World Surveillance Group Inc. - Letter to Shareholders
KENNEDY SPACE CENTER, FL--(Marketwired - May 8, 2014) - The
following is a statement by World Surveillance Group Inc.
(PINKSHEETS: WSGI) President and CEO, Glenn D. Estrella.
Dear Fellow Shareholders:
From the day I joined WSGI (WSGI or the Company) in June 2010, I
accepted the challenge of taking a company with an extremely
troubled past, one that had no hard assets and no revenues, and
making it into one that can compete in the growing global markets
of communications and intelligence, surveillance and reconnaissance
(ISR). My goals have been to (i) identify, address and clean up
legacy issues, (ii) identify commercially viable products and
services in the markets for communications and ISR, and (iii)
adequately fund the Company to develop, market and sell such
products and services. To accomplish those goals, I formed a strong
team that developed a strategic plan to restructure the struggling
Company in an attempt to create a sustainable operating
company.
Legacy
Issues
Our first goal was to identify and address the many inherited
legal and financial issues facing the Company that prevented the
Company from moving forward. We have been able to resolve many
of these legacy issues over the past several years, including the
SEC lawsuit. We have settled many of the lawsuits, disputes
and claims against the Company, although this has proven to be a
financial drain on the Company and has resulted in dilution to our
shareholders as shares of our stock were issued to resolve such
matters. While there are still several remaining legacy issues
that we continue to deal with, the Company is in a position where
it can now move forward focusing primarily on the growth of our
businesses.
Global Telesat Corp.
(GTC)
We were able to accomplish another key step in our corporate
strategy in March 2011 by completing the purchase of Global Telesat
Corp., after which it became our wholly owned subsidiary. GTC
provides mobile voice and data communications services globally via
satellite to the U.S. government, defense industry and commercial
users. GTC specializes in services related to the Globalstar
satellite constellation, including satellite telecommunications
voice airtime, tracking devices and services, and ground station
construction. As a result of that acquisition, WSGI was
immediately able to bolster its balance sheet by adding over $3M in
hard assets in the form of satellite processing hardware. Over
the past three years, while the ongoing legacy cleanup has
continued, we worked on integrating GTC into WSGI. With very little
investment funds and after years of hard work, our GTC team created
and launched www.gtc-usa.com, GTC's e-commerce mobile satellite
solutions portal. GTC has also launched www.gtctrack.com, a
subscription based online tracking portal, designed to attract new
satellite and GSM tracking customers by offering an easy-to-use
interface and compatibility with a wide range of devices. With our
strong partnership with Globalstar and access to their new, highly
advanced, Low Earth Orbit (LEO) satellite network, we believe the
opportunity to grow GTC's business is large by tapping into the
increasing demand for satellite tracking services. We intend
to continue to grow and expand GTC's business by targeting
commercial customers through the online portal and through more
aggressive advertising and sales efforts. I look forward to GTC
expanding its footprint in the mobile satellite solutions market
and increasing its market share in the satellite communications and
tracking market.
Argus One
As part of our product evaluation, we decided to focus on the
development of an Unmanned Aerial System (UAS) business focused on
a lighter than air (LTA) platform that we believe can provide
communications and ISR to large areas of land and sea. For
years the Company had been analyzing the most effective technology
to successfully operate a High Altitude Long Endurance vehicle and
other UAS. We initially funded a program to develop a low- to
mid-altitude UAS. The technology ultimately developed by the
Company resulted in the Argus One airship, a unique LTA technology
on which the Company has filed two patents. Following its
construction, the Company then successfully conducted numerous test
flights of the Argus One, including flights at a secure U.S.
Government facility in Nevada. Unfortunately due to a lack of
resources, the Company was not able to continue the development and
commercialization of the Argus One on its own. In 2013, the
Company was approached by one of our partners with the idea to
relocate the Argus One to Ohio to further its development, testing
and commercialization utilizing the resources of a consortium of
companies focused on aerospace and technology. As a result of
this economically efficient concept, WSGI entered into an agreement
whereby the Argus One was relocated to Ohio. Under the newly formed
Consortium, it is currently undergoing design and system
improvements that we believe will lead to future test flights and
demonstrations to potential customers. We believe in our LTA
technological approach and we intend to refocus on our Argus One
program. With large companies like Google and Facebook now
focusing on the space, we hope to be able to secure the proper
resources to finish its development resulting in a commercially
viable product.
Lighter Than Air
Systems Corp. (LTAS)
In 2012 while we were working on the Argus One airship, we began
to realize that smaller tactical UAS were going to be in demand for
both government and commercial applications. Based on this, we
set out to develop our own tactical UAS and, during that process,
we identified and forged a partnership with Lighter Than Air
Systems. This partnership quickly grew into the idea to merge
LTAS into WSGI and we acquired LTAS in March 2013. Over the
past year, we have been unable to completely integrate the LTAS
business into WSGI, primarily due to financial issues, including
but not limited to, the ongoing financial drain on WSGI related to
legacy issues. As a result of WSGI's inability to adequately
fund LTAS, the Principals of LTAS and WSGI came to believe that it
would be in the best interest of all parties to look to sell LTAS
to a group that could properly fund it so it can grow and develop
as we had envisioned.
LTAS Sale and Related
Transactions
On May 5, 2014 (Closing Date), WSGI sold LTAS to Drone Aviation
Corp. (DAC), a Nevada privately held company, in exchange for
$335,000 in cash and 10,000,000 shares of common stock of
DAC. WSGI signed a Lock-Up Agreement that includes
restrictions on the sale of the shares of DAC by WSGI for a
fifteen-month period following the Closing Date, although WSGI will
be able to sell a certain volume of shares in the thirteenth
through fifteenth month following the Closing Date provided DAC
becomes a publicly traded company.
As part of the transaction, the Principals of LTAS and our
Director of Business Development have each terminated his or her
employment agreements with the Company and Felicia Hess resigned as
a director of WSGI. As part of the transaction, the Principals of
LTAS each waived certain bonuses, options and accrued wages owing
to them from the Company.
On May 5, 2014, the Company also entered into a Securities
Purchase Agreement for the sale and purchase of $150,000 of
restricted common stock of the Company at a purchase price of
$0.007 per share.
On May 5, 2014, the Company also entered into a non-binding term
sheet for a registered direct offering of up to $1,000,000 of
common stock of the Company with an investor. The offering is
subject to, among other things, the filing and effectiveness of a
Registration Statement under the Securities Act of 1933, as
amended, registering the shares of common stock of the Company sold
in the offering and the parties' agreement to the price per share,
which has not been negotiated by the parties prior to the time the
Company's Registration Statement goes effective.
Finally, the Company also simultaneously entered into two
Consulting Agreements to assist the Company with help restructuring
its balance sheet and identifying potential acquisition targets for
the Company, among other things. The Company issued an
aggregate of 15,000,000 shares of common stock in connection with
such Agreements.
The sale of LTAS resulted largely from (i) the Company's
inability to find adequate funding on terms suitable for the growth
of the Company (including LTAS), in large part due to the remaining
legacy issues on the Company's balance sheet, (ii) the ability to
sell LTAS for a price that will supply much needed capital to the
Company, (iii) the desire to refocus the Company's efforts on its
core competencies, our Argus One program and GTC's business, and
(iv) the forging of a strong relationship with the investors in the
acquirer who also became investors in WSGI and will provide
the consulting guidance to the Company on a going forward
basis. WSGI's Board, after reviewing the Company's financial
and business situation, its prospects with and without the
Transactions, the terms of all of the Transactions and their
effects on the Company, believe that the sale of LTAS and the
related Transactions are in the best interests of the Company, its
shareholders and debt holders.
WSGI Future
We are committed to moving WSGI forward by growing GTC's
business and accelerating the development and commercialization of
the Argus One. As a result of the above transactions, WSGI now
has capital to run its business in the near term and has the
ability for future growth by accessing additional capital pursuant
to the term sheet once an effective registration statement is on
file with the SEC, assuming the other conditions of the term sheet
are satisfied. The Company also plans on working with the
consultants to strengthen the Company's balance sheet through the
ongoing clean up of legacy issues such that WSGI will hopefully be
able to receive additional funding on satisfactory terms in the
future. The consultants will also be working with the Company
to identify potential companies to acquire that will advance one or
more of the Company's business lines. The consultants WSGI will be
receiving advice and guidance from are a group of experts and
investors with a proven track record in restructuring and
recapitalizing companies in the small- and mid-cap space. We are
honored and excited to begin working with our new investors and
advisors and look forward to transitioning the results of our soon
to be growing business and the improvements in our balance sheet
into a reflection in our share price.
Finally, the shares of DAC received by the Company as purchase
price in the sale of LTAS are also now a significant asset of the
Company and could become more valuable based on the value of the
DAC common stock going forward, which will be partly a result of
the success of our LTAS business acquired by DAC. WSGI now also has
capital to invest to accelerate the development and
commercialization of the Argus One and expand the customer base for
GTC into additional markets.
We appreciate your continued support as we focus on our core
businesses and continue our strategic business transformation of
WSGI. We look forward to sharing our future success with you,
our shareholders.
Sincerely,
Glenn D. Estrella President and CEO