Star Citizen – Scoops

[dsmart]

 

Once again, sources are telling me that the performance issues seen in the recent AtV broadcast (my analysis), are thus far insurmountable, and that they don’t know how this upcoming 3.0 patch (analysis of latest dev schedule) is ever getting released without that being addressed.

More talk about access to moons and planetoids possibly ending up being #justanotherlevel via a menu option.

Claim that if they were to release 3.0 within the “next 90 days”, that it would be an unmitigated disaster.

I hope they release it – at least to Evocati (so I can get my hands on it).

CryEngine is legendary for its performance issues in pure fps games. We’ve seen in the 2.6.x builds just how horrendous it can be with all these fidelitious models in it. Now go and add million plus polygonal planets.

But Chris Roberts is arrogant enough to release 3.0, regardless of performance issues, then advocate to backers that they should upgrade their machines to run it. Most of them probably will. The rest will put in for a refund.

And it doesn’t matter what state the deliverables are in, they’re just going off a checklist now in order to not run afoul of liability* issues. As long as they deliver an item promised, regardless of state or condition, they’re covered. That’s why Hangar, Arena Commander, Star Marine (LOL!!) and similar, aren’t getting frequent updates. In fact, the last 2.6.3 build was back on April 7th.

*That OldSchoolCmdr guy on Reddit, wrote a pretty good summary of what he thinks; though he doesn’t think it’s a scam.

[dsmart]

THE EXTINCTION LEVEL EVENT

Back in April 2016, I wrote the Star Citizen – Extinction Level Event blog which was my ground zero point for the inevitable collapse of the project. In July 2015 when I wrote that first Interstellar Citizens blog, I had already expressed my opinions as to why I didn’t think the project was possible, and even so, not without a capable team, engine, and minimum $150M. In April 2016 when I wrote that E.L.E blog, they had already raised $112M (according to the public funding chart).

In that E.L.E blog, I wrote about several events which I believed were evidence of an E.L.E (btw it isn’t an instantaneous event. It is a series of ripple events over time, until the final end) that was moving along apace. I said:

“For about two weeks now I have been hinting that on-going events which, combined with what has transpired long before this project turned into the shit-show that it is now, are likely to see this project result in a catastrophic collapse before they can deliver on promises. If you are in the media, a backer (are you a disgruntled whale? then you’re even more vested; do something), or in a position of authority, you need to do one thing, and one thing only. Ignore all the noise and the drama, because my opinion remains the same, the game is never going to come out as promised. Instead, just follow the money.“

I also opined about some very specific things which I will outline below.

1) Terms Of Service Agreement

Having failed to deliver the games in Nov 2014 (the same month they were fully funded to $65M for the over-scoped project), and with the additional 18 month ToS deadline approaching, I stated that they would likely change it again because the projects were nowhere near completion. I said :

“You could start with the ever-changing ToS which, effective May 31st, 2016 from their inability to deliver as promised, requires them to provide not only refunds, but also a financial accounting of how the money raised from backers, has been spent. They’re unlikely to do it. And there is a reason that they shifted that date from 12 months (expired Nov 30th, 2015) to 18 months (expires May 31st 2016).”

They changed it in June 2016 to a version that not only removed certain promises (refunds, financial accountability etc) made to backers, but also set the stage for the reduction of liability in the event of a catastrophic collapse of the project. I have an entire forum dedicated to the discussion of those changes.

2) The Refund Debacle

They were actively refusing refunds, even though Chris Roberts had gone on the record saying that refunds were not guaranteed because the 2.0 build (released in Dec 2015), was a “substantial update”. I said:

“That aside from the fact that they have been routinely refusing to give refunds to people who have seen through the lies, and want their money back. They prematurely released a broken tech demo in Q4/15 as the first PU 2.0 – which as was to be expected, netted them quite a bit of cash. Shortly after, in a bid no doubt designed to curb the flow of backers ejecting and asking for refunds, they started using it as an excuse to refuse refunds.  And when Sandi Gardiner got into an exchange with Beer, an early backer and previously staunch supporter, here’s the fallout from that fiasco.”

Less than a month later after I stated that they had no legal reason to refuse refunds, having missed the dates in their own ToS by a wide margin, a backer who was refused a sizable refund, decided to test my theory. He went straight to the CA State authorities who agreed with my assessment. Barely a week later, he got his refund, and refunds became a thing again, and continues as of this writing. It wrote Star Citizen – The Refund Debacle blog about the whole thing.

3) The Engine Dilemna

Chris made key statements in a Dec 2015 broadcast that led me to believe that they had reconciled the fact that, as I had stated back in July 2015, they didn’t have the engine needed to make the games promised. I said:

“As I stated in my first July 2015 blog, they simply don’t have the tech to build the game he promised. He knows it. His team of skilled engineers know it. The backers (at least those who are paying attention) know it. It’s simply not a secret anymore; and he has said so himself after so many denials and rebuttals to my blog statements and commentary. And the fact that they keep systematically cutting things out, walking back promises etc, they have completely proven the point that I made in my first blog back in July 2015″

At GamesCom 2016, Brian Chambers, studio head at F42-GER where the primary engine dev takes place, stated in an interview that they had modified CE3 “by about 50%”. In Sept, I wrote that it simply wasn’t enough. I said :

“At the end of the day, as I mentioned in my missive, in order to come up with a custom engine which would make it somewhat possible to build vision 2.0 of the game, they would have to modify CE3 by a whole lot more than 50%. And even so, the underlying CE3 architecture is still going to be there because things like scene management, 64-Bit positioning, networking etc, are all the things they would need to either rip out and replace, or build on top of. And the time it takes for them to be doing all that, could have been spent building a custom engine which specifically does what they want.

It is hard for a none programmer to quite grasp how horrendous it is to go back and modify someone’s code; let alone an engine built by several people. Which is why, last year when people were saying that opening F42-GER with ex-CryTek engineers was going to be the magic bullet, most of us who know better, just laughed. It’s been almost 18 (?) months since; look at what they have now.

To be clear, I don’t envision there ever being a time whereby their CE3 FrankenEngine ever powers vision 2.0 of the game. I simply don’t see it happening. For that, would need to modify CE3 by 90% or more. Well, therein lies the rub.”

In Dec 2016, without having previously said anything about it, we learned that they had switched from one CryEngine 3 derivative to another (Lumberyard) in the 2.6 release.  I wrote extensively about that in my Star Citizen – Irreconcilable Differences blog a few days later.

And if you read my article on the disastrously disappointing GamesCom 2017 show this past August, then you already know where this is headed.

4) Minimum Viable Product

For years I had stated that they simply couldn’t build the game pitched, and that they would be left with no choice but to ship “something”, release it, then if they survive the fallout, build on that. I said:

“Here’s the thing; he could have ten like them and NEVER build the game he wants to build. Aside from that, he’s got a bunch of ex-CryTek (the company that developed the engine they are using as a baseline) parked in a separate studio in Frankfurt Germany. That was almost a year ago. Still no game – or anything that remotely resembles one. Why? BECAUSE IT CAN’T BE DONE. PERIOD.”

A few days after my E.L.E blog went live, Chris in a broadcast, made clear that they couldn’t in fact deliver the games promised, and that they were instead going to work on an MVP; then build from there. In my follow-up article, I called that plan the final nail in the Star Citizen coffin.

He made the same claims in an interview from this past GamesCom 2017 event. You can read about that in my GC2017 coverage. It’s eye-opening.

5) Financial Difficulties

Having raised about $112M at the time, without ever delivering an Alpha product, rumors started swirling that they were – again – facing financial difficulties. I said:

“Rumors and unconfirmed reports have been swirling for months that they’re running out of money to complete these projects, that they’ve been seeking external investor funding, trying to take advantage of tax credits etc. Even over in the UK, where reports like this come out, there is no evidence of them ever filing with the BFI if they did in fact take advantage of UK tax credits.  If they’re out trying to raise investor money, it should come as a complete shock to anyone who thinks that $112M should have been enough to, you know, develop the game as promised. All the negativity surrounding the game, the shitty and toxic community that has sprung up around it; the aforementioned videos of a shitty tech-demo (aka CryEngine mod) everyone is now laughing (1, 2) at, are collectively likely to affect any efforts to raise money outside of a bunch of gullible whales firmly entrenched in sunk cost fallacy and cognitive dissonance. Here’s the thing, any investor or investment banker looking to invest in a project which, for five years, has raised over $112M (that we know of) for a project that the creator was originally asking $2M from the public, should be doing extensive research into all the execs associated with this project.”

Later that year, between the Aug GamesCom 2016 and Oct CitizenCon 2016, Chris did the following: (1) presented an R&D demo being passed off as live 3.0 gameplay (which was later debunked by me, forcing them to admit to it) (2) claimed that the build – which he was playing – was due out on or before Dec 19th (3) didn’t show SQ42 as was expected, but later released a “Road To CitizenCon” video which proved, beyond a shadow of doubt, that they didn’t even have anything to show of SQ42 at the event – but they lied about it anyway.

As a result of these carefully planned events – seemingly designed to mislead and rip off backers – he subsequently raised about $23M through that period. All based on what we now know, almost a year later, to be pure lies.

It didn’t stop there. It wasn’t until June 2017, that we finally learned that the aforementioned rumors were in fact true. This time, they had taken out a loan in the UK, while pledging assets paid for by backers, as collateral. I wrote about this in my Star Citizen – The Final Countdown blog, and also in a follow-up article about a week later.

Then days ago, someone who attended GC2017, posted a rumor on Reddit, that CIG was seeking $75M investment at the event. The poster also made a video.

Since that April 2016, E.L.E blog, every single thing they have done has been about raising money by any means necessary. This has included on-going JPEG concept sales, showcasing carefully crafted videos at events being passed off as the game in order to continue raising money from backer whales, various refund shenanigans in which some backers are reporting that they are either not getting their full and correct refunds, or CIG is making it prohibitive (e.g. requesting ID, attempting to refund to expired or invalid credit/debit cards etc) for them etc.

I have also learned that CIG is going to stop issuing refunds very soon, due to their on-going financial difficulties.

Then, out of nowhere, an industry developer wrote an extensive two-part article outlying why he thinks that the project is now in financial distress.

THE EXIT STRATEGY

About a week ago, I had a very disturbing discussion with a top tier (CEO of a large and well known studio) industry peer with connection to several people working on this project. That discussion left me shaken with anger, resentment, and confusion. I released this Tweet.

“BREAKING! Huge Star Citizen news inbound! 1st, read my Extinction Level Event blog from April 2016 for context”

Basically people in the industry who are either connected to the project, or to someone who is, are all talking now more than ever before. And the general theme is that the project is, as has been reported before, a complete failure, that Chris Roberts was not only looking around for investment, but also seeking an “exit” strategy. Speaking to several of my sources, they indicated to me that people are already leaving (Note that this is the most difficult industry to find work in, so leaving a project is not a decision that is made lightly) either through termination, or resignation. In fact, several of the recent ones already went public.

Statements made include, as has been reported before, that Chris Roberts is difficult to work with, and has run the project into the ground due to not taking the advice of the people he is paying to build these games, even as him and his friends blow through backer money irresponsibly. Most people on the project are basically pulling a paycheck until the final collapse because, as I mentioned before, it’s very hard to find work in the industry these days; no matter who is hiring.

You know why I’m mad? Because he’s done this before. I recently posted a short compilation which would give you some insight into what I’m talking about.

And now comes this….

Though I can’t go into a lot of detail at this point because it would compromise some sources, even as I await further clarification, I also learned at the same time that, in addition to the dozen or more corporations involved in this venture, this past Aug 29th, they formed yet another shell corporation in the UK called Cloud Imperium Rights LTD. It is a wholly owned subsidiary of another shell corp, CIG UK Ltd. I know what the implications of this are, I know the details, and I know what it’s for. But unless and until I obtain some key pieces of information that I am awaiting, I can’t yet say anything more about it. In fact, the only reason that I am even mentioning this at all is because though some of us have been discussing it in private, some people are now also aware of the existence of this new entity – though they have no clue what it’s for, nor why it exists.

FYI: Back in early August, Playdek which had raised over $660K via crowd-funding, abandoned the project, then passed the rights off to another company.

My April 2016 E.L.E blog was written for a reason. More soon.

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UPDATE 2: Eurogamer just published an interview Chris Roberts gave at GamesCom 2017. It’s an eye-opening read which contains ample evidence of what I’ve stated that they can’t develop the game promised, and that they were possibly planning to dump 3.0 as a Minimal Viable Product. I covered this extensively in various blogs. To recap his statements from April 18th, 2016:

“…and, awh, wuh… we’ll have what will sort of determine a sort of… MINIMUM VIABLE PRODUCT FEATURE LIST for what you would call STAR CITIZEN the COMMERCIAL RELEASE, which is basically when you say, “OK! Ah, we’ve gotten to this point and we’ve still got plans to add a lot more COOL STUFF and MORE CONTENT and MORE FUNCTIONALITY and MORE FEATURES”, which by the way includes some of… the LATER STRETCH GOALS we have cos not all of that’s meant to be for ABSOLUTELY RIGHT HERE, on the commercial release…“

I like how he says the public schedule is the same as the internal one. I guess 3.0 did come out in 2016.

I am also thrilled to see that he is still reading my articles because I was the first and only person to leak that the internal and public schedules were different.

So basically, he’s gone from a $160m (as of now) crowd-funded project with a Nov 2014 delivery date, to pre-Alpha, and now right into an early access release instead, thus removing any future release dates.

He’s a liar, a scam artist, and a fraud.

UPDATE 1: For those of you asking about the ramifications of this new shell company, my answer is that I can’t say anything more about it until I get additional feedback, answers to some questions I’ve asked, as well as clearance to share some of the other pertinent info that I am not permitted to share at this point.

However, I can share a bit of background to give you an idea of why this new shell company should be raising new Red flags even if nothing funny is going on. Even it was for the sole purpose of IP licensing etc, they don’t need another EU shell corporation when they already have three in the same country, and another, F42-GER in Germany.

What this new shell company highlights is how they have systematically taken money out of these corporate entities.

Basically Chris took approximately $75M (publicly filed expenses from the formation of the studio) of backer money and built/maintained F42-UK studio for his brother and lifelong friends (The Elms, Derek Senior et al over in the UK). The corporation papers were filed in Sept 2013.

Then in 2014, at the height of the crowd-funding windfall, they turned around, and through CIG-UK, bought the company back from Erin et al for £440k, thus taking money OUT of the entity. Money which should have been spent on developing the games. Money which btw, is funneled from the US by CIG-UK via the RSI-UK subsidiary.

And during that time, they were putting the company into debt with not one, but now two UK loans – one of which collateralizes IP and assets paid for with backer money – even after taking money out of the entities for no good cause other than what can only be regarded as Unjust Enrichment. And we don’t know what is going with the US side of the financials, as those aren’t public.

All of the above in addition to Erin taking a larger than normal salary, even while giving himself salary raises and bonuses – never having shipped a single product.

And some of these same execs were part of the massive collapse of Gizmondo (which I also wrote about in 2015).

The other question mark in their books is that in 2015, CIG-UK bought an IP “on paper” for £1.36m. That same year, it sold that same IP to the tune of about £2m, thus booking a “profit” of about £655k. Nobody knows what that IP is. But my guess is that, since they’ve never even mentioned it, and the fact that they “sold” it, points to them selling Star Citizen and/or Squadron 42 related IP among their shell companies. Hilariously, even with the profit, the end of year filing for the value of the aforementioned IP, is still £1.36m.

As there are no books to show who the IP was bought from or sold to, it stands to reason that it wasn’t sold to any of the UK entities (or it would be recorded there in the P&L which we have access to in the UK), but maybe to either one of the other shell companies in the US or in GER. Companies for which backers have no financial access or overview.

[dsmart]

BREAKING NEWS! UK STAR CITIZEN COMPANIES FILE ACCOUNTS

Seeing as they tend to file late, this one caught me by surprise late last night. I am currently working on a blog with a real life accountant, and another party to make sense of all this. I have also pinged a very good contact of mine who specializes in FINCEN related crimes and misdemeanors for his take. Once I get all my ducks in a row, I will publish the blog. Until then, this is what we have so far.

So the UK companies filed their 2016 accounts. As I have done in the past, I will be pouring over them as I mentioned above.

What’s interesting about this one is that, no doubt sparked by the due diligence required by the Coutts loan (I wrote about that in my Final Countdown blog) which they took out, with secured collateral, it has more detailed information. This is similar to the corrections they filed in the 2015 accounts and which shed even more light on the money movements between companies.

 

Since 2015 I have been writing that sources had said that Chris Roberts, family and friends, had enriched themselves with backer money, outside of just wages and project related expenses. Things like setting up over a dozen corporate (some of them shells) entities around the world, buying the IP back from themselves, setting up F42-UK with backer money, then buying it back from Erin, excessive paychecks for the friends and families – and for a group of companies that has yet to ship a single game – are just some of the biggest Red flags now brought to light. And so far we only know about the UK side as the filings are public as mandated by the UK govt.

There is no way to obfuscate this. They have basically taken money out of the project, enriched themselves, then went out and not only took out loans, but also continued all kinds of deceptive practices in on-going efforts to continue squeezing backers. Meanwhile, $161 million and six years later, neither of the two games, Star Citizen or Squadron 42, is anywhere near completion.

Do you remember what happened with the crowd-funded projects which State attorneys went after? For example the Lily drone one whereby they were raided in a criminal investigation followed by the DA filing a lawsuit against them. What about that case were the FTC also took action, specifically against someone who used backer money for something else. There are several similar stories across different States in the past two years.

Well think about how all of that reflects on Star Citizen and what the founders have seemingly done with backer money. And that’s what we know on the UK side. A few months back, I had written a lengthy blog about following the money.  In fact, the gist of all my Star Citizen blogs, has been about that one thing; especially given the people who were involved in this project and their past dealings.

The sad part in all this is that the award winning TheEscapist magazine who reported on this back in 2015 after reaching out to sources who confirmed what I’d written, were incessantly attacked by both Croberts and his minions. The author, Liz Finnegan, even went on to win an SPJ award for that 2015 article. That article was since removed earlier this year after CIG threatened (back in 2015) a lawsuit when it was published. With Defy Media focusing on their other properties, the recent downsizing at Defy Media, and with layoffs announced a few days ago, it makes sense now why they would have wanted to settle the matter, rather then engage in a lengthy legal battle for zero gain. Especially since CIG has the benefit of free backer money.

With the recent news of RSI refusing to issue refunds, under the guise of delays due to the much delayed 3.0 patch, even as backer whales ($24K refund attempt!) try to get their money back,  while others offering suggestions ranging from chargebacks to small claims court, I feel that we’re closer to the end game now more than ever before.

I would be remiss if I didn’t mention the latest report in states that Over three times as many video game projects fail than succeed on Kickstarter. Take a look at the trends. Then note that Star Citizen Kickstarter was in Oct 2012.

This is a developing story. In the meantime, below are some third-party comments and analysis about the filing from the Goon numbers guys.

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Consolidated
This year they filed their consolidated accounts. This means that rather than being just that company, the set of accounts is consolidated to include all the subsidiaries. Any transactions between subsidiaries/parent are cancelled out.

Intellectual Property
The accounts preparation improves year on year as errors get picked up. I’ve pointed out the IP issue before and it’s now apparent what happened here.

On the 1st of July 2015 CIG UK paid £1,359,185 for Intellectual Property. This isn’t entirely clear but the suggestion would be that this was for the worldwide rights to Squadron 42. The sale of intangibles for £654,612 was the US rights of Squadron 42 being sold to Cloud Imperium Games Inc. Because of apparent errors in earlier sets of accounts we can’t be sure where that £1.36m actually went to, it could quite easily be to Chris Roberts himself, or a personal services company that is essentially himself.

Fixed Assets
These are actually broken down for the first time since they filed consolidated accounts. In the UK they’ve spent a little over £1m on computer equipment to December 2016. £400k on Fixtures and fittings. £300k improving the leased premises.

Goodwill
This is an accountancy term that represents the extra cash paid for an asset. If a company has a value of £34,851 and you pay £440,000 then in your company’s set of accounts this is recorded as an investment of £440,000. In your consolidated group accounts however, you include the activities of the subsidiary. Because of this, you do not include that investment of £440,000. You reverse it out through a set of journals which includes the value of the assets at £34,851 and the goodwill figure of £405,149. The goodwill is then amortised (written off) over, in this example, a five year period.

As you have no doubt guessed, these are the actual figures for Cloud Imperium Games Ltd’s purchase of Foundry 42 Ltd from Erin Roberts et al.

Related parties – mistakes
Note 20 on Related Parties Transactions. Accounting errors. All amounts are actually due [b]to[/b] the respective companies, but they are in brackets so the lines that currently read “due from” are correct (Like a double negative).
It’s an easy mistake to make, but it’s surprising that a professional auditor wouldn’t notice it instantly. All three disclosures should really read something like, “Amounts due (to)/from” and it would be easier all round to understand and avoid mistakes such as the one made.

Related parties – analysis
There’s three US companies under Chris Roberts control that have transactions with the UK group. These transactions, from a standard accountancy point of view, are sort of nonsensical. The flow of money however keeps changing and changed again in late 2016.

1. Roberts Space Industries Corporation. This continues to be the main money pig. The UK group tells America how much to pay and they pay. “Costs recharged in the year” is turnover for the UK group. As the American company settles these, a balance remains. Because of poor planning, Roberts Space Industries Corporation has actually settled more costs than the UK has recharged. The balance comes down as they adjust (Compare 2015 and 2016).

2. Cloud Imperium Games, LLC. This one is interesting. In early 2015 it relinquished the role of funding the UK group that is now undertaken by Roberts Space Industries Corporation. Now we learn in late 2016 it has gone to being dependent on the UK group for financing. “Costs recharged in the year” is turnover for the UK group. In 2015 it is a positive and in 2016 the figure is in brackets, which means it is no longer turnover for the UK group but an expense. Apparently some US expenses were actually paid by the UK group, so this figure is netted off that which is due to the American company.

3. Cloud Imperium Games Texas, LLC. This is a brand new entry for the UK in 2016 and it only has one figure. “Costs recharged in the year” is turnover for the UK group. However, this is a figure in brackets, which means it is no longer turnover for the UK group but an expense. We know this was done in late 2016 because the amounts for both CIG US companies are relatively small and remain unsettled at the year end.

Related parties – conclusion
What this means is that they have once again refactored the way the money moves around the companies. All sales continue to be made and received by the US companies and flow to Roberts Space Industries Corporation where it is funneled to the UK and distributed in the UK but now, going forward some will then flow back to the US to pay for Cloud Imperium Games(, LLC and Texas, LLC). Pointless.

Financial Risk Management
“The Company does not actively use financial instruments as part of its financial risk management.” I’m not sure how this ties into the reddit hivemind and the infamous Sunday panic statement by Ortwin. It seems pretty unlikely however that the “pay day loan” was some sort of hedge against currency exchange rates.

Completely Speculative Conclusion
Steps have been taken to change the flow of money. It appears going forward (and this means since December 2016) that perhaps nearly all the income is going to be funneled to the UK from the USA. Some of this is then moved back to the US to cover expenses in Texas and LA. This would have the appearance of higher income in the UK group. We know in 2017 that CIG UK put up a lot of collateral to secure loans. It would be in their best interest if the interim management accounts provided to banking institutions showed more turnover. Also beyond just the vanity of a higher turnover figure, there’s the fact that the UK is now receiving its funding before studios in LA and Texas for example. The sort of thing a lender in the UK might stipulate.

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“This is something I don’t understand at all – if they created Foundry to build the game then charged them for the license… where did Foundry get the £2 million from? Did they go into £2 million debt right off the bat to develop a game for the brother of the guy who runs the studio? But then didn’t CIG buy Foundry outright further down the line anyway?

Why sell them the license when you are contracting them to build the game that the license covers anyway?

Absolutely none of this makes any sense to me“

The IP is actually in the books of CIG UK not Foundry 42 Ltd. Basically, by moving things around it is easier to introduce actual bank loans. Banks would not normally lend a company money to buy shares from the directors or IP from the directors or companies owned by the directors.

This was a summary of the activity of CIG UK specifically that strips out the inter-group transactions:

Sources of funding
£710k Long Term Loans
£290k Short Term Creditors
£200k Shareholder Investment [1]
£650k Sale of IP to USA company
============
£1.85m Total

Outgoings
£440k purchase of Foundry 42 Ltd from Erin Roberts and others [2]
£ 50k Admin Expenses
£1.36m IP purchase from USA company/Chris Roberts?
============
£1.85m Total

“Well even if the Google Sheet was accurate, let’s assume that it is a best case scenario as well, then they have a huge issue, it shows that they have raised $21M so far this year although the cashflow forecast would need them to raise $30M, a difference of $9M. With projected cash reserves of $13M at year end, assuming that their costs were as anticipated and that they did not take in any more debt then cash reserves are probably down to $4M right now. If this trend continues, losing around $1M a month in cashflow, then they would be illiquid by Feb 2018. Again, this is purely speculation based on the forecast, they would have to start reducing team sizes and costs, if not already done so, to try and balance the cashflow. Of course, if they start getting more negative press then this would only detract further pledges from the community leading them into a cash leaking spiral.“

Even the simplest concept like turnover isn’t straight forward for the UK group. The parent company, Cloud Imperium Games UK Ltd and Foundry 42 Ltd, basically have zero turnover. It gets zeroed out in the group accounts. The only company that has actual “turnover” is Roberts Space Industries International Ltd. The one with the £1 balance sheet that is really a non-trading company.

But even they are uncomfortable with this being turnover. It’s a non-trading company and the accounts make different references to it. This behaviour (calling your headline turnover, “costs recharged in the period”) is not in any way standard. I’ve never even heard of this term before in an actual accountancy setting. It’s strange but another first for CIG I guess.

 

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“The fact that Robert Space Industries and Roberts Space Industries are both registered companies in this money shifting scam should set off alarm bells too. Licensing their own IP to themselves is just the tip of the iceberg.

However whenever brought up, Shitizens believe it’s totally normal for a studio working on their first game have 17+ LLCs and corporations registered. This whole saga is just laughable how pathetic it is. Instead it is Frontier, the makers of Elite, who are ruining PC gaming with their cash grabbing! I mean, come on, they have 3 different large games in the works now and still only have Frontier Developments plc and Frontier Developments Inc. registered as their corporate entities. Totally pathetic way to run a business.”

I updated my wildly optimistic cashflow estimate for Star Citizen. The main assumptions made are the low costs for running companies in LA, Texas, and Germany compared to Manchester. Also that Subcontractors are really cheap. Yeah. I also assume that they receive $36mil this year in pledges and that refunds all time are negligible.

In this fantasy best case scenario the end of 2017 sees a cash balance of around $13mil with bank loans of $5.5mil. Obviously they could pay the loan off, but then they would have cash of $7.5mil.

It’s worth thinking back to June 2017 though. At the end of June, Star Citizen would not yet have received their tax credit rebate in respect of 2016 some $4mil, also no estimated bank loan of $4mil against 2017 tax credits. Also their half year income was only $13mil compared to the yearly $36mil estimate. Expenses would have been half a year’s worth. Working capital would have been tight in places. A more realistic/pessimistic estimate than mine would probably include bank loans in Germany and the United States and higher expenses in these places. It is really surreal that they still need to hit $177mil in pledges this year and this can be balanced directly with the product available at the same time, not any future product which will require ongoing funding.

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UPDATE: In a four part series, a UK accountant takes a look at the financials in great detail; revealing glaring issues and omissions. Not to mention the disappearance of over £2.4m that seemingly disappeared off the books.

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