PowerLinx Inc (PWNX)

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Despite turmoil, tech firm proceeds with IPO plans
Tom Hals Business Journal Staff Writer
MALVERN -- Elcom Technologies Corp. plans to raise roughly $24.2 million through an initial public offering for marketing its product, which allows voice, video and data to be transmitted over power lines.

The company is offering 2.42 million shares priced at $10 per share. The IPO is being underwritten by Pennsylvania Merchant Group Ltd. of West Conshohocken.

The company developed the Customer Premises Area Network system, or CPAN, which eliminates the need for consumers and small businesses to add extra telephone and cable television lines in their home or office.

A homeowner, for example, may have a telephone in the kitchen and want an additional phone line in the bedroom. Rather than paying the local phone company to add another line, the homeowner can plug Elcom's ezPHONE into an outlet in the kitchen. The phone line is plugged into ezPHONE and the telephone connection is transmitted throughout the house over the power lines. To add another phone, ezPHONE is plugged into the electrical socket in the bedroom and a telephone is hooked up to it.

The technology also allows cable television or computer networks to be broadcast on the electrical wires through an entire house or office.

The company is also developing an ezVIEW product that will allow video cameras hooked to an electrical socket to provide surveillance through power lines. Elcom also is developing ezGUARD, which reduces the risks of power surges.

Elcom had a net loss of $7.95 million last year on revenues of $523,000, according to a preliminary prospectus filed with the Securities and Exchange Commission. The company did not generate any revenues prior to last year. Reported 1995 assets totaled $10.57 million and backlog as of Sept. 30 was $900,000.

The company is headed by Robert A. Vito, 34, the president, chief executive officer, treasurer and chairman. He will own 11.5 percent of Elcom following the IPO.

While Elcom has been recognized for its technology -- it won the 1995 Ben Franklin Emerging Business Award for most innovative new product -- it has also been engaged in an internal squabble over control of the company.

Charles Abraham, a native of Hungary, developed the technology on which the company was founded. He teamed up with Vito, who was previously with Price Waterhouse LLP, to launch Elcom in 1993.

In 1994, the pair began to disagree about the direction of the company and last year they ended up settling their differences in court. As a result of the litigation, Abraham, who had been the company' largest shareholder, left Elcom.

Abraham took with him his patents and continues to develop his ideas with VideoCom Inc., a company he founded in Wayne. Elcom continued to pursue similar technology developed by its staff engineers.

Abraham insists he holds the patents for transmitting video over power lines and said he would pursue a case of patent infringement if Elcom developed such a product.

Elcom currently offers five products: ezTV, ezPHONE, ezONLINE, ezAUDIO and ezREMOTE. The company markets its products through national consumer electronics and computer retailers, electronic distributors and catalog retailers. The company also sells its products through West Chester-based electronic retailer QVC Inc.

The preliminary prospectus identified risk factors connected with the offering, including lack of profitable operations, no assurance of successful product development, dependence on third-party manufacturers, technological change, government regulation and possible volatility of stock price.

The filing also cited current litigation. Last year, Phonex Corp. of Midvale, Utah, filed a lawsuit against Elcom, alleging patent infringement. The suit hasn't been settled, and Elcom states the suit could result in more than $500,000 in legal fees. If a judgment is made in favor of Phonex, Elcom could be barred from distributing the ezPHONE product.

Elcom has one patent for the ornamental design of one of its products. It does not have patent protection on any of its products, although patent applications have been filed.

In addition to Vito, executives in Elcom include: Myrddin L. Jones, 62, vice president of strategic planning; Louis J. Petriello, 41, chief operating officer, chief financial officer and corporate counsel; Stephen B. Pudles, 37, vice president of business development; C.B. Patel, 56, vice president of engineering; George Daly, 61 vice president of operations; Robert B. Sando, 36, vice president of finance and secretary; and Paul Kouch, 39, director.

All of the executives are selling shareholders, offering a total of 300,000 shares. Their stake in the company will be reduced from 31.9 percent before the IPO to 22.8 percent after the offering is complete.

The company employs 41.

Elcom has applied to have its common stock listed on the Nasdaq National Market under the symbol ELC

http://philadelphia.bcentral.com/philadelphia/stories/1996/11/04/smallb2.html


Interesting stuff! I look forward to hearing what you found out FG! Better be able to "prove it"! Would not want to have any of this "he told me" stuff! We want PROOF!

JMHO