The last several months have been a public-relations fiasco for Redcon1, a sports nutrition brand based in Florida.
First, its founder Aaron Singerman was sentenced in January to 54 months in prison and ordered to forfeit millions of dollars after pleading guilty to crimes involving another sports nutrition company, Blackstone Labs.
Singerman received his prison sentence after he was arrested for boating under the influence and separately crashed his car while allegedly under the influence of a pharmaceutical drug to treat insomnia.
Last week, Redcon1 encountered more drama when three creditors led by Hi-Tech Pharmaceuticals Inc. filed an involuntary Chapter 7 bankruptcy petition against Redcon1, raising questions about its financial health.
Hi-Tech Pharmaceuticals has manufactured nutrition products for Redcon1 since its inception and continues to do so, according to Hi-Tech’s owner Jared Wheat, who had no additional comment as of this story's publication.
On Tuesday, Oct. 18, the parties filed a motion to dismiss the case in U.S. Bankruptcy Court in the Southern District of Florida. In the filing, Redcon1 argued “the petition was filed due to a misunderstanding between the parties as to payment terms.”
“Nevertheless, shortly after the filing of the petition, the parties reached an agreement to amicably resolve all issues between them,” the filing added.
Before Redcon1 reached an agreement with Wheat, news of the Chapter 7 filing already had been published by a Florida-based news website, BocaNewsNow.com, and the bodybuilding community was opining on the petition’s significance in online videos.
According to the Oct. 13 bankruptcy petition, Redcon1 owed Hi-Tech Pharmaceuticals nearly $6.42 million, Hi-Tech Nutraceuticals Inc. $108,581.75 and Print Partners LLC $308,927.45 for a total of almost $6.84 million.
A hearing on the motion to dismiss has been scheduled for Oct. 26 before Judge Erik P. Kimball in West Palm Beach, Florida.
Redcon1 Chief Legal Officer Jay Manfre said the bankruptcy filing came as a surprise to the company.
In a joint interview Wednesday with Redcon1 President Eric Hart, Manfre described the financial health of the company as “strong” with significant investments in such categories as energy drinks. Redcon1 in September announced plans to launch a line of energy drinks.
“We wouldn’t be able to do that if we weren’t healthy financially,” Manfre told Natural Products Insider. “It takes a lot of investment.”
Still, the bankruptcy petition raised questions about the financial health of Redcon1, which has described itself as the "fastest growing sport supplement brand in history.”
An involuntary bankruptcy petition is typically filed “when several unsecured creditors of a company believe that the management of the company itself is doing something with the funds of the company that are improper and that the company is already insolvent or will become insolvent because of one of these improper transactions,” said bankruptcy attorney Seth Kleinman.
Kleinman, who is not involved in the Hi-Tech/Redcon1 case, was interviewed Tuesday, the same day the parties filed a motion to dismiss the bankruptcy petition.
Redcon1’s Hart described the situation with Hi-Tech’s Wheat as a “misunderstanding” that’s been resolved “expeditiously and amicably.”
“We’ve had tremendous growth over the last six years, and we’re on pace to have a strong 2022—greater than 2021,” Hart said, adding Redcon1’s products are distributed through about 30,000 retail outlets in the U.S., via such varied distribution channels as gyms, Kroger, GNC and Walmart. “The company’s been growing leaps and bounds.”
Even if Redcon1 hadn’t reached an agreement this week with its creditors, it would have had the chance to contest the bankruptcy filing.
“In a voluntary [bankruptcy] case, the order for relief is automatic; basically, they’re in bankruptcy,” said Darryl Scott Laddin, a partner and chair of the Bankruptcy, Creditors’ Rights and Financial Restructuring Practice with the law firm Arnall Golden Gregory LLP (AGG). “In an involuntary case, the debtor has the right to file an answer and controvert the petition and may do so on multiple grounds.”
To move forward with a Chapter 7 bankruptcy, unsecured creditors must establish they are owed money, and the claims are not contingent or disputed, explained Kleinman, a partner in the Business Restructuring and Insolvency Group of Morrison & Foerster.
“The key is that those creditor claims have to be non-contingent and not subject to a bona fide dispute as to liability or amount,” Laddin said.
The point likely is moot—thanks to Redcon1 and three of its creditors reaching an agreement.
The stakes, however, could have been colossal for the sports nutrition company, especially if the case proceeded in Chapter 7 and the judge appointed a bankruptcy trustee.
A bankruptcy trustee assumes management of company, including its books and records, and its job is to wind down the company’s operations, Kleinman explained.
“A bankruptcy trustee is a fiduciary for the benefit of all creditors and seeks to locate the assets that may exist and distribute those to bona fide creditors of the debtor,” added Laddin, who is not involved in the Hi-Tech/Redcon1 case and, like Kleinman, was interviewed Tuesday.
In the interview with Natural Products Insider, Hart also addressed—and contested—speculation that certain developments at Redcon1 signal the company faced financial distress even before the bankruptcy petition was filed.
He noted Redcon1 still operates out of its same headquarters at 701 Park of Commerce Blvd. in Boca Raton after it was sold last year to Aaron Singerman, the founder of Redcon1. Local government records reflect the property is owned by 701 Rose LLC, whose manager is listed in an amended annual report as Darielle Singerman, Aaron’s wife.
Hart also addressed questions about Redcon1 parting ways with employees.
In September, Redcon1 announced partnering with a third-party logistics company called STORD. In a press release at the time, Redcon1 cited challenges in scaling the business while shipping products out of its headquarters.
“We did move everything to 3PL logistics because it’s way more efficient,” Hart shared. “Amazon’s got people trained, and everything ships in one to two days.”
With the transition, Redcon1 let go over 60 warehouse employees, whom Hart said received severance packages and were paid their vacation time.
“It was really inefficient to ship out of Florida,” he said. “You’re shipping product in from … Tennessee, Georgia, California, and then ship it back out of Florida where these aren’t good shipping routes."
Finally, Hart addressed conjecture that Redcon1 couldn’t afford to pay a professional bodybuilder from Ireland who was promoting its products, Blessing Awodibu, and recently severed a contractual relationship with him for the second time.
During a podcast interview in the spring with Fouad Abiad Media, Awodibu—who has a large social media following—said RedCon1 fired him, adding while crying, “It broke my heart.”
Redcon1 and Awodibu negotiated a subsequent sponsorship agreement, the company confirmed. But the agreement also has been terminated and was the subject of online chatter that Redcon1 dropped the bodybuilder yet again.
“The truth of the matter is [Awodibu] thought he could get more money somewhere else, walked into the office and resigned…after we re-signed him,” Hart said in the interview.
According to Redcon1, Awodibu terminated the contract on Sept. 19.
Awodibu didn’t immediately respond Wednesday to a request for comment sent to an email address listed on his Facebook page.
Redcon1 was founded in 2016 by Aaron Singerman, who last year agreed to plead guilty to two counts in a 14-count criminal indictment: introduction of unapproved new drugs into interstate commerce with intent to defraud and mislead, and conspiracy to distribute controlled substances. The indictment implicated Blackstone Labs and people associated with the company, and it was not related to activities at Redcon1.
“I own the fastest-growing supplement company in the world, Redcon1, with over 150 employees,” Singerman boasted in an article published in June in Muscular Development while serving time in a minimum security federal prison camp in Pensacola, Florida. “I have started nine multimillion-dollar businesses in the last 10 years, and before that, I covered the world of bodybuilding for Dave Palumbo and RxMuscle.”
Redcon1 said the figure cited by Singerman included the company's employees at its two gyms in Tennessee and Florida. The current headcount—including gym employees—is nearly 100 employees, according to the company.
“I don't feel sorry for myself and I’m not sad or mad," Singerman also wrote, in part. "I’m using my time to better myself, and I plan to come out of here a better person.”
In the column, Singerman provided an email address for people to contact him. The email address bounced back as undeliverable after Natural Products Insider tried to reach him on two occasions for this story.
Trivest Partners LP, a Florida-based private equity firm that invested in Redcon1 in 2021, did not respond to an email seeking comment on the recent bankruptcy filing.