Technical Communications Corporation was organized in 1961 as a Massachusetts
corporation to engage primarily in consulting activities. Since the late 1960s,
the business has consisted entirely of the design, development, manufacture,
distribution, marketing and sale of communications security devices, systems
and services. The secure communications solutions provided by TCC protect vital
information transmitted over a wide range of data, video, fax and voice networks.
TCC’s products have been sold into over 115 countries to governments,
military agencies, telecommunications carriers, financial institutions and multinational
corporations. The Company’s business consists of one industry segment,
which is the design, development, manufacture, distribution, marketing and sale
of communications security devices, systems and services.
The Company’s products consist of sophisticated electronic devices that
enable users to transmit information in an encrypted format and permit recipients
to reconstitute the information in a deciphered format if the recipient possesses
the right decryption “key”. The Company’s products can be
used to protect confidentiality in communications between radios, landline telephones,
mobile phones, facsimile machines and data network equipment over wires, fiber
optic cables, radio waves, and microwave and satellite links. The principal
markets for the Company’s products are foreign and domestic governmental
agencies, law enforcement and military agencies, financial institutions, and
multinational companies requiring protection of mission-critical information.
TCC historically and presently designs and develops its own equipment and software
to meet the requirements of general secure communications applications, as well
as the custom-tailored requirements of specific users. A customer may order
equipment that is specially programmed to encrypt transmissions in accordance
with a code to which only the customer has access. Management believes the coordinated
development of cryptographic software and associated hardware allows TCC to
provide high-strength encryption security products with efficient processing
and transmission. Both criteria, the Company believes, are essential to customer
satisfaction.
TCC manufactures most of its products using third-party vendors for the supply
of components and selected processing. Final assembly, software loading, testing
and quality assurance are performed by TCC at its factory. This manufacturing
approach allows TCC to competitively procure the components from multiple suppliers
while maintaining control of the manufacture and performance of the final product.
TCC’s products are sold worldwide through a variety of channels depending
on the country and the customer. Generally, TCC does not use stocking distributors
because the Company’s products are required to be sold under an applicable
U.S. government license, which generally requires end-user information. Rather,
the Company sells directly to customers, original equipment manufacturers (“OEMs”)
and value-added resellers using its in-house sales force as well as domestic
and international representatives, consultants and distributors. The marketing
and selling approach varies with each country and often involves extensive test
and demonstration activity prior to the consummation of a sale. TCC has a network
of in-country representatives and consultants who conduct performance demonstrations,
market the products and close the sale, and who handle on behalf of TCC many
of the ancillary requirements pertaining to importation duties, taxes, registration
fees, and product receipt and acceptance. After-sale, in-country support by
the representatives maintains customer satisfaction and provides a liaison for
the Company’s customer support services.
Providing secure communications systems and services for government and military
markets worldwide remains a principal focus for TCC, as the Company believes
continued concerns over security will sustain demand for increased protection
of both voice and data networks. Our focus in the government market also now
includes law enforcement special operations customers. Additionally, we see
increased interest for secure communications in the corporate industrial sector.
The Company is pursuing selected, evolutionary upgrades and product derivatives
of our government/military products both to provide entry into these new markets
and meet new requirements of our existing customers. We believe the ability
of TCC to custom-tailor cryptographic functions and control systems to satisfy
unique customer requirements will meet a growing demand as customers become
more sophisticated in defining their communications security needs.
Described below is TCC’s portfolio of communications security solutions
for mission-critical voice, data and video networks for military, government
and corporate/industrial applications.
The Government Systems product line has traditionally been the Company’s
core product base and typically generates the majority of the Company’s
revenue. During fiscal 2017, 67% of the Company’s revenue was generated
by our Government Systems product line and 29% of the Company’s revenue
was generated by our engineering services. Although we expect engineering services
to remain strong, we also expect that sales of our Government Systems products
will constitute the majority of our revenue in the future. These products, such
as the CSD 3324 SE telephone/fax encryptor, and the DSP 9000 radio encryption
system, have proven to be highly durable, which has led to significant repeat
business from our government customers. The Company believes that these products
and their derivatives will continue to be the Company’s most significant
source of near-term future revenues.
The Government Systems products also include our DSD 72A-SP military bulk encryptor.
Due to diminished demand in recent years, this product is no longer being marketed.
However, we will continue to support a large installed base of this equipment
still in use with our customers, as there remains a demand for spare parts and
small network upgrades.
With the availability of our next-generation IP encryptors and the ability
to integrate customer-specific national algorithms, the Company believes that
its Network Security Systems are competitive for a growing niche of mission-critical
government and industrial/corporate network applications worldwide. TCC is hopeful
that future derivatives of its IP encryptor and KEYNET IP Manager system will
expand the market opportunity for these products.
The Company’s Secure Office Systems product line had primarily consisted
of products that were originally acquired through an asset and rights purchase
from a subsidiary of AT&T in 1995. These products are no longer being marketed.
While one of these products, the CSD4100 secure executive telephone, is still
available and remains profitable, demand for it has diminished in recent years.
We will continue to offer this product from existing inventory, which we anticipate
will be sufficient for several more years.
TCC has been offering CipherTalk® secure mobile phone communication solutions
since 2005. In fiscal 2016, the Company introduced its next-generation CipherTalk
8500, a secure mobile IP-based phone. The market for high-end secure wireless
mobile phones is competitive and product demand has not developed as expected.
We will continue to market this product with reduced expectations.
The Company also provides customized tools, products and training upon a customer’s
request, as well as design solutions for OEM requirements. In addition, the
Company actively sells its engineering services in support of funded research
and development. These services are typically billed to a customer on a time
and materials basis and can run for several months to several years depending
on the scope of the project.