Fools and their Money

News comes of one seriously unwise investment.

Today, it was announced that Golden Gate Investors committed to funding Infinium Labs to the tune of $5 Million, according to this story on Gamasutra. For those who are unaware of Infinium, it is the company that is theoretically planning the, aptly named, Phantom Game Service.

I will be the first to admit my ignorance about investing, but if I had that kind of money, I would do some basic due diligence before giving it to somebody else. The first thing to look at is the history of the company, so let us start there.

Infinium Labs was founded in 2002 by Timothy Roberts, and about three years ago, the press was publishing hype articles about the Phantom Game Console as a supposed rival to the Xbox. Within six months or so, the game industry was awash with rumors about this being nothing but vaporware. A few independent exposes were published, including one on [H]ardOCP, Behind the Infinium Phantom Console [September 17, 2003]. Among other things, it revealed Mr. Roberts as having a penchant for stretching the truth (to put it charitably) and that the company address was nothing more than a mail drop in Florida.

Since the publication of that article, Infinium has (inexplicably) made the game news somewhat regularly with different pieces of “news” but never any actual product. Last February, Roberts estimated that the console would ship before the end of 2005. Then it was announced that, rather than a game console, they were going to create a game service instead. Roberts stepped down or was forced out of at least some of his positions and replaced (even more inexplicably) by people with actual industry credibility, including Kevin Bachus, formerly of Microsoft [Xbox], who resigned after only 3 months at the helm.

This brings us to the recent past, when last month, Infinium announced that before launching any game service, they would be producing a wireless game peripheral, the Phantom Lapboard, but only if they managed to get another $2 million investment. In three years, they have gone from competing with the Xbox console, to a gaming service, to a wireless keyboard/mouse combination, if the company (or any of us) survives that long.

The next thing that I would look at is the financial position of the company, both the current situation and the future potential (and liabilities). I cannot interpret financial statements well, but it is clear that Infinium Labs has lost at least $57.5 million since inception, with no sales at all. Additionally, they are the defendant in investor lawsuits, are the subject of an SEC investigation, and owe the IRS $2.35 million in payroll taxes and penalties, as of half a year ago. This is not a promising picture.

In my opinion, naming the products “Phantom” was the most honest thing Infinium has done, as it is highly unlikely that the public will ever see one of these products. Clearly, somebody has been making money off of the investors, and I am curious to know where all of the cash has actually gone.

The big question in my mind is: How is Infinium Labs still able to get people to invest in this scheme? Perhaps more to the point: How did these investors end up with this kind of money if they use it so foolishly?

Just in case there are any big investors reading this, I have lots of game designs and prototypes that would be very successful if I could just find the time and/or help to complete them. If you want to fund a my new company for a while, we would actually deliver a real product, and at a fraction of Infinium’s debt. Think about it.

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