MDI's CEO J. Collier Sparks Says 'Worst Times' Are Over

Sparks' company address outlines plans for future of business, new product angles


NEW BUSINESS -- Our team has managed to increase the Company's business with implementations of our SAFEnet and VIEWpoint integrated video security solution at a new United States Air Force facility on the West Coast. This project has resulted in approximately $450,000 in revenue. As implementations like this one prove successful, we will use the knowledge gained with each project to increase our penetration into the commercial and the middle market with similar solutions.

Recent Accomplishments

In August, the Company successfully raised approximately $4 million through the sale of common stock to a group of private investors. This gives the Company cash it needs to further its business plan. In addition to this, we recently received notice from Nasdaq in August that we were back in full compliance with the Nasdaq SmallCap Market Place Rules. With these two issues resolved, we can devote all our time and efforts on developing the business.

In order to succeed, our business must be developed through our Security Dealers and Security Solution Partners. As we do not sell directly to end users, our dealers are the primary point of focus in our latest marketing efforts. We have signed 44 new dealers in the first half of 2005. This is equal to the total number of dealers signed in all of 2004.

In July, we announced that we had signed a business agreement with the PSA Security Network, the largest buying cooperative of its kind in the world. This network includes over 250 dealers nationwide. We are dedicated to the PSA network and will invest the necessary resources and manpower to make this relationship a success.

A Word About Our Stock

We care about our shareholders and the ability for them to realize a fair return on their investment over time. But, we do not, and will not, operate the Company, or issue "news releases," or otherwise promote ourselves in a way designed to artificially cause movement in the price of our stock.

2005 Summary

I will now summarize some of our activities and accomplishments over the first half of 2005.

(i) Upon completing our review of our mid-year results, it became apparent that we did not require the level of staffing that we had for the first half of the year. As a result, we have been able to reduce our headcount by 25%. As our business increases, we will ramp-up to meet demand.

(ii) We successfully launched a new line of video security products, which we sell under the VIEWpoint brand. This new product line was developed based on the needs and requirements of our Security Dealers and their customers.

(iii) We successfully launched a new mid-level integrated access control product, which is based on the SAFEnet software platform. This application, which we branded as iTRUST, is more affordable and easier to use than our enterprise-level SAFEnet system because it is designed to handle the access control and monitoring functions for organizations who need an entry-level system.

(iv) Our SAFEnet Open System Integration platform was awarded integrated physical security product of the year by Network Defense Product News (a Government Security News Publication) at the ISC West conference in Las Vegas.

(v) At the same conference, we introduced our nTEGRITY line of access control readers and biometrics. This line gives our Security Dealers an affordable package for iTRUST customers while allowing them to purchase everything they need from one single source, minimizing order complications and delays.

(vi) We introduced the Company's first formal software maintenance packages, complete with tiered pricing levels, focused on streamlining technical support while increasing revenue.

(vii) SAFEnet became the first (and only) security product in the industry to receive NIST certification on its proprietary Advanced Encryption Algorithm.

(viii) MDI received UL 1076 and UL 294 certification on SAFEnet in advance of the new UL Listing requirements.

(ix) The Company's iTRUST small business solution was awarded Security Technology of the Year for 2005 by Secure Convergence Magazine.

(x) MDI's SAFEnet and VIEWpoint products were chosen to secure Singapore's National Day Parade.

(xi) MDI signed an agreement with the PSA Security Network to offer its iTRUST, VIEWpoint and nTEGRITY products to over 250 PSA Member Dealers.

2005 Challenges

Despite our accomplishments in 2005, there are many challenges in front of us that we will have to meet head on. These challenges include: