BRIGHT FUTURE; COMPANY HAS ITS PRINTS ALL OVER THE GROWTH OF IMAGING TECHNOLOGY.

Byline: Ben Sullivan Daily News Staff Writer

At first glance there would seem little in common between Arete Associates Inc.'s two standard-bearer products: graphics software to simulate water and sky in movies, and a fingerprint-identification system for security and time-clock applications.

But there is one common denominator: Both products of the Sherman Oaks-based company exploit once-classified imaging technology developed by company president and CEO Stephen Lubard for the U.S. Department of Defense.

Lubard's is a classic tale of a Southland military contractor-turned-entrepreneur. And, based on the success of commercial products developed and marketed by Arete, he plans to take its subsidiaries public in the next 18 to 24 months.

Toward that goal, ``I'm working as hard as I can, as fast as I can,'' the often-reticent Lubard said.

At the heart of both Arete product lines are algorithms - sets of mathematical equations that describe how data is to be manipulated - with roots in the Cold War.

Lubard had been an employee of defense contractor R&D Associates in the 1970s when he and four colleagues split off to pursue their own line of research. Lubard won't say precisely what that research was, but their company worked on oceanographic projects for the U.S. Navy to identify submerged objects with radar and laser soundings. The firm also developed software to mimic waves, currents and eddies and help the Navy better understand water masses.

``The key to both technologies is the physics that goes with the phenomenology of imagery,'' Lubard said.

Over the course of two decades the company grew from five to more than 100 employees and developed a reputation as a well-respected, low-profile government contractor.

But cutbacks in military spending after the Cold War spurred Lubard to seek other markets for the technology and talent he had amassed.

Since both Arete Image Software and Biometric Identification Inc. were formed in July 1995, the group's biggest commercial success has been in sales of the graphics software spun off from its oceanographic research.

Arete's Digital Nature Tools, a package that retails for about $5,000, has been used in the production of such big-budget films as ``Waterworld,'' ``20,000 Leagues Under the Sea,'' ``The Island of Dr. Moreau'' and ``Titanic.''

The software lets filmmakers simulate waves, spray, current and other phenomena in scenes that would be too expensive, impractical or physically impossible to shoot with real water.

Playing the devil in an upcoming film, actor Al Pacino is seen at one point walking past a pool of water. As he passes, the water bunches up near Pacino and follows him the length of the pool. That's Arete software at work.

Karen Goulekas, who used Arete software as digital effects supervisor on ``The Fifth Element,'' described it in a written statement as ``very cool.''

``It is very difficult to tell the difference from the real thing,'' Goulekas said.

Arete Image Software should generate about $1 million in revenue for the company this year, Lubard said.

Still, for all the relative glamour of the simulation software, it may be Arete's other commercial wing that has the larger revenue potential, Lubard said.

Biometrics - using biological characteristics as a way to identify an individual - is one of the fastest-growing fields in security and time-and-attendance control, industry officials say. And Arete's Biometric Identification Inc. earlier this year began shipping a product that observers say could give the $100 million-a-year biometrics industry a major push forward.

The Veriprint 2000 by BII is a dull-looking white, metal box about the size of a large brick. On one side is a small glass plate with a tiny LCD screen above it.

When a thumb or other finger is pressed against the plate, the Veriprint scans it. If it matches a prerecorded print, the machine sends a message that can open a door, allow access to a computer or simply record that a person has shown up for work.

The machine uses the same sort of signal-recognition algorithms that let advanced radar systems accurately differentiate objects in a background of signal ``noise.''

In August, the Venezuelan Congress bought 290 of the BII devices, which sell for about $1,200 each, to help prevent fraud in the legislative chambers.

Venezuelan federal lawmakers are allowed to assign proxies to vote on their behalf, but until recently there was no way to tell whether someone claiming to represent an absent legislator was indeed an approved surrogate.

``What was happening was (legislators) were sending down their brother, or friend or whoever to vote,'' said Tom Reilly, director of software engineering for BII. Amid the hubbub, false proxy votes were sometimes cast.

With the Veriprints in place, votes cast by anyone not included in the machine's database are rejected until the person's authority is verified.

The deal grossed more than $200,000 for BII, about one-fifth of what Lubard expects in first-year revenues for the firm.

Because of their reliability and relatively low cost, the BII machines will lead the way in making biometrics available to small and midsize firms, said Donald Kirkendall, vice president of Jason Data Systems Inc., the nation's largest reseller of time-and-attendance equipment.

Other firms market similar machines, Kirkendall said, but because of weaker algorithms they have far higher failure rates - either not identifying legitimate prints, or mistaking false prints for the real thing.

``Theirs works,'' Kirkendall said, adding that Jason Data has presold 300 Veriprint machines and expects to sell up to 1,000 in 1998.

Lubard said he expects to take BII public sometime in 1998. Arete Image Software officials say they similarly are preparing for an initial public offering in the next 24 months.

Further, Lubard said he is considering starting two more companies based on Arete technology, though no final decision has been made. And in true Cold War fashion, he is keeping the nature of their potential work mum.

``Over the years I've learned to switch direction on an instant,'' Lubard said of his interests in the entertainment, military and industrial worlds. ``That's an absolutely essential trait to someone trying to do a start-up like this.''

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3 Photos

Photo: (1--color) In addition to identification imaging, Arete Associates also develops effects for movies such as ``The Fifth Element.''

(2--color) Engineering executive Curt Harkless demonstrates the Arete software that scans fingerprints for access control.

(3) Angus Taggart, senior software developer for Arete, creates an image of water and a sphere with company equipment that is used in movies.

Michael Owen Baker/Daily News