Press Release Source: MDI, Incorporated
MDI, Inc., State of the Company Address
Tuesday July 24, 1:34 pm ET
J. Collier Sparks - CEO and President Letter to Shareholders
SAN ANTONIO--(BUSINESS WIRE)--MDI, Inc., (NASDAQ:MDII - News): The first half of the year has come to a close and we will soon be filing our 10-QSB, which will give you the results of our second quarter. Those results will not tell you all that we have truly accomplished or where we are headed as a company. The 10-QSB will mainly focus on what our specific financial results were for April, May and June 2007.
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I would like to take this opportunity to detail to our shareholders some of the initiatives that we have accomplished over the course of the last 6 months and why these actions are critical to our go-forward strategy. I am truly excited about our company's strategic direction and financial future and I look forward to the last half of this year as the most lucrative six months in the company's history. It is my hope that you, our investors, will appreciate how a dedicated group of talented people, a proven security management product and a long list of key government and corporate clients have banded together to re-build a company and position it to succeed at a level far beyond the industry's expectations.
With a growing list of blue-chip business partners, a new small business product soon to hit the market, a strong international presence in a growing overseas market, a new dedicated sales initiative which is designed to drive business in government channels and an amazing opportunity to gain a majority share of the educational safety and security market, it is easy to see why my belief in our company's future is now stronger than ever.
I have detailed some of our key issues, initiatives and accomplishments below. Please take the time to understand how each of these sections come together to fulfill a strategy that we believe will strengthen our corporate direction and position us for future growth. Thank you for believing in MDI.
1. Integration of Learn Safe(TM) and the Safe Programs into MDI - Last week we announced that the "Safe Initiatives", including Learn Safe(TM), Work Safe(TM), Play Safe(TM) and Live Safe(TM), now belong to MDI. Stratis Authority, Inc. was the former owner. Let me concentrate on Learn Safe because it is the initiative where we are dedicating significant resources. Learn Safe is an initiative designed to locate, contract with and provide financing to schools for a broad spectrum of security services and products rolled up into a turn-key program. For those of you who may not know, MDI has sold security systems to public and private schools for over twenty years. We chose to join the Stratis team because our school-based systems, in the form of a complete safety and security program, would be much more appealing to school districts, especially when the program is delivered with multiple financing options. However, during the course of the last six months, it became evident to MDI and Stratis that Learn Safe, in the hands and control of MDI, was a much better decision for the program than if it had remained in the control of Stratis. It was through MDI's efforts in recognizing that a program of this magnitude would need to integrate the right partners to sell and scale nationally.
By focusing on bringing the right global partners into the Learn Safe program, MDI was able to achieve scalability while creating barriers to entry. By successfully partnering with two industry giants, Nortel and ASSA ABLOY, the program immediately achieved technical, installation, product, service and sales penetration goals. These multi-billion dollar organizations each saw the value of the program and the future potential in capturing a large share of the educational security market. Each has dedicated time, staff and corporate resources that we believe will make Learn Safe a success.
By signing the SBS Group, an innovative company of professional school-based psychologists with a "train-the-trainer" behavioral intervention curriculum that adds proactive prevention to a school's safety program, we have a huge competitive advantage that will be difficult for other security partnerships to replicate. In the past few weeks, MDI has added additional opportunities to the Stratis sales pipeline. We are expecting to announce several of these opportunities in the near future as we continue to develop, refine and automate the lead management and sales processes within the program.
2. Stratis Authority Issues - MDI did not buy Stratis Authority, Inc. MDI has no relationship with Stratis Authority, Inc. and, in fact, MDI now owns the name "Stratis", but does not intend to use that name partly due to its limited operating history. Stratis Authority will transfer a large book of targeted business opportunities that exist within the various "Safe" initiatives, a one-of-a-kind school safety and security program designed for educators-by-educators, a world-class board of advisors, a national advertising campaign and numerous other business related items that will drive future value to MDI.
3. Stratis Authority Employees and Board of Advisors - Jim Vandevere, Jack Walser and Kelly Tomeo have agreed to become employees of MDI dedicated to further growth and development of the "Safe" Initiatives. They will assist in closing the opportunities that they have brought to the table within the existing sales pipeline, while growing new opportunities across all initiatives. As part of the MDI business development team, they now have the full set of resources necessary to succeed. We welcome them to MDI and anticipate that they will be instrumental in the development of future business for the company. MDI also will continue the relationships with the Learn Safe Board of Advisors and are hopeful that they will continue to be able to bring their talents, expertise and professional relationships with school decision makers to MDI in development of future Learn Safe opportunities.
4. Jim Vandevere Board Issues - Jim Vandevere came on the Board of MDI after MDI and Stratis agreed to become business partners. Our board had 5 members at the time and Jim made 6. By the Nasdaq Stock Market standards, all companies must have a majority of its board "independent" and Jim qualified at the time as being independent. With the addition of Jim, the Board had 4 independent directors out of 6. A clear majority. We realized, however, that there might come a time when the relationship between MDI and Stratis Authority, or with Jim personally, might cause Jim to lose his independence and, in such events, Jim agreed that he would resign as a member of any committees of the board and from the entire board if that was in the best interest of MDI.
When MDI took over the Learn Safe Initiative, Jim agreed to become an employee of MDI, which resulted in him losing his independence as a board member. So, he resigned in July from the board of MDI. The board now has 5 members, of which a majority is independent. As an employee focused on high-level business development and sales, Jim will have much more impact on the company's bottom line.
5. Building Ownership - MDI announced in June that it had entered into an agreement to purchase a 49.9% interest in its former headquarters at 9725 Datapoint Drive in San Antonio, Texas. Upon further examination of the accounting details of the agreement, we realized that the put option may negatively impact short term net income for MDI. Accordingly, we are reconsidering execution of the Datapoint transaction and we are examining other, more appropriate alternatives that are in line with our growth strategy. For example, MDI and the owners of our existing facility at 10226 San Pedro Avenue have recently been examining the possible purchase by MDI of 100% of our current building complex, which consists of a two-story concrete office building and a separate, but adjacent and connected, two story Georgian brick office building, which is fully leased by a solid tenant. The total facility is in excess of 50,000 square feet. MDI occupies the top floor of one building, which was completely renovated prior to our moving there in January 2007. We believe we will need additional space for growth during the next 6-18 months, so it may make sense to own the entire building rather than leasing space here and owning 1/2 of another building. We will keep you posted as we learn more.
6. 2007 Revenue - This has become a hot topic for the short-term shareholder because on March 1, 2007 we issued a press release announcing our receipt of a multi-million dollar blanket purchase order from Stratis Authority, Inc. We stated at that time that we would begin work immediately to become prepared to fill any and all orders for specific projects that Stratis might place on us. To that end, we proceeded to take appropriate actions, including hiring a number of qualified personnel and partnering with industry leaders as mentioned in section 1 above. As the new owners of the "Safe" Initiatives, and based on the current sales pipeline, we are in the process of forecasting what the potential revenue from the Learn Safe Initiative might be for the remainder of 2007. We are fairly sure that it will be significant, especially when compared to our revenue over each of the last 2 years. Furthermore, under the leadership of Michael M. Garcia, our Senior Vice President of Sales and Marketing, we have made major inroads into selling our products and services to school districts through the Learn Safe Initiative over the last two months. As previously announced, MDI was recently awarded a purchasing contract from a school cooperative purchasing network in Texas that covers multiple states and state government agencies. This was a huge win for us as it allows MDI to market directly to the entire membership of the network, comprised of over one thousand school districts, while bypassing any need for competitive bids. Learn Safe recently sponsored a conference held by the National Association of School Boards and every component of the program was accepted with great success.
Our focus on business in Texas and the South Eastern United States over the last few months has been paying off and we expect to have news of specific awards very soon. We will provide details as soon as we are able.
As you can see, these new opportunities, combined with sales feedback from the existing Learn Safe book of business have allowed us and our program partners to remain optimistic about achieving our goals in the second half of 2007. We believe in the power of the Learn Safe program and are moving forward together. Time to market is critical and we are positioning ourselves to succeed.
MDI's sales plan consists of five different market initiatives. These include:
Learn Safe (and other "Safe" Initiatives) - as explained above
New Federal Government Business
Systems Upgrades for Existing MDI Clients (government & commercial)
Middle East Business Development Opportunities
Up-selling into Existing Nortel Commercial Channels
To launch our new Federal Government business development efforts, we are pleased to announce that we have added former Homeland Security Official Justin Oberman to the MDI team. Justin is former Assistant Director of the Transportation Security Administration. He will advise me and direct all business development activities in the Washington, D.C. beltway area for MDI Security Systems. His experience in developing the Office of Transportation Threat Assessment and Credentialing, where he was responsible for programs to identify terrorists seeking to exploit the transportation system, and his contacts at the highest levels of government security will be key to assisting MDI to develop new business in the Federal Sector.
In addition, we will soon be announcing our association with a successful government sales organization in the D.C. area that will allow us to have a multi-tiered sales force, sales offices and dedicated conference and demo area as part of our launch.
To expedite our sales channels in the Middle East and within the Nortel organization, MDI has contracted the services of John Linton, former CEO and COO of SecureInfo Corporation and principal partner in Clearview Partners, LLC, a consulting and investment firm. Linton has extensive knowledge of Nortel's business model and existing sales channels and will spearhead all business initiatives within the partnership. These initiatives include bundling MDI's new small business access control product, PointGuard Xtreme, with current Nortel small business IT offerings and sold through both IT and physical security distribution channels. PointGuard Xtreme will be formally launched by MDI next month.
John will also manage the relationship between MDI and Almana Networks in the Middle East, which is already projected to bring in over 1 million dollars this year.
7. Sale of 5.3 Million Shares - On January 31, 2007, we entered into a purchase agreement with Stratis Authority, Inc. to sell approximately 5.3 million of our shares for $2.6 million. The shares were priced at a premium to market and thus we agreed to let them be paid for over 6 months starting in March 2007. It developed that the financial backing for Stratis Authority, Inc. deteriorated to the point that it could not pay for the shares without jeopardizing its financial stability. Accordingly, MDI and Stratis began discussions about finding alternative sources to finance the purchase of the shares. Ridgemont Investment Group LLC has agreed to purchase the 5.3 million shares for $2.6 million. Ridgemont will, in turn, have control over the ownership of the 5.3 million shares once MDI receives payment for them. At the same time, it was agreed that the Safe Initiatives should be delivered to and operated by MDI.
In closing, while all shareholders may not agree with some of the decisions made by the company, it is the goal of each and every employee at MDI to provide the greatest possible return to our shareholders. Thank you once again for your continued support.
Sincerely,
J. Collier Sparks
CEO & President
MDI, Inc.
About MDI, Inc.
MDI (NASDAQ:MDII - News) manufactures security technology solutions designed to protect people, facilities and assets. These solutions are unified by ONE Technology. ONE Technology unifies security point products, systems and subsystems into a common management platform. Far beyond the Integrated Security Management software promoted by industry competitors, ONE delivers an open architecture environment that adapts each individual application and device into its platform -- promoting global collaboration as ONE system. The MDI product family currently protects over 8 million alarm points across the globe for many of the world's most recognized organizations including Microsoft, MBNA Worldwide, John Deere, Pepsi, FBI, TSA, Fidelity Investments, Bureau of Engraving & Printing, American Express, Department of Defense, IRS, Disney, Smithsonian Institution and MIT to name a few. The company has received numerous industry awards for their security technology including Frost & Sullivan's Security System Technology Leadership Award and the Security Industry Association's Best Integrated Product Award for 2006. For more information on MDI or its diversified line of products and professional services, please visit www.mdisecure.com.
Forward-Looking and Cautionary Statements
Except for historical information and discussions contained herein, certain statements included in this document may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included in this document, other than statements of historical fact, that address activities, events or developments that management expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "project," "forecast," "plan," "may," "will," "should," "expect" and other words of similar meaning. Investors should not rely on forward-looking statements because they are subject to a variety of risks and uncertainties and other factors that could cause actual results to differ materially from the Company's expectation. Additional information concerning risk factors is contained from time to time in the Company's SEC filings. The Company expressly disclaims any obligation to update the information contained in this release.
Contact:
MDI, Incorporated, San Antonio
Investor Relations Contact:
Richard A. Larsen, 210-582-2664
Richard.Larsen@mdisecure.com
or
Media Contact:
Michael M. Garcia, 210-477-5400
Mike.Garcia@mdisecure.com
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Source: MDI, Incorporated
