It's a long-held truism in the Valley not to risk your own money on a project when there are plenty of people willing to let you risk theirs in the hope of a return. You can now add that you probably shouldn't risk your company's most vital assets in exchange for loans from interested parties. As it stands, all of Flagship and partner Ping0's employees have been laid off, and HanbitSoft along with competitor Perfect World are now sniffing around the remains looking to poach whatever engineering and development talent they can, while Roper and other executives are said to be paying the last of the team's salaries out of their own pockets.

And according to our source, the death of the company couldn't have come at a worse time. The development team were just putting the finishing touches on the code to allow players of Mythos to make "real money transactions" — in other words, pay for in game items and new content as they played. By offering the game for free or nearly so and then charging the players nominal fees afterwards, the game can benefit from wide adoption early on and a revenue stream to pay for the development of more features and content as time went on.

But it meant that Flagship would have to eat the cost of early game development (which can be wildly expensive) and would almost guaranteed not to recoup the full cost on release. While it's an interesting business model that could prove wildly profitable a well-funded company, at one where Roper's old pal from Blizzard, CFO Ken Williams, couldn't keep the burn rate under control and was pawning IP off to licensees in exchange for bridge loans, it might make a little more sense to get some sales in first and nickel-and-dime players later. (Photo by Gamerscore Blog)

Instead, PodTech's buyers get a company that may not have been paying employees after a "reorg" and was pretty much entirely in hock to its bankers, says our tipster. On the one hand, the company has tried to drum up new business while on the other, quiet calls were being made behind the scene looking to unload what scant assets the company held — kudos to the unnamed acquirer for picking up "classic Robert Scoble!" Might we suggest removing "Pod" from the name of the company? With the iPod displaced by the iPhone and podcasting moribund, it's what the cool kids like Adam Curry are doing.

Now rumors have it that while the upper management is desperately seeking to merge with another player in this space to help stop their cash hemorrhaging (Healthline, HealthCentral and Waterfront are all leading candidates), they'll have to push out another set of layoffs on the quickly-shrinking company. My contacts suggest the next set of layoffs will occur by month's end and be in the 35 - 45 person range, bringing the company down to a 140-person business (from its high of 250+).

The save-the-company-through-acquisition plan is believable. Revolution Health's latest strategy has been to pursue traffic for traffic's sake — like last month's deal with social network Daily Strength. The company, we're told, earns most of its revenues from CarePages, a previous acquisition. Combining with other health sites to increase advertising inventory essentially turns Revolution Health into a vertical ad network. Because of the pace at which ad dollars are moving online, it's a very popular move for failing companies these days. But it's not the consumer revolution in healthcare Case promised.

As a last ditch effort, they were going to go all porn with 'CarnalTV.' They lost the last of their talent at this point because they didn't want to work for a porn company.

Dear XXXXXXXX

A number of difficult personal family health problems have led me to make a few hard choices related to Red Herring Wireless.

Indeed, for the first time in nineteen years, I have decided to postpone an event. Red Herring Wireless has been rescheduled to the mid September in Beijing - we will notify you of the exact date in the coming weeks.

In Beijing this month we had assembled a unique group of exceptional players who have managed to play an instrumental role in defining the wireless sector. Telstra, China Mobile, eAccess and many others committed to join us. We trust that we will manage to see them again in September.

We will contact you in the next weeks and I look forward to working with you. I appreciate your understanding and I trust we will speak soon,

With kindest regards,

Alex Vieux
CEO

We had hundreds of active users and you could feel the buzz around it. We threw a few parties that continued to support the good mood all around. Hell, our CTO Sam even met his current girlfriend at one of them.

One hopes those laptop's batteries were charged. A source tells us PG&E was also preparing to shut off the Herring's electricity over an unpaid power bill.

In this clip filmed at a recent Red Herring conference Vieux bragged about firing unproductive employees, and scolded entrepreneurs for not doing the same. What would he say about a CEO who doesn't pay rent on his employees' offices?

After winning kudos from the site that chronicles startups in 2005, Michael Arrington invested in the company. Cubrilovic even contributed to the site and crashed at Michael Arrington's place for a time. What followed were many laudatory posts which, though the relationship was disclosed, didn't state the obvious — that by mid-2007 the company owed customers, investors and employees money.

The only mention that the site, and the company, was facing problems came in an addendum to a post about Joyent. Arrington had stopped writing about the company as investor, but continued to write other companies he'd funded which weren't tanking. Duncan Riley finally pointed out last January that "there are big questions about [Omnidrive's] long term viability." Riley proceeded to defend Cubrilovic on a podcast run by the entrepreneur, before one of the hosts described spending an evening at Arrington's house in January of 2007 "doing shots all night with [Cubrilovic]."

The details that I've heard are that a competitor, possibly Box.net, tried to make a deal that could have at least allowed the company to close the book on some debts; but that because of the company's structure, Cubrilovic had to sign off on the deal, yet was unreachable. Observers say that the CEO's erratic behavior showed a pattern perhaps indicative, in their opinion, of substance abuse. Former CTO Phil Morle's contention that payments went directly to an account held by Cubrilovic sounds like a recipe for a binge-spending disaster.

In an update to his original post that Cook published yesterday, the investor seemed to dance around the issue of alcoholism:

Too many parties, too many conferences, too much working between 1-4am, not enough working normal business hours, too much socializing, not enough focus, no business development, and not enough follow up and delivery.

It's true. I used to work for them over 2 years ago and all of my friends that were there are now gone. They laid off the last of them today. It's sad but LONG OVERDUE. Akimbo is now officially dead although the heartbeat died over a year ago.

Not even the HR person knew about it until the rest of the employees were notified (in an impromptu all-hands meeting in the middle of our normal lunch hour - how obnoxious!). The execs, of course, had to have known about it the day before, and one of them even assured some of us yesterday that we had "nothing to worry about" in terms of the health of the company or job security.

It seems like the CEO was hoping he'd be able to swoop in at the last minute and play the hero. Unfortunately, such was not meant to be. They're only keeping all of the execs and high-level managers, a couple of engineers, the accountant, the HR person, and a little flunky who filled a position that wasn't even open at the time of his interview. Apparently he is related to or knows a friend of the CEO. What the hell were they thinking?!?

It's all a bit shady if you ask me. Clearly the board thought so, too.

In short, Vieux pressures his "finalists" to attend the conference and pay $7,500 for a video interview. (No wonder his videographers quit all at once, citing interference from the business side of the Herring.) What's really shameful is that executives like Google's David Lawee and Microsoft's Dan'l Lewin lend their names to this farce.

Just wanted to share the news that I have resigned as a director from Pulvermedia. And I am not able to say anything else nor can I address any questions about this.

The debate is interesting enough: With cell phones constantly changing, should one try to optimize Web pages for small screens and numeric keypads, or make tools that run on any number of phones?

But that debate doesn't tell us why Mowser failed. A former Yahoo insider says Beattie's Mowser drew on several elements of Yahoo's Sushi platform for cell-phones, now known as Yahoo OneSearch and OneConnect, among other names. Beattie, better known inside Yahoo for his prolific blogging and conference attendance than for his product-management skills, just couldn't duplicate the design. (Other ex-Yahoos did manage to recreate parts of Sushi, allegedly so successfully that they got sued by Yahoo.)

His former colleagues, from what we hear, aren't shedding too many tears over his tale of woe, which includes getting his car repossessed twice and subsisting on buttered macaroni. Then again, given that his alternative was somehow hanging onto a job at Yahoo, I'm not sure Beattie was worse off in the end.

The departures include Yahoo veteran Tish Whitcraft, CFO Tom Cronan, and VP of communications Sarah Ross — though we're told Ross is still consulting for the company. Outcast PR, Ooma's agency, tells me it no longer represents the company; dropping a PR agency is usually the sign of a company whose cash is running short. No wonder: Ooma's phone device is overpriced and technically unimpressive.

The video team and I are departing collectively today, April 1. Our reasons are as follows:

a) With the exception of yesterday, late paychecks over the past quarter, and before, have resulted in bounced check fees, late rent fees, and other financial issues that have cost the team collectively thousands of dollars.

b) Management's failure to adequately inform the staff of late paychecks (ie, with sufficient notice to make alternate arrangements) has been consistent.

c) Utilizing video team members as assistants to interns is both demeaning, and not what they were hired to expect.

d Recent repackaging of videos as value-added bonuses to conference registration raises substantial conflict of interest issues — ie, pay-for-play, as opposed to the post-sales of rebroadcast rights, which was more ethically defensible.

e) The defaulting on dental insurance since last September has left team members owing thousands of dollars for dental treatments received during the uncovered period.

f) Promises on the part of management for additional equipment and resources have forced team members to spend out of pocket for supplies, repairs, and miscellaneous expenses which, in light of how tardy paychecks have been, have little chance of being reimbursed in a timely fashion.

g) Personal and profane attacks by the CEO against video team members for taking previously scheduled vacation time, including accusations of lying or dishonesty, threats of violence or termination, have been appreciated, and contribute to a hostile work atmosphere.

h) Ongoing financial difficulties (IRS woes, threats of eviction) have supplemented an already-challenging working atmosphere.

Finally, it appears the business is undergoing a significant change from being a media company to an events company that occasionally produces events-oriented media, typically in the form of promotion. When we were hired, individually, and collectively, it appeared that the Red Herring company was actively engaged in expanding its media reach. This fundamental change in orientation compromises journalistic ethics, and the kinds of programming we will likely be called upon to create in the near, and for the foreseeable future.

Over the past year, the video team has single-handedly constructed and manned a fully-functioning greenscreen studio, evolved live-broadcast capabilities, and produced more than 300 CEO, venture capitalist, and market leaders. We regret that this low-cost, high volume capability has not been better leveraged to realize revenue on behalf of the organization, without violating fundamental journalistic tenets.

Our resignations, collectively, and individually for Sean Wolfe, Anthony Nielsen, Ryan Velasquez, Jamie Yee, and Si Lee, are effective immediately.

The undersigned,

Sean Wolfe

Anthony Nielsen

Ryan Velasquez

Jamie Yee

Si Lee

-30-

My last 2 pay checks where paid thanks to home equity loans taken out by [the] CEO and president. I have also had a hard time getting my final pay check from them. They claim they are unable to pay me ( $400 after advance repayment ) until they receive funding. The last few months I was at the company they kept promising funding would be coming "this friday we should have it..." was said at least 4 times. In the 2 years I worked there, I never once heard the term "profitable" mentioned, only the far off idea's of being snapped up by [some] big company

- The flip side of the founder's coke addiction was a black market Viagra dealer in the office who supplied him, which enabled him to brag publicly and often about having sex with his 20-year old girlfriend several times in one day.

- When I arrived at Capazoo, his wife worked there, as did his mother. And the other founder's wife as well. I should have run screaming. He left his wife a few weeks later... That didn't stop her from showing up at the office with their young child and spitting on the window while we were having meetings.

- [His wife] started posting messages on the founder's page on the website, including that he was bi. Unfortunately, we hadn't yet implemented "remove comment" functionality, which led to several weekends spent just cleaning up the founder's profile, over and over again. Fun.

- The brothers often talked shit about each other, saying that they saved the other from destitution, and that one would be nothing without the other. Should have run screaming.

- Was contacted one day by the founder's assistant, because she was trying to mount a coup d'etat with the other founder to get rid of him. As if that's something you can do to the guy who holds over 50% of the company.

- Several people with ties to the gambling and porn industries, as well as the mafia were hired. On this last point, at least one investor/partner told me he was not worried about losing his investment for this reason. Just another reason you cannot use my name.

- BTW, pro athletes are idiots, it's not hard to swindle them out of money by saying things like "next MySpace, next Facebook".

The one brother has a notorious coke addiction that was obvious to all investors he approached (it was a constant discussion among VCs, employees and anyone close the company) and the two brothers ended up fighting over the company, with one being ousted and them suing each other in court.

The IRS has stepped up efforts to crack down on unpaid payroll taxes in recent years. This form of fraud hurts both employees, who may be on the hook for monies withheld from their paychecks but never sent to the government, as well as taxpayers. The IRS can press charges against not just the company but top officials as well; the corporate veil, a legal concept which protects officers and directors from the actions of a corporation, does not apply here, I'm told.

That likely explains why Red Herring reported last year that half its board members had quit. David Chao, the cofounder of VC firm Doll Capital Management, still serves on the board, according to his online biography. Is his reputation worth a continued association with the Herring? Vieux can be charming and persuasive. Perhaps he kept Chao and other board members in the dark.

If the IRS investigation concludes that the Herring didn't pay its taxes, its directors have an unpleasant choice: Confess to complicity in the fraud, or admit that they were among the many Vieux has duped. Embarrassing as it would be, I'd suggest they go with the latter. They'd have plenty of company.

Solidus Networks, which does business as Pay By Touch, sold its two "noncore assets," and plans to auction the main business, the biometrics payment business, on March 14. One subsidiary, which Pay By Touch purchased for $82 million, sold for just $4.2 million. The other, bought for $30 million, went for $600,000. Now all that's left are questions.

It's already sold off the database, market research, and enterprise group. All it's got left is PC Magazine, its game group (which recently restructured itself, merging print and online, to the mass confusion of all), ExtremeTech, and the DigitalLife conference. Young insists the company's making great progress. Why doesn't he just file for Chapter 7, the liquidation kind of bankruptcy? That seems easier.

Click to expand these images.