In news that is sure to have more fallout in the coming weeks, UFC sponsor Xyience, Inc filed for Chapter 11 bankruptcy on Friday. Chapter 11 bankruptcy asks for protection from creditors while the company sets a course of reorganization. The controversy that has been swirling over the supplement company's finances is going to lead to more news developing out of the filing.

 

According to the Las Vegas Review Journal, The Las Vegas manufacturer and distributor of energy drink Xenergy, which sponsors the Ultimate Fighting Championship, has filed for bankruptcy protection amid claims of intimidation and death threats.

 

www.mmanewsdesk.com has confirmed that Xyience reported a staggering $42.3 million in liabilities and only $5.3 million in assets. Xyience sells its energy drink through 230 convenience and grocery stores, mostly in the Southwest. Friday's voluntary bankruptcy petition follows an involuntary petition that was filed January 3 by a group lead by Xyience founder and former CEO Russell Pike.

 

In an interview with the Review Journal, Xyience President Omer Sattar actually expressed optimism of all thing. The prexy was quoted as saying "We're excited about the opportunity (to reorganize the company) ... Xyience has a great brand name and has a strong affiliation with the UFC."

 

Here's where it gets just a little complicated. Frank and Lorenzo Fertitta, members of the family that founded Station Casinos, are the owners of UFC. The Fertittas are also listed as creditors of Xyience with $12.5 million in unsecured claims and $5.3 million in secured claims, according to the bankruptcy filing.

 

In an interview with the Review Journal, Sattar is quoted as saying Xyience would have filed for liquidation under Chapter 7 had not it not enjoyed the continued support of the Fertittas. Sattar said Xyience continues as a key UFC sponsor. Xyience signed a $15 million sponsorship agreement with the UFC for 2007.

 

So why the bankruptcy?  Sattar said the bankruptcy became necessary when the company was unable to raise $7.5 million more from shareholders. In the bankruptcy filing, Sattar claimed "Those negotiations, however, were derailed by a campaign of intimidations and threats led by company founder and former CEO Mr. Pike, Terry Cardenas, Ronald Solomon and Rick Klingenberg... Associates of Mr. Pike and Mr. Klingenberg made threats of physical violence against Xyience management and board members and, on at least one occasion, showed up uninvited at the home of one member of management... Mr. Klingenberg and his brother David Bergstrom stormed into the Xyience office, cornering (Chief Financial Officer) Michael Levy in an office and refusing to allow Mr. Levy to depart until their demands were met."

 

In the filing, Sattar also claimed that Klingenberg and Bergstrom made threats that they receive twenty thousand dollars, or "they would return the next day with guys who had a 100 percent collection rate,"

and the statement was that "somebody was going to ... get killed."

 

The records reveal that Xyience was founded in 2004, and sales were $109,000. Those sales grew in 2006 to $20.4 million.

 

When Pike resigned and tried to sell Xyience stock in California, the state's Department of Corporations issued a desist and refrain order against Xyience, according to court papers. Sattar said the company has obtained postbankruptcy financing enabling it to pay for a backlog of drinks being kept by the drink maker, Cott Corp. The financing will enable Xyience to avoid losing shelf space to competitors, which would be difficult to regain, he said.

 

Sattar said Xyience encountered financial difficulties because it spent large sums of money on advertising and promotion but couldn't get the drink distributed in many stores. He hopes to revitalize the company by expanding its distribution to other convenience and grocery stores and by giving away samples at sporting events in hopes of developing new customers.

www.mmanewsdesk.com will continue to monitor this explosive story as it develops.

IN OTHER NEWS...