'Standing Eight' count started as gym operator gets notice.

SPORTS Club Co., operator of the high-end Sports Club/LA, is getting more pummeled than one of its punching bags.

The company last week announced it received a notice of default from U.S. Bank, trustee for the holders of its 11 3/8 percent senior secured notes due March 2006, because the gym hasn't filed the quarterly financial results.

In its letter, U.S. Bank gave Sports Club 30 days to file certified results or face being in default of the company's loans. Sports Club officials blame the delay on "complex issues" stemming from new accounting rules implemented by the Securities and Exchange Commission.

The company said in a statement earlier this month that it worked out a timeframe with the American Stock Exchange, where the stock is listed, for submitting the proper filings. Even after the threat of default, there was no word when those financials would be ready.

"While no assurances can be given as to the timing of the company's filing, the company continues to make satisfactory progress towards completion of its financial reports and expects to file within the allotted 20-day period, which would nullify (U.S. Bank's) notice," wrote Timothy M. O'Brien, Sports Club's chief financial officer in a statement.

Last month, preliminary results were filed for the three months ended March 31 that showed a loss of nearly $6 million on revenue of $37.2 million. In the year-ago first quarter, the loss was $3.7 million on revenue of $32.6 million.

Sports Club faces increased competition from operators of ritzy gyms, especially New York-based Equinox Holdings Inc., which is undergoing a national expansion and opening two new operations in Los Angeles.

The losses spurred Sports Club to sell off more shares two months ago in order to continue making debt payments. Sports Club sold $6.5 million shares in a private placement to its chief executive, Rex A. Licklider, and its primary investors, Kayne Anderson Capital Partners LP and Millennium Entertainment Partners LP.

"The proceeds of this offering are being used to make the $5.6 million interest payment on our senior secured notes, with the balance to be added to working capital," wrote Licklider.

The tumult comes on the heels of a shakeup in the company's executive suite. Sports Club founder D. Michael Talla relinquished his role as chairman and co-chief executive in March to Licklider so he could "focus more on outside real estate activities," according to a statement. Talla remains on the board.