[Reprinted with permission from Monday Morning Quarterback, Zig Zag Corporation]
Texas-based seating manufacturer Bodybilt, suffering like the rest of the industry from slow industry sales and a recent loss in arbitration of a trademark dispute that will cost it some $400,000 (see MMQB 7/15/2002), Friday reported that one if its major secured lenders, Finova Mezzanine Capital, Inc., has decided to cancel a public sale BodyBilt’s assets that was scheduled to take place [July 31, 2002].
In its original Notice of Public Sale, Finova had planned to sell off BodyBilt’s equipment, inventory, accounts receivable, trademarks and copyrights to settle its debts. The sale was scheduled to take place at BodyBilt’s facility in Plano, Texas.
However the company says that while it is true Finova issued a foreclosure notice, no one involved envisioned an auctioning off of assets. “Finova seems to have chosen this approach due to its intercreditor agreement status which has prohibited it from receiving any payments. As a result, Finova has not been able to participate in the more than $5 million paid to the company’s primary lender. The foreclosure notice was promptly withdrawn. The companies are close to an agreement on a loan payoff,” said Matt Prochaska a spokesperson for BodyBilt.
Bodybilt says that the debt was incurred by BodyBilt’s parent (with BodyBilt assets pledged as collateral) and used to fund a completely separate enterprise.
The amount of indebteness was not listed in the Notice of Public Sale.
BodyBilt “has been forced to spend literally years of its collective energies and millions of its hard earned dollars dealing with the deliberately specious patent claims (now put permanently to rest) of a hostile competitor. In fact, those close to the company feel that it is an absolute testament to the quality and viability of the products, the company, and its sales force that BodyBilt has been able to succeed in light of such false and hostile claims,” added Prochaska.
BodyBilt’s past is long and complex. On August 19, 1998 ErgoBilt, Inc. (aka BodyBilt), voluntarily delisted from the Nasdaq when it could no longer maintain minimum Nasdaq listing requirements. The company also hired an investment banking firm to discuss strategic options. For its part BodyBilt says that the parent company’s decision to delist from NASDAQ was an event triggered by losses unrelated to BodyBilt’s operations. In contrast, BodyBilt claims it made several million dollars in profits for the 12 months preceding the parent’s 1998 NASDAQ decision. As for hiring an investment banking firm, the investment firm’s primary focus, says the company, “was to help the parent realize the value of its very profitable subsidiary, BodyBilt.”
ErgoBilt was originally acquired at an SBA foreclosure auction in 1988, and was the inception of BodyBilt, with the assets being purchased from a failed enterprise that was actually the predecessor of a competitor. ErgoBilt was not founded until 1995. According to BodyBilt, “the purchase began more than a decade of annual compounded growth of nearly 20% (literally multiples of the industry average), culminating in an initial market valuation for BodyBilt’s parent (whose only asset was the stock of BodyBilt) in excess of $40 million.”
This article originally appeared in The Ergonomics Report™ on 2002-08-01.