U.S. Endorses Codercard Inc. Security Products

Codercard Inc., a small Santa Ana company struggling to emerge from bankruptcy, said Tuesday that it has won a long-sought endorsement of its computer security products from the U.S. government.

That stamp of approval from the National Security Agency, a unit of the Department of Defense that contracted for development of a low-cost computer security device, gives Codercard its first big sales boost, said Chief Executive Ronald Hofer.

“We expect sales of $3 million to $4 million in the first year,” Hofer said. Ciphernet, a joint venture of Codercard and Sterling Investments of Denver, Colo., will market the products, he said.

Also on Tuesday, Codercard said it had signed a letter of intent to merge with Allante Capital Corp., a small public company headed by Robert W. Herman, who founded Codercard in 1983 and is a member of its board of directors.

Herman, a physicist, invented the Codercard technology, a code system to prevent theft of sensitive information transmitted over communication lines.

Allante holds the exclusive marketing rights for a new therapeutic ultrasound device designed to treat brain tumors without surgery.

The proposed merger must be approved by the U.S. Bankruptcy Court and the shareholders of both companies. Codercard sought protection from its creditors last month under Chapter 11 of the Federal Bankruptcy Act.

Hofer said Allante claims that by exercising existing warrants it can raise $4.5 million to be used, in part, by Codercard to retire its debt and to build up production of its computer systems.

“We are investigating to see if it is feasible for them (Allante) to do what they say they can do,” Hofer said. If not, he said, the merger will fall through.

Meanwhile, Hofer said Codercard is seeking other funding sources. He said Codercard is talking to a major New York investment bank and with private investors in Australia.