                                              1.85
                                              
                                              
                                              
                                              477,723
                                              
                                              
                                              $
                                              1.85
                                              
                                              2.25
      years
                                              
                                              
                                              883,788Dec
      31, 2007
                                              
                                              
                                              
                                              
                                              
                                              
                                              6,433,368
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              6,433,368
                                              
                                              
                                              $
                                              0.84
                                              
                                              1.58
      years
                                              
                                              
                                              5,395,099Issued
                                              
                                              $
                                              0.52
                                              
                                              
                                              
                                              375,000
                                              
                                              
                                              $
                                              0.52
                                              
                                              
                                              
                                              375,000
                                              
                                              
                                              $
                                              0.52
                                              
                                              5.0
      years
                                              
                                              
                                              195,000Expired
                                              
                                              $
                                              1.00
                                              
                                              
                                              
                                              (3,066,978
                                              )
                                              
                                              $
                                              1.00
                                              
                                              
                                              
                                              (3,066,978
                                              )
                                              
                                              $
                                              1.00Dec
      31, 2008
                                              
                                              
                                              
                                              
                                              
                                              
                                              3,741,390
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              3,741,390
                                              
                                              
                                              $
                                              0.95
                                              
                                              3.1
      years
                                              
                                              
                                              2,523,121Mar
      31, 2009
                                              
                                              
                                              
                                              
                                              
                                              
                                              3,741,390
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              3,741,390
                                              
                                              
                                              $
                                              0.95
                                              
                                              3.0years
                                              
                                              
                                              2,523,121





7.           Series A Preferred
Convertible Redeemable Stock




On
      March 24, and April 6th,
      2005 the Company sold a total of $8,666,000 Convertible Promissory Notes
      to accredited investors in a private placement of
      securities.  This note was payable upon written demand on or
      after March 31, 2007, and was converted into Series A Preferred
      Convertible Redeemable Stock (“Series A”) at the Company’s election on
      November 29, 2006.  Each share of Series A is convertible into
      one share of Common Stock at no cost by stockholder and is redeemable by
      the Company not later than March 15, 2010.  Series A pays
      interest at 6% per annum.  Dividends payable are included within
      accrued liabilities on the Company’s balance sheet.  Also, the
      Registrant issued one (1) warrant (a "Warrant") to acquire one (1) share
      of Series A Preferred Stock for every two shares of Series A
      stock.  The Warrants shall be exercisable to acquire shares of
      Series A upon the effectiveness of actions by the Registrant's
      shareholders to authorize the Series A.  The Series A Warrants
      first issued on March 24, 2005 expire on March 24,
  2010.





The
      Warrants shall be exercisable at $0.50 per share of Series A, subject to
      adjustment, and shall be exercisable for a period of 5
      years.  In addition, at the option of the holder, each Warrant
      is also immediately exercisable directly to acquire, instead of shares of
      Series A, shares of Common Stock on an as-converted-from-Series-A
      basis.  Unexercised Warrants shall expire earlier upon notice by
      the Company to the holders of the Warrants following any consecutive
      30-day trading period during which the Common Stock trades on its
      principal market at a price at or above three (3) times the then
      applicable exercise price with average daily volume of at least 100,000
      shares (subject to adjustment of such trading volume threshold in the
      event of stock splits, reverse stock splits, stock dividends,
      recapitalizations or similar
events).





13





Currently
      there are 4,464,628 Series A shares outstanding and there were no
      conversions in the period
presented.





8.
            Available-for-Sale
      Securities





Available-for-sale
securities consist of the following:





March 31, 2009Estimated
                      Fair
                      Value
                    
                    
                    Gains in
                      Accumulated
                      Other
                      Comprehensive
                      Income
                    
                    
                    Losses in
                      Accumulated
                      Other
                      Comprehensive
                      IncomeCurrent:Common
      Stock
                    
                    $
                    225,858
                    
                    
                    
                    -
                    
                    
                    $
                    1,172Total
      current securities
                    
                    
                    225,858
                    
                    
                    
                    -
                    
                    
                    
                    1,172Total
      available-for-sale securities
                    
                    $
                    225,858
                    
                    
                    
                    -
                    
                    
                    $
                    1,172





During
the period the company sold shares to the value of $233,407 and the remaining
shares were valued at $225,858 resulting in an unrealized loss of
$416,920.  Net unrealized holding losses on available-for-sale
securities in the amount of approximately $1,172 for the period ended March 31,
2009 have been included in accumulated other comprehensive income.





9.           Investments





As of
March 31, 2009 and December 31, 2008 the company had investments at cost in the
following entities:





March 31,
                    2009
                  
                  
                  December 31,
                    2008Prize
      Mobile Ltd
                  
                  $
                  1,860,235
                  
                  
                  $
                  1,860,235XOGO
      Ltd
                  
                  
                  1,314,735
                  
                  
                  
                  1,314,735Rosario
      Technologies Ltd
                  
                  
                  3,247,500
                  
                  
                  
                  2,572,500Avatar
      Gateways
                  
                  
                  500,000
                  
                  
                  
                  500,000Target
      Wireless
                  
                  
                  500,000
                  
                  
                  
                  -DG2L
      Technologies
                  
                  
                  -
                  
                  
                  
                  250,000Total
      Cost
                  
                  $
                  7,422,470
                  
                  
                  $
                  6,497,470





The
company holds 19.61% of Prize Mobile and less than 10% of each of the respective
privately held entities which approximates the company’s pro rata share of their
underlying value.  The company made these investments in technologies
which are complimentary to its current technologies or has received stock from
sale of other investments.  It is not practicable to estimate the fair
value of the Company’s investment in the common stock of these entities because
of the lack of quoted market prices and the inability to estimate fair value
without incurring excessive costs.  However, management believes that
the carrying amount of $7,422,470 was not impaired as of March 31,
2009.





14





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





The
following information should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form
10-Q.





General





Electronic
Game Card, Inc. (referred to as "EGC", "us", "we" or "Company") is a supplier of
innovative games to the promotional, gaming and lottery markets
worldwide.  The Company’s lead product is the EGC GameCard, a unique
credit card-sized pocket game combining interactive capability with "instant
win" excitement.





The
Company





Electronic
Game Card, Inc. is an emerging international corporation developing reward based
games for the sales promotions, casino and lottery and incentive
markets.  EGC’s core product is the Electronic GameCardTM, a unique and
innovative proprietary technology adapted to a platform, with patents pending
worldwide and with the technology that can be adapted to other
markets.  The EGC GameCard was designed by us to be rich in
functionality, customizable, portable, and cost efficient.  The
GameCard platform is currently embedded in a credit card size digital device
with an LCD window, touch pad controls and microchip, allowing for many game
formats to be programmed to suit a variety of applications in several industry
sectors.





EGC’s
GameCards are used in the sales promotion market as an incentive or loyalty
sales promotion tool to be given away by the brand promoter to the consumer with
prizes given as rewards for winning simple fun games designed specially for the
brand.





An
opportunity exists for the Company to sell GameCards for re-sale to the public
as a gaming device in selected areas of the casino market in which blackjack,
poker, bingo or similar games may be played.  In other areas of the
world, however, re-sale is permitted and EGC expects to start marketing its
range of game formats as soon as they are developed during the
year.  EGC also intends to leverage its gaming, manufacturing and
technology IP knowledge to the wider market place anticipated from rapidly
expanding areas of digital communications offering reward based games
opportunities.





Sales
Promotion Market





The sales
promotion prize and competition market is one in which the promoter (usually a
well known brand) must not be seen to obtain money for entry, and where no
purchase of the brand's goods is necessary in order not to fall under the laws
by which lotteries are regulated.  Our GameCards can be applied to a
broad range of potential promotional opportunities although introducing a new
product into the sales and promotion marketing arena, despite its demand for
novelty products and innovative ideas, takes time and adaptability to market
needs.





Within
the sales promotion market, the Poker sector has developed into a distinct and
vibrant opportunity.  In Europe, Australasia and South Africa playing
and watching Poker at tournaments and, on-line or on television has moved from a
specialist area to mainstream entertainment and gaming in the last 12
months.





The large
number of Poker players and viewers forma substantial and dynamic opportunity
for the gaming sector, and the profile being generated by marketers is of a
vibrant and expanding sector with increased promotional budgets.  The
Company is currently working on development of specialist GameCards and
promotions to extend the interest and impact of Poker to maximize this
opportunity.





15





Lottery
Market





Lottery
operators currently make use of paper scratch cards to give players an "instant"
win or lose reward experience.  Over the last several years, scratch
cards have become increasingly large and complex to accommodate consumer demand
for multiple plays and multiple chances to win.  The EGC Electronic
GameCardTM offers the potential to simplify the scratch card while giving the
opportunity to raise the selling price to consumers and increase
sales.  Our product has been seen by some leaders in the lottery
industry as potentially providing the next contemporary digital evolution of the
scratch card, offering multiple plays and multiple chances to win in an
entertaining and secure manner while using existing methods of distribution as
with scratch cards.





Indian
Gaming Market





The
Indian Gaming on Native American Tribal Lands covers parts of 28 States within
the United States of America and represents a significant portion of the total
gaming industry.  The NIGC report that the market was $25.7 billion
dollars in revenue in 2006 with 415 casinos operated by more than 200 tribes
across the United States and Canada.





The
Company has a legal opinion from the National Indian Gaming Commission (“NIGC”)
that the EGC GameCard is a Class II device under IGRA (Indian Gaming Regulatory
Act).  The Class II designation is significant because it exempts the
Company from becoming subject to the state license procedures and
requirements.





Business
Strategy





The
Company has continued to expand its volume production of the Electronic
GameCardsTM.  This necessitated the cost effective and secure design of
GameCards from the manufacturers, involving quality control practices of an
extremely high level.  The Company marketed the Electronic GameCardTM
in conjunction with Scientific Games International, Inc. through the
distribution agreement for North America, Mexico and Italy distribution of
Electronic GameCardsTM to the lottery industry and directly to sales promotion
companies and lotteries in Europe excluding Italy.  Staff is
responsible for either selling the GameCards direct  in the case of
sale promotion products or in the case of lotteries, through an exclusive
distribution license.





We market
our products through agents in the US, Europe and the rest of the
World.  We currently have outlets in New York and London
(U.K.).  Our management team has relevant experience in their
appropriate markets to contract agents and distributors to sell and increase
product.





Indian
Gaming appertains solely to the sale of GameCards as gaming devices directly to
the public in casinos and reservations owned and operated by Indian Tribes in
the USA.  The Company has received Class II classification for its
products from the National Indian Gaming Council (NIGC).





Product
Development





The
company has a continuous program of product development comprising improvement
of existing designs and additions to the suite of games currently on offer to
clients.  Game design is divided into four stages; concept
development, software writing, testing and finally
manufacturing.  Product development and improvement is generated by in
house review and response to specific customer recommendations.





The
production team continues to focus on physical and software improvements and
this has resulted in sourcing higher specification Chip, more complex LCD
display and changes to the depth of the gamecard casing.





This
increased depth in the casing will allow us to explore the use of replaceable
(AAA alkaline batteries), which will lead to increased product
longevity.





16





The
production team is also looking at the advantages of increasing the overall size
of the gamecard with a view to refreshing the existing portfolio by offering a
larger product with improved LCD visibility.





Additionally
a new checksum function, using a Base 16 code will be added to the GameCard
software to provide a coded product verification solution for Client’s back
office users and Gaming Regulators.





The key
focus for the last quarter has been on the Know It All quiz card and Thomas
& Friends projects.





Following
an intensive week of software testing and technical development in Hong Kong in
April, the first variation of the Know It All Quiz Card software has been signed
off and full working samples will be produced . It is expected that samples will
be available during the next quarter.





In the
meantime, work on the game script for the 2nd
variation, using an improved 6 x 5 dot matrix STN LCD screen is underway and
software testing on this is due to take place by the end of the next
quarter.





These
games have working titles such as Fruit Loot, Chase The Ace and Dime
Busters.





The
GameCard has passed a series of tests by Gaming Laboratories, Inc. (GLI), one of
the most respected testing houses in the global gaming
industry.  These tests proved the GameCard’s ability to resist
attempts at manipulating the IC logic or otherwise breaching the numerous
security measures incorporated in the GameCard.  This formal
endorsement by GLI of the GameCard’s effective security defenses demonstrates
the Company’s continuing commitment to product development and
security.





We are
now able to offer customers a library of 35 games most of which can be
personalized to their specific design requirements.





Results
of Operations





The
company has recorded $2,951,095 of revenues this quarter compared with
$2,294,621 in the same period in 2008.  This represents revenue growth
of 28.6% on the comparable period and has been derived from repeat business,
additional licensing and also trial orders of new lines introduced at the end of
last year.  This may be regarded as volume growth as there have been
no price increases compared with the same period last year.





Gross
Profit was $2,312,584, an increase of 32.5% compared with $1,745,621 in the
comparable period in 2008.  The increase in Gross profit margin
reflected the increase in license fees which have minimal associated
cost.  The company purchases its manufactured stock in USD and all
cost of product it dependent on the strength of the currency at the time of
ordering.





Sales and
Marketing costs were $63,340 compared with $791 in the same period for 2008,
primarily due to Sales staff employed to generate sales.  The current
staffing levels are expected to increase as our sales and marketing team
increase activity in the North America and the Pacific Rim.





General
and Administration expenses were $125,257, a decrease of 2.5% when compared with
$128,149 for the same period in 2008.  This expense was lower than the
comparable period as we were able to make further economies, mostly linked to
lower Administrative staff numbers, during the period.





Consultancy
costs were higher at $268,516 an increase of 77.3% when compared with $151,482
for the same period in 2008.  This was due to examination of new
product areas for the gamecard and testing performed by GLI.  This
will continue as new products are developed.





Salaries
and payroll costs were $73,235 compared with $86,886 in 2008 as costs were
closely controlled in the period and will continue to be so, on an on-going
basis.





17





Operating
      income excluding the interest charges was $1,782,236 compared with
      $1,378,313, an increase of 29.3% on the comparable period of
      2008.  Higher revenues and lower cost of sales combined to
      produce this improvement.





Total
      comprehensive income was $1,741,371, 35% better than the $1,287,479 for
      the same period in 2008.





Basic
earnings per share were $0.04 in 2009 compared with $0.03 in the comparable
period of 2008.  Fully diluted earnings per share were $0.03 and $0.02
respectively.





The
company sold its investment in DG2L which had a carrying value of $250,000 for
$675,000, a profit of $425,000.  We also sold marketable securities to
the value of $233,407 and revalued the remaining marketable securities at
$225,858, an unrealized loss in value of $416,920.





Liquidity
and Financial Resources





The
Company had cash and cash equivalents of $9,687,299 at March 31, 2009 compared
to $8,281,899 at December 31, 2008.  Operating expenses were
approximately $530,000 for the quarter.  As of March 31, 2009, EGC
current assets were $12,769,451 and current liabilities were
$1,236,348.  Stockholders’ equity at March 31, 2009 was
$14,609,915.  We had net cash provided by (used in) operating
activities for the three months ended March 31, 2009 and 2008 of $2,202,885 and
$1,011,757, respectively.





Off-Balance
Sheet Arrangements





As of the
date of this Report, the Company does not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on the Company’s financial condition, changes in financial condition
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors.  The term
“off-balance sheet arrangement” generally means any transaction, agreement or
other contractual arrangement to which an entity unconsolidated with the Company
is a party, under which the Company has (i) any obligation arising under a
guarantee contract, derivative instrument or variable interest; or (ii) a
retained or contingent interest in assets transferred to such entity or similar
arrangement that serves as credit, liquidity or market risk support for such
assets.





ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





There
      have been no material changes in our market risk since December 31,
      2008.




We have
Series A Redeemable convertible stock which carries a 6% dividend and is
redeemable in May 2010.  There are currently 4,464,628 of Series A
outstanding.  These instruments are not leveraged and are held for
purposes other than trading.




Interest
Rate Risk





We do not
engage in trading market risk sensitive instruments or purchasing hedging
instruments or “other than trading” instruments that are likely to expose us to
market risk, whether interest rate, foreign currency exchange, commodity price
or equity price risk.  We have not purchased options or entered into
swaps, or forward or future contracts.  We do consider that we have
any significant exposure to interest rate variations.





18





ITEM
      4.
            CONTROLS
      AND PROCEDURES





At
      the end of the period covered by this report the Company carried out an
      evaluation under the supervision and with the participation of the
      Company’s management including the Company’s Chief Executive Officer and
      the Company’s Chief Financial Officer of the effectiveness of the design
      and operation of the Company’s disclosure controls and procedures (as
      defined in Rules 13a-15e and 15d -15-e under the Securities Exchange Act
      of 1934 as amended).  Based on this evaluation, the Company’s
      Chief Executive Officer and the Company’s Chief Financial Officer the
      Company concluded that information is recorded, processed, summarized and
      reported within the time period specified by the Commission’s rules and
      forms, and that information is accumulated and communicated to our
      management, including our Chief Executive Officer and our Chief Financial
      Officer, as appropriate to allow timely decisions regarding required
      disclosure.  Under the supervision and with the participation of
      our Chief Executive Officer (or acting Chief Executive Officer, as the
      case may be) and our Chief Financial Officer, we evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of
      March 31, 2009, the end of the period.  Following the review by
      our Chief Executive Officer (or acting Chief Executive Officer, as the
      case may be) and our Chief Financial Officer, each of them has determined
      that our disclosure controls and procedures are
  effective.





Changes
      in Internal Controls over Financial
Reporting





There
were no changes in the Company’s internal controls over financial reporting that
occurred during the period covered by this report that has materially affected,
or are reasonably likely to materially affect the Company's internal control
over financial reporting.





19





PART
II - OTHER INFORMATION





ITEM
      1.
            LEGAL
      PROCEEDINGS





None.





ITEM
      2.
            CHANGES
      IN SECURITIES





None.





ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIES





None.





ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS





None.





ITEM
      5.
            OTHER
      INFORMATION





None.





ITEM
      6.
            EXHIBITS
      AND REPORTS ON FORM 8-K





(a)           The
following exhibits are included as part of this report:





Exhibit
              
              Description31.1
              
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.31.2
              
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.32.1
              
              Certification
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2
              
              Certification
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.





20





SIGNATURES





In
accordance with the requirements of the Exchange Act, the Registrant caused this
report to be signed on its behalf by the undersigned, thereby duly
authorized.





ELECTRONIC
      GAME CARDDate
      :May 15
      2009
                        By:  /s/ Lee ColeLee
      ColeExecutive
      Officer





Date
      :  May
      15 2009
                      By:  /s/ Linden
    BoyneLinden
      BoyneSecretary
      / Treasurer(Principal
      Financial Officer)





End
of Filing





21