TECHNOLOGY
Year One Complete
Wed, Nov. 22, 2000 09:34
By Thien Huynh, Canada-iNvest.com
Heritage Concepts International (HCI) ended its fiscal year by slowly getting out of the soup business
and finished the quarter with respectable revenues. But next year will be the true test as the company
expects revenues to roll in from its new biometrics division. When this finally happens, HCI expects to
be immediately profitable.
The company caused a lot of excitement this summer as it switched from being Grandma Lee’s
restaurant chain, to a full fledged biometrics firm, specializing in facial recognition technology. HCI
perhaps took its final step in shedding it self of its restaurant business in the fourth quarter.
The company reported revenues of $80,711 for its fiscal fourth quarter, compared to $70, 783 from the
same time last year. Revenues for the year ended June 30th, 2000 were $682,752, compared to
$582,833 last year.
The company had a net loss of $1,904,367 for the quarter, an improvement of $4,297,873 from the fourth
quarter of last year. Net loss for the year was $4,565,311, compared to a net loss of $5,350,440 last
year.
David Lobb, HCI’s CFO, explains that the company has yet to reap any revenues from its biometrics
division, but that will change next year as HCI becomes an all-out technology firm.
“We are anticipating the first revenues to be in the first quarter of next year. I think we’ll see revenues
from both our Chubb contract and some other things that we are working on. I think the minute that we
start producing revenues; we’ll be profitable. Don’t forget that in most of these cases, we are doing this
as an effective licensing deal. It’s not like we are bearing a lot of the costs associated with it. I think we
will profitable almost immediately.” says Lobb.
“We essentially started the transition last year when we sold off the rights for Grandma Lee’s Ontario.
We still have the over all rights for Grandma Lee, which we are in the process of trying to put a deal
together on. We will eventually get out of the restaurant business. We have a pending deal for the real
estate we own. We’ll consider investments outside of biometrics but the business that we are going to
be in will be high-tech/biometrics.”
Revenues and immediate profitability are words that HCI investors are dying to hear after an interesting
year for the company. The stock it self was once the talk of the market, creeping from a low of 3 cents
to a high of 95 cents at one point. It closed Monday at 26 cents.
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. In May it bought a 50%
interest in AND Biometrics. The subsidiary is now focused on biometrics facial recognition technology
and is called AcSys Biometrics.
HCI develops and markets 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.
In the course of its fiscal year, the company has shown some promise by scoring a couple of contracts
that it had alluded to.
The company’s biggest deal to date was when it signed a sub-contracting deal with American-based
Litton PRC and the U.S. government. Litton PRC was one of five prime vendors awarded a contract by
the General Services Administration (GSA) to offer smart card systems and services to all U.S. federal
agencies. The security program has a total value of US$1.5 billion over a 10-year time period. The
program will initially focus on providing employee identification, building access, and computer network
access. The deal was a result of HCI's presentations to the U.S. State Department Consular Services
Branch and the U.S. Immigration and Naturalization Services Passport Control Program.
HCI had previously signed an OEM development deal with a division of security superstar, Chubb PLC.
In addition to the Chubb deal, representatives from the United Kingdom's BAA, the world's leading
airport company, recently checked out the product.
Michael Thieme, a senior analyst for International Biometrics, thinks that the facial recognition market is
still hot and that government interest in the technology will push biometrics to the next level of
development.
“There is continued strong interest in facial recognition technology in the U.S. because of its potential
use on things like passports. And that interest is going to be mirrored across different jurisdictions. I
know that the Philippines is supposed to do a project with finger and face technology for their driver’s
license or passports. There is a definite strong interest in facial technology,” says Thieme.
“The U.S. government is investing a lot of money and attempting face recognition technology to work in
more challenging situations. One of the challenges of facial recognition has been to work at a distance,
at an angle with subjects who may or may not be co-operative, like scoping an airport for terrorists. That
sort of investment by the government or private institutions is going to drive the technology so that it
reaches that next level of performance and deployability.”
In 1999, revenue figures for biometrics hardware and software were a measly US$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 Biometrics,
reports that potential revenues could explode to US$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 biometrics in terms of mind and market share, with hand
geometry coming in second, followed by face and iris scanning. |
