Social Media Company Buys Itself a “Pheromone”

Somehow, I missed this press release back on May 17th:

CrowdGather Partners with Human Pheromone Sciences to Launch “Made for Social Media” Patent Pending Attraction Fragrance

CrowdGather, Inc. is a company attempting to create new value in the social media market by bundling together fan forums which, in the age of FaceBook, are considered a rather old-fashioned form of social media. Human Pheromone Sciences, Inc. has patented mood-enhancing compounds for use in perfumes and colognes, and licenses the molecules to companies such as Victoria’s Secret and Avon.

The headline was justified by this portion of the press release:

CrowdGather will partner with Human Pheromone Sciences to launch and distribute Erox®, a unisex fragrance, which has been proven to increase feelings of arousal, excitement, social warmth and friendliness in both female and male users. The fragrance will be launched, sold and marketed through the use of social media and forum communities. Erox® will be the first commercial product to contain Human Pheromone Sciences’ patent pending ER303 compound which has been shown to increase feelings of attraction and flirtiness in both males and females during a double blind placebo controlled study.

The idea of a conglomerate of online fan-sites (PaintBall Nation being one of the cooler ones; Pocketbike Planet not so much) merchandizing a flirtiness fragrance to its socially awkward base of geeks, nerds, losers, dweebs, and tech enthusiasts generated immediate mirth at Mediaite:

This Exists: ‘Social Media Fragrance’ Oddly Does Not Smell Of Cheeto Dust And Tears.

This weekend Ad Age blogger Bob Garfield joined the mockery, suggesting that one of the prime reasons for the project was “the crippling horniness of the 70% male CrowdGather crowd.”

“Our network is a sausage fest,” [CrowdGather CEO Sanjay] Sabnani says. “There’s always conversations about picking up on the opposite sex.”

[Sausage fest?—Ed.]

Being keenly interested in the business end of the perfume blotter, and having met some of the principals of Human Pheromone Sciences, Inc. [HPSI] back in the last century when it was known as EROX Corporation, my eye was drawn to the second line of the press release:

CrowdGather (OTCBB:CRWG.ob - News) today announced that it has acquired brand assets from Human Pheromone Sciences, Inc.

Hold on! There’s a world of difference between partnering with a firm and acquiring its brand assets. Exactly what assets are we talking about?

As part of the agreement CrowdGather will acquire the Erox.com domain name and trademarks from Human Pheromone Sciences, and make a strategic investment in the company via a private placement at the time a final product is accepted by CrowdGather. Human Pheromone Sciences will design and contract out the manufacture of the fragrance for CrowdGather and its distribution partners.

Hmmmm . . . With a little digging at the SEC website I found the specifics of the deal, which was consummated the day before the press release. It smells a lot more like a creeping takeover than a “partnering.” CrowdGather will provide HPSI the grand sum of $100,000. An initial $50,000 buys CrowdGather the Erox trademark and erox.com domain name, plus product development, manufacturing and fulfillment services for a CrowdGather flirtiness fragrance. Once the fragrance is launched, CrowdGather kicks in another $50,000 to acquire restricted common stock of HPSI. (This is the strategic investment or private placement part.)

HPSI stock is currently selling over-the-counter at about 11¢ per share. At that price, Crowdgather will pick up around 454,545 shares. As of its 2010 annual report, HPSI had about 4,151,954 shares of common stock outstanding. If all goes as planned, CrowdGather will own roughly 10.9% of PHS, making it the company’s second largest shareholder after HPSI director Carson Tang and the shares he owns personally and beneficially through Renovation Global Funds, L.P. (32.8% in total).

In its annual report released in March, PHS acknowledged that it “has not had sustained profitable operations,” that it “is dependent on a few major customers,” and that “it requires additional funding to continue operations.” The situation is dire: “management believes that the Company’s existing cash resources and cash forecasted by management to be generated by operations will not be sufficient to meet working capital and capital requirements through the current year,” i.e., through 2011.

So, thanks for the additional funding and welcome aboard, Mr. Sanjay Sabnani! What sort of top note did you have in mind for Eau de Geek?