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Magnasphere Corp. |
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May 9, 2016 Issue |
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The Most Powerful Name In Corporate News and Information |
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Magnetic Switch Technology used in Sensors for Low and High-Level Security Markets from the Home to Government Buildings and Industrial Commercial Facilities |
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Magnasphere Corp.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – May 9, 2016
CEOCFO: Mr. McHugh, would you tell about Magnasphere? Mr. Kirschman: Magnasphere manufactures a proprietary magnetic switch technology called the Magnasphere switch, which is used in what we look at as two primary markets. One is the security market where the product is used in sensors that indicate whether doors are open or closed, which are used in every security system in the world. We make them from residential type all the way to the highest- level products used by the government in embassies and other government buildings around the world. The other focus of the company and the switch technology is what we call the industrial commercial market where the actual switch technology is implemented into a myriad of products and applications. Some existing customers are Aston Martin and Intel. We are working now with the Motorola Solutions and several others. The technology has a wide variety of applications.
CEOCFO:
What is different, better, more efficient and easier about what you provide?
CEOCFO:
Are the various industries aware of Magnasphere and the superiority of the
product? Mr. McHugh: You could state some of the agencies such as the Department of Homeland Security, the Pentagon, the Capital Police, the Bureau of Engraving and Printing, State Department, FBI, and nuclear storage facilities. We can include almost all of the agencies that need security. We now have the technology and we can support the type of areas needing protection. Mr. Kirschman: It is also used by every branch of the military on their bases.
CEOCFO: Would you give us an example of what would happen if a breach was starting with the standard technology in place and with your technology? Mr. McHugh: The technology that we are replacing is something that was actually developed in the late nineteen thirties called the Reed Switch. The Reed Switch is similar in construction to a light bulb. It has filaments inside and it is glass enclosed and it is extremely fragile and it is also magnetically oriented. There are two metal strips inside that would replace the filaments in a light bulb. If you put a magnet near it, it either opens or closes those two little magnetic strips. Every problem that you can envision that goes wrong with a light bulb, can go wrong with the Reed Switch. That is the main technology in this whole security area that we are trying to replace. Mr. Kirschman: A perfect example would be, I will give you a term called SCIF and it is widely used throughout all government agencies. It stands for Sensitive Compartmented Information Facility. That is any secure room, cabinet, any place where sensitive documents or sensitive information is stored or discussed. If you have a device using the old technology, a trusted insider could easily defeat that device with small magnets that are virtually unseen. They could enter and leave the premise undetected because they have now defeated the device, which sends a signal to the alarm system, and at a later date, easily remove that defeat mechanism undetected and no one knows the breach has occurred. With our device, that type of internal magnetic tamper cannot take place. Therefore, even if you have a “trusted” insider they cannot override the system and shut it down and enter undetected.
CEOCFO: Are you selling your products to manufacturers who are installing them as part of the systems and are you able to retrofit a system that might already be in place? Mr. Kirschman: Yes, we are able to do that. On the security side we actually manufacture these devices that incorporate our Switch technology on the inside. We have a range of probably 150 different products that contain our technology that are used in the security applications. The main customers are specified originally by the agencies themselves but our main customers are the security integrators that do the security installation work for these agencies and military branches. Mr. McHugh: On the other side of the coin that Rick is mentioning, is our industrial markets. These switches are initially sold to design engineers around the world. They incorporate the Magnasphere switch into the design of products that will ultimately go into production. Rick mentioned some of the names such as Aston Martin. Another very large company that we have been with for several years is Pierce Fire Truck. It is a sensor on the various doors that they have on the fire trucks. This is a combination of multiple people getting together and designing a system, which can monitor all of those types of doors. Mr. Kirschman: Those sensors are based on our technology.
CEOCFO: Is cost a factor and why should it matter given the importance of the best protection? Mr. Kirschman: The actual switch factor itself, is greater than the old nineteen thirties technology; it costs more but is not significantly more. The advantages of our technology is such that an additional cost does not stand in the way. In the industrial and commercial world that we were talking about, some of the unique characteristics are such that, that is not even an issue. Unfortunately, in the security world at least in the high-volume residential security world, cost is a real factor. The type of system that you might have in your home, the people that put that in operate on a business model that is called recurring monthly revenue. They are in business to get your monthly fee for monitoring, so they do not really care if the system is secure or not. The lowest installation cost is all they care about. They are not really in the security business, they are in the detection and notification business. Consequently if someone breaks into your home, ultimately that will be detected and at some point down the road they will notify someone. In that world, price has been a barrier to entry for us. In the world of the higher-level security in the government and higher-end commercial and companies that manufacture sensitive products or even drugs and so on, it is not as big a factor.
CEOCFO: Do you need to maintain a large inventory? Mr. Kirschman: For the most part, we have a broad range of products that are always expanding. We will do some customization for customers. In most cases what we have in our catalog, which is extensive, is sufficient for most of our customers at least in the security world. Mr. McHugh: As far as inventory, most of the products that we have we can build within two or three days. We keep a lot of components and we are prepared to assemble. Our high-volume moving items, we do keep a significant amount of parts in inventory. If people are doing a high security installation, they are probably only looking for maybe five to ten parts at the most. We have that kind of inventory on hand all the time. At the lower end volumes, we can put this stuff together relatively fast.
CEOCFO: How are you reaching out to the various parties that should be interested in Magnasphere? Mr. Kirschman: In the security world we have always done major tradeshows and continue to do that. When the technology was first introduced to the security world in 2002, we won the overall best of show at the International Security Conference, as well as the best new Intrusion Detection Technology. We have had several articles written along the way about us and trade magazines have featured the technology. We do not do any real advertising other than these tradeshows. The same is true on the switch side for the commercial business. In 2002 when we launched the company we exhibited at what is called the Sensors Expo. We won the gold medal for the best new switch technology then. What has helped us get the word out is that in 2007, the Magnasphere switch technology was accepted and put into the Digi-Key catalog. Digi-Key is the world’s largest catalog distributor of electronic components. They have a global active customer base of over 500 thousand design engineers. That is pretty much the go-to distributor for anybody designing a product that requires some sort of an electrical component. That has given us global exposure and a lot of credibility. Over time, they have brought on more and more of our products and they carry just about everything we make now in their catalog as well.
CEOCFO: How is business? Mr. Kirschman: It is finally good. Last year 2015, we were up 37% over the previous year. The first quarter of 2016 we are up 65% over the same quarter of 2015.
CEOCFO: What happened over the last year and a half? Mr. Kirschman: A lot of the efforts began getting traction for us. The biggest thing of all is there is a government regulation that was written several years ago for the secure areas for the SCIFs. That regulation was rewritten in September 2015 and it now requires a device that meets a certain standard, which is called Underwriters Laboratories 634 Level Two High Security Standard. We are pretty much the standard for that product. We built the name recognition and now everyone of these rooms is putting us in and any new construction uses the Magnasphere high-security products. Any modifications to the intrusion detections system in these existing SCIFs require an upgrade to this Level Two, High Security Sensor.
CEOCFO: How have you remained free of competition? Mr. Kirschman: We are probably too small for anybody to try to knock us off, even though we show you on the website exactly how the switch works and is made. Mr. McHugh: We have an active base of seventeen patents right now. As we continuously change the technology, we have refreshed those patents so that we have extensive protection if anybody were to try to duplicate the way we are doing it. In order to step in and do the same thing we are doing, they almost have to come up with a new technology on their own. They cannot duplicate how we have done it because we have protected that with patents. They could go back to the old technology and there have been some competitors that were in play trying to build UL 634 High Security devices. Most of those have failed and they have lost their listings.
CEOCFO: Did you always know it would take off at some point? Mr. Kirschman: We always knew it. We have given up the last thirteen years of our lives and Jim came out of retirement to help us. It is a good product for so many applications and especially in the security world.
CEOCFO: Why pay attention to Magnasphere? Mr. McHugh: With the two industries that we are talking about, you have to understand the size of the marketplace that we are dealing in. This high-end government security market is a limited market in and of itself. It is only about fifty thousand units a year and not that significant. We do believe over time that this will expand itself into the residential world. The residential world is probably more like possibly of thirty million units a year in the US alone. When you are looking for both new and replacement technology, it is continuously growing. If you look at the industrial side of the business, there are competitive types of sensors being sold in excess of one billion units a year. We are not a perfect fit in all one billion instances, but the robustness of the switch and its ability to sense metal without having to add another magnet, puts it into play in a lot of areas. The only thing that has caused that to take so long is the typical project on the industrial side, takes maybe four to five years on the development phases. We have several projects right now that are on the drawing board within major companies and most of them are under a non-disclosure agreement. The projects we are involved with now are easily up over five million switches per year when they finish development and go into production. The potential growth here is phenomenal. It is almost unlimited where you could put these devices. The problem we have is how you get it in the hands of the people that have the resources to exploit the technology. We have done things to demonstrate that the technology can work, with the idea of looking for partners that will result in that kind of growth. |
“In comparison to the other magnetic switch technology in these industries, the Magnasphere Switch is more robust. It is constructed largely of metal, where the older technology is mostly glass. It has a resistance to permanent contact welding when exposed to high voltages and power surges. Unlike other technologies, it is resistant to tamper or defeat through the use of external magnets. In addition, it has a unique capability of being able to sense a ferrous metal target rather than just a magnet. That gives it an opportunity to be a very low-cost and compact ferrous proximity sensor.”- Rick Kirschman
Magnasphere Corp.
Contact: Richard Kirschman 262-347-0711
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Magnetic Switch Sensors, Magnasphere Corp., UL 634 Balanced Magnetic Switch, CEO Interviews 2016, James McHugh, Rick Kirschman, Magnetic Switch Technology used in Sensors for Low and High-Level Security Markets from the Home to Government Buildings and Industrial Commercial Facilities, Technology Companies, UL634 High Security, Reed Switch, Ferrous proximity sensor, Non-mercury tilt switch, Digi-Key, High Security door contact, BMS, ICD 705, SCIF, Level 2 high security, Magnasphere Corp. Press Releases, News, Tech Stock, Companies looking for venture capital, Angel Investors, private companies looking for investors, high security door contact companies seeking investors, magnetic switch companies needing investment capital |
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