Gizmondo Scandals – Do They Know What They’re Doing? – Part 2

A couple of weeks ago, I posted a piece about the new wannabe entrant into the handheld gaming market, “Gizmondo – Do They Know What They’re Doing?“. My conclusion was that they probably didn’t:

It seems to be a so-so product (let’s be charitable), launching into an incredibly competitive market, with entrenched, strong incumbents and trying to do so at a premium price, with a model that forces you to watch 3 re-hashed TV commercials every day.

But that hasn’t deterred the management from announcing yesterday a Nasdaq listing.

So in Part 2 of this post, I’ve been doing a little digging into the management’s track record so far, alerted by a post on Gadget Guy. It’s turned up some very interesting finds. I don’t even need to comment, as the content of their annual report available on the Securities and Exchange Commission website says all that needs to be said.

Just remember that this company pays its Directors well, by any standards, bearing in mind that the launch of Gizmondo has only happened in one market (the UK) and hasn’t exactly been a spectacular success to date:

In 2004, Michael W. Carrender (CEO) earned $ 1,266,783
Carl J. Freer (Chairman) earned $ 1,075,684, a bonus of $ 1,123,850 and stock awards amounting to a further $975,000, plus other compensation of $279,516.
Steve Carroll (CTO) earned $ 1,020,580, with stock awards of $ 1,492,587
Bo Stefan Eriksson (Director of Gizmondo Europe) earned $867,465, a bonus of $ 1,365,456, $884,024 stock awards and further compensation of $104,095

Tamela Sainsbury, the corporate secretary of Gizmondo Europe, is the co-habiting partner of Steve Carroll, a director of the Company. In 2004, Gizmondo Europe paid Ms. Sainsbury $149,844 in base compensation, other compensation and bonuses of $82,954 and provided her with a luxury automobile valued at $69,108 at the time of acquisition. In addition, in 2004 the Company issued Ms. Sainsbury a
total of 160,681 shares of the Company’s common stock valued at $467,213. Ms.Sainsbury’s base compensation for 2005 is $192,777.

In September 2004, Northern Lights Software Limited (“Northern Lights”), a company registered in the United Kingdom, and Gizmondo Europe entered into a License Agreement, pursuant to which Northern Lights licensed the games Chicane and Colors and provided software development services to Gizmondo Europe. During 2004, Gizmondo Europe paid Northern Lights a total of $3,513,000 under the License Agreement, which amount was invoiced during the regular course of business. Carl Freer, Chairman of the Company’s Board of Directors, and Stefan Eriksson are directors of both Northern Lights and Gizmondo Europe [my highlights] and each is the beneficial owner of 23.5% of the issued and outstanding share capital of Northern Lights.

In 2004 and the first quarter of 2005, Gizmondo Europe paid Anneli Freer, the spouse of Mr. Carl Freer, $116,000 and $57,831, respectively, for consultancy services provided to Gizmondo Europe. Mrs. Freer provided marketing and public relations services, an introduction to the performer Sting and time spent in
connection with the creation of the “Agaju” gaming concept currently in development.

In 2004, the Company paid $163,855 to Bankside Law for legal fees incurred on behalf of Mr. Freer, personally. The Company included this amount as additional compensation to Mr. Freer.

In the first quarter of 2005, Gizmondo Europe acquired a luxury automobile for Mr. Carroll. The automobile had a value of approximately $231,324 at the time of acquisition, which amount is included in his 2005 compensation.

In August 19, 2005, Ogilvy Group Sweden Limited (“Ogilvy”) commenced an action against Gizmondo Europe Limited in the Stockholm District Court to collect approximately $4.1 million plus interest allegedly owed to Ogilvy for marketing and advertising services provided to Gizmondo Europe during 2003 and 2004. Gizmondo Europe’s relationship with Ogilvy was terminated on June 30, 2005. The Company has issued 400,000 shares of its common stock to Ogilvy as collateral for Gizmondo Europe’s obligations to Ogilvy.

This is on top of the legal disputes highlighted in Part 1 of this post, plus there are others in Report.

I’m rather lost for words. Or am I missing something?

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