UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q


(Mark
One)




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




For
the quarterly period ended March 31, 2010




OR




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




For
the transition period from _____________  to
______________




Commission
file number:   333-141521




Game
Trading Technologies, Inc.


(Exact
Name of Registrant as Specified in Its Charter)




Delaware
            
            20-5433090(State
      or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
      Employer Identification No.)




10957
      McCormick Road, Hunt Valley, Maryland
            21031(Address
      of Principal Executive Offices)
            (Zip Code)




(410)
      316-9900(Registrant’s
      Telephone Number, Including Area
Code)




City
      Language Exchange Incorporated, 6021 Roxton Road, Halifax, Nova Scotia,
      Canada, B3H 1H4(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. Yesx  No ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes   ̈  
No    ̈  (not
required)




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” 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 in Rule
12b-2 of the Exchange Act).  Yes   ̈   No 
x




As of May
17, 2010, there were 8,290,000 shares of the registrant’s common stock
outstanding.





Table of Contents








Game
Trading Technologies, Inc.




TABLE OF CONTENTS





PagePART
      I - FINANCIAL INFORMATION3Item
      1.      Unaudited Financial
      Statements16Item
      2.       Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations18Item
      3.       Quantitative and
      Qualitative Analysis About Market Risk18Item
      4T.     Controls and
      ProceduresPART
      II - OTHER INFORMATIONItem
      1.        Legal
      Proceedings
            19Item
      1A.     Risk Factors
            19Item
      2.        Unregistered
      Sales of Equity Securities and Use of Proceeds
            19Item
      3.        Defaults Upon
      Senior Securities
            20Item
      4.        Removed and
      Reserved
            20Item
      5.       Other
      Information
            20Item
      6.        Exhibits
            20SIGNATURES
            21









- 2
-
 Table of Contents




PART
I   FINANCIAL INFORMATION




Item 1. Financial Statements


Game
      Trading Technologies, Inc.Consolidated
      Balance Sheets(Unaudited)
            
            
            (Audited)March
      31, 2010
            
            
            December
      31, 2009ASSETSCurrent AssetsCash
      and cash equivalents
            
            $
            300,575
            
            
            $
            641,088Accounts
      Receivable - Net of Allowance of $100,000 and $100,000 as of March 31,
      2010
            
            
            5,326,491
            
            
            
            2,383,688and
      December 31, 2009  respectivelyInventories
            
            
            4,387,311
            
            
            
            2,897,432Prepaid
      Expenses
            
            
            239,149
            
            
            
            -TOTAL
      CURRENT ASSETS
            
            
            10,253,525
            
            
            
            5,922,208Property
      and Equipment, net of accumulated depreciation of $327,109 and $246,549
      respectively
            
            
            136,037
            
            
            
            109,984Other AssetsDeferred
      Financing Costs
            
            
            -
            
            
            
            258,325Other
      Deferred Expenses
            
            
            39,940
            
            
            
            -TOTAL OTHER ASSETS
            
            
            39,940
            
            
            
            258,325TOTAL
      ASSETS
            
            $
            10,429,502
            
            
            $
            6,290,517LIABILITIES AND STOCKHOLDERS'
      (DEFICIT)Current LiabilitiesAccounts
      payable
            
            $
            5,202,044
            
            
            $
            4,253,396Accrued
      expenses and other
            
            
            6,494
            
            
            
            60,534Note
      Payable - Bridge City Language
            
            
            -
            
            
            
            250,000Note
      Payable - S/B note payable - current portion
            
            
            263,046
            
            
            
            263,046Note
      payable - TW development LLC - related party
            
            
            725,286
            
            
            
            408,424Discontinued
      Operations-Liablilties
            
            
            63,848
            
            
            
            88,921TOTAL
      CURRENT LIABILITES
            
            
            6,260,717
            
            
            
            5,324,321Long Term LiabilitiesNote
      Payable - Columbia Bank
            
            
            1,443,344
            
            
            
            1,800,000Subordinated
      Note Payable
            
            
            
            
            
            
            700,000Warrant
      Redemption Liability
            
            
            3,346,998
            
            
            
            281,935less:
      Current Maturities of long term debt
            
            
            (263,046
            )
            
            
            (263,046
            )TOTAL
      LONG TERM LIABILITES
            
            
            4,527,296
            
            
            
            2,518,889TOTAL
      LIABILITIES
            
            $
            10,788,013
            
            
            $
            7,843,210Stockholders' deficitPreferred
      stock, $0.0001 par value, 20,000,000 shares authorized,1,950,000
      and none issued and outstanding as of March 31, 2010 and March 31, 2009
      respectively
            
            $
            195
            
            
            $
            -Common
      stock, $0.0001 par value, 100,000,000 shares authorized, 8,290,000 and
      3,145,000 shares issued andoutstanding
      at March 31, 2010 and March 31, 2009 respectively
            
            
            829
            
            
            
            31,450Additional
      paid-in capital
            
            
            3,110,369
            
            
            
            58,918Accumulated
      deficit
            
            
            (3,469,904
            )
            
            
            (1,643,062
            )Total
      stockholders' equity (deficit)
            
            
            (358,511
            )
            
            
            (1,552,693
            )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
            
            $
            10,429,502
            
            
            $
            6,290,517The
      accompanying notes are integral parts of these financial
      statements.


- 3
-
 Table of Contents


Game
      Trading Technologies, Inc.Consolidated
      Statements of Operations(Unaudited)For
      the Three Months Ended March 312010
            
            
            2009Net
      Sales
            
            $
            11,401,287
            
            
            $
            8,341,060Cost
      of Sales
            
            
            9,428,651
            
            
            
            6,899,492Gross
      Profit
            
            
            1,972,637
            
            
            
            1,441,568Operating
      Expense:Employee
      Compensation
            
            
            1,249,625
            
            
            
            276,735Shipping
      Expense
            
            
            245,751
            
            
            
            131,684Professional
      Services
            
            
            2,026,659
            
            
            
            33,708Selling
      General & Administrative
            
            
            342,895
            
            
            
            338,151Total
      Operating Expense:
            
            
            3,864,931
            
            
            
            780,278Income
      (Loss) From Operations
            
            
            (1,892,294
            )
            
            
            661,290Other Income (Expense):Other
      income
            
            
            46,493
            
            
            
            -Total
      Other Expense
            
            
            46,493
            
            
            
            -Income
      (Loss) From Continuing Operations Before Income Taxes
            
            
            (1,845,801
            )
            
            
            661,290Provision
      for income taxes
            
            
            -
            
            
            
            -Income
      (Loss) From Continuing Operations
            
            
            (1,845,801
            )
            
            
            661,290Discontinued
      Operations:Loss
      From Discontinued Operations
            
            
            -
            
            
            
            33,156Net
      Income / (Loss)
            
            $
            (1,845,801
            )
            
            $
            628,134Preferred
      Dividend Payable
            
            
            18,958
            
            
            
            -Net
      Income / (Loss) Attributable to Common Stockholders
            
            $
            (1,864,760
            )
            
            $
            628,134Net Income (Loss) Per Common Share from Continuing
      Operations:Basic
      & Diluted
            
            $
            (0.362
            )
            
            $
            0.200Weighted
      average shares outstanding of common stockBasic
      & Diluted
            
            
            5,145,833
            
            
            
            3,145,000The
      accompanying notes are integral parts of these financial
      statements.


- 4
-
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Game
      Trading Technologies, Inc.Consolidated
      Statements of Cash Flows(Unaudited)For
      the Period Ended March 31,2010
              
              
              2009Cash
      flows from operating activitiesNet
      Income (Loss)
              
              $
              (1,864,760
              )
              
              $
              623,267Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Depreciation
      & Amortization  - Property and Equipment
              
              
              24,064
              
              
              
              16,270Issuance
      of Stock Warrants for Services
              
              
              1,496,024
              
              
              
              -Stock
      Options for employee services
              
              
              929,874
              
              
              
              -Changes
      in assets and liabilitiesAccount
      receivable
              
              
              (2,942,803
              )
              
              
              (1,805,570
              )Inventory
              
              
              (1,489,879
              )
              
              
              584,302Accounts
      payable
              
              
              948,648
              
              
              
              1,171,014Accrued
      liabilities
              
              
              (54,040
              )
              
              
              257Deferred
      Expenses
              
              
              39,940
              
              
              
              -Prepaid
      expenses and deposits
              
              
              (239,149
              )
              
              
              (5,598
              )Liabilities
      of discontinued operation
              
              
              (25,073
              )
              
              
              -Net
      Cash Provided (Used) In Operating Activities
              
              
              (3,177,154
              )
              
              
              583,943Cash
      flows from investing activitiesPurchases
      of fixed assets
              
              
              (49,953
              )
              
              
              -Net
      Cash Provided (Used) In Investing Activities
              
              
              (49,953
              )
              
              
              -Cash
      flows from financing activitiesProceeds
      from the sale of preferred stock
              
              
              2,049,025
              
              
              
              -Proceeds
      from the sale of warrants
              
              
              1,850,975
              
              
              
              -Deferred
      financing - stock warrant liability
              
              
              (281,936
              )
              
              
              -Payments
      on subordinated note payable
              
              
              (700,000
              )
              
              
              (56,250
              )Increase
      (Decrease) in deferred financing costs
              
              
              258,325
              
              
              
              -Advance
      (Repayment) of due to stockholder
              
              
              -
              
              
              
              (35,000
              )Issuance
      (Repayment) of note payable-TW development-related party
              
              
              316,862
              
              
              
              (156,107
              )Issuance
      (Repayment) of note payable
              
              
              (606,656
              )
              
              
              -Net
      Cash Provided (Used) In Financing Activities
              
              
              2,886,595
              
              
              
              (247,358
              )Net
      increase (decrease) in cash
              
              
              (340,513
              )
              
              
              336,585Cash
      At The Beginning Of The Period
              
              
              641,088
              
              
              
              301,397Cash
      At The End Of The Period
              
              $
              300,575
              
              
              $
              637,983Supplemental disclosure of cash flow
      information:Cash
      paid for interest
              
              $
              64,934
              
              
              $
              143,873Cash
      paid for taxes
              
              
              -
              
              
              
              -The
      accompanying notes are integral parts of these financial
      statements.
  - 5
-
 Table of Contents


GAME
TRADING TECHNOLOGIES, INC.


and Its
Wholly Owned Subsidiary


Notes to
Consolidated Condensed Financial Statements (Unaudited)


March 31,
2010








1.                
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES





Nature
of Business





On
February 25, 2010, we completed a “reverse acquisition” transaction, in which we
entered into a securities exchange agreement (the “Exchange Agreement”) with
Gamers Factory, Inc., a Maryland corporation (“Gamers” or the “Company”) and for
certain limited purposes, its stockholders.  Pursuant to the Exchange
Agreement, the shareholders of Gamers transferred all of the issued and
outstanding shares of common stock of Gamers to us in exchange for 7,090,000
newly issued shares of our common stock (the “Transaction”).   At the
time of the Transaction, our corporate name was City Language Exchange, Inc.
 Following the merger, we changed our name to Game Trading Technologies,
Inc. (the “GTTI”) and our trading symbol to “GMTD.OB.”   As a result of the
Transaction, Gamers became our wholly-owned subsidiary, with Gamers’ former
shareholders acquiring a majority of the outstanding shares of our common
stock.





The
transactions contemplated by the Exchange Agreement are being accounted for as a
“reverse acquisition,” since the stockholders of Gamers owned a majority of the
outstanding shares of our common stock immediately following the Transaction.
Gamers is deemed to be the acquirer in the Transaction and, consequently, the
assets and liabilities and the historical operations that will be reflected in
the financial statements will be those of Gamers and will be recorded at the
historical cost basis of Gamers. Except for the right of the holders of our
series A convertible preferred stock, as a class, to elect one of our directors,
no arrangements or understandings exist among present or former controlling
stockholders with respect to the election of members of our board of directors
and, to our knowledge, no other arrangements exist that might result in a change
of control of our company.





In
connection with the closing of the Exchange Agreement, we completed the closing
of a private placement (referred to herein as the “February 2010 private
placement”) of $3,900,000 of units (each, a “Unit” and collectively, the
“Units”) pursuant to the terms of a Securities Purchase Agreement, dated as of
February 25, 2010, with each Unit consisting of one share of our series A
convertible preferred stock and a warrant to purchase one share of our common
stock.  Each share of series A convertible preferred stock has a
stated value equal to $2.00 per share and is initially convertible at any time
into shares of our common stock at a conversion price equal to $2.00 per share
or an aggregate of 1,950,000 shares of common stock, subject to adjustment under
certain circumstances. Each warrant entitles the holder to purchase one share of
common stock (equivalent to 100% warrant coverage in respect of the shares
underlying the series A convertible preferred stock) at an exercise price of
$2.50 per share through February 25, 2015.





At the
closing of the February 2010 private placement, buyers that purchased shares of
our series A convertible preferred stock with a stated value of at least
$150,000 received a unit purchase option (the “Unit Purchase Option”) to
purchase, on the same terms as those Units sold at the closing of the February
2010 private placement, additional Units of series A convertible preferred stock
and warrants equal to 50% of the Units they purchased at the closing of the
February 2010 private placement. In the event that any holder of a Unit Purchase
Option does not exercise some or all of such option on or before April
21, 2010, any unexercised portion of such Unit Purchase Option will be
offered and may be purchased (no later than April
26, 2010) by each other holder of a Unit Purchase Option that elects to
exercise its Unit
Purchase Option in full. The shares of common stock underlying the securities
issuable upon exercise of a Unit Purchase Option are entitled to the same
registration rights as those securities underlying the Units issued at the
closing of the February 2010 private placement.




Game
Trading Technologies, Inc. is a leading provider of comprehensive trading
solutions and services for video game retailers, publishers, rental companies,
and consumers.  Through our trading platform, we provide our customers
with extensive services including valuation, procurement, refurbishment, and
merchandising of pre-owned video games.  Additionally, through our
trading platform, we process and market video game consoles, DVDs, and video
game accessories, and provide related e-commerce retailing and interactive
marketing services.







- 6
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 Table of Contents







Basis
of Presentation





Certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
Unites States of America, have been condensed or omitted.  It is
suggested that these consolidated condensed financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Annual Report on Form 10-K for the year ended December 31, 2009
filed by the Company.  In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of the interim financial information have been
included.  The results of operations for any interim period presented
herein are not necessarily indicative of the results of operations for the year
ended December 31, 2010.





The
consolidated condensed financial statements and accompanying notes are prepared
in accordance with accounting principles generally accepted in the United States
of America.





A summary
of the significant accounting policies consistently applied in the preparation
of the accompanying consolidated condensed financial statements is as
follows:





Principle
of Consolidation





The
consolidated condensed financial statements include the accounts of Game Trading
Technologies, Inc. and its subsidiary.  Intercompany transactions and
balances have been eliminated.  Equity investments in which the
Company exercises significant influence but do not control and are not the
primary beneficiary are accounted for using the equity
method.  Investments in which the Company is not able to exercise
significant influence over the investee and which do not have readily
determinable fair values are accounted for under the cost method.





Management’s
Use of Estimates and Assumptions





The
preparation of the consolidated condensed 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 the assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated condensed financial statements, and
the reported amounts of revenue and expense during the reporting
periods.   Actual results may differ from those estimates and
assumptions.





Reclassifications





Certain
amounts reported in previous period have been reclassified to conform to the
Company’s current period presentation.





Cash
and Cash Equivalents





The
Company periodically maintains cash balances in financial institutions in
amounts greater than the federally insured limit of $100,000. Management
considers this to be an acceptable business risk.





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





Use
of Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.





Accounts
Receivable





The
Company extends credit to customers without requiring collateral.  The
Company uses the allowances method to provide for doubtful accounts based on
management’s evaluations of the collectability of accounts
receivable.  Management’s evaluation is based on the Company’s
historical collection experience and a review of past-due
amounts.  Based on management’s evaluation of collectability, there is
a $100,000 allowance for doubtful accounts as of March 31, 2010 and December 31,
2009 respectively.  During the three months ended March 31, 2010 and
the year ended December 31, 2009, the Company wrote off $0 and $148,957
respectively as uncollectible accounts receivables. The Company determines
accounts receivable to be delinquent when greater than 30 days past
due.  Accounts receivable are written off when it is determined that
amounts are uncollectible.





- 7
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 Table of Contents








Inventory





Inventory,
consisting of goods held for resale, is stated at the lower of cost or
market.  Cost is determined using the weighted-average
method.  At March 31, 2010 and December 31, 2009, no allowance for
obsolete inventory was deemed necessary based on management’s estimate of the
realizability of the inventory.





Property
and Equipment





Property
and equipment is stated at cost.  Depreciation and amortization
expense is computed using principally accelerated methods over the estimated
useful life of the related assets ranging from 3 to 7 years. When assets are
sold or retired, their costs and accumulated depreciation are eliminated from
the accounts and any gain or loss resulting from their disposal is included in
the statement of operations.





The
Company recognizes an impairment loss on property and equipment when evidence,
such as the sum of expected future cash flows (undiscounted and without interest
charges), indicates that future operations will not produce sufficient revenue
to cover the related future costs, including depreciation, and when the carrying
amount of the asset cannot be realized through sale. Measurement of the
impairment loss is based on the fair value of the assets.





Impairment
of Long-Lived Assets





The
Company assesses long-lived assets, such as property and equipment and
intangible assets subject to amortization, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
group may not be fully recoverable. Recoverability of asset groups to be held
and used in measured by a comparison of the carrying amount of an asset group to
estimated undiscounted future cash flows expected to be generated by the asset
group.  If the carrying amount exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of an asset group exceeds the fair value of the asset group. The Company
evaluated its long-lived assets and no impairment charges were recorded for any
of the periods presented.





Revenue
Recognition





Included
in Accounting Standards Codification (“ASC”) 650 “Revenue
Recognition”





The
Company recognizes revenue based on Account Standards Codification (“ASC”) 605 “Revenue
Recognition” which contains Securities and Exchange Commission Staff
Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements’
and No. 104, “Revenue Recognition”. In all cases, revenue is recognized
only when the price is fixed or determinable, persuasive evidence of an
arrangement exists, shipment has occurred, price is fixed or determinable and
collectability of the resulting receivable is reasonably assured.  The
Company had $11,401,287 and $8,341,060 in revenue for the three months ended
March 31, 2010 and the three months ended March 31, 2009,
respectively.





Shipping
and Handling Costs





The
Company includes its outbound shipping and handling costs in selling, general
and administrative expenses.  Those costs were $245,751 and $131,684
for the three months ended March 31, 2010 and 2009,
respectively.  Inbound shipping and handling costs are included as an
allocation to inventory.  Those costs were $82,568 and $213,779 for
the three months ended March 31, 2010 and 2009, respectively.





Share
Based Expenses





ASC 718 "Compensation - Stock
Compensation", codified in SFAS No. 123, prescribes that accounting and
reporting standards for all stock-based payments award to employees, including
employee stock options, restricted stock, employee stock purchase plans and
stock appreciation rights, may be classified as either equity or liabilities.
The Company should determine if a present obligation to settle the share-based
payment transaction in cash or other assets exists. A present obligation to
settle in cash or other assets exists if:





a)
            the
      option to settle by issuing equity instruments lacks commercial substance
      or




b)
            the
      present obligation is implied because of an entity's past practices or
      stated policies. If a present obligation exists, the transaction should be
      recognized as a liability; otherwise, the transaction should be recognized
      as equity.







- 8
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 Table of Contents






The
Company accounts for stock-based compensation issued to non-employees and
consultants in accordance with the provisions of ASC 505-50 "Equity - Based Payments to
Non-Employees"  which codified SFAS 123 and the Emerging Issues
Task Force consensus in Issue No. 96-18 ("EITF 96-18"),  "Accounting
for Equity Instruments that are Issued to Other Than Employees for Acquiring or
in Conjunction with Selling, Goods or Services".  Measurement of
share-based payment transactions with non-employees shall be based on the fair
value of whichever is more reliably measurable:




a)
            the
      goods or services receive or




b)
            the
      equity instruments issued.




The fair
value of the share-based payment transaction should be determined at the earlier
of performance commitment date or performance completion date.





Fair
value of Financial Instruments





The
Company adopted ASC topic 820,
“Fair Value Measurements and Disclosures”, formerly SFAS No. 157 “Fair
Value Measurements,” effective January 1, 2009.  ASC 820 defines “fair
value” as the price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date.  There was no impact relating to the adoption of ASC
820 to the Company’s financial statements.  ASC 820 also describes
three levels of inputs that may be used to measure fair value:





·
            Level
      1: Observable inputs that reflect unadjusted quoted prices for identical
      assets or liabilities traded in active
markets.




·
            Level
      2: Inputs other than quoted prices included within Level 1 that are
      observable for the asset or liability, either directly or
      indirectly.




·
            Level
      3: Inputs that are generally unobservable. These inputs may be used with
      internally developed methodologies that result in management’s best
      estimate of fair value.




Financial
instruments consist principally of cash, prepaid expenses, accounts payable, and
accrued liabilities. The carrying amounts of such financial instruments in the
accompanying balance sheets approximate their fair values due to their
relatively short-term nature.  It is management’s opinion that the
Company is not exposed to any significant currency or credit risks arising from
these financial instruments.





Income
Taxes





Under the
asset and liability method prescribed under ASC 740, Income Taxes, The
Company uses the liability method of accounting for income taxes.  The
liability method measures  deferred income taxes by
applying  enacted  statutory rates in effect at the
balance  sheet date to the differences  between the tax
basis of assets and  liabilities  and their
reported  amounts on the  financial
statements.  The resulting deferred tax assets or liabilities are
adjusted to reflect changes in tax laws as they occur.  A valuation
allowance is provided when it is more likely than not that a deferred tax asset
will not be realized.





The
Company recognizes the financial statement benefit of an uncertain tax position
only after considering the probability that a tax authority would sustain the
position in an examination. For tax positions meeting a "more-likely-than-not"
threshold, the amount recognized in the financial statements is the benefit
expected to be realized upon settlement with the tax authority. For tax
positions not meeting the threshold, no financial statement benefit is
recognized. As of March 31, 2010, the Company has had no uncertain tax
positions. The Company recognizes interest and penalties, if any, related to
uncertain tax positions as general and administrative expenses. The Company
currently has no federal or state tax examinations nor has it had any federal or
state examinations since its inception. All of the Company's tax years are
subject to federal and state tax examination.








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Discontinued
Operations





Accounting
for the Impairment or Disposal of Long-Lived Assets, the Company classifies a
business that has been disposed as a discontinued operation if the cash flow of
the business has been eliminated from the ongoing operations and will no longer
have any significant continuing involvement in the Company.  The
results of operations of discontinued operations through the date of sale,
including any gains or losses on disposition, are aggregated and presented as
one line in the consolidated statements of operations.  ASC 360-10-05, formerly SFAS
No. 144 requires the classification of amounts presented for prior years as
discontinued operations.  The amounts presented in the statements of
operations for the three months ended March 31, 2010 and 2009 were classified to
comply with ASC
360-10-05.





During
the year ended December 31, 2006, the Company decided to discontinue operations
of Planet Replay, LLC, a retail affiliate of the Company, and sell or liquidate
the assets of the discontinued operations.  The decision to
discontinue the operations of Planet Replay, LLC was based upon the historical
and continuing losses of Planet Replay, LLC.  All assets were disposed
during 2007 and liabilities of $63,848 and $88,921 existed at March 31, 2010 and
December 31, 2009. The Company recognized a loss from discontinued operations
totaling $0 and $144,828 for the years ended December 31, 2009 and 2008,
respectively. The assets and liabilities of the discontinued operation are
presented separately under captions “Assets of discontinued operation” and
“Liabilities of discontinued operation,” respectively, in the accompanying
consolidated balance.





Abandoned
Leased Facilities





In
December 2006, the Company’s affiliate, Planet Replay LLC, abandoned its retail
locations in Tennessee and Maryland. Although the Company remains obligated
under the terms of these leases for the rent and other costs associated with
these leases, the Company made the decision to cease using these spaces on
December 31, 2006, and has no foreseeable plans to occupy them in the future
(see commitment footnote).  Therefore, in accordance with ASC 420, Exit or Disposal Cost
Obligations, formerly FASB Statement of Financial Accounting Standards
No. 146,  Accounting for Costs Associated with Exit or Disposal
Activities , the Company recorded a charge to earnings of approximately $297,274
to recognize the costs of exiting the space. The liability is equal to the total
amount of rent and other direct costs for the period of time space is expected
to remain unoccupied.  The Company also recorded a charge to earnings
of $100,000 for estimated general and administrative costs related to exiting
the retail locations. Total exit costs expected to be incurred of $397,274 were
recorded as a liability of discontinued operations and included in loss from
discontinued operations as of December 31, 2006.  As of March 31, 2010
and December 31, 2009 a liability has been recorded of $63,848 and
88,921.





To
determine the lease cost, which is the Company’s loss after its cost recovery
efforts from subleasing a building, certain estimates were made related to the
(1) time period over which the relevant building would remain vacant, (2)
sublease terms, and (3) sublease rates, including common area charges. If market
rates continue to decrease in these markets or if it takes longer than expected
to sublease these facilities, the actual loss could exceed this
estimate.





Income
(loss) Per Common Share





Basic
income (loss) per share is calculated using the weighted-average number of
common shares outstanding during each reporting period.  Diluted loss
per share includes potentially dilutive securities such as outstanding options
and warrants, using various methods such as the treasury stock or modified
treasury stock method in the determination of dilutive shares outstanding during
each reporting  period.   Common equivalent shares are
excluded from the computation of net loss per share since their effect is
anti-dilutive.





Recent
Authoritative Accounting Pronouncements





FASB
Accounting Standards Codification





(Accounting Standards Update (“ASU”)
2009-01) In June 2009, FASB approved the FASB Accounting Standards
Codification (“the Codification”) as the single source of authoritative
nongovernmental GAAP. All existing accounting standard documents, such as FASB,
American Institute of Certified Public Accountants, Emerging Issues Task Force
and other related literature, excluding guidance from the Securities and
Exchange Commission (“SEC”), have been superseded by the Codification. All other
non-grandfathered, non-SEC accounting literature not included in the
Codification has become nonauthoritative. The Codification did not change GAAP,
but instead introduced a new structure that combines all authoritative standards
into a comprehensive, topically organized online database. The Codification is
effective for interim or annual periods ending after September 15, 2009,
and impacts the Company’s financial statements as all future references to
authoritative accounting literature will be referenced in accordance with the
Codification. There have been no changes to the content of the Company’s
financial statements or disclosures as a result of implementing the Codification
during the year ended December 31, 2009.





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As a
result of the Company’s implementation of the Codification during the quarter
ended September 30, 2009, previous references to new accounting standards and
literature are no longer applicable. In the current year financial statements,
the Company will provide reference to both new and old guidance to assist in
understanding the impacts of recently adopted accounting literature,
particularly for guidance adopted since the beginning of the current fiscal year
but prior to the Codification.





Subsequent
Events





(Included
in Accounting Standards
Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165
“Subsequent Events”) SFAS No. 165 established general standards of
accounting for and disclosure of events that occur after the balance sheet date,
but before the financial statements are issued or available to be issued
(“subsequent events”). An entity is required to disclose the date through which
subsequent events have been evaluated and the basis for that date. For public
entities, this is the date the financial statements are issued. SFAS
No. 165 does not apply to subsequent events or transactions that are within
the scope of other GAAP and did not result in significant changes in the
subsequent events reported by the Company. SFAS No. 165 became effective
for interim or annual periods ending after June 15, 2009 and did not impact
the Company’s financial statements. The Company evaluated for subsequent events
through the issuance date of the Company’s financial statements. No recognized
or non-recognized subsequent events were noted.





2.                
PROPERTY AND EQUIPMENT





Property
and equipment consists of the following at March 31, 2010 and December 31,
2009.





3/31/10
            
            
            12/31/09Machinery
      and equipment
            
            $
            305,183
            
            
            $
            251,347Leasehold
      improvements
            
            
            16,653
            
            
            
            19,483Computer
      equipment and software
            
            
            142,641
            
            
            
            142,223$
            464,477
            
            
            $
            413,053Less
      accumulated depreciation and amortization
            
            
            328,440
            
            
            
            303,069Property
      and Equipment, net
            
            $
            136,067
            
            
            $
            109,984




Depreciation
and amortization expense for the three months ended March 31, 2010 and 2009
totaled $24,064 and $16,032, respectively.





3.                
NOTES PAYABLE





Subordinated
Note Payable





Effective
July 25, 2006, the Company entered into a financing agreement issuing a
debenture to Allegiance Capital Limited Partnership in the amount of
$1,000,000.  This debenture was retired utilizing proceeds from the
February 2010 private placement transaction.





Note
Payable-Columbia Bank





On
December 29, 2009 the Company issued a note payable of $1,800,000 to Columbia
Bank. The note bears interest at 8.0% and matures on December 29,
2014.  The note requires consecutive monthly payments of principal and
interest of $15,055.92 with a balloon payment due on December 29,
2014.  The borrower may repay this note at any time, in whole or in
part, without penalty or additional interest.  The note is
collateralized by substantially all assets of the Company and personal assets of
the majority shareholder.  The balance as of March 31, 2010 was
$1,443,344.





Note
Payable-City Language Exchange Incorporated





On
December 22, 2009 the Company issued a note payable of $250,000. The note bears
interest at 8.0% and matures on June 30, 2010.  The note requires a
payment of principal and interest due on June 30, 2010.  The borrower
may repay this note at any time, in whole or in part, without penalty or
additional interest.  This note is not collateralized.  This
note was retired utilizing proceeds from the February 2010 private placement
transaction.








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Note
Payable – TW Development LLC





On
December 6, 2007 the Company issued a note payable of $500,000 to TW Development
LLC a related parted.  The note bears interest at 6% and matured on
April 4, 2008, at which point it was extended to December 31,
2009.  The note requires no monthly payments.   The
borrower may repay this note at any time, in whole or in part, without penalty
or additional interest.  During the first quarter of 2010, additional
funds were advanced by the related party and the note was extended to December
31, 2010. The balance as of March 31, 2010 was $725,286.





4.                
INCOME TAXES





The
company has a net operating loss carry forward of approximately $143,000, that
expires in 2027.





Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Company’s deferred tax assets and liabilities are as follows:





As
      of December 312009
            
            
            2008Deferred
      tax assets:Net
      operating losses carryforwards
            
            $
            57,583
            
            
            $
            670,463Difference
      between book and tax depreciation
            
            
            -0-
            
            
            
            -0-Total
      deferred tax assets
            
            
            57,583
            
            
            
            670,463Deferred
      tax liabilities:Difference
      between book and tax depreciation
            
            
            11,000
            
            
            
            17,857Total
      deferred tax liabilities
            
            
            11,000
            
            
            
            17,857Net
      deferred tax assets before valuation allowance
            
            
            46,583
            
            
            
            652,606Valuation
      allowance
            
            
            (46,583
            
            
            
            (652,606
            )Net
      deferred tax assets
            
            $
            -0-
            
            
            $
            -0-





5.                
COMMITMENTS





Effective
March 1, 2007, the Company has entered into an operating lease agreement for its
corporate office.  The Company was released from its lease at its
prior location on November 2, 2006 due to the Company relocating to a new
facility owned by the same landlord.  The Company relocated to the new
facility in February 2007.  The current lease term expiration date is
January 31, 2012.





Future
minimum payments required under operating leases are as follows:





Year
      Ending December 31:2010
            
            
            175,3222011
            
            
            178,8262012
      and thereafter
            
            
            29,902$
            384,050





Rent
expense plus common area maintenance and related facilities fees for the three
months ended March 31, 2010 and the three months ended March 31, 2009 totaled
$53,519 and $46,942, respectively.










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Effective
August 15, 2005, the Company guaranteed payments on an operating lease agreement
for retail space for the benefit of its affiliate Planet Replay
LLC.  The operation has been discontinued.  The lease
requires monthly payments of $6,170 plus Common Area Maintenance and taxes with
annual increases of 2.5% and the term is for 10 years. The location has been
vacated as a result of the discontinued operations (see discontinued operations
footnote). The 2010 amount of the future payments are included in the
liabilities of the discontinued operations.





Future
minimum payments required under operating leases are as follows:





Year
      Ending December 31:2010
            
            
            82,4132011
            
            
            84,4762012
            
            
            84,4762013
            
            
            84,4762014
      and thereafter
            
            
            159,012$
            494,853





Rent
expense for the three months ended March 31, 2010 and 2009 totaled $25,073 and
$33,156, respectively.





6.                
RELATED PARTY TRANSACTIONS


On
December 6, 2007 the Company issued a note payable of $500,000 to TW Development
LLC, a company owned by the shareholders of Game Trading Technologies, Inc. The
note bears interest at 6% and matured on April 4, 2008, at which point it was
extended to December 31, 2009. The note requires no monthly payments. The
borrower may repay this note at any time, in whole or in part, without penalty
or additional interest. During the first quarter of 2010, additional funds were
advanced by the related party and the note was extended to December 31, 2010.
The balance as of March 31, 2010 was $725,286.





7.                
PREFERRED STOCK





We
are authorized to issue shares of our Series A Convertible Preferred Stock,
$2.00
stated value. As of March 31, 2010, 20,000,000 shares of our Preferred
Stock were authorized, with 3,000,000 shares designated as Series A, and
1,950,000 shares
issued and outstanding. The rights and preferences of the Series A
Convertible Preferred Stock include, among other things, the
following:




·
            liquidation
      preferences (120% of stated value);





·
            dividend
      preferences;





The
Series A Convertible Preferred Stock provides an annual dividend of 5% payable
quarterly in arrears in cash or stock.  Each Series A Preferred share
is convertible into one share of the Company’s common stock at an exercise price
of $2.00 per share.





8.                 DIVIDEND
- PREFERRED STOCK





The
dividend payable on the Series A Convertible Preferred Stock for the quarter
ended March 31, 2010 is $18,958 and will be paid in cash.








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9.                
WARRANTS & STOCK OPTIONS





The Class
A Warrants entitle the holder to purchase one share of the Company’s common
stock, have a term of five years from the date of issuance with 100% coverage
and an exercise price of $2.50.  The warrants shall become exercisable
on a cashless exercise basis if the underlying shares have not been fully
registered within twelve months of the closing of the February 2010 Private
Placement transaction.  Under FASB Statement 123R, the Company
estimates the fair value of each stock award at the grant date by using the
Black-Scholes option pricing model with the following weighted average
assumptions used for the grants, respectively; dividend yield of zero percent
for all periods; expected volatility is 45%; risk-free interest rate .41%;
expected lives ranging from three years to five years.





A summary
of the Company’s stock awards for options and warrants as of December 31, 2009
and changes for the three months ended March 31, 2010 is presented
below:





Options
              and Warrants
            
            
            Weighted
      Average Exercise Price
            
            
            Weighted
      Average Grant Date Fair ValueOutstanding,
      December 31, 2009
            
            
            1,110,000
            
            
            $
            0.65
            
            
            $
            4.05Granted
            
            
            2,733,333
            
            
            
            2.26
            
            
            
            2.84Exercised
            
            
            --
            
            
            
            --
            
            
            
            --Expired/Cancelled
            
            
            1,110,000
            
            
            
            0.88
            
            
            
            3.89Outstanding,
      March 31, 2010
            
            
            2,733,333
            
            
            
            2.26
            
            
            
            2.84Exercisable,
      March 31, 2010
            
            
            2,733,333
            
            
            
            2.26
            
            
            
            2.84





The
following table summarizes information about the Company’s outstanding stock
options and warrants at March 31, 2010:





Range
      of
              Exercise
              Prices
            
            
            Number Outstanding
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Weighted
              Average
              Remaining
              Contractual
              Life
            
            
            Number
              Exercisable
            
            
            Weighted
              Average
              Exercise
              Price$
            0.65
            
            
            
            310,000
            
            
            $
            .65
            
            
            
            5.00
            
            
            
            310,000
            
            
            $
            .652.25
            
            
            
            383,333
            
            
            
            2.25
            
            
            
            5.00
            
            
            
            383,333
            
            
            
            2.252.50
            
            
            
            2,040,000
            
            
            
            2.50
            
            
            
            4.95
            
            
            
            2,040,000
            
            
            
            2.502,733,333
            
            
            
            
            
            
            
            4.97
            
            
            
            2,733,333




10.              MAJOR
CUSTOMERS





Two major
customers accounted for a combined $9,884,518 and $6,460,733 of revenue for the
three months ended March 31, 2010 and 2009, respectively.  These amounts
represent 87% and 77% of the Company’s revenue for the three months ended March
31, 2010 and 2009, respectively.





As of
March 31, 2010 and 2009, these customers accounted for 97% and 77% of accounts
receivable, respectively.





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11.              SUBSEQUENT
EVENTS





The
Company evaluated for subsequent events through the issuance date of the
Company’s financial statements and the following items are noted.





On April
20, 2010, certain holders of Unit Purchase Options exercised Unit Purchase
Options to purchase 825,000 Units resulting in aggregate gross proceeds to us of
$1,650,000.





On April
22, 2010, in connection with his appointment as a director, Eric Salzman
received an option to purchase 60,000 shares of our common stock at a price of
$4.75 per share, the closing price of our common stock as quoted on the
Over-the-Counter Bulletin Board on April 21, 2010.





On April
26, 2010, certain holders of Unit Purchase Options exercised Unit Purchase
Options to 62,500 units of our securities resulting in aggregate gross proceeds
to us of $125,000.





Bank
of America Revolver





On
May 4, 2010, Gamers Factory, Inc. (the “Borrower”), a wholly owned
subsidiary of Game Trading Technologies, Inc. (the “Company”) entered into a
Loan Agreement (the “Loan Agreement”) with Bank of America, N.A.   The
Loan Agreement provides for a revolving line of credit to the Borrower equal to
the lesser of (i) $2,500,000 (the “Credit Limit”) or the sum of (a) 75% of the
balance due on Acceptable Receivables (as defined in the Loan Agreement) and (b)
the lesser of $1,000,000 or 20% of the value of Acceptable Inventory (as defined
in the Loan Agreement) (the “Facility No. 1 Commitment”).  The
Borrower has the right to prepay loans under the Loan Agreement in whole or in
part at any time. All amounts borrowed under the Loan Agreement must be repaid
on or before May 27, 2011.  Loans under the Loan Agreement bear
interest at a rate equal to the British Bankers Association London interbank
offered rate (“BBA LIBOR”) plus 2.50% per annum.





Initial
borrowings under the Loan Agreement are subject to, among other things, the
substantially concurrent repayment by the Borrower of all amounts due and owing
under the Borrower’s existing second amended and restated loan agreement and
$1,800,000 second amended and restated promissory note, each dated December 29,
2009, respectively, with The Columbia Bank and the satisfaction and termination
of such borrowing (collectively, the “Columbia Bank Loan”).  All
amounts owed under the Columbia Bank Loan were satisfied and terminated by
Borrower on May 6, 2010.




As of the
date of this filing the balance on the revolver was $1,863,285, with additional
availability of $636,715.








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Item 2.   Management’s Discussion and Analysis
of Financial Condition and Results of Operations




This
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements that reflect
Management's current views with respect to future events and financial
performance. You can identify these statements by forward-looking words such as
“may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or
similar words.  Those statements include statements regarding the
intent, belief or current expectations of us and members of our management team
as well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risk and uncertainties, and that
actual results may differ materially from those contemplated by such
forward-looking statements.




Readers
are urged to carefully review and consider the various disclosures made by us in
this report and in our other reports filed with the Securities and Exchange
Commission. The following Management’s Discussion and Analysis of Financial
Condition and Results of Operations of the Company should be read in conjunction
with the Consolidated Financial Statements and notes related thereto included in
this Quarterly Report on Form 10-Q.
Important  factors  currently  known  to
Management  could  cause  actual  results  to
differ  materially  from  those in
forward-looking  statements.  We undertake no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes in the future operating results
over time. We believe that our assumptions are based upon reasonable data
derived from and known about our business and operations.  No
assurances are made that actual results of operations or the results of our
future activities will not differ materially from our
assumptions.  Factors that could cause differences include, but are
not limited to, expected market demand for our products, fluctuations in pricing
for materials, and competition.




Overview




On
February 25, 2010, we completed a “reverse acquisition” transaction, in which we
entered into the Exchange Agreement with Gamers Factory, Inc. (“Gamers”) and for
certain limited purposes, its stockholders. Pursuant to the Exchange Agreement,
the shareholders of Gamers transferred all of the issued and outstanding shares
of common stock of Gamers to us in exchange for 7,090,000 newly issued shares of
our common stock (the “Transaction”). As a result of the Transaction, Gamers
became our wholly-owned subsidiary, with Gamers’ former shareholders acquiring a
majority of the outstanding shares of our common stock.  At the time
of the Transaction, our corporate name was City Language Exchange, Inc.
 Following the merger, we changed our name to Game Trading Technologies,
Inc. (“GTTI”) and our trading symbol to “GMTD.OB.”




In
connection with the Transaction, we completed the closing of a private placement
of $3,900,000 in Units, each Unit consisting of one share of our series A
convertible preferred stock and a warrant to purchase one share of our common
stock, to purchasers that qualified as accredited investors, as defined in
Regulation D, pursuant to the terms of a Securities Purchase Agreement, dated as
of February 25, 2010. Each share of series A convertible preferred stock has a
stated value equal to $2.00 per share and is initially convertible at any time
into shares of common stock at a conversion price equal to $2.00 per share or an
aggregate of 1,950,000 shares of common stock, subject to adjustment under
certain circumstances. Each warrant entitles the holder to purchase one share of
common stock (equivalent to 100% warrant coverage in respect of the shares
underlying both the series A convertible preferred stock) at an exercise price
of $2.50 per share through February 25, 2015.




Game
Trading Technologies, Inc. is a leading provider of comprehensive trading
solutions and services for video game retailers, publishers, rental companies,
and consumers.  Through our trading platform, we provide our customers
with extensive services including valuation, procurement, refurbishment, and
merchandising of pre-owned video games.  Additionally, through our
trading platform, we process and market video game consoles, DVDs, and video
game accessories, and provide related e-commerce retailing and interactive
marketing services.




Results
of Operations - Three Months ended March 31, 2010 compared to the Three Months
ended March 31, 2009




Net
revenues increased by $3,060,227, or 37%, compared to the three months ended
March 31, 2009.    The increase was due primarily to an
increase in bulk sales along with the launch of a major new retailer program,
“Great Games Under $20.”  We also had greater access to supply in the
market as a result of increased working capital from our February 25, 2010
capital raise.  The gross profit percentage of 17.3% remained
consistent, as the supply and sales channels were similar.


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  Operating expenses increased by $3,084,663, compared to the three months ended
March 31, 2009. The major component of these expenses was professional services
consisting of legal, accounting and investor relations fees.  Of the
$3,084,663 in operating expenses, a total of $2,877,170 is attributable to legal
and accounting services as well as the charges resulting from the warrants and
stock options issuances related to the private
placement.


For the three months ended March 31, 2010, professional fees were $2,026,659,
which was 52% of the operating expense for the period. This is an increase of
5,912% from the professional fees of $33,708 incurred for the three months ended
March 31, 2009, representing 4% of the total operating expense for the period.
Professional fees incurred during the three months ended March 31, 2010 were
primarily attributable to the reverse merger transaction and private placement
consummated February 25, 2010.  Of the $2,026,659 in professional fees
for the three months ended March 31, 2010, $1,496,024 was a noncash charge due
to the issuance of stock warrants in exchange for professional services related
to the February, 2010 private placement.  The value of the warrants
was determined using the Black Scholes method, the details of which are more
fully explained within the notes to the financial statements for the three
months ended March 31, 2010.
  Employee compensation expense increased by $972,890, or 352%, to $1,249,625 for
the three months ended March 31, 2010 primarily due to stock options
compensation expense of $938,590 related to the incentive stock options
compensation plan. The incentive stock options were valued using the Black
Scholes method and the option shall become exercisable during the term of
recipient’s employment in three equal annual installments, the first installment
to be exercisable on the one year anniversary of the option
agreement.
  Outbound shipping expense increased by $114,067, or 87%, to $245,751 for the
three months ended March 31, 2010. The increase in shipping expense as a
percentage of revenues is due to significantly increased volume of small package
shipments, which are higher in cost per unit as compared to LTL and truckload
shipments.
  Selling, general, and administrative expense increased by $4,744, or 1%, to
$342,895 for the three months ended March 31, 2010.
  Depreciation expense increased by $7,944, or 47%, compared to the three months
ended March 31, 2009 based upon ongoing capital expenditures for computer and
warehouse equipment.
  The net loss of $2,492,894 represents a change of $2,473,936, or (397%),
compared to the three months ended March 31, 2009.  Increased expense
of $2,877,170 for legal and accounting services as well as the charges resulting
from the warrants and stock options issuances related to the private placement
is the primary reason for the net loss for the period.





Liquidity
and Capital Resources




Since our
inception, we have financed operations through video game product sales to
customers, debt instruments from institutional investors and existing
stockholders, and short-term debt.  As of March 31, 2010, we had
approximately $300,575 in cash and cash equivalents. We estimate that our
existing cash, combined with the proceeds of our recent private placement, will
be sufficient to fund current operations for at least the next 12
months.




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Cash
Flows
 Net cash used in operating activities was $3,177,154 for the three months ended
March 31, 2010, an increase of $3,761,097 or (644%) from the comparable period
in 2009. This increase is primarily attributable to increases in accounts
receivable, inventories, and prepaid assets as well as decreased accounts
payable and accrued liabilities.
  Net cash used in investing activities was $49,953 for three months ended March
31, 2010, an increase of $49,953 or 100% from March 31, 2009. This increase is
primarily attributable to the acquisition of additional computer and warehouse
equipment.
  Net cash
provided by financing activities was $2,886,595 for the three months ended March
31, 2010, an increase of $3,133,953 or 1,267%, from the comparable period in
2009. This increase is primarily attributable to funds received from the
February 2010 private placement and additional cash from notes payable to TW
Development, a related party.


Off-Balance
Sheet Arrangements
  As of
March 31, 2010, we had no off-balance sheet arrangements.


Item 3.       Quantitative and
Qualitative Disclosures About Market Risk




None.





Item 4T.     Controls and
Procedures




(a)         
 Evaluation of Disclosure Controls and Procedures




Under the
supervision and with the participation of our management, including our chief
executive officer and principal financial officer, we conducted an evaluation of
our disclosure controls and procedures, as such term is defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), as of the end of the period covered by this report.  Based on this
evaluation, our chief executive officer and our principal financial officer
concluded that our disclosure controls and procedures were effective at the
reasonable assurance level, to ensure that (i) information required to be
disclosed by the issuer in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms
and (ii) that information required to be disclosed by an issuer in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the issuer’s management including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.




(b)          Changes
in Internal Control Over Financial Reporting




There
were no changes in our internal control over financial reporting during the
first quarter of fiscal 2010 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.




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PART
II - OTHER INFORMATION





Item 1.    Legal
Proceedings




We are
not party to any legal proceedings, nor are we aware of any contemplated or
pending legal proceedings against us.





Item 1A.   Risk Factors




Not
applicable.





Item 2.  Unregistered Sales of Equity
Securities and Use of Proceeds




On April
26, 2010, the holders of certain unit purchase options (the “Options”) issued by
the Company in connection with that certain securities purchase agreement, dated
February 25, 2010 (the “Purchase Agreement”), exercised Options to purchase
62,500 units of the Company’s securities for aggregate gross proceeds of
$125,000.  Each unit (“Unit”) consisted of one share of the Company’s
series A convertible preferred stock and a warrant to purchase one share of the
Company’s common stock at an exercise price of $2.50 per share through April 26,
2015.




On April
22, 2010, in connection with his appointment as a director, Eric Salzman
received an option to purchase 60,000 shares of our common stock at a price of
$4.75 per share, the closing price of our common stock as quoted on the
Over-the-Counter Bulletin Board on April 21, 2010.  The options vest
in three (3) equal installments of thirty-three and one-third percent (33 1/3%),
the first installment to be exercisable on the date of grant, with an additional
thirty-three and one-third percent (33 1/3%) becoming exercisable on each of
April 22, 2011 and April 22, 2012, respectively.  These options were
issued under the Company’s Amended and Restated 2009 Incentive Stock
Plan.




On April
20, 2010, the holders of certain Options issued by the Company in connection
with the Purchase Agreement, exercised Options to purchase 825,000 units of the
Company’s securities for aggregate gross proceeds of $1,650,000.  Each
Unit consisted of one share of the Company’s series A convertible preferred
stock and a warrant to purchase one share of the Company’s common stock at an
exercise price of $2.50 per share through April 20, 2015.




On March
9, 2010, in connection with his appointment as a director, Jack Koegel received
an option to purchase 50,000 shares of the Company’s common stock at an exercise
price of $2.50 per share and an option to purchase 100,000 shares of the
Company’s common stock at an exercise price of $4.60 per share.  The
options vest in three (3) equal installments of thirty-three and one-third
percent (33 1/3%), the first installment to be exercisable on the date of grant,
with an additional thirty-three and one-third percent (33 1/3%) becoming
exercisable on each of March 9, 2011 and March 9, 2012,
respectively.  These options were issued under the Company’s Amended
and Restated 2009 Incentive Stock Plan.




On
February 25, 2010, we completed a “reverse acquisition” transaction (the
“Transaction”), in which we entered into the Exchange Agreement with Gamers
Factory, Inc. and for certain limited purposes, its stockholders. Pursuant to
the Exchange Agreement, the stockholders of Gamers transferred all of the issued
and outstanding shares of common stock of Gamers to us in exchange for 7,090,000
newly issued shares of our common stock, and all of the outstanding warrants of
Gamers were exchanged for warrants to purchase 1,160,000 shares of our common
stock.




In
connection with the closing of the Exchange Agreement, we completed the closing
of a private placement (referred to herein as the “February 2010 private
placement”) of $3,900,000 of units (each, a “Unit” and collectively, the
“Units”) to purchasers that qualified as “accredited investors”, as defined in
Regulation D promulgated under the Securities Act of 1933, as amended, pursuant
to the terms of a Securities Purchase Agreement, dated as of February 25, 2010,
with each Unit consisting of one share of our series A convertible preferred
stock and a warrant to purchase one share of our common stock.  Each
share of series A convertible preferred stock has a stated value equal to $2.00
per share and is initially convertible at any time into shares of our common
stock at a conversion price equal to $2.00 per share or an aggregate of
1,950,000 shares of common stock, subject to adjustment under certain
circumstances. Each warrant entitles the holder to purchase one share of common
stock (equivalent to 100% warrant coverage in respect of the shares underlying
the series A convertible preferred stock) at an exercise price of $2.50 per
share through February 25, 2015.


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At
the closing of the February 2010 private placement, buyers that purchased shares
of our series A convertible preferred stock with a stated value of at least
$150,000 received a unit purchase option (the “Unit Purchase Option”) to
purchase, on the same terms as those Units sold at the closing of the February
2010 private placement, additional Units of series A convertible preferred stock
and warrants equal to 50% of the Units they purchased at the closing of the
February 2010 private placement.  In the event that any holder of a
Unit Purchase Option does not exercise some or all of such option on or before
the 55th day following the closing of the February 2010 private placement, any
unexercised portion of such Unit Purchase Option will be offered and may be
purchased (no later than the 60th day following the closing of the February 2010
private placement) by each other holder of a Unit Purchase Option that elects to
exercise its Unit Purchase Option in full. The shares of common stock underlying
the securities issuable upon exercise of a Unit Purchase Option are entitled to
the same registration rights as those securities underlying the Units issued at
the closing of the February 2010 private placement.




Approximately
$702,000 of the net proceeds of the February 2010 private placement was used by
us to repay outstanding indebtedness on behalf of Gamers, as
follows:




·
            $452,000
      to Allegiance Capital Limited Partnership to prepay in full Gamers’
      subordinated debenture issued in July 2006 to Allegiance Capital, which
      bore interest at 12%, would have matured on July 1, 2011, and required
      monthly principal and interest
amortization.




·
            $250,000
      to Vision Opportunity Master Fund, Ltd., to prepay in full Gamers’ senior
      secured promissory note, dated December 23, 2009, which bore interest at
      8% per annum and would have matured on June 30,
  2010.




Approximately
$2,850,000 of the net proceeds of the February 2010 private placement will be
used for working capital and general corporate purposes, including amounts
required to pay officers’ salaries, ongoing public reporting costs, investor
relations, insurance, office-related expenses (including equipment and
supplies), and other corporate expenses.





Unless
otherwise noted in this section, with respect to the sale of unregistered
securities referenced above, all transactions were exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"), and Regulation D promulgated thereunder.




Item 3.Defaults Upon Senior
Securities





None.





Item 4.    Removed and
Reserved




Item 5.   Other Information





None.





Item 6.   Exhibits





Exhibits required by Item 601 of Regulation S-K:




Number
            
            Description31.1
            
            Certification
      as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 by
      Chief Executive Officer and Chief Financial Officer.32.1
            
            Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 by Chief Executive Officer and Chief
      Financial Officer.





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SIGNATURES




In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




GAME
      TRADING TECHNOLOGIES, INCDate:   
      May 17, 2010
            By:
            /s/  Todd
      HaysTodd
      HaysChief
      Executive Officer
              (principal
      executive officer and principal financial and
              accounting
      officer)




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Number
              
              Description31.1
              
              Certification as Adopted Pursuant to Section 302(a) of
      the Sarbanes-Oxley Act of 2002 by Chief Executive Officer and Chief
      Financial Officer.32.1
              
              Certification Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief
      Executive Officer and Chief Financial
  Officer.




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