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 June 30, 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 July 29, 2009Common
      Stock, $0.001 par value
              
              60,843,297










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 June 30, 2009 (Unaudited), and December 31,
      2008
                      4Consolidated
      Statements of Income and Comprehensive Income for the Fiscal Three Months
      and Six Months Ended June 30, 2009 and 2008 (Unaudited)
                      5Consolidated
      Statements of Cash Flows for the Fiscal Six Months Ended June 30 2009 and
      June 30, 2008 (Unaudited)
                      6Notes
      to Unaudited Consolidated Financial Statements
                      7ITEM
      2 – Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                      14ITEM
      3 – Quantitative and Qualitative Disclosures About Market
      Risk
                      17ITEM
      4 – Controls and Procedures
                      18PART
      II.            OTHER
      INFORMATIONITEM
      1 – Legal Proceedings
                      18ITEM
      2 – Changes in Securities
                      18ITEM
      3 – Defaults Upon Senior Securities
                      18ITEM
      4 – Submission of Matters to a Vote of Security
      Holders
                      18ITEM
      5 – Other Information
                      18ITEM
      6 – Exhibits
                      19SIGNATURES
                      20




3


PART I–FINANCIAL
INFORMATION





ITEM
1.  FINANCIAL STATEMENTS





ELECTRONIC
GAME CARD, INC.


CONSOLIDATED
BALANCE SHEETS





June 30, 2009
                            
                            
                            December 31, 2008(Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                            
                            $
                            11,352,973
                            
                            
                            $
                            8,281,899Marketable
      securities
                            
                            
                            254,768
                            
                            
                            
                            876,186Accounts
      receivable
                            
                            
                            3,258,938
                            
                            
                            
                            2,757,685Deposit
      on inventory
                            
                            
                            51,833
                            
                            
                            
                            51,833Other
      receivables
                            
                            
                            125,967
                            
                            
                            
                            120,109VAT
      receivable
                            
                            
                            14,304
                            
                            
                            
                            25,916Deferred
      charges
                            
                            
                            -
                            
                            
                            
                            38,119Total
      current assets
                            
                            
                            15,058,783
                            
                            
                            
                            12,151,747Machinery
      and equipment
                            
                            
                            71,575
                            
                            
                            
                            68,900Office
      equipment
                            
                            
                            61,392
                            
                            
                            
                            58,078Furniture
      and fixtures
                            
                            
                            1,160
                            
                            
                            
                            1,017Less
      accumulated depreciation
                            
                            
                            (120,977
                            )
                            
                            
                            (106,398
                            )Net
      property, plant and equipment
                            
                            
                            13,150
                            
                            
                            
                            21,597OTHER
      ASSETSPatents
                            
                            
                            268,977
                            
                            
                            
                            258,321Investments
                            
                            
                            7,422,470
                            
                            
                            
                            6,497,470Total
      other assets
                            
                            
                            7,691,447
                            
                            
                            
                            6,755,791Total
      assets
                            
                            $
                            22,763,380
                            
                            
                            $
                            18,929,135LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
                            
                            $
                            624,526
                            
                            
                            $
                            749,118Accrued
      liabilities
                            
                            
                            214,753
                            
                            
                            
                            268,748Total
      current liabilities
                            
                            
                            839,279
                            
                            
                            
                            1,017,866Deferred
      license fees
                            
                            
                            29,625
                            
                            
                            
                            279,625Total
      liabilities
                            
                            
                            868,904
                            
                            
                            
                            1,297,491Series
      A 6% convertible redeemable preferred stock, $.001 par value, 10,000,000
      shares authorized; 3,348,823 and 4,464,628 shares issued and outstanding
      at of June 30, 2009 and December 31, 2008, respectively
                            
                            
                            3,348,823
                            
                            
                            
                            4,464,628Shareholders’
      equityCommon
      stock, $.001 par value, 100,000,000 shares
      authorized;  60,843,297, and 57,137,661 shares issued and
      outstanding at June 30, 2009 and December 31, 2008,
      respectively
                            
                            
                            60,843
                            
                            
                            
                            57,137Additional
      paid in capital
                            
                            
                            34,954,064
                            
                            
                            
                            33,318,440Accumulated
      deficit
                            
                            
                            (15,195,839
                            )
                            
                            
                            (19,192,706
                            )Accumulated
      other comprehensive loss
                            
                            
                            (1,273,415
                            )
                            
                            
                            (1,015,855
                            )Total
      shareholders’ equity
                            
                            
                            18,545,653
                            
                            
                            
                            13,167,016Total
      liabilities and shareholders’ equity
                            
                            $
                            22,763,380
                            
                            
                            $
                            18,929,135





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


4


ELECTRONIC
GAME CARD, INC.


CONSOLIDATED
STATEMENTS OF INCOME




(Unaudited)




For
      the Three Months Ended
                      
                      
                      For
      the Six Months EndedJune 30, 2009
                      
                      
                      June 30, 2008
                      
                      
                      June 30, 2009
                      
                      
                      June 30, 2008Revenue
                      
                      $
                      3,056,542
                      
                      
                      $
                      2,485,683
                      
                      
                      $
                      6,007,637
                      
                      
                      $
                      4,780,304Cost
      of revenue
                      
                      
                      600,431
                      
                      
                      
                      512,589
                      
                      
                      
                      1,238,942
                      
                      
                      
                      1,161,589Gross
      margin
                      
                      
                      2,456,111
                      
                      
                      
                      1,873,094
                      
                      
                      
                      4,768,695
                      
                      
                      
                      3,618,715Operating
      expenses:Sales
      and marketing
                      
                      
                      7,806
                      
                      
                      
                      40,564
                      
                      
                      
                      71,146
                      
                      
                      
                      41,355General
      and administrative
                      
                      
                      237,770
                      
                      
                      
                      199,449
                      
                      
                      
                      363,027
                      
                      
                      
                      327,598Professional
      fees
                      
                      
                      310,131
                      
                      
                      
                      125,667
                      
                      
                      
                      578,649
                      
                      
                      
                      277,149Salaries
      and wages
                      
                      
                      83,446
                      
                      
                      
                      86,105
                      
                      
                      
                      156,681
                      
                      
                      
                      172,990Total
      operating expenses
                      
                      
                      639,153
                      
                      
                      
                      451,785
                      
                      
                      
                      1,169,503
                      
                      
                      
                      819,092Income
      from operations
                      
                      
                      1,816,958
                      
                      
                      
                      1,421,309
                      
                      
                      
                      3,599,192
                      
                      
                      
                      2,799,623Other
      income (expense):Interest
      income
                      
                      
                      94,442
                      
                      
                      
                      61,669
                      
                      
                      
                      152,133
                      
                      
                      
                      123,245Interest
      expense
                      
                      
                      (63,996
                      )
                      
                      
                      (147,432
                      )
                      
                      
                      (169,085
                      )
                      
                      
                      (295,494
                      )Gain
      on sale of investments
                      
                      
                      -
                      
                      
                      
                      122,900
                      
                      
                      
                      415,075
                      
                      
                      
                      122,900Total
      other income (expense)
                      
                      
                      20,446
                      
                      
                      
                      37,137
                      
                      
                      
                      398,123
                      
                      
                      
                      (49,349
                      )Net
      income
                      
                      $
                      1,837,404
                      
                      
                      $
                      1,458,446
                      
                      
                      $
                      3,997,315
                      
                      
                      $
                      2,750,274Other
      comprehensive (loss) gain:Foreign
      currency translation (loss) gain
                      
                      
                      131,622
                      
                      
                      
                      (114,719
                      )
                      
                      
                      130,450
                      
                      
                      
                      (119,068
                      )Unrealized
      loss on marketable securities
                      
                      
                      28,910
                      
                      
                      
                      -
                      
                      
                      
                      (388,010
                      )
                      
                      
                      -Comprehensive
      income
                      
                      $
                      1,997,936
                      
                      
                      $
                      1,343,727
                      
                      
                      $
                      3,739,755
                      
                      
                      $
                      2,631,206Net
      income per common share (basic)
                      
                      $
                      0.03
                      
                      
                      $
                      0.03
                      
                      
                      $
                      0.06
                      
                      
                      $
                      0.05Weighted
      average number of common shares outstanding (basic)
                      
                      
                      59,616,374
                      
                      
                      
                      51,439,633
                      
                      
                      
                      59,637,091
                      
                      
                      
                      50,031,766Net
      income per common share (diluted)
                      
                      $
                      0.03
                      
                      
                      $
                      0.02
                      
                      
                      $
                      0.06
                      
                      
                      $
                      0.04Weighted
      average number of common shares outstanding (diluted)
                      
                      
                      68,579,997
                      
                      
                      
                      64,871,010
                      
                      
                      
                      67,830,650
                      
                      
                      
                      64,091,569




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




5


ELECTRONIC
GAME CARD, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS




(Unaudited)




Six
      months endedJune 30, 2009
                          
                          
                          June 30, 2008Cash
      flows from operating activities:Net
      income
                          
                          $
                          3,997,315
                          
                          
                          $
                          2,750,274Adjustments
      to reconcile net income from continuing operations to net cash used in
      operating activitiesDepreciation
      and amortization
                          
                          
                          14,579
                          
                          
                          
                          10,301Amortization
      of deferred charges
                          
                          
                          38,119
                          
                          
                          
                          76,238Deferred
      license fees
                          
                          
                          (250,000
                          )
                          
                          
                          (250,000
                          )Stock
      issued for services
                          
                          
                          -
                          
                          
                          
                          192,000Gain
      on sale of investments
                          
                          
                          (415,075
                          )
                          
                          
                          (122,900
                          )Redeemable
      preferred shares issued for interest
                          
                          
                          74,830
                          
                          
                          
                          -Change
      in assets and liabilities:Accounts
      receivable
                          
                          
                          (501,253
                          )
                          
                          
                          (204,662
                          )VAT
      receivable
                          
                          
                          11,612
                          
                          
                          
                          16,129Other
      receivables
                          
                          
                          (5,858
                          )
                          
                          
                          (78,628
                          )Accounts
      payable
                          
                          
                          (124,592
                          )
                          
                          
                          59,353Accrued
      liabilities and interest payable
                          
                          
                          (53,995
                          )
                          
                          
                          210,838Net
      cash provided by (used in) operating activities
                          
                          
                          2,785,682
                          
                          
                          
                          2,658,943Cash
      flows from investing activities:Purchase
      of patents
                          
                          
                          (10,656
                          )
                          
                          
                          -Purchase
      of property and equipment
                          
                          
                          (6,132
                          )
                          
                          
                          -Purchase
      of investments
                          
                          
                          (675,000
                          )
                          
                          
                          (841,318
                          )Proceeds
      from sale of investments
                          
                          
                          675,000
                          
                          
                          
                          433,754Proceeds
      from sale of marketable securities
                          
                          
                          233,408
                          
                          
                          
                          -Net
      cash provided by (used in) investing activities
                          
                          
                          216,620
                          
                          
                          
                          (407,564
                          )Cash
      flows from financing activities:Cash
      paid for share buy back
                          
                          
                          (798,472
                          )
                          
                          
                          -Proceeds
      from issuance of common stock
                          
                          
                          736,794
                          
                          
                          
                          -Net
      cash used in financing activities
                          
                          
                          (61,678
                          )
                          
                          
                          -Foreign
      currency exchange effect on cash
                          
                          
                          130,450
                          
                          
                          
                          (119,068
                          )Net
      increase in cash and cash equivalents
                          
                          
                          3,071,074
                          
                          
                          
                          2,132,311Cash
      and cash equivalents at beginning of period
                          
                          
                          8,281,899
                          
                          
                          
                          4,753,040Cash
      and cash equivalents at end of period
                          
                          $
                          11,352,973
                          
                          
                          $
                          6,885,351Supplemental
      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
                          
                          
                          
                          1,083,673Shares
      issued for redeemable preference shares
                          
                          $
                          1,201,008
                          
                          
                          
                          1,032,884




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 six months ended June 30, 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)





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.


7


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





SFAS No.
168 – In June 2009, the FASB issued Statement No. 168, “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles” (“SFAS 168”).  SFAS 168 will become the single source of
authoritative non-governmental U.S. GAAP, superseding existing FASB, American
Institute of Certified Public Accountants ("AICPA"), EITF, and related
accounting literature.  SFAS 168 reorganizes the thousands of GAAP
pronouncements into roughly 90 accounting topics and displays them using a
consistent structure.  Also included is relevant Securities and
Exchange Commission guidance organized using the same topical structure in
separate sections.  SFAS 168 will be effective for financial
statements issued for reporting periods that end after September 15, 2009, which
means July 1, 2009 Electronic Game Card, Inc.  We do not expect the
adoption of the Codification to have an impact on our financial position or
results of operations.





SFAS No.
165 – In May 2009, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No.165 “Subsequent
Events.”  SFAS No. 165 establishes the standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued.  This Statement also requires the
disclosure of the date through which subsequent events have been
evaluated.  The adoption of SFAS No. 165 did not have a material
impact on the consolidated financial statements.





FSP EITF
No. 03-6-1 – In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating
Securities”.  FSP 03-6-1 clarifies that unvested share-based payment
awards that contain non-forfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and are to be included in
the computation of earnings per share under the two-class method described in
SFAS No. 128, “Earnings Per Share”.  This FSP was effective for the
Company on January 1, 2009 and requires that all prior-period earnings-per-share
data that are presented be adjusted retrospectively.  The adoption of
FSP 03-6-1 did not have a material impact on its earnings per share
calculations.





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.  The adoption of  FAS 157-4 did not have
a material impact on the consolidated financial statements.




8


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.




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.  If fair 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 and the
United Kingdom,  As of June 30, 2009, the Company had a net operating
loss carry forward for income tax reporting purposes of approximately $8,200,693
in the United States and $5,713,615 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
six months ended June 30, 2009 and 2008 income tax expense was $0 and $0,
respectively.





As
      at June 30,:
                                      
                                      2009Income
      Tax Provision at Statutory rates
                                      
                                      
                                      862,000Adjustment
      to reconcile to the Income tax provision:Valuation
      allowances
                                      
                                      
                                      (862,000
                                      )Benefit
      of Net Operating loss carry forwardProvision
      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.




3.           Related Party
Transactions





During
the three and six months ended June 30, 2009, the Company incurred rent expense
of $35,594 and $58,057 for the London office compared with $37,500 and $58,057
for the comparable periods of 2008, respectively, which it rents from an
affiliate of the Company.





4.           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 non-financial
assets and non-financial 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 June
30, 2009 and December 31, 2008:




June
      30, 2009
                          
                          
                          December
      31, 2008Level
                          
                          
                          Fair
                            Value
                          
                          
                          Carrying
                            Amount
                          
                          
                          Fair
                            Value
                          
                          
                          Carrying
                            AmountAssetsCash
      and cash equivalents
                          
                          
                          1
                          
                          
                          $
                          11,352,973
                          
                          
                          $
                          11,352,973
                          
                          
                          $
                          8,281,899
                          
                          
                          $
                          8,281,899Marketable
      Securities
                          
                          
                          1
                          
                          
                          
                          254,768
                          
                          
                          
                          254,768
                          
                          
                          
                          876,186
                          
                          
                          
                          876,186Other
      receivables
                          
                          
                          3
                          
                          
                          
                          125,967
                          
                          
                          
                          125,967
                          
                          
                          
                          120,109
                          
                          
                          
                          120,109Investments
                          
                          
                          3
                          
                          
                          
                          7,422,470
                          
                          
                          
                          7,422,470
                          
                          
                          
                          6,497,470
                          
                          
                          
                          6,497,470





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





5.           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
  $0.355.





The
      Company has a total of 7,383,368 options and warrants outstanding at June
      30, 2009.





The
      following table sets forth the options outstanding as of June 30, 2009 and
      2008 :





Options
                      
                      
                      Weighted
                        Average
                        Exercise
                        Price
                      
                      
                      Weighted
                        Average
                        Fair ValueOptions
      outstanding, June 30, 2008
                      
                      
                      566,000
                      
                      
                      $
                      0.52
                      
                      
                      
                      -Granted,
      exercise price more than fair value
                      
                      
                      4,000,000
                      
                      
                      $
                      0.2125
                      
                      
                      
                      -Granted
      , exercise price more than fair value
                      
                      
                      2,000,000
                      
                      
                      $
                      0.355Granted
      , exercise price more than fair value
                      
                      
                      4,000,000
                      
                      
                      $
                      0.52Granted,
      exercise price less than fair value-
      Exercised
                      
                      
                      (4,000,000
                      )
                      
                      $
                      0.2125-
                      
                      
                      
                      --
      Cancelled
                      
                      
                      (1,066000
                      )
                      
                      $
                      0.462
                      
                      
                      
                      -Options
      outstanding, June 30, 2009
                      
                      
                      5,500,000
                      
                      
                      $
                      0.484
                      
                      
                      
                      -





A summary
of the options outstanding as of June 30, 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
                          
                          
                          3,500,000
                          
                          
                          $
                          0.52
                          
                          
                          
                          0
                          
                          
                          $
                          0.0
                          
                          4.25
      years$
                          0.355
                          
                          
                          2,000,000
                          
                          
                          $
                          0.355
                          
                          
                          
                          0
                          
                          
                          $
                          0.0
                          
                          2.75
      years





The
following table sets forth the summary of warrants outstanding as of June 30,
2009 by range of exercise price :


12





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
                      
                      
                      
                      2,658,832
                      
                      
                      $
                      0.50
                      
                      
                      
                      2,888,667
                      
                      
                      $
                      0.50
                      
                      2.25
      years
                      
                      
                      1,444,333Issued
                      
                      $
                      1.25
                      
                      
                      
                      288,204
                      
                      
                      $
                      1.25
                      
                      
                      
                      477,723
                      
                      
                      $
                      1.25
                      
                      2.25 years
                      
                      
                      883,788June
      30, 2008
                      
                      
                      
                      
                      
                      
                      6,014,014
                      
                      
                      
                      
                      
                      
                      
                      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
                      )
                      
                      $
                      1.00Exercised
                      
                      $
                      0.50
                      
                      
                      
                      283,587
                      
                      
                      $
                      0.50
                      
                      
                      
                      (283,587
                      )
                      
                      
                      -
                      
                      -
                      
                      
                      -June
      30, 2009
                      
                      
                      
                      
                      
                      
                      3,605,623
                      
                      
                      
                      
                      
                      
                      
                      3,457,803
                      
                      
                      $
                      0.95
                      
                      3.1 years
                      
                      
                      5,590,099





6.           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 are exercisable at $0.50 per share of Series A, subject to
      adjustment, and are exercisable for a period of 5 years expiring on March
      15, 2010  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).





Currently
      there are 3,348,823 Series A shares outstanding there were 1,201,008
      conversions in the period
presented.





7.
            Available-for-Sale
      Securities





Available-for-sale
securities consist of the following:





June 30, 2009Estimated
                    Fair
                    Value
                  
                  
                  Gains in
                    Accumulated
                    Other
                    Comprehensive
                    Income
                  
                  
                  Losses in
                    Accumulated
                    Other
                    Comprehensive
                    IncomeCurrent:Common
      Stock
                  
                  $
                  254,768
                  
                  
                  
                  28,910
                  
                  
                  $
                  416,920Total
      current securities
                  
                  
                  254,768
                  
                  
                  
                  28,910
                  
                  
                  
                  416,920Total
      available-for-sale securities
                  
                  $
                  254,768
                  
                  
                  
                  28,910
                  
                  
                  $
                  416,920





During
the six months ended the Company sold shares in the
amount 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 $388,010
for the six months ended June 30, 2009 have been included in
accumulated other comprehensive income


13


8.           Investments





As of
June 30, 2009 and December 31, 2008 the Company had investments in the following
entities:





June 30,
                          2009
                        
                        
                        December 31,
                          2008Prize
      Mobile Ltd
                        
                        $
                        1,860,235
                        
                        
                        $
                        1,860,235XOGO
      Ltd
                        
                        
                        1,314,735
                        
                        
                        
                        1,314,735Rosario
      Technologies Ltd
                        
                        
                        3,747,500
                        
                        
                        
                        2,572,500Avatar
      Gateways
                        
                        
                        500,000
                        
                        
                        
                        500,000DG2L
      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 June 30,
2009.





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.


14





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 form a 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.





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 over $26 billion
dollars in revenue in 2007 with 405 casinos operated by more than 240 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).


15





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.





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 available in August 2009.





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.





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 $3,056,542 of revenues this quarter compared with
$2,485,683 in the same period in 2008 and $6,007,637 and $4,780,304 in the
comparable six months period to June 30, 2009 and 2008.  This
represents revenue growth of 22.9% and 25.7% respectively on the comparable
periods 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 for the three months ended June 30, 2009 was $2,456,111, an increase of
31.1% compared with $1,873,095 in the comparable period in 2008 and for the six
months ended June 30, 2009, gross profit was $4,768,695 compared with $3,618,716
in the comparable period in 2008, 31.8% higher.  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 is dependent on the strength of the currency at the time
of ordering.





Sales and
Marketing costs were $7,806 compared with $40,564 in the same period for 2008,
the reduction is due primarily to reduced attendances at trade shows in the
period ended June 30, 2009.  Sales and marketing costs were $71,146
compared with $41,355 in the comparable period six months in
2008.  The current staffing levels are expected to increase as our
sales and marketing team increase activity in the North America and the Pacific
Rim.


16





General
and Administration expenses were $237,770, an increase of 19% compared with
$199,449 for the same period in 2008.  For the six months ended June
30, 2009, general and administration expenses were $363,027 and $327,598, an
increase of 10.8% for the comparable period in 2008. The increases reflect the
higher staffing levels in administration during the period.





Professional
fees were higher at $310,131, an increase of 147% compared with $125,667 for the
same period in 2008 and for the six months ended June 30, 2009, professional
fees were $578,649 and $277,149 for the comparable period in 2008 an increase of
131%.  These increases were largely due to higher costs resulting from
the strengthened management team now in place.  Salaries and fees
related to the new management appointed in this fiscal year total
$286,733





Salaries
and payroll costs for the three months ended June 30, 2009 were $83,446 compared
with $86,105 in 2008 slightly lower than the comparable period and for the six
months ended June 30, 2009, salaries and payroll costs were $156,681 and
$172,990 for the comparable period in 2008





Operating
income excluding the interest charges for the three months to June 30, 2009 was
$1,816,958 compared with $1,421,309, an increase of 27.8% on the comparable
period of 2008 and for the six months ended June 30, 2009, operating income was
$3,599,194 compared with $2,799,623 in the comparable period in 2008 an increase
of 28.5%.  Higher revenues and lower cost of sales combined to produce
this improvement.





Total
      comprehensive income for the three months to June 30, 2009 was $1,997,836
      compared with $1,343,727, an increase of 48.7% on the comparable period of
      2008 and for the six months ended June 30, 2009, total comprehensive
      income was $3,739,755 compared with $2,631,206 in the comparable period in
      2008, 42.1% higher. There was a foreign currency gain of $130,450 in the
      six months.





Basic
earnings per share were $0.03 for the three months ended June 30, 2009 compared
with $0.03 in the comparable period of 2008 and $0.06 for the six months ended
June 30, 2009 compared with $0.05 in the comparable period of
2008.  Fully diluted earnings per share were $0.03 for the three
months ended June 30, 2009 compared with $0.02 in the comparable period of 2008
and $0.06 for the six months ended June 30, 2009 compared with $0.04 in the
comparable period of 2008.





Liquidity
and Financial Resources





The
Company had cash and cash equivalents of $11,352,973 at June 30, 2009 compared
to $6,885,351 at June 30, 2008.  Operating expenses were approximately
$640,000 for the quarter.  As of June 30, 2009, EGC’s current assets
were $15,085,783 and current liabilities were $839,279.  Stockholders’
equity at June 30, 2009 was $18,552,593.  We had net cash provided by
(used in) operating activities for the six months ended June 30, 2009 and 2008
of $2,825,585 and $2,785,682, 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 3,348,823 of Series A
outstanding.  These instruments are not leveraged and are held for
purposes other than trading.


17




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.





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.





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.


18





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.


19





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
      :June14, 2009
                  By:  /s/ Lee ColeLee
      ColeExecutive
      Officer




Date
      :  June 14, 2009
                    By:  /s/
      Linden BoyneLinden
      BoyneSecretary
      / Treasurer(Principal
      Financial Officer)




End
of Filing


20