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November 29, 2004
Volume V, Issue 116
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To OTC Journal Members:

Global E-Point (NASDAQ: GEPT): Transitioning to Homeland Security

Global E-Point has not been on a lot of radar screens in recent months, but I believe that is going to change. The stock is very cheap and under followed, and therefore I don't believe there is much downside risk in this idea. The upside potential from the current valuation makes this one an ideal candidate for a profitable year end trade.

At about $2.50 with only 10.8 million issued and outstanding, the company is trading at a market valuation of a mere $27 million. With $20 million in annual sales, strong growth, and a move into digital surveillance with homeland security applications, the stock represents an outstanding opportunity as most companies in this particular technology space trade in the 5 to 10 times revenue range. GEPT is trading at 1.3 times annual sales.

September quarterly results show the company is delivering solid growth:

  • September quarterly revenues were about $5 million, up from $3.8 million in '03 (31.5% growth).
  • Nine months results in revenues were $14 million in revs, up from $8.2 million in '03 (70% growth).
  • The company is operating at a loss, but I believe they could turn profitable in 2005 as sales accelerate.

GEPT announced a new strategic focus for the company in 2005 today just after the market closed. In 2004 GEPT acquired two different companies with synergistic businesses. They acquired Airworks Inc., a leading producer of digital surveillance systems for commercial and aerospace markets, including its proprietary Cockpit Door Surveillance System back in April. At the same time, GEPT also acquired Perpetual Digital, a systems integrator and supplier of digital video recording systems for commercial and industrial security and surveillance.

The combination of the two companies has led GEPT to introduce a highly competitive digital surveillance product for use in cockpits on commercial airlines. Pilots can remotely view activities in the cabin via digital video. The system has already been ordered for installation in 48 planes for German based Air Berlin, and the system has been ordered for 19 planes for Lufthansa.

GEPT has also developed and is marketing electronic flight packs for pilots which will replace the cumbersome Jeppsen charts pilots lug around in those large briefcases you always see.

The video surveillance applications can also be used by law enforcement agencies. Police vehicles can upload video surveillance information to central computers over cellular. The images can be used for vehicle and visual identification remotely. Digital video is also preserved to create a video record of police activity in the event the record needs to be reviewed in the future.

Services for the airline industry will extend far beyond just cockpit surveillance. From their core competency of digital video delivery systems, GEPT is developing the technology for In-flight Entertainment. Over the next decade all the major airlines are going to have to upgrade their in-flight entertainment to compete. Jet Blue's recent success has proven consumers will gravitate towards a better quality on in-flight entertainment.

They are also working on some new technologies for in-flight internet access.

GEPT is FAA certified for electronic installations and has existing relationships with a number of carriers. Therefore, there will be lower barriers to entry as new products are developed.

Expansion for 2005 will also take the company into the corporate digital video surveillance arena. Currently, over 98% off all video surveillance in US retail stores works on archaic VHS technology. Large chains are beginning to upgrade to digital systems wherein recordings can be preserved and time frames can be located with considerable more ease and lower costs. Look for the company to deliver new business in 2005 in retrofitting existing VHS systems with a digital upgrade. This market could expand far beyond the retail environment into the banking sector, restaurants, and workmen's comp fraud protection.

Shareholders in GEPT have been on Mr. Toad's wild ride for 2004. Buyers of the stock in the $8 range six months ago are completely underwater in this one.

However, as you can easily see from the chart, the stock has been trading quietly in the $2.50 range since late July. Excessive optimism was probably priced into the stock at $8 last May. Excessive pessimism is priced into the stock at $2.50 today, which equals opportunity with short term upside.

GEPT has finished integrating acquisitions from earlier in the year. The company has absorbed the costs associated with acquisitions, and a whole new generation of homeland security and video surveillance technology is now coming out of the newly combined entities.

Volume has dwindled down to an average of only 21,000 shares daily over the past 20 trading days. This suggests all the sellers who were going to sell have done so. 

A little upside pressure could move this stock up quite easily. Today's post-close news release marks the beginning of a new era of product introduction for GEPT. Trading at about 1.3 times annual sales, the risk/reward ratio makes GEPT an excellent candidate for a strong turn around. 

If you like oversold stocks where the fundamentals have turned ahead of price, invest some of your trading capital GEPT in the $2.40 to $2.75 range. I hope the stock moves up into the $3 area over the course of this week, with higher levels in the cross hairs as the company starts to deliver some fundamental news. 

There won't be much to talk about technically until the stock starts to trade a little better. We can then cover support and resistance levels, and set an upside target and a stop loss.

Here is the complete text of today's news release which lays out GEPT's new initiatives for your review. If the company is identified on Wall Street as a player in Homeland Security, look for some high volume volatility like the recent interest in Isonics Corp (NASDAQ: ISON).

Press Release Source: Global ePoint, Inc. 

Global ePoint Announces Strategic Initiatives For 2005

Monday November 29, 4:22 pm ET 

CEO Reaffirms Commitment to Growth in Homeland Security Technologies, Product Development and Strategic Agreements 

CITY OF INDUSTRY, Calif.--(BUSINESS WIRE)--Nov. 29, 2004--Global ePoint, Inc. (Nasdaq:GEPT - News), an innovator in homeland security solutions in aviation law enforcement and high-volume contract manufacturing, announced today its Strategic Initiatives for 2005. The announcement, by Toresa Lou, CEO of Global ePoint, reviews the Company's key achievements of the past year and presents the Company's vision and business goals for the coming year. 

"In the past year, we successfully completed core strategic business acquisitions in our aviation and digital security divisions, and we believe we are now strongly positioned to be a major marketplace leader in electronic surveillance and data transmission technology," said Toresa Lou, CEO of Global ePoint. "Our optimism for continued growth through 2005 and beyond is predicated upon the continuing, booming demand for new and more effective solutions and products within the homeland security sector. Our proprietary products have already begun to achieve acceptance and validation by key standards-setting customers in the law enforcement and commercial marketplace, and we have continued to establish high-volume supply relationships worldwide through our contract electronics manufacturing division." 

Global ePoint, Inc., based in the City of Industry, California, is a vertically integrated technology and product developer, contract manufacturer and distributor of advanced homeland security products and solutions. The Company's operations are coordinated across three divisions: Digital Technology, which produces state-of-the-art digital video for homeland security and surveillance applications; Customized Computing Systems, which manufactures customized systems for the industrial, business and consumer markets; and AirWorks Aviation, specializing in on-board digital surveillance systems for the commercial aviation sector. 

Key achievements during 2004 include: 

Acquisition of Airworks Inc., a leading producer of digital surveillance systems for commercial and aerospace markets, including its proprietary Cockpit Door Surveillance System (CDSS). (April)
Acquisition of Perpetual Digital, a systems integrator and supplier of digital video recording systems for commercial and industrial security and surveillance. (April) 
Positive accomplishments reported in the Company's 3rd quarter financial results, include: 

Revenues for three months increased 29.5% over same period in previous year;
Revenues for nine months up 69.3% over previous year;
Continued integration of recent acquisitions;
Continued R&D investment yields new product introductions; 

Strategic initiatives for 2005: 

Strategic Initiative 1 -- Protect and grow margins while maintaining cost-leadership through integration of R&D, manufacturing, sales and product support functions: 

Global ePoint's key operational strength is its vertical integration. The Contract Manufacturing division provides an excellent example of the Company's effective margin protection strategies at work. In order to obtain a competitive advantage in the market place, the Company continually manages component pricing and operational costs and strives to provide scaleable, in-time production capabilities. By keeping control of all vertical functions -- from design to distribution -- the Company is able to effectively manage all processes from start to finish. By keeping these functions in-house, the Company is able to capture efficiencies and maintain a cost leadership advantage over our competitors. The Company also intends to follow a strategy of seeking out additional synergies and new cost saving structures across its three divisions. Manufacturing, sales and marketing and management strengths and core assets from the companies that Global ePoint has recently acquired provide the Company with significant leveraging opportunities it intends to pursue and exploit. 

Strategic Initiative 2 -- Horizontal product and application expansion, such as new video cameras, network security applications and access control systems: 

Global ePoint is committed to building its R&D program, especially in light of technology and intellectual capital that has been incorporated to the Company through its acquisitions. The Company recently added a new business unit with the purpose of developing new technology as well as augmenting existing technology. One example of this business unit's efforts is the development of breakthrough compression technology for next-generation digital video and Internet-protocol applications for commercial, consumer, and other security and surveillance needs. 

The Company is developing proprietary Internet protocol (IP) camera for special weapons and tactics team (SWAT) surveillance operations to transmit real-time, streaming video and audio. This is a very powerful information gathering, transmitting and sharing technology in pressing demand by the nation's diverse network of first responders, law enforcement and intelligence organizations. The Company is also active in supplying technology and products to the military and defense marketplace; it has previously announced delivery of a prototype advanced digital video recorder that is currently undergoing evaluation for use in U. S. Air Force B-1 Bombers. 

Strategic Initiative 3 -- Expand sales, marketing and strategic partnerships to include additional applications and geographic markets: 

Global ePoint is expanding its marketing and sales efforts to build brand awareness of our security products and applications across diverse and emerging market places. The Company intends to pursue strategic relationships where appropriate. It has already successfully entered the Mexican contract electronics marketplace, supplying 40,000 personal computers in the last quarter of 2003 to customers there, with continuing sales development efforts in progress. The Company is also developing initiatives to provide digital video security recorders to the Mexican banking industry, which are now required by law to be installed in banks in that country. The Company intends to continue to expand globally as demand for its higher-end PC systems grows. In addition, with demand increasing for security products, strategic alliances will help the Company gain more rapid market penetration and revenue growth. 

Strategic Initiative 4 -- Continue both organic growth and synergistic acquisitions: 

The Company intends to continue and extend its successful track record of identifying, closing and integrating acquisitions established. Over the past two years, Global ePoint closed major acquisitions in each of the Company's three divisions. Airworks, Inc. provided core surveillance technology integral to cockpit security in aircrafts. Perpetual Digital enabled the Digital Technology division to greatly enhance product offerings in the digital video surveillance space. The acquisition of intellectual property from Sequent Technologies, Inc. brought an extensive portfolio of proprietary technology in the design, development and manufacture of video transmission systems. The Company will continue to examine unique and complimentary technologies, but will remain careful to determine which firms offer the best and most accretive fit. Shareholder value is a top priority; the Company will never undertake an acquisition without thorough due diligence and 100% confidence in the long term effects of any acquisition on its business. 


Global ePoint is enthusiastic about its early successes and the numerous milestones achieved to date. Most importantly, the Company looks forward to substantial growth in revenues, earnings and, ultimately, in shareholder value. The Company is positioned to create market momentum within the homeland security arena in order to further expand brand awareness and cultivate new strategic alliances. Global ePoint's mission is to become the leading force in digital surveillance, homeland security and information-gathering applications, while building upon consistent revenues in contract manufacturing of personal computers and electronics. 

About Global ePoint 

Global ePoint's growth catalyst, through its wholly-owned subsidiaries, is the design, manufacturing, sales and distribution of digital video surveillance systems for the law enforcement, military, aviation and homeland security markets. On the cutting edge of digital technology and seeking to expand its product line, Global ePoint is developing new compression technologies and next-generation, secure network digital video systems and servers for a wide range of new markets and applications. As a solid recurring revenue stream, the Company also manufactures customized computing systems for industrial, business and consumer markets, as well as other specialized electronic products and systems. Complete vertical integration -- from design and manufacturing to sales and distribution -- allows the Company to capture efficiencies and maintain a cost leadership advantage in these growing markets, particularly homeland security. For more information, please visit

Cautionary Statement 

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the company's current expectations, estimates and projections, management's beliefs and numerous assumptions, all of which are subject to change. These forward-looking statements are not guarantees of future results and are subject to numerous risks and uncertainties. Our actual results could differ materially and adversely from those expressed in any forward-looking statement. For example, deliveries may be delayed or installations canceled. Regulations may change and negatively affect demand for our products. There can be no assurance that the company's subsidiaries and/or divisions will be able to achieve growth of sales or market share. The forward-looking statements in this release speak only as of the date of this release. We undertake no obligation to revise or update publicly any forward-looking statement for any reason. These and other risk factors are detailed in our periodic filings with the Securities and Exchange Commission. 

     Global ePoint, Inc.
     Toresa Lou, 909-869-1688
     [email protected]

Source: Global ePoint, Inc.

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