Mr. Douglas Dyment reports

GATEKEEPER SYSTEMS PROVIDES CORPORATE UPDATE

Gatekeeper Systems Inc. has provided an update to shareholders regarding the recent developments of the company, as well as growth and goals anticipated for the coming year.

• 40-per-cent annual increase in overall systems sold;
• $700,000 in new high-definition system sales;
• Launch of body cameras and evidence management;
• Signed strategic reseller agreement with SunGard;
• Closed $1.97-million non-brokered private placement.

To date, Gatekeeper has executed on its business plan and achieved its milestone targets. Gatekeeper showed a 40-per-cent increase in overall mobile video systems sold to 224 customers enhancing top-line growth. Solid sales results can be attributed to the significant demand for the company's products in its base business including school buses, transit buses, law enforcement vehicles and military aircraft. Customer requirements for streamlining video management drove more interest and sales for the company's wireless features including Wi-Fi and livestreaming of video over 3G and 4G cellular networks.

To grow and expand sales levels, the company is focused on a combination of direct and strategic sales targets, strategic alliances, and the strategic integration of Gatekeeper products with leading mainstream software companies that provide solutions to end-user customers. Examples of these strategies include targeting the world's largest software companies and system integrators in an effort to provide unique product solutions aimed at the public safety markets.

The company is focused on three core growth areas, including the transition of analog cameras to high definition, the stop-arm camera recurring revenue model and the body-camera market as a total end-to-end integrated solution.

High-definition product activity

During the most recently completed fourth quarter ended Aug. 31, 2015, 11 per cent of the company's total sales were high-definition orders successfully executing on 100 per cent of the customers Gatekeeper presented to. All customers continue to choose Gatekeeper high-definition systems over competitors' traditional products primarily due to superior video quality, scalable features, Autowake, Wi-Fi-downloading capability, expandable 3G and 4G livestreaming, and ability to integrate with third-party software applications. Initial high-definition prelaunch orders received in July and August totalled approximately $700,000.

The company is planning a North America-wide marketing program this fall, including the entire family of high-definition mobile video systems ranging from five to 12 cameras. The company's entry-level high-definition product is small enough to fit in the palm of a hand, providing customers with flexibility where space is at a premium. The high-definition systems range from solid state with dual SD card storage capability to two terabytes of storage for 12-camera systems. The entire family of high-definition systems comes fully featured, capable of livestreaming video over 3G and 4G cellular networks. A common incident management software application allows customers to scale from a five-camera to 12-camera system without changing the software application, thus reducing training and saving customers valuable time.

The transition of analog video to high-definition video in the fixed-site security market is estimated at 20 per cent. Gatekeeper estimates the mobile market to be less than one per cent high-definition cameras with the balance being analog.

The company has also finalized the testing phase of its new military standard high-definition recorder for homeland security and defence aerospace market, and finalized the design of its high-definition multilane licence-plate-reading system. The company's Viperfish digital recorder is used by the United States Air Force on the AC-130 gunships. The new high-definition airborne recorder will interphase with high-definition sensors such as Wescam's MX10 and MX20. The new high-definition recorder will meet military standard requirements for electromagnetic interference, explosion resistance and various environmental requirements. This will allow the company to target new gunships and other military aircraft. The multilane licence-plate-reading system with stop-arm auto-detection capability will give the company a scalable solution for school districts operating their buses on multilane highways where stop-arm violation incidents are high.

Stop-arm recurring revenue activity

Gatekeeper's stop-arm camera technology, including the Student Protector high-speed licence-plate-reading system, designed for school buses to record stop-arm violations, has been receiving national press coverage over the last 12 months. With new legislation in several states which allows school bus-surveillance video to be used as evidence for stop-arm violation citations, this national press coverage has resulted in significant interest from school districts and bus contractors across North America.

Gatekeeper's total solution eliminates the need for reliance on third party software to provide the end-to-end solution. Ownership of Student Protector equipment, and TIM (traffic infraction management), a proprietary software application, remains the property of Gatekeeper, thereby providing a zero-capital-cost solution to school districts while enabling them to share in stop-arm violation ticket revenue. Fines typically range from $250 (U.S.) to $500 (U.S.).

During the past six months, Gatekeeper has been in discussions with 23 school districts, representing approximately 4,000 school buses, to install a complete and fully functioning stop-arm camera system for a specified period, subject to receipt of signed demo agreements. The evaluation phase enables school districts to verify the quality of Gatekeeper's Student Protector technology, as well as monitor the number of stop-arm violations experienced, prior to entering into a contract.

The company currently has 14 school districts in the evaluation phase, representing 975 school buses, and is hopeful that it will be awarded contracts following the completion of the evaluation phase. Early indications from the results of the evaluation phase show an average incident rate of 1.5 stop-arm violations per day, per bus.

The National Association of State Directors of Pupil Transportation Services (NASDPTS) released its annual projection for stop-arm violations. During a one-day count, 78,513 illegal passes occurred. It is estimated over 14 million stop-arm violations will occur this coming year.

Body-camera market

The company launched its body camera, docking station and evidence management software targeted to smaller agencies. It's an easy-to-use system for law enforcement agencies that lack IT resources. The system is scalable for larger agencies with Gatekeeper's vision to create unique products by way of full integration to the operation backbone such as computer-aided dispatch and business record management systems. Gatekeeper sees its evidence management solution being fully integrated with in-car video systems, cellphone video, CCTV video and broadcast video.

The company is also targeting best-in-breed software companies to provide unique product offerings for its partners resulting in end-to-end integrated solutions. An example is the company signing a strategic reseller agreement with SunGard Public Sector, an indirect subsidiary of SunGard, one of the world's leading software and technology services providers with approximately $2.8-billion (U.S.) in annual revenue. Public safety and justice agencies use SunGard Public Sector solutions to manage emergency dispatch operations, citizen and incident records, mobile computing in the field, and operations of courts and jails. More than 115 million citizens live in communities that are supported by SunGard Public Sector products and services. Gatekeeper has entered into final discussions with another leading software company that provides licence-plate sensor and processing systems as well as facial recognition software to approximately 2,800 law enforcement agencies in North America.

As stated in the Washington Post by Jim Bueermann, president of the Police Foundation in Washington, "Within the next five years or so, body-worn cameras will be as ubiquitous in the world of policing as handcuffs, the police radio and the gun."

The company estimates approximately 30 million law enforcement officers and security personnel could be wearing body cameras in the next five years.

Corporate activity

During the last several months, the company has travelled to and presented to investment groups in New York, Europe, Toronto, Montreal, Vancouver and the Okanagan to increase awareness of the company. With a new U.S. and Frankfurt listing, combined with the commencement of an investor relations agreement with Skanderbeg Capital Advisors, the company is actively engaged in educating investors about Gatekeeper's vision.

Since the closing of the recent private placement in July, 2015, the company is in the process of expanding its sales and engineering team to include new software engineers, sales engineers and salespeople.

In August, 2015, the company entered into a strategic reseller agreement with SunGard Public Sector Inc. to promote the company's body camera and evidence management solution to its law enforcement customer network. The company is planning a joint marketing and product launch of Gatekeeper's body camera and data management system scheduled for Oct. 24 at the International Chiefs of Police conference located in Chicago, Ill.

Doug Dyment, president and chief executive officer, commented: "This is a very exciting time for us as we prepare for growth in the three core areas of our business. All facets of our business are showing positive results as we continue to aggressively push forward in an effort to make the next fiscal year Gatekeeper's best year in the company's history."