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Who's buying Cornwall?

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Thursday, March 26, 2009
I listened to the conference call today discussing the Tri-S earnings report, if only because its Cornwall subsidiary does some security installation, even though its Paragon guarding company generates most of its revenue. Surprise for me, it was announced the company would be selling off its Cornwall Group, which it purchased back in 2005 for around $15 million. So, who's the buyer? They wouldn't say yet, but there's apparently a letter of intent that's been signed and they expect to announce terms at the end of next week. The company's kind of desperate to get rid of Cornwall, since it needs to pay down some debt and it's in the process of closing on another financing facility with Wells Fargo. Though the company grew some 50 percent last year, it's losing money to the tune of $14 million in 2008 (though $6 million of that is a goodwill impairment). But growth is well liked, apparently. One investor was so enthusiastic about the potential of the company that he wondered if Tri-S had takeover protections in place. It does not.

Raefield has work to do at Mace

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Thursday, March 26, 2009
Mace released their 2008 financials today. See for yourself. There's a lot there to wade through, so I'll give you some highlights (or lowlights, depends on your point of view): Security revenue has actually dropped each of the last three years. 20,788,000 - 2008 - 27.5 percent gross margin 22,278,000 - 2007 - 27.1 percent 23,366,000 - 2006 - 25 percent 24,909,000 - 2005 - 29 percent But you can see that they're headed back in the right direction on cost of sales and gross margin. Still, the overall numbers don't look good for the company yet. They took a net loss of more than $10 million on about $51 million in sales (though there's a $5 million goodwill charge in there that makes that look worse than it really is). While the company has lost about $6 million a year since 2004, and you could say this is right in line with that, there still aren't signs of Mace moving toward profitability, even with a new digital marketing arm that's bringing in more than $17 million. There are good signs, though. First, Mace has almost no debt, just over $6 million, which isn't much at all, especially in this economy. Second, the company still has more than $16 million in working capital, so there's cash on hand for operations and even possible small acquisitions, like that central station they've been talking about. Here's what they've got to say about the make-up of the security segment:
Our Security Segment designs, manufactures, markets and sells a wide range of products. The Company’s primary focus in the Security Segment is the sourcing and selection of electronic surveillance products and components that it produces and sells, primarily to installing dealers, system integrators, retailers and end users. Other products in our Security Segment include, but are not limited to, less-than-lethal Mace defense sprays, personal alarms, high-end digital and machine vision cameras and imaging components, as well as video conferencing equipment and security monitors. The main marketing channels for our products are industry shows and publications, outside sales representatives, catalogs, internet and sales through telephone orders. Revenues generated for the year ended December 31, 2008 for the Security Segment were comprised of approximately 35% from our professional electronic surveillance operation in Florida, 43% from our consumer direct electronic surveillance and machine vision camera and video conferencing equipment operation in Texas, and 22% from our personal defense and law enforcement aerosol operation in Vermont.
So, of that $20,788,000, roughly $7,275,800 is coming from the professional electronic security market and their dealer program. That's the number to watch going forward. In 2007 it was $7.8 million. In 2006 it was $9.1 million. Here's the explanation of the movement downward:
The decrease in revenues within the Security Segment in 2008 was due to several factors. The majority of the decrease in sales was from decreases in sales of our consumer direct electronic surveillance division, our professional electronic surveillance operation and our machine vision camera and video conferencing operation. Our Vermont personal defense operations sales remain consistent between years. The decrease in sales of our consumer direct electronic surveillance, machine vision camera and video conference equipment operations, and our professional electronic surveillance operation was due to several factors, including the impact on sales of increased competition and the impact of management’s completion of its consolidation of the Security Segment’s electronic surveillance equipment operations from Ft. Lauderdale, Florida to the Farmers Branch, Texas warehouse. The consumer direct electronic surveillance and professional electronic surveillance division had a decrease in sales due to a delay in introducing new product lines during 2008. In the latter part of 2008 sales also decreased due to a reduction in spending by certain of our customers impacted by the deteriorating economy.
I think 2009 will be a real bellwether for Mace. They've got the management in place, they've got a plan, and people are going to expect returns in 2009. They've yet to really be able to leverage their brand. We'll see if they can do that this year.

See you at Booth 5047

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Thursday, March 26, 2009
Sam and I were arguing over who would get to blog about this press release from The Spy Place. I won. What's The Spy Place? It's a security business that's going to start a franchise. Franchisees will do GPS monitoring, document destruction, (and, I'm unclear, but have some kind of security gift shop?) Anyway, the whole shebang will be introduced at ISC West. First: I love the name. Spies are cool. Harriet the Spy was my favorite book in elementary school. I took my kids to the Spy Museum when it opened in DC. There were a few years when I actually wanted to be a spy ... Nice name. And I like franchises. We've reported on a lot of franchises lately, so I'm interested in this trend. I'm really interested in this press release though. The release gives some history of The Spy Place, which has "humble beginnings" in Indiana. There's talk of the "energy" created by this name and how the opportunity represents a "paradigm shift." The final quote is a paradigm shift in setting expectations. What, you think The Spy Place might stink? Well think again. Spokesperson Smock says:
”We packaged it. We packaged it like it has never been packaged before. We wrapped it up, along with our most unique business model and plan, in the most easily recognizable, electrically charged, energy generating way. The Spy Place is sure to become the most recognized name in the security industry, period,” explains Ms. Smock.
You can't keep me away from Booth 5047. See you there, and here's the rest of the release.
The Spy Place Franchising, LLC Offering a Full-Service, Fully-Integrated Security System Debuts at ISC West—Booth # 5047 Las Vegas, NV (April 1, 2009) From its humble beginnings as a security shop in Fort Wayne, Indiana, The Spy Place has developed into a full-service, fully-integrated security system franchise that is being introduced at the International Security Conference (ISC) West, at the Sands Convention Center, April 1—3, according to Tammy Smock, The Spy Place spokesperson. “The Spy Place is geared to become a leading security and surveillance franchise company. The energy created by this name and system are unlike anything in the industry. We are committed to helping entrepreneurs take full advantage of the energy and industry diversity created by The Spy Place,” notes Ms. Smock. “We have all seen successful businesses that service only one aspect of the security or surveillance industry such as GPS vehicle tracking software, mobile document destruction, limited access or lighting. That corporate model can only go so far and is self-limiting. We believe that franchising a system that allows for one business to serve every aspect of the industry is a paradigm shift that will allow this industry to grow and develop,” says to Ms. Smock. “We pride ourselves on being an innovative franchisor utilizing the highest quality training and systems for our franchisees. The Spy Place franchisees will run our exciting James Bond-type retail store complete with the most innovative and exciting spy gadgets. Our unique system and trademarked name, The Spy Place, allow for a panoply of surveillance services far beyond the generalized business model of installation and monitoring, limited access and lighting control. There is no limit as to what our franchisees can do in this industry. In addition to the general business model, our franchisees can also service GPS vehicle tracking, document destruction, vehicle recovery, personal protection, private investigation, computer forensics, and any other niche from within the industry. In essence, the franchisees will be running several different businesses under one name,” adds Ms. Smock. In order to train franchisees, the company will provide a fully-integrated sales training program including “Perception Training” at The Spy Place University in its world headquarters located in Fort Wayne, Indiana. During the two-week course, franchisees will be provided insight into the company’s operating system, along with its business knowledge and leadership. Because of the combined buying power of a franchise system, The Spy Place has arranged for franchise owners to receive preferred pricing from its approved surveillance industry suppliers. What did The Spy Place do for the surveillance and security Industry? ”We packaged it. We packaged it like it has never been packaged before. We wrapped it up, along with our most unique business model and plan, in the most easily recognizable, electrically charged, energy generating way. The Spy Place is sure to become the most recognized name in the security industry, period,” explains Ms. Smock. For additional information on this extraordinary franchise opportunity, please go to www.TheSpyPlace.com .

EMERgency24 launches new site with lead generator

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Wednesday, March 25, 2009
I just got a press release from EMERgency24. They've got a brand new site up and running. The new site features all kinds of educational features and a lead generation function, which should be helpful for dealers. The site actual looks pretty cool, and could serve as a nexus for the many different aspects of the world of security, from end-users to dealers, to AHJs. It's good to see more and more education going on out there. I've blogged about it before a few times.

Feel like poking around the NetVersant case?

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Wednesday, March 25, 2009
Have at it. It's currently making my head hurt, but I think I've pulled out some interesting information. Look for a story on our newswire tomorrow.

Cantronic buys in China

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Wednesday, March 25, 2009
Not a huge deal, but I think it's interesting that Canadian infrared video maker Cantronic has bought into Chinese video management firm AVINFO. IMS is talking about China being a $3 billion surveillance market. I guess Cantronic's trying to get in while the getting's good:
"The combination of AVINFO's network management software and Cantronic's camera products will allow us to offer a complete solution in China's rapidly expanding security and surveillance market," stated James Zahn, president and CEO of Cantronic. "AVINFO has established its software as one of the leading management platforms for monitoring and surveillance, with small and large installations in some 60 Chinese cities. As these cities expand their networks they are more likely to choose a proven software solution with a user interface that their staff has been trained on. With AVINFO, Cantronic has improved its product offering, acquired a growing customer base in China and added talented technical and sales management. Cantronic is now well positioned to achieve its China growth strategy."

Video surveillance is unbiased

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Wednesday, March 25, 2009
There's an interesting article in the Times today about video surveillance being used against police officers, either in vindicating accused individuals or in the process of perjury investigations against officers. I won't get into the specifics of the article, though it's a good read, because what did or didn't happen isn't really relevant. What I find interesting is that video gets us to a place that seems to be harder and harder to find nowadays: the truth. In a litigious society that's fallen in love with the argument at the expense of fact, good video surveillance delivers an unbiased eye and shows us what actually happened, rather than forcing us to rely on memories and explanations. There's real power in being able to see what actually happened. For those who cry "Big Brother" every time another camera is installed, this is yet another argument for more cameras to be installed. People are not watching these cameras in real time. No one is watching what you're doing. But if you're assaulted by a police officer, you can prove it happened. Isn't that empowering for the the little guy in this country who might be worried about being marginalized by a growing government? Isn't making everyone more accountable a good thing? As long as they're used correctly, video cameras offer public protection in a very real way.

Get in the central station source book

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Tuesday, March 24, 2009
It's time for SSN's annual central station/monitoring source book, where we list all the third-party centrals and the services they offer. To get in, all you need to do is fill out this survey: http://vovici.com/wsb.dll/s/3cdcg24684 But do it now, because the DEADLINE IS MARCH 26. Why so soon? Because we've found that no one fills it out after the first week we send announce anyway. And the sense of urgency might actually generate more responses. Plus, everyone's going to be at ISC West after that.

More on the stimulus

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Tuesday, March 24, 2009
I continue to be wary of people who think the stimulus package is going to be a boon for security. Here's another article talking about how ports are likely to use the money. Security isn't what they're concerned about:
The American Association of Port Authorities says more than 200 projects are available for funding to the tune of about $8.5 billion. Projects range from a $100 million lock replacement in the Soo locks to dock wall reconstruction for the Ports of Indiana and numerous dredging and channel maintenance projects around the county.
...
"Ports got a push after 9/11 with port security, but the transportation infrastructure component has really been given short shrift," he said. "There are people on the Hill and in the administration that understand both domestic and international trade is what really helps propel the economy, and if we're going to nurture that business, we've got to make sure the transportation connections are efficient."
Security will be a part of this stimulus, but when they say infrastructure, they mean infrastructure. There's going to be a lot of concrete poured and steel bent because of this stimulus package, but maybe not as much wire pulled and cameras installed as the industry might have hoped.

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