Danny Johnston, President & CEO

What a great first half of the year for the Company!!! Both Safe Systems and Gladiator have maintained solid revenue and profit growth while adding additional personnel and technology infrastructure to both divisions. Consolidated revenues are up 27% over the same period for 2004 and both revenue and expenses are right on our projected budget for the 2005 year. New customer growth remains very strong and the existing customer renewal rates remain at an incredible 99%, reflecting our overall high customer satisfaction ratings based on our surveys.

We have added additional regulatory and compliance personnel to maintain our leading position as a key consultant to our financial institutions in such matters as we continue to grow. Additionally, our informative webinars, timely e-blasts, and comprehensive training classes have greatly enhanced our financial institutions ability to be proactive in training your employees on security and technical issues and anticipating new regulatory areas of emphasis, in an informed manner.

Safe Systems network installation sales are up 12% and support contract revenue has increased by 16%. As mentioned in my 2004 review letter, we have hired additional account managers and re-aligned territories to enable Safe Systems to be more involved with assisting each customer with both regulatory and technical issues. Our project management group has added an additional PM. The Annual System Review document has been reformatted to be easier to be read easily by non-technical client employees and has been expanded to address new customer and regulatory expectations.

Gladiator CoreDefense 24×7 monitoring revenue is up 64% as we continue to grow across the country. Our business partners, Jack Henry & Associates and CSI/ATTUS, have been terrific in helping us achieve our revenue goals and we were recently endorsed by the Georgia Bankers Association (GBA) as a Strategic Partner. Our intrusion prevention monitoring layer has been highly successful and, when added to our other monitoring components, allows for our new correlation engine to monitor security events from a client’s technology infrastructure in a comprehensive manner. The report module has been reformatted as we continually look for ways to present important information in ways that help our financial institutions manage their systems effectively. Our SAS Type II audit is in process and going very well. We are also close to making two major new product announcements.

Finally, we are proud to announce that Ben Murphy, Gladiator’s Director of Secure Operating Center Operations, achieved the highest test score and ranking in North America and second highest score in the world on for his Certified Information Security Manager (CISM), a test that had over 16,000 information security specialist participants last year. He was asked to address their convention in Las Vegas this spring. Congratulations to Ben.

Thank you for your trust and confidence. We appreciate the opportunity to be your partner.

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