UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

GAMING PARTNERS INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

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 x  No o

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

The number of shares outstanding of each of the registrant’s classes of common stock as of May 1, 2008 was 8,103,401 shares of Common Stock.

GAMING PARTNERS INTERNATIONAL CORPORATION

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2008

TABLE OF CONTENTS

PART I.  FINANCIAL INFORMATION

ITEM 1.          FINANCIAL STATEMENTS

GAMING PARTNERS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share amounts)

See notes to unaudited condensed consolidated financial statements.

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GAMING PARTNERS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)

See notes to unaudited condensed consolidated financial statements.

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GAMING PARTNERS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE INCOME

(unaudited)

(in thousands, except share amounts)

See notes to unaudited condensed consolidated financial statements.

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GAMING PARTNERS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

See notes to unaudited condensed consolidated financial statements.

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GAMING PARTNERS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(unaudited)

Note 1.           Nature of Business and Significant Accounting Policies

Organization and Nature of Business

Gaming Partners International Corporation (GPIC), a Nevada corporation, was formerly known as Paul-Son Gaming Corporation and owns, directly or indirectly, three subsidiaries as the result of various combination and merger agreements:  Gaming Partners International USA, Inc. (GPI USA), Gaming Partners International SAS (GPI SAS), and GPI Mexicana S.A. de C.V. (GPI Mexicana).  GPI USA, formerly Paul-Son Gaming Supplies, Inc., was founded in 1963 in Las Vegas by our former Chairman, Paul S. Endy, Jr., and initially manufactured and sold dice to casinos in Las Vegas.  The former Bud Jones Company was founded in Las Vegas in 1965 by Bud Jones to manufacture and sell gaming supplies and, after being purchased in 2000 by GPI SAS, eventually merged into GPI USA.  GPI SAS, formerly Etablissements Bourgogne et Grasset S.A., was founded in 1923 by Etienne Bourgogne and Claudius Grasset in Beaune, France to produce and sell counterfeit-resistant chips to casinos in Monaco.  The Company has established brand names such as Paulson®; Bourgogne et GrassetÒ, or B&G, Bud JonesÒ; and T-K®.  GPIC and each of its subsidiaries are sometimes collectively referred to herein as the “Company,” “us,” “we,” or “our.”

We are headquartered in Las Vegas, Nevada and have manufacturing facilities located in Las Vegas, Nevada; San Luis Rio Colorado, Mexico; and Beaune, France.  GPI USA has sales offices in Las Vegas, Nevada; Atlantic City, New Jersey; and Gulfport, Mississippi and sells our casino products to licensed casinos primarily in the United States and Canada.  GPI SAS has a sales office in Beaune, France and sells our casino products internationally to licensed casinos.

Our business activities include the manufacture and supply of gaming chips, table layouts, playing cards, dice, gaming furniture, roulette wheels and miscellaneous table accessories such as chip trays, drop boxes and dealing shoes, which are used in conjunction with casino table games such as blackjack, poker, baccarat, craps, and roulette.

Basis of Consolidation and Presentation

The condensed consolidated financial statements include the accounts of GPIC and its wholly-owned subsidiaries GPI SAS, GPI USA, and GPI Mexicana. All material intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. These statements should be read in conjunction with our annual audited consolidated financial statements and related notes included in our Form 10-K for the year ended December 31, 2007.

These unaudited condensed consolidated financial statements, in the opinion of management, reflect only normal and recurring adjustments necessary for a fair presentation of results for such periods. The results of operations for an interim period are not necessarily indicative of the results for the full year.

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GAMING PARTNERS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (Continued)

Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157).  SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurement.  The provisions of this statement are generally to be applied prospectively in fiscal years beginning after November 15, 2007 and interim periods within that fiscal year. The FASB has issued Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), which applies to non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. For items within its scope, FSP 157-2 defers the effective date of SFAS 157 until fiscal years beginning after November 15, 2008.  The Company has adopted SFAS 157 for our marketable securities and the disclosure requirements are reflected in Note 2 of our condensed consolidated financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standard No. 159 The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115 (SFAS 159). The new statement allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. At this time, the Company has chosen not to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value.

In March 2008, the FASB issued Statement of Financial Accounting Standard No. 161, Disclosures about Derivative Instruments and Hedging Activities- an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The guidance in SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. We are currently assessing the impact of SFAS 161.

Note 2.           Marketable Securities

Available for sale marketable securities consist of investments in securities offered by French banks, primarily bond portfolios (in thousands):

Long-term marketable securities include 500,000 euros ($791,000 at March 31, 2008), which must be maintained as a minimum balance as security for a loan obtained in June 2006.

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GAMING PARTNERS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (Continued)

Fair Value Measurement

The Company has determined that its marketable securities should be presented at their fair value.  Fair value is 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.  For valuation techniques using a fair value hierarchy, the Company has determined that all of its marketable securities fall into the Level 1 category, which values assets at the quoted prices in active markets for the same identical assets.  For the three months ended March 31, 2008, the fair value recognized on our marketable securities was $7.2 million, while at the year ended December 31, 2007, the value was $5.5 million.  There were no assets or liabilities where Level 2 and 3 valuation techniques were used and there were no assets and liabilities measured at fair value on a non-recurring basis.

Note 3.           Inventories

Inventories consist of the following (in thousands):

Note 4.           Property and Equipment

Property and equipment consist of the following (in thousands):

Depreciation expense for the three months ended March 31, 2008 and 2007 was $564,000 and $535,000, respectively.

Note 5.           Goodwill and Other Intangible Assets

Goodwill, which has an indefinite useful life, totaled $1,790,000 and $1,680,000 at March 31, 2008 and December 31, 2007, respectively.  The amount of goodwill held by GPI SAS for March 31, 2008 and December 31, 2007 was $1,590,000 and $1,480,000, respectfully, which includes the net effect of foreign currency exchange of $416,000 and $306,000, respectively.

Trademarks, which also have an indefinite life, totaled $583,000 at March 31, 2008 and December 31, 2007, respectively.  Other intangible assets consisted of the following (in thousands):

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GAMING PARTNERS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (Continued)

Amortization expense for the three months ended March 31, 2008 and 2007 was $32,000 and $66,000, respectively.

Note 6.           Stock Option Programs and Stock-Based Compensation Expense

Stock Option Programs and Warrants

We have stock option programs, which consist of the 1994 Long-Term Incentive Plan (Incentive Plan) and the 1994 Directors’ Stock Option Plan, as amended (Directors’ Plan).

The Incentive Plan provides for the grant of stock options to executive officers, key employees, outside consultants and employee-directors.  The Incentive Plan expired on January 30, 2004, except as to the stock options outstanding on that date.  All of the outstanding stock options under the Incentive Plan have vested. The options granted under the Incentive Plan expire ten years after the date of the grant, subject to earlier termination for death, retirement, or termination of employment and association.

The Directors’ Plan provides that each non-employee director, upon joining the Board of Directors, will receive an option to purchase 6,000 shares of common stock. The initial option grant vests over a three year period, with one-third of the option grant vesting at the end of each year. At the beginning of the fourth year of service on the Board of Directors, and each year thereafter, each non-employee director receives an annual grant to purchase 2,000 shares of common stock. In addition, each year each non-employee director receives an option to purchase 1,500 shares of common stock for serving on certain committees of the Board of Directors.

In 2008, the Board of Directors amended and the stockholders subsequently approved an amendment to the Directors’ Plan to: (i) increase the total number of shares of common stock for which options may be granted to 450,000, an increase of 100,000 shares and, (ii) include authorization by the Board of Directors to grant discretionary stock options covering up to 100,000 of the total 450,000 shares to non-employee directors.

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GAMING PARTNERS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (Continued)

The following is a summary of stock option activity for the year-to-date period ended March 31, 2008:

Note 7.           Earnings per Share (EPS)

In accordance with SFAS 128, Earnings per Share, basic EPS is calculated by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the effect of potential common stock, which consists primarily of assumed stock options. Potentially dilutive securities are not taken into account when their effect would be antidilutive. The weighted-average number of common shares outstanding used in the computation of basic and diluted earnings per share is as follows (in thousands):

For the first quarter of 2008 and the first quarter of 2007, the Company was in a loss position and, accordingly, the basic and diluted weighted average shares outstanding would be equal because any increase to the basic shares would be antidilutive. Therefore, we did not calculate the dilutive effect of the 357,000 and 347,500 options outstanding.

Note 8.           Business Segments

SFAS 131, Disclosures about Segments of an Enterprise and Related Information, requires public business enterprises to report selected reporting information about operating segments in annual financial statements and requires public business enterprises to report selected information about operating segments in interim and annual financial reports.  We manufacture and sell casino table game equipment and have determined that we operate in one operating segment - casino game equipment products.  Although the Company derives its revenues from a number of different product lines, the Company does not allocate resources based on the operating results from the individual product lines nor does it manage each individual product line as a separate business unit.

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GAMING PARTNERS INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (Continued)

The following table presents certain data by geographic area (in thousands):

(1)  Includes Canada, Africa, Australia, South America, and other countries.

The following table presents our net sales by product line for the three months ended March 31 (in thousands):

Sales by GPI USA primarily are to casinos in the United States.  Sales generated by GPI SAS are primarily from casino chips sold to casinos in Asia and Europe.

The following table represents our property and equipment by geographic area (in thousands):

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GAMING PARTNERS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (Continued)

The following table represents goodwill and intangibles by geographic area (in thousands):

Note 9.   Accumulated Other Comprehensive Income

Accumulated other comprehensive income, which is presented net of tax, consists of the following (in thousands):

Note 10.         Commitments and Contingencies

Legal Proceedings and Contingencies

Liabilities for material claims against the Company are accrued when a loss is considered probable and can be reasonably estimated. Legal costs associated with claims are expensed as incurred.

On September 6, 2007, The Center for Environmental Health (CEH), a non-profit environmental advocacy group, filed its first amended complaint against Gaming Partners International USA, Inc. (GPI USA) and card rooms (the Card Room Defendants) who purchased gaming chips manufactured by GPI USA. The complaint was filed in the Superior Court of California, County of Alameda, under Case No. RG07336796. CEH had previously served GPI USA and the Card Room Defendants with a 60-day Notice of Violation (NOV), which is a pre-condition to bringing a private action under the California Safe Drinking Water and Toxic Enforcement Act, also known as Proposition 65. Proposition 65 requires that persons in the course of doing business in California provide a clear and reasonable warning before exposing anyone to chemicals known to the State of California to cause cancer and/or reproductive harm.

The CEH action alleges that Paulson® brand gaming chips manufactured by GPI USA and distributed in California contain lead, a Proposition 65 listed chemical, and that GPI USA and the Card Room Defendants failed for a three-year period to provide the required warning in connection with the sale and use of the chips. CEH seeks, and Proposition 65 authorizes, civil penalties and injunctive relief as well as recovery of costs and legal fees. GPI USA has received and accepted tenders of defense from twenty-one of the twenty-four Card Room Defendants named in the action, all of whom purchased gaming chips from GPI USA without knowledge that the chips contained lead and may have been subject to Proposition 65 warning requirements.

GPI USA has reached a $575,000 settlement with CEH on its own behalf as well as on behalf of the owners of the twenty-one Card Room Defendants for whom GPI USA accepted tenders of defense.  The settlement will be entered as a consent judgment subject to review and approval by the court as well

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GAMING PARTNERS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (Continued)

as the California Attorney General’s office.  In the consent judgment, GPI USA has further agreed to provide warning signs to its customers who are using chips that contain lead and to reformulate its gaming chips to reduce the amount of lead present in them such that a warning will no longer need to be provided by it to its customers who purchase those reformulated chips.   GPI USA has already complied with these two requirements.

On June 27, 2007, a putative class action complaint also alleging violations of federal securities laws based on alleged misstatements and omissions by the Company, entitled Robert J. Kaplan v. Gerard P. Charlier, Paul S. Dennis, Eric P. Endy, Alain Thieffry, Elisabeth Carrette, Robert J. Kelly, Charles R. Henry, Laura McAllister Cox and Gaming Partners International Corporation was filed in the United States District Court for the District of Nevada, under Case No. 2:07-cv-00849-LDG-GWF. Plaintiff Kaplan has been designated by the court as “Lead Plaintiff.” On February 12, 2008, Plaintiff filed an amended complaint, deleting several of the above named defendants, and adding three others. The action is now captioned Robert J. Kaplan v. Gerard P. Charlier, Melody J. Sullivan a/k/a Melody Sullivan Yowell, David Grimes, Charles T. McCullough, Eric P. Endy, Elisabeth Carrette and Gaming Partners International Corporation. The Company has engaged counsel and intends to vigorously defend against the claims presented.  Defendants filed a Motion to Dismiss the Complaint on April 16, 2008.  The disposition of that motion is currently pending.

On August 31, 2007, a shareholders derivative complaint alleging breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment, entitled Glenn D. Hutton, derivatively on behalf of Nominal Defendant Gaming Partners International Corp., plaintiff, vs. Gerard P. Charlier, Eric P. Endy, Alain Thieffry, Elisabeth Carrette, Robert J. Kelly, Charles R. Henry and David W. Grimes, defendants, and Gaming Partners International Corp., Nominal Defendant was filed in the United States District Court for the District of Nevada, under Case No., 2:07-cv-01180-JCM-LRL. The Board of Directors has formed a Special Litigation Committee composed of an independent director who is not a party to the litigation, and an unrelated independent person, to review and assess the claims asserted against the defendants.

The French Tax Administration has completed their audit of GPI SAS for tax years 2004, 2005 and 2006. On March 29, 2007, we received a notice seeking additional taxes of 551,000 euros based on their findings. In July 2007, we were notified they had revised their assessment to 531,000 euros ($839,000 at March 31, 2008). The Company disagrees with their analysis and believes that there will be a significant reduction or possible elimination of the additional tax sought by the French Tax Administration.

We are also engaged in disputes and claims in the normal course of business. We believe the ultimate outcome of these proceedings will not have a material adverse impact on the consolidated financial position or results of operations.

Commitments

On October 25, 2001, GPI SAS entered into an exclusive patent license agreement with Enpat, Inc. The subject patents were subsequently sold by Enpat, Inc. to Shuffle Master Inc. in the fourth quarter of 2004. Thereafter, in the second quarter of 2005, Shuffle Master Inc. sold 50% of its rights in the subject patents to International Game Technology and later the other 50% of its rights in the subject patents also to International Game Technology. The agreement grants GPI SAS (and its affiliated GPIC companies) the exclusive rights to manufacture and distribute gaming chips and readers in the United States under the patents for a gaming chip tracking system and method, which utilizes gaming chips with embedded electronic circuits scanned by antennas in gaming chip placement areas (gaming tables and casino cage), or Radio Frequency Identification Devices (RFID) technology. The duration of the

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GAMING PARTNERS INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (Continued)

exclusive agreement is for the life of the patents, the last of which expire in 2015. Minimum annual royalty payments of $125,000 are required to be made by GPIC over the remaining life of the exclusive patent license agreement.

On November 3, 2005, GPI USA entered into an exclusive purchase agreement with a supplier for particular raw materials used to manufacture finished goods. The supplier agreed to not compete in the sale of these finished goods in the United States during the five-year term of the agreement. GPI USA is required to purchase a minimum amount of raw material totaling $569,000 in the first year and $711,000 per year for years two through five of the agreement. The prices negotiated under this agreement represent prevailing market prices at the time of the agreement. As of March 31, 2008, we had purchased more than the minimum required by the agreement.

Line of Credit

In April 2007, GPI SAS secured a one year, 1,000,000 euros line of credit for short term needs. Interest is at a variable rate and based on Euro Interbank Offered Rate plus 0.35%. As of March 31, 2008, this line of credit is fully available.

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

The following discussion is intended to assist in the understanding of our results of operations and our present financial condition. The condensed consolidated financial statements and the accompanying notes contain additional detailed information that should be referred to when reviewing this material. Statements in this discussion may be forward-looking. Such forward-looking statements involve risks and uncertainties that could cause actual results to differ significantly from those expressed. See Item 1A, Risk Factors of the Company’s Form 10-K for the period ended December 31, 2007.

For a Company Overview and information on our products as well as general information, see Part I—Item 1. Business of the Company’s Form 10-K for the period ended December 31, 2007.

Revenues for the first quarter of 2008 of $12.1 million were $3.2 million, or  36% higher than the first quarter of last year, which was a particularly weak quarter.  Approximately a quarter of that increase is attributable to the dramatic increase in the value of the euro in relation to the US dollar.  Volatility of revenues is a key characteristic of our business.  In order to be profitable in this environment, we must make significant adjustments to our cost structure so we can still have positive results even in low sales quarters.  That process has begun with the on-going move of our Las Vegas-based chip manufacturing operations to our Mexico facility.  The move is expected to be completed in the second quarter of 2008.  With its completion, the cost of manufacturing Bud Jones chips should decrease significantly.

Based upon our first quarter sales of GPI USA, the slow down of revenues in the gaming industry attributable to economic concerns in the United States may be affecting our sales and could have an adverse effect in future quarters.  We would expect any slowing effect to be associated with consumable products such as dice, cards and layouts more than casino chips.

Much of our growth in recent years has been as a result of the major developments in the gaming industry in Macau.  Although the gaming industry has met great success, we have anticipated that our participation would diminish as fewer casinos open.  Furthermore, in April 2008, a high-ranking government official in Macau, Edmund Ho, announced a freeze on new development.  Since this announcement also said that gaming construction currently underway or in discussion would not be affected, it does not affect our near-term prospects in Macau.

We remain optimistic about the potential to create new demand for casino chips through the use of RFID in our casino chips. RFID casino chips provide casinos with two benefits.  The first benefit is enhanced security, which addresses the ongoing threat to casinos of someone counterfeiting their “currency.” We started producing chips with low frequency 125 KHz RFID, a technology particularly well-adapted to chip tracking for security and automatic accounting, more than 12 years ago and have sold several million of them to casinos world-wide. We have acquired expertise in the production of 125 KHz RFID chips as well as chip tracking readers and associated software.

The second benefit of RFID technology is player tracking.  This benefit, as well as the use of high frequency 13.56 MHz RFID in casino chips facilitates information being processed more quickly and allows casinos to gain knowledge about their table games that has been limited to slot machines. To address this market it is important to be able to offer sophisticated computer systems for table management and local presence for after-sales services. We recognize that establishing strong partnerships is crucial. Therefore, we continue to enhance our strategic alliance with Progressive Gaming International Corporation (PGIC) and our relationship with International Game Technology (IGT) in order to accelerate the acceptance of 13.56 MHz RFID casino chips with PGIC/Magellan technology as part of a comprehensive tracking and management system.  A direct result of our collaboration with PGIC and IGT led to the winning of an order for over one million Paulson® 13.56 MHz RFID casino chips delivered to MGM Grand at

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Foxwoods, the new expansion of the Foxwoods Resort Casino in Connecticut, for its opening in mid-May 2008.  We are also in the process of creating a line of 13.56 MHz readers similar to our 125 KHz RFID readers so that casinos interested in PGIC’s sophisticated table management applications have the possibility to first start with chip tracking hardware and applications compatible with PGIC’s systems.

In the first quarter of 2008, we continued efforts begun in 2007 to address concerns about the lead levels in earlier versions of our Paulson brand gaming chips.  Relying on independent, fact-based research, we have been able to counteract reports aired in November 2007 by a Phoenix television station that contained numerous misrepresentations and inaccuracies in alleging the potential for injurious exposure to the public from handling Paulson brand gaming chips.  This research also resulted in the issuance of a final report by the Arizona Department of Health which concurred that the use of Paulson gaming chips did not pose the health hazard reported by the television station.

Federal and state laws regulate the post-consumer management of numerous commercial and household products including those that contain substances identified as toxic such as lead and lead compounds.  GPIC is aware of recent consumer product safety concerns in the United States regarding lead in various items, as well as the specific issues associated with lead compound that had been used in older versions of its Paulson brand of gaming chips.  As such, the Company has undertaken as part of its commitment to product stewardship to advise its customers who may still have these gaming chips in their inventory to manage the chips properly at such time as they are no longer needed and discarded.  The Company has contacted and is working with various customers and the regulatory community to develop an appropriate management approach to apply to future disposal of those older versions of Paulson chips known or believed to contain significant concentrations of lead.

CRITICAL ACCOUNTING ESTIMATES

Our condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States.  Certain of our accounting estimates, including: revenue recognition; write-down of obsolete, excess, or slow moving inventories; the depreciable lives of our fixed assets; the recoverability of deferred tax assets; the accounting for stock-based compensation; and the estimated cash flows in assessing the recoverability of long-lived assets require that we apply significant judgment in defining the appropriate assumptions for calculating financial estimates.  By their nature, these judgments are subject to an inherent degree of uncertainty.  Our judgments are based on our historical experience, terms of existing contracts, our observance of industry trends, information provided by or gathered from our customers and information available from other outside sources, as appropriate.  There can be no assurance that actual results will not differ from our estimates.  To provide an understanding of the methodologies we apply, our significant accounting policies are discussed where appropriate in this discussion and analysis and in the notes to the condensed consolidated financial statements.  See the Company’s Form 10-K as of December 31, 2007 for more detail regarding our specific critical accounting estimates.

RESULTS OF OPERATIONS

A significant portion of our financial statements relate to GPI SAS, which uses the euro as its functional currency.  As of December 31, 2007 and March 31, 2008 the US dollar to euro exchange rates were 1.4721 and 1.5812, respectively, which is a 7.4% change.  The average exchange rates for the three months ended March 31, 2007 and March 31, 2008 were 1.3105 and 1.4997, which is a 14.4% change.

Comparison of Operations for the Three Months Ended March 31, 2008 and 2007

The following table summarizes selected items from the Company’s Consolidated Statements of Income as a percentage of revenues:

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The following table details the Company’s revenues by product line (in thousands):