Total Sleep Holdings, Inc announced closure of its operations on December 9, 201 1.

The company was based in Irving, Texas with 54 sleep centers in eight states , Arizona, Georgia, Indiana, Kansas, Louisiana, Massachusetts, Missouri and Texa s. Texas comprised the largest number of sleep centers with 8 in Austin, 4 in H ouston and 9 in North Texas. Arizona 2, Georgia 12, Indiana 2, Kansas 1, Louisi ana 5, Massachusetts 9 and Missouri 2 sleep centers. Total Sleep Holdings emplo yed approximately 100 in Texas with 64 employees at the corporate office in Irvi ng, Texas. Total Sleep Holdings, Inc consisted of Sleep Diagnostics, Inc., Sleep Management Services, Inc., total Sleep Services, Inc., Trusted Life Care, Inc., and Klabzu ba Properties III, LTD. According to court documents, GE Business Financial Services, Inc and MCG Capita l Corporation are seeking to recover $ 28.5M. Total Sleep Holdings had not made a payment to the investment group since December of 2010. How Total Sleep Holdings became indebted to the extent of $ 28.5M is baffling to industry experts. A sleep center is comprised of equipment and furnishing at a cost of approximately $50K per sleep center bed or room. With the addition of the build out of the leased site at approximately $250K per site. Total Sleep H oldings had 54 locations and approximately 120 sleep rooms. The simple math is $13M for the leased space and $ 2.7M for the furnishings and equipment. Many of the vendors were never paid for equipment, construction build out, supplies or monthly lease payments. The investment groups appointed their own management in 2011 according to former employees. The investment group management had very little knowledge of sleep center operations and marketing. Industry insiders began to hear grumblings in early 2011 of vendors not being pa id and property management firms not being paid lease payments or construction c osts. Employees were paid until December 9, 2011 when they were notified to vaca te the sleep centers. Total Sleep Holdings left behind valuable patient data, e quipment, furnishings and provided no continuity of care for their current patie nts. Two of the large vendors are Respironics Corporation and ResMed. Respironics Co rporation is a division of Royal Phillips Electronics (NYSE: PHG, PHIA ) with he adquarters in Murrysville, Pennsylvania. Respironics comprises less than one pe rcent of Phillips yearly sales. ResMed (NYSE: RMD and ASX) is based in San Dieg o, California. Former employees communicated Respironics and ResMed are each owed several milli on dollars from Total Sleep Holdings. Respironics supplied the Polysomnography (PSG) equipment and ResMed supplied the durable medical equipment (DME). Accord ing to former employees, the majority of the equipment was leased and Total Slee p Holdings leased the majority of their office space. The short term economic, regulatory and patient care issues are immense. Patien t records must be protected from the closed offices to conform to current federa l HIPPA regulations. Many sleep centers in Texas began to notice an influx of p atients from Total Sleep Holdings in early December 2011. Patients had no acces s to their medical records and additional diagnosis and treatment had to be comp leted. It is unclear if insurance companies will pay for the initial services p roved by Total Sleep Holdings which account for millions of dollars. Former employees of Total Sleep Holdings have been placed in competitor sleep ce nters. The former CEO, Bill Gudetti, resided in Kansas City and was hired by Ap ria the week after Total Sleep Holdings closed. Brennen Garry was a VP at Total

Sleep Holdings and was hired by Graymark Healthcare, a competitor of Total Slee p Holdings. The good news for sleep centers is the demise of Total Sleep Holdings will place a glut of polysomnography and DME equipment on the market and drive down both n ew and used prices. Respironics and ResMed will experience a large amount of us ed sleep equipment on the market. Many sleep centers are expanding in Texas to fill the void left by Total Sleep H oldings. New centers are opening in Austin, Dallas/Fort Worth, San Antonio and Houston.