ARCHIVE 2003

Home Director Inc. Investment Recommendation: Strong Buy

Home Director has established a niche position in a sector of the home
networking market that is expected to grow dramatically over the next several years. By marketing a
comprehensive and multi-functional home networking solution with a variety of entry and upgrade
packages and pricing structures that allow homeowners to create individualized products, the company
has developed a product line that has widespread appeal to new and existing homeowners. Over the
last two years, Home Director has substantially strengthened its operational and strategic infrastructure
by i.) Installing a new and highly experienced management team, ii.) Restructuring debt and reducing
debt service costs, iii.) Acquiring Digital Interiors, a complementary established installation and
integration company, iv.) Implementing cost savings programs that have reduced expenses by more
than 64% and, v.) Bringing the company public and establishing the public infrastructure that can be
used for future acquisitions, financings and incentives to attract and retain management talent. As a
result of these efforts, and an expanded marketing program that will give Home Director a much
greater presence outside of its initial California market, the company is well positioned to become
operationally profitable during the second half of this year and report significant earnings growth
during 2004 and beyond. By 2005, with a relatively slower growth in the cost base, anticipated
revenue growth of 80% could result in a greater than tripling of profits. We believe that a 16X - 18X
one year forward earnings price target on 2005 earnings is supportable. Assuming the company meets
our projections we believe a 18 to 24 month price target of $18 to $20 is reasonable.