“Homeland Security is too important to be left to the government alone.”

  “Homeland Security is too important to be left to the government alone.”

By Allen R. Gibson www.homelanddefensestocks.com

August 26, 2004
That is the unofficial motto of the “Homeland Security Fund,” says one of the fund’s principals at Paladin Capital Group, Dr. Alf Andreassen.

“Homeland Security is a team sport,” he adds, “and companies must realize that the market is one part government and three parts commercial, and that each market has very different sensitivities.”

Darryl Moody, Senior VP for Homeland Security of Bearing Point Inc. agrees, “This takes a team approach. You need to be willing to work with and understand the point of view and different business models of potential partners. Since 9-11, for example, there has been a convergence of three communities –law enforcement, emergency preparedness and response, and intelligence – that didn’t have much overlap prior to 9-11. Now we realize that no one has the single answer, and we all have to work together.”

Dr. Andreassen points out defense was struggling in the years prior to 9-11. “Over the past 15 years, US force structure and the military intelligence function both suffered serious cutbacks. So real innovation that was relevant to homeland security was being done in the corporate world.”

His partner Lt. Gen. Ken Minihan, a former head of the National Security Agency, saw NSA’s budget shrink 38% in a decade.

“After 9-11 there was a feeling that money would flow into the sector very quickly and that a lot of innovations would take place,” says Andreassen, ”But so much of what was initially needed was filling store shelves for our first responders.”

Now that first responders supply needs are being taken care of, the focus is shifting towards applying new technologies in a cost-effective manner. After all, with over 80% of the nation’s critical infrastructure in commercial, not government, hands, cost-effectiveness is a key requirement.

Cost-effectiveness key for business success.
So for companies that can deliver effective, innovative solutions to security concerns while at the same time reducing costs, the market is booming. One such company is Wave Dispersion Technologies Inc., whose ‘WhisprWave®’ product has been under development for almost ten years, but whose sales have leaped since the product was found to have defense applications.

The WhisprWave floating breakwater has 27 patents either granted or pending, and is the only water barrier in the world built to withstand 100 mile an hour winds and 15 foot seas. The US Navy proved it will do just that when the WhisprWave installation at Naval Amphibious Base Little Creek in Norfolk, Virginia, successfully weathered Hurricane Isabel on September 15, 2003, with the barrier requiring no repairs or even maintenance when the hurricane was over, unlike some of the rest of the base.

WhisprWave was initially developed in response to the serious problem of shoreline beach erosion. The State of Louisiana, for example, is losing an acre of land every 35 minutes! So the state is looking at installing many miles of WhisprWave barrier. The product is attractive to the state not only because of its performance characteristics, but it is also cost effective. A WhisprWave floating breakwater costs one quarter to one fifth of putting a traditional rock breakwater in place, according to WhisprWave founder and CEO Dennis G. Smith, while steel barriers can cost as much to maintain annually as to install.

The 34 sided polygon modules which make up the WhisprWave are made of hi-density, hi-molecular-weight polyethylene – the strongest plastic around. The walls of the WhisprWave are only a quarter inch thick, but it takes 300,000 pounds of pressure to ‘crush to destruction’ a unit. Floating, the whole thing sways out of phase with the waves, by design, to further reduce wave force.

“The defense market is at least equal to the breakwater business. The fact that it was originally designed to withstand the forces of the open ocean is why everyone wants it.” says CEO Smith.

So how did this beach erosion product become a hot defense item? A very well executed Internet marketing strategy and website, says Smith, and a fortuitous convergence of needs and timing.

“Originally, the Navy came to us from our website. The: Kings Bay, Georgia, Sub base needed sign buoys to warn people off when the subs were in port. They thought that our module design would make good security buoys,” he explains.

“Then Naval Facilities Engineering called in August of ’99, and said ‘we have a feeling this might be a good port security barrier.’ So we designed our Small Craft Intrusion Barrier (SCIB), and promptly didn’t hear a thing from them for a long time! Then the DAY the USS Cole was attacked in October of 2000 in Yemen, they called and wanted the buoys. And it took off from there, and of course when 9-11 came, everybody now needs port security barriers. We build barriers now for the US Army, US Navy, US Coast Guard, Hydro Dams – a middle east Kingdom – everybody.”

We asked him what his company learned about the government and defense procurement process that you wish you’d known at the beginning?

“The government is methodical in their approach. So when you think you’ve sold it to them, it’s still a long process until you get a purchase order, much longer cycle than the business cycle, which is about a third as long. If we had debt at the time and thought we were getting a huge order from them, then we might have been at the mercy of our lenders!”

Smith says WhisprWave was lucky in that the government wanted their product, and agencies pushed for a General Service Administration listing for the company and helped them clear the paperwork hurdles. Without that, he says, it would have been an even more difficult process.

Helping companies to deal with the government is a major part of what Paladin does for the companies it invests in. And with former heads of both the NSA and CIA as partners, they can “really get behind and boost a later stage company,” notes Dr. Andreassen.

Where else is new technology making inroads?
Andreassen: “I think a lot in the physical security area, which has been manpower intensive and relatively low-tech for a very long time. We have invested in VistaScape, which is in the business of automating surveillance. It’s a wonderful story of a way to do something which provides better security and at the same time reduces costs.”

Also communications, which was identified as a major problem facing first responders on 9-11, is another arena of intense focus. Companies like Roaming Messenger Inc. and Onscreen Technology Inc. are providing innovative ways to get messages to the right people at the right time. Onscreen makes portable programmable LED signs that can be powered off of any vehicle, and set up in mere minutes to provide highly visible communication in an emergency. Roaming Messenger, meanwhile, puts critical information into a "smart courier" message. The result is a messenger that roams the wired and wireless worlds - from mobile devices, to desktop PCs, to central servers - tracking down decision makers in real-time.

The advantage of going through the arduous process of becoming a defense contractor to the government is that, once you’re in, successful relationships with the military tend to be long-term.

That’s a lesson that United Industrial has learned with considerable success. A few years ago, United starting getting out of the business of refurbishing rail cars and electric trolleys, which was no longer profitable, and started in to the business of unmanned aerial vehicles (UAVs). The transition has paid off. Second quarter sales were up 27% this year to over $109 million, and the company has recently signed a long-term contract to supply support services for new bioweapon detection capabilities on its tactical UAVs for military installations around the world. The five year deal with the Defense Department is expected to be worth $160 million, and underscores just how seriously the military views the threat of bioterror.

Bioterror still a big threat.
Paladin’s Andreassen says that, for him, bioterrorism is the threat we are least prepared for. “The physics is not good, in terms of what you do to respond to it.”

But isn’t a bomb, or nuclear ‘dirty bomb’, a more likely scenario for a terrorist attack than a bioweapon? The arrest in Britain of several Al-Queda plotters with dirty bomb plans was apparently the basis for the our recent heightened threat level and the attack warnings about specific buildings.

Perhaps so, says Andreassen, but “at least with a bomb or even dirty bomb we know how to respond and how to cope. We’ve been training for years to respond to nuclear attacks. Bioterror, on the other hand, is more difficult to cope with, and has the potential to get out of hand.”

Andreassen sees the potential for a plague like the deadly flu epidemic in the early 20th century, either from a bio attack or from natural viral mutation.

With Project Bioshield being signed into law recently, considerable attention is now being paid to the issue, as the United Industrial contracts suggest. Significant concerns remain to be dealt with. Discovering when you’re being attacked, for example, remains difficult, requiring the installation of air and water monitoring equipment in the nation’s major cities and at our bases abroad.

If an attack does happen, the capability of hospitals to cope with the mass of patients is also in doubt. And if the attack is from a ‘weaponized’ virus, we could be in big trouble, simply because capable scientists today can create new pathogens that are treatment resistant, and it’s not possible to create vaccines or drugs that will be effective against every possible strain of bioweapon.

So a growing focus of research is after-the-fact treatments for infected people.

Mr. James A. Joyce is the head of Aethlon Medical, Inc. whose blood purifying device is being developed for chronic diseases like HIV, but who is now exploring its use as a treatment countermeasure against biological weapons. Aethlon recently entered into an agreement with the National Center for Biodefense, which has been established at George Mason University, to develop its treatments for battlefield and civilian defense.

“I think companies who are going to be successful are going to be developing treatments that augment or mimic the immune function, and are effective against multiple pathogens. That increase the production of T cells, for example, or, as in our case, a product that has benefits like an artificial lymph node; clearing viruses from the blood before cells and organs can be infected,” says Joyce.

The National Center for Biodefense is headed by one of the world’s foremost experts: Dr. Ken Alibek; whom Joyce says is supportive of Aethlon’s technology. Alibek has published his successful use of a similar viral filtration system, in fact, that saved the life of a colleague who’d been accidentally exposed to a tremendously deadly bio-weapon, while Dr. Alibek was the head of the Russian Bioweapons Programs.

“So he’s seen this approach work.”

Which is exactly what the companies who are successfully inserting themselves into the homeland security space are all striving for: approaches that work!

Allen R. Gibson

With additional reporting by Muphen R. Whitney.

About the author:

HomelandDefenseStocks.com includes a growing list of public companies in the sector. Click here for a partial list of companies involved in homeland defense and security technology and solutions in Airport Security, Biodefense, Biometrics, Defense, Internet Security, Integrated Security, Military, Border and Port Security.

www.InvestorIdeas.com/Companies/HomelandDefense/Articles/StockList.asp
For more information contact:

Dawn Van Zant / Trevor Ruehs

Muphen Whitney



Toll free: 800-665-0411

Email: dvanzant@HomelandDefenseStocks.com
truehs@HomelandDefenseStocks.com MWhitney@HomelandDefenseStocks.com

 dawn van zant

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