The company that popped up to acquire defunct startup LifeBrand is using promises of equity to court LifeBrand’s former employees, many of whom say they are still owed back pay.
Founded in 2019 in the Philly suburb of West Chester, online reputation service LifeBrand laid off its entire 30-person staff in May. In mid-August, a press release appeared online saying the company had been acquired by Sentiment AI.
Thomas “TJ” Colaiezzi, the 43-year-old founder of LifeBrand — who made a splash inking major league sports deals, and who has multiple lawsuits pending against him for alleged financial mismanagement — is now Sentiment AI CEO, according to the press release. Back in May, LifeBrand began working with Second Wind Consultants, which specializes in companies facing financial turmoil.
Second Wind helped LifeBrand liquidate its assets and find a company to acquire it, Colaiezzi said. He declined to provide financial details of the acquisition deal.
“They don’t have the resources to staff Sentiment AI from their parent company and they needed our people,” Colaiezzi said. “We were able to work something out with them, that in exchange for our employees coming over, they would also carry over our investors.”
An August letter to former LifeBrand employees offering positions at Sentiment AI was accepted by 18 people, according to Colaezzi. They will receive 5% collective equity, according to an internal memo.
Account executive Chuck McHugh is one of the returning employees. He signed his offer letter on Aug. 20, and has received back pay, he told Technical.ly. Employees expect to be back in the firm’s Church Street office by Sept. 9, he said, but haven’t yet met with new leadership.
“Don’t know much about the parent company yet,” McHugh said. “I know that they plan on having a meeting and everyone introducing themselves so we can get to know who they are.”
Colaiezzi said Dan Wagner, cofounder of Sentiment AI’s parent company Global Fusion AI — which also appears to have launched in 2024, according to LinkedIn — is supposed to come to Pennsylvania next week to meet with staff members.
Founding a company to acquire a bankrupt startup, then gunning for a $25M valuation
It’s not uncommon for failed startups to be acquired by other companies, taking in valuable tech with an opportunity for a fresh start. Nine out of 10 startups fail, according to Startup Genome, and 16% of the time that’s due to financial problems, a survey of more than 80 failed startups found.
Startups buying up other startups is also becoming more common. In just the first quarter of 2023, at least 99 startups were acquired by other startups, Crunchbase said.
Still, the Sentiment AI-LifeBrand deal stands out. While acquisitions are a common exit strategy, tech usually gets bought by other companies that use the proprietary tools for their own growth. Sure, there are dedicated acquisition companies like Sentiment AI appears to be, but those tend to be the Goldman Sachs and Morgan Stanleys of the world — not a brand-new startup seemingly founded for the purpose of acquiring another company.
An internal document obtained by Technical.ly says shareholders who invested money into Colaiezzi’s initial startup will be carried over to the new firm, gaining equity in Sentiment AI, though Colaiezzi said this was still to be determined.
“All founders shares [sic], advisory shares, employee shares or any other shares that were granted are not being honored and are essentially worthless now that LifeBrand Inc is liquidated and insolvent,” the document states.
A planned seed round would value the new company at $25 million with most funding coming from new, outside sources, per the leaked memo, and current shareholders will be given the first opportunity to invest.
As of 2021, employee stock options are modified or canceled to cut company costs during a merger or acquisition about 80% of the time, research from Arizona State University found. That’s because it makes the company a lot more valuable to buyers. For example, if a company cancels 38% of employee stock option compensation, its market value can go up 3% to 4%.
Employees are better off if their options are vested, or they’ve met certain terms of their employment as laid out by the company. In LifeBrand’s case, there does not appear to be a clear vesting schedule.
Retaining employees can vary from company to company. Less than 2% of staff receive retention packages after a merger, according to McKinsey in 2020. In LifeBrand’s case, it looks like about 60% of the employees came back post-acquisition after the previous layoff. But statistics say a third are likely to leave in the first year of the acquisition, according to a 2019 Massachusetts Institute of Technology report.
Senior creditor liquidates assets, as employees wait for back pay
What does the new company do? Sentiment AI’s main purpose is to acquire and revamp other AI companies, according to its website.
That website was created on Aug. 16, according to GoDaddy records, a day after the press release announcing the LifeBrand acquisition. The first posts on the site are about the acquisition. Technical.ly could not locate any search results mentioning Sentiment AI prior to that month, and an email to the address listed on the website went unanswered.
Sentiment AI is a new spinoff of its parent company Global Fusion AI. The company provides AI consulting, privacy and safety, data infrastructure and incubator services to companies, individuals and other organizations, according to Wagner’s LinkedIn profile. It often works with small AI firms, Colaiezzi said.
Global Fusion AI’s website doesn’t have a lot on it, which Colaiezzi said is because of a rebranding process that it plans to launch next week. Global Fusion AI founded Sentiment AI earlier this summer specifically to acquire LifeBrand, Colaiezzi said.
“We were the first acquisition that [Sentiment AI] went through,” Colaiezzi told Technical.ly in an interview last month.
The acquisition happened via a UCC Article 9 sale, he said, which is when a secured creditor can sell parts of the company, “where our senior creditor [invoked] their right to liquidate our assets, and fortunately, our consulting firm was able to find a company on the other side that was interested in it.”
The leaked shareholder document states that all of LifeBrand’s outstanding Delaware taxes have been paid as of Aug. 14 and it’s in the process of paying back local state payroll taxes. Sentiment AI projects its annual operating costs to land around $2,694,000.
Just before the startup laid off its entire 30-person staff, the company’s board resigned, Technical.ly learned in May.
Colaiezzi told Technical.ly this week he had caught up on paying about 70% of the owed back pay. There were three incomplete payment cycles in May, he said. Some staff were paid for the May 3 cycle and no one was paid for the May 17 and May 31 cycles. Two former LifeBrand employees told Technical.ly that, as of the time of publication, they still haven’t been paid.
In 2020, Colaiezzi appeared with Kevin O’Leary in a pitch competition hosted by StartEngine. The following year, LifeBrand was named Technical.ly’s No. 2 RealLIST Startup, and in 2022 the company raised a $27 million Series A.
CEO faces fraud allegations and lawsuits from investors
Colaiezzi has also been involved in multiple lawsuits.
A group of investors filed a lawsuit in July against Colaiezzi and LifeBrand accusing him of fraud. Colaiezzi convinced shareholders to buy stock based on business dealings that were not actually profitable, according to the lawsuit.
The lawsuit relates to sports partnerships with major brands such as the Phillies, Eagles and Sixers. Investors believed these partnerships to be profitable, but they were actually sponsorships that cost the company money.
Colaiezzi previously told Technical.ly that the sports partnerships were not profitable and were part of a marketing strategy to gain users and connect with more corporate partners. He denied telling investors they were profitable.
The lawsuit also accuses Colaiezzi of using investment money for personal purposes and paying friends and family large salaries to hold positions at the company.
“A $6.17 million ‘bonus’ paid to TJ and other exorbitant bonuses and compensation to other insiders when the [LifeBrand] had not yet achieved meaningful revenue is indicative of [Colaizzi’s] faithless stewardship of [the] investments,” the lawsuit said.
Colaiezzi said this lawsuit is inaccurate and he is working to have it dismissed.
Previously, Ray Bartoszek, CEO of investment firm RLB Holdings, filed a lawsuit against Colaiezzi and LifeBrand in April. He loaned LifeBrand $500,000 under a promissory note, according to court documents, and Colaiezzi was inconsistent with repaying the loan.
Novus Capital Funding filed a lawsuit in February for breach of contract, according to public records. The lawsuits are still being worked out by the courts, as LifeBrand and Colaiezzi move ahead under their new identity with Sentiment AI.
Sarah Huffman is a 2022-2024 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Lenfest Institute for Journalism.
LifeBrand
