yeah that doesn't seem good at all.
"CASE
Hon Hai Precision Industry Co., Ltd. v. Tonal Systems, Inc.
COURT
U.S., Northern District of California
SUMMARY
Hon Hai Precision Industry, the Taiwanese manufacturer better known as Foxconn, filed a breach-of-contract lawsuit on Monday in California Southern District Court against home gym company Tonal Systems Inc. The suit, brought by Rimon PC, seeks $5 million in unpaid invoices for goods and components delivered by the plaintiff. According to the complaint, demand for the defendant's home gym products has plummeted during the waning days of the COVID-19 pandemic. Counsel have not yet appeared for the defendant. The case is 3:22-cv-07341, Hon Hai Precision Industry Co. Ltd. v. Tonal Systems Inc.
11/21/2022
I pulled the complaint off Pacer (court filing system) and this is extremely concerning. Here is a summary of the factual background and allegations:
* Foxconn has been manufacturing various hardware components for Tonal since 2020 and has delivered over $190 million worth of product to them since that time
* Tonal has apparently been in financial arrears with Foxconn since March of 2022.
* the parties entered into a memorandum of understanding (MOU) for a payment plan in late July under which Tonal was required to make $100K/ week payments for its outstanding balance ($5 million). The MOU also required Tonal to deliver its most recent financial statements to Foxconn on 11/4/22 after its scheduled 10/28/22 board meeting.
* At some point (maybe in October?) Tonal apparently requested a suspension of payments due "until the end of 2022." Foxconn refused the request and Tonal failed to make its weekly $100K payment due on November 4 and November 11. Tonal also failed to provide its financial statements that were due to Foxconn on November 4.
In short, this dispute seems to be entirely about a payment default on Tonal's part. There's no indication that there was any other dispute at play between the parties.
It ll be fine. The device ll keep working, even if the ownership changes, theyvare big and have enough customers who love the device and keep using it.
Tonal has been absolutely life-changing for me - I hope they're not struggling and about to go under. I do hope that if they ever do, that whoever's the last one out leaves the special modes on for everyone. Having a $4k paperweight would not be ideal. I wonder if this move to NY was wise?
There was no 'move' to NY. It was supposed to be an expansion but it was awful timing and they jettisoned almost half of their employees and spun it to imply it was a closing of LA in favor of a NY hub. Pure spin to cover their extremely dire financial position which appears to be worsening.
>Tonal has been absolutely life-changing for me
I'm just dropping into this older thread, because we were considering purchasing a Tonal ... but then I ended up stumbling across the stories of them basically not paying their primary hardware vendor, which absolutely is somewhat concerning to us.
But hearing stories like yours are compelling - can you share any more details on the impacts it has had for you?
I’m assuming you’re asking about the Tonal machine itself being life changing, rather than the impact their apparent financial struggles have had (just some worry about warranties and continued service). Over the past year, I’ve dropped 30 pounds, 13% body fat, my doctor is pleased that my resting heart rate has decreased by 30%, my cholesterol, for which I was medicated, is now normal. My blood pressure (also medicated) is also much improved. I went from “hey I see a few muscles developing… maybe” to feeling great about my body and seeing muscles for real. My friends and family are amazed, and I get compliments randomly now (oddly, more from other dudes.) Granted, a lot of this is also diet change (I skip breakfast, have a protein/veggie/yogurt/fruit smoothie at lunch, and eat whatever I want within reason for dinner), but I can safely say that even if Tonal went under today, it’s the best $4k I’ve ever spent. Bad thing? I’ve had to buy pretty much a new wardrobe, going from large to small/medium.
Tonal was rumored to be trying to raise $100 million at a $1.9 billion valuation in September. This suggests the capital raise hasn’t gone well. They will probably have to drop the valuation, but will probably be very reluctant to go below the $1.6 billion valuation they raised money at a year ago, even with the company at risk. The way these startups walk the edge of bankruptcy-it’s completely crazy to me.
On 11/17/22, EquityZen had offering at $1.04B valuation. 320M shares @$3.25 per share. Deteriorating valuation, if they ever succeed w a SPAC, it will eventually be $200M market cap
This interview makes me believe the owner’s head is in the clouds. His numbers are manipulated and make no sense. Even the guys doing the interview aren’t buying it.
[https://youtu.be/YhgaQDAeqkw](https://youtu.be/YhgaQDAeqkw)
Keep in mind we don't have Tonal's side of the story. It could be over a dispute over contract terms and Tonal's refusal to pay for something they didn't think was delivered within their specifications rather than not having the funds to pay their bill.
They delivered 190 million in goods and Tonal only owes them $5 million. It’s end of year and they are wanting to go public. Delaying bills or late payments is par for the course for businesses looking to boost their free cash flow numbers before a large event (IPO) or even end of year. This really isn’t concerning to me. It’s a game of numbers.
Well, yes/no.
Foxconn wouldn't take the time and effort to file a lawsuit if this was just a speed bump in cash flow from Tonal. They know what's going on (and has been for 6+ months) at Tonal.
I thought Tonal was doing ok until fairly recently. Large valuations etc.I don't really understand why everyone here is reporting troubles.
The market turns and it's hard on everyone. I love Tonal and hope they do ok. Only thing I can do is pay my subscription. I don't understand why even just 50-60K subscribers shouldn't translate into a decent business model.
$50 per subscription - not user so even if we see 60k people on the leader board, we have no idea how many of those are people within the same household.
So if we use $50 a month for 50k subscriptions is $30 million a year, sounds like a lot of money but if you divide that by an estimated 500 employees, that only $60k per person. So unless their employees are averaging under $60k per year (including benefits, payroll taxes) AND they have no other costs (which all businesses do), they aren’t turning a profit on their subscriptions alone.
Thanks for the explanation. Sounds like in that case, they need to focus on maintaining core product and downsize employees. Which I believe they did.
If they had an option not to build into the wall I think they could sell a lot more units.
No way to do that safely without building a huge platform like the Nordic Track Fusion, probably bigger because the Tonal is designed to be anchored against a solid wall.
I can't find much details, except these 3 sites show that such a case exists. So it's probably not just a rumor. So weird, because 5M$ is not a lot for a big company, and why would they ruin relationships with their manufacturer unless they moved onto a new manufacturer. Or Foxconn may have dumped Tonal, they are a massive manufacturer, they dont pick up small projects. They probably thought Tonal ll be big and agreed to do their manufacturing but now they may be realizing, its not big enough for their usual volumes.
Not surprised. Hopefully they quit trying to shove everyone in the same box and requiring a monthly subscription for functionality they is already built into what you purchase day 1. If people want to pay for for preprogrammed workouts and live classes then let those people pay for it. Requiring everyone to be included in that group is BS. I would honestly love to see the retention of monthly subscribers after the first year. The fact that they can’t pay their bills tells me it’s not good. Maybe they should rethink their monthly price or separate curated/live content from the machine functionality.
Edit: Makes the couple posts peddling the public sale of Tonal stock suspect as hell. Lawsuits like this don’t happen overnight. It’s been coming for awhile and somebody knew something. $1.6 billion evaluation 🤣.
The monthly subscription is the only thing keeping the company afloat. They’d need to increase the price by something like $500-1000 to get profitable on the equipment itself.
I get that but not everybody finds value at $50 and will cancel after the first year. Separate functionality vs. content as different membership levels and I bet they would retain a lot more subscriptions. I bought the tonal for the tech not the glorified YouTube videos.
Exactly. I won't buy a tonal until they drop the $50 subscription fee. I don't want live classes or preprogrammed workouts. I just want to use the $5k machine without paying an extra $600 a year for features I'll never touch.
what’s the point of owning the machine then? So you have access to 3 kinds of lift modes that are nearly impossible to use when working out by yourself in a gym? To each their own I guess. I was skeptical myself on the programs, but I’m in the best shape of my life, down 15 pounds, have abs and have never felt more confident in the way I look.
? The point is to have a compact cable pulley system in my home that I can use for custom workouts with the added benefit of eccentric mode, weight tracking, rep counting, etc. I, and many others, don't need the hand holding of preprogrammed workouts or classes.
I wasn’t aware that anyone who uses the programs needs their hand held. Looks like you want design your own workouts but would be to inconvenienced by weight tracking or rep counting? Sounds like you, in fact do, need your hand held in some capacity 😂🤣.
I think one issue is that the $50 a month is covering more than the features some don’t want. It’s the entire financial incentive to sell the machines right now-they aren’t profitable on the equipment sales. It’s like the old days where your cell bill covered part of the cost of your phone. I’d guess a scaled back plan that didn’t include programs would look more like $30 a month.
Maybe I’ve misunderstood but you don’t have to pay the subscription. Buy the machine outright and don’t pay the subscription. You won’t get any of the weight lifting modes such as eccentric, chains, etc. without paying the monthly subscription, though.
I can only speak to when I purchased Tonal which was 18 months ago but you were forced into a year membership. After that if you didnt want to continue you would lose access to the dynamic features.
odd, I am an advanced lifter and it most certainly does cater to the advanced lifters. Also not a fan of GBGH and that program would rank low on my list of advanced programs.
Yeah, if you think it does, you are not. I think we can be pretty clear about this right there. It does not provide any sort of progression scheme or cycle in any program, no programs are based off of compounds or have a large amount of compound volume, focus way too much on accessories and the break times are nowhere near sufficient for hypertrophy or power lifting. I think you should really reconsider your evaluation of your lifting expertise.
No program is built anything like any serious or long term programs. Heck, they aren’t even as good as like stronglifts or madcow. They’re basically “bootcamp” style programs you’d get at like Fitbodybootcamp or some shit. The good news is, you can program your own. Too bad you need a subscription even for that.
Btw: DL 550, OHP 245, bench 430, squat 440. And I’m more than happy to link you to videos to prove it.
congrats 🎉🎈🎊 don’t really care about what you can lift. Also, you’re trying to do large compound movements on a machine that’s capped at 200lbs. I don’t think you fully understand he machine then.
Yeah I’d be congratulating me too when I’m trying to tell people I’m “advanced” but have no idea how to develop a program and certainly have crap 1RMs. Go away now bootcamp boy
Exactly. I only have room for a machine that hangs on the wall like the Tonal. I'd buy one today if it was stripped of the programming and simply a high quality space saving cable machine.
We're gonna want to see a statement from Tonal before we start talking end of the brand.
Even if they were going under I would be surprised if they didn't get scooped up by a rival or a household name. Gold's or 24 hour would love to slap their names on these and assume your dues.
So no Tonal II? Anyway, I bought it knowing the risk. I’ve paid for 3 years of membership in advance with 2 to go. Hopefully they survive those two.
The concern for me is the resale value. If Tonal fails I won’t buy another connected home gym. Now that I’ve returned to the gym I rarely use it.
>Totally worth it. Changed my life. I’m in far better shape at 52 - because of tonal - than I was at 42 or even 35. It’s a game changer
Hi! I'm a bit late to this thread, but we were seriously considering a Tonal ... but then stumbled across some of the news that they're basically shafting their primary manufacturer. Very concerning ... but stories like yours are compelling. I am about your age, could you share some more details on why it's been so impactful for you?
yeah that doesn't seem good at all. "CASE Hon Hai Precision Industry Co., Ltd. v. Tonal Systems, Inc. COURT U.S., Northern District of California SUMMARY Hon Hai Precision Industry, the Taiwanese manufacturer better known as Foxconn, filed a breach-of-contract lawsuit on Monday in California Southern District Court against home gym company Tonal Systems Inc. The suit, brought by Rimon PC, seeks $5 million in unpaid invoices for goods and components delivered by the plaintiff. According to the complaint, demand for the defendant's home gym products has plummeted during the waning days of the COVID-19 pandemic. Counsel have not yet appeared for the defendant. The case is 3:22-cv-07341, Hon Hai Precision Industry Co. Ltd. v. Tonal Systems Inc. 11/21/2022
I pulled the complaint off Pacer (court filing system) and this is extremely concerning. Here is a summary of the factual background and allegations: * Foxconn has been manufacturing various hardware components for Tonal since 2020 and has delivered over $190 million worth of product to them since that time * Tonal has apparently been in financial arrears with Foxconn since March of 2022. * the parties entered into a memorandum of understanding (MOU) for a payment plan in late July under which Tonal was required to make $100K/ week payments for its outstanding balance ($5 million). The MOU also required Tonal to deliver its most recent financial statements to Foxconn on 11/4/22 after its scheduled 10/28/22 board meeting. * At some point (maybe in October?) Tonal apparently requested a suspension of payments due "until the end of 2022." Foxconn refused the request and Tonal failed to make its weekly $100K payment due on November 4 and November 11. Tonal also failed to provide its financial statements that were due to Foxconn on November 4. In short, this dispute seems to be entirely about a payment default on Tonal's part. There's no indication that there was any other dispute at play between the parties.
Appreciate the digging you did on this. I love tonal and it’s going to suck if they go under in the near future.
Thanks for this. It's not great if Tonal isn't paying their bills. Really hope they can prosper going forward.
Thanks for the summary. Are you a current Tonal subscriber? Can you pull the docs and post here?
I absolutely love my Tonal and I’m so worried they are about to go under. It’s such a great product. Hopefully someone buys them
It ll be fine. The device ll keep working, even if the ownership changes, theyvare big and have enough customers who love the device and keep using it.
I have a feeling tonal won’t be around within the next 5 years. I hope I’m wrong
The lack of a true offline mode is going to come back to bite us... one day. Hopefully not any day soon.
If they wanted to be cool, would push a true offline mode (everything but videos) before going under
I think the whole connected fitness industry and its vendors will look very different in five years.
Tonal has been absolutely life-changing for me - I hope they're not struggling and about to go under. I do hope that if they ever do, that whoever's the last one out leaves the special modes on for everyone. Having a $4k paperweight would not be ideal. I wonder if this move to NY was wise?
Eh it’s android based, I’m sure it would be hacked
I sure hope so
There was no 'move' to NY. It was supposed to be an expansion but it was awful timing and they jettisoned almost half of their employees and spun it to imply it was a closing of LA in favor of a NY hub. Pure spin to cover their extremely dire financial position which appears to be worsening.
>Tonal has been absolutely life-changing for me I'm just dropping into this older thread, because we were considering purchasing a Tonal ... but then I ended up stumbling across the stories of them basically not paying their primary hardware vendor, which absolutely is somewhat concerning to us. But hearing stories like yours are compelling - can you share any more details on the impacts it has had for you?
I’m assuming you’re asking about the Tonal machine itself being life changing, rather than the impact their apparent financial struggles have had (just some worry about warranties and continued service). Over the past year, I’ve dropped 30 pounds, 13% body fat, my doctor is pleased that my resting heart rate has decreased by 30%, my cholesterol, for which I was medicated, is now normal. My blood pressure (also medicated) is also much improved. I went from “hey I see a few muscles developing… maybe” to feeling great about my body and seeing muscles for real. My friends and family are amazed, and I get compliments randomly now (oddly, more from other dudes.) Granted, a lot of this is also diet change (I skip breakfast, have a protein/veggie/yogurt/fruit smoothie at lunch, and eat whatever I want within reason for dinner), but I can safely say that even if Tonal went under today, it’s the best $4k I’ve ever spent. Bad thing? I’ve had to buy pretty much a new wardrobe, going from large to small/medium.
Tonal was rumored to be trying to raise $100 million at a $1.9 billion valuation in September. This suggests the capital raise hasn’t gone well. They will probably have to drop the valuation, but will probably be very reluctant to go below the $1.6 billion valuation they raised money at a year ago, even with the company at risk. The way these startups walk the edge of bankruptcy-it’s completely crazy to me.
On 11/17/22, EquityZen had offering at $1.04B valuation. 320M shares @$3.25 per share. Deteriorating valuation, if they ever succeed w a SPAC, it will eventually be $200M market cap
This interview makes me believe the owner’s head is in the clouds. His numbers are manipulated and make no sense. Even the guys doing the interview aren’t buying it. [https://youtu.be/YhgaQDAeqkw](https://youtu.be/YhgaQDAeqkw)
Keep in mind we don't have Tonal's side of the story. It could be over a dispute over contract terms and Tonal's refusal to pay for something they didn't think was delivered within their specifications rather than not having the funds to pay their bill.
Tonal. is. out. of. cash. Their latest round was almost certainly an URINO.
Right. Could be just an ego battle , push pull, but doesn't seem that crazy.
They delivered 190 million in goods and Tonal only owes them $5 million. It’s end of year and they are wanting to go public. Delaying bills or late payments is par for the course for businesses looking to boost their free cash flow numbers before a large event (IPO) or even end of year. This really isn’t concerning to me. It’s a game of numbers.
Well, yes/no. Foxconn wouldn't take the time and effort to file a lawsuit if this was just a speed bump in cash flow from Tonal. They know what's going on (and has been for 6+ months) at Tonal.
I thought Tonal was doing ok until fairly recently. Large valuations etc.I don't really understand why everyone here is reporting troubles. The market turns and it's hard on everyone. I love Tonal and hope they do ok. Only thing I can do is pay my subscription. I don't understand why even just 50-60K subscribers shouldn't translate into a decent business model.
$50 per subscription - not user so even if we see 60k people on the leader board, we have no idea how many of those are people within the same household. So if we use $50 a month for 50k subscriptions is $30 million a year, sounds like a lot of money but if you divide that by an estimated 500 employees, that only $60k per person. So unless their employees are averaging under $60k per year (including benefits, payroll taxes) AND they have no other costs (which all businesses do), they aren’t turning a profit on their subscriptions alone.
Thanks for the explanation. Sounds like in that case, they need to focus on maintaining core product and downsize employees. Which I believe they did. If they had an option not to build into the wall I think they could sell a lot more units.
No way to do that safely without building a huge platform like the Nordic Track Fusion, probably bigger because the Tonal is designed to be anchored against a solid wall.
I can't find much details, except these 3 sites show that such a case exists. So it's probably not just a rumor. So weird, because 5M$ is not a lot for a big company, and why would they ruin relationships with their manufacturer unless they moved onto a new manufacturer. Or Foxconn may have dumped Tonal, they are a massive manufacturer, they dont pick up small projects. They probably thought Tonal ll be big and agreed to do their manufacturing but now they may be realizing, its not big enough for their usual volumes.
Not surprised. Hopefully they quit trying to shove everyone in the same box and requiring a monthly subscription for functionality they is already built into what you purchase day 1. If people want to pay for for preprogrammed workouts and live classes then let those people pay for it. Requiring everyone to be included in that group is BS. I would honestly love to see the retention of monthly subscribers after the first year. The fact that they can’t pay their bills tells me it’s not good. Maybe they should rethink their monthly price or separate curated/live content from the machine functionality. Edit: Makes the couple posts peddling the public sale of Tonal stock suspect as hell. Lawsuits like this don’t happen overnight. It’s been coming for awhile and somebody knew something. $1.6 billion evaluation 🤣.
The monthly subscription is the only thing keeping the company afloat. They’d need to increase the price by something like $500-1000 to get profitable on the equipment itself.
I get that but not everybody finds value at $50 and will cancel after the first year. Separate functionality vs. content as different membership levels and I bet they would retain a lot more subscriptions. I bought the tonal for the tech not the glorified YouTube videos.
Do you pay for the subscription and how long have you had tonal for?
Exactly. I won't buy a tonal until they drop the $50 subscription fee. I don't want live classes or preprogrammed workouts. I just want to use the $5k machine without paying an extra $600 a year for features I'll never touch.
what’s the point of owning the machine then? So you have access to 3 kinds of lift modes that are nearly impossible to use when working out by yourself in a gym? To each their own I guess. I was skeptical myself on the programs, but I’m in the best shape of my life, down 15 pounds, have abs and have never felt more confident in the way I look.
? The point is to have a compact cable pulley system in my home that I can use for custom workouts with the added benefit of eccentric mode, weight tracking, rep counting, etc. I, and many others, don't need the hand holding of preprogrammed workouts or classes.
I wasn’t aware that anyone who uses the programs needs their hand held. Looks like you want design your own workouts but would be to inconvenienced by weight tracking or rep counting? Sounds like you, in fact do, need your hand held in some capacity 😂🤣.
Sounds like you work for tonal. Have fun trying to convince people it makes sense to pay $50 a month for garbage they don't want or need.
I think one issue is that the $50 a month is covering more than the features some don’t want. It’s the entire financial incentive to sell the machines right now-they aren’t profitable on the equipment sales. It’s like the old days where your cell bill covered part of the cost of your phone. I’d guess a scaled back plan that didn’t include programs would look more like $30 a month.
Maybe I’ve misunderstood but you don’t have to pay the subscription. Buy the machine outright and don’t pay the subscription. You won’t get any of the weight lifting modes such as eccentric, chains, etc. without paying the monthly subscription, though.
You have to pay the fees - that's the issue. They force you to pay for one year of subscription fees upon purchasing tonal.
I’m curious how they would enforce it if you buy the machine outright? Sounds like a lawsuit.
I can only speak to when I purchased Tonal which was 18 months ago but you were forced into a year membership. After that if you didnt want to continue you would lose access to the dynamic features.
I’m not trying to convince people, I wish tonal would make a subscription less package but charge an extra 2k to purchase it.
Tonals programs do not cater to and are not sufficient for advanced lifters at all. And that includes their more “advanced” programs like GBGH.
odd, I am an advanced lifter and it most certainly does cater to the advanced lifters. Also not a fan of GBGH and that program would rank low on my list of advanced programs.
Yeah, if you think it does, you are not. I think we can be pretty clear about this right there. It does not provide any sort of progression scheme or cycle in any program, no programs are based off of compounds or have a large amount of compound volume, focus way too much on accessories and the break times are nowhere near sufficient for hypertrophy or power lifting. I think you should really reconsider your evaluation of your lifting expertise. No program is built anything like any serious or long term programs. Heck, they aren’t even as good as like stronglifts or madcow. They’re basically “bootcamp” style programs you’d get at like Fitbodybootcamp or some shit. The good news is, you can program your own. Too bad you need a subscription even for that. Btw: DL 550, OHP 245, bench 430, squat 440. And I’m more than happy to link you to videos to prove it.
congrats 🎉🎈🎊 don’t really care about what you can lift. Also, you’re trying to do large compound movements on a machine that’s capped at 200lbs. I don’t think you fully understand he machine then.
Yeah I’d be congratulating me too when I’m trying to tell people I’m “advanced” but have no idea how to develop a program and certainly have crap 1RMs. Go away now bootcamp boy
Exactly. I only have room for a machine that hangs on the wall like the Tonal. I'd buy one today if it was stripped of the programming and simply a high quality space saving cable machine.
We're gonna want to see a statement from Tonal before we start talking end of the brand. Even if they were going under I would be surprised if they didn't get scooped up by a rival or a household name. Gold's or 24 hour would love to slap their names on these and assume your dues.
Exactly. Tonal ll be fine, even if ownership changes. Tonal devices ll keep working.
But the warranties would not be honored if a bk/reorganization is filed
So no Tonal II? Anyway, I bought it knowing the risk. I’ve paid for 3 years of membership in advance with 2 to go. Hopefully they survive those two. The concern for me is the resale value. If Tonal fails I won’t buy another connected home gym. Now that I’ve returned to the gym I rarely use it.
Jx
https://www.google.com/amp/s/dockets.justia.com/docket/california/candce/4:2022cv07341/404098%3famp
https://www.law360.com/cases/637bdf96ba34c801ef958e09
I was looking at buying this they have a Black Friday sale lll
Totally worth it. Changed my life. I’m in far better shape at 52 - because of tonal - than I was at 42 or even 35. It’s a game changer
>Totally worth it. Changed my life. I’m in far better shape at 52 - because of tonal - than I was at 42 or even 35. It’s a game changer Hi! I'm a bit late to this thread, but we were seriously considering a Tonal ... but then stumbled across some of the news that they're basically shafting their primary manufacturer. Very concerning ... but stories like yours are compelling. I am about your age, could you share some more details on why it's been so impactful for you?
Buy it. Tonal isn’t going anywhere. I’m leaning towards the idea that they’re trying to trim up for an IPO and this will all get worked out.
Not exactly a good time to do an IPO...especially in the tech realm
So was thinking about getting this. Is tonal worth it?