The Federal Communications Commission has mandated that all commercial U.S. broadcasters must broadcast a digital signal within their city of license no later than May 2002 and noncommercial stations by May 2003.  The above unit will help broadcasters meet that deadline with a minimum investment rather than a huge initial capital outlay. The TTU1000FT then becomes the building block for future power upgrades.

CEOCFOinterviews: Mr. Nardone, please give us a brief history of EMCEE Broadcast Products.

Mr. Nardone: “EMCEE was started in1960, in Mount Vernon, New York under the name of “Electronics, Missiles and Communications, Inc.” The staff of three engineers initially directed their efforts toward the design and manufacture of broadcast television translators.  In 1963, when the FCC allocated microwave frequencies for education, EMCEE envisioned the potential to develop one of the first ITFS (Instructional Television Fixed Service) system.  By 1967, they had out-grown their New York facility and were enticed by the Commonwealth of Pennsylvania to relocate here in White Haven. In 1969, we moved into a 27,000 square foot building and 28 acres in White Haven.

In 1970, the FCC authorized a new service known as MMDS (Multi-channel Multipoint Distribution Service) intended for the transmission of business data. It is very similar to the ITFS technology and it was obvious that the product evolution at EMCEE would benefit when we became a major supplier in the industry. Over the decades, the company has grown; we now have product in over 90 countries including South America, Asia, and the Caribbean and all over Europe. In 1995, the corporation changes its name to EMCEE Broadcast Products Inc. to accurately reflect the company product line.  We continued along that line until a couple of years ago when we bought a high-powered transmitter company called Advanced Broadcast Systems (ABS).  We are now a full-service transmitter company and doing business nationally and internationally.”

CEOCFOinterviews: What is your most recent and exciting news? 

Mr. Nardone: “Our most recent news actually occurred  on April 19, when we shipped to the U.S. Army Special Operations Command, a one-kilowatt, solid-state unit that is going to be used for mobile applications by the Army. Our model TTU1000CQ is a one-of-a-kind UHF television transmitter with worldwide capabilities. What is unique about this unit is that it is frequency agile.  Most transmitters can transmit on a channel or a couple of channels, but this transmitter will transmit on any channel just by dialing in a frequency between 470 and 830 MHz in Band IV or V. What the Army can do with this is virtually take it anywhere in the world, dial in to the frequency and transmit to most places where transmitters are limited.  Because of this feature, we have dubbed this unit the Freedom Transmitter”.

CEOCFOinterviews: When was this transmitter developed?

Mr. Nardone: “It was designed and built during the past 4 months by our engineering group. It is a special unit requested by the U.S. Army.  In addition, this unit will operate on all world television transmission standards including NTSC (National Television System Committee), PAL (Phase Alternating Line) and SECAM (Sequentiel e memoire).  NTSC is used in the US, Japan, Canada and a few other countries while the other two systems cover the rest of the entire world.  The unit is capable of modulation in any standard, any channel.”

CEOCFOinterviews: Is it a portable unit?

Mr. Nardone: “Yes, it is a portable unit. We have designed similar units in prior years for the United States government, mostly for an airborne platform and not frequency agile, but this one will be on wheels.”

CEOCFOinterviews: What would that allow them to do?

Mr. Nardone: “I don’t know the specific purpose they would use it for, but it would allow them to take these units anywhere in the world and broadcast a television signal in a defined area. As long as they have a video feed going in, they will be able to broadcast just about anywhere in the world. Not very many transmitter companies were interested or capable of producing this product on a compressed schedule.  We were selected based on our historical performance and delivery.”

CEOCFOinterviews: What else can we look for coming from your R&D efforts?

Mr. Nardone: “We are working on some technology that will allow us to utilize a two-way repeater to enhance coverage in the MMDS market. It will improve the distance covered, the number of channels and the number of people served. Much of the time with MMDS, an operator can’t serve a populated area because of a terrain barrier or trees; the repeater is a way to get an improved signal to areas that otherwise would require a larger capital investment.”

CEOCFOinterviews: Do you still allocate a great deal of revenue for research and development?

Mr. Nardone: “We have three projects right now that we are evaluating with our R&D. The difficult thing is balancing the cash flow with the expenditures in R&D.  Right now, we are in a tight cash situation. We expect to continue to develop new products and apply current products into new markets. We are not spending as much as we’ve historically spent on R&D, but we are a lot further along than we ever have been. Additionally, the acquisition of ABS has provided significant engineering horsepower that we didn’t have before. ”

CEOCFOinterviews: Currently, what future markets are you targeting?

Mr. Nardone: “Right now the FCC (Federal Communications Commission) requires television broadcasters to go to a digital format for high-definition television. Their first deadline for all commercial U.S. broadcasters was May 2002; they have pushed that to some time in August. For noncommercial stations, it must be done by May, 2003. We are focused on assisting broadcasters into the digital format in a cost effective manner.

A number of broadcasters in the market place don’t want to spend the money because they are not in a highly populated area and HDTV is not a household purchase yet. To meet the FCC regulations, however, they need to convert their signal. We are in the process of building transmitters for broadcasters to convert to DTV. That is our business in the immediate future. Our TTU1000FT will become the building block for future power upgrades when the broadcasters are ready and able to do so. This unit will help broadcasters meet their deadline with a minimum investment rather than a huge initial capital outlay.”

CEOCFOinterviews: Is there a push to entirely replace analog?

Mr. Nardone: “No, that is going to take a long time. It is a similar situation as color television; when color television came out, it was a while before households purchased them.  I think this is going to be similar with HDTV. There is probably going to be a 5-10 year wait while the old televisions die out and the new ones are purchased.”

CEOCFOinterviews: Do you feel that you benefit from what has become a fiercely competitive battle between satellite and cable?

Mr. Nardone:  “Well, as far as broadcast issues are concerned, our focus in on over-the-air delivery and that is the primary mechanism for DTV.  Satellite and cable carriage of DTV programming is quite limited, although increased receiver penetration will no doubt provide an incentive for these operators to embrace this new format.  We have this segment covered since we design and manufacture both low and high power transmission systems.   As far as wireless is concerned, it has advantages of its own and lends itself nicely to portable applications and rural areas where DSL and cable modem service may not be available.  In addition wireless provides an alternative to expensive last mile connections and it can deliver a variety of high speed broadband services to both residential and business subscribers.”

CEOCFOinterviews: Currently, is the greatest percentage of your business coming from domestic or international market?

Mr. Nardone: “The greatest percentage of business right now is in the domestic market. Historically, a little over 60% of our business has been in the international market, mostly with the MMDS line.  In the last few years with the decline in economies worldwide, and the opportunity to get into high-definition television business here, our business has ‘flipped’ a bit, and most of it (in excess of 65%) is domestic.

We are focused here in the states although we do a lot of business in Brazil, Korea, Europe and a few other places. We have systems in over 90 countries and we still support products that we deployed fifteen or twenty years ago. The people that built those are still here; the average length of employment here is in excess of 19 years.”

CEOCFOinterviews: Does your client list include operators that use wireless high-speed Internet connectors?

Mr. Nardone: “Yes, our other clients on the MMDS side would be primarily operators that use wireless high-speed Internet connections that might deploy a system in a rural area. We are partners in a company. out in Utah, that deploys a wireless Internet connection to over a hundred homes and businesses.”   

CEOCFOinterviews: Which segment of your business currently provides the greatest revenue?

Mr. Nardone: “Because of the pending FCC regulations regarding DTV, years ago EMCEE had this idea that broadcasters will not want to spend upward of $500,000 to get into this digital format.  We developed what is called a “transition strategy” that allows the broadcaster to buy from EMCEE, a low-powered transmitter in the 200-400 watt category for under $85,000.  Then, over time, up-grade the low-powered transmitter into a high-powered transmitter that would result in an overall lower cost system . Also, the customer would be able to apply a lot of the components from their low-power to the high-power system. The biggest segment of our business now is providing low-power transmitters in the transition strategy to the broadcasters that need to convert to DTV requirements.”

CEOCFOinterviews: Do you think that will continue to be the major revenue pull for your business over the years?

Mr. Nardone: “That is going to continue to be part of it; whether it is going to be major part or not I don‘t know. My focus since I got here, in October (2001), has been to re-establish the company’s priorities and not just be considered a transmitter company or a company that is selling boxes to the broadcasters. We are currently evaluating a number of avenues, to partner with integrators, and manufacturers of other products.

I know that transmitters will continue to be a chunk of our business; but currently we are looking at other alternatives to utilize our core-engineering group. We have a lot of manufacturing capacity to take on sub-contracting for manufacturers on either P.C. boards or assembled parts. I am also looking at bundling our product with a number of other companies whose products are used ultimately by the broadcasters.”

CEOCFOinterviews: Besides producing great product, what do you need to do to continue to be competitive in the marketplace?

Mr. Nardone: “We are one of three small players with a couple of 400 lb. gorillas in the same market. Historically the company has niche-marketed their product. I think there is an excellent recognition factor in the marketplace because we provide a quality product that is long lasting.

Over the years, EMCEE has not focused on marketing. We are a small player in a multi-million dollar market. There is a lot of business out there in the MMDS and the broadcast transmitter industry and I don’t believe that we have secured our share because we just haven’t done a good job in marketing. We spent a lot of time in engineering and building great units, but we have kept it a secret. We need to change a little bit of our focus and become a more of a marketing company.”

CEOCFOinterviews: Do you have a new marketing strategy in place?

Mr. Nardone: “Yes we have. We realigned our budget and started a change in culture here. We have set new standards for customer service by making sure that our parts are delivered on time and we have modified our manufacturing process to significantly improve our on time delivery percentage. We have a number of ongoing initiatives to improve the process so that when a customer gets the product, they will actually brag about not only how well the transmitter works but also that we did what we said we were going to do when we said we would do it. Historically we were more focused on engineering than promoting outstanding all around customer service.  We need to do both.”

CEOCFOinterviews: Do you feel you have the sales and marketing staff in place to do all of this or will you be building that out in the future?

Mr. Nardone: “We are going to build that out. We currently utilize a number of avenues for sales. We have a distributor system in a variety of countries; it’s managed by someone from our sales team that has been with us for over 30 years. We also have some in-house sales people. What I found out is that a lot of consultants in the market place have a high regard for our product so we are going to tap into their expertise and the opportunities they can bring to us.”

CEOCFOinterviews: What do you think gives you a direct competitive edge with your products?

Mr. Nardone: “It is the dependability of our products that give us a competitive edge. For example, we still service products that we built 20 years ago.”

CEOCFOinterviews: What then would you say is your greatest challenge going forward?

Mr. Nardone: “Our challenge is to continue the cost reduction that we have initiated over the last three months to really attract customers from not only a value perspective but also a price perspective. I think we have a lot of value added but I don’t know that we have marketed that properly. We are working on focusing the culture and the value of the organization while being a low cost producer so that we can compete effectively in the marketplace. A lot of the clients that we are working with are also working with competitors that can build and finance the transmitters; we are just not big enough to do that.”

CEOCFOinterviews: When do you see this happening?

Mr. Nardone: “I expect this to be happening within 90 days; we are zeroing in on the final details.”

CEOCFOinterviews: When you get things in place what will that do for your business in terms of revenue growth?

Mr. Nardone: “My goal is to double this business in terms of revenue within eighteen months.”

CEOCFOinterviews: Do you have the cash and credit in place to continue to go forward?

Mr. Nardone: Since I got here last October, it has been a ‘turn around’ situation. Our cash is tight, and we are heavily leveraged right now but there has been a dramatic improvement in the last few months. I think that we are doing many of the right things. Like many companies in technology, it is hard to raise money right now but we are looking at opportunities both from a financial prospective and even from partnering or a possible merger. Once we could get the resources necessary to really ‘pop’ this company, the opportunities are out there.”

CEOCFOinterviews: To reach profitability, is it a matter of increased sales or reduction of spending or a combination?

Mr. Nardone: “It is a combination; we are putting a plan together to increase sales and I think we are going in the right direction. The other things we have focused on are efficiency improvement, and cost reduction within the manufacturing process. We have had to reduce the work force since January, we have modified the way the production system is implemented and we have made further modifications to implement the material flow on the production floor that will be completed soon.

I think we are going to have increased efficiency, reduced labor cost and increased sales as a result of what we have done so far. We have budgeted for a profitable year (fiscal 2003) and I think we are going to be fine. It would be a lot easier if someone would invest in our company, or enter a partnering arrangement. We are currently looking in that direction. If that doesn’t come to fruition, however, we will do it on our own.”

CEOCFOinterviews: Can we expect any acquisitions from EMCEE in the future to build out your business?

Mr. Nardone: “We are currently looking at that, whether it will come to fruition or not, I really don’t know. We look at the opportunity to do a reverse merger, to merge with another company in the industry or to utilize our company to acquire or merge with another company. Those three options are constantly considered; when we find the right situation, we will act on it.”

CEOCFOinterviews: In closing, what would you like to say to current shareholders and potential investors?