INK INC./ Local company hopes to make its mark with technology

Gazette, The (Colorado Springs), Jul 20, 2003 by CHRIS WALSH

Lyle Small expects big things out of his tiny Colorado Springs business.

He believes the products Chromatic Technologies Inc. develops one day will be in the pockets of every American - on cash, credit cards, driver's licenses, passports, receipts and checks.

He envisions sales of at least $100 million annually from a product everyone comes into contact with every day: ink.

"We think it can change the world, especially when you think about security," Small said. "Right now we're trusting a 17-year-old at 2 a.m. at 7/Eleven to figure out if the $100 bill in his hands is real. That's not the future."

In the future, Small believes his ink and the related technology his company develops will play a vital role in deterring counterfeiters, bolstering national security and reducing piracy, which costs businesses billions of dollars each year.

"We are the only company that offers true security," Small said. "And we have developed technology to put our (product) on everything: compact discs, circuit boards, clothing, watches, anything with a value of more than $20 that you want to protect."

RESPONDS TO HEAT, LIGHT

Developing ink for security is a relatively new direction for Small, who founded Chromatic in 1993.

The operation primarily focused on research and development until 1998, when Chromatic began making ink that responds to heat and light.

The market for those inks has grown in recent years as businesses try to set their products apart from competitors.

Chromatic inks change color or become clear when exposed to set temperatures, ultraviolet rays or other types of light.

The company's ink has found its way onto well-known national products: On 3 million boxes of Kellogg's Pop Tarts, the ink reveals a message when rubbed. On 1.5 million AMC movie theater cups and tens of millions of Dixie cups, the ink changes colors when the cups are filled with cold drinks.

Chromatic's ink also now appears on more than 40 million Dairy Queen cups. The ink is invisible until exposed to sunlight, when a message appears telling the consumer whether or not he or she won a prize. The cups are featured in television commercials - now being aired nationally - for Dairy Queen's blizzards.

Despite the weak economy, Chromatic's business has grown. The firm nearly tripled its sales last year to about $1.5 million and has been profitable for two years. This year it expects to do more than $2 million in sales.

It has invested in new equipment and added two workers this year, bringing its head count to 10. Since December, it has doubled its office and production space to 4,000-square-feet off Garden of the Gods Road, and will double that later this year.

"As soon as the Nasdaq went down, our business took off," said Dave Randall, senior account executive. "We've actually been doing really well while many companies have had a tough time."

SHIFTING TO SECURITY WORK

But the future of Chromatic's ink does not lie in Dairy Queen cups and Pop-Tarts.

The world has evolved since Small founded the company a decade ago after graduating from Cornell University.

Technology has changed the threats to both businesses and the country.

"I thought I'd always make things that changed color," Small said. "That was as far as my brain could envision the company going."

Now he hopes to take his ink into the realm of security.

Small has restructured operations, spinning off the traditional business into Chromatic Promotions and creating a new company, called Quantag, to focus mainly on developing ink for security uses under a patent it recently won.

Chromatic now is a holding company for both businesses. Small sees a massive market in developing ink for security.

U.S. companies lose an estimated $250 billion a year in product counterfeiting and fraud, according to the International Anti- Counterfeiting Coalition, a non-profit trade association.

Software companies like Microsoft lose billions of dollars annually from illegal copying and selling of their software.

Large firms like Nike and Rolex lose money when their products are cheaply reproduced and sold under their names.

"That ripples through down to the everyday consumer when companies raise prices to cover their losses from fraud," said Doug Davidson, an advisor to Chromatic.

In addition to security problems for businesses, the government is grappling with how best to track potential terrorists who use an array of fake IDs to enter the country.

Identification now can be forged using a home computer, software and a printer.

And new technology has made it easier for counterfeiters to make fake cash, forcing the government to redesign currency often.

Among the many means used to prevent piracy, fraud and counterfeiting, ink is a major component.

"There is no one magic bullet that has categorically prevented or stopped counterfeiting," said Igi LeRoux, technical director of Secura Monde International, a consulting company in the bank note and document security industries.

"Typically a compendium of features ranging from design, special inks - both visible and invisible - special printing techniques, special surface effect features (holograms, threads etc.) are deployed in concert to make counterfeiting as difficult as possible."