IS XYIENCE’S TURKEY COOKED?

Posted on | November 22, 2007 | 152 Comments

XYIENCE’S NEXT CHAPTER

By: Rich Bergeron

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Never in my wildest dreams did I ever expect to get invited to a UFC event after beginning my series exposing the ongoing mess over at Xyience, Incorporated. If I doubted that possibility while I was working on the story, I had no good reason to change my outlook after being sued by Xyience for $25 million in the 8th District Court of Nevada in July of this year.

Yet, I just got back from New York City where I stayed in a room on the 30th floor of the posh W Hotel in Times Square in order to attend a UFC event on Xyience’s dime. Even while this lawsuit hangs over my head, I was there at the fights and invited by Xyience to take it all in. I clearly didn’t imagine actually sitting in the stands in Xyience’s seats and seeing UFC 78 live. That happened. It doesn’t make any sense, but it happened. I even had a witness who saw the fights with me and met some of the Xyience folks. I brought a friend in the Web-site business from Newark, New Jersey where the Prudential Center Arena that hosted the fight is located. He can vouch for me that I really was there.

What began as a minor inquiry into a questionable situation at a supplement company has now blown up into a full-scale monster of a financial mess. A new chapter is unfolding, one much more intriguing and powerful than anything I have produced thus far. The latest infusion of capital and the circumstances surrounding the delivery of this deal is coming to light and looking extremely damning for the players who made it happen. What appears to be happening now is a situation in which the new investors are trying to bankrupt the company and write off the rest of the people who put in money early and stuck with this company from day one. All of this is resulting in a level of infighting that has left both sides now seeking to enlist my help.

No, I’m not dreaming, I keep telling myself. This is really happening.

First of all, the players who invited me to the Big Apple are Xyience CO-CEOs Adam Frank and former Global Cash Access Holdings Director Kirk Sanford. Both have some skeletons in their closet as far as their past business dealings, and both men are also dealing with a significant backlash due to the stock options they set themselves up with and the 600,000 shares they each acquired when they came on board the Xyience train. These guys contacted me and made it appear as if they wanted to put everything behind them. They kept telling me the lawsuit would be over and they just wanted to meet with me and talk about the future of the company. They even talked about hiring me on as an advisor to the board of directors.

Naturally, I don’t necessarily think it’s cool to be walking around with a $25 million lawsuit hanging over my head. I figured I’d hear them out and see what they’d bring to the table to end it. These guys acted like they were intent on really helping the company get cleaned up. Yet, over time and interaction with Frank and Sanford, I realized that my trip to NYC would be better off as a recon mission. I took the opportunity of our first lunch meeting to invite a new friend to our table who works for a company in NY that provides capital in situations exactly like the one Xyience is facing right now. Frank and Sanford seemed a bit miffed, but they accepted our new guest and soon were talking to him about the future more so than me.

They even wanted to know how soon and how much money they could get out of this company if they needed it. My friend told them of one instance when his company provided over $1 million in a 24-hour period for a California power company.

The tone of the conversation had Frank and Sanford maintaining over and over again that the company needs to be bankrupted. They also repeatedly mentioned the 340 investors they would have to buy out or appease if they chose another route. That’s when my friend suggested the “knock on doors” approach. Basically, that procedure involves going directly to investors and buying them out one by one.

When asked if the plan was to ultimately go public, Sanford was especially irked by my line of questioning pointing to the Fertittas favoring private companies over public ones. He finally explained that they would do whatever they had to do to make sure the company is the most profitable it can be.

When we concluded lunch, Frank and Sanford each plopped a $100 bill down on the table for me so I could get a ride to Newark for the fights. I told them I spent just about all the travel expenses they sent me for the trip on my suit, which was true. I went the extra mile to look professional only to arrive to find Frank and Sanford dressed like they were ready to go on a camping trip.

My first impression led me to believe both men were trying to take over Xyience for themselves and reap all the benefits with a much smaller group of investors than they currently have to deal with. Coupled with the Fertitta Enterprises contribution, it looks like Frank and Sanford are in position to be part of the company’s new regime whenever the current mess is sorted out. Yet, all their talk of cleaning up the company didn’t match up with what they told us they wanted to do next.

My friend and I spoke at length after Frank and Sanford left the restaurant. This potential investor/financier I had just met was eager to provide capital and help this company out of the current mess. One of the shareholders in the other camp trying to oust Frank and Sanford complained to me recently to let me know that the new leaders of Xyience just can’t seem to find the capital they need to keep the company out of trouble. Yet, I found it easy to find someone with enough capital to help, and here I am just a blogger with virtually no business and financing experience.

It is my humble opinion that Frank and Sanford don’t want to find new capital. They instead appear more willing to bankrupt the company, reconstitute it, and rake in the profits without having to share revenue with a huge pool of folks that bought in early when the company was looking a heck of a lot more successful than it looks now.

What also baffled me is that my friend found me by looking at my blogs about Xyience. The Xyience lawsuit claims that my stories made it practically impossible to find investors to put money into this company. Yet, I only made one phone call and found someone willing to offer up his company’s extensive coffers to help.

Later on, I reconnected with Adam Frank at the venue. My fellow Web-site entrepreneur friend met me there late after a whole lot of hassle trying to network with him and figure out where he was. I went to find Adam Frank in the Xyience suite they had for the fight, but I ended up spending most of the night in my seats. Frank was scarce for most of the evening, and even before my friend arrived he didn’t seem very talkative. It appeared to me that these guys had no plan as to how to deal with me. I had documents and paperwork in hand that I almost passed off to them in hopes of getting a deal done, but something held me back. Something was not right.

After watching the great card, I wasn’t able to locate Frank at all. I called him and asked if there was anything going on afterward, giving him one last chance to meet and negotiate. He never called back.

Having had no chance to do any real business as far as planning for the future, the trip became more valuable to me as an informal deposition. I was able to measure the commitment of these two men, and I found it lacking. As far as making sure there is really an effort to clean things up, I think I came away with the impression that the Xyience situation is only getting worse. I was disappointed in Frank and Sanford’s approach to things, and I am glad I had a business and financial expert by my side to get everything out of them in discussion. Had I been there alone, I wouldn’t have thought of half the questions to ask about the business aspects of the situation.

I ventured home via Laguardia Airport and set the stage for how to proceed. Such a big charade is par for the course with Xyience, as that is how I was told they attracted much of their initial investors. They get them to come to the fights, see the Xyience name associated with the big UFC event, and wine and dine people into chipping in. I have to admit, I was spinning my wheels thinking of how I could chip in after all was said and done and I was in the air on the way back to Boston.

My latest motion set to be filed soon in my lawsuit asked for $1 million before the trip. I figured I’d start the negotiations there, and I did so through some detailed emails explaining how I thought I could help from the inside. I even offered to have the contract structured over 2 years.

Putting all that out there wasn’t enough, though. I knew there also had to be an alternative plan, which would be to keep the lawsuit going. To me, I felt a bit disrespected by the whole process, because Frank and Sanford assured me the case against me was going to be over soon, and I told them I wanted it over and done with by the time I got to NYC. They lied to me. Then they told me they were going to give me $5,000 for travel, and they only gave me $500. On top of those red flags there was the affidavit Frank signed that is the centerpiece of the case against me:

Give that a read, and then tell me if this conversation I recorded with Adam Frank and Kirk Sanford makes any sense to you:

I made this music player at MyFlashFetish.com.

Whatever the possibility of me coming on board at Xyience, which I knew was probably pretty far fetched anyway, I still had a $25 million case hanging over my head.

To me it felt like someone pointing a gun at me telling me they’re not going to hurt me, but they never stop aiming it at my head while I talk to them. The lawsuit itself was like someone punching me in the head and then turning around and suing me for hurting their hand. It was always Xyience defaming me through subversive blogs that spouted complete bullshit and didn’t even include one shred of proof. I only printed the truth.

So, I decided to play hardball when I came back from my trip. I increased the asking amount in my motion for Rule 11 sanctions to $5 million in damages and financial sanctions against the plaintiff. I feel like a message needs to be sent here. Corporations can’t be permitted to crush innocent people under their feet. If I stand in the way of Xyience making a bright future possible for themselves it is only because I exposed the truth about what they were doing wrong. If my stories were lies the suit would be applicable and needed, but they were not lies.

BERGERON’S RULE 11 MOTION

Whatever happens from here, I am in a promising position. What began as a skeptical public saying I had some grudge against Xyience has now resulted in lots of people starting to come out of he woodwork realizing I am right. Some of the more mainstream MMA press backed my reporting up with recent stories that confirmed what I wrote months ago. The general public is even starting to sniff out the truth. Blog comments I’ve read about the subject have featured most people giving me props for sticking to my guns.

However, I know I still ought to and need to do the right thing here. I need to carry this through to the end and make something good happen here with Xyience if I can. People on all sides have told me how damaging my pieces were to the company, and I am honestly sorry about how that might have affected the innocent folks there just doing their jobs. Yet, the ultimate purpose was always to do a great deed and expose the shady behavior so it could be fixed. Now it appears that the involved parties have vastly different ideas about what it will take to truly fix this broken company. The infighting threatens to destroy Xyience from within, and I’d hate to see that happen. Although it makes it easier for those attacking me to believe I have it out for Xyience, I really don’t. I have always wanted to see this company cleaned up and put back in line to be a great contributor to the MMA scene again like it once started out to be.

Stay tuned for more.

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