WFI Committee Says Company Missed $30M to $40M in Non-Cash Compensation

Wireless Facilities Inc., a local telecom company that's been investigating its stock option granting process, said it has uncovered sufficient negative evidence that will require restating of its financial results from 1998 to September 2006.

The revelations, announced Aug. 20, follow the criminal

Apparently, the theft was part of a larger problem, as WFI said the sum of non-cash equity based compensation charges it missed from 1998 to 2005 is an estimated $30 million to $40 million.

Wireless Facilities Chief Executive Officer Eric DeMarco said the investigation conducted by a special committee of WFI directors was complete. And, he concluded "that no inappropriate actions regarding the granting of options were related to our current executive management team."

The key word there is "current," and it prompts the question of who was responsible for the improper stock option grants during the years before DeMarco arrived in 2003 as the top executive.

It also suggests that federal prosecutors and the Securities and Exchange Commission will take a hard look at the report.

In April 2004, DeMarco, a former president of Titan Corp., was promoted to chief executive, replacing Masood Tayebi, who was named WFI's executive chairman.

WFI was co-founded by brothers Masood and Massih Tayebi in 1994, and both have held top level executive and board positions at the company.

Last year, WFI embarked on a wholesale restructuring of its business, which is designing and managing wireless networks. DeMarco's plan was to shift into a different model, one similar to a model that Titan was engaged in, providing communications consulting services to federal government agencies.

WFI said it had 2,300 employees last year, but because of the sale of its wireless engineering unit and the wireless deployment unit this year, it now has 1,500 employees.

Still traded under WFII on Nasdaq (it faces delisting unless it files past due financial reports), shares closed Aug. 20 at $2.15, and ranged from $1.01 to $2.8 in the past 52 weeks.

Earlier this month, WFI received notice from Nasdaq that it failed to comply with requirements on filing timely financial reports when it didn't file its second-quarter results by the prescribed deadline. The company already obtained an extension to file its annual 10-K report and reports for the first quarter on or before Sept. 10.

Viking Systems Buying German Company: Viking Systems Inc., which designs and makes vision systems used in laparoscopic surgery, said Aug. 20 that it agreed to acquire Tuebingen Scientific Medical, a maker of surgical instruments used in minimally invasive surgery, which is based in Germany.

Terms were not released, but the company said the purchase represented a strategic shift and should boost its revenues.

The combination of the two companies would provide doctors, patients and hospitals with a full line of products designed for complex minimally invasive surgery, according to the press statement.

"We are convinced that the combination of our solutions would be of tremendous value in complex minimally invasive surgery, the fastest growing segment of the surgical market," said Viking CEO Donald Tucker.

Viking said completion of the deal depends upon successful negotiation and completion of a definitive agreement, due diligence and arranging all the financing. Viking said it expects a final agreement by year's end.

The company's main product is the 3Di digital vision system, used by surgeons for laparoscopic surgery, with an initial focus on urology, gynecology, bariatrics and general surgery.

Founded in 1998, Viking has yet to make a profit, and reported a net loss of $17 million on revenue of $5.6 million in 2006. For the first quarter, Viking reported a net loss of $4.4 million on $1. million in revenue.

For the first half of the year, Viking reported a net loss of $8.7 million on revenue of $4.7 million, with sales increasing 120 percent from the first half of 2006. As of June 30, it had an accumulated deficit of $24.4 million.

Traded under VKSY on the Over the Counter Bulletin Board, shares rose a penny on Aug. 20 to 19 cents. Its 52-week range was between 16 and 24 cents.