Veritec May Be on Verge of Success With Code : Technology: The company’s president says Vericode can pack in more information than its familiar black-and-white striped competition.
For the last 10 years, Robert Anselmo has been peddling a checkerboard symbol that he swears is better than the bar code, the familiar black-and-white stripes printed on books, candy bars and other consumer items that enable retailers to electronically ring up sales.
“The bar code is wimpy,” said the 55-year-old president of Veritec, a Chatsworth firm that markets Vericode, a machine-readable matrix code. Vericode can pack more information in small places, he said. “We can even put it on a grain of rice.”
For all its claims, though, Veritec has had little success so far. Since the firm went public in 1986, it has lost money every year, in all about $3 million on sales of less than $1 million during that time. In the last six years, Veritec has moved its offices four times. Anselmo said he hasn’t been paid in three months. And its stock, which is lightly traded on the over-the-counter market, closed last week at a bid price of 83 cents a share.
But now, after years of slow development in the shadow of the fast-growing bar code industry, Veritec appears to be on the verge of breaking through its development stage. Experts say Vericode and codes like it could add a new dimension to the $20-billion worldwide automatic identification systems market, of which retail bar codes are just one segment. The new codes could be used in the electronics, aerospace, military and pharmaceutical industries, mainly in manufacturing processes.
“I think Veritec will turn out to be a viable niche player,” said Richard Bravman, vice president of marketing for Symbol Technologies of Bohemia, N. Y., the leading supplier of equipment and services for the bar code industry.
In most bar codes, the stripes represent a short sequence of numbers or letters, usually read with a sweep of a laser scanner. Like license plates, the one-dimensional codes themselves contain little information; rather, they are really labels for data stored elsewhere in a computer.
Vericode and other two-dimensional codes, which include new stacked bar codes, are more dense, enabling users to pack more information in the codes.
But the real value of these codes, experts say, is that they allow manufacturers to put identification marks on small items like microchips. A Vericode stamp, Anselmo said, could include data on the product’s origin and quality-control inspections, thus giving manufacturers a way to ensure that they’re using the right part before installing it, and to track the parts once they’re in use.
Veritec’s big break came in February when Rockwell International Corp. said after an extensive study for the National Aeronautics and Space Administration that Vericode could help the agency better identify and track spacecraft components, some of which are now labeled by color codes or aren’t labeled at all because they’re too small. Two months later, Veritec got another boost when Mitsubishi Corp. of Japan agreed to make hand-held scanners that would read Vericode.
But NASA hasn’t yet ordered any product from Veritec, and Veritec won’t begin benefiting from Mitsubishi’s announcement until the scanners are actually sold.
Indeed, experts say Veritec’s growth will likely be slow. Vericode and similar technologies have only recently begun to be tested, and consultants think that it could take a few years before they gain wide acceptance and usage. Scanners and integration systems have also not been fully developed for two-dimensional symbologies.
“Dense code technology came along first, and now there is a need for products to read and use the technology,” said Keith Kuzman, a consultant based in Natick, Mass.
In the meantime, Veritec, whose cash reserves have dwindled to about $100,000, is expected soon to get an infusion of additional money. Last week, New World Capital Markets Inc., a Santa Monica investment firm, said it would raise between $1 million and $3 million for Veritec through a private sale of preferred stock.
Wendell Birkhofer, New World’s managing director, said he’s confident that Veritec can raise the whole $3 million, enough to keep Veritec going for a couple of years.
Veritec isn’t without competition, however. Vericode is one of half a dozen matrix codes developed in recent years. One of the others is Data Matrix, which was developed by International Data Matrix in Florida and looks almost exactly like Vericode. That firm was founded in 1987 by Dennis Priddy, who is Anselmo’s brother-in-law. Like Anselmo, Priddy said his firm has agreements with major companies.
Veritec and its 15 workers also face competition from suppliers of the equipment that handle traditional bar codes, such as Symbol Technologies, which has a 900-employee operation in Costa Mesa. Last year, Symbol introduced a stacked bar code that it offered to the public, which Symbol’s Bravman said will help spread its use. Unlike Veritec, which is licensing its patented code, Symbol plans to make money by selling scanners that would read two-dimensional codes.
Unlike bar codes, where the thickness of stripes and the spacing between them represent a letter or number, Vericode and other matrix codes are read in binary language. A character in Vericode is represented by certain squares, enclosed in a box, that are either shaded or left blank, thus its checkerboard-like look. Carl Anselmo, 53, Robert’s brother and a program manager for TRW, said a one-inch Vericode representing hundreds of characters can be etched on a product using a laser or a number of other ways and read with a high-resolution camera.
The Anselmos argued that Vericode is more durable and less prone to error than the bar code or stacked codes. But after testing stacked bar codes for potential use in the medical industry--say, to mark pill bottles and patient identification labels--James Fales of Ohio University in Athens, Ohio, said the stacked codes were “highly robust” and could hold as many as 80 characters in a quarter-inch square.
Robert and Carl Anselmo invented Vericode on Halloween night in 1981 when the two were thinking about anti-counterfeiting technologies. And the brothers have spent much of the last decade refining the idea--developing ways to read Vericode and to imprint the symbol on metals and other non-paper surfaces.
In Veritec’s early years, the Anselmos tried to sell the code as an anti-counterfeiting tool, proposing to put a unique Vericode “fingerprint” on expensive watches, lottery tickets and bank notes. “But we never made any headway there,” Carl Anselmo said, adding that companies “weren’t sure of the technology and its costs.”
When Veritec went public in 1986, selling 2.5 million shares of stock for $1 a piece, it set out on a new course, marketing Vericode not so much as an anti-counterfeiting technology but as an identifying mark for items where the bar code couldn’t go.
But until recently, companies were skeptical about the new technology. And with cash running short, Veritec’s technical development moved slowly. In 1988, its then-president Robert Stander left because he was not getting paid. Only two years earlier, Stander had predicted that Veritec’s revenue would exceed $92 million by 1990.
Robert Anselmo, who has worked for several major aerospace companies in both marketing and technical fields, explained Veritec’s long struggle this way: Potential users of electronic codes “were stunned because we were so far ahead of them. Here they were just learning about bar codes and we were saying here’s something that’s going to replace the bar code.”
Most experts say Vericode and other matrix codes are highly unlikely to replace the bar code, so entrenched and widespread is its use. But many agree that Veritec is on the leading edge of a potentially new market, albeit a specialized one.
David Collins, head of the consulting firm Data Capture Institute in Duxbury, Mass., thinks that the market could be as much as $500 million a year.
“We were very impressed with Veritec’s system,” said one executive of a big aerospace company, who asked not to be identified. “If they can get through some remaining technical hurdles, I think it’s going to be the wave of the future.”
Anselmo thinks that Veritec could be profitable in a year, but he isn’t making any promises. “I can’t say we’ve made it because the revenues haven’t come in yet,” he said. “But with major corporations coming to Veritec, we’re on the upside of major growth.”
