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zyl read this .all you need to know

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    Week’s Special
    ZYLOTECH’s MARKET LEADING TECHNOLOGIES DESERVE ATTENTION
    By Jenny Prabhu and Gerald Stanley

    Zylotech is an impressive technology company on the verge of a major breakthrough ino company making orders. The board is prestigious, highly skilled, long serving and tenacious. The company has managed to remain debt free since it joined the industrial boards.
    It is under valued in the light of its potential and can be seen to offer a significant opportunity.
    While its natural major customers are Defence departments, Civil Defence organisations, other government organisations and local councils – notoriously slow in making decisions - a re-rating of Zylotech is likely to begin after this week’s announcement of a teaming deal with Fujitsu.

    Zylotech, following its acquisition of Sonacom last year, offers virtually the only non military unclassified acoustic technology in the world for long life, solar powered intelligent unmanned surveillance of coastal and other sensitive marine areas – like the Great Barrier Reef, where the no go zone has just been lifted to around 30 pct from 5 pct of the total reef Marine Park - as well as hazardous areas.

    Zylotech’s other area of expert technology is in wireless based IP (Internet Protocol) video surveillance solutions for local governments and police and commercial organizations. Their first major local government order, with video surveillance cameras installed integrated with industrial Wireless LAN technology was at Dubbo local council, and it has been an outstanding success.
    Every misdemeanor from drunken or loutish behaviour on streets to rubbish dumping to serious crime has been dramatically reduced in the CBD area according to police.

    While Zylotech has been modestly un-profitable in some years, it is not until sales volume overtakes the significant R&D spend that it will be solidly profitable – although this may not be too far away.

    ZYLOTECH – A SNAPSHOT

    Zylotech Ltd had its origins in 1996 when, along with QuikTrak, it was floated out of Chris Kyriakou’s stable of mining companies under the Walhalla Mining Company umbrella. Zylotech listed in the shell of diamond explorer Magnet Group Ltd, with Walhalla initially retaining a 63 pct stake. There were also cross links with Quiktrak with the CEO Bernie Mc George also on the board of QuikTrak..

    Zylotech has three remarkable technologies – the Digital Video Conferencing, the real time live wireless based IP video surveillance technology that is now being bundled by Fujitsu, and the Sonobuoy technology acquired following the merger with Sonacom last year.
    Sonacom and Zylotech merged on the suggestion of the major shareholder in both, Investika Ltd (Investika is also the major shareholder in QuikTrak).

    Zylotech’s EYELINK IP SmartCam
    Zylotech’s EYELINK IP SmartCam based video surveillance range of products together with the EYELINK TV ComsLink set-top-box range of products is one of the company’s two core solutions.
    The technology, now in the fourth generation of development originally commenced with “Filmlink” a process developed by Melbourne based International Communications Services Pty Ltd which allows video and film to be digitally encoded, compressed stored and transmitted over the internet and intranet with video picture clarity and sound quality limited only by the viewer’s bandwidth quality.
    Over the last few years several councils and government departments have signed contracts with Zylotech for the use of its technology, particularly in remote area video conferencing and the like – although the translation of contracts into orders remains as notoriously slow as for any others dealings with governments and councils.
    Zylotech has however received two grants from government over the last couple of years, and, given the first breakthrough order for the live video surveillance technology with the Council of Dubbo, a roll out through other advanced thinking Councils is likely to gain momentum.

    The 4th Generation technology features mean that Zylotech’s EyeLink Stage 12 VDC powered industrial packaged solutions enables video surveillance and security on board vehicles, vessels, tanks, planes, excavators, cranes etc roving anywhere in the world. For instance with assistance from DSTO and SAAB Systems Australia Pty Ltd, who are the major shareholders in Aerosonde, two IP Smartcam units are being used on-board two of the Australian Aerosonde UAV’s (Unmanned Arial Vehicles), to transmit video images to base, commissioned by the ADF for use in the Solomons.
    Equally, monitoring and control of fixed installations from any moving vehicle or even in vehicle to vehicle applications is also possible.
    Such mobility is also the only answer to surveillance and security for temporary staged or seasonal installations such as Grand Prix Events, Concerts etc. or for the quick setting-up of a surveillance perimeter where there is no copperwire or fibre communications networks.
    Being able to use totally wireless networks that support IP also means there are no cabling, digging and site restoration costs and it means installations can take place almost instantly, avoiding the need for environmental approvals and/or Heritage Building authoritative content other than for power, although solar energy can minimize power cabling as well..
    The breakthrough Dubbo Council order
    The Dubbo Council, Zylotech’s first Local Council client for its IP SmartCam technology, which was installed by Chubb, was keen to use a wireless LAN infrastructure since many of the shop fronts were heritage buildings.
    The system, which is live, enables police at base to actually see and task each other to go to places where problems are occurring. Every category of crime – from ‘drunks everywhere’ to serious crime has been reduced significantly.
    The Dubbo Council also cooperated fully with Crime Prevention advice, cutting away some trees, increasing lighting, placing of cameras at hot spot locations, etc leading to the great success of the operation. Shared pass word protected remote access can be assigned during emergencies to other authorities, such Fire Brigade or SES, as all they need to view an IP addressed camera is a PC, the pass word and the camera IP address.
    NEC Australia has been conducting a mobile transport system pilot for a major government department using the Zylotech IP SmartCam at core .
    There are various R&D products in the pipeline, but a primary requirement is the signing of a “Non Disclosure Agreement” covering these projects.
    Fourteen of Zylotech’s staff of 20 are engineers or skilled technicians.
    The dredging order in Singapore
    Singaporean listed company Portek International Systems and Equipment Ltd, has won and completed a project to develop an integrated Internet Protocol based wireless video surveillance solution for offshore dredging platforms with the IP SmartCam video server supplied by Zylotech as core.
    The system transmits images from dredges operating offshore to a mainland office some 10 km away and allows the dredging operation to be remotely monitored by engineers, dispensing with the need to have supervising engineers on the vessels.
    There is no line of sight between the dredge and the mainland office, transmission range for the 802.11b communications was restricted by a Singaporean power limit of 100 milliwatts for such transmitters.
    Other orders won
    *In May this year Zylotech was selected by the Defence Material Organisation, Department of Defence as a Team Australia supplier for its Australian Airborne Acoustic Systems Strategy as one of the four Australian based companies including Thales Underwater Systems Pty Ltd, Nautronix Ltd and Acoustic Technologies Pty Ltd to form the industry sector supply group.
    Zylotech expects to achieve a substantial and ongoing revenue flow from this initiative over a number of years.
    *Zylotech has been selling video conferencing equipment to government departments for remote areas for three years – clients include the Queensland Local Government Association and its member councils government, NSW Agricultural department sites and the Northern Territory.
    *In November last year Zylotech announced it has been awarded the Pitjantjatjara Yankunytiatiara (PY) Media Association Aboriginal Corporation tender to supply video conferencing technology for their initial 13x remote sites throughout South Australia.
    The Zylotech EYELINK MultiConnect Video Conferencing solution was selected based on its price competitiveness, optimum performance, ease of use and ability to operate in harsh environments at the highest reliability level.
    Earlier orders were executed for BHP Coal, Cable & Wireless Optus for bi directional video and audio transmission over satellite links to remote communities. Zylotech is a Telstra Partner under the Telstra partners programme.
    Zylotech has distributors in South Africa, Singapore, the UAE and China and is actively seeking other resellers and distributors with the technical skills needed to understand and support this new technology.
    The teaming agreement with Fujitsu
    As announced on October 8, Fujitsu will bundle and integrate the Zylotech digital video surveillance solutions for Local Government with its own products, initially offering NSW local councils integrated digital CCTV solutions with Zylotech’s IP SmartCam video servers and Digital Video Recorders at core together with other Fujitsu products and services.
    After extensively testing and evaluating the Zylotech supplied solutions, Fujitsu Australia Ltd Business Solutions Division were satisfied that they were fit-for-purpose and are prepared to integrate them with other Fujitsu products and services as part of their offerings to existing Fujitsu clients and in response to relevant government and local council tenders.
    Fujitsu Australia GM Business Solutions Peter Takle in a statement included in the report on October 8 said, “The benefits of having the ability to view video cameras in real time as well as digital recorded video data from remote sites is a relatively new offering compared to traditional CCTV (Closed Circuit TV), it will take some time to educate the market, but as many local councils and government organisations have an increasing need to improve security we believe these market segments are a good place to commence the process and to refine our solution range offerings as a prelude to marketing on a broader front”.

    Other likely clients
    The Department of Education in areas where there are major safety concerns, hospitals, large corporates and other organisations are all prospective customers and civil defence organistations are prime customers for the SeaWatch Acoustic surveillance systems.

    The Sonobuoy Technology
    Following the acquisition of formerly listed company Sonacom in 2002, Zylotech has continued R&D activities in the acoustic surveillance area, specifically the development of sonobuoys and the commercialisation of these products.

    The SeaWatch moored Sonobuoys offer solar powered acoustic surveillance via an anchored buoy, replacing or complimenting the need to physically patrol coastal waters in hazardous locations, no go areas or for other reasons, and the technology can improve existing patrol efficiency, by providing a warning of an un-authorised presence and targeting the patrol air aircraft and seacraft to the location rather than relying on only ad hoc and broad patrols.

    The Australian Defence Magazine, carried a May report by Zylotech’s managing director Bernie McGeorge on the technology. Mr Mc George was also seconded temporarily, during 2002- early 2003, to a PMSEIC (Prime Minister’s Science Engineering and Innovation Council) working group to assist in preparing a paper on how Australia’s science, engineering, and technology providers can contribute in practical ways towards meeting Australia’s current and future anti and counter-terrorism needs.

    Sonacom used an AusIndustry grant to help develop the technology behind the Sea-Watch system before being taken over by Zylotech. In October last year Zylotech/Sonacom completed delivery of its first small order of 20 special application sonobuoys to DSTO.
    The report says in part, “The Sea-Watch is a flexible and scalable system; the core solution includes the Sea-Watch Sonobuoy SW1 which can be anchored in shallow as well as deep water with an on-buoy hydrophone system for detecting and processing man-made sounds such as boat engines which are transmitted over a satellite or other wireless communications network to the shore based Sonasurv Geographical Display and Warning Units.
    “Other systems such as Vessel Monitoring Systems may be integrated according to the needs of individual users, to identify authorised vessels.
    “The on-buoy processor analyses the data which is then transmitted to the Sonasurv unit on shore using radio/satellite links. Contacts can then be displayed on a PC in nautical chart form and can be saved.

    “The system can be configured and linked to communications networks to send text messages to nominated individuals to inform them that alarms have been raised

    “Sea-Watch SW1 sonobuoys are robust and designed for long life, use solar energy to recharge battery power and maintenance depends on the exigencies of each location but is estimated at around the 3 to 4 month mark on average. The acoustic sonobuoy system being robust could possibly be used for additional functions besides Acoustic surveillance in future versions. For instance one additional use, at very early stages of the research phase, is the possible addition/ integration of water quality monitoring technology, without interfering with the acoustic surveillance core task.

    The company has received expressions of interest from a number of possible customers within Australia and overseas including China, the UAE, Malaysia and India, along with the Great Barrier Reef Authority” and Coast Watch but is keen to see this Australian developed technology purchased and deployed in the Australian environment in the first instance.

    The company is hopeful of government decisions on the deployment of this technology will be announced within the next few months.

    Financials
    Last Traded price 1.4 cents
    Shares Issued 419.7m
    Options 187.2m exercisable at 6 cents by March 31, 2005
    Market Cap $5.9m
    Year ended June 30, Values in Millions$
    INCOME 2003 Int 2002 2001
    Op Revenue 1.0 1.8 1.5
    Net profit (1.1) (1.7) (1.0)
    (L)PS (Cents) (0.3) (1.0) (1.3)

    BALANCE SHEET 2003 Int 2002 2001
    Current Assets 2.0 2.2 1.8
    Non Current Assets.. 0.8 0.9 0.2
    Current Liabilities 0.4 0.6 0.2
    Non Current Liabilities 0.1 0.1 -
    Net Assets & Shareholders' Funds 2.3 2.4 1.8
    Intangibles 0.6 0.6 0.1
    Net Tangible Assets 1.7 1.8 1.7
    Gearing (Net of Cash) % Nil Nil Nil
    NTA per share (cents) 0.4 0.6 2.1
    Shares Issued (Millions) 389.7 288.7 82.2

    Cash Flows: 2003 Int 2002 2001
    Cash on hand (at open) 1.1 0.7 1.4
    Operating Activities (1.1) (1.2) (1.3)
    Investing - 0.2 -
    Financing Activities 1.0 1.4 0.6
    Cash on hand at Year end 1.0 1.1 0.7
    OUR NOTES:
    1/30m shares issued at 1.2 cents each on August 21 2003
    2/Grant income in the first half was $400,900.
    3/It is envisaged a capital raising will be required in the medium term.

    Directors
    *Sydney JP Borg, chairman, a director of major shareholder Investika Ltd and the principal of PCS Australia Pty ltd, a systems integration company facilitating networks in the corporate and government areas.
    Zylotech’s former chairman, ex Chief of Australian Air Force and ex Governor Air Marshall Sir James Rowland joined as chairman in September 1997 and chaired the board until he died a few years ago).
    *Vice Admiral Don B Chalmers, AO (non exec) retired in 1999 as Chief of Navy, is chairman of CEA Technologies Ltd. Appointed on October 22 2002. (Was formerly chairman of Sonacom)
    *Bernard J McGeorge, managing director. Was 27 years with Australian Consolidated Press ltd in various management roles where he rose to the position of Executive Director. He subsequently spent ten years with the Hannan Group as Group GM. Appointed to the board of Zylotech on Sep 15 1997.
    *Nicholas Sikotis, Technical Director (B.S.E.E., M.I.E.E.E. (USA). Mr Sikiotis is an electrical and electronics engineer and has worked in executive/engineering management roles in Australia, US and Europe for organisations including Keller Automation in Switzerland, GEC Australia, Klockner-Moeller Corporation and Siemens Ltd. He was appointed to the board on April 30 1998.

    Major shareholder
    Investika Ltd with 13.63 pct of shares and 24.59 pct of options
    Capma Pty Ltd (Chris Kyriakou), 11.45 pct of shares and 8.84 pct of options


    ends
 
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