News
Transcrypt takes steps to overcome controversy about financial statements
Transcrypt International released its restated audited financial reports on July 15, 1998, after a four-month-long sequence of events resulting from questions about the wireless communications products manufacturer’s financial condition, operations, liquidity and ongoing 1997 audit.
The reports, issued by auditor KPMG Peat Marwick, Omaha, NE, restated the revenues for 1997 and 1996 as $40.4 million, and as $10.6 million, respectively. The restated revenues for 1996 and 1997 showed a $14.5 million discrepancy from the original financial reports, according to Transcrypt’s statement. The net loss for the two-year period increased by about $9.1 million.
The Lincoln, NE-based company said in a press release that it had reanalyzed its accounting policies regarding revenue recognition, which resulted in the restatement of previously reported financial results for 1996 and 1997. In other words, revenue had been recorded for products shipped but not yet paid for. The new report stated that revenue was recognized for “certain sales where a formal written agreement was not received” and for “sales of certain products which were subsequently returned to the company.” The methods of recognizing the percentage of completion of the E.F. Johnson acquisition and the allocation of the purchase price of the acquisition were also cited. Transcrypt acquired E.F. Johnson, the two-way radio and system manufacturer, on July 31, 1997 for $34 million.
Craig J. Huffaker, Transcrypt’s chief financial officer, said, “We have initiated tighter monitoring and control procedures to ensure strict compliance with the company’s revenue recognition policies moving forward. New accounting policies have been instituted in regards to government contracts and the use of extended payment terms to customers. We are also changing the reporting relationship for our order-processing group. This area will report to finance.” KPMG issued the financial reports a little over two months after being hired by Transcrypt to replace Coopers & Lybrand as independent auditors. Coopers & Lybrand resigned on April 24 and withdrew its previously issued auditor’s reports for the fiscal years 1996 and 1995.
Jim Stark, Transcrypt’s director of investor relations, said, “Now we have a clean opinion from KPMG on our financials. It wasn’t contingent or subject to anything, which is very good. Normally if a company has wrongdoings or fraud, per se, an accounting firm will not give you a clean opinion until the company comes out and makes a statement to that manner-that there was some fraud or something.”
The controversy began in March when an anonymous letter, addressed and delivered to Coopers & Lybrand, alleged that two sales totaling $1.75 million to one government customer in 1997 were not properly recorded. On March 27, Transcrypt announced a delay in the completion of its 1997 audit because certain accounting principles relating primarily to revenue recognition had not been resolved.
Between March 31 and May 27, 12 class action lawsuits were filed against the company in the U.S. District Court in Nebraska. Some of the complaints also named one or more officers as additional defendants. The complaints allege violations of some federal securities laws and relate primarily to allegations of false and misleading financial statements and representations and material omissions by the company.
“The lawsuits are starting to progress a little more quickly. There were 12 federal class-action suits filed, and I’m sure they’ve all been combined into one class action lawsuit. Our expectation is that we might see some movement on those within the next 60 to 90 days,” Stark said. “I think if we can resolve that outstanding issue, it will help on the NASDAQ side of business, as well as with the SEC investigation.”
Within three days of Coopers & Lybrand resigning, the NASDAQ National Market delisted the company’s stock based on the panel’s determination that the company failed to maintain current public filings with audited financial statements.
The Securities and Exchange Commission also issued a formal order of investigation to determine whether violations of federal securities laws had occurred in connection with the company. Transcrypt stated in its new financial report that it is “unable to predict whether the SEC is likely to initiate proceedings against the company or its affiliated parties relating to these events.”
Stark said, “The SEC is looking at our accounting records. Any piece of information they ask for, they get. That’s how we’ve been cooperating with them.”
About a month after its stock was delisted, Jeffrey L. Fuller, Transcrypt president, and C. Eric Baumann, vice president of North American sales, resigned. John T. Connor, chairman of Transcrypt, has been acting as CEO in the interim. The board of directors appointed a committee, chaired by Director Thomas Thomsen, to conduct a nationwide search for a permanent CEO. Ed L. Osborn, the senior vice president of marketing and chief operating officer who joined the company in April, moved up to acting president.
The delay in the 1997 audited consolidated financial statements, the resignation of Coopers & Lybrand, the ongoing investigation by the SEC and the resulting uncertainty of class-action lawsuits have “negatively impacted the company’s sales and customer confidence during the second quarter of 1998,” according to Transcrypt’s statement.
Now that the restated financial results have been released, Transcrypt is working to come out ahead in the wake of this four-month-long ordeal.
“We certainly have to go through a period of rebuilding customer confidence, now that we have our numbers and audits,” Huffaker said. “The main thing is to show them our viability because a lot of questions were raised when all this occurred. There was a lot of uncertainty. And now we can go out and show them our audits and show them that we are, in fact, a viable company. I think that will go a long way.”
Stark said that once the company is current with its filings with the SEC, various stock dealers can become market makers, which will probably move the stock into trading on the over-the-counter bulletin board.
Transcrypt continues to have conversations with Nasdaq regarding the timing of its relisting. Stark said that it could take several months.
“Getting this audit is actually a very positive step for our customers because there had been concern of ‘would Transcrypt be around?'” Stark said. “We put in a press release what our cash balances were and where we stood with everything, so they would know that we are a viable company and we plan to be around.”
Geotek directors resign; company seeks Chapter 11 bankruptcy protection
Five directors of Geotek Communications, Montvale, NJ, resigned in June, including Yaron I. Eitan, chief executive officer, and members Haynes G. Griffin, Winston J. Churchill, Walter E. Auch and Purmendu Chatterjee. William Spier will remain on the board as chairman. George Calhoun is departing his position as senior vice president of marketing, but will retain his membership on the board of directors, along with Richard T. Liebhaber and Richard Krants. Also departing is Michael McCoy, executive vice president and chief operating officer.
In papers filed with the Securities and Exchange Commission, Geotek revealed loans ranging from $100,000 to $300,000 that it provided to Eitan, McCoy and Calhoun for personal use. As of March 31, 1998, each of these loans had an outstanding balance due.
Resignations are not unusual for a company undergoing changes such as Geotek’s, according to Alan Shark, president of the American Mobile Telecommunications Association (AMTA).
“People on the board who have not been successful bringing in the capital make way for people who can,” he said.
Geotek has not yet selected a new chief executive officer. Both a human resources employee and an investor relations employee refused to comment on the issue. Upper-level management at Geotek did not return phone calls.
Shark sees four options for Geotek that the new management can choose from, including finding a partner, being acquired, obtaining unacquired finances or dissolving the company.
“I think they are still trying to weigh their options,” Shark said. “I still hope they can turn this around. They have been a very good member [of AMTA] and they offer a neat package of services.”
The management transitions are just the beginning of changes at Geotek. The company and its domestic subsidiaries filed voluntary petitions seeking protection under Chapter 11 of the Bankruptcy Code on June 29. The filing, along with $10 million in debtor-in-possession financing, will enable the company to conduct business while negotiating a reorganization plan.
Although the plan is subject to court approval, Geotek expects to use all operating revenues from the continued sale of its communications systems and services, in addition to the $10 million debtor-in-possession commitment, to cover operating expenses.
S-C Rig Investments III, L.P., an affiliate of the Soros Group, provided the $10 million commitment. Chatterjee is a director and president of S-C Rig Investments. Geotek employees will continue to receive their normal salary and benefits.
“The filing, coupled with the new financing, affords the company the opportunity to stabilize its financial situation, restructure its balance sheet and reinforce and maximize the underlying value of its business to attract additional investors or strategic partners,” Spier said in a press release.
Reflecting the company’s financial problems, Geotek’s stock prices fell to 12 cents per share and attracted the attention of the NASDAQ Listing Qualifications Panel, which delisted Geotek’s securities from NASDAQ on June 30, 1998.
As of March 31, 1998, Geotek Communications had consolidated assets (unaudited) of about $351 million and consolidated liabilities (unaudited) of about $424 million.
Lucent claims to cut E9-1-1 connect time
Lucent Technologies, Murray Hill, NJ, has formed a business venture that will help police and fire departments and other agencies respond to E9-1-1 emergency calls faster and more efficiently, even when calls are made from a wireless phone.
The Lucent Public Safety Systems venture has expanded its product offering with an integrated package of Palladium products and services. The Palladium products, designed by Bell Laboratories, include software for telephone network switches, caller location databases, E9-1-1 call answering equipment, computer-aided dispatch (CAD) systems and records management systems (RMS).
Bob Oliver, president of Lucent Public Safety Systems, said “Our latest offerings use high-speed ISDN signals and promise to cut average connect time for E9-1-1 calls from about eight seconds to about two seconds.”
Connect time is the elapsed time between the end of a caller’s dialing and the sending of a ringing signal from the E9-1-1 attendant’s station. It is important because E9-1-1 callers frequently hang up and try again if they don’t hear a ringing signal within a few seconds. Recent FCC orders mandate that E9-1-1 services for mobile telephony users allow the public safety agency to automatically receive information about the caller’s location.
FCC Notes
Phase II 220MHz service licenses to be auctioned
The FCC will hold an auction for 908 licenses to operate in the 220Mhz- 222Mhz band. These licenses encompass the United States, Northern Mariana Islands, Guam, American Samoa, the U.S. Virgin Islands and Puerto Rico. The auction begins Sept 15. The schedule will be announced by public notice at least one week before the start of the auction. Bidding will be conducted on each business day until it has stopped on all licenses. It will be conducted as simultaneous multiple round bidding, and will be permitted from remote locations, either by computer or telephone.
The pre-auction deadlines are as follows:
Auction seminar, Aug. 6; short form applications (FCC Form 175), Aug. 17, 5:30 p.m.; up-front payments (via wire transfer), Aug. 31, 6 p.m.; orders for remote bidding software, Sept. 1, 5:30 p.m.; mock auction, Sept. 11, (TBA).
Cellular database becomes part of universal licensing system
The Wireless Telecommunications Bureau is developing a universal licensing system to unify 11 separate licensing databases and to provide greater efficiency in the licensing process. The licensing system will provide the public with electronic filing as well as online querying and mapping capabilities.
Previously, the bureau ensured the integrity of the cellular database by mailing each licensee a copy of its authorization on an annual basis, which provided an opportunity for corrections. Now, the bureau has created an opportunity to make these corrections via the Internet, allowing the database to be updated much more frequently.
Instructions clarified for Part 22 paging licensees filing renewals
The Wireless Telecommunications Bureau designated use of the Universal Licensing System for all processing of radiotelephone service (Part 22 applications). ULS provides significant benefits for Part 22 paging licensees, including the fast and easy filing of electronic renewal applications on FCC Form 601, designed specifically for electronic filing in ULS, and the automated processing of such applications.
MRT’s publishing company changes name
On July 1, the name of the company that owns Mobile Radio Technology was changed from Intertec Publishing to Primedia Intertec. Primedia Intertec, Overland Park, KS, is the largest operating division of New York-based Primedia, a public company. It contributed nearly 20% of Primedia’s 1997 sales of $1.24 billion.
Intertec Publishing’s president, Raymond E. Maloney, has been promoted to president of Primedia Intertec. He said the name change is part of a comprehensive branding strategy begun in October 1997 by Primedia.
“Our company will only continue to prosper and grow through its partnership with Primedia’s powerful media brands,” Maloney explained.
Within Primedia Intertec, the company’s magazine groups have been renamed as five market-focused magazine divisions. Cameron Bishop, previously the senior vice president of Group II, has been promoted to president of the Communications & Entertainment Division. Along with MRT, the division includes magazines that serve the telecommunications, wireless com-munications, entertainment and apparel industries.
Hutton uses ‘electronic commerce’ to improve customer service
With customer serv-ice in mind, Hutton Communications, Carrollton, TX, is turning to electronic commerce applications including extensive email communication with customers and an interactive CD-ROM catalog. The CD-ROM catalog, which Hutton plans to migrate to its Web page on the Internet, allows customers to view inventory and product specifications, and to compare similar products to make a final decision. The catalog, and eventually the Web site, can accept orders at any time of the day. This is an advantage for customers, according to Randy Weber, electronic commerce manager for Hutton.
“We’re trying to get a better handle on what our customers want,” he said. “It has literally changed the way we do business.”
Weber also stressed the importance of email in customer service. Instead of using long-distance phone calls for technical questions, Hutton has set up email addresses for each of its six U.S. branches. Customers can use the email to ask questions, and to place and track orders. This process is much more efficient than standard phone calls, and Hutton has a policy of answering all electronic inquiries within one business day, said Weber. Weber explained that using email saves customers time and frustration caused by placing phone calls during business hours and enduring multiple transfers while the person answering the phone searches for someone who can answer the question. The process also saves money for the company by reducing long-distance bills and shortening hours that the phone lines must be staffed.
“The idea is that we can provide (customers) with the information they need when they need it,” Weber said.
In addition to these projects, Hutton has updated its Web site for faster service with more available information, and has begun to look at ways to incorporate its own Web site with that of its subsidiary, Hutton Communications Canada. Hutton has also implemented an in-house Intranet to improve communication among employees.
Trimble, Midwest Traffic join to offer GPS-AVL
Trimble Navigation, Cincinnati, and Midwest Traffic Products, Romeoville, IL, have signed an agreement to combine resources for GPS-based automatic vehicle location and traffic signal pre-emption. Emergency response and transit vehicles equipped with Trimble’s AVL systems will be able to request green signals at intersections based on GPS information. Traffic signal pre-emption could save lives and property by allowing faster and safer response for emergency vehicles. It can also reduce overall traffic congestion for public transit vehicles by cutting travel times and improving adherence to schedules.
Under the agreement, MTP will resell Trimble’s GPS-based traffic signal pre- emption system with AVL and central dispatch capabilities. In turn, Trimble will have the ability to integrate MTP’s signal preemption capabilities. The integrated system uses the same GPS receiver for both fleet management and traffic signal pre-emption.
The first contract for the integration of the traffic signal pre-emption with AVL was placed by Palm Beach County, FL, for 95 intersections and 103 vehicles in April 1998.
Trimble’s GPS/AVL subsystem is a comprehensive system of fully integrated products, including a PSC-200 intelligent data controller with a built-in GPS receiver, an Echoxl message data terminal and base station software packages for AVL management and communications control.
ANSI approves Project 25 common air interface
The American National Standards Institute (ANSI) has approved the Telecommunications Industry Association’s (TIA) standard, the Project 25 Common Air Interface.
“The document begins to satisfy two of our primary original objectives in Project 25,” said Art McDole, Project 25 co-chairman. “This new standard will help ensure public safety agencies are able to buy Project 25 communications products in an open and competitive marketplace,” he said
Indiana State Police launches communications project
Indiana has begun a long-awaited project to replace its present outdated public safety voice radio communications network announced Indiana State Police Superintendent Melvin Carraway. The new integrated system, based on state-of-the-art 800MHz digital technology, will replace numerous systems that have deteriorated since they were first installed, some more than 25 years ago.
Superintendent Carraway said that the new system has received the strong support of Indiana’s integrated law enforcement council (ILEC). It will not only provide seamless voice communications, but also will enable more effective field operations by supporting mobile data communications.
Carraway said, “Public safety agencies throughout Indiana will be able to communicate not only clearer, faster and more reliably, but interagency communications for mutual aid among local departments and the state will be greatly improved.”
The state retained The Warner Group, Woodland Hills, CA, to develop a comprehensive strategic plan and system design.
Icom Funmobile tours United States, Canada
ICOM America, Bellevue, WA, is sending its Funmobile, a 29-foot van loaded with communications equipment, around the United States and Canada. ICOM employees are taking turns driving the van to various retail stores and industry trade shows. The van features pilot, boating, public safety, ham and SWC communication equipment.
The company hopes the tour will build awareness of the types of equipment that ICOM produces. ICOM also uses the Funmobile for hands-on training of end- users and retail sales staff.
The tour began in April in the northwest United States and will continue through the fall. ICOM has generated an enthusiastic response from its effort. Thousands of people have visited the Funmobile at its various locations, and the company has received many positive comments from both users and retailers.
A Funmobile itinerary can be viewed via the Internet at www.icomamerica.com.
Cerulean expands mobile info application suite
Cerulean Technology, Marlborough, MA, has announced a new component of its Packetcluster mobile information application suite that enables police officers in the field to collect data, enter information and upload and update reports, from their patrol cars. Packetwriter field reporting streamlines the documenting, writing and storing of reports while extending the computing desktop from headquarters to the patrol car.
Together, Packetwriter and Packetcluster Patrol provide wireless connectivity across multiple radio infrastructures, integration with back office records systems and interoperabil-ity with other desktop applications.
Blue Ridge Jail members join area radio system
Three of the five members of the Blue Ridge Regional Jail Authority (BRRJA) will be joining the Central Virginia Regional Radio System in a deal allowing the BRRJA to just purchase radios instead of a completely new communications architecture.
Nearly two years ago, the cities of Lynchburg, VA, and Bedford, VA, and the counties of Bedford and Amherst purchased an $11.7 million system from Ericsson to support radio communications for their public safety agencies that would allow seamless interoperability between the municipalities. The BRRJA will operate on this infrastructure.
Participating users of the BRRJA are Lynchburg, Bedford and Moneta. These users will use the system to cover on-site communications and communications made during the transportation of prisoners.
The Central Virginia Regional Radio System is scheduled to come on-line later this year, and the BRRJA will begin using its radios in simplex mode this summer.
IBM offers real-time access to databases
>From the safety of the patrol car, law enforcement officers can now have real-time access to information from local, state and federal databases, including criminal, vehicle and driver information with IBM’s Enetwork Law Enforcement Express.
The system extends the reach of host- and Web-based applications to the mobile patrol force by allowing law enforcement agencies to use Internet and intranet informtion in real-time. Based on client/server architecture, it features a graphic interface that is activated by the touch of a pen, keyboard or mouse, and runs on a variety of mobile hardware platforms, from basic laptop computers to units specifically designed for public safety.
CommServe to market Gabriel products
Gabriel Electronics, Scarborough, ME, and CommServe Marketing, Canada, have entered into an agreement for CommServe Marketing to market Gabriel products throughout Canada.
CommServe will be marketing Gabriel’s line of terrestrial microwave point-to-point antennas, point-to-mulitpoint antennas, cellular base station antennas, coaxial cable, elliptical waveguide, rigid waveguide components and related accessories. Gabriel also carries a line of pressurization equipment for communications systems.
American TriTech changes name, releasing software
American TriTech, San Diego, changed its name to TriTech Software Systems in June.
“We are an international company, and wanted our name to have broad, international appeal,” said Christopher D. Maloney, president of TriTech.
Maloney said the company chose to announce the change at this time because it is releasing VisiCAD for Law Enforcement later this year. This program will allow users to dispatch all three agencies (fire, police and EMS), using a single program.
News Notes
World Wireless Communications, Salt Lake City, has opened a SCADA and Telemetry division in Kansas City, MO. The division develops SCADA (supervisory control and data acquisition) and telemetry systems for oil and gas production, vending machines and weather data collection. “The SCADA and telemetry systems being developed by our new division will augment and service our current telemetry contracts as well as expand World Wireless’ presence in the Midwest,” said David Singer, president of World Wireless. The division will also develop products used to monitor vending machines, pipelines, water tanks and personal protection systems, said Don Wallace, vice president of the SCADA and Telemetry Division.
BellSouth, Atlanta, has assumed 100% operational control of RAM Mobile Data USA and has renamed the business “BellSouth Wireless Data.” “We are excited about this opportunity to have the power of the BellSouth brand behind our efforts to increase the presence of our company in the rapidly expanding marketplace,” said William F. Lenahan, president of the new BellSouth Wireless Data.
Midland USA, Kansas City, MO, and Uniden Private Radio Communications, Fort Worth, TX, have agreed to market Midland’s LMR products with Uniden’s advanced ESAS system. “ESAS has proven itself to be a reliable, affordable and beneficial enhancement to the standard LTR protocol, and this is being recognized by the growing list of manufacturers that are offering ESAS products,” said Sal Farina, Uniden Private Radio Communications’ vice president of domestic sales.
Dataradio, Atlanta, will integrate its Collision Avoidance Radio Multiple Access (CARMA) mobile data technology with a 48MHz, low-band voice radio infrastructure from Cleco, Pineville, LA, to provide Cleco with a mobile computing system that uses its existing private radio network. “The Dataradio solution made it possible for us to utilize our existing radio network,” said Sonny Carter, Cleco’s manager of distribution operations. “We were in pretty big trouble. Dataradio saved this project.”
CPI Communications has moved to a new location. The new address is: 941 Hensley Lane. Wylie, TX, 75098. The new phone number is 800-869-9128, and the fax is 888-437-5360.
The Jefferson Parish Sheriff’s Office, Gretna, LA, has tested its digital 800MHz voice and data two-way radio systems at the Motorola Customer Center for Systems Integration in Schaumburg, IL. “The new data system will provide officers in the field direct access to computerized law enforcement databases that will give them the information they need in a wide variety of situations,” said Harry Lee, sheriff of Jeff-erson Parish.
Glenayre, Charlotte, NC, and PageNet, Plano, TX, signed a multiyear volume purchase agreement for a nationwide, two-way narrowband PCS paging system. Under the agreement, Glenayre will install infrastructure and software to migrate PageNet’s one-way networks to high capacity two-way voice and data networks. The companies also signed a second volume purchase agreement for the supply of Glenayre’s word-messaging acknowledgment pager, the AccessMate. “We are very pleased to offer PageNet an end-to-end system solution that provides them with cost and performance advantages,” said Gary Smith, president of Glenayre.
CMC Distributing, Van Nuys, CA, changed its corporate name to Electro-Comm West to better reflect the company’s focus on distributing RF telecommunications products and its separation from Communications Marketing Company, a manufacturer’s representative company. All the employees, phone numbers and addresses associated with the former company remain the same. Along with the name change, the company also plans to expand its product offering.
Motorola has appointed Leavitt Communications, Skokie, IL, an authorized distributor of the new Motorola 900MHz Creatalink paging control module. “Creatalink is the first of a new generation of one- and two-way paging products with virtually unlimited potential,” said Philip Leavitt, president of Leavitt Communications.
The Antenna Specialists and Decibel Products divisions of Allen Telecom, Cleveland, OH, named Stinson Associates, Havertown, PA, as its 1997 Representative of the Year.
The city of Richmond, CA, selected Ericsson to provide digital access trunked radio systems for its agencies in an $8.3 million contract. Richmond will receive a five-channel, four-site GPS simulcast system with six C3 Maestro consoles for Windows NT for its police, fire and public works departments, as well as its housing authority.
The National Institute of Standards and Technology (NIST) has issued a FIPS 140-1 Validation Certificate to Transcrypt International, Lincoln, NE, for its SC20-DES two-way encryption module. The FIPS 140-1 certification recognizes that the device has met the stringent security requirements of cryptographic modules that protect sensitive but unclassified information within a computer or communication system. As an aftermarket encryption module for two-way radios, the SC20-DES secures communication by utilizing DES algorithm to encrypt digitized voice audio. “Engineering a product which meets the stringent standards of NIST and provides a digital security solution for radio users around the world is a testament to our research and development process,” Joel Young, Transcrypt’s vice president of engineering, said.
Calling auctions “an inappropriate mechanism” for licensing private internal systems, the Industrial Telecommunications Association, Arlington, VA, has asked the FCC to implement a system of efficiency-based lease fees to license the spectrum allocations requested in the Land Mobile Communications Council’s (LMCC) April 22 Petition for Rulemaking. ITA urged theFCC to take an active role in pursuing the lease-fee authority from Congress.
The TSM-2000 Card Access System, developed by Hark Systems, Summerville, SC, will be used on the 83rd floor of the Empire State Building to control access and to monitor the status of environmental readings in the communications suites, such as temperature and moisture conditions.
Flagship Marketing will represent PanaVise Products, Reno, NV, in Texas, Arkansas, Louisiana and Oklahoma. “We are very pleased to add Flagship to our sales team,” said Gary Richter, PanaVise president.
The American Mobile Telecommunications Association (AMTA) applauds the release of an FCC Public Notice announcing the new start date for the auction of Phase II 220MHz licenses. AMTA especially noted the FCC Wireless Telecommunication Bur-eau’s decision to reduce some upfront payments and minimum opening bids for the auction, now scheduled to start Sept. 15, 1998. “As we’ve stressed all along, the small amount of spectrum in each license and lower infrastructure costs for 220MHz make this industry a real opportunity for small business participation, if the auction costs themselves are reasonable,” said Alan Shark, president of AMTA.