RemoteMDx, Inc. (RMDX.OB-OTC: BB)

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February 13, 2009 Issue

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With About 7.3 Million Offenders In The Criminal Justice System In The United States Today, RemoteMDx Is In The Right Place At The Right Time With Their TrackerPAL Device Easing The Burden Of Overcrowding Prisons Lowering The Cost Of Incarceration

Company Profile: RemoteMDx, through its SecureAlert subsidiary, delivers patented monitoring systems that observe and track offenders no matter where they may be -- in their car, home or office. SecureAlert can intervene in real-time with direct voice communication when an offender is in violation of probation or parole, such as sex offenders who are prohibited from entering school areas, parks, etc. Highly trained case managers monitor the offender's activities 24/7 through satellite mapping and computer systems. The SecureAlert programs allow convicted criminals to re-enter society by keeping them accountable 24 hours a day, every day, while reducing the burdens and costs carried by the criminal justice system.

John L. Hastings III – President RemoteMDx and SecureAlert
Joining the Company in 2008, John Hastings brought 23 years of progressive general management, marketing and sales experience in 30 countries with Nestle/Stouffer's, Kraft/General Foods, Nissan Motor Acceptance Corp., NCR/Teredata, Unisys Corp. and VNU/ACNielsen.


With an MBA from Pepperdine University, Malibu, CA, John spent eight years with VNU/ACNielsen, a $4.5B+ global research, media and publications company headquartered in New York, where he last served as Senior Vice President and General Manager of VNU MI Global Business Intelligence. Most recently, Hastings has been the interim President & CEO of Klever Marketing, Inc. of Salt Lake City, where he has overseen the company's recent-term financial clean-up and business transformation.

GPS-Tracking & Monitoring

RemoteMDx, Inc.
150 West Civic Center Drive, Suite 400
Sandy, UT 84070
Phone: 866-451-6141

Interview conducted by: Walter Banks, Publisher,, Published – February 13, 2009

Mr. Hastings, please tell us what brought you to RemoteMDx and what the vision is.

Mr. Hastings: “I’ve joined the company in the past year. I came out of a consumer background and also a business-to-business background. What attracted me to this industry and opportunity was the technology innovation, as well as the size of the marketplace and the opportunities that avail themselves in that marketplace. There’s about 7.3 million offenders incarcerated or on parole and probation in the USA alone. Quite frankly historically a very low percentage of those offenders are being tracked, leaving quite a substantial growth opportunity in the market of helping agencies reduce their cost of incarceration, and addressing issues of overcrowded jails. From my background on the consumer side, I view offenders as my consumers and I view law enforcement agencies and county governments as my retailers. Whether they be gang related offenders, domestic violence and sexual predators, you really have to understand what motivates these offenders, as well as how to track and monitor them, adapting and innovating technologies that allow society to have some sense of reassurance of public safety. Agencies and county governments are  looking for alternatives to overcrowded jails and better ways to rehabilitate offenders.  I think on two levels, I came because I recognized the opportunity in the industry, the size of the marketplace and the financials that drive the marketplace, as well as the overarching opportunity to improve public safety and serve a higher purpose.”


CEOCFO: Tell us about your product, your competitors and what your position is in the marketplace.

Mr. Hastings: “Right now, I would say that we have about 5% of the marketplace currently. We serve what I consider to be the higher end. When we talk about the tracking and monitoring individuals, there are three segments in the marketplace today. There is a traditional segment, which is the largest segment, house arrest or radio frequency (rf) tracking. It’s been around for over 20 years. There are some very substantial competitors in that space that have been around for most of that time, but they are really focused on house arrest and the ability to incarcerate someone within their own home upon release. The next level or area is GPS (global positioning system), which allows you to track offenders out of their homes and outside of traditional prisons. It allows you to track them at large. Available in vehicles and hiking products, most people are familiar with many of the GPS tracking systems now available, but now there is the opportunity through our technology to track individuals using GPS. The third and emerging segment, includes the integration of GPS and RF tracking technologies with integrated cellular capabilities, this segment is what we offer and lead the market in. We’ve taken single piece device, the electronic ball and chain if you will and created a device that has the intelligence within itself and when strapped to the ankle would include the ability to impose house arrest, track with the GPS and create electronic fences or what we call exclusion or inclusion zones. It can also facilitate two and three way communication directly with the offender; facilitating calls from policing authorities, probation parole officers, or other individuals approved by our client agencies.”


CEOCFO: What sets you apart?

Mr. Hastings: “What sets us apart is the technology itself. We have a patented offering that has the ability to interact with a live monitoring center. With the live monitoring center, in conjunction with the ankle device itself, allows us the perpetual ability to not only track, but to intervene. We like to talk about our monitoring capability as an intervention based monitoring capability where we see an offender who is either entering an exclusion zone or leaving an inclusion zone, and we have the ability to immediately take action. This could be by activating a 95 decibel alarm in the device and/or communicating directly with the offender and attempting to persuade them form their course of action. For example, we’ve seen a high occurrence and growth in the area of domestic violence in the USA and globally. Unfortunately, domestic violence is not only a crime of physical abuse, but is also a crime of psychological abuse. With simply an order of protection, an offender may drive by their ex spouse’s house, just so that he or she sees him, or the offender may drive to their work, school or ex in-law’s, creating  psychological abuse and threats. Our device creates an electronic parameter around the would be victim and applies some sense of security in the monitoring of the offender. Likewise, if you look at a gang member, we have the ability to exclude gang members from their usual turf or areas that they would frequent to either sell drugs, illegal firearms or commit other crimes. We have the ability to limit their movement, restrict it, and put an electronic fence around that. Secondly, I think what makes us unique in the marketplace is the intervention based monitoring we provide, with direct access to the device and to the offender. We’ve also enhanced our technology offering and services offering with the ability to offer case management. Case management allows us to offer private probation and become a force multiplier for the agencies that we represent and do business with. Many of them have budget strains and our service allows them to extend the people and officers that they have in place allowing them to have a larger case load, leverage technology, and leverage our ability to manage offender cases.”


CEOCFO: Tell us about your business and revenue models and does it involve recurring revenues?

Mr. Hastings: “What I think is one of the most important aspects of our business and something that attracted me to this business model, is the recurring revenue. The recurring revenue is our lifeblood. We charge a daily occupancy rate for the active device being attached to an offender. We charge a daily rate and we have an a la carte menu of other service offerings. The base device itself is offered at one price point. If you would like to have the base GPS tracking and monitoring a company by a house arrest capability, then we would charge an incremental fee. If you would like to layer on a case management, then we add on an additional fee. We try to keep it simple and not offer too many prices on the a la carte menu, but we try to accommodate the needs of individual agencies and individual offender requirements.

Secondly, one of the things we do is that we see a substantial growth in the area of what we a call offender pay, and offender pay is where the burden shifts actually from the taxpayer to the offenders themselves. In many jurisdictions where budgets are constrained, we have seen a substantial growth in the area of offender pay. In some cases, offenders are held accountable for an hour of pay a day, but they are provided the opportunity to have the freedom that they wouldn’t otherwise have. They pay for one hour of the monitoring time per day on the device and it is a condition of their release.

We have also seen parent pay for juveniles, where unfortunately we have substantial growth in incarceration. These types of programs are coming about, because the costs required to incarcerate a juvenile or an adult; averaging anywhere from $65 to upwards of $250 - plus per day depending on the jurisdiction, the amenities and the level of security involved. We are quite an attractive alternative not only to incarceration, but to other programs focused on re-socialization of offenders. One of the upsides of  our device is not only to focus on tracking the offenders, but because we have integrated cellular technologies, one of the potential revenue streams that has attractive to investors and agencies, is our ability to create rehabilitation programs through the device itself. We can actually facilitate contact with a minister, a social worker or a sponsor and provide positive affirmations not just focused on tripping or trapping the offender. We are however, finding ways to positively motivate them and encourage them in an effort to keep them from recommitting crimes and to reduce the recidivism rate.”


CEOCFO: Are you now in the global marketplace or are you strictly in the USA?

Mr. Hastings: “We’re in the process of expanding globally and that model is a little different. We are focusing first and foremost with direct sales force on the domestic marketplace in the USA. However, we are also looking to extend that direct sales force opportunity into Canada and Mexico, to take full advantage of the North American marketplace. Outside of that geography, we are leveraging a distributor type model, where we provide our content, knowledge and know how, our proprietary software and leverage our patents and technology. Most importantly, through a distributorship, leverage local contacts that have both the financial and relationship where-with-all to extend the business model. We see those opportunities currently in Latin America where we have a distributor as well as some opportunities that we’re exploring in the Middle East and in South Africa. The substantial growth opportunity in the global marketplace and one of the other benefits of our technologies is that it is truly global and we’ve tested our products throughout the world. Our monitoring center can actually track any device. We have to make some minor modifications to the cellular communication protocol, but otherwise, we’re able to communicate and track with the device in many countries throughout the world. Importantly, in November of this past year, we were certified by AT&T communications, which and is a much sought after and coveted certification. In fact, we are the only global offender monitoring and tracking company that is certified by AT&T. To give you some idea of comparison, we are a relatively small company, but we’ve had to pass the same bench marks and standards to premier top tier companies such as an Apple, Sony, Motorola or Sanyo would have to pass in terms of the certification protocols.”


CEOCFO: Does acquisitions play a role in your strategy, whether it is advancing your customer base or product?

Mr. Hastings: “We started off 2008 with a couple of acquisitions, Court Programs and Midwest Monitoring. These two acquisitions allowed us to expand our business model and more importantly, they helped educate us as to case management initiatives and had established relationships with a number of agencies for a decade or more. They were privately held, but more importantly brought principals into the company that could allow us to replicate that business model and extend it into a broader offering beyond their traditional geographic boundaries. I think from a strategic perspective, we’re very open to ongoing acquisitions and mergers or consolidation in the industry. What we are focusing on in addition to growth through acquisitions, is organic growth. We’ve seen some substantial organic growth within our existing client base. As we continue to innovate the technology and provide a broader service offering, we’ve had the opportunity to significantly increase our installed base and in a very healthy and profitable way.”


CEOCFO: What should potential investors know about Remote MDX that they may miss in first glance?

Mr. Hastings: “I think that there are three critical areas. One is that I’ve intentionally infused a traditional consumer packaged goods mentality into the company, where we take a strong look at a classical P&L, we manage products and services with a strong eye toward the potential margin of the business and the research required in terms of expanding and growing the company. One thing is the discipline of how we operate and run along the lines of traditional brand management and classical consumer packaged goods. Secondly, this past year we’ve improved about 88% in revenue growth year-on-year and at the same time, we’ve decreased expenses and have seen a 90% improvement in gross margins. We are arriving beyond what I would consider the two year start up mentality, where we have introduced a product that is now in its second generation. I’m happy to say that we’re striving in the near term for operational break even and driving towards cash flow break even. I think if you look at us today and historically, you would see a substantial improvement in the financials.”


CEOCFO: Are you still doing a lot of R&D spending?

Mr. Hastings: “We’ve reduced R&D spending and we continue to innovate. My objective coming in was that we had a very broad based spending level in the area of R&D and we are tempering that to focus on stability and reliability of our existing products and services. We have some minor modifications and some short-term innovation, but my overall objective is that leverage technology where it exists in the marketplace. We are not trying to recreate the wheel, but to drive down R&D spending to a manageable level to get out of that two year kind of ramp up, entrepreneurial innovation and to rely and focus on the product that we’ve now taken to market.”


CEOCFO: Will you have to go to the street to do any more raising of funds or need to borrow?

Mr. Hastings: “We’re very fortunate in that we have a number of very long term investors who continue to work with us and evaluate our business model. We talked a little about international expansion and with the capital requirements for manufacturing internationally; we’re going to have to raise the capital to support that. What I’ve tried to do is reduce our requirements for operational financial support. We will continue to raise more money and I think it will be more purposeful and strategic. However, as apposed to just being open in the marketplace, it will be driven by the need and will certainly be more value based. I think even existing investors and shareholders are really looking at us to hit some of these financial milestones to justify incremental investments. The opportunity of incremental investment will be extended to everybody, but I think those who have been interested and stood by the company over the last few years have really noticed a substantial and marked improvement in the financial performance as I alluded to earlier with the revenue growth and improvement in gross margins.”


CEOCFO: In closing, what should people remember most about RemoteMDx?

Mr. Hastings: “Strategically, one of the other draws to the company is that we have a mindset to really listen to agencies and our customers and to create a flexible offering that meets their needs. We have defined a flexible strategy in terms of this tough budgetary marketplace that not only meets the public safety need, but meets the physical needs of the agencies that we serve at large.”


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“What sets us apart is the technology itself. We have a patented offering that has the ability to interact with a live monitoring center. With the live monitoring center, in conjunction with the ankle device itself, allows us the perpetual ability to not only track, but to intervene.” - John L. Hastings III does not purchase or make
recommendation on stocks based on the interviews published.