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By filing for Chapter 11 U.S. Bankruptcy Code protection, Digicash hopes to buy some time to further develop its eCash technology.
Digicash Inc.'s aggressive three-year drive to make electronic cash as popular in the U.S. as it is in Europe and Australia has, for now, run out of the money. The Palo Alto, CA-based company in November filed for Chapter 11 protection under U.S. Bankruptcy Code, leaving both the futures of the electronic micropayment pioneer and its nascent industry in doubt.
Digicash's financial problems began long before the bankruptcy court filing. In an effort to stay afloat, the company slashed its workforce from 50 in January to just six. But saddled with $4 million of debt, Digicash's ship finally sank. The company is surviving on a bridge loan given by its initial investors-August Capital, Applied Technology and Gilde Investment of Holland.
Digicash also closed its satellite office in Amsterdam, where the company was founded in 1990, and will focus its reorganization efforts in Palo Alto, where a skeleton staff will oversee the company's future. Digicash executives aren't revealing their immediate or long-term plans; they declined to be interviewed by BTN for this article. The company did however confirm that Digicash founder David Chaum and former chief executive officer David Nash are no longer with the company, and that Scott Loftesness has been named Digicash's interim chief executive officer.
Cashing in on Europe
While Digicash failed to make a splash in the U.S., the company did make some waves in a few overseas markets, where central-bank oriented economies that better support electronic cash prevail. In fact, Digicash recently inked a pact with Switzerland-based Credit Suisse to test eCash, Digicash's online payments product. Other foreign banks that are using eCash include Deutsche Bank, Bank Austria and Den Norske Bank in Norway.
Digicash executives say they're not giving up on deploying eCash in the U.S., although plans for its future are vague. "The company is exploring a range of potential alternatives including working with major strategic players to finance the market development of eCash or the sale and/or licensing of the company's intellectual property portfolio," Loftesness stated in a November news release. "eCash, as it has been developed by Digicash, is an important and inevitable payment...