International, Inc. (EKCS)
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ECSI International with a very
strong position in South East Asia, the Middle East and Central America is projecting
growth in the US because of Homeland Security infrastructure requirements
security. ECSI equipment is built for harsh weather conditions with low installation,
operating and maintenance costs. In addition, their products provide low nuisance and
false alarm rates.
CEOCFOinterviews: Mr. Barchenko, please give us a brief history of ECSI International.
Mr. Barchenko: When we started the company it was primarily a design and manufacturing firm for the correctional industry. We developed the specific systems that were correctional facility oriented and then completed a number of installations at major facilities for approximately five years. During that period, we developed certain technologies and realized that these technologies had broader applications than just the correctional market. We began to move away from the correctional market for various reasons but stayed with the product that was developed for that particular application. That product evolved into a series of pulsed infrared detection systems that were used for perimeter security. The perimeter security system market became our target. For the past ten years we have been further developing the technologies required to address perimeter security and access control for both the government and private sectors.
CEOCFOinterviews: What are the larger areas of concern in protecting a facility?
Barchenko: Some of the larger concerns effect penetration of the outer
perimeter in an undetected manner. The concern is to identify an attempted breach of a
perimeter early enough so that the response team from within the facility can address the
threat in a timely and effective manner. Therefore,
before you can really apply any technology whether it be pulsed infrared,
fiber-optics, microwave or thermal detection with motion detection for redundancy, one
must do a threat and vulnerability assessment of the site.
CEOCFOinterviews: Is cost the main factor in how many layers the company will use?
Barchenko: I dont think in todays environment and especially
since 9/11, that cost has been or should be the factor. Its more important to have a
perimeter system that is dependable, has a probability of detection in the 98.5 to 99%
range, and has minimal nuisance and false
alarms and one that the guard force can count on and have confidence in. One thing that is
necessary with perimeter detection systems is to build confidence in the guard force. That
is if an alarm should occur at the perimeter, the guard force will identify the alarm, the
cause of the alarm and respond in a timely manner to prevent an intrusion by an individual
or a group of individuals.
CEOCFOinterviews: Can you tell us about the new technology that you have licensed and how it will affect what you do?
Barchenko: This new technology known as acoustic perimeter intrusion
detection system, or APIDS, will enhance what we do. The sensor, developed by Penn State
University, is an acoustic sensor and was developed for 1,500 to 2,000 ft. applications.
Along the 1,500 to 2,000 ft. deployment, one could identify an intrusion within
approximately thirty feet along the entire length of the perimeter. That particular sensor
system, integrated properly with video for assessment purposes, will be a natural for very
large perimeters such as airports, oil refineries, reservoirs and dam facilities.
CEOCFOinterviews: Do you grow your product portfolio through R&D or acquisitions?
Barchenko: Since ECSI is a small business with limited R&D resources, we
have looked to other companies that have developed technology but were not able to
effectively bring it to market. In the case of Penn State, they found us to be a solid
company with whom they wanted to affiliate due to our reputation in the industry and the
market acceptance we have as a company. Some of the technology we acquired, for example,
the fiber-optics sensor systems, was purchased from Mason & Hanger, a company that was primarily in the management and operations
end of the business. Mason and Hanger
developed the technology to the point where they were satisfied with its marketability but
then determined they should stick to their core business and decided to sell the
fiber-optic sensor system division.
CEOCFOinterviews: What is you sales and marketing model?
Barchenko: There are a number of levels we work at. The first is through
professional sales and representation. Our own national sales manager and international
sales manager create market acceptance and market demand with the end user, be it a
government agency or large corporation. After the market acceptance and demand develops,
the end-user usually has a dealer-installer or systems integrator bid on the project. We then submit proposals to these people. The next step is to supply the equipment including
soft services in support of the installation process.
These dealer-installers are our customers; we train the personnel on how to
install the product and they sell it to the end-user and maintain it after installation.
CEOCFOinterviews: Is each installation customized?
Mr. Barchenko: In most cases the people operating the facility do not know exactly what the requirement is or how the problem should be addressed. Therefore, we are usually asked to come in and work with the security consultant or security director. ECSI works with the professionals to do a site survey, prepare a conceptual solution and submit a budget for a basic and alternate approach for solving the threat at the site. This takes a period of time and a significant amount of effort on our part as well as the consultant and end user consultant. Once the team evaluates the threat, mitigates the risk, applies the technology, works out an arrangement to meet the owners budget as well as the consultants requirements, we then supply the technology to meet the site installation requirements. In most cases we insist on supplying the supervision, commissioning, testing of the system and training of the personnel to operate and maintain the system to ensure the end-user will be satisfied with the equipment and its performance. Success is based on the customers complete satisfaction.
CEOCFOinterviews: How has 9/11 impacted business?
Mr. Barchenko: 9/11 was horrific for everyone worldwide. As far as the security industry goes, it presents complex challenges. The last year and-a-half has been very active from the standpoint of threat assessments and setting up programs for the various industrial and infrastructure concerns of corporate America and the government. However, there has been a limited amount of funding released to address and implement these security programs. We are hoping that the latter part of fiscal 2003, and certainly 2004, will see those funds released and flowing into the industry so both the government and the private sector can actually implement the security programs required. The target markets we have chosen are a countrys infrastructure such as airports, marine terminals, and energy and water resources. That is one of the reasons we are excited about the Penn State acoustic perimeter intrusion detection system, as most of these applications are very large area perimeters.
CEOCFOinterviews: What are the concerns and your efforts with state run airports?
Barchenko: In the past we have installed a system or two at a particular
terminal within the airport. Now, our current
mission statement has to do with creating a comprehensive security envelope for an entire
airport, and not just selling a product. We found at present, the States have been more
concerned with product purchase and product application than a so-called total
solution for an airport environment. Since
9/11 funds have been spent on the installation of explosive-detection and x-ray systems.
There has been very little discussion addressing perimeter security, personnel security,
or how to address a threat if an explosive devise is detected. One has to be concerned
about the outer perimeter, employer access control, passenger and baggage verification,
explosive containment and disposal, support service groups such as food and fuel
suppliers, cleaning personnel, etc. All of
these issues need to be addressed in order to secure an airport.
CEOCFOinterviews: Are you finding more interest in your products and services in the United States or abroad?
Mr. Barchenko: Interesting question. We find that the airports that are paying attention to a total solution are outside the country. We are looking forward to enjoying significant growth for the company in the overseas market during 2003-2004. We hope that the total solution concept and growth in the United States will catch up in the latter part of 2004-2005.
CEOCFOinterviews: Is it difficult finding the right people to represent the company and to do the work needed as you have been building up in the last couple of years?
Mr. Barchenko: The industry does not have a college or university program. We have the American Society of Industrial Security that offers programs for the training of personnel and the various aspects of security. We find it very difficult to find competent professional marketing and sales personnel. Therefore, most of our people have been trained internally. They almost always come from within the industry, as a former security consultant/integrator or installer with some basic knowledge of the industry. We take it upon ourselves to educate and train our own people. It is very seldom we bring someone in from the outside who does not have a sound industry background.
CEOCFOinterviews: How do you generate most of your sales and do you have recurring revenues through upgrades as part of your model?
Mr. Barchenko: The majority of all work in the past has been outright sales and, yes, we are constantly upgrading the technology. We offer those upgrades to our customers. However, our mission right now is to develop recurring revenue and, therefore, the major programs we are offering will include: design, build, install, lease and maintain for five, seven or ten years. During this period we will guarantee to upgrade the equipment to the latest state-of-the-art during the lease/purchase program. At the end of the lease, the owner will have the option to purchase the system for one dollar and renew our maintenance program or not purchase the equipment and just continue the upgrades and the maintenance going forward.
CEOCFOinterviews: That sounds like a good thing for them and a good thing for you!
Mr. Barchenko: Yes, we call it a government private partnership.
CEOCFOinterviews: Do you have much competition and why are so many people coming to you for your services?
Barchenko: There is a great deal of competition; it has been a fragmented
industry, made up of many small single technology companies. In the past five years or so
and particularly since 9/11, the larger companies have been acquiring the smaller
companies and creating so-called Homeland Defense Groups. Those companies such
as G.E. (General Electric Company NYSE: GE), set up their own security group after they were unable to
acquire Honeywell International, Inc. (NYSE: HON). AlliedSignal acquired and became
Honeywell; Lockheed Martin Corporation (NYSE: LMT) has been acquiring many small
companies, as has Northrop Grumman Corp. (NYSE: NOC). We look to work with these larger
corporations and we do on certain projects.
CEOCFOinterviews: Are there any patents or proprietary technology or is it simply the ability to put it together well?
Mr. Barchenko: It is a combination. We have patents and the knowledge of how to apply that technology so that it can effectively operate at a given site. You mentioned earlier that each job was a custom application and you are correct. The greatest strength of our company and the focus that we have had for the last ten to fifteen years has been to develop a standard off-the-shelf product that could be inventoried in a sub-assembly and component state. It would then be custom configured to meet the specific sites requirements. Therefore, we are able to turn that project very quickly. We are able to respond to an inquiry and a purchase order and then deliver in a relatively short period of time by using all standard components and custom configuring the sensors to adapt to that specific sites requirement.
CEOCFOinterviews: Will you tell us a bit about the cash and credit position of the company?
Mr. Barchenko: The cash position could be better than it is right now because we currently have a lot of money tied up in inventory. Inventory build-up has been required to address the projected in-coming orders. The orders that were projected to be released have been slower than anticipated. Therefore, we probably have inventory of $750,000 - $1,000,000 more than we should. We expect to be able to ship this material during the next twelve months which will relieve some of the cash pressures we have at this time. As far as the finances go, we completed a $2 million private placement about a year ago and invested that money to strengthen our marketing, design engineering and software programming group, as well as building the necessary inventory required for the projects we have committed and anticipate being released in the months ahead.
CEOCFOinterviews: In closing, what would you like to say to your shareholders and potential investors?Mr. Barchenko: We have been in the two and-a-half to five million dollar range now for a number of years. We have averaged about $3.1 million over the last three years. Right now, we are working on more projects than ever before. We have approximately $199 million in proposals and quotations outstanding at this time. In the past, if we had $40 or $50 million outstanding, that was considered a great deal of money. Currently our backlog is larger than it was last year and our expectations for new business going forward are significantly higher than ever. We have a very strong position in South East Asia, the Middle East and Central America; these areas are growth oriented for the security industry. Certainly, in the United States, we are going to maintain our existing customer base and we expect to expand our sales through the teaming agreements we have with some of the large systems integrators.
Northrop Grumman Corp., Carson, Calif, EER Systems Incorporated, Chantilly, Va., ECSI International, Clifton, N.J., Abacus Technology Corp., Chevy Chase, Md., is being awarded a $498,000,000 indefinite delivery/indefinite quantity contract to provide for Integrated Based Defense Security (IBDSS) acquisition, which will result in a multiple award contract vehicle for satisfying all the Force Protection Command and Control Directorate's acquisition requirements for the next five years. Two awards are anticipated for the Small Business Set Aside portion of this acquisition and two awards are anticipated for the unrestricted full and open competition portion of this acquisition. This acquisition will support quick reaction temporary and permanent fixed site deployments as well as multiple installations at different locations in parallel throughout the world. IBDSS provides a critical line of defense for all critical assets, fixed, temporary or mobile by way of electronic detection, alarm assessment, access control, communications and command, control and display capabilities to support and give effective response. The Air Force can issue delivery orders totaling up to the maximum amount indicated above, though actual requirements may necessitate less than this amount. No funds have been obligated. This work will be complete by September 2011. Solicitation began April 2003. The Headquarters Electronic Systems Center, Hanscom Air Force Base, Mass., is the contracting activity (F19628-03-D-0010-0012, F19628-03-D-0016-0022).
Posted: 9/26/03 - CEOCFOinterviews.com
ECSI RECEIVES 5 YEAR CONTRACT FROM DEPARTMENT OF THE AIR FORCE TO SECURE GLOBAL STRATEGIC SITES
Continued DOD Business Displays Congruence with Homeland Security Act
Clifton, NJ 9/5/03 ECSI (Electronic Control Security, Inc. (OTCBB:EKCS)) of Clifton, New Jersey, announced that it received a 5-year indefinite delivery/indefinite quantity (IDIQ) contract with the United States Department of the Air Force to secure highly strategic global military facilities. The projected value may exceed $120,000,000 over the life of the contract.
Posted: 9/9/03 - CEOCFOinterviews.com
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