O.C. BUSINESS PLUS : Incomnet Files for Bankruptcy Protection

Less than two weeks after a crucial financing deal collapsed, Irvine-based Incomnet Inc. has filed for bankruptcy.

The company, a long-distance service reseller, filed for Chapter 11 bankruptcy protection, a move to buy the company some time to seek new financing or a merger, Incomnet said Thursday.

The company will continue to operate as usual during the bankruptcy proceedings, said George Blanco, chief financial officer.

Incomnet has been reeling since it learned last week that a financing arrangement with Ironwood Telecom, announced in June, had fallen through because of the company’s deteriorating financial condition.

“Up until last Friday, we thought we had a deal struck and worked through the weekend to try and resurrect it,” Blanco said.

But the company decided to seek bankruptcy protection “to clean things up that had occurred over the last five or six years under previous management,” Blanco said.

Incomnet has lost money for seven consecutive quarters, including $1.54 million, or 8 cents a share, in the first quarter ended March 31 on sales of $8.7 million. In 1998, the company lost $19.1 million on sales of $54.8 million.

In their bankruptcy filing, the company listed $23.1 million in assets and $27.5 million in debts.

The company’s stock closed Thursday at 13 cents a share, down 5 cents.

The company’s primary unit, Incomnet Communications Corp., had been beset with financial and legal problems. In 1997, the unit paid $1.25 million to settle accusations that it switched the long-distance service of at least 10,000 customers without their permission, a process known as slamming.

At the time, the unit was known as National Telephone & Communications Inc.

Last year, there was a top-level shake-up, and the name of the unit was changed “to make a separation from the past,” Blanco said.

Incomnet’s 127 employees will not be affected by the bankruptcy filing, he said.

Blanco said the company expects to emerge from the bankruptcy as a stronger, profitable concern.

He noted that Incomnet has been adding 6,000 to 7,000 customers a month.