Electronic Control Security, In (EKCS) research, news, and more from GeoInvesting

Company description

Wed, 30 Nov 2016 21:25:40 GMT

ECSI is recognized as a global leader in perimeter security and an effective quality provider for both the Department of Defense and Homeland Security programs. The Company designs, manufactures and markets physical electronic security systems for high profile, high threat environments. The employment of risk assessment and analysis allows ECSI to determine and address the security needs of government and commercial-industrial installations. The Company has teaming agreements with major system integrators in both the United States and overseas to support the installation and aftermarket. For more information on ECSI and its customers, please visit www.ecsiinternational.com.

Research

Mon, 03 Oct 2022 14:02:52 GMT

Electronic Control (OOTC:EKCS) a leading provider of electronic security system technologies to the government and private sectors announced Q4 2022 results:

Q1 2022 sales of $279,000 vs $349,000 in the prior year period
EPS of $0.01 vs $0.01 in the prior year period

It appears that EKCS is facing some significant challenges regarding its potential involvement in its African projects due to political roadblocks, which was one of the caveats that we had discussed in prior updates.

"...the Company’s two major projects previously reported in Africa have been delayed due to local political issues as well as the pandemic. Both projects are still being developed; however, we have serious concerns of if and when these projects will move ahead based on the current political and international situation."

Research

Wed, 22 Dec 2021 17:44:07 GMT

Electronic Control (OOTC:EKCS) ($0.15; $2.4M market cap), a leading provider of electronic security system technologies to the government and private sectors, issued an update on progress with “Ashanti Port Services Limited (APSL) in Securing the Integrated Logistical Terminal in the Republic of Ghana.”

Some highlights from the release:

Seems like revenue has begun with consultation services for the project
Established an in-country engineering partner and in final stages of securing 750,000 sq ft facility
Obtained an LOI (letter on intent) from EXIM Bank in the amount of $83.7 million

A subtle takeaway from this development is that even though the bank loan is an LOI, the news still shows the ASPL project may be close to commencing, and related contracts may be finalizing. As we mentioned in the past, we believe the funding for the project was going to be the biggest obstacle to legitimize EKCS’ participation.

We feel we are one step closer to alleviating that risk. Although we would not consider this to be huge news, sometimes the stock market is a game of poker, and this could be a small tell for more substantial developments later. We will continue to approach the story as if it will play out in our favor.

Research

Tue, 16 Nov 2021 18:06:25 GMT

Electronic Control (OOTC:EKCS) ($0.45; $12.3M market cap), a leading provider of electronic security system technologies to the government and private sectors announced Q1 2022 results:

Q1 2022 sales of $132,830 vs $155,522 in the prior year period
Net loss of $0.01 vs loss of $0.00 in the prior year period

We continue to wait on updates of LOI’s and MOU’s to convert into contracts, qualifying factors which may have to occur, such as the company and/or projects receiving financing to carry out the projects. We want to stress that EKCS is a very speculative play.

Research

Sun, 24 Oct 2021 04:00:00 GMT

Electronic Control (OOTC:EKCS), a leading provider of electronic security system technologies to the government and private sectors announced it has signed a distribution agreement with Tamas Projects in the United Arab Emirates.

“We’re pleased to welcome TAMAS PROJECTS as our exclusive distributor for the Gulf Cooperation Council (GCC) and Egypt to provide our core products and services,” said Arthur Barchenko, Electronic Control Security, Inc.’s CEO. “With a long history of success in promoting products and services to governmental and industrial customers in the Middle East, TAMAS PROJECTS brings to Electronic Control Security, Inc. a valuable network of potential new business.”

ECKS did not provide detailed information about the agreement, and while we were able to find information on TAMAS via their website, they have yet to list any relationship with EKCS.

Research

Mon, 16 Aug 2021 04:00:00 GMT

Electronic Control (OOTC:EKCS) ($0.45; $12.3M market cap), a leading provider of electronic security system technologies to the government and private sectors announced Q4 2021 results:

Q4 2021 sales of $527,729 vs no revenue recognition in the prior year period
EPS of $0.02 vs loss of $0.02 in the prior year period

Surprisingly, the company’s revenues for 2021 came in at $829,389, capped off by the strong fourth quarter, vs. $619,586

While these results obviously portray some great news, we still do not have a clear direction on when various new projects secured by LOI’s and MOU’s will actually convert to and become enforceable contracts. However, management continues to affirm that they will begin generating revenues from these projects in fiscal 2022, which started in July..

Our assumptions are that in order for various LOI’s and MOU’s to convert into contracts, qualifying factors which may have to occur, such as the company and/or projects receiving financing to carry out the projects. We want to stress that EKCS is a very speculative play.

Research

Tue, 03 Aug 2021 14:13:49 GMT

Electronic Control (OOTC:EKCS) ($0.50; $13.4M market cap), a leading provider of electronic security system technologies to the government and private sectors, announced it has entered into a teaming agreement with Gets Systems, to market and sell their line of radar and telemetry systems.

Gets Systems, in joint cooperation with ECSI, will release the MADE IN USA product line of cost-effective, superior-quality Radar and Telemetry Systems as a welcomed addition to our advanced perimeter detection systems...

...Arthur Barchenko reported that ECSI will market the proprietary line of Radar Systems to government agencies within the Departments of Defense, Energy and Justice as well as the private sector, offering added safety & security at facility perimeters by detecting and tracking approaching drones, vehicles and pedestrians.

The company has a lot of irons in the fire, but we are still uncertain of how they're going to finance all of their projects and specifically how they intend to market this new product line.

Research

Mon, 28 Jun 2021 15:47:08 GMT

Electronic Control (OOTC:EKCS) ($0.55; $14.5M market cap), a leading provider of electronic security system technologies to the government and private sectors, last Friday announced Q3 2021 results (ending March 31, 2021):

Sales of $301 thousand vs $695 thousand in the prior year
Net loss of $209k vs loss of $61k

As expected, the numbers for this quarter do not portray the potential growth story of the company. As we recently mentioned, the company looks like it is on its way to executing on transformative contracts that are slated to begin in calendar Q4 2021 (ending June 30, 2021). At this point, our main concern is that these contracts are still memorandums of understanding (MOUs) that need to be finalized.

Research

Wed, 02 Jun 2021 20:28:12 GMT

Electronic Control (OOTC:EKCS) ($0.59; $15.7M market cap) - In February 2021, EKCS, a leading provider of electronic security system technologies to the government and private sectors announced it had entered into a teaming agreement with Ashanti Port Services Limited for a major multi million dollar border project in North Africa. Yesterday the Company provided an update on the progress of the project.

EKCS has obtained a 15% equity stake in Ashanti Port Services Limited and CEO Arthur Barchenko has accepted a position on the Board of Directors to help with the planning and implementation of the project.

Ashanti also obtained a letter of interest from EXIM Bank in the amount of $83.7 million with a 14 year payback term to fund the project.

It appears that the project is slated to start in the fourth quarter of this year.

For more color on the project, this source discusses the project approval.

Research

Thu, 11 Mar 2021 19:05:36 GMT

Electronic Control (OOTC:EKCS) ($0.66; $17.4M market cap) is a leading provider of electronic security system technologies to the government and private sectors. Yesterday, during regular market hours, EKCS announced that it entered into a binding Memorandum of Understanding (MOU) with Ashanti Port Services Limited to secure the Boankra Integrated Logistical Terminal (BILT) in the Republic of Ghana.

“BILT, which is strategically located near Kumasi, was initiated by the Ghana Shippers Authority (GSA) and the Ghana Ports and Harbours Authority (GPHA) in the early 1990s to create a dry port as an extension to the Tema Port. is to be developed on a 413-acre parcel of land located 27 kilometers from Kumasi in the Ashanti Region which is located in the southern portion of The Republic of Ghana and will support the import and export of agricultural, petroleum, lumber and industrial products for The Republic of Ghana as well as three (3) land locked countries; Mali, Burkina Faso and Niger.”

CEO of EKCS Arthur Barchenko stated:

“that this is one of the most exciting opportunities that the company has ever been involved with, since it is not only a project, but a thirty (30) year National program for the Republic of Ghana affording long term opportunities.”

Keep in mind that this development is only an MOU and not a contract award. Regardless, we believe this program is separate from the 5 year multi phased program to secure the border of a North African country, for which the company recently announced a phase one contract award that is estimated to generate up to $85 million in revenues. You can read more about that project here.

Please note that while it is great to see that the company is making significant progress towards resurrecting operations that have been dormant for several years, we still need to question how the company will fund its new growth opportunities. We are hoping that the terms of the contract will provide some type of funding support through favorable payment terms.

Research

Fri, 26 Feb 2021 19:33:21 GMT

Electronic Control (OOTC:EKCS) ($0.55; $14.5M market cap), a leading provider of electronic security system technologies to the government and private sectors announced Q2 2021 results:

Sales of $261 thousand vs $303 thousand in the prior year
Net income of $162k vs loss of $22k

The numbers for this quarter do not tell the current story of the company. As we recently mentioned, the company won a transformative contract this month. The 10-Q discusses the company’s current position:

Present Position

In January, EKCS announced its engagement with Alpha-Innomed Pte Ltd., a leading-edge data mining company with offices in Singapore and Switzerland, to identify and engage with powerhouse distributors and marketing partners in the Australian and Greater Asian Region for Water Infrastructure Sensing Equipment (WISE®), EKCS’s new advanced real-time water contamination detection system.

Also, in January, EKCS has engaged with Nadicon Solutions, an Athens, Greece-based marketing services company, to introduce our substantial perimeter security product offerings to government and military organizations, as well as corporate and educational facilities and campuses, in countries throughout Europe, southeast Asia, the Middle East, and South America. Nadicon brings to Electronic Control Security, Inc. a valuable network of potential new clients. We expect this expanded coverage to significantly increase our market opportunities in the years ahead. This will minimize our dependency on the US government sectors.

Earlier this month, EKCS entered into a Teaming Agreement for a five (5) year multi-phased program to secure the border of a major border project in a North African country. Phase one (1) of this project is estimated to be $85M with shipments scheduled for fiscal 2022 and on.

The company has strong business relationships with a number of prime contractors under the United States Air Force FPS4 Program valued at some $900 million dollars for security system upgrades over five years. There is no assurance as to when this program will become operational due to the Pandemic.

Research

Fri, 19 Feb 2021 05:00:00 GMT

Electronic Control (OOTC:EKCS) ($0.49; $12.9M market cap), a leading provider of electronic security system technologies to the government and private sectors, announced during the trading day yesterday that it has entered into a teaming agreement for a major multi million dollar boarder project in North Africa.

We issued a premium tweet when the news crossed:

Comments from management:

“some seven (7) years ago an NDA was entered into between the company and the prime contractor. Following that, we devoted a great deal of time assessing the terrain and environmental concerns in order to prepare preliminary designs, bills of material and budgets.

During the past seven (7) years of planning and development we addressed the design, engineering, manufacturing,integration, factory acceptance testing, field testing and training in the maintenance and operation of the technologies to secure a nation...

...now that the project is ready to move ahead a formal teaming agreement has been entered into between the parties for a five (5) year multi-phased program to secure the border of the country. Phase one (1) is estimated to be potentially up to $85M with shipments scheduled for fiscal 2022 and on.”

This contract is extremely significant given the company’s market cap is still only $13 million even after yesterday's strong move.

The stock shot up to $0.83 at its highs, up over 700% in yesterday's trading session before pulling back to mid $0.30’s and finally settling in near $0.50. We believe the stock traded off its highs for the following reasons:

The press release mentions shipments related to the contract will begin in fiscal 2022, and investors may be unaware that the company is currently midway through its fiscal 2021. Fiscal 2022 begins in July.
The market may be questioning if the full $85 million solely pertained to EKCS. Also, the contract says estimated to be potentially up to $85 million, so the exact amount is a little vague.
Investors may be questioning if the company will have to raise funds to execute the contract

After further due diligence, we believe that the potential of the $85 million is their portion of Phase 1 of this North African border security project. Furthermore, even if the contract is significantly less than the $85 million, it will still be significant for the EKCS given they have had TTM sales of about $1 million coupled with such a small market cap.

If the stock traded at 1x this potential revenue, the price equivalent would be near $3.25 per share. While we do not know what the margins will be on the contract, it's worth noting that EKCS has spent the past several years restructuring its business so it would attain healthy margins once its weakened business outlook improved.

Also, it should be considered that this a 5 year multi-phase project, so we would expect the company to continue to receive additional work in the form of maintenance and/or other ongoing services and products congruent with those of Phase 1. Clarity is obviously needed for Phases 2 through 5.

All and all, we view this as a very positive development which gives increased visibility and the potential to achieve consistent growth over the next several years, which we believe could lead to significant increases in the company’s valuation multiples. We will continue our due diligence into the project and contract.

Research

Fri, 29 Jan 2021 17:51:49 GMT

Nadicon is a Greek based marketing services company and will help introduce ECSI’s substantial perimeter security product offerings to government and military organizations, as well as corporate and educational facilities and campuses, in countries throughout Europe, southeast Asia, the Middle East, and South America.

“We’re pleased to welcome Nadicon as a sales avenue for our core products,” said Arthur Barchenko, Electronic Control Security, Inc.’s CEO. “With a long history of success in promoting products to military and industrial customers globally, Nadicon brings to Electronic Control Security, Inc. a valuable network of potential new clients...

..We expect this expanded coverage to significantly increase our market opportunities in the years ahead. This will minimize our dependency on the US government sectors.”

Research

Wed, 27 Jan 2021 05:00:00 GMT

Electronic Control (OOTC:EKCS) ($0.09; $2.7M market cap) , a leading provider of electronic security system technologies to the government and private sectors, announced Q1 2021 results. The company's operations continue to be negatively impacted by government project delays caused by COVID-19. However, the shareholder letter is worth a read as it highlights some of the recent positive developments that we have discussed over the past month.

See page 12 of the quarterly report for the full letter.

Research

Wed, 30 Dec 2020 05:00:00 GMT

Electronic Control (OOTC:EKCS) ($0.06; $1.5M market cap), a leading provider of electronic security system technologies to the government and private sectors, announced the launch of its WISE®Advanced Water Contamination Detection System.

Being that this is the first press release in over 4 years from the company, we wanted to just provide the full text:

As a valued addition to its comprehensive portfolio of facility security and control systems, WISE® can detect and alert users to potential biological and/or chemical water contamination issues in their facilities on a real-time basis, and can shut off water flows, or redirect water to a filtered path, until appropriate remediation steps are taken.

“We believe the WISE® system is particularly timely, given the environment we’ve been living in since early this year,” said Arthur Barchenko, CEO. “Buildings such as offices, schools and hotels are especially vulnerable to water contamination issues after having been closed for a period of time due to COVID-19. The stagnant water systems have created ideal breeding grounds for undesirable biological growth.”

EKCS has also identified that medical facilities can benefit from WISE®, with their ongoing and substantial need to monitor and control water system issues.

“Hospital buildings represent a particular challenge for controlling infection, given the vulnerable population and the infrastructure associated with these facilities,” Barchenko continued. “WISE® now gives the hospital a fighting chance by identifying water-related infection problems in real-time, so they can be addressed before they become expensive, dangerous and potentially litigious issues.”

EKCS is currently engaging with distributors and marketing concerns worldwide to disseminate its WISE® technology.

We remain long EKCS and the stock continues to be a very speculative selection on our Micro-cap Run to One portfolio. The company's operations have been challenged by to COVID-19 from delays in government projects the company was bidding on. The new product launch is certainly interesting and something we need to dig into. It is good to see that the company is still fighting and trying to find ways to generate revenue during difficult times as it waits for its core business to resume growth.

Research

Fri, 20 Mar 2020 04:00:00 GMT

Q2 2020 Results

Sales of $304k vs $514k in the prior year
Net income of $26k vs $29k in the prior year

Research

Wed, 18 Dec 2019 05:00:00 GMT

Electronic Control Security Inc (OOTC:EKCS) (Defense/Homeland Security) announced Q1 2020 results with sales down 8% versus the prior year and a small operating loss vs a small operating profit in the prior year. You can read the full 10-Q here and our past research coverage notes here.

As has been the case since we disclosed a position in EKCS in July 2017, we don’t mind being patient for the long term to see if management can find a way to build business momentum as opposed to “blocking and tackling”. While we do like that that management is doing what it can to fund the company through their personal capital and short-term loans, we see growing without actually raising equity to be one of the challenges EKCS faces going forward.

Research

Wed, 09 Oct 2019 14:21:07 GMT

Electronic Control (OOTC:EKCS) ($0.07; $1.2M market cap), a company that designs, develops, manufactures, and markets technology-based integrated security solutions, released its Q4 and full year 2019 earnings update:

Full year 2019 sales $1.79 million vs $0.98 million in the prior year
Full year EPS of $0.01 vs a loss of $0.01 in the prior year
Q4 2019 sales of $358,325 vs $463,796 in the prior year
Q4 net income of $22,281 vs $135,301 in the prior year

While full year results are strong, the company’s Q4 results were down versus the prior year. Overall, we are still pleased with the progress management has made over the last few years to stabilize the business, especially in gross margins which have benefited from changes in how the company bids for government contracts. The company saw a significant increase in gross margins (67.9% vs 55.9%) and expects to remain profitable for 2020.

However, the business is still project-based and the backlog of $700,000, down from, $835,000, will be depleted in the next 6 months. New contract wins and follow-on orders will remain the key for future growth. We'd also like to see the company gain success in securing new business outside its legacy perimeter security focus, which is why we are excited to follow their progress in drone security initiatives mentioned in the quarterly update letter to shareholders.

Shareholder Letters

Wed, 09 Oct 2019 12:58:44 GMT

Research

Fri, 09 Aug 2019 15:28:52 GMT

Q3 sales of $583,528 vs $195,896 in the prior year
Q3 gross profit of $244,192 vs a loss of $27,404
Q3 net income of $20,851 vs a loss of $153
Nine month sales of $1.4 million vs $0.52 million with EPS of $0.01 vs a loss of $0.01

In early June we highlighted the company’s six month results, stating that the key would be maintaining its Q2 2019 run rate.

While the company unfortunately did not break down its third quarter results in its new 2019 nine months results letter, we were able to back them out.

Q3 sales did come in slightly sequentially higher than Q2. However, Q3 net income did not follow suit. Overall, it looks like the company is moving in the right direction.

One concern is that EKCS noted an extension to one of the programs which was expected to contribute to 2020 fiscal results. It now looks to be pushed to 2021. It is unclear what type of impact this will have because management talks about new projected orders expected to close over the next 6 months. They believe these orders will have a positive impact on both sales and profits for 2020 and 2021.

All in all, it is nice to see the company sending updates to shareholders in a more timely manner than in the past.

We remain long EKCS and the stock continues to be a very speculative selection on our Micro-cap Run to One portfolio

Research

Wed, 05 Jun 2019 17:11:00 GMT

Electronic Control (OOTC:EKCS) ($0.08; $1.9M market cap) designs, develops, manufactures, and markets technology-based integrated security solutions. Yesterday, we highlighted the Company’s fiscal 2019 6 month results. We were able to obtain first quarter 2019 financials and wanted to provide further clarity on the strength of the company’s Q2 2019 quarter.

Q1 2019 sales were $336,915 vs $166,557 with net income of $11,994 vs a loss of $92,404
Q2 2019 sales $513,726 vs $162,380 with net income of $126,253 vs a loss of $201,955 and EPS of $0.01 vs loss of $0.01

It is still unclear if the Q2 2019 revenues will become the company's new run rate, since the company’s revenues and gross margins have historically been lumpy. While gross margins have also been lumpy, it is encouraging to see that they have been improving on a year over year basis.

Margin improvement was an area we highlighted in our initial report.

Q2 2019 gross margins were 71% vs 58% in the prior year
Q1 2019 gross margins were 42% vs 24% in the prior year

The key will be to determine if these Q2 2019 results are an outlier or the possible new run rate. When we first interviewed management, they discussed a new software offering which obviously would have bigger gross margins. We will try to determine if the software was the cause for the boost in Q2 gross margins.

Research

Tue, 04 Jun 2019 15:33:34 GMT

Electronic Control (OOTC:EKCS) ($0.06; $1.4M market cap) designs, develops, manufactures, and markets technology-based integrated security solutions. The company issued its latest shareholder letter with results for its six months ending December 31, 2018 (first 6 months fiscal 2019):

Sales of $850,641 vs $328,937 in the prior year
EPS of $0.01 vs a loss of $0.01

“Management is pleased to report that during the first six months of Fiscal 2019, the Company continued to increase sales, improve cash flow and strengthen its balance sheet. As of December 31, 2018, the Company’s backlog was $835,000. Approximately 80% of this amount represents product to be supplied to our Nuclear Power Stations and Department of the Air Force customers...

...New contracts and purchase orders projected to close during the January 1, 2019 to June 30, 2019 period are expected to materialize based on the funding of numerous government projects. Management expects this will have a positive impact on both sales and profits in both Fiscal 2019 and 2020.”

The company letter shows a “3 month ending” financial table which we believe should state 6 months ending. We will email the Company to verify that indeed that is a 6 month financial table as well as ask for Q1 results ending in September

Research

Tue, 19 Feb 2019 14:50:17 GMT

Electronic Control (OOTC:EKCS) ($0.07; $1.7M market cap) designs, develops, manufactures, and markets technology-based integrated security solutions. The company issued its latest shareholder letter with results for the year ending June 2018. Revenues were down to $988,629 versus $1.2 million in the 2017 period, however, the company was able to improve gross margins to 55.9% from 20.3% and continues to execute on filling its backlog. We continue to wait for a new catalyst that will propel revenues and profitability. The company mentioned that as of July 1, 2018 the backlog was approximately $1.0 million and that it expects to fill the backlog in the first 6 months of fiscal 2019. EKCS remains a high risk speculative position.

You can read the cover letter below, and we will be posting the accompanying results later today.

Research

Mon, 09 Jul 2018 15:47:42 GMT

Electronic Control (OOTC:EKCS) ($0.09; $2M market cap) designs, develops, manufactures, and markets technology-based integrated security solutions. The company sent its year-end shareholder letters with fiscal 2017 results and 2018 outlook (which ended June 30, 2018). For fiscal 2017 the company reported $1.2 million in sales with a loss of $0.03. The company states it expects to be profitable for fiscal 2018. We need to contact management for more color on top line growth. Below is a snapshot from the shareholder letter:

Research

Thu, 01 Feb 2018 17:31:29 GMT

EKCS Taking Steps To Coming Out From The Dark

As a shareholder of Electronic Control Security Inc. (PINK:EKCS) ($0.09; $1.1M market cap), I just received a shareholder letter from the company. Although EKCS has not uploaded the letter to OTCmarkets.com, we have made the letter available here. You may recall from our previous research that EKCS went dark after U.S. government contracts it had won (but were not funded by the Government) were never executed.

In the letter, the company touches on the following points:

History with the government contracts
Update on 2016 financials
Update on 2017 financials
Update on 2018 growing backlog
Retained a respected auditor (ranked 11) to bring the company’s financials current

The letter marks the first communication from the company since the last contract release in July of 2016. The last annual update was given in September of 2015, via its annual report.

The current letter to shareholders provides 2016, 2017 and first half 2018 (year ends June 30) financial results:

Fiscal 2016, $513,048 in sales with a net loss of $853,595
Fiscal 2017, $1.1 million in sales and projected profit of $75,000
First 6 months 2018, the Company states a shippable & profitable backlog of $2.25 million with 6 months left to go in fiscal 2018.

Background On Our Coverage

In August 2017 we added Electronic Control Security to our Run to One MockPortfolio when the stock was trading at $0.03. EKCS is recognized as a global leader in perimeter security and an effective quality provider for both the Department of Defense and Homeland Security programs. As we stated in our original note, EKCS was once a GeoSpecial back in 2010. At that time, we purchased shares of EKCS due to the Company being selected as a primary contractor for the United States Air Force (USAF) IBDSS project. Second, it was involved with Lockheed Martin Cp (NYSE:LMT), as a subcontractor in an Anti-Terrorism Force Protection initiative (ATFP) for U.S. naval bases worldwide. Shares had a nice run during its tenure moving from $0.17 to a high of $0.72 before running into some government contract problems which brought shares back down.

The Company went dark in 2015, no longer issuing filings of any sort and only occasionally issuing a press release from time to time.

Fast forward to November 2016, we once again came across EKCS and added it to our Border Securityscreen where we highlighted a number of stocks that could benefit from the U.S. efforts to protect its borders. The company had announced several contracts at that time. After several months of no news flow, the Company once again announced a few contract wins.

The stock saw a little uptick on the contract news then once again fell doormant. Over the last several days, it has began trading up a bit once again. We believe this recent uptick may be due to the shareholder letter that has been sent to current shareholders (not published on the internet).

Closing Comments

We are certainly encouraged by the theme of the letter regarding communicating with investors and getting back on track as a reporting company. And especially encouraged with the company forecasting profitability for 2017 and 2018. As we stated before, while we can still only go off past filings, it seems the company has a favorable capital structure with only about 20 million outstanding shares. We look forward to the company updating its financials as well as its plan to execute on filling its backlog.

Caveats:

Very Illiquid stock
They use “shippable backlog” in the letter when discussing first half 2018 progress, it is unclear to us what exactly “shippable backlog” means. For example, we have to be cognizant that the company may need to raise funds to fill its backlog, although we do not feel the required funding will be significant.
No current filings (However, Company plans to become a reporting company once again)
Audit for 2016 and 2017 have not been completed yet

Shareholder Letters

Thu, 01 Feb 2018 17:28:01 GMT

Research

Wed, 09 Aug 2017 15:26:35 GMT

**Micro-cap Run to One Mock Portfolio

We recently added $EKCS ($0.03) to our Run to One MockPortfolio. EKCS is recognized as a global leader in perimeter security and an effective quality provider for both the Department of Defense and Homeland Security programs.

EKCS was once a GeoSpecial back in 2010. At that time, we purchased shares of EKCS due to the Company being selected as a primary contractor for the United States Air Force (USAF) IBDSS project. Second, it was involved with $LMT as a subcontractor in an Anti-Terrorism Force Protection initiative (ATFP) for U.S. naval bases worldwide. Shares had a nice run during its tenure moving from $0.17 to a high of $0.72 before running into some government contract problems which brought shares back down.

Fast forward to November 2016 when we once again came across EKCS and added it to our Border Securityscreen, where we highlighted a number of stocks that could benefit from the U.S. efforts to protect its borders. The company had announced several contracts at that time. After several months of no news flow, the Company once again announced a few contract wins. While there are no recent filings, per the information available to us, it seems the Company has a favorable capital structure with roughly 20 million fully diluted shares outstanding.

Caveats:

No current filings
No clarity on the break-even point of sales

Conference Call Notes

Mon, 12 Apr 2010 04:00:00 GMT

EKCS held a conference call last week. We view this as possible clue that the company may finally be on the cusp of a turnaround as this is the first conference call EKCS has hosted that i can recall.

"Arthur Barchenko, President and CEO, stated that the Company's marketing and sales objectives, implemented in Fiscal 2008, are now producing the results that were anticipated. Those objectives were to change the direction of the Company from a prime contractor on Department of Defense programs to a technology and support service supplier to the large system integrators and selected end users. Arthur apprised call participants that the Company is now showing strong profitability through improved sales and gross margins which afford positive cash flow. He also outlined the Company's current marketing activity as well as its pipeline of proposals (approximately $53 million), current committed but unreleased backlog ($7.1 million), and $3.5 million which have been released."

Although Arthur was not more specific with regards to profitability, we view this is a good start to opening up communication with shareholders.

Arthur also stressed a continued emphasis on shoring up an already improving balance sheet and not diluting EKCS stock.

Special Situations

Tue, 09 Feb 2010 05:00:00 GMT

On February 5th, 2009 the GeoTeam coded Electronic Control Securities (OTCBB:EKCS), In general, GeoSpecials are stocks that possess characteristics that may positively influence their prices.

We originally purchased shares a while ago as a result of the company’s endeavors at the time. First EKCS announced that it was selected as a primary contractor for the United States Air Force (USAF) IBDSS project. Second, it was involved with Lockheed Martin Cp (NYSE:LMT), as a subcontractor in an Anti-Terrorism Force Protection initiative (ATFP) for U.S. naval bases worldwide. While the Lockheed contract is still going strong, the IBDSS contract did not pan out as the company had hoped. Consequently, my investment failed to yield any return, putting me under water on EKCS years later. Consequently, we recently had a brief conversation with the company’s President and CEO, Arthur Barchenko, to inquire into why the contract did not meet expectations. He explained that the problem originated from the company’s business model in which EKCS acted as a primary contractor for government projects. Four main problems resulted from this:

The original IBDSS contract, which has expired, was originally slated to address 34 USAF bases, but in the end it only addressed 5 over five and a half years.
It was difficult to compete against larger competitors for government contracts due to the company’s smaller size.
Even when awarded contracts, turning a profit from them could be unpredictable. As a primary contractor, EKCS was involved with the installation of equipment. These are tasks that can quickly erode margins if they were improperly priced at the time of bid.
The business model was totally dependent on government contracts

About two years ago management decided to shift its business model away from being a primary contractor for government projects. Instead, it chose to become a technology supplier and subcontractor to giants like Lockheed Martin Cp (NYSE:LMT), Raytheon Co. (NYSE:RTN) or Northrop Grum Hol Co (NYSE:NOC). This quasi “partnership” model gives EKCS access to a much larger pool of government and commercial contracts. For example, the company is a technology supplier to the prime contractors on the FPS2 USAF program and has received hundreds of thousands of dollars for their equipment. Also, the company no longer installs equipment for its subcontracted work. It just sells support services and equipment, which reduces its risk and should result in higher sustainable margins. More importantly, EKCS is developing solid relationships with quality firms it intends to grow with.

The fruits of its efforts may be paying off. Albeit minimal, EKCS just reported its first profitable quarter in 13 quarters.

Fiscal Yr. Ends In June	2nd Quarter Dec. 2010	2nd Quarter Dec.2009	Period Change
GAAP Revenue	$1.6 million	$2.4 million	-33.3%
GAAP EPS	$0.01	$-0.03	n/a
Tax Rate	0.00%	0.00%	n/a

Source: 10Q Filing for the period ended December 31, 2009.

Although sales declined due to its gradual shift away from primary contract work, these results show that the company’s new focus is reaping rewards on the margin front. If EKCS can devise a plan to increase sales, then we could have the best of both worlds. And this appears to be the case, at least for the near term. The company will fill contracts during the second half of the year totaling at least $1.5 million compared to about $1 million in the 2008 comparable period. (Year ends in June). Also, it is has submitted proposals on major projects for the Department of Defense facilities and numerous nuclear power stations in the United States and South Korea valued at approximately $2,250,000. A decision relating to these proposals is expected during the third quarter of fiscal 2010.

Still, there are a few flies in the ointment:

A recent 10Q states, “In January 2006, the Company raised net proceeds of $831,000 from the private placement of $1 million in principal amount of Senior Secured Convertible Debentures. The Debentures had a term of three years and are convertible at the option of the holder at any time into shares of the Company's Common Stock at a conversion price of $.75 per share, subject to certain adjustments. The principal owing on the debentures became due as of January 11, 2009 but was not repaid. The Company has been making payments to the Debenture holders pursuant to a monthly payment program based on free cash flow plus 8% interest. The company has continued principal payments to the Debenture holders proportional to the amount outstanding for each which amounted to $87,500 in aggregate for the six months ended December 31, 2009 leaving a balance due of $365,000 as of such date. However, no assurance can be provided that the Debenture holders will not resort to legal process and/or attempt to foreclose on their lien.”
Electronic Control Securities’ business has been uneven, so the company will have to prove to investors that its new model can deliver consistent results.
Contract delays are always a risk when dealing with government projects.

Given some of the existing uncertainties that add a significant level of risk, we have coded EKCS as a low tier GeoSpecial. However, the renewed focus on a higher quality contract pipeline and the fact that the stock is selling under its book value per share of $0.28 may offer a significant opportunity for risk tolerant investors. (Stock currently has wide Bid/Ask Spread)