Electronic Game Card Posts Full Year and Q4 2008 Earnings

Mar 23, 2009 (Close-Up Media via COMTEX) -- EGMIE | Quote | Chart | News | PowerRating -- Electronic Game Card, Inc., a company that develops, produces and markets games to the promotional industry worldwide, toys and games, casinos and lottery, has reported financial results for its full year and fourth quarter ended December 31, 2008.

In a release on March 16, the company noted:

__During the course of the last twelve months the company has delivered four profitable quarters and increased shareholder equity by $12 million, achieved cash balances net of all debt and convertible preferred of $3.5 million, expanded its software library from 25 to 32 titles, was awarded two patents, received GLI approval, and appointed senior executive management and board talent to deliver on the next phase of profitable revenue growth. In 2009, Electronic Game Card's management team expects to deliver continued strong growth with revenue in excess of $17 million and earnings per share of $0.14 per diluted share, as it continues to develop its product range to address new markets.

Revenues for the full year 2008 increased over 76 percent to $10.6 million from $6.0 million in 2007. The 76 percent revenue growth in 2008 was achieved despite adverse currency fluctuations impacting the reporting of the company's sales in the United Kingdom and Continental Europe. The British Pound declined by 26 percent against the dollar and the Euro declined by 6 percent against the dollar during 2008.

The Company reported an 81 percent year-over-year increase in net income applicable to common stockholders for 2008 of $6.3 million or $0.11 per basic share or $0.10 per diluted share, versus net income of $3.4 million or $0.07 per basic share or $0.06 per diluted share for 2007. Operating income was $6.0 million in 2008 compared to $3.0 million in the previous year. Electronic Game Card's gross profit on revenue was $8.1 million or 76 percent in 2008. As the Company moves into new markets led by new products such as the Know-It-All QuizCard, the gross margin percentage may decline due to an increase in high volume direct product sales into large consumer markets. It is anticipated that these sales will achieve higher volumes with lower margins than the company currently achieves, and although this has the effect of reduces the company's overall gross margin percentage the actual effect on the company's overall business would be accretive to earnings per share.

In line with increased revenues, total operating expenses increased 35 percent during 2008 to $2.1 million, and represented 19.5 percent of revenues, which is down from 25.5 percent of revenue incurred in 2007. Selling, general and administrative expenses increased by approximately $105,000 during 2008 to $760,000 as a result of an increase in marketing activity. Salaries and wages increased slightly during the twelve month period, while consulting expenses increased approximately 58 percent to $927,000 as the Company sought advice of regional gaming industry experts to support its market expansion. Company management expects to continue the use of regional consultants in the interim as it develops new markets, both in terms of products and geography. Interest expense for 2008 decreased by $61,000 to $591,000 due to the conversion of 3.1 million shares of Series A preferred stock to common stock during the year.

For the fourth quarter ended December 31, 2008, Electronic Game Card reported revenues of $2.8 million, a 58 percent increase over the prior year fourth quarter of $1.8 million, and compares to third quarter 2008 revenues of $3.0 million. The decrease in revenue from third quarter to the fourth quarter is predominately the result of adverse currency movements. A significant percentage of the Company's fourth quarter sales were denominated in British Pound Sterling, which witnessed a 25 percent decline in valuation in the final three months of 2008. The Company reported comprehensive net income applicable to common stockholders for the fourth quarter of $1.8 million or $0.03 per basic and diluted share and versus net income of $1.6 million or $0.03 per basic and diluted share for the fourth quarter 2007 and net income of $1.7 million or $0.03 per basic and diluted share for the third quarter 2008.

Cash and equivalents on December 31, 2008 were $9.2 million, an increase of $4.4 million from the December 31, 2007 level, and an increase of $1.3 million from the prior third quarter 2008 level. Accounts receivable increased year-over-year by $434,000 to $2.8 million, representing a DSO (Days Sales Outstanding) of 94 days, which compares to a DSO of 140 days for the previous year. At year end 2008, the Company's current ratio was 11.9-to-1, compared to 6.1-to-1 for the previous year level. The Company achieved positive shareholder equity for the first time on December 31, 2007, which has consistently grown through December 31, 2008 to $13.3 million.

As of December 31, 2008, Electronic Game Card had approximately 56.8 million shares of common stock outstanding, an increase of approximately 3.5 million shares from September 30, 2008 predominately reflecting the conversion of the Series A 6 percent Convertible Redeemable Preferred Stock during December 2008. The weighted average number of fully diluted common shares used in the calculation of the 2008 fully diluted earnings per share was 63.1 million shares, reflecting the use of the treasury stock method and the exclusion of options, warrants and the convertible preferred, if anti-dilutive. During the most recent Board of Directors meeting held February 23, the company has elected to authorize a 5 percent share repurchase program subject to convertible preferred shareholder approval. As of December 31, 2008 the Company had net operating tax loss carry forwards of $11.9 million in the United States and $7.2 million in the United Kingdom that may be used to offset future taxable income through 2023.

"2008 marked the Company's second successful profitable growth year. Our balance sheet is strong and our net cash balance is building consistently. Our company's technology platform is robust and has been prepared to quickly evolve into the next stage of the Company's growth. Electronic Game Card is securely positioned to achieve its earnings guidance of $0.14 per share for 2009," said Kevin Donovan, CEO of Electronic Game Card, Inc. "The arrival of new management with new, innovative ideas, enthusiasm and key business relationships, will mark an inflection point in the growth of EGC, which should add to growth during 2009 as new opportunities in each of the company's three core business segments of gaming, promotions, and education materialize."

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