By Dawn McCarty
Bloomberg News
Friday, November 9, 2007

InPhonic, which sells wireless products and services, sought bankruptcy protection after it agreed to be bought by a private-equity firm.

InPhonic listed assets of $120.9 million and debt of $179.4 million in Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Wilmington, Del.

InPhonic, which hired the investment banking firm Lazard last month to explore a possible sale, plans to sell its assets to an affiliate of Philadelphia-based Versa Capital Management, the District firm said in a statement. The sale must be approved by the bankruptcy court.

"We intend to use this filing to take the actions necessary to position InPhonic for future success," chief executive Andy Zeinfeld said in the statement.

Zeinfeld, a veteran executive from Radio Shack, assumed the helm in October after the company's founder, David Steinberg, stepped aside.

Steinberg started selling cellphones from his Bethesda townhouse in the late 1990s, and turned the company into one of the fastest-growing in the United States. But the firm has stumbled in the past year.

Earlier this year, InPhonic restated its 2006 second- and third-quarter earnings, blaming a $5 million increase in its previously reported net loss on accounting errors by inexperienced employees.

Seven affiliates of InPhonic also filed for bankruptcy protection yesterday. The company, which began operations in 1999, asked that the cases be jointly administered by the court.

The 20 largest consolidated unsecured creditors are owed $34.4 million. The three biggest unsecured creditors are: Microsoft's MSN unit, owed $8.2 million; Yahoo, owed $3.7 million; and Google, owed $3.5 million.

InPhonic fell 33 cents, or 84 percent, to 6 cents in Nasdaq Stock Market composite trading.