UPDATED SHAREHOLDER LETTER:::::
Homeland Integrated Security Systems, Inc.
A GLOBAL TECHNOLOGY COMPANY
February 26, 2007
To Homeland Integrated Security Systems, Inc. Shareholders:
This is the most recent letter that I have written to our shareholders. It replaces the letter we published on February 15, 2006, because there have been some significant developments since we posted that letter. I would also encourage you to read the other letters dated July 27, and October 20, and November 15, 2006, if you haven’t done so already. These letters each contain information that I will be referring to in this letter. All the CEO letters can be accessed at our web site, www.hissusa.com.
The major new development concerns Evans Systems, Inc. On January 5, 2007, Evans Systems was named a defendant in a lawsuit in which Big Apple Consulting, USA, Inc. was the plaintiff. The allegations in this suit were outlined in Evan’s annual report, which can be viewed on-line. Since we published the earlier CEO letter, which this letter replaces, we have been able to settle the lawsuit with Big Apple. More details regarding this settlement will be published later.
Our next task will be to focus on the suit that has been filed by former Homeland Integrated Security Systems, Inc. CEO and President, Frank Moody II. His suit names Homeland and its
directors as defendants and claims that he is due shares of Evans common stock. The Company vehemently denies his claims and has countersued Moody. The issue is before the Courts in
North Carolina.
Looking back at 2006, it was a very challenging year for Homeland. Frank Moody II, Chairman, CEO and President, resigned from the company in June. This meant that the two company
founders had now left the company. After I agreed to become CEO and President in July, our new team conducted a total review of our entire operation, from culture, strategy, through to our
operations, including financial reporting. As a result of the financial part of our review, our management team adjusted 2006 financials to reflect changes in earlier period statements. We
also embarked on a major campaign to reduce costs. This has led to our decision to close our two cellular stores in 2007, and consolidate operations at our Asheville headquarters.
Another adverse event in 2006 was our stock price. The Company has experienced significant dilution due to the conversion of Preferred Stock to Common Stock, and the fact that the company itself continues to rely on stock sales in order to complete development of the Cyber Tracker product line in other formats such as GSM. As a result, there has been a significant
increase in the number of common shares outstanding. These additions to the stock float, among other factors, have adversely affected the price of our stock. However, the worst of the “storm” appears to be over. We can now focus on a long range plan to reduce the number of shares in the float. This is a high priority for the Board, which now consists of Ian Riley, Brian Riley and myself.
Evans Systems Inc., our sister bulletin board company, also presented challenges for our management team. As you know we were able to complete the dividend of Evans stock for our HISS shareholders in October. And, in October, we were able to sign a Letter of Intent to purchase TeleCents Communications, Inc. TeleCents was a privately held telecommunications company that provides Voice Over Internet Protocol (VoIP) services, internet based call-on demand, and pre-paid, PIN based calling card services. We were very excited about TCI and the opportunities it presented in the future. Unfortunately, TeleCents management pulled out of the non-binding LOI when we notified them during the due diligence process that we were facing two lawsuits.
Another factor which adversely affected us in 2006 was the political situation in the Middle East, particularly in Lebanon. We have spent considerable resources in developing strong ties in the region. We had done this because there was a high level of interest in the Cyber Tracker and we also had the opportunity of selling explosion detection devices in Lebanon and later in Iraq. Unfortunately, our opportunity to sell explosion detection equipment was lost. However, our prospects remain very bright with respects to selling the Cyber Tracker in the region.
2006 also had a great deal of positive activity. For example, our team completed the development of the iDen version of the Cyber Tracker in May when it was certified on the Sprint/Nextel
network in May. We conducted a national campaign to solidify our relationships with Sprint/Nextel field sales people. We developed strong relations with carriers in Europe and the Middle East. We made the decision to refocus the Cyber Tracker away from our sea ports after learning that doing business in the ports is very complicated. We decided to take advantage of the Cyber Trackers capabilities as a “Smart Box” and focus the Cyber Tracker in the M2M arena. M2M stands for Machine to Machine, Machine to Mobile, and Mobile to Machine. M2M offers
significant new opportunities for businesses across major industries to compete more effectively in our information economy. Management believes that this market vertical has tremendous potential for increasing sales in the future.
In order to capitalize on M2M applications, we have added software programming capabilities to complete the final integration of OBDII and J-bus telemetric applications. OBDII, or “on board diagnostics” is available on all cars and light trucks manufactured after 1996. The OBDII portal has thousands of bits of data that are available all the time. The CT can be set up with the correct programming to send select data to the vehicle owner/operator or any other authorized party. Some examples of functions would be: engine diagnosis, oil pressure, water temperature, airbag deployment just to name a few. J-bus is a similar technology, but is geared to heavy equipment
and trucks.
Another exciting new offering is the solar powered Cyber Tracker. As we announced several weeks ago, our solar powered CT is in the alpha testing phase. The unit has performed
flawlessly in testing and is providing continuous tracking and service with no interruptions of power. The successful development of this product will open more sales opportunities such as the millions of heavy duty trailers in the U.S.
Everything considered, despite the “ups and downs” we were able to make a great deal of progress and are poised to move out of the start-up phase during 2007.
2007 will be an important year for our company. We are beginning our third year of operations
and there are many significant milestones ahead. For example, we will complete the development of the GSM version of the CT this year. The GSM version has passed all the necessary FCC testing and is waiting for the GSM network approval. We believe that if all goes well we will have units in Cingular/ ATT’s hands for their final approval at the end of the first
quarter of 2007 or early second quarter. Completion of the required testing will allows us to begin selling our GSM Cyber Tracker on a worldwide basis. This presents a significant
opportunity for us to add sales.
The Board has also decided to focus our growth strategy through acquisition using Homeland as the base company. We plan to change the name of the company to Global Tek and elevate it to
the bulletin board. This can be done by completing a form 10SB filing with the Security Exchange Commission, or by merging Homeland into an existing bulletin board. In any event,
Global Tek’s business plan will be to acquire dynamic private companies which offer advantages such as innovative technology, a strong potential for profitable growth, a significant competitive advantage, marketing channel strength and current financial stability. These companies will be integrated into Global Tek or in some cases “spun out” as independent public corporations. In the latter case, Global Tek will retain a minority ownership position.
Homeland Integrated Security Systems will also continue to pursue additional market opportunities outside the US. In addition to our original relationship with Xpress
Communications in Amon Jordan, we have made additional sales in Saudi Arabia with Bravo Communications. We are in the process of developing a relationship with a carrier in Singapore.
They have purchased units for testing and evaluation and we are hopeful that an initial sales order will come by the end of first quarter or early second quarter. In addition, we are currently in varying states of negotiation with six other countries in the Middle East and Far East to resell our Cyber Tracker.
Of course, a major objective of the Board will be to enhance share holder value. It is a long term effort that can be accomplished by reducing the number of shares outstanding, increasing sales, and growing though acquisition. This is a top priority and we will work diligently to accomplish our goal.
I would again reassure our share holders that the HISS Board is working very hard to bring success to the company. We are confident that we have a long term strategy that will accomplish
this. We plan to “keep in touch” with you with a new newsletter and a Telephone Conference later in the year.
Sincerely,
Fred Wicks
CEO and President
Homeland Integrated Security Systems, Inc.
Safe Harbor: This letter contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the ability of the Company to successfully implement its turnaround strategy, changes in costs of raw materials, labor, and employee benefits, as well as general market conditions, competition and pricing. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forwardlooking
statements included in this letter will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as representation by the Company or any other person that the objectives and plans of the Company will be achieved. In assessing forward-looking
statements included herein, readers are urged to carefully read those statements. When used in the Annual Report on Form 10-K, the words "estimate," "anticipate," "expect," "believe," and
similar expressions are intended to be forward-looking statements.
Homeland Integrated Security Systems, Inc.
A GLOBAL TECHNOLOGY COMPANY
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