Thursday, March 28, 2002
Judge OKs PocketScript's plan
Employees won't get back pay
By James McNair, email@example.com
The Cincinnati Enquirer
PocketScript Inc. all but completed its journey through bankruptcy Wednesday when a federal judge approved a plan that leaves the Mason technology company in the hands of its original investors minus most of its debt.
The developer of a wireless drug prescription device for doctors filed for Chapter 11 bankruptcy Feb. 4, saying it had no choice after a group of unpaid former employees persuaded a Warren County judge to freeze PocketScript's bank account.
The employees were owed $180,000. Once U.S. Bankruptcy Judge J. Vincent Aug Jr. signs the order approving PocketScript's reorganization, the company will owe them nothing. Altogether, about $4 million in debt was erased.
PocketScript had hoped to find a buyer by auctioning itself off to the highest bidder. Its lawyer, Don Rafferty, said notices were sent to more than 100 prospective buyers, eight of whom inspected the company's books.
It was a well-publicized event within the realm of folks we believed would be interested, Mr. Rafferty told Judge Aug. I fielded countless phone calls from attorneys and interested parties alike, but ultimately we received no bids.
Little is left of what had been a 68-employee company on the cusp of revolutionizing the way doctors write prescriptions. The technology, which several hundred doctors use to match drugs with patients' health plans and transmit prescriptions on hand-held computers, is Pocket-Script's core asset.
The company taking control, PCACQ Inc., essentially consists of the same people in charge before PocketScript co-founders Stephen Burns and Dr. Ted Bort, investor Lawrence Waldman and others. This time, they will be joined by John Kane, the retired president of Cardinal Health in Dublin, Ohio.
The purchase price was $1.4 million, which that group and two banks had loaned to PocketScript. Their claims had priority over other creditors including the former employees. Of the $1.4 million, about $940,000 was owed to KeyBank and Firstar Bank. The company will continue to operate, with the loans to be repaid later.
Mr. Kane, who had loaned $150,000 to PocketScript, is being sought for an active role at the company. The former CEO, Mr. Burns, said he didn't know what role he would have, if any.
If this hasn't tarnished the company's reputation too much, we have high hopes, he said. It's not as if some other company has swooped in and taken the market.
In January, PocketScript's board turned down a $13.5 million offer that promised to meet the company's financial obligations over time. That suitor, New Business International (NBI), is out about $400,000 it had invested in PocketScript.
In hindsight, it was clear that our loan was used as bridge capital for another plan that was in the works, said NBI President Rob Reinders. We believed Steve Burns when he said he wasn't going to take PocketScript into bankruptcy. Unfortunately we were wrong.
One former employee owed back pay by PocketScript, Daniel Braga, regretted the tossing out of his claim, but wished Mr. Burns luck.
I sure hope, now that the load in his backpack is lighter, that if he does make it, he'll keep us in mind, Mr. Braga said.
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