Quaterra was originally incorporated with public service intentions of operating a computer bulletin board system for the Deaf and Hard of Hearing. Original capital was $35,000 and the business plan called for operating the BBS, called AbleServ out of the founder's (Dan Schramm) home. Dan Schramm received 17 percent of the company stock. This proved not practical and for other reasons, it was decided by the 5 member board of directors to obtain actual commercial office space. Due to our plans involving telecommunications, the natural location was the Wells Building at 324 E. Wisconsin Ave. which contains many ISPs, backbone providers and telephone companies. It is right behind the Ameritech Broadway Central Office and all the fiber optic cable in Milwaukee runs through the building.
After moving to office space in the Wells Building in downtown Milwaukee, the business plan was expanded to include the development of electronic products for the deaf. The first was intended to make it practical for users of TTY/TDD devices to use the AbleServ computer bulletin board.
Quaterra contracted with a local firm to develop TTY-Vision, a product invented by Quaterra vice president Dan Schramm. TTY-Vision was a clever idea to provide a full screen computer-like display for TTY or TDD devices which the deaf use to communicate and which usually have a single line display of 20 characters.
The TTY-Vision unit used any television set as a display with 24 characters across and 10 lines deep. The display scolled up as does a computer display and both sides of a TTY conversation were displayed in different colors. It allowed deaf/hoh users to read sentences in context. The AbleServ system had nodes dedicated to TTY callers and the menus were designed to fit on the TTY-Vision display.
The biggest mistake (not that there were funds to do it any other way) in retrospect was jobbing out the product design. The electrical engineering firm broke every term of the contract, such as delivery date and the production cost of the units. The first design was not stable and the second design took many months more and was not completely stable. The engineers were not happy about redesigning the unit and they took many months to do so. During the wait for the first design and the wait for the re-design, a great deal of money was burned. The envisioned market for the device did not develop as Quaterra had minimal funds for promoting the product and lacked the funds to do a full scale production run (even if the design were stable).
While the TTY-Vision unit was being developed, Dan Schramm and a programmer worked on the AbleServ computer BBS. There were many problems with using a TTY with a computer BBS, so the BBS code was modified for TTY callers. A door program was created that allowed a TTY to access an online word processing program. TTY users could store messages, they had a personal address book, they could write and edit messages and then send them out as bbs mail, internet email, faxes or Western Union mailgrams. Various secondary things and deals were worked out, such as allowing BBS users to actually purchase and send Western Union moneygrams while online. One serious technical problem was with the Ultratec Intellimodems which allowed a computer to talk to a TTY. These did not work the same as a computer modem. There was no way for the BBS to hang up the modem at the end of the TTY call. The modems were designed to be simply turned off at the end of the call; they were not designed for automated or BBS use. Thus, it was necessary to have a circuit designed that could detect when the calling party hanged up, and this circuit then would cycle the power to the modem, letting the BBS know the caller had disconnected and to get ready for the next call.
Lacking any real income except for investments, Dan Schramm investigated the federal SBIR (Small Business Innovation Research) program and began to develop ideas for products for the deaf/hoh which would have a chance of being funded and which were also within the limited capabilities and experience of the company. Several SBIR proposals were written and submitted without result. The last SBIR proposal failed in part because the general manager never showed up to write the work plan portion of the proposal.
Dan Schramm also conceived and wrote Quaterra's first winning SBIR contract proposal for an automated directory assistance system for the deaf. This $40,000 contract was the first significant income (other than investments) that Quaterra had. The contract paid mainly payroll and didn't contain any profit. It also included focus groups of deaf/hoh consumers. We applied for a Phase II contract to create and operate the actual system for $250,000, which would have generated profits and paid for equipment, but this was not awarded, primarily because the operational costs of the system were deemed impractical.
Dan Schramm produced a video tape to promote TTY-Vision and AbleServ and other promotional activities (with a minimal budget) were conducted. These efforts did not result in any meaningful income. He also invented other products such as PC Alarm Central and the Aterm computer terminal system. The Aterm device was a network computer, long before network computers were invented and came to the internet. Some additional capital was raised but it did not amount to enough to undertake these other large projects.
A more practical project was TTY-Computer Connect. This was to be a service that would allow TTY and computer callers to directly connect to each other. It was based on a debit card system. The programmer, who was also the general manager, did not get it completed before the company ran out of money.
Toward the end of 1994 the board of directors voted to shut down our AbleServ online information service for the deaf. AbleServ was a great idea but the market was not there. A lot of money was put into the BBS, but the market lacked resources and we were caught in the middle of the transistion from direct dial BBS's moving to the Internet and the entire growth of the Internet. We simply did not have the resources to become an internet service provider nor was that part of the business plan.
These computers handled the dial-in callers. Each user had their own modem and computer dedicated to their call. The computers standing on end handled TTY's and these were all built by Dan Schramm as where the servers. The 4 mini-towers up high are the computer nodes and these were purchased from a dealer.
Photos of the computer systems used for running the AbleServ on-line service. Cursor over photos for more details.
This table has storage underneath in the middle. The table was designed by Dan Schramm and built by cabinet maker one of our stockholders knew.
It cost $1,200. Dan Schramm stained it, installed all the electrical outlets and built runways for all the cables to go through.
The table to the right held servers for the system and a HP LaserJet 4. In the background is a teletype terminal, a printer, a dumb terminal and other items.
During 1994 Dan Schramm, who founded Quaterra, had no financial duties or responsibilities. The general manager, who was managing the company and the treasurer, controlled all finances. At the end of January 1994 Quaterra ceased operations having exhausted its small amount of capital. Dan Schramm continued to come into the office and worked on various Quaterra business activities which needed to be taken care of, and attempted to keep the company going. We discussed taking smaller space in the building and other options to keep things alive, but that was not possible. The board of directors continued to meet at 324 E. Wisconsin Avenue until about June 1995. The offices were moved in July 1995.
Quaterra never owed the intellectual property rights to the products invented by Dan Schramm. He wrote a couple of intellectual property licenses, one of which the board indicated it would accept, but no document was ever signed. In the second part of Quaterra's operations, Dan Schramm invented the following products on his own time, and wrote the SBIR proposals on his own time. He owns all intellectual property rights to these products.
Dan Schramm, as the founder of Quaterra, felt an obligation to the stockholders and continued to try to resurrect the company. He invented a new product to help the deaf called TTY Universal Voice Mail and wrote a SBIR proposal for the TTY Universal Voice Mail System and won a Phase I SBIR contract from the U.S. Department of Education for $40,000. With this money, together with loans and funds advanced by Dr. Leonard Weldon, Quaterra got back into business. Dr. Weldon also allowed Quaterra to occupy the basement of his dental clinic building at no charge and provided funds for Dan Schramm to clean and remodel the basement into usable office space. This was done out of his own pocket and he did not receive reimbursement for these costs. If not for the generousity of Len Weldon, Quaterra would not have been able to go back into business. Phase I involved creating a bread-board prototype, embedded programming written in assemly and software written in Quick Basic to run on an MS-DOS computer.
Following completion of the Phase I contract, Dan Schramm wrote and submitted a proposal for a Phase II contract which was awarded and provided funds for completing the design of two versions of the TTY Universal Voice Mail system. The contract ran for two years and had a value of nearly $250,000. An electrical engineer and computer programmer were hired. The engineer hired for Phase I was not rehired due to excessive salary demands and availability problems. Two complicated circuits were designed and produced. This included the writing of the embedded C language operating system for the board, and the creation of an extensive program in Visual Basic which provided the user and operator interfaces.
During the Phase II contract with the U.S. Department of Education, Dan Schramm, who previously had invented a computer game he named "Reality Street", wrote a SBIR proposal for getting it funded which was submitted to the U.S. Department of Health and Human Services. Centers for Disease Control awarded an SBIR Phase I contract for $100,000 over six months. Two programmers were hired on a part time basis, one to develop the programming for the game and the other to work on the natural language interface which was part of the game. The game was intended to operate on a computer bulletin board system. Phase I resulted in a game program which would operate on a single personal computer, but it was not possible in the 6 month contract to have it run online. In addition to the game program itself and the language engine component, databases and resources were created for the game, a separate scoring engine was created, and an impressive database application was created for developing characters for the game. The game is room based and a 9 square block neighborhood was designed and is stored in a database. The language engine used files called Knowledge Bases which provided factual knowledge to the characters in the game. We developed a utility program to manage these Knowledge Bases. We hoped to get a Phase II contract to complete the game and submitted a proposal which was not granted.
The Phase II contract with the U.S. Department of Education ran until August 31, 1998. The game contract was up at the end of Feburary 1998, but the game was not nearly completed. The game was more complicated than originally envisioned and the programmers were in over their heads. We obtained an extension on the contract term (there was not additional funding) and worked on the game for several additional months at our own expensve. This was necessary so as not to default on the contract and to have a chance at getting a Phase II contract which could have been for as much as $750,000.
Also during the second quarter of 1998 the city of Shorewood objected to us having offices in the basement of the building. We thus moved the equipment essential to the completion of the TTY Universal Voice Mail system contract to Dan Schramm's residence where it occupied several rooms.
The contract payments were made every two months. Thus, at the end of a two month period, an invoice and a detailed report were completed and submitted. It would take at least 30 days for payment to be approved and a check to be issued. Sometimes there were various glitches and it would take longer. Thus, payments lagged payroll by 90 days and sometimes more. Up until about November 1997 when he resigned as president and CEO, Len Weldon also borrowed the company money out of his pocket to meet payroll and other expenses while waiting for a check to arrive, though he was not able to do this for every payroll period while waitng for a check. Employees many times had to work and wait for many weeks before they were paid. We also had to suffer through delays caused by the Dept. of Education, one particular one for over two months, being unable to pay anyone until after Christmas.
The U.S. Dept. of Education contract for TTY Universal Voice Mail came to an end August 31, 1998. These contracts covered payroll, but provided no or little profit. They also did not cover overhead, though the Phase II contract provided funds for required software and equipment.
During 1994 the treasurer of Quaterra did not pay any of the required withholding taxes or FICA payments. After ceasing operations in 1994, the State of Wisconsin compelled the board members to take care of the state taxes, along with penalities and interest. Len Weldon paid these amounts for all the board members out of his own pocket. After Quaterra went back into business and began paying withholding and FICA, the IRS demanded payment of the withholding money owned from 1994 together with penalities and interest amounting to over $50,000. An installment agreement was worked out and Quaterra paid the IRS $500 per month. The Phase I contracts did not provide any profit. The Phase II contract provided a profit of $500 per month, which went to the IRS.
In addition to the withholding being paid under the installment contract, the board members were personally obligated for the FICA payments. Some board members had their income tax refunds seized and Dan Schramm paid $1,000 to the IRS. Len Weldon again came to the rescue and paid most of the FICA taxes together with penalities and interest of over $10,000.00.
During the course of the installment contract, the IRS employee we worked with was well aware that we got paid every two months and that the payments would not always be exactly on time. Nevertheless, the IRS would seize the contents of our bank account whenever the installment payment was late, which caused no end of problems for the company and the employees.
The electrical engineer took longer to complete the second circuit board design, which involved a 12 line unit, than the contract allowed so the contract ran over about 6 weeks. At the completion of the contract, Quaterra's property was moved back to the basement of Len's building.
Finally at the end of the contract the IRS filed a lien on our final payment from the Dept. of Education of $19,000 dollars. Employees were owned nearly 3 months of payroll as the contract ran 6 weeks past the Aug. 31 deadline. After the extensive final report and invoices were filed, we had to wait a considerable amount of time for the final check to be issued. When it was, we received only $9,600. Each of the three employees were paid $3,000 ea. The corporation got the $600.
Two employees were owned nearly $9,000 each. They were not happy. Thus, most of the company's equipment was divided among the employees, based on the amount they were owed. The electrical engineer and the programmer received the bulk of the equipment. They each worked 20 hours per week. Dan Schramm, who was the principal investigator on the contracts worked 10 hours per week under the Education Phase II contract. Both of the employees also were paid more money than was Dan Schramm. No employee received any fringe benefits. Employees were contract term employees and no unemployment compensation was paid.
Thus, in October 1998, Quaterra ceased all operations. Later, Dan Schramm personally set up and operated Quaterra Internet Services, which was not actually part of Quaterra Communications Corp. It was primarily a re-sale operation, purchasing internet dialup capacity on a wholesale basis. This was wholly a secondary site. Dan Schramm had his own internet access business directed towards the gay community and potential customers who did not want a gay ISP were directed to the quaterra.net site. Quaterra.net only signed up a small number of people and when the dialup business was sold it had fewer than 25 customers.
The dialup business was not particularly successful either and developed into a huge pain. It began running up debts to the wholesale provider and backbone provider. Finally in Sept. 1999 the backbone connection was lost and there was no choice but to sell the handful of dialup accounts to another ISP together with the web site. No money was received for these, as the payment was made directly to the nationwide wholesaler ISP which actually provided the dialup facilities.
This web site is operational out of the personal resources of, and maintained by Dan Schramm as a service to stockholders and other interested parties.
Long after Quaterra ceased operations, the former real estate company of the Wells Building, Towne Reality sued Quaterra and Dan Schramm for back rent and interest. Towne Realty had previously sued Quaterra and had a judgment. They apparently forgot about the judgment but that did not stop them from trying to get another one. Normally this is blocked by judicial doctrines like res judicata and collateral estoppel, but Towne's attorney argued otherwise. As the judge had no clue in this area of the law and Dan Schramm appeared pro se, the judge sided with Towne. Stockholders and officers are not responsible for the debts of a corporation unless there is fraud involved. That was not the case here. The court decided that because Schramm continued to operate Quaterra after the corporation was dissolved, Quaterra was thus owned by Schramm and he was responsible for its debts. Thus, proving true once again that no good deed goes unpublished.