Thursday, February 07, 2002

PocketScript auction ordered by bankruptcy court




By James McNair
The Cincinnati Enquirer

        PocketScript, the Mason company whose hand-held drug-prescription device is used by 750 U.S. doctors, will be sold to the highest bidder in a federally supervised auction.

        The plan was announced Wednesday in U.S. Bankruptcy Court, whose protection PocketScript sought two days earlier. The company estimated its debts at between $1 million and $10 million, its assets at less than $50,000.

        “It's unfortunate, but when the employees locked up the bank account, you can't operate,” said Stephen Burns, PocketScript's co-founder and chief executive.

        Mr. Burns was referring to a lawsuit filed by 15 former employees seeking payment of $180,000 in back wages and benefits. In that case, a Warren County judge froze PocketScript's account at KeyBank.

        The ex-employees, represented Wednesday by lawyer Thomas Coffey, tried to block a PocketScript proposal to borrow $75,000 and use part of it to pay its seven remaining employees. Mr. Coffey's effort was denied by U.S. Bankruptcy Judge J. Vincent Aug Jr.

        Founded in 1999, PocketScript used privately raised money and bank loans to develop and roll out a hand-held communicator that doctors use to transmit prescriptions based on patients' health plans and other drug use.

        The company generated almost $1 million in revenue in 2001, but was losing money. Talks with 20 potential investors fizzled. Debts to vendors turned into civil judgments. Its lack of cash led to the layoff of almost its entire work force last summer.

        PocketScript said a company formed by one of its original investors, Blue Ash accountant Lawrence Waldman, agreed to lend it $75,000 to meet payroll and to pay its bankruptcy lawyers. The company, PCACQ Inc., will start the PocketScript auction with a $1.4 million bid and the assumption of certain undisclosed liabilities.

        “We've got a good, strong investor group behind us,” Mr. Waldman said. “We want to create ongoing value.”

        A month ago, PocketScript's owners rejected a buyout bid that called for $2 million upfront and a deferred $11.5 million. That offer came from New Business International, a company headed by Deerfield Township investor Rob Reinders.

        Mr. Reinders said he won't get involved until he reviews the PCACQ offer.

        “Our effort from the very beginning was to facilitate a structure that would avoid the unnecessary losses of creditors and customers that result from a bankruptcy filing,” he said.

        PocketScript owes a total of $1.86 million to Key Bank, Firstar and other secured creditors. Its unsecured debt wasn't added up, but includes six-figure sums owed to ProtoCall of Cincinnati, Pomeroy Computer Resources of Hebron and the public relations firm Fleischman Hilliard.

        Although Judge Aug commended PocketScript's former employees for banding together to assert their claims for back pay, he said it was more important to keep the company alive.

       



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