San Francisco Chronicle, February 21, 1920, page 4:

Poulsen  Wireless  Company  Presents  Plans  for  Winding  Up  Its  Entangled  Affairs
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Its  Stockholders  to  Be  Offered  One  Share  of  Federal  Telegraph  Stock  for  Surrender  of  Each  Poulsen  Share;  Situation  Reviewed  by  Schwerin
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    The Poulsen Wireless Corporation, after many vicissitudes and turmoils, is about to disappear as a separate entity but will continue in existence as the Federal Telegraph Company, of which it was the holding corporation.
    The proposal which will come before a meeting of the Poulsen Corporation to be held at Prescott, Ariz., on March 20, is to increase the stock of the Federal Company from $100,000 to $2,500,000, in $10 shares at par, and to distribute that stock to holders of the Poulsen Corporation stock in the ratio of one $10 share for each $100 share of the Poulsen Corporation.
    The Poulsen Corporation is capitalized at $25,000,000 in 250,000 $100 shares.
    In the opinion of R. P. Schwerin, president of the corporation, who was appointed chairman of a committee for investigating its affairs, that capital is so large that it will be absolutely impossible ever to earn a dividend thereon or give the stock a staple value. Hence the recommendation set forth above--the stock of the Federal Telegraph Company being now the sole asset of the Poulsen Corporation.

AFFAIRS  INVESTIGATED

    The Poulsen Company was organised October 31, 1910 and the Federal Telegraph February 9 of the same year.
    Shortly thereafter the former concern transferred all its assets to the latter.
    The prospects of the two companies were considered so good at the start that the stock was a good seller on the exchanges. Subsequently, however, the affairs of the Poulsen Corporation became so entangled that, in January 1919, Schwerin was appointed chairman of an investigating committee, and took charge of the properties, with the following committee:
    From the Poulsen Company: Leon Bocqueraz, Francis Carolan, John Johnson Jr. and T. C. Tognazzi.
    From Federal Telegraph: Leon Bocqueraz, Alex Hamilton, Hiram Gallois, C. F. Leege, Charles D. Marx and Augustus Taylor.
    Preliminary investigation showed a bad condition of affairs. There was no working capital, relations with the Navy Department, the company's best customer, were unsatisfactory; pressing debts of $450,000 beset the company, and its credit was seriously impaired.

WHAT  AN  INQUIRY  REVEALED

    Investigation revealed that on May 15, 1918, Dr. Washington Dodge had arranged a deal with the United States Government, turning over to the latter practically all the properties of the company, including an exclusive license for radio purposes in the United States for all its patents, the shop at Palo Alto, and its foreign rights, all for the sum of $1,600,000 in Liberty bonds.
    Prior to this Dr. Lodge, who was the president of the company, had obtained a contract from the Federal Telegraph to a company called the Valencia Development Company, providing for a commission of 30 per cent on any such disposal of the property. Accordingly, when the deal was consummated, the Valencia company took $480,000 of the $1,600,000.
    This commission of $480,000 was divided between Dr. Dodge and his associates of the Valencia Company. Schwerin's report says that Dodge admitted having received $115,000 as his personal share.
    Creditors were pressing at the time and it was necessary to sell 13,777½ shares of stock to realize $159,980 which in addition to the Liberty bonds received went to meet urgent obligations.

STRIPPED  IN  SALE  TO  U. S.

    "The sale of the Federal Company's properties to the United States Government took the very heart and soul out of the business and the company was stripped of working capital," says Schwerin.
    Suit against Dr. Dodge was then taken under consideration by the company; but it is understood that the matter had been left in abeyance, since his recent tragic death.
    Dr. Dodge also claimed 20 per cent of the shares secured by the Federal Company in the Pan-American Wireless Telegraph and Telephone Company, which was organized in 1917 to carry on business between the United States, South America, Central America, Mexico and Cuba. One quarter of the stock in that company was taken by the Federal Company while the British and American Marconi companies received three-eighths each, respectively.
    Schwerin's report points out that the company's interest in the Pan-American may yet become profitable if the Navy Department permits the operation of the proposed stations.

COMPANY  CREDIT  RESTORED

    The Federal Company's business is now in a satisfactory condition, the strained relations with the Navy Department have been changed to cordial, "working capital has been created, accounts payable practically cleared off, so that the company's credit at the present time is of the very best."
    In these circumstances it is assumed that Schwerin's proposal to reorganize the Poulsen Corporation on the lines suggested will be accepted by the meeting of the shareholders at Prescott, Ariz. next month.

PUBLIC  ACCOUNTANTS'  REPORT

    The report of Haskins & Selis, public accountants, shows the balance sheet as follows:
    Federal Telegraph Company balance sheet, October 31, 1919:
 
ASSETS
Plant property$319,798.66
Rights and contracts2,505,444.19
Miscellaneous investments151.00
Current assets----
    Cash on hand$3,742.76
    Account receivable78,634.55
    Materials, supplies130,217.04
    Work in progress    222,571.43
435,165.78
Deferred debit items        33,355.94
    Total$3,293,915.57
LIABILITIES
Capital and surplus$3,036,719.95
Current liabilities----
    Audited vouchers$29,962.23
    Accounts payable67,535.63
    Notes payable    13,535.95
111,033.81
Reserves----
    For depreciation$142,922.51
    For doubtful accts      3,239.30
      146,161.81
    Total$3,293,915.57

PRESENT  INCOME

    The accountants show that in the sale to the United States government losses amounting to to $22,021,222 were sustained, the total cost of the assets sold having been placed at $23,121,903.
    The present income of the corporation, they state, is from profits on wireless apparatus manufactured by the Government, rental of ships' apparatus and from tolls for telegraphic messages, which business it continues under a variety of conditions. A lucrative business has been acquired in the telegraph and manufacturing field, the value of which directors have placed at $2,500,000, for which amount it is proposed to capitalize the Federal Telegraph Company. There are incomplete contracts with the United States Government, on which, to September 30, 1919, have been figured, after deductions, profits of $95,500. This amount the accountants regard as conservative. They add that after reduction of the capital and the elimination of the Poulsen company there should be no difficulty in paying a dividend of 5 per cent upon the capitalization of $2,500,000 and providing a reserve for working capital of from 2 to 6 per cent per annum.

ASSETS  AND  LIABILITIES

    The consolidated balance-sheet submitted shows outstanding capital stock at the par value of $24,917,750 and a deficit of $21,817,225. The elimination of the Poulsen corporation and the other changes proposed would produce a balance-sheet of Federal Telegraph as follows:
 
ASSETS
Plant property$    316,292.38
Rights and contracts2,504,729.19
Investments4,151.00
Current assets534,222.34
Deferred charges        21,507.05
    Total3,380,901.96
LIABILITIES
Capital stock outstanding--249,
    177½ shares of $10 each		$2,491,775.00
Current liabilities132,548.22
Reserves147,329.47
Surplus      609,249.27
    Total3,380,901.96

    The balance-sheet of the two companies as of September 30, 1919, shows plant property of 316,292; rights and contracts, $2,504,729; investments $4151; current assets $534,222; deferred debit items, $21,507. Liabilities are: Outstanding stock, $24,917,750 of Poulsen; stock of Federal Telegraph of five shares issued to directors, $500; current liabilities, $132,548. Total reserves, $147,329; total liabilities, $25,198,127. This leaves a deficit of $21,817,225.
    This deficit looks much larger than it is in reality when it is considered that much of the capital stock of Poulsen was purchased by those holding it at fairly low figure--for a long time it has been selling at $4 or less locally.

INCOME  AND  PROFIT  ACCOUNT

    As will be seen from the income and profit account attached, the affairs of the company are by no means hopeless. This follows:
 
Total    9 months
End. Sept.
30
1919		1918
Oper. rev$  2,137,144
Oper. exp1,211,522
Grs prof. opr925,591
Adm., gen. ex387,528
Gross income541,064
Nt inc period*287,134
Profit & Loss Charges
Dfict beg. prd. . . . . .
Loss on sale
      cap assets.    21,530,091
      Total$21,530,091
Dfict end prd$21,817,225
 $     347,791
165,474
182,316
35,223
147,093
128,386

21,945,612

                    
$21,945,612
$21,817,225		 $     458,793
174,973
283,819
30,256
253,562
178,710

594,231

  21,530,091
$22,124,322
$21,945,612
      *Deficit.

LEASED  WIRES  IN  DISPUTE

    Included in reports and notices mailed to the stockholders is an additional and later one, which states that the Pacific Telephone and Telegraph Company had canceled contracts covering leased wires from San Francisco to Portland, over which the Federal Telegraph Company had been conducting its business. As this has seriously crippled the Federal Telegraph Company, suit has been commenced against the Pacific Telephone and Telegraph Company, which concern Schwerin characterizes as follows:
    It is impossible, of course, to forecast the results of any court action, but it is felt that in view of the substantial equities on the side of the Federal Telegraph Company, coupled with the unmoral action of the Pacific Telephone and Telegraph Company, which was contrary to every business precedent and every business custom, that the action as now filed should be prosecuted to the courts of final resort. It should be very clearly understood, however, that in the event the telephone company is able to persist in the unwarranted action, that the loss of revenue, which will result from the situation above stated, will in no wise affect the manufacturing end of the company's affairs, nor will it have any relation to returns obtained from the rental of ship's apparatus.