Thursday, June 09, 2005

The Phantom: Digging in Deep

There's a very funny interview over at with Kevin Bachus, who blew up his career and his credibility to cash a giant check and become President of Infinium Labs. Here's a link:

Now do I think The Phantom game console will make it to market? I don't know, but if it doesn't people will be going to prison. Even if it does launch, that doesn't mean it will be on the market for long--it's not a viable concept, the people involved have zero credibility and a lousy track record, and they've been consistently disingenous. In fact, the only place where they seem to have been honest is in their SEC filings. Let's take a look.

10QSB (5/23/2005)
The Company has entered into content agreements with 11 PC game publishers and developers, representing over 500 titles for launch. The content distribution agreements include four of the top ten game companies that represent collectively 1/3 of the PC games market according to PC Data's July report. (see The Company has not yet made payments to some of these publishers, and our failure to make payments could result in cancellation of these agreements. The Company currently owes these entities an aggregate of $885,000 and intends to pay the developers and publishers with the proceeds derived from additional bridge financing transaction and by issuing additional shares of equity.

Ouch. Here's one more gem of goodwill:
...while the Company may have less than ideal relations with the content community at this time, the viability of repairing any damaged relationship is feasible and no out of pocket financial risk on the part of publishers or developers is at stake.

So they already owe these publishers nearly a million dollars, and that doesn't mean they won't owe more before the console actually launches. If they don't pay, the publishers pull their games. This wouldn't be a huge deal if they had any money left, but they don't. They need 11.5 million in bridge financing (at a minimum) to even launch the system, based on their SEC filings.

The Company is currently seeking funding for the launch of the Phantom Game Service and manufacture of the Phantom Game Receiver. Management estimates that the Phantom Game Receiver and Phantom Game Service will be available for launch 120-150 after it has secured funding of the first $11.5 million.

Now back to the interview. Here's a classic quote from Kevin Bachus:
I think that it’s easy for people to misinterpret the public filings because there’s something that’s really unusual about our company. It’s not unique, but it is unusual, and that is that we are a pre-revenue public company. What that means is that you’re seeing public filings that typically you’d see when a company is more mature. When a company at least has a product on the market.

Absolutely, Sparky, and that's why "pre-revenue" companies don't go public: because 99% of the time they're worthless. The only way Infinium went public was to buy a publicly traded company (Global Business Resources) and change the name. That has stink coming off it from fifty miles away.

So why did they do it that way? They needed the company to be public, but no investment bank in the world would have participated in an inital public offering with them. But the stock of a publicly traded company has measurable value, and then they could issue millions of stock options to attract people like--Kevin Bachus!

It's ugly. Beyond ugly, actually. And when it does finally blow up, it should be quite a show.

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