10 Cent Gatekeeper Offers Very Attractive Risk/Reward for 2019

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Gatekeeper Systems (GSI: TSXV 10 cents / GKPRF:OTC and 1GK:FSE)

www.gatekeeper-systems.com

Shares Outstanding: 88 million / Market Cap at 10 cents: $9 million

Net Cash and Receivables: $6 million

= Enterprise Value (EV) $3 Million. Extremely low considering:

> GSI has annual revenue near $8 million and a very clean balance sheet

>  Over 100,000 devices have been installed to date and they have 3,500 customers

>  They have unique video technology for student safety & public transit safety / security – with a focus on evidence management (a new, high growth segment of the video surveillance industry).

November 29th Gatekeeper announced a contract win that continues to validate their video surveillance technology as best-in-class. They are working closely with the largest transit authority in North America and the largest bus manufacturer. In addition to the dollar value of this contract, it is a great credibility builder for Gatekeeper.

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Gatekeeper Announces New Flyer Contract for Delivery of Transit Bus Video Systems for SEPTA
Abbotsford, British Columbia–(Newsfile Corp. – November 29, 2018) – Gatekeeper Systems Inc. (TSXV: GSI) (OTC Pink: GKPRF) FSE: 1GK) (“Gatekeeper” or the “Company”), a leading provider of high definition video surveillance systems developed to protect people in transit, is pleased to announce it will supply high definition video systems on 335 diesel-electric hybrid transit buses being manufactured for Southeastern Pennsylvania Transportation Authority (“SEPTA”) by New Flyer of America Inc. (“New Flyer”).
SEPTA has notified Gatekeeper that it has been chosen as a supplier of new high definition video systems after completing an in-depth technology evaluation. SEPTA has purchased 525 new hybrid buses from New Flyer over a five-year contract, with 335 buses remaining to be delivered. These remaining buses will now be equipped with Gatekeeper’s high definition video systems. Delivery, commissioning and installation of Gatekeeper’s high definition video systems will take place at New Flyer’s facility in St. Cloud, MN.
Doug Dyment, CEO commented: “We continue to expand our operations to support our growth plans in Philadelphia and I couldn’t be more excited to have Gatekeeper’s technology platform as part of the safety and security infrastructure in one of the world’s largest and most diverse transit operations.”
New Flyer of America Inc. is a subsidiary of NFI Group, which is the largest transit bus manufacturer and parts distributor in North America.
SEPTA is one of the largest transit authorities in the United States, providing over 300 million passenger rides annually on over 3,600 vehicles which includes approximately 970 trains.

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Along with this, Gatekeeper recently announced their latest (more advanced) camera technology for catching drivers who pass a school bus when the stop arm is out. That same morning (after their news was released), this happened.

Tuesday October 30th …. “A nine-year-old girl and her twin six-year-old brothers were struck and killed by a pickup truck as they crossed a northern Indiana road to board a school bus”

In the United States 14 MILLION vehicles annually pass school buses illegally (when the stop-arm is out)

New (more advanced) Gatekeeper HD Video Technology & Complete Evidence (plus ticketing) System. This should be standard issue on ALL school buses and part of a transportation law.

From their October 30th Press Release:

Gatekeeper Systems Inc. has unveiled its new SP25 10-megapixel dual-camera system featuring crystal clear image quality and superior range, which will make it a powerful new weapon in the fight against school bus stop-arm violators. The compact, quick to install system attaches to the side of school buses and provides outstanding picture quality in bright, low-light, and night-time conditions between 98 to 164 feet (30 to 50 metres) with coverage across multiple highway lanes.

“This system is a game-changer: It’s going to ensure a safer environment for kids in and around school buses, and provide peace of mind for operators, administrators, legislators and, most of all, parents. It’s a powerful deterrent to drivers thinking about running the stop-arm sign and will provide the legal system with irrefutable evidence when prosecuting those who commit this unforgiveable crime.” [Doug Dyment, CEO of GSI]

“While stop arm technology may not prevent all deaths and injuries, it should reduce incidents by reminding violators that they will receive a serious fine if they don’t stop and law enforcement will have video footage as part of its evidence program when prosecuting violators.”

The SP25 builds on Gatekeeper’s proven technology by offering a multi-lane viewing licence plate capture capability, a high-speed licence plate tag reader, and cellular network compatibility ready for remote, auto downloading of stop arm violations. And it features an integrated Global Positioning System with time, date, and vehicle sensors which meet State regulations and laws.

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October 26th – Child dies in Georgia after two children hit by a car at a school bus stop.

https://www.wctv.tv/content/news/Colquitt-County-students-hit-by-car-at-school-bus-stop-498552151.html

October 30th THREE children (from one family) die after being hit while approaching their school bus.

https://globalnews.ca/news/4614260/indiana-school-bus-sibilings-dead/?utm_source=Article&utm_medium=MostPopular&utm_campaign=2014

This is a large and disturbing problem not just in North America, but many countries. Yet enforcement has been very difficult due to the evidence that is required for automated ticketing OR in the court system (and the time and costs associated with that legal process).

Statistics show 14 to 15 million violations in the United States alone. But rarely is anything done about it until someone is hurt or killed. Law enforcement agencies say they don’t have the resources to properly monitor school buses, and lawyers tend to get people off because there is not enough evidence. So sheriff departments and police officers feel it is a waste of time and resources.

But Gatekeeper clearly has the solution. And NOW they have what should be a “Bullet Proof” solution.

This could be enough to motivate local and state governments to provide the funding necessary to outfit their school divisions or school bus operators with Gatekeeper equipment and services.

In the past they could push back because the evidence provided wasn’t enough to guarantee enforcement. But now they have video, a clear photo of their license plate, GPS coordinates and a time/date stamp tying it all together. Not to mention full automation that isn’t dependent upon law enforcement witnessing the incident (which is very rare).

In the summer of 2018 I had an opportunity to sit in on a board of director’s presentation that outlined their direction (business plan) for the next year or two. It was VERY clear that their focus would be on “evidence”.

In fact, the ENTIRE evidence chain right from the point of incident, through to a prosecutor sitting in a court room. This would apply to everything associated with public transportation. It was very impressive and clearly what they announced on Tuesday morning is a large part of that strategy.

 

CONCLUSION

The primary challenge with GSI as a microcap investment is the patience required. Their entire industry is dependent upon government funding (school boards and public transit). But these can also involve huge contracts. And if the company is successful in convincing local governments to approve their “automated” ticketing system, the revenue growth potential is enormous – because this is a revenue sharing model.

Typically they need state-level approval for this… and we’re dealing with politicians who sometimes care more about getting elected, than they do about child safety. Maybe at the Federal level something will change. But until it does, the tragedy we saw in Indiana Tuesday will be an ongoing threat to children.

Common sense would say that putting these camera systems on ALL school buses would be a “no brainer”. Especially if school divisions and state or local government can share in the ticket revenue (and Gatekeeper already has this built into their software). But it’s impossible to know what the catalysts will be to motivate that decision.

If or when that begins to happen, we know Gatekeeper has the technology to provide a “complete” evidence package. Maybe the Gatekeeper news on Tuesday (and the Indiana tragedy) will be the motivating factors we need to start seeing real material changes in this industry.

For now, GSI with an enterprise value near $3 million is such that, a person should be able to tuck this away and wait for contracts to be secured. And at that stage, either the investment community responds with a higher valuation – or they potentially get bought out.

Patriot One (PAT:CSE $2.75) is a good example of unique technology in the public  safety / security industry that can attract enormous valuations. They have a low microwave radar system for detecting concealed weapons in a public space or building. Their market cap is now $315 million and they recently raised $40 million at $2.50.

The end of April they had $36 million in the bank, but ZERO revenue. The enormously high valuation is because of the growth “potential” within their global target market. The potential is definitely there, but the valuation seems a bit ridiculous until they start landing material contracts.

Gatekeeper by comparison, has a $3 million enterprise value (market cap less net cash) and $8 million in annual revenue, 3500 customers, and over 100,000 equipment installations. This valuation seems equally insane – but on the other end of the valuation spectrum.

In the United States there are 183,000 public transit vehicles (bus and rail – excluding school buses). And like Patriot One, Gatekeeper has unique technology to provide the safety and security of the general public. But Patriot One had good promoters and brokers/bankers behind them. People were paying attention to them. Gatekeeper (for the time being) is the polar opposite.

But if they can begin landing more material contracts, we could see this valuation change “dramatically”. Hopefully their new technology is the catalyst we need to see this start happening in 2019. Either way, the risk/reward in this current price range is very attractive.

Gatekeeper Corporate Presentation:

http://www.gatekeeper-systems.com/images/documents/Presentations/Gatekeeper%20Presentation%20Sept%202018.pdf

 

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