Gilat’s Attorneys: “Comtech is sabotaging the Merger”

A judge in the Delaware Court of Chancery, Texas, issued earlier this month a temporary injunction order against Comtech, following information presented by Gilat’s lawyers, according to which Comtech’s representatives met many times during the recent months with officials from the Federal Antimonopoly Service of Russia, without informing Gilat of the meetings, Bloomberg News revealed.

According to the information, Comtech members held about 17 “secret calls” with Russian officials, contrary to the agreement between the companies, which requires that representatives from both companies be present or informed at any “significant” meeting related to the merger transaction. Gilat’s lawyers claim that the very act of conducting these meetings and their concealment indicate that Comtech made steps behind Gilat’s back that were meant to delay the approval of the merger in Russia until after the deadline set in the agreement (October 23).

After receiving the information, Judge Joseph Slights issued an injunction order requiring Comtech to provide Gilat with a notification 24 hours before any meeting or conversation with the Russian authority. The trial between the two companies will begin on October 5. The injunction order issued by the judge is a hard blow to Comtech, as the new information debunks its claim that Gilat is the one who tried to sabotage the obtaining of an approval from Russia.

Comtech’s Original Sin: Excessive Leverage

Gilat is a satellite networking technology, solutions and services provider. At the end of January 2020,  Comtech Telecommunications Corp. and Gilat signed a deal under which Comtech would acquire Gilat for $577 million: 70% of them in cash and the rest in shares. The merger was supposed to create a company with annual revenues of about $1 billion. Even then, however, question marks arose concerning the financial basis of the deal.

Oppenheimer Israel analyst, Assaf Handley, told Techtime that he had already warned at the time of signing of the agreement that the capital structure of the deal was problematic, since it required Comtech to incur a debt of $500 million. “Such a debt represents a leverage that is four times larger in relation to the EBITDA of the merged company.

“It is a very high leverage for this industry, since the satellite communications market is very volatile. Companies of this type don’t take on large leverage since the volatility in quarterly earnings is very high, and cancellation of even a single order could cut a significant portion of the revenue and cash flow – and jeopardize repayment ability.”

Were the Russians merely an excuse?

If 2020 had been a normal year, Comtech would have been able to handle the debt burden, but COVID-19 shuffled the deck: the revenues of both companies fell sharply in the first half of 2020. Gilat ended its first quarter with a 23% drop in sales and a loss of $11.7 million. In the second quarter, sales fell by 35% and the company reported a loss of $4 million. Comtech reported a 20% drop in sales in the fiscal quarter that ended late April and a loss of $4 million.

Both companies attributed the deterioration in business to delays in orders in the wake of the COVID-19 crisis. Comtech’s share has been cut by more than half  – a major blow to the merger, since approximately third of the deal was supposed to be paid for in shares. Could it be that Comtech has decided to withdraw from the deal due to this reason? Unilateral cancellation of the agreement involves payments of tens of millions of dollars in compensation. According to Gilat’s attorneys, this is the reason why Comtech had decided to find an excuse to renege the agreement.

The injunction order is not reassuring for Comtech

In July 2020, Comtech filed a lawsuit in the Delaware Court of Chancery, alleging that Gilat had made structural changes to its subsidiary in Russia and thereby jeopardized the approval of the merger. A few days later it filed a revised lawsuit in which it sought a declaratory ruling that would determine that the COVID-19 crisis had inflicted a “significant adverse harm” to Gilat’s operations, and that this constitutes a ground for rescinding the agreement.

Gilat responded in a counterclaim in which it claims that Comtech is deliberately trying to sabotage the approval of the deal, and is looking for an excuse to shake off the merger. Handley believes that regulatory proceedings in Russia were simply an excuse. “If Comtech really wanted a deal, they would simply waive the Russian approval.

“In any case, Gilat’s activity in Russia is negligible. The injunction order issued by the judge, which in fact supports Gilat’s claims, is not reassuring for Comtech. It is hard to believe that in the current circumstances the deal will be executed, but there may be a real basis for Gilat to sue for compensation due to the substantial damages it suffered.”

Jungo’s AI transform touch-based interfaces into touch-free

Israeli Jungo Connectivity has launched a new AI software, which can transform touch-based interfaces into interfaces controlled simply by the user’s voice commands and remote hand gestures, i.e., without touch. The software is based on image processing algorithms, which analyze the movement of the user’s hands and eyes, captured by a simple HD camera. Amidst the COVID-19 crisis and the need to maintain hygiene, Jungo’s aim is to help avoiding the need to touch the many touch-based interfaces so abundant these days in the public space, such as ATMs, cash-less payment machines and touch screens in offices and factories.

Today, Jungo is focused mainly in the automotive world. Its main product, the Co-Driver software, can detect if the driver has dozed off, not paying attention to the road, got distracted or not wearing a seat belt, etc., based on a visual analysis of the tillt of the head and the body posture, and the movements of his eyelids. Talking to TechTime, Jungo CEO, Ofir Herbst, explained that the new product is based on the same technology.

“The new software relies on the technologies we have developed for the automotive industry, though it opens up a new world of applications for us outside the automotive. There is no doubt that COVID-19 was the trigger for development, in order to provide an alternative solution for non-sterile public touch screens.”

Will COVID-19 Give the Market a Push?

The advantage of Jungo’s software, called MagiaTouch, is that it can be embedded into existing touch applications, without the need to change the code or the interface design, but by merely installing a simple HD camera and microphone. The software analyzes the user’s hand movements and translates it into on-screen commands as if he was moving a mouse or pressing keyboard keys.

Herbst reveals that Jungo is already conducting a pilot with a manufacturer of automated cash-less payment machines. “Manufacturers of automated cash-less payment machines for retail shops have run into a problem in the current circumstances, as those machines require touch. With our software you can still use those same machines but to avoid pressing the screen with your fingers.”

The market of gesture and voice control interfaces has been attempting to gain traction for several years by now, especially in the automotive sector where there is a safety-related need to control infotaiment system without having to use touch. However, in the fields of consumer electronics and smart homes, attempts to introduce such technologies have not yet been successful. Perhaps now, as a result of the need to maintain hygiene in the public sphere, this market will receive a significant boost. Indeed, according to a recent forecast by the research company Research & Markets, the market of non-contact interfaces is expected to grow in the coming years at an annual rate of 17.6% and reach $15.3 billion by 2025.

Gilat-Comtech Merger becomes Forced Marriage

Gilat Satellite Networks announced it intends to file a counterclaim against Comtech, demanding to enforce the $577 million Merger Agreement signed on January 2020, or otherwise determine financial compensation to the amount of hundreds of millions of dollars. Gilat’s threat comes after Comtech recently filed an amended complaint with the Delaware Court of Chancery, in which it has already asked quite explicitly from the Court to withdraw from the Merger Agreement with Gilat, which was in advanced stages of regulatory approval.

In its statement, Gilat said that it was aware that Comtech’s amended complaint requests an additional declaratory judgment which will confirm that due to COVID-19, Gilat has suffered a “Material Adverse Effect”, and therefore Comtech was not required to complete the merger. Gilat reacted sharply, “strongly rejects all these allegations,” claiming that Comtech’s complaint “is nothing short of an attempt to avoid its clear contractual obligation to acquire Gilat, due to Comtech’s own rapidly deteriorating performance.”

Exploiting the Russian Regulator

The initial complaint filed by Comtech concerned changes made by Gilat in its Russia-based subsidiary, which, according to Comtech, could have undermined attempts to receive approval from the Russian Monopoly Service (FAS). Gilat claims that it was only a pretext sought by Comtech in order to annul the Agreement, and whoever sabotaged attaining Russian approval was in fact Comtech: “Gilat believes that Comtech has willfully breached its obligations under the Merger Agreement so as to attempt to ensure that FAS approval is not timely obtained and Comtech will not be required to consummate the merger.

Gilat said in a press release that it intends to file a counter claim against Comtech seeking, “among other things, a declaration that Comtech cannot terminate the Merger Agreement and, if the merger is not consummated, Comtech should pay Gilat monetary damages for all losses that Gilat and its shareholders and option holders have suffered, which Gilat will assert amount to hundreds of millions of dollars.”

COVID-19 hit both companies

Gilat Satellite Networks provides satellite-based broadband communications, including a cloud based VSAT network platform, high-speed modems, high performance on-the-move antennas and high power Solid State Amplifiers (SSPA) and Block Upconverters (BUC). During Q1 2020, Gilat’s sales totaled $47.7 million, compared to $62.1 million in Q1 2019. The company said that the decline in sales was a result of the effects of the COVID-19 pandemic, mainly due to sharp decline in passenger aircraft market (Inflight Connectivity).

Comtech’s business situation is no different: for the quarter ended April 2020, it reported a 17% drop in sales to $135.1 million, also due to the COVID-19 pandemic. As a result, it was forced to take action to reduce expenses, including a 10% reduction in the workforce and a reduction in wages.

Viziblezone app Identify contacts with COVID-19 Patients

Above: Verint’s offices in Israel and the new app. Verint will both employ and distribute the solution to its customers

Against the backdrop of an ongoing public debate regarding the use of the ISA’s (Shin Bet) cellular tracking technology for pinpointing contacts with COVID-19 carriers, the Israeli startup Viziblezone has launched a dedicated solution that allows organizations to track all of the employees who came into contact with an employee diagnosed with COVID-19, without invading their privacy.

The company announced first collaboration with the Israeli cyber and intelligence Verint, which employs thousands of employees worldwide. Verint will implement the solution on its premises, and distribute it to its customers. Viziblezone is also in talks with other organizations in Israel and abroad concerning the adoption of its new app.

The Data is kept in the Smartphone

Viziblezone’s solution is based on the smartphone’s Bluetooth: Whenever it receives a radio signal from a nearby smartphone, it it assigns the “encounter” with a random identification number and encrypts the data in a contact log file stored on the device. Thus, the smartphone of each employee records all of the contacts between them, each on their own device, without the information being transferred to an external server.

In the event that a person in the organization is diagnosed with COVID-19, he informs the person in charge of COVID-19 on behalf of the organization and receives a single-use code that allows him to send his contact log file to all of the devices in the organization, via the local server. The rest of the devices cross-check with the personal contact log stored within them, to see if there is a documentation of encounter. When a match is detected, the employee is alerted that he has been exposed to a COVID-19 patient.

Maintaining Business Continuity

The algorithm calculates how long the encounter lasted and what was the estimated distance between the workers, and thus determine if the encounter exceeded the social distancing rules. This clever concept does not involve penetrating a device or gaining access to irrelevant private information.

Founder and CEO Gabi Ofir, told Techtime that the app is designed for the workplace. “The solution is not intended for the public space, but for companies and organizations that employ a considerable amount of employees. It can prevent a situations in which a diagnosis of a COVID-19 patient would lead to sending all of the employees off to quarantine.”

From Automotive to Healthcare

Viziblezone was founded in early 2019 by Gabi Ofir, former system architect at Motorola, to develop life-saving smartphone-based software solutions for the roads. When the system detects a potentially life-threatening situation, such as a pedestrian, cyclist or scooter rider crossing a road, the user’s smartphone transmit warning signals to nearby cars concerning a potential for collision.

Ofir: “In the face of The COVID-19 we had to make a decision on whether to furlough our employees or to somehow adapt our technology to the situation. Thus we decided to utilize our technology to provide monitoring contacts solution that can help with business continuity. We had to overcome critical technological challenges: maximum power saving, processing the Bluetooth signals, neutralizing interference from other signals and more. The result: we achieved 99% accuracy rate in tracing the contacts for a period of two weeks back.”

 

 

Tags:, Gabi Ofir, Verint

SuperCom to Provide Electronic Handcuffs for Middle East Countries

The Tel Aviv based SuperCom revealed last week that it had sent its electronic ankle bracelets to two Middle Eastern countries for a pilot program to examine these measures concerning tracking COVID-19 patients who stay in home quarantine. Following the announcement, SuperCom’s shares in NASDAQ rose by 10%. The company provides IDs and biometric passports, RFID-based identification tags for the fields of retail and medical, and electronic surveillance solutions for parolees and other populations who are under observation, such as people with dementia who might get lost.

Recently it launched a solution tailored for the monitoring of COVID-19 patients in quarantine. The customized solution called PureCare is not fundamentally different from the handcuff designed for parolees, but is branded differently; it’s colored white and comes with a user-friendly app. It is  a thin, lightweight bracelet worn on the ankle beneath the sock and does not interfere with the patient’s daily routine and is not visible to the environment.

The bracelet communicates with the smartphone via short-range Bluetooth communication. The smartphone’s GPS transmitter is used to accurately identify the location of the person under observation, therefore it is impossible to exit the location without the smartphone, in order to mislead the surveillance system. Several countries have already begun experimenting with the use of electronic handcuffs to monitor COVID-19 patients. The South Korean government places electronic handcuffs on COVID-19 patients who violated their quarantine. In the State of Kentucky, US, the court authorized the application of a similar policy, and Hong Kong decided to attach an electronic handcuff to every incoming tourist to make sure they obey the mandatory 14 days quarantine.

Increasing Production

During the past month, SuperCom has also reported a number of significant deals for the supply of electronic handcuffs for former inmates. The reason: many countries in Europe, North America, and other regions have decided to execute mass early prison releases in order to reduce overcrowding and prevent an outbreak of the plague behind prison walls. This led to a pressing demand for electronic handcuffs.

Last week Supercom announced a new 5-year contract with the national government of Latvia to deploy its enhanced PureSecurity Electronic Monitoring (EM) Suite, including both RF House Arrest and GPS tracking. The nationwide program with the Ministry of Justice is set to cover all cases nationwide requiring electronic monitoring of offenders using both RF House Arrest and GPS Tracking solutions.

The company’s CEO, Arie Trabelsi, said the company is preparing for a spike in demand. “The quantities in question, supplied simultaneously to several countries, are unlike anything we’ve ever encountered. We are making an effort to increase our production output to meet the demand.” The company manufactures its products in Israel.