Farewells, apologies, and hopes for the future

[ScottDodson]

Many of you have had questions about what happened with Tenacious, What does the sale of our assets mean and more vocally, “Where’s my money?” I have wanted to post for a long time, but I’ve been focused on working towards the best result possible, and waiting for a resolution at least so I could say things more definitively.

I also have to admit that Tenacious’ downfall has taken its toll on me, emotionally of course, but in many other ways as well. Like a captain going down with his ship, I’ve been the last one left to handle a host of responsibilities. Moving and storing an office full of furnishings, promos and records. Dealing with Singapore’s closure and all that entailed. Managing warehoused inventory and our last incoming shipment from China. Myriad tax filings. Negotiating with potential buyers, etc. Working with the IRS and the lien they held on our assets, etc. All the while trying to put my life and finances back together after a draining 6+ years. In many cases this has meant late nights and long weeks writing emails, physically culling material, loading countless boxes, wrapping pallets, loading trucks, cleaning out spaces, etc. Ah yes, all the glamour you can imagine…

While all the work is not done, there is at least resolution, so giving you an account of what’s happened and what it means for you has vaulted to the top of my stack. Oh wait, there’s no stack in The Spoils. Ok, you get the idea. Let me start with a brief description of Tenacious Games’ unfortunate downfall.

Those who have read Patrick’s post (http://www.thespoils.com/spoils/showthread.php?t=6271) should know most of this, but basically, we were very good at fundraising for quite a long time, and believed we would continue to be successful with it. Certain investors made representations they were unable to fulfill, and still we worked tirelessly to fundraise and continue to provide product and Organized Play to our players. We took massive pay cuts, we found volunteers, we found printers and vendors who were willing to take equity in the company instead of cash. To give you one personal example, as CEO, I put in 50+ hour weeks, week after week and took no vacation. My total compensation before taxes from Jan 1st, 2007 to the present was $14,000. And I actually turned around and loaned $1,000 of my take home pay back to the company in 2006. The fact that the vendors, I and everyone else on the team was willing to do this and to work for so long under difficult financial circumstances is a testament to our unshakable belief that we would find a way to fund the company through to profitability and we would meet all our commitments to players, vendors, and investors.

Shortly before the Las Vegas $13K, in beginning of 2008, It looked like we might not be able to pull it off. We made a final plea to existing investors to totally recapitalize the company (read give up the vast majority of our equity to them and allow them to invest at a fraction of the company’s initial valuation). When that failed, and to our dismay we realized we would likely not be able to make good on cash prizes, we switched the prize to the only thing we could guarantee - cards, and I began to look in earnest for buyers. I tapped all the usual suspects to no avail. Virtually no one stepped up to buy the assets of tenacious.

Ultimately there were only two serious bidders, and neither of their highest offers amounted to even half of what we owed the IRS, not to mention the rest of our players and creditors. I doubt this will soften the loss you have suffered as players, but this was perhaps the darkest hour of my life. To have put some much into the company, to have sacrificed so much—and not only to see it fail, but to leave a host of people who had believed in us and for whom I had great respect with nothing—it was extremely painful. I saw everyone as a stakeholder, people who had played a part to make it happen: Players. Employees, Vendors & Partners, Advisors & Investors.

In the end we never declared bankruptcy. Apparently a corporate bankruptcy is very expensive- probably more than the total purchase price of the assets. All our creditors likewise realized they had no chance of recovering any reasonable amount of money so none of the creditors forced us to file (I learned that it’s even more expensive for them than it would be for us). Because of the structure of our capitalization, the company had over $2.5 million in debt. A big part of that was to the IRS, and another large chunk of it to employees. Both of these would be considered “priority claims” inside of (or outside of for that matter) a bankruptcy. Ultimately, the amount that we sold for was considerably less than what was owed to the IRS. Which means every dime went to them. Even if we had sold for more, The IRS would have got their money first, then former Employees. The remainder, if any, would have been distributed on a pro rata basis among all other creditors. This would have been a drop in the bucket. Unfortunately, the day we stopped functioning as a company was the day that it was pretty much guaranteed that no one would see any $ owed.

To give you an example of what I mean by “drop in the bucket”, let’s say $10,000 remained after paying The IRS and non-executive employees (which, by the way we were no way near to accomplishing), and you were a creditor, a player, or an investor (in the second round, convertible-debt round—the first, equity round would see $0 regardless) owed $25,000 in services, prize money, or debt. You would have received 1% ($25,000/$2,500,000) of the $10,000, or $100 for your $25K. But as I said we didn’t come close. The IRS received all of our sale amount, and I and some of the other executives are still on the hook.

I humbly and sincerely apologize to every player owed money by Tenacious. We let you down. I let you down. We desperately wanted and worked very hard to make the best game supported by the best OP. But all our good intentions and hard work amounted to nothing. I am truly, deeply sorry.

At this point, however, we all have to move on. The company owes me well over $100K. If I can move past this I hope you can too. Tenacious Games has no assets whatsoever. The IRS controlled the sale and has closed the shell that remains of Tenacious in an “uncollectable” status. I can't imagine how, but if somehow Teancious were to recieve more revenue, it too would go to the IRS.

My only consolation in all this is that it is hard to imagine a better shepherd for the assets of the company than Michael & Arcane Tinmen. I’ve worked with him for months now on the sale and transition, and I will say you will find very few people as honest, direct, and competent. Unlike Tenacious, his company is solid, stable, and profitable. He will manage The Spoils within his means and will not make promises he can’t keep. There may not be $13,000 cash tournaments for a while, and maybe not ever, but there will be The Spoils™, and there will be support, and with luck and *your* support, it will grow and thrive, and take the place it should have in the pantheon of great card games.

My other hope is that this will be enough, for now at least, for most people reading. If you feel you need to contact me further, my email scott@tenaciousgames.com is still active. I can’t promise I’ll respond immediately, but I will try. And I will do my best to respond in one particular arena: if you’re thinking about starting a business or a game company. If so, I’ll do what I can to share what I’ve learned with any and all fans and supporters of The Spoils. I learned a lot and while there have been many painful lessons, I also learned a bit of what to do, along with what not to do. I will say that through all the trials and tribulations your support and enthusiasm made it all worthwhile and I’m grateful.

Sincerely,

Scott