The story we ran below was originally researched and written on August 30 after hearing rumors that Sierra Snowboard had allegedly laid off its staff on August 27. Since that time, a great deal has transpired in the case. Here’s what we know from court documents filed with the Northern District of California’s U.S. Bankruptcy Court:
On August 30, Michael Anthony Management, Inc., (MAM) the corporate entity behind Sierra, filed a request to convert Case No. 10-55755 RLE from Chapter 11 “to a Chapter 7 case immediately.” This came on the heels of a statement from Michael Harrosh, CEO of MAM, stating that he was actively pursuing a sale of MAM’s assets, not including the domain name “sierrasnowboard.com,” which Harrosh claims he registered before MAM was formed. The next day the Official Committee of Unsecured Creditors, a group of Sierra’s seven largest creditors excluding Burton working to secure payment for goods and services rendered to Sierra, filed an objection to the motion stating: “The Committee was shocked to learn that in the midst of promising ongoing negotiations for the sale of the Debtor’s assets, and less than two days prior to the hearing on the Committee’s Trustee Motion, the Debtor filed its Conversion Motion … The Committee is unaware of any external factors that precipitated this reversal. In short, the Committee can think of no rationale for filing the Conversion Motion other than Harrosh’s spite for the Committee and the creditors of the Debtor.”
On Friday, September 3, MAM followed up with a motion for the approval of the sale of its assets to Active Boarder Corporation, whose principal is Steve Poindexter, who is also the President of Active Sports, Inc., which operates Minnesota’s The House.
The judge in the case approved the sales process in a hearing on Friday and the next hearing on the process will take place on September 22. Harrosh says he has received a letter of intent from Active to buy MAM’s inventory at cost, which is estimated to be approximately $4.5 to $5 million. The LOI also include a deal to pay Harrosh personally $750,000 for intellectual property including the domain name and to hire him on as a consultant following the sale. Harrosh says his “sale of the domain name and entry into a consulting agreement will produce at least $3.5 million more for the inventory of Debtor than could be obtained if the inventory were to be sold without also selling the domain name and if Mr. Harrosh did not agree to work for the buyer.” Harrosh adds he will only move forward with the agreement if these terms are met and that several corporations owned by he and his family are release from all claims against them.
Jay Indyke, chair of Cooley LLP’s Bankruptcy and Restructuring Division, which is representing seven of the largest creditors in the case not including Burton, refutes that Harrosh owns the intellectual property personally and asserts that he should not be allowed to be absolved of all personal responsibility. Indyke says that there is approximately $12-13 million in outstanding trade debt and believes that the business should be sold to the highest bidder and the funds be put in escrow until ownership and responsibility is determined. A complicated battle over the ownership of the intellectual properties and claims process is expected. “There are complex issues here,” says Indyke. “There are millions of dollars of inside deals here … There is no justification to the release from all claims,” continues Indyke, who says he doesn’t believe that Harrosh own the intellectual property.
On August 30, MAM also filed a motion to reject the lease contract of its offices at 58 Atwood Avenue, Unit 1, Sausalito, California, stating it “does not need the Premises and has given its lessor, Sunbow Properties, LLC, notice of its intent to vacate.”
It’s also interesting to note that in his sworn statement from August 25, Harrosh blames Burton for his company being forced into Chapter 11 by a motion to secure the $7 million MAM owed Burton after terminating his dealer service agreement and adding “I am informed and believe Burton terminated MAM’s dealership agreement because it was too successful in it sales activity and Burton wished to be making such sales through its own website.”
Here’s a copy of MAM’s service list from court records:
Here’s the original story:
Rumors of Sierra Snowboard‘s bankruptcy have been swirling since early June and unconfirmed further reports that the company laid off all of its staff on Friday, August 27 have been coming in.
On June 1, 2010 in the Northern District of California’s U.S. Bankruptcy Court, Michael Anthony Management, Inc., the corporate entity run by Michael A. Harrosh, Sierra Snowboard and sierrasnowboard.com’s owner, filed for Chapter 11 bankruptcy. While Harrosh did not return multiple phone and email messages, court documents were filed on June 1 and June 9 listing him as the debtor in two separate cases with Dakine and Burton.
Sources amongst Sierra’s suppliers told TransWorld Business that alledgedly they have received a notice that the bankruptcy has been converted to a Chapter 7 bankruptcy, which basically governs liquidation of a company’s assets versus reorganization in Chapter 11. An “official committee of unsecured creditors” is bringing a motion against Sierra lead by Cooley LLP law group to secure outstanding debt and inventory. Counsel for Sierra Snowboard denies the accusation that the organization has converted to Chapter 7 bankruptcy.
The initial bankruptcy filling came on the heels of Burton and Jarden announcing they were pulling product from the retailer for failure to honor online dealer service agreements. Sierra’s 267,458 member strong community is still live, however the live chat function for customers is currently not staffed.
Stay tuned for further information on what this means for the industry and the 60 plus brands Sierra carries, as well as customers ordering product from the site.
TAGS: bankruptcy, BURTON, dakine, michael harrosh, sierra snowboard, snowboard industry
