E-MAIL TO SHAREHOLDER'S:
Background: Below is extracted from an e-mail prepared by the President of Elcom for several shareholders. Thomas Barth sent me a copy. I complained about Two new Bonus Plan's to be approved at the Annual Shareholder meeting which give up to 20% of the increase in the Company's (annual fiscal) Operating Profit to Executives and Key Employees. My own feeling is the company needs to show a notable increase in revenue to move the stock price higher. Be aware that letters like this are often used to attempt to impact the stock price and that the Catalink subsidiary catalink.com generates most of ELCOM INTERNATIONAL INC.'s revenue.
" . . . The new executive performance bonus plan in the Company's current proxy is to focus management on increasing operating earnings (which is a fundamental) which, over time, in lieu of, or in conjunction with, any acquisition/merger of/by the Company, should drive shareholder value. The entire Senior Management team are all existing shareholders or hold significant options.
If you look at our previous press releases/announcements you will notice that we have "on-going" discussions with several potential strategic partners. This is the operative phrase and as long as those discussions are continuing and, as determined by the Board of Directors, significant to the Company, we will continue to pursue them as we investigate, with Salomon Smith Barney, the best method to "break out" shareholder value. It would be completely inappropriate for us to say this in a press release if it were not true.
The lack of research coverage is obviously an issue that hopefully will resolve itself once we reach a conclusion to our engagement with Salomon Smith Barney. We believe that analysts will be interested and that we will be able to therefore generate multiple analyst research coverage after Salomon Smith Barney and the Company have concluded our engagement (we believe with a positive result). Volpe, Brown, Whelan & Company is the only analyst covering our stock and we cannot selectively comment, outside of a press release to all our shareholders, on any specific earnings estimate.
We have an Internet ordering system in the final stages, obviously, it will be less powerful than the client/server PECOS. Keep your eye on Procurement Manager (from Elcom Systems), we are very excited by it (second half 1998). Elcom Systems generated over $4.6 million in revenue (data from the Company's 10K) and is positioning itself to introduce and market Procurement Manager during 1998. See Elcom.com.
Our enterprise Oracle system installation was more difficult than anticipated and it has taken us longer to implement than we thought. We fix problems and move on. We will be very careful with the U.K.'s implementation. We already have the scar tissue. I cannot comment further on the current status of the Company's systems as that would be selective disclosure, so I can't give you an update except via a press release to all of our shareholders simultaneously.
. . . As stated in one of our last press releases/announcements, it is more important that we find the correct "long-term" partner or strategic alternative that is best for the Company and best for shareholder value. That's taking longer than we thought. Discussions are on-going. Be patient.
. . .
As this is an external communication, the following Litigation Reform Act statement is included (as with press releases).
Statement Under the Private Securities Litigation Reform Act
Except for the historical information contained in this letter, the matters described herein contain forward-looking statements that involve risks and uncertainties which might cause the results of such forward-looking statements to differ materially from those anticipated. Such risks and uncertainties include: the industry's acceptance and usage of electronic commerce software systems, the impact of competitive technology products, service providers, and pricing, control of expenses, levels of gross profits, revenue growth, overall business conditions, price decreases of PC products, corporate demand for PC products, the success and timing of fully implementing the Company's new management information system, availability of appropriate financing, risks associated with acquisitions of companies, the consequent results of operations given the aforementioned factors, and other risks detailed in the Company's Annual Reports on Form 10-K and from time to time in the Company's other SEC reports, including the Company's prospectus included as part of the S-1 Registration Statement declared effective on December 19, 1995 under the Securities Act of 1933. Regarding the Company's evaluation of possible strategic partners and financing alternatives, including for Elcom Systems, there can be no assurance that any strategic alternatives, including any possible arrangements with a strategic partner or the possible sale, merger or financing of the Company, can be successfully identified or solicited, negotiated, or consummated to the betterment of the Company or the Company's stock price, or what the timing, terms, or ultimate impact of any such arrangement might be.
cc: Thomas, Barth, Vice President Corporate Development" |
