EGMI board,

Usually I hold some token shares of stocks that burn me. In this case I've liquidated it all. Spent 2 1/2 years acquiring this stock with the comfort no matter the share price that the audited financials provided the stock with a downside saftey net. I guess I should be somewhat happy that my cost basis was in the .50's, but somehow it doesnt make me feel much better.

This story should be the new Wall St. movie. It has easily been the oddest and most dramatic unraveling of a company I've witnessed in my 6 years as a professional active money manager.

I never posted frequently, but I attended their only 2 annual meetings and was under the impression I had a pretty good grasp of the business. I still have a bunch of gamecards that I got almost 2 years ago. Amazingly, they still work, although my use for them is as coasters nowadays.

I would like to thank the long-time participants of this ongoing dialogue that made this a very informative forum - AB, Raw, GW, WM and others. Jesus AB, we sure were right to jump all over the resignation of Schiff when it happened. Too bad I didn't listen to myself and dump it then. Live and learn.

I wish you all the best. This has become a pure gamble imo, and an expensive one at that at this price level. I think its 50/50 that we never get a straight answer to what happened here. Furthermore, for those that are clinging to hope beware. The PR signed by Boyd on the day this started trading the grey's was the securities fraud nail in the coffin.

That's my 30 cents,

Cameron A. Crisman, CFA

I think their core business alone in the promotional market is enough to invest in this company, although I might not hold as much of it as I do if that were the case. Great margins, great cash generation. Butter on top of that.

This guy makes me laugh when he posts doubt about the continuing promo business and 2010 forecasts, and backs it up with his oh-so-mighty grandfatherly trading wisdom. There has been nothing secretive about 2010 posturing. The promo business revs are already booked over 60% for 2010 and is expected to grow marginally. As everyone (most everyone) knows, the reason the company isn't giving forecasts for '10 are cause the forecasts would be highly suspect. Kind of ironic that the lack of forecasts keep you away sweet; if they were indeed giving concrete 2010 forecasts I'd probably be out of the stock.

EG has had a bit of a falling from Grace. I could understand the short-term traders bailing with their big profits over the past year and shifting into what are perceived to be more favorable risk/reward plays while the first period of uncertainty in EG's recent past works through the system. But spare me the ridiculous statements this guy keeps harping on.

-Bino

"Well here we are and we are at $1.20. If this stock was in the can (meaning not going anywhere) we would be at .75c or lower."

Correct.

"We expected to be higher and we want ANSWERS from the company. Well, we aren't getting any."

Incorrect. Try giving them a call. Anybody that has any real money in this company and the motivation to inquire with the company will get all the answers they need to make an informed decision.

-Bino

You're not taking into account any possibility that the D&O insurance slip=up and Schiff's waffling as to whether he returns as CFO could be unrelated. I am the first to admit that the whole thing is fishy, and I see your logic related to the D&O and Schiff's return and how that reflects on KD's credibility, but imo KD's credibility was tarnished the moment he tried to paint Schiff's hiring as fully meritocratic. Thus I've been having trouble gauging what comes out of his mouth for a while now. He's a marketer/salesman with a slick tongue (look how successfully he wooed gurupup the other night), but that in and of itself doesnt make everything he says suspect.

I need to be convinced further that the smell test has been violated before I take drastic measure. Obviously, by waiting for more proof that something is off base would mean the price per share I receive when I do dump is lower than otherwise, but I'm willing to accept that risk/reward on this particular stock. It helps that my cost basis is in the mid-.50's.

-Bino

Good point. The financial statements sign-off is what I'm really interested in.

-Bino

The reason I don't think Schiff is coming back, possibly, is that I don't want him to come back. I know we both agreed that the silence on Donovan's part when he was originally hired with regard to their former relationship at Plantwide was odd. I figured I might get a beat on him at the annual meeting, but he sat there the entire time without opening his mouth. Granted, he was somewhat of a newby at the time, but I don't even recall the guy saying "hello." Believe me, I intended to ask regarding the Planetwide thing, but I suppose the upbeat nature of the gathering and the numerous other questions I had let it ride.

If he doesnt return and they get another credible CFO that will sign a Q then I will strike the odd departure as either a personal issue or some kind of friction bet. Schiff and KD.

It would take successive oddities like Schiff for me to start dumping. The overall story is just too compelling and the possiblity that nothing fraudulent is taking place very real.

Let's all hope that the nixing of the tax offsets we saw in the amended Q is the only one-off alteration of the financial statements we see in the transition from Boyne to Schiff/new CFO.

-Bino

In fact, it doesnt even feel like he's ever been there, seeing as he hasn't yet signed his name to an SEC filing as of yet.

-Bino

Maybe it's just me but I don't get the impression that he's coming back.

-Bino

Paul Ferrell

Good to see plausible reasons as to why Board members resign their positions. I had never inquired with the company as to the impetus behind his departure from the Board since the EGMI position was never sold and only transferred out of Pequot:

http://www.reuters.com/article/idUSTRE5B64H220091207?feedType=RSS&feedName=innovationNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FdealsNews+%28News+%2F+US+%2F+Deals+News%29

Here's the SEC filing of Ferrell's departure:

http://www.sec.gov/Archives/edgar/data/1083036/000114420408055905/v127929_8k.htm

Reasonable explanations make me sleep better at night. Anybody got an explanation for Schiff's departure yet? Yeah, exactly.

-Bino

$1.41

-Cambino

Raw,

I don't believe that convertible preferreds are ever incorporated into fully diluted share counts. Options and warrants most definitely are.

I don't agree with you on the share buyback. Simply having the 5% buyback approved and outstanding is enough. When it was approved in the .40-.50 price range it made total sense to begin raking them back in, but at these price levels I'd rather see their cash spent in other ways.

The outstanding convertible preferred's at 1.01 should be all worked out by the next Q filing. As you said, could very well be part of the reason for the recent selling.

-Bino

Hey Mike,

I never checked the I-hub board for TSTA - just noticed your posts. Been with you on EG for over 2 years now.

Looks like you called the 2010 revenue and backlog decline quite accurately. I have yet to contact management, but was contemplating a trip to the annual meeting in a couple weeks.

I've been a fairly large buyer since the dissapointing earnings release. Current market cap just over $10 mil, no debt and $5 mil in the bank. It's a definite accumulate imo for the time being, with a major caveat for me being the overall age of the board and management.

-Bino

GW,

If I recall correctly it was related to the first Thomas the Train card shipment. I think they were positive it would hit this year according to projections but as of the annual meeting were waffling as to whether it would be recorded this year or beginning of next. Either way they stated that it wouldnt materially affect EPS - my interpretation was that margins were lower.

-Bino

Mike,

EGMI's been my largest holding for over a year and I purchased more today at 1.411 as well. What an opportunity.

-Bino

I agree. Glad I had the chance to meet him at the meeting and appreciate his transparency and open way of conducting business. My condolences to his family.

Thank goodness that he assembled and implemented EG's management team before this occurence.

-Bino

Absolutely ridiculous. How are you not broke. That was a statement, not a question - no need to respond.

-Bino

So now we've got:

- odd Yankee's references in the online presentation from the annual meeting

- American Idol packaging for one of their new products that was on display at the meeting

- a Shell Gasoline image under the Promotions tab on their website


The implications of these could range anywhere from positive, to benign, to pending lawsuit.

-Bino

Just sounded like he had previously thought there was a good chance a deal would have been inked by the meeting and it didn't happen. That's all. I'd have been dissappointed as well. No indication as to the reason.

I'm guessing that Ian will be providing an update sometime soon, but here are a couple points I'm recalling:

- Regarding listing: NASDAQ ticker symbol CIRQ has been reserved. There will be no reverse split, nor will there be any shares purchased under the share repurchase plan. They appear confident that the share price will acheive the $4 necessary for listing of its own accord.

- Regarding investments on their balance sheet: they are still on track to liquidate all of them (except Prize Mobile, I think) by next year - I don't recall exactly when.

- Sovereign Game Card is exceeding expectations and they are talking with them on a daily basis.

- ChinaLotSynergy: KD was visibly dissappointed that a finalized deal wasn't done in time for today's meeting, but sounded quite confident that one is coming within 3-4 weeks.

- Thomas: should see sales in Q1 2010.


The meeting was upbeat and positive. The management and BOD's of EGMI is making an obvious effort to be as transparent as possible. When asked about the Roth guidance for 2010 LS's response went something like, "We will meet, exceed, or blow away the guidance." There were over 50 people in attendence, with a large percentage of individual shareholders like myself. Last year the annual meeting was attended by only 2 individual shareholders, myself and another person who has posted on this board. Talk about a tidal wave of interest in just one year...

It was of great reassurance to meet Lord Leonard Steinberg and hear him speak so honestly about his intentions and involvement. He is a lively looking 72, keen, and has a sense of wit IMO. He would have happily sat there for another couple hours feilding questions if it had been necessary.

-Bino

With you again Mike. 1.38

-Bino

I bought some today for the first time above my previous highest purchase of .83

-Bino

Good point Mike, although I'm still perplexed as to why KD wouldnt trumpet the arrival of his talented former colleage from Planetwide as opposed to presenting him as an outsider when the PR was released. There is nothing conspiracy about it as some here are trying to imply, it just creates a moment of head scratching. Head scratching moments, especially in the OTC world, can be things to take note of.

-Bino

Thanks AB. That got under my radar. Definitely cause for the warning light to go off. I would be a lot more comfortable right now if KD had said something like, "...and we decided to go with a colleage of mine from Planetwide....", on the CC. In fact, it doesnt make much sense that one would talk up 2000 candidates, then go with someone familiar without informing the investment community of such.

I'll be at the annual meeting and will be sure to pointedly ask the reasoning behind this.

-Bino

If I recall correctly, IR stated that none of the Pequot shares were sold, just transferred to a new fund. The 13-G is just a reflection of the dissolution of the Pequot funds imo.

-Bino

>> The evidence of a potential buyout at .25 <<

Anybody who thought that was either on drugs or in dire need of them being prescribed.


The company stated that they had been in contact/negotiations with Lord Steinberg late in 2007 and that they hadn't reached any agreement. It wasn't until the beginning of 2008 that Steinberg began buying shares. My interpretation of those events has always been that Lord Steinberg attempted to buy the company outright and was rebuffed.

-Bino

Um, ok bart.

-Bino

It's an MOU. I believe we were told that revenue enhancing deals were what was going to be announced, not a MOU that means little until something comes of it.

MOU's are a dime a dozen. I used to write them. It's great news, I'm long EGMI and havent sold any; still think it's undervalued purely based on this year's guidance, but this news announcement isn't all that exciting to me.

-Bino

Amb,

"They have been real for 6 quarters. The stock has been undervalued for 6 quarters. Donovan hasn't closed on anything yet. Nothing has changed, except we have a new CEO who is in the process of proving himself. But anyone is better than Cole. They could have replaced him with a hot-dog vender and the stock would have hit $1.00. So they replace him with a smoothie king and it hits $1.13. I'll take it! That's why I've been pounding the table for Cole's replacement all this time. Get him off the conference calls it might go up another .30."

Met Cole at the annual meeting last year. He looks like he sounds like on the calls. Myself, I could care less about his barely intelligable drawl and it didnt play any kind of role in my decision to invest in the company. The results under his leadership spoke for themselves. He was never meant to run the company long-term anyways, and all appearances are that he wants to be a behind-the-scenes actor as badly as you want him to be one. That said, the message and image of the company are improving with the new CEO. Let's just hope he doesnt start making those famous OTC stock promises that are so common and devoid of basis in reality.


"Until they are closed, it's all hype. I've been around penny stocks long enough to know the deal-io."

Totally agreed. To be honest, based on the tone of Donovan's voice and the words he chose on the CC when questioned about the 2 'deals,' I'd say there is a much greater chance they turn out to be insignificant than not. It's not those deals in and of themselves that I find appealing, it's their cumulative impact when considered in unison with all these other positive factors...just fuel to the fire.

"We could benefit from a lenghty consolidation. In my experience, the steeper the rise the weaker the hands."

Especially the case with OTC companies regarding the steep rises. Just a less efficient marketplace. I got no problem waiting around for some consolidation; been scaling in for almost 2 years now so I think I can wait a couple months more...but I just don't see myself having to wait much longer; the stock looks set to move one way or the other soon.

-Bino

Amb,

"Aside from momentum players, who are the other eyes? Daytraders are a fickle lot. And there is no hard evidence of increasing institutional backing. Is there?"

The increasing volumes and breakout to new all-time highs attracts attention imo. Combine that with the fact that the results for the company are real, insiders are buying, a share repurchase is authorized and there are possible game-changing deals that could be announced ect ect...sure, some of the move can from momo-traders, but I'd venture to say there are more strong hands that acquired the stock looking at a longer horizon than the traders that noticed the breakout and jumped in. Anyways, those traders are probably gone now as we consolidate in the .80's.

No, the evidence of institutional backing for the stock has been minimal at best considering their performance and outlook. Hopefully we'll see that changing as the price rises to $1+ and the prospect of listing gets closer. Another possible positive catalyst, and since there aren't many large concentrated institutional holdings left at this point we don't have much risk of a large holder liquidating their position.

[...the markets are not in free-fall mode (at least they havent been for a while, although I fully expect this to change)]

"If that's the case, then maybe it's just a matter of timing the exit before all hell breaks loose (again)."

That depends on one's philosophy regarding the marketplace. I have been laddering into a significant put option position on SPY and have been buying gold for months as well to protect my flank (NEM calls, GLD straight, GLD calls, AGT etc). But that doesnt necessarily mean I think that the overall market and EGMI are highly correlated...in fact, I was of the firm opinion that they were barely correlated at all until Trafelet folded...enter Systematic Risk stage left. Regardless of that event I think the correlation is low and the risk/reward too appealing to bail due to a belief in the market falling.

[...the fund manager for Pequot is on the EG BOD. We kind of have to assume this go around that the company and he would get together and cross the shares.]

"Is it legal for director Farrell to still manage the holdings in that Pequot fund containing EGMI? I'm not sure about this. I'm guessing no."

I highly doubt they would have elected him to the board had it been illegal. Presumably Pequot was in it for the long-term and having Mr. Farrell on the BOD was a vote of confidence in their investment and a positive for both. Also, presumably, he would be subject to similar blackout periods for trading the stock. Otherwise it might be construed as insider trading; but hey, one only has to look as far as the reason why the Pequot Funds are shutting down to see that the possibility is within the realm of reason.

-Bino

Amb,

I'd assume that the Trafelet Fund scenario doesnt play out again for a couple reasons:

- a lot more eyes are on this stock to snatch it up at bargain prices

- the markets are not in free-fall mode (at least they havent been for a while, although I fully expect this to change)

- the fund manager for Pequot is on the EG BOD. We kind of have to assume this go around that the company and he would get together and cross the shares.

I'd have preferred EG to be buying up common or Preferred's from weak hands and wasn't counting on Pequot turning out to be a weak hand, but at least they are in a position not to let too many shares thrash the open market.

Buy Gold,
Cam

Uh-oh.

Are we in for a repeat of the Trafelet Fund explosion??

http://finance.yahoo.com/news/Report-Pequot-Capital-hedge-apf-15364010.html?sec=topStories&pos=1&asset=&ccode=

I've got to run out the door, but somebody find out if egmi is part of this one of Pequot's Funds.

-Cam

I had bought a chunky starter position in ALIF a couple weeks ago, but dumped it all within days of the Q being filed. A whole lot of revenue and a whole lot of receivables that they are basically saying have a good percentage chance of not being collected. Been there done that.

Raw,

I've been in since '07 and havent done anything but accumulate since then. My lowest purchases were at .30.

Was at their first annual meeting in Manhattan last year.

I think a lot of the weak hands and original investors have sold off to date and the majority of the current large float holders are strong hands. What do we call a squeeze when there's no short position to speak of? :)

-Cam