Thanks for the update on the suit, Wicked. I'm curious -- has the suit been filed yet, and if so, where is it filed and is a copy of the filed complaint, including all named defendants, available?

You can see more about them at:
http://rubensteinir.com/

They appear to be a relatively small IR firm based in NYC. They list ABAT as one of four case studies on their website. You can also find a bio on Tim Clemensen. All of this, of course, if written about them by themselves, so it may be biased.

I saw this ABAT news this afternoon. Anyone have any insight about the issues?
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NASDAQ Halts Advanced Battery Technologies, Inc.
3:16p ET November 15, 2011 (GlobeNewswire) The NASDAQ Stock Market(R) (Nasdaq:NDAQ) announced that trading was halted today in Advanced Battery Technologies, Inc. (Nasdaq:ABAT) at 14:06:21 p.m., Eastern Time, for "additional information requested" from the company at a last price of $0.9775.

Trading will remain halted until Advanced Battery Technologies, Inc. has fully satisfied NASDAQ's request for additional information.

For news and additional information about the company, please contact the company directly or check under the company's symbol using InfoQuotes(SM)on the NASDAQ(R) Web site.

For more information about The NASDAQ Stock Market, visit the NASDAQ Web site at http://www.nasdaq.com.

NDAQO

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: The NASDAQ OMX Group, Inc.

CONTACT: NASDAQ OMX Media Contact:
Wayne Lee
+1.301.978.4875
Wayne.D.Lee@NASDAQOMX.com

I read the press release about the bank loan and wondered why a company with more than $70 million cash reported on its balance sheet would need to borrow $7 million and feel it worthy of a press release. I haven't dug into the details with any specific research, but what am I missing here?

Well done analysis. Thanks for sharing!

There also seems to be a clear factual conflict about the training center between the 10-K and the investor presentation on the CEU website in the investor relations section.

The 10-K states: "We have a 36,600 square foot training facility in Harbin, Heilongjiang Province, PRC, which has 17 classrooms and can accommodate 1,200 students."

The presentation states: "...36,000 square foot building with 80 modern classrooms, with capacity for 3,600 students."

I don't see how both statements can be true, so I am concluding either (a) the facility is fictional and management creates whatever story they believe sounds best at the time, or (b) communication of facts among management is flawed, or (c) management has little regard for the factual accuracy of what they present.

And, NONE of these conclusiions leave me with a warm fuzzy feeling.

I've been trying to research the facts presented in the video.

At this point, I'm not able to duplicate the address search and find the building on Google maps. But, it seems to me that if they were at the wrong address, it would have been very simple for CEU management to post pics of the correct building with their rebuttal facts. The fact that the address of the building is not disclosed in the 10-K and that management has not provided a written and detailed response to the video certainly leaves me very uncomfortable.

I'm also very concerned about the audits having been conducted by a very small CPA firm in New York with no clear expertise or physical presence in China is problematic for me. I've been burned before by small CPA firms needing cash -- without any deep pockets to protect and likely without meaningful error and omissions insurance.

I'm also concerned that the young CEU CFO Mr. Pan just passed the CPA exam a couple of years ago, lives a long ways from China in Oklahoma, and appears to have no prior public company auditing or reporting experience. I suspect he may have stepped into his first career position with his new CPA certificate and gotten in over his head.

I still have a small position in CEU so I hope the video conclusions about CEU fraud are wrong -- but at this point I am quite concerned that their conclusions may be largely correct.

I began some dialog last May with Phillip Kim of The Rosen Law Firm, which is one of the firms that filed a lawsuit against EGMI and various management. I understand that Rosen is most likely the firm to take the lawsuits forward as the various actions are consolidated into a class action.

I asked for an update from Mr. Kim and got this response last week:
"The case is still pending. These cases last 2-4 years on average, and the bankruptcy has slowed it down a bit."

It's not much, but I'll keep you posted if I learn more.

I agree with you that a broad mission can be detrimental to any company, but particularly an early stage growth business such as ALIF with its relatively limited resources.

Again, ALIF currently states "Our current core business is to develop, market, distribute, and sell leading-edge mobile applications and technologies for the latest 3 rd and 4 th generation (3G and 4G) wireless telecommunications devices and mobile (smart-) phones."

Based on your understanding of the ALIF business, how would it read after you refine it?

I've been following ALIF since last year, although my position in it is small and my knowledge and focus on it is not as in-depth as some. I would look forward to further education by you or others.

In the latest 10-K ALIF states "Our current core business is to develop, market, distribute, and sell leading-edge mobile applications and technologies for the latest 3 rd and 4 th generation (3G and 4G) wireless telecommunications devices and mobile (smart-) phones."

How are their current actions outside of this?

I try to keep up with it each day. If issues arise that deserve dialog I'll be glad to participate.

Bayside Petroleum link? Does this relate to EGMI?

I really hope we get to see the completion of the forensic review. Coming from a public company audit background, I continue to be amazed that the CPAs appear to have not only allowed misstatement of the cash balances for three years -- but may also have allowed misstatement of the value of investments and other assets, revenues, net income, shares, and all of the related explanatory notes.

Gross negligence in auditing? Conspiracy? Well-concealed and extensive fraud by management? One or two in management or collusion among many? I've never encountered a securities situation with such a mixture of fact and apparent fiction, with little basis for determining which is which.

A true case study in the making...

According to Form 4 filings, LS purchased 4.0 million shares of EGMI from 3/26/2009 through 8/17/2009 on the open market or by private purchase, not from the Company. It's not clear to me how he acquired his 5.9 million shares prior to 3/26/2009.

Yes, that's the way I read it -- with a caveat.

AH's resignation letter was dated January 25, 2010, which was six days prior to her one-year vesting period of February 1, 2010. Her letter referred to a ten-day notice to terminate under her employment agreement, but she stated she was willing to resign immediately if the Company permitted it. It is not clear to me how the Company responded. So, AH may not have any vested options, or she may have 500,000.

Of course, if she wanted to buy EGMI stock she could likely do so at $.03-.05 now -- so options with an exercise price of $.355 don't mean much, unless she's just looking to make a capital infusion into the Company. Unless there's something major going on that we don't know about, this is all an exercise in moot theory anyway.

As for the REIT, etc....keep thinking. Creativity is a virtue.

Great catch, Pontiac! I'm impressed by your wealth of information and your diligence.

I doubt if the 106,944 shares at $.03 was Anna selling. If I'm reading that Form 4 right, those 1.5 million shares were options exercisable at $.355 per share vesting over 3 years of service beginning February 1, 2009. After reading her departure letter I doubt if she exercised her options.

Somebody needed pocket change, but at least somebody else was willing to provide it.

Yes, as an agent Anna Houssels certainly represents some nice properties.
http://www.rlmwest.com/agents_details.php?agent_ID=3

EGMI has/had some talented and well-connected team members that probably could have done very well.

Getting the SEC actively involved may be our best opportunity to secure any funds that may exist and secure criminal penalties.

I've posted this before, but if anyone has not yet filed a complaint with the SEC, I would encourage you to do so. The more complaints the SEC receives, the higher it may move up in their priorities. You may file your complaint online at:

https://denebleo.sec.gov/tcr/add.action?c=12

Thanks for your post, bobsleigh, and welcome!

RE: Who Cares! The money is gone walk away!...

I'll be the first to admit that EGMI certainly hasn't played out as I expected last year or even a few months ago. If you're looking to invest in a company in high-growth mode, EGMI is no longer it.

However, if you're looking for a special situation stock, this may be as good as any, particularly at current prices. There are a lot of IF's here, but it seems likely that a judgment could be secured for the loss of value as a result of the misstatements or fraud, with a judgment value in the neighborhood of $2.00 per share or more.

Then come the IF's. If (a) the judgment can be collected (with LS's estate perhaps having the deepest pockets, reportedly deep enough to pay the full amount, and/or (b) operations, if they existed, can be resumed, and/or (c) the technology can be licensed or sold --- then the upside return could be 10X-50X current prices. And the probability? I wouldn't bet my grocery money on it, and it may be months or even 2-3 years before we know the outcome --- but in my opinion there is very little downside at this point.

I would not expect the SEC to reply to any complaint unless you are offering information that is not currently available. SEC investigations operate behind the scenes until a public disclosure is made.

Was EGMI operating legitimately?...

I suppose it's a matter of degree. I don't believe we will know the degree until amended 10-K's and audited financial statements are filed. The best information at this time is probably the company's 8-K filing dated May 18, 2010:
http://sec.gov/Archives/edgar/data/1083036/000119983510000363/electronicgame_051810-8k.htm

The level of current operations, if any, are in question. The website is down and I haven't seen any reports of operating activity, other than dealing with these historical issues, since the Poken demos in February 2010.

RE: Class action lawsuits...

From my posting on May 19, 2010:
"I spoke with Phillip Kim at the Rosen Law Firm this morning. He shared with me that they now have their lead plaintiff reporting a loss on EGMI of about $1 million, which is higher than the lead plaintiff on the other filed suit. He therefore expects that when the lawsuits are consolidated this summer that Rosen will take the lead.

They will be amending the lawsuit to include other parties such as auditors, officers, directors or others. They may also enlarge the time period covered by the suit. The case will likely take 2-3 years to resolve and collection will depend on insurance, personal assets or other resources available. Their fees will typically be limited to 1/3 of the recovery. He would not make any estimate of the recovery potential, but they must feel it's worth pursuing since they seemed to be excited to be taking the lead and willing to front the considerable time and expenses that will be required."

Unless you have some information that is not publicly available, you do not need to take any action. All shareholders who incurred a loss as a result of the misstatements or fraud will be included in the class. The amount of the suit will likely claim 100% if the losses resulting from those actions, consisting primarily of a market value loss in excess of $100 million.

Of course, under the circumstances getting a judgment may be the easiest part -- collecting it will be the challenge. The estate of LS may be the deepest pockets that could be tapped. We'll see.

The suggestion of bankruptcy could be a solution to the problem you have described. Lawsuits take time and money, and the funds in question remain outside of EGMI's reach until judgement is rendered -- likely years down the road. With a bankruptcy filing, the court can secure and protect the assets while any questions are resolved.

I know it's hard to rely on previous financial statements, but my understanding is that EGMI has very few debts or creditors, outside of the stockholders. As unusual as it may be, this may be one case where a bankruptcy filing could benefit stockholders.

RE: "EGCI continues to explore its strategic options, which may include filing for bankruptcy protection" from the EGMI press release of May 18, 2010.

Two thoughts on this as a strategy: (a) a bankruptcy trustee has tremendous legal power and can move very quickly to secure and protect company assets, potentially including the disputed cash accounts and other assets, with any disputes to be sorted out later in an open and judicial manner, and (b) if there were no company assets or operations to protect, there would be no need to file bankruptcy.

While my initial reaction to this press release was negative, after further reflection I believe there may actually be some potential positives represented here.

If you would like to submit a complaint to the SEC, you may do so online at:

https://denebleo.sec.gov/tcr/add.action?c=12

It will take less than 5 minutes to complete the form. "The mission of the U.S. Securities and Exchange Commission is to protect investors..." Some advantages of the SEC involvement are that they (a) have the ability to seek criminal prosecution, (b) can seek restitution for investors, (c) can more easily cross international boundaries than civil lawsuits, (d) can access information that may not be as available in civil actions, and (e) put your tax dollars to work and perform their mission without charge to investors. Of course, they may or may not diligently pursue EGMI or be successful for us if they do, but it's one more resource to have working on the EGMI issues.

I know that the SEC is already aware of EGMI's issues, but a larger number of complaints filed may help promote their action.

I like your Washington bailout plan best. I'm sure for some EGMI was too big to fail!

Your claim potential will continue whether you still own your stock or not, according to Phillip Kim of the Rosen Law Firm. A loss caused by misstatements or fraud is still a loss whether your loss is realized or still on paper.

I spoke with Phillip Kim at the Rosen Law Firm this morning. He shared with me that they now have their lead plaintiff reporting a loss on EGMI of about $1 million, which is higher than the lead plantinff on the other filed suit. He therefore expects that when the lawsuits are consolidated this summer that Rosen will take the lead.

They will be amending the lawsuit to include other parties such as auditors, officers, directors or others. They may also enlarge the time period covered by the suit. The case will likely take 2-3 years to resolve and collection will depend on insurance, personal assets or other resources available. Their fees will typically be limited to 1/3 of the recovery. He would not make any estimate of the recovery potential, but they must feel it's worth pursuing since they seemed to be excited to be taking the lead and willing to front the considerable time and expenses that will be required.

I had spoken with the SEC several weeks ago and was told they are already following EGMI, although consistent with SEC policies they will neither confirm nor deny that an investigation is in process. I suspect that filing a complaint will be redundant, but it only takes a little time to do so.

Of course, I think we're all hopeful that what's left of our management and highly-qualified professionals will be able to pull this out for everyone. With a remaining market cap of less than $3.5 million it's hard to believe there's not some salvage value worth more than that.

Seems like a bargain to me. I want to update my analysis, but so far I haven't see anything that seems unexpectedly negative. With the recent price drop I think it's a real buying opportunity.

RE: I'm wondering about even the new auditors now- how long does it take to verify whether $12 million is either there or gone?

I believe we are all assuming that part of PWC's tasks include issuing an opinion on financial statements for the 4 years of 2006 through 2009, which includes the 3 years for which the opnions were withdrawn by M&B. As such, PWC must do far more than simply verify $12 million cash -- their opinions attest to the accuracy of the entire financial statements, and as such, they must perform complete audits of each year, which will include planning the audit, reviewing all major agreements and transactions, testing transactions, confirming balances, researching issues and analyzing supplemental schedules and explanatory notes for accuracy and completeness under GAAP and SEC requirements. If M&B is cooperating, PWC may be able to use M&B's files and documents to save some initial organizational time, but PWC must still perform sufficient auditing procedures to form their own opinion.

The standard time allowed by the SEC for completing an annual audit and filing the 10-K for companies EGMI's size is 90 days, and given the limited reliance on internal controls and lack of internal audit assistance it generally requires most of this time to complete. In EGMI's case PWC has 4 years of activity and reporting to work through.

Sorry to say this, but under the circumstances the bottom line answer to your question about how long to verify...? -- if everyone cooperates we can probably measure it not in days but in months.

BWD - I spoke with a couple of the attorneys a few weeks ago. The main points were that (a) they were looking for a lead plaintiff (someone with more than $50,000 lost), (b) the various lawsuits would be consolidated, and (c) additional defendants such as officers, directors, auditors or others would be added as the facts developed.

Were you looking for other information about the lawsuits?

KJ - I admire your creative thinking! I won't speculate on the probabilities of your theories -- but here's a quick thought on the lack of insider purchases this year that you noted. Even if management wanted to acquire stock at these bargain prices (which is currently less than their option exercise prices of $.35) I believe all insiders would be barred from any stock transactions until they publicly release the financials and other required disclosures. To acquire stock now would subject them to insider-trading penalties.

15% of the oustanding stock would be about 10,500,000 shares. That's going to be a fairly big hurdle to get over without the support of one or more of the major stockholders -- but it may be interesting to see. I have 50,000+ shares and would be glad to assist.

Note that Section 6 provides an exception to the stockholder inspection rule for companies that have filed their financials currently with the SEC as required. From my reading it appears to me that if PWC completes the audit and the 10-K is filed, this stockholder demand may be moot. But, it appears that the window is open now -- and a little stockholder organization might prompt more attention to and better communication with us.

Wm - RE: Liability of KD v LC...

My main question with your thoughts that the primary liability rests with KD rather than LC is that the CPA's withdrawal of their opinion goes back to the years ended in 2006, 2007 and 2008 -- all prior to KD's arrival.

I like LC's apparent passion for EGMI and his sense of proper ethics he portrayed in his writings. I look forward to hearing KD's version, and of course, clarification of the facts relating to the prior year's financials and other charges made by LC.

Until then, it's difficult for me to judge who may have the greatest exposure.

Wm - I'm with you about the Light of Day being a very good thing. The first step to resolving any problem is to first identify it. It appears that we are now getting the problems out in the open -- and we seem to now have a very qualified team of CPA's, attorneys and investment bankers to help resolve them in a professional and upright manner. While it's certainly a mess, I read this as moving in a positive direction compared to where it has been for the past few months.

Seems like a shareholders' meeting may be needed to reconstitute a Board of Directors. I haven't seen the articles and by-laws, but I assume that a shareholders' meeting can be called as needed and that all directors are ultimately elected by the shareholders.

Are EGMI's larger shareholders actively involved in helping sort this out? Anyone have facts and insight here?

May 10, 2010 10:45AM

RE: What a crock!...

PaulyG, you raised a number of questions. I would appreciate your helping me better understand your information and your other thoughts that you shared:

(a) To me, $X dollars from licensing revenue is better than $X from sales revenue because licensing does not require any cost of goods sold. Licensing can be nearly pure profit. IF the revenues dollars were the same, why do you prefer sales over licensing?

(b) What is your source for the information that Sovereign Games has ceased their payments to EGC?

(c) What very large holdings does or did LC have in EGC? I haven't found any significant holdings under his control in the SEC filings. What holdings does/did LC have and what is your source for this information?

(d) Likewise, I have not found any documentation that LC was dumping his stock -- since my searches didn't find him having any holdings. What were his stock sales, and what is your information source?

(e) I'm not familiar with the term -- what do you mean by the term "tangible sales"?

RE: Share count different in 10Q

Your post caused me to review the 9-30-09 10Q. You noted that "There is an issue as to the count as the figures on the 10Q are different. The cover page and balance sheet use different figures."

The most obvious reason for these differences is that the cover shows the common shares outstanding (70,086,709) as of the document completion date of November 15, 2009, while the balance sheet shows common shares outstanding (68,353,451) as of the balance sheet date of September 30, 2009. On the surface, this is not an error, with the difference in dates allowing for the exercise of stock options/warrants etc.

Just as an added note for others who may find confusion -- the number of shares used in the income statement for computing net income per share is also different because the calculation uses a weighted average number of shares throughout the period, while the balance sheet shows the number of shares outstanding at the end of the period. And of course, the income statement also shows both basic and diluted numbers, assuming the exercise of options and warrants and conversion of any convertible securities.

RE: Lee Cole Resignation

Kasode, welcome to the board. I think we're probably all reading Lee Cole's resignation statements the same way, and IF TRUE, it would certainly be a positive for EGMI and a sign that EGMI is tremendously underpriced now at $.21 PPS.

The key words are IF TRUE. My concern is that this statement is coming from the same control person with responsibility for EGMI's financial statements for at least 2006 through 2008 -- the same financial statements that the independent auditors have now withdrawn their opinion from due to irregularities.

How much can Lee Cole's statements be trusted? We hope Lee Cole is correct, but until the forensic review is completed and amended financial reports filed we simply won't know.