Darren Bridges, President

The first half of 2007 has been very exciting for Safe Systems. Things have settled down from the news of the recent acquisition of our sister company Gladiator Technology, and Safe Systems is on track to have another great financial year. With regard to the acquisition of Gladiator, let me reiterate that our ultimate goal is that this separation will be seamless to you, our valued customer. We will continue to offer Gladiator’s monitoring services to our clients, and your Account Manager will still represent both companies. We want to continue to offer the best products and services to our customers, and we feel that this arrangement will allow us to do this from both companies’ perspectives.

From a financial standpoint, Safe Systems achieved solid revenue and sales growth for the first half of 2007. Our first half revenue exceeded the same period last year by 12%, and we are on pace to again see more than 20% revenue growth over 2006 fiscal year end revenue. This continued strong revenue growth is fueled by strong sales in the DeNovo installation market and a continuation of our 99% customer retention rate on Support Contracts. Contracted Sales hit an all-time record during the second quarter of 2007, and the forecasted outlook for the third quarter remains strong. We continue to manage our expenses within forecast, and we are on track to see solid operating income results for the fiscal year.

From a Support standpoint, the launch of NetGUARD (our monitoring product) has been extremely well received by our clients as we have signed up 36 customers since its launch. NetGUARD allows us to change our fundamental approach to a more proactive model by providing support for your institution. For example, instead of a bank calling us when their email stops working, we can spot the issues that are occurring before they take the email system down. Furthermore, several of our Senior Technical Staff recently spent a week in Boston working on future enhancements to this product, and there are big plans to expand the scope of what this product can provide in the daily management of our client network environments in the coming months.

Our Education Department continues to develop new classes and webcasts. One of the key products that we foresee being implemented into our client base within the coming months is the latest version of Microsoft’s email product, Exchange 2007. In addition to many new features, Exchange 2007 provides a greatly enhanced capability to remotely access email. Our Education Department is also working on a Certification Program for our customers that will address the variety of training needed to successfully remain on top of managing and administering a network while adhering to regulatory and compliance requirements. Also, we have seen a continued growth in our training package offering which gives our customers a way to prove to examiners that they have a focus on Information Technology and Information Security training.

Our internal Research Group has been working on several key offerings that you will soon be hearing more about including our Network Disaster Recovery Planning and Testing Services and our Email Archiving Solution. Our Centralized Backup Solution completed Beta Testing several months ago and has been integrated into many of our clients’ network infrastructure. Also, we have recognized a continued interest in our network hardening services. Either before or after your next Vulnerability Assessment, we can resolve security issues and give your management team the ability to prove issues have been addressed and resolved.

Finally, I want to thank you for trusting us not only as a technology partner but as a business partner. Our reputation, in that regard, is our most valuable asset. I hope to see many of you in the coming months as I plan on visiting as many clients as possible. In the meantime, if there is anything that I can do for you, please do not hesitate to call.

Sincerely,

Darren Signature
Darren Bridges
President

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