Incomnet Says Stock Relisting Is Unlikely
Financially troubled Incomnet Inc., which filed for bankruptcy protection in September, said Monday it is unlikely that its stock will be listed again on any exchange or that shareholders will receive any value for their shares.
The Irvine long-distance service reseller also said that plaintiffs in a class action against the company will not receive anything from a settlement last June.
The plaintiffs, who had accused the company of falsely denying the existence of a Securities and Exchange Commission investigation, had settled for $500,000 in cash, $100,000 in expenses and about $4 million worth of stock.
Incomnet’s stock was removed from the Nasdaq SmallCap market soon after the company filed for Chapter 11 bankruptcy. Incomnet said it planned to submit a restructuring plan in U.S. Bankruptcy Court in Santa Ana next week. The approval process could be completed within 90 days.
Under the plan being formulated, the company said, creditors would be repaid and nothing would be left for shareholders or class-action members.
The company, which has 120 employees in Southern California, had listed $27.5 million in debts in its bankruptcy filing. It listed assets of $23.1 million.
Incomnet has lost money for seven consecutive quarters and said its third-quarter loss was significant. It had third-quarter sales of $7.7 million. The company has been beset with financial and legal problems for several years.
In 1997, one of its subsidiaries, National Telephone & Communications Inc., paid $1.25 million to settle accusations that it had switched the long-distance service of at least 10,000 customers without their permission, a process known as slamming.
That same year, it had paid $800,000 to settle a shareholder lawsuit that involved former Chief Executive Sam Schwartz.
The class action stemmed from the company’s denial in 1994 that it was under SEC investigation.
Schwartz, who resigned from Incomnet in 1995, had been investigated by the agency for allegedly making improper trades of the company’s stock.
In 1996, he turned over to Incomnet more than $2 million he made on his trades. He defended his actions by saying he was trading the shares in an attempt to protect the stock from short sellers.
