www.PokerWinningSeat.com looks like the website for one of the contract sales reps or distributors for EGMI. In EGMI's 2009 10-K under "Plan of Operations" is this description:

"The Company marketed the Electronic GameCard™ during 2008 in conjunction with distributors and direct sales in North America and Europe. Staff is responsible for either selling the GameCards direct or through distributors in specific market sectors and geographic areas. Our management team has relevant experience in their appropriate markets to contract agents and distributors to sell and increase distribution of our products.

Currently we have distributors in the Native American Indian casino and gaming field, State and National lotteries in the United States, Canada, Mexico and Italy, Charity lotteries and gaming in the European Union, Educational products in the UK ,Spain and Germany and Sports Promotions in the European Union."

Good point about LS. I agree that the November 2 death of LS created great uncertainty about the potential impact on the high-level operations of the company, and some uncertainty about what impact his estate could have on the market with his shares.

Then those concerns were reinforced with the Poken announcement and postponement of updates from management in January & February.

The Jan-Feb price drop coincided with two press releases from management: (1) promotion of Poken announced 1/20, which I believe lead many to believe the company was off track and wasting time and resources, and (2) the postponement of the conference call update announced on 2/10.

As for resumption of OTC market-making, here's the answer on the SEC website:
"For stocks that trade in the OTC or the over-the-counter market, trading does not automatically resume when a suspension ends. (The OTC market includes the Bulletin Board and the Pink Sheets.) Before trading can resume for OTC stocks, SEC regulations require a broker-dealer to review information about a company before publishing a quote. If a broker-dealer does not have confidence that a company's financial statements are current and accurate, especially in light of the questions raised by the SEC, then a broker-dealer may not publish a quote for the company's stock."

So, I think it's likely that trading could resume upon filing of the audited financials and amended reports, but it appears to be up to each broker-dealer to make their own determination.

2009 10-Q's are subject to adjustment also. I just wanted to clarify this possible misunderstanding in your statement of facts. The CPA's have withdrawn their audit opinions only through December 31, 2008 because the quarterly financials are unaudited and 2008 was the last audit completed. We assume the 2009 audit is in process and about to be completed, which will include prior period adjustments.

The 8-K filed on 2/20/2010 states: "EGCI intends to determine the adjustments necessary to reissue its prior financial statements, and file amended Annual Reports on Form 10-K for the years ended December 31, 2006, December 31, 2007 and December 31, 2008, and amended Quarterly Report on Form 10-Q for the periods ended March 31, 2009, June 30, 2009 and September 30, 2009 as soon as practicable."

Welcome. I think pontiac has recapped the situation fairly well in his reply #12311. The only thing I would add is that the accounting issues, delays in updates and SEC trading suspension have planted two concerns in investor minds -- management character and management incompetence -- and many people simply don't want to go forward if either of these issues are involved.

Throw into the mix the pending class action litigation, the unknowns about the financials, management changes and other unknowns and the uncertainty level continues rising. Your PE bargain analysis is accurate, but management's statement on March 5 that "it believes that there will be no material change to the Company's net asset value" does not mean there won't be material adjustments to net income, retained earnings or adjustments between periods -- so reported earnings and PE analyses are subject to change. Bottom line, markets don't like uncertainty.

Many of us believe, as pontiac portrayed, that these issues will be corrected by the team and EGMI will have a bright future. Personally, I think a price of $1.50 to $3.50 is quite possible within the next 12 months -- and possibly in much less time than that. You can see my latest analysis at post #12224.

We're rooting for your tremendous success!

After connecting the dots, I'm increasing my position. I admit there are plenty of dots still missing, but with what I have to date here are my key observations and judgments:

1. EGMI has proprietary technology and products that have a proven market. While there are still market risks, there is a solid base from which to continue building the company. This conclusion is based in part on comments from many of you who have tested the products and shared your favorable findings. Thanks to all of you.

2. The management team includes considerable talent, experience and capabilities. No management team for any business will ever be perfect. While we can all question the lack of value added, errors and public-company inexperience of some members of the team, I believe the team overall is quite capable for a company of this size.

3. Accounting errors happen, particularly when you have a rapidly growing and evolving company with numerous subsidiaries, affiliates and changing structures. Based on the company's release on March 5 of "no material change to the Company's net asset value" I'm speculating that the errors may have involved consolidation-type errors between affiliated entities that require more of a reclassification of assets than operating income adjustments. I continue to discount the intentional fraud or embezzlement theories. In any event, the company's update on March 5 provides some comfort to me.

4. Acquisition seems plausible. Several major companies have been identified on this board for whom an acquisition of EGMI could make good sense at the right price and terms. Since no announcement has yet been made of a difinitive agreement, I assume there are still unresolved issues -- so I see an acquisition or merger as still a major uncertainty. However, I don't see the lack of an acquisition at this time as problematic to the company's long-term value -- and an acquisition or merger in the future, if not now, will always remain an option.

5. The company has cash and other resources to pursue its opportunities. Yes, errors have been made and will continue to be made. Market tests and failures are part of the entrepreneurial and growth process as opportunites are explored. Some of these explorations may result in a major opportunity. The company has the balance sheet and management team to absorb and adapt to these learning experiences.

6. And this may be the most important factor leading to my current conclusion - management financial incentives are consistent with our objectives as shareholders. Unlike some micro-caps that are pump-and-dump oriented, I have not seen that here. Directors and officers have substantial share positions, which I understand they continue to hold. So it makes sense to me that they would try to do everything they can to increase shareholder value, whether by operations or pursuing an acquisition. I don't see any significant conflicts between management's position and ours. If you believe my observation #2 above, then the management team will ultimately figure out what they need to do to right this ship.

Based on this, I have concluded that at the current share price of about $.35, the upside potential within 12 months (or less) is 5X-10X or more, while the absolute worst-case downside is 1X. While I personally believe the odds of upside are higher than the odds of downside, even if it's a 50/50 proposition the expected value of investment now is strongly on the upside. It's not without risk, but Las Vegas was built on the house having far less favorable odds than these. So, again, I'm increasing my position.

I welcome your comments or corrections. If I've missed some key dots or haven't connected them properly, please do me a favor and share your thoughts.

Anna Houssels gone from the website is a very astute catch -- I admire your due diligence. I have confirmed that her bio was there about three weeks ago. I haven't seen an 8-K announcement yet -- I believe they have 4 days from a director departure to do so. Looks like the timelines for some announcements may be quickly approaching. Thanks for your observation!

To answer your questions, I started my career as a CPA with one of the major firms, working largely with public companies auditing financials and reviewing SEC filings. Also served as a treasurer for a public company. I also spent about 20 years working as a business consultant and investment banker involving both public and private small and mid-sized companies. My focus for many of those years was on the capital-raising process, including all of the related documents and filings.

Keep in mind, none of this makes me an expert. It just means that I've probably made more mistakes in these areas than most. If we learn more from our failures than our successes, then I'm a pretty educated guy.

The Sundance video struck me the same way -- not a very effective marketing piece for Poken, EGMI or Kevin -- in part for the stumble you mentioned. That stumble about OTC may also highlight Kevin's inexperience leading a public company.

Aside from that, his video explanation of Poken doesn't seem to make many people want one -- which is surprising for a marketing guy. He showed what the Poken is and how the Poken works but never answered WHY anyone would want to use it. I'm guessing a lot of people who've seen this demo are wondering the same thing.

It gave me concerns when I first read the Poken announcement of January 20, 2010. EGMI doesn't have enough on its plate without moving into a whole new market with a totally different product platform? Where's our vision statement?

I've written and reviewed many press releases and securities disclosure statements. There's a strong appeal by most writers to including plenty of positive statements and none of the negatives, while meeting the minimum legal disclosure requirements -- particularly when written by marketing-oriented people rather than attorneys. I suspect that is the case here.

I'm only speculating here since Planetwide Games appears to be a private company, but since at least two key employees (Kevin Donovan and Thomas Schiff) left Planetwide, I'm guessing that this early-stage company -- launched in 2008 according their website -- isn't doing as well as hoped. Highlighting that two key employees left Planetwide may not have been considered a positive. Just a guess.

As for the part-time start for Thomas Schiff at EGMI, the only significance that comes to my mind is that Thomas and Keven had an existing relationship, the EGMI office was "moving" to where Thomas was already located, Thomas probably could work on both Planetwide and EGMI during a transition period -- possibly even from his same desk since EGMI apparently didn't provide him with one in the UPS box.

Just one man's speculation and opinions.

Thomas Schiff's continuing employment is addressed in an EGMI 8-K filed 11/4/2010. Just to confirm the exact working, it is as follows:

Resignation of Executive Officer; Appointment of Interim Replacement Officer

Effective on October 30, 2009 Thomas E. Schiff resigned from his positions as Chief Financial Officer and company Secretary of Electronic Game Card, Inc ("EGC") because EGC did not have all effective insurance cover required by the terms of his employment agreement. EGC agrees that cover was not in effect but is in the process of securing that cover. Mr. Schiff did not express any disagreement relating the EGC’s operations, policies or practices. Mr. Schiff, however, continues to provide his services to EGC pursuant to his employment contract. Linden J. Boyne, who recently retired as Chief Financial Officer and company Secretary of EGC, was appointed interim Chief Financial Officer and company Secretary effective October 30, 2009. Mr. Boyne is employed by Sterling FCS Limited, who have been contracted to supply various financial function and company secretarial function services to EGC since 2006 pursuant to a contract scheduled to expire on March 2, 2010. EGC presently anticipates that Mr. Boyne will again retire from those roles and that Mr. Schiff will be reappointed to those positions, by the conclusion of the upcoming annual meeting of EGC’s shareholders.

See my post #12094 for my earlier theory on this CFO issue -- which I believe is still valid.

Yes, those are the only two options -- unless there are others -- such as having now determined that they won't have their accounting and reporting issues resolved by March 15. March 15 appears to be much less of a goal line now, so while I hate to think about it, this uncertainty could continue for much longer.

Very interesting catch -- I saw EGMI on the Roth schedule a couple of days ago, but you're right -- that 11:30 slot's blank now. It could be bad news as you suggest -- or if a Bally's or other acquisition is moving forward I suppose that could account for the deletion also. The dots continue...

OK, I'll throw out a theory on the CFO thing:

First, for a little background, here are a couple of quotes from the 8/10/2009 EGMI press release:

"August 10, 2009 - Electronic Game Card, Inc. (OTCBB: EGMI) (“EGC”), announced today that it has appointed Thomas E. Schiff as its chief financial officer effective September 1, 2009, replacing Linden J. Boyne who is retiring after serving as ECG’s interim chief financial officer, corporate secretary and board member over the last three years. Mr. Schiff, formerly a certified public accountant with over 15 years of public and private company CFO experience, will work from the Company’s new headquarters to be located in Irvine, CA.

Commenting on Mr. Schiff’s appointment, Kevin Donovan, EGC’s chief executive officer, said, “Our search for a highly qualified financial executive with relevant industry and public company experience was extensive..."

I have two comments on this. First, Mr. Schiff is "formerly" a CPA -- which may indicate there is something in his background that caused him to lose his license -- anything from criminal conviction, fraud or other finding of moral turpitude or simply failure to maintain his license renewal requirements. Trying to connect the dots, I'll speculate that the reason may be serious enough to have become an SEC disclosure item or cause for the denial of D&O insurance. Subsequent press releases state that he is still employed by EGMI under the 3-year agreement. If he works for EGMI but is neither an officer nor director then disclosure of his background is not required. So, as a work-around Mr. Boyne resumes the officer title while Mr. Schiff carries the daily work load behind the scenes.

Second, I don't know how "extensive" the search really was, if my information is correct, since Thomas and Kevin worked together at Planetwide Games prior to joining EGMI. Just trying to connect the dots again, I suspect that the search wasn't really that extensive. A level of comfort probably developed while working together that may have side-stepped the full background checking until the attorneys or D&O underwriters moved this into public-company full-disclosure mode and issues arose.

Just one man's theory of how these dots may connect.

Interesting observation. Here's a link to the Scientific Games website where they talk about Electronic Games. I'm still getting up to speed on EGMI, but I don't recognize the "Electronic Scratch Ticket" or "PushPlay" as EGMI products. You can see the pics on the link. You may be right.
http://www.scientificgames.com/sections/printed-products/instant-electronic-game-cards.aspx

Home > Printed Products > Instant Games > Instant Lottery Games > Electronic Game Cards

Electronic Games
Lights, sound and motion have come to into the instant lottery ticket play experience with the advent of the Electronic Game Card (EGC). With the success of EGC games in Kansas and Iowa, Scientific Games has developed two additional electronic handheld games for the lottery industry:

Electronic Scratch Ticket (EST) and PushPlay™.

Both products are comprised of two components: a handheld player and a scratch ticket. The scratch ticket is printed using the same process as a typical lottery ticket, but also includes printed circuitry that tells the handheld player which game is playing and the outcome of that particular game. To play the game, a consumer inserts the ticket into the handheld device, scratches the “activation key” and plays an electronic interactive lottery game. Consumers not only enjoy the experience of playing, the games last much longer than a traditional scratch ticket, typically with up to 80 plays per card.

It is a sequential process. The auditors and management would need to confirm or adjust the prior financials first in order to properly compute the beginning point and change for the quarter. They will also need a little time after finalizing the numbers to write the accompanying notes and management's analysis. While they could release the revised prior periods first, I think it is likely that they will release them together after completing reviews by management, auditors, legal counsel and perhaps the SEC.

Thanks for sharing your research -- you raise an interesting point. I've read your links and certainly appreciate your view.

I'm new enough to following EGMI that I don't know if Yvonne was ever in a role to consult with EGMI "in software design and development to support the Company's new product innovations," or if that was boiler-plate that didn't get changed or an intentional misstatement.

Aside from that, I'm not sure that serving in an investor relations role falls with the SEC definitions of a promoter that would be prohibited.

So, it appears to me that you may have raised two points (a) was the S-8 factual, and (b) did Yvonne perform prohibited services in exchange for her shares. If the litigation moves forward these seem like valid issues that will likely be explored. I'm not an attorney either.

I have not reviewed the details of EGMI options, warrants and capital structure or by-laws, but based on your statements here are my initial thoughts.

I believe management in general should be incentivized by their stock ownership, options and warrants to achieve the highest selling price for their position regardless of their cost basis or exercise price, which should also mean the highest price for all shareholders. In that regard, management's objectives should be aligned with ours -- which is good. If they have expiration dates of March 30, 2010 as you suggest, certainly that could be a factor in their desire to conclude a transation prior to that date. Sounds like at $.52 some of their options are under water at the current price -- which might put some extra pressure on management to either conclude a sale or help move the stock price back up prior to expiration.

Of course, any transaction such as what we are contemplating is ultimately based on negotiations and what a buyer is willing to pay. Virtually all issues including options, warrants, management roles and compensation going forward, stock swaps and cash compensation to shareholders are all negotiable issues and can be changed by agreement and board approval. Some of these issues can create a conflict between management and outside shareholders, so to that extent we are reliant on management and the board properly exercising their fiduciary duty to protect our shareholder interests. As for price and terms, if there is only one potential buyer in the negotiations, that buyer will ultimately dictate the terms and the board will either accept or reject.

Without understanding more about the buyer's valuation of EGMI, and the competition of other buyers that may exist in the negotiations, I don't believe I could form an opinion of the likely price.

I'm new to InvestorsHub -- found it while searching for more info on the current EGMI situation. I'm still getting up to speed but I hope to become a regular participant. My background includes experience as a CPA with a major firm doing financial audits and SEC filings, as well as many years working in investment banking with small and mid-sized businesses.

Let me first say that I'm very impressed with the level of discussion I've found here, and particularly with your research of facts and your logical connection of the dots.

I believe your speculation that the accounting issue was discovered by an outside authoritative source during the due-diligence phase of a major transaction makes perfect sense. If the current CPA firm or internal management had discovered the issue on their own, my experience is that they would have handled it differently. Like yourself, I discount the intentional fraud theory at this point. I tend to think that management's inexperience with public companies, uncertainty about various issues and the loss of LS as a mentor and guide are more likely the causes of the current investor turmoil.

A pending merger or acquisition by another company -- whether BYI, PRTY or other -- would also, as you have noted, explain the inaction on CirQ branding, lack of key hirings, and the short-term approach with a UPS box office rather than furnishing and staffing a more traditional office. If my information is correct, the UPS box, residences of Kevin Donovan and Tom Schiff, and Planetwide Games office are all within about 6 miles of the Mendoza Berger & Company CPA offices in Irvine, CA -- so there are plenty of spaces available when face-to-face meetings are needed.

A pending acquisition that management felt was imminent might also explain their seeming lack of focus on maintaining current shareholder relations. I believe that no disclosure of an acquisition or merger may be required until a definitive agreement is concluded, so with no disclosure I would assume that some unresolved issues are still pending. Management walks a fine line in situations like this -- being accused of hyping the stock if they make announcements prematurely that later are not consumated. While we are seeing the negative impact of silence, sometimes silence is the appropriate action even when management might want to say more. It can be a tough position for everyone.

Like yourself, I certainly don't profess to have the answers but am also working to connect the dots as they become available. I think your focus on March 15 as a key source of more dots is right on.