Here are the two latest developments in this
ongoing saga...
1) On October 1st GetFugu, Inc. filed a
form 8-K with the SEC in response the lawsuit filed against it by SpongeTech (
SPNG) earlier that same day. In the document the company acknowledged the legal action, dismissed it as being without merit and announced that it had terminated its relationships with both SpongeTech Delivery Systems, Inc. and Vanity Events Holdings, Ltd. (
VAEV). The company also maintained that it had a "fiduciary obligation to retain the funds" it had received while it investigated "potentially illegal activities" perpetrated by these investors that are "jeopardizing GetFugu and its continued viability." GetFugu's allegations from the filing are listed below:
- We have reason to believe that you have been engaging in short selling of Company stock in anticipation of your proposed investment in the Company in violation of federal securities laws.
- SpongeTech has been publicly accused of forgery and identity theft in connection with attorney opinion letters allegedly forged by SpongeTech.
- In addition, in researching these events, it came to our attention that the payor in each of the electronic wires described above was RM Enterprises International, Ltd., not SpongeTech or Vanity. We are unsure about the connection of RM Enterprises with SpongeTech or Vanity. RM Enterprises was never considered by GetFugu to be a party to the proposed investment, and we were previously unaware of the existence of RM Enterprises. We find troubling the fact that monies have come from this entity, rather than SpongeTech or Vanity as originally intended and as publicly announced by all parties.
2) Then, on October 9th Vanity Events Holding, Inc.
announced that it had determined not to proceed with its previously announced $1mil investment in GetFugu, Inc. (no great surprise).
- “After further consideration, the Company determined that, at this time, it was in its best interest to rescind the plans to invest in GetFugu and its technology,” commented CEO of Vanity, Steven Moskowitz. “We do believe their technology is exciting and could change the way consumers purchase products via their mobile phones and we wish them well on their launch.”
- Contrary to any press releases or other statements issued by GetFugu, the transaction was canceled prior to the execution of any definitive documentation between the parties and no funds were advanced or invested by Vanity.
I must say, as information continues to emerge on this story, and as I read on multiple investor discussion boards about the reputations of the overlapping directors of SpongeTech, Vanity Holding and RM Enterprises International (mentioned in the GetFugu 8-K filing) as stock promoters (which some think is good), the more I feel that this whole transaction could use a healthy scrubbing with one of SpongeTech's products. Fundamentally, in what world does it make sense for mini microcap companies in the soap-infused sponge and touring swimsuit model businesses (the latter doesn't even have a website) to invest in an enhanced mobile search marketing company? (Clue: It doesn't) I get the sense that all of these companies, including GetFugu, are primarily in the business of making management (and early stage investors) wealthy in the very short run, rather than creating quality products and/or services to form the basis of sustainable companies that can hire employees, benefit consumers and generate income for a large number of investors over the long term. Is building a real business an anachronism? I hope not. Unfortunately, there are still far too many companies in the mobile entertainment space, and in the broader entrepreneurial economy, wedded to poisonous, dotcom era (everyone's gonna be a millionaire) thinking that validated and glorified the creation of companies where the most important component of the business plan was the exit strategy, with its associated payday. It's way past time to move on. It's time to celebrate real business.
Enhanced mobile search company GetFugu (GFGU) concedes in their latest 10-Q, filed with the SEC on 11/23/2009, that their accumulating losses and dearth of cash (less than $50k, with a burn rate of $500-$600k per month) make securing additional capital from external sources mission critical in the short-term. Failing that, these issues "raise substantial doubt about the Company’s ability to continue as a going concern." I would suggest that their prospects for obtaining those additional funds, considering their financial track record, recent investment drama, an alarming new exposé on Realtid.se and the fact that their lone product seems to have disappeared from the iTunes App Store, are about as paper-thin as expertly prepared blowfish.
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