Electronic Control Security (OTCBB:EKCS), a provider of integrated entry control and perimeter security system technologies to the government and private sectors, announced its results of operations for the three and six months ended December 31, 2010. Arthur Barchenko, President and CEO, stated, "We had net revenues of $1,881,963 for the six months ended December 31, 2010 compared to $1,635,704 for the corresponding six month period in 2009, representing an increase of 15%. The increase is primarily attributable to new orders received in fiscal 2010 and released for shipment in fiscal 2011. Net revenues for the three months ended December 31, 2010 decreased by approximately 13% to $1,080,411 from the prior period due to the backlog of confirmed orders awaiting approval of the Company's submittal drawings and change in scope by the customers."Further, "Gross margins for the six months ended December 30, 2010 were 62% compared to 66% of revenue for the corresponding six month period in 2009. Gross margins for the three months ended December 31, 2010 were 58% compared to 63% for the corresponding period in 2009. The decreases are attributable to a continuing shift in the order mix of equipment sales and support services. The Company's sales and gross margins may vary quarter to quarter, but gross margins have remained within the 58%-68% range." Mr. Barchenko then stated, "The selling, general and administrative expenses for the six months ended December 31, 2010 were $680,580 compared to $745,753 for the corresponding six months in 2009. For the three month period in 2010, these costs totaled $338,765 compared to $518,437 for the same three months in 2009. The decreases are due to our efforts to reduce our marketing, sales and sales support costs. Additionally, the costs for the 2009 period contained a write-off of certain bad debts taken during that quarter."
The income from operations increased to $391,741 in the six-month period in 2010 compared to $234,577 in the 2009 period. For the three months ended December 31, 2010, income was $243,100 compared to $222,137 for the comparable period in the prior fiscal year. The increases are due to higher gross margin orders, a more profitable mix of design and engineering support services billings, and controlled selling, general and administrative expenses. As reported previously, the Company submitted proposals during fiscal 2010 on projects for Department of Defense (DoD) facilities and certain nuclear power stations in the United States and southeast Asia valued at approximately $13,650,000. Approximately $2.2 million of these DoD and nuclear projects were awarded and partially shipped during the fourth quarter of fiscal 2010 and the first quarter of fiscal 2011. An additional $850,000 of these proposals were awarded during the second quarter of fiscal 2011. The Company anticipates decisions relating to the remaining proposals during the second half of fiscal 2011 with deliveries scheduled through the last six months of fiscal 2011 and the first half of fiscal 2012.
The Company has achieved cash and cash equivalents of $739,772 at the end of the current period, compared to $271,242 at the end of the 2009 period, to finance the backlog and projected sales during the remainder of the 2011 fiscal year. Based on the inability of many companies to raise capital when needed in this economy, management made a strategic decision to take a proactive stance in making sure we have funds available, if and when required, to support the Company's future profitable growth.
To that end, the Company has entered into a financial arrangement with Auctus Private Equity Fund, LLC. Auctus affords the Company the opportunity to raise capital as required when the market and price structure of the Company's shares will benefit its shareholders and afford the Company financial profitable growth going forward. Further, a leading lender has reaffirmed the Company's existing $3.5 million line (or more as the business grows) of credit for large government and/or private sector contracts which the Company has used previously during the Integrated Base Defense Security System (IBDSS) program.
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