TECHNOLOGY
In Your Face
08/08/2000
By Thien Huynh, Canada-iNvest.com
Heritage Concepts International (HCI) has been on a roll since it sent Grandma Lee packing
and made an about face into the biometrics industry. The company is expected to announce its
biggest and most important contract this week.
HCI purchased restaurant chain Grandma Lee’s Inc. in 1997. But the company realized
declining sales in the restaurant industry and made the transition into a technology-based firm.
While the company still retains some of its restaurant assets and has interests in Internet and
media and real estate, the firm is now focused on biometric facial recognition technology.
In May it bought a 50% interest in AND Biometrics and it is through AND that they hope to
realize some significant gains. HCI is hoping to score a large biometric contract from a major
security firm this week. It will be HCI’s first ever contract since implementing its new strategy.
"We are in heavy discussions with a major player in various industries but we can't name
anyone yet. It will be a huge deal and we are still qualifying as to how we would like to be
reimbursed. We are hoping to announce something this week," says David Lobb, HCI's Chief
Financial Officer.
"Signing a contract with a big name like this would cause a domino affect and set us up for a
while. The announcement of this contract will be big and will be a turning point for our
company."
Shares of HCI exploded over 26% on Friday and closed at 19 cents. In early trading on
Tuesday, it was up another 3 cents. The stock had impressive volume as close to 8 million
shares were traded. The stock has a 52-week high of 44 cents and a low of 3 cents.
HCI and AND are developing and marketing facial recognition technology, called
Holographic/Quantum Neural Technology. The product allows a computer to learn a person's
facial structure, identify a person and store their personal information in a database
A person would be monitored by a normal video camera and a connecting computer would
recognize the image in less than 30 seconds and check if the person is entered into the
database and authorized.
The many uses for this biometric technology can be derived from several spy and science
fiction movies. Practical uses for facial recognition technology ultimately revolve around building
security and e-commerce security. For example, employees would be monitored and their data
checked by a computer before entering a building. Police could have facial scans and
databases of criminals. A personal computer equipped with the technology could also scan the
user's face before allowing them to use the computer, making sure traditional typed passwords
are not violated. Computer giant Compaq has already looked into the idea.
The biometrics industry is fairly small right now. In 1999, revenue figures for biometric hardware
and software were a measly $58.4 million. But the figure didn’t include government applications
such as finger print databases used in welfare and criminal investigations. An independent
biometrics consulting and integration firm, International Biometric, reports that potential
revenues could explode to $594 million by 2003.
Until recently, the problem with biometrics has been its staggering cost. But prices have
dropped by 80% to 90% in the past two to three years. A boom in research and development
"largely driven by an increasing need for accurate forensics" has produced quality
improvements and price reductions. A stand-alone fingerprint reader might have cost as much
as $3,000 two years ago, but now it can sell for less than $100.
Analysts say fingerprint scanning is the top biometric in terms of mind and market share, with
hand geometry coming in second, followed by face and iris scanning.
The viability of the industry is getting stronger because of the inability of passwords to protect
large scale and important transactions that take place in a virtual environment.
“The technology has come quite a long way in the past couple of years. If you asked if this
industry was viable two years ago, the technology was just in the developmental stage. Now
the technologies are deployable on a large scale. A lot of factors are coming together to bring
this industry to the forefront. There is a ton of money moving around the Internet right now and a
lot of transactions are happening in a virtual environment that has very lax authorization,” says
Michael Thieme, a senior analyst for International Biometric in Manhattan.
The technology is already being deployed on a large scale in California and Europe. There are
also a number of large Canadian banks looking into the technology and are testing out the
product. But as a whole, companies are not fully convinced that they need it because there has
yet to be a widely publicized breach in corporate security.
“People just haven’t seen the screaming need for this yet, but it just takes one major security
break to get their attention,” says Thieme. “Biometric companies such as HCI hope that it will
get to the level of one day having a person having to scan their face to get into their house. But
right now the good old key and lock idea is still the popular choice. But the PC network is a
setting that needs this kind of high security. It’s much better than a password.”
The biometrics industry is a small emerging market but there is already a daunting line-up of
competing companies trying to gain position. The International Biometric Group reports working
with around 185 different companies in the industry alone. Thieme likes what HCI is trying to do
but admits any company in this industry will struggle for market share.
“Ever week someone’s out of business and every week there is someone there to take their
place. There is not enough pie to share. We envision that there will be a period of mergers,
acquisitions and bankruptcies. There are also going to be people with technology that just isn’t
strong enough. I mean you can’t compete with potential players like Sony and Motorola with
something that you made in your garage,” says Thieme.
His two Canadian biometric picks are Ottawa’s American Biometric Company and HCI’s
direct competitor, Vancouver’s Imagis Technologies (NAB), who also deal with face
recognition. Imagis trades on the CDNX.
“There are other players in this market but no one has technology like ours. Most of the
existing applications just concentrate on different parts of your face like your nose, eyes or
mouth. We can do the whole face,” says HCI’s David Lobb.
Lobb points out that HCI’s face recognition technology can identify changes in a person’s
appearance. The computer would learn and incorporate new physical aspects of a person
currently in the database, such as a haircut, a new beard or a fresh pimple.
“HCI’s face recognition doesn’t require any contact with the person. It is non-intrusive and fairly
accurate. But face recognition in general is subject to lighting changes and oddly enough, it
works better on some ethnicities than others. Economically, face recognition is bigger than
retina scanning and that discrepancy will widen. So HCI is on the right track,” says Thieme.
HCI expects to become profitable once they complete their contract this week. In its third
quarter, the company reported a loss of $2.6 million compared to revenues of $600,000. Most of
the losses continue to come from the firm's switch from being a restauranteur to an emerging
tech player.
If the mega contract goes through as expected, HCI looks to be on its way to making a name
for itself in the Canadian biometrics market. Grandma would have been proud.
Copyright © 1998-2000 GlobalnetFinancial.com |
