Defense Stocks; Security Threat from Counterfeit Documents

Point Roberts, WA - December 14 , 2010 - Investorideas.com, an investor research portal covering multiple stock sectors including defense and security stocks, presents CFA commentary, Security Threat from Counterfeit Documents, featuring Visualant, Inc. (OTCBB:VSUL) and other key players.

Security Threat from Counterfeit Documents
Lisa Springer, CFA, Equity research analyst
Defense and Security Stocks in this Article; L3 Communications (NYSE:LLL), L1 Identity Solutions (NYSE:ID) , FLIR Systems (NASDAQ:FLIR) , American Science & Engineering (NASDAQ:ASEI) ,OSI Systems (NASDAQ:OSIS), Visualant, Inc. (OTCBB:VSUL)
Counterfeit IDs and currencies can pose as grave a threat to US border security as drug runners and terrorists. When setting up operations in the US, these criminals need to appear legitimate. The way they do this is with counterfeit documents.
Counterfeit IDs are usually created from stolen identities. Identity theft is now the Number 1 concern of US consumers, according to the Federal Trade Commission. . Recent statistics indicate a new victim of this crime every 79 seconds. An independent Gartner study estimated 15 million victims of identity theft and set odds of becoming a victim at 1 in 20.
The costs of identity theft are staggering - estimated at $50 billion annually for US businesses and consumers. Consumers spend more than $5 billion each year trying to undo the damage. The average victim of identity theft spends 40 hours cleaning up the financial mess and suffers $1,200 in unreimbursed financial losses.
Approximately 50% of world trade in illegal identities occurs in the US. An identitystolenfrom a US citizen can be purchased for under $20. Millions of illegal immigrants acquire identities this way, including some criminals. Mexican drug gangs regularly use fake documents to cross borders. A worst case scenario detailed in a PBS Frontline story found terrorists being specifically trained to use counterfeit documents to cross borders. The use of counterfeit documents has become a routine part of the training of Al Qaeda operatives .
A closely related threat comes from counterfeit currency. Most counterfeiting is done by sophisticated criminal gangs, but there is also a considerable body of evidence linking the most dangerous counterfeits, called "supernotes" to hostile foreign governments. Highly accurate $100 and $50 supernotes first appeared on the scene in the late 1980s. During the Bush administration, the US formally charged North Korea with counterfeiting the dollar, a claim since echoed by the Obama administration. The economic threat from supernotes was so pervasive that it triggered the first major redesign of US paper currency in decades.
Fraud detection has evolved into a $76 billion worldwide market attracting both large companies like L3 Communications (NYSE:LLL), L1 Identity Solutions (NYSE:ID) and FLIR Systems (NASDAQ:FLIR) and smaller niche players like American Science & Engineering (NASDAQ:ASEI) and OSI Systems (NASDAQ:OSIS). Most authentication technologies rely on sensor cameras, key cards and scanners to collect and verify data.
An emerging player in this space, Visualant, Inc. (OTCBB: VSUL) , has developed and begun commercializing a patent-pending technology that provides fast, accurate authentication and has low production costs. Spectral Pattern Matching (SPM) technology begins with the premise that all dyes, chemicals and natural pigments possess a unique spectral signature invisible to the human eye but as absolutely unique as DNA or fingerprints. The technology uses a proprietary micro-miniature sensor to illuminate a subject multiple times with changing combinations of colored light. It detects the object’s unique spectral pattern and then matches it against existing databases. SPM can be easily integrated into hand-held or fixed devices and used to instantly authenticate access documents such as passports, driver’s licenses and facility badges as well as financial instruments such as currencies and checks. The technology can even be used to identify illicit substances and authenticate branded products like pharmaceuticals and semiconductors.
To help roll out SPM technology, Visualant recently acquired TransTech, an established national distributor of authentication products serving security and law enforcement markets. TransTech has a 15 year history, a national reputation and a distributor base of over 500 dealers, resellers and integrators. Since acquiring TransTech in June, Visualant has made considerable progress prepping for the market launch of its technology. The company completed its first demonstration unit, which was used to showcase SPM technology at industry trade shows in Atlanta and New York and at meetings in Japan. In addition, Visualant renewed a maintenance contract for staff ID cards with the California Department of Corrections and Rehabilitation in October and won a contract with a major North American defense contractor in November. The contract is to provide upgrades to the employee badge printing system of this Fortune 50 Company and is valued at $450,000.
Through TransTech, the company has already identified a number of lucrative launch opportunities for its technology. One such opportunity is the $4.1 billion law enforcement market for detecting illegal drugs such as cocaine, heroin and methamphetamine. An immense $11.4 billion market opportunity is found in authenticating branded products. Verifying IDs is already a $4.2 billion market and annual sales of systems that detect counterfeit currencies and checks currently exceed $3.5 billion.
In addition to its authentication capabilities, the Visualant SPM technology provides a tool for diagnostics. There is a shift in color that we perceive as humans in medical, agricultural and environmental diagnostics. Visualant intends to license its SPM technology for applications in these non-core areas. With its low cost and form factor flexibility, the SPM technology could provide significant advantages and utility as a diagnostic tool.
Over the next 18 to 24 months, Visualant (OTCBB: VSUL) plans to grow combined revenues from $10 million to a range of $35 million to $50 million by acquiring other high quality authentication product companies complimentary to TransTech. Visualant anticipates building critical mass and a footprint quickly by closing 1-2 such acquisitions per year.
Lisa Springer, CFA -Bio and disclaimer: http://www.investorideas.com/About/Lisa-Springer-CFA/
The author, Lisa Springer is a freelance writer and was compensated for writing this article by Investorideas.com and doesn't own shares of any of the companies mentioned in this article.
About Visualant, Inc. (OTCBB: VSUL)
Visualant, Inc. develops low-cost, high speed, light-based security and quality control solutions for use in homeland security, anti-counterfeiting, forgery/fraud prevention, brand protection and process control applications. Its patent-pending technology uses controlled illumination with specific bands of light, to establish a unique spectral signature for both individual and classes of items. When matched against existing databases, these spectral signatures allow precise identification and authentication of any item or substance. This breakthrough optical sensing and data capture technology is called Spectral Pattern Matching (SPM). SPM technology can be miniaturized and is easily integrated into a variety of hand-held or fixed mount configurations, and can be combined in the same package as a bar-code or biometric scanner. www.visulant.net
Through its wholly owned subsidiary, TransTech Systems, Inc., the Company provides security and authentication solutions to security and law enforcement markets throughout the United States. www.ttsys.com
Contact Visualant, Inc.
Lynn Felsinger, 206 903 1351
lynn@visualant.net
Visit the company profile on Investorideas.com
http://www.investorideas.com/CO/VSUL/
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Visualant, Inc. (OTCBB:VSUL) Featured showcase company on Investorideas.com and related security portals and blogs
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Disclaimer: Visualant, Inc. (OTCBB:VSUL) Featured showcase company on Investorideas.com and related security portals and blogs. Starting Nov 24th, 3 months (4000 per month by third party)