CEO Interview - published 01/26/2004
DOCUMENT # WAL617
ALLAN GRIEBENOW is President and Chief Executive Officer of AXCESS Inc.
He came to AXCESS Inc. when the company acquired Prism Video, Inc.,
mid-1999. Mr. Griebenow had founded Prism in 1994, specializing in
digital video security surveillance technology. Prior to that, he was
President and CEO of Vortech Data Inc., which specialized in digital
medical image networking before its acquisition by Eastman Kodak. He has
25 years' experience in advanced telecommunications applications and
early stage ventures, starting his career in the late 1970s as a
Presidential Management Intern with NASA. Mr. Griebenow holds a BS in
Business Administration from the University of Maryland and an MBA from
San Francisco State University.
Sector: SECURITY & PROTECTION SERVICES
TWST: Please tell us about AXCESS.
Mr. Griebenow: AXCESS is in the physical security product space in the
security industry segment. We provide automated, intelligent
surveillance systems for the enterprise and for government. Using
technology, our goal is to extend the security network and make it more
effective and less labor intensive through the use of RFID wireless
tagging, digital streaming video and networking. Our systems
automatically locate, identify, track, monitor and protect the assets.
Those assets are typically people, vehicles, computers, inventory, test
equipment, etc. In security as well as in asset management, particularly
post-9/11, human eyes really can't productively address the challenges
of the 21st century, so we employ automatic sensing, surveillance and
notification as required. Quite simply, we use a computer network and
wireless technology as a platform for application solutions using
streaming video and battery-powered wireless tags commonly referred to
as active RFID tags (radio frequency identification tags). We target
those technologies toward four applications. One is personnel access
control and tracking. The second is vehicle access control and
logistics. Next is asset management, monitoring and protection. And
finally, security video recording and remote surveillance (again, all
over the network). The result is a system that's more intelligent and
more productivity enhancing, which provides much greater coverage than
would ordinarily be provided by full-time humans watching the assets or
the people. And we offer that at a lower cost than the systems in place
today, which ultimately boils down to a productivity gain for the people
that implement it. We're traded on the OTC Bulletin Board. The company
was actually taken public way back in the early 1980s under the name
LaserTechnics. It's been oriented to the security and access control
space its entire life. Back in the 20th century, the company provided
access control cards and credentials for immigration. That technology
was sold off and since 1999 it's focused on using active RFID and CCTV
technology for automating surveillance, again leveraging the corporate
network.
TWST: Walk us through the stream of technology that's focused in on
access control and identification.
Mr. Griebenow: About 30% of the system integrator market today worldwide
is access control and CCTV. It's a $5.8 billion total market. Video
security and access control are rapidly growing applications and are
under pressure to use advanced technologies to improve their
effectiveness. The benefit of active RFID tagging comes from the battery
embedded in it. It's an autonomous tag, which means it can transmit
without an outside power source. And you can program it to do a lot of
things. First, it provides a hands-free identification for unlocking
doors. It means you can automatically track things like people going in,
out and around a facility, including identifying intruders. You're
automatically able to link a person with an asset such as a laptop
computer. You can track an asset through a facility and prevent it from
leaving. You can identify and authenticate vehicles approaching a gated
entrance, automatically opening gates and doors. Independently and
together, these offer a productivity enhancement by reducing manpower
while increasing security coverage. So, active RFID within the
enterprise gives the system much more intelligence and vision to be able
to control and track assets, relatively loosely defined in terms of
people and vehicles and corporate assets. It works very nicely with
network-based video as any incident signified by an RFID tag
transmission can be automatically reviewed via video clip. There's a
wholesale transformation going on in the security industry today, moving
what we would call old analog systems onto digital, networked platforms.
This has really been evolving for about 15 years or so as private
computer platforms gave way to Microsoft-based platforms and common
software and network support. So this transformation onto the network
initially gives the security system a lot of productivity improvement
and reduces cost, but then the use of the network lets the system
integrator pull together various technologies to solve a particular
problem. For example, in an access control environment you typically
have an RFID tag automatically open a door, and if, for example, there
was a question about what went in or what went out of that particular
door, the network allows you to connect immediately to a video clip.
There's a tremendous improvement in the ability to respond, as well as
the quality of the evidence associated with the security event. So we
see the access control market continuing to evolve very nicely in its
adoption of technologies ' RFID and network-based solutions ' as well as
video security, which is called CCTV in the security video market. And
we like the idea of our company being able to exploit this wholesale
transformation to digital intelligent devices for access control and
security surveillance.
TWST: What has been the sales and marketing approach to date? Is it
changing or evolving?
Mr. Griebenow: It actually is evolving. The most significant change in
the security space is the growth and recognition of the large-system
integrator. Because systems are being integrated on a common platform,
the end users are typically going for a one-stop-shopping approach to
the large-system integrators ' the Tycos, the Honeywells of the world '
that are able to solve the customers' problems in multiple industries
across multiple geographies, and are able to do that with credibility
and experience. What that means for a company like AXCESS is that our
end customer really is that system integrator. Our organization is
targeted to developing sales channels through the system integrators,
and we've been very successful in the last year in identifying and
securing Tyco, Honeywell and companies like those in the security-buying
co-op PSA. We are able to get our products not only in their pricing
scheme but also embedded into their core system. Our strategy has been
to supply these large-system integrators with a unique technology they
would not easily be able to develop themselves. This way they can easily
fill out their entire product portfolio and not only be able to offer a
full range of product solutions but also be able to address relevant
industries ' homeland defense, government, military or just enterprise
solutions.
TWST: What does the customer space look like today for AXCESS? How do
you see it changing and evolving as those channels and contacts evolve
and change?
Mr. Griebenow: Of interest, of course, was the trauma of 9/11, which
sent shock waves through the security industry. For roughly a year or so
there was a lot of reassessing done, mostly because security networks
had been oriented to thievery as opposed to sabotage ' and terrorism is
like sabotage. What's of interest ' and many people don't realize this '
is that well over 80% of all terrorist attacks have been perpetrated on
commercial enterprises, not, typically, government or military
installations. That was a wakeup call to security directors. And we see,
particularly as it relates to access control and security video, those
systems growing now in terms of their scope as well as the coverage
that's required within the enterprise.
TWST: What part of the equation, from the user's perspective, does price
and integration play at this point?
Mr. Griebenow: Typically, the price in the security system ranks very
high on the end user's priority list, as well as the quality of the
integration and the reliability of the system. So it takes a great deal
of time to get a product through a sales channel such as a large system
integrator because of the big premium on the customer relationship. One
of the things that we've been able to do is to take advantage of
existing system architectures to make our solutions easy to implement.
We do keep the pricing in mind. For example, the use of network cabling
is dramatically less expensive than coaxial video cabling. We use the
existing corporate network for a security solution, and are adapted very
easily to an existing network infrastructure. As far as reliability is
concerned, every security system has to have that as a major component.
One of the things that has made us successful in RFID has been our
ability to tag things reliably. In asset protection, for example, you
need to be able to depend on the ability to read that asset's identity
and location ' particularly an asset leaving a facility ' so that you
can be appropriately alerted. We worked many years on making sure that
happens. Now we have a preeminent technical position in access control
and asset tracking in being able to tag virtually anything in the
enterprise, knowing where it is within the enterprise and when it
leaves.
TWST: What's the financial status of AXCESS at this point? How strong is
your balance sheet? What does the current technology you have represent
as far as a financial opportunity for the company?
Mr. Griebenow: Clearly, security has been in the eyes of the financial
industry and the investment financial community over the last few years.
Most recently, RFID has received some good press regarding its place in
the retail supply chain and this awareness has helped AXCESS. Being
public and being an early-stage company, we were able to complete two
financings in the past year, the most significant of which was just
completed in December. We were able to secure a little over $3 million
for the company. I think that was a very interesting event because it
represented a return of the banking community on Wall Street to
investing in early-stage public entities like AXCESS, and we were
pleased to get that done. It means that with the balance sheet
restructuring, which we announced also in the December time frame, we
were able to reduce our debt significantly and with the financing,
increase our cash position. We think we're now very well positioned for
our march to profitability in 2004.
TWST: Is that a slow, steady process, or is it a spiky, lumpy process,
as you grow revenues?
Mr. Griebenow: With early-stage companies it tends to be more spiky and
lumpy. Our environment is one, however, where we are very easily able to
adapt to surges in purchase-order volume. We use contract manufacturers
to make our products. Our RFID products, network cameras and
transmitters are all printed circuit board based, so we are able to tap
into a tremendous wealth of capacity and that makes us very flexible and
able to respond to differing volume requirements. We have no fixed plant
in-house for manufacturing. So we expect 2004 to be a little bit choppy,
with a number of large orders that we'll respond to. But I think the
company has anticipated that in the way it's set up in fulfillment and
as we grow it will make it very easy to scale.
TWST: What are the strengths of the IT you've developed and how
defensible is it at this point?
Mr. Griebenow: We have a patent portfolio of 15 patents, 12 on the video
side and three on the RFID side. On the video side, they're very
pioneering patents with the focus predominantly on industrial-based
compression. One of the challenges in moving video over the network is
that it can be very bandwidth intensive. That is a lesson that's
gradually being learned by the industry. The application of off-the-
shelf web cameras to industry security really doesn't work because they
use too much bandwidth. Our compression allows us to transmit and store
an equivalent video stream with about 1/35th the amount of bandwidth. On
the RFID side, the three patents cover: first, the ability for the tag
to manage its power effectively, which is a very important element;
second, our ability to control doors which is mandatory in security; and
thirdly, the infrastructure layout. We were able to patent a distributed
infrastructure where the receiver technology is installed, very similar
to the way Wi-Fi networks are concentric circles which blanket the
enterprise. Tags are activated on a door-to-door basis. Tags then
transmit to the nearest receiver. So we have an architectural advantage
that we think not only sets us apart but also helps us win business
because our systems are more economic.
TWST: What's the agenda over the next 12 months? What goals do you need
to meet to make that time frame a success?
Mr. Griebenow: We are very clearly focused on getting to profitability
at this point. I think, as for many companies, the past 18 months to two
years have been very traumatic with the economic cycle. Clearly, the
financing world has been a very difficult one. But we were able to
weather the storm. We became very focused on our operating expenses and
we downsized. We think that we're now set very nicely for growth in
2004. We have the necessary technology, the product portfolio, and our
products are now well established in our system integrator channels, so
we're very much focused on marketing and sales and driving the top-line
revenue to profitability.
TWST: Introduce us to your top-level management team, the bench strength
and skill sets you have onboard. Do you see any areas you'll need to
augment as you roll out your plan?
Mr. Griebenow: We have onboard here at CFO, Allan Frank who was a
public-company CFO before he came to AXCESS. He came out of the wireless
community, so he understands not only what running a public company is
about but also what the market is about. A number of the employees who
are here, including Ben Donohue, our vice president of business
development, have been with me for about 10 years. We have very
excellent engineering, both on the RFID side and on the video side. It's
very critical to understand not only what you need to accomplish today
but how you look at the horizon for new technology. We have the team for
that. We will expand our focus a little bit in 2004 toward the supply
chain area. This means that we will be keeping in touch with how our
systems and solutions can participate in what's going to be an explosive
market for the tagging of articles in the retail chain. We have some
experience in this area, linking the payloads on trucks to the truck and
the driver and then automatically being able to identify when they leave
and when they enter, also controlling the gates. And we have just
recently introduced a middleware product that can easily link into
supply-chain software. So we think that as supply-chain systems grow, we
will support the logistics portion. I think everyone's trying to figure
out exactly when retail RFID tagging will explode. Some of the recent
announcements by Wal-Mart and Gillette would indicate that it's probably
in early 2006. We are well positioned to follow that trail and if we see
enough movement this year, we'll staff up in sales to meet the demand.
TWST: In the integration business, more tools make you more powerful.
Being part of a company that has a larger tool set, you become more
important or at least you acquire more marketing muscle. What, then, are
your M&A plans at AXCESS?
Mr. Griebenow: We expect to look at that opportunistically. We get, as
you can imagine, a number of inquiries from private entities that want
to roll into a public entity such as we are, and we see the strategic
landscape as a very interesting opportunity for AXCESS to grow that way.
We don't have a specific agenda this year to focus on M&A, but we do
spend a lot of time understanding how that could benefit the company and
the shareholders. On that basis we're going to continue to look at those
options ' again, opportunistically.
TWST: Looking at your stock price and market cap, you seem to be a bit
stronger than the typical OTC Bulletin Board company.
Mr. Griebenow: We have spent some time this past year working on IR. In
the spring, we were able to bring in an IR firm by the name of ROI Group
Associates. They have helped us significantly in getting to those in the
shareholder community and the broker community who are interested in
micro-cap public entities, particularly in the space we're in. We have
an advantage, being in the physical security space, one that people are
forecasting for growth, as well as in the RFID space ' where people,
more and more, understand the productivity benefits of RFID in addition
to the technology itself. I think the space we're in, the technology
we're in and the ability to get that message to the broker and investor
community has really helped us this past year. I spend a significant
amount of time on IR and will be again in 2004. One of the reasons, I
think, people like AXCESS is that in addition to the space and the
technology we're in, we have set the company up for success. We're able
to grow very rapidly as business comes our way, and we feel very
confident that ' with the integration of our systems in the Tyco and
Honeywell channels, for example ' that will happen.
TWST: Do you have any need for additional capital in the next year or
two? Are you looking to add to liquidity?
Mr. Griebenow: We think we have the amount of money that we need to get
to profitability. There is, of course, the old adage that you never turn
down money if it comes your way ' and there's another one that says a
company is always fund-raising, no matter what its size. We completed a
focused fund-raising campaign in December. But we always look
opportunistically at raising money if it would be beneficial to the
growth of the company and shareholder value.
TWST: Are there any warrants or options still open that might have an
impact on pricing?
Mr. Griebenow: We do have an employee stock option plan in place, and
we're going to continue to add to that in 2004. We also have warrants
that were associated with our last two financings that we expect, with a
rising stock price, will be able to be exercised and bring additional
capital into the company as well as increase our float.
TWST: What have been the analysts' responses?
Mr. Griebenow: Analyst coverage was initiated in August 2003 by Kama
Krishna, the well known and well followed technology analyst who now
runs Equitis. I think in 2004 we'll get the opportunity to do a little
bit more in terms of analyst coverage. Right now, we have a following in
the over-the-counter micro-cap community. But analyst coverage and IR is
a never-ending process.
TWST: What are three or four summary statements you'd make to get
investors to review AXCESS and include it in their current portfolios as
well as in their longer-term strategies?
Mr. Griebenow: In AXCESS you have a micro-cap company that's poised for
success. If you take a look across the board, you can say that we're the
kind of technology company characterized as pre-dot-com. We have done it
the old-fashioned way: we have a secure patent portfolio for our
technology; our products are perfected and in the bloodstream of system
integrators to the extent that they've embedded them into their core
platforms. If you take a look at our sales leverage, we have the
equivalent of about 2,000 foot soldiers out there who can sell our
products in 2004. We have products in two very exciting areas '
corporate CCTV and RFID, both burgeoning growth areas. And we're a
company that can scale very fast. One of the points I like to make is
that AXCESS is truly a pure play. We have very focused products and very
focused applications, and by putting our stock in the portfolio you know
that you have a toehold on both RFID and security in what is clearly the
coming wave of the technology in the physical security industry.
TWST: Thank you. (DWA)
ALLAN GRIEBENOW
President & CEO
AXCESS Inc.
3208 Commander Drive
Carrollton, TX 75006
(972) 407-6080
(800) 588-6080 - TOLL FREE
(972) 407-9085 - FAX
www.axcessinc.com
Investor Relations Contact:
CHARLES NELSON
ROI Group Associates, Inc.
(212) 495-0200
e-mail: cnelson@roiny.com
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