Intellicheck Inc (IDN) 2004 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. My name is Robert. I will be your conference facilitator today.

Welcome to Intelli-Check's 2004 third quarter earnings conference call.

Following remarks from the Company, there will be a question-and-answer session. [OPERATOR INSTRUCTIONS] We would like to ask that questions be brief so that all telephone participants will have the opportunity to ask questions. If you have additional questions, you are certainly invited to press star 1 again.

This call is being recorded, and is copyrighted. Therefore it cannot be recorded, transcribed, or rebroadcast without Intelli-Check's permission. Your participation implies consent to our recording this call and placing it on our website. If you do not agree to these terms, simply drop off the line.

Before I turn the call over to Intelli-Check, I'd like to read the forward-looking language.

Certain statements on this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. When used on this conference call, words such as expect, believe, intend, will, and similar impressions, as they relate to the Company or it's management, as well as assumptions made by, and information currently available to the Company's management, identify forward-looking statements. Actual results could differ materially from these projected in the forward-looking statements. Additional information concerning forward-looking statements is contained under the heading of Risk Factors, listed from time to time in the Company's filings with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking information.

With that aside, I'll turn the call over to Mr. Mandelbaum.

Thank you Robert, and thank you, everyone, for joining us on today's call. With me today are Edwin Winiarz, our Senior Executive VP and Chief Financial Officer, who will discuss the financials we released earlier today. Russ Embry, our Senior VP and Chief Technology Officer, will discuss recent developments in our technology, and Ralph Thomas, our Senior Vice President of Sales and Marketing, who will discuss our current and future sales and marketing initiatives.

All of us will be pleased to answer any calls you may have at the end of the formal part of the presentation.

I will turn the call over to Ed, who will take you through the financials.

Thank you, Frank. Good afternoon, everyone.

I would like to discuss some of the pertinent financial information that is contained in our 10-K for the third quarter ending September 30, 2004, which as Frank said, we filed earlier today.

Revenues decreased in the third quarter of 2004 by about $113,000 from the prior year's quarter, to a total of approximately $233,000.

Actual sales and shipments in the third quarter declined by approximately $100,000 from the same quarter last year. Ralph will walk you through some of the details of current sales initiatives, and why we experienced a drop in this quarter later in the presentation.

During this quarter, we wrote down an additional $200,000 of our ID-Check unit inventory, due to the reduced sales of these units, which has negatively affected our gross profit for this quarter. Our gross profit, excluding the inventory write down of $200,000 in this quarter, as a percentage of revenues, decreased to 61.3% in the three months ended September 30, 2004, compared to 70.5% for the three months ended September 30, 2003.

Our gross profit percentage was negatively impacted by a change in our sales mix of our bundled software and hardware products, which are our lower margined as compared to sales from pure licensing of our technology.

Total operating expenses increased by about $350,000 from the prior year's quarter, to $1.636 million for the three months ended September, 2004.

Our legal fees increased substantially in this quarter compared to last quarter, and this quarter last year, as a result of the active nature of the Tricom patent litigation. If you exclude these legal fees, our operating expenses would have decreased from the prior year's quarter.

Including our estimated legal expenses for our patent suit over the next year, we expect our cash expense burn rate, excluding capital expenditures, which have not been material to-date on average, to be no greater than approximately 390,000 per month, including the payments required under our current convertible redeemable preferred stock agreement. However, we have begun implementing a cost reduction program to reduce our cash expense burn rate.

The reasons prior stated, we reported a net loss for the third quarter ended September 30, 2004, of $1.669 million, or $0.17 per share, compared with a net loss of $1.204 million, or $0.13 per share for the quarter ended September 30, 2003.

At this point, I would like to review the Company's liquidity and capital resources.

Net cash, including cash equivalents and short-term marketable securities and investments, decreased for the 9 months by approximately -- I'm sorry, decreased for the -- for the 3 months by approximately $1.3 million. I'm sorry, that is 9 months.

The principal reason for this decrease resulted from the net cash used in operating activities caused by our cash expense burn rate exceeding cash receipt from revenues. As of November 1st, we had approximately $5.2 million in cash, cash equivalents, and marketable securities. Our cash is invested in short-term high grade commercial paper, CDs, and bonds.

Our ratio of current assets to current liabilities for the period ended September 30, 2004, remains strong, at 4.31 to 1, compared to 1.45 to 1 for the period ended September 30, 2003. We anticipate that our current available cash in hand, cash resources from expected revenues from the sale of our products, including the sale of our units in inventory and licensing of our technology, will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months.

Now I will turn the discussion over to Russ Embry, our Chief Technology Officer.

Thank you, Ed. Good afternoon, everyone.

I am pleased to report that since our last teleconference, the Company has continued to develop two new software products for in-person proofing, ID-TRAVELER and IDENTITY-PASS. Both of these products are aimed at meeting the credentialing requirements of Presidential Directed HSPD-12, and to assist financial institutions in compliance with the Patriot Act. They also have applicability across a wide range of retail markets.

The IDENTITY-PASS product offers all of the benefits of the Company's patented ID Check pathology, plus the additional capability for proving one claimed identity. The IDENTITY-PASS software first verifies the presented document by instantly reading, analyzing, and verifying the encoded data on the document. The second step presents the cardholder with several multiple choice questions that are specific to the person, making it highly unlikely anyone other than the actual person would be able to answer them correctly. The software can also store images of the documents presented for later retrieval and review.

The ID-TRAVEL product includes all of the benefits of the Company's ID-Check technology, plus the additional capability to electronically match in seconds, similar data that is encoded on documents, such as name and date of birth. It is capable of matching the similar data encoded on driver's licenses, state issued I.D.s, military I.D.s, passports, Visas, and border crossing cards. It also has the capability to include the IDENTITY-PASS product as an option. The Company has applied for patent protection on this product.

I am also pleased to announce that our ID-Check technology is currently being integrated into other systems. A leading global provider of payment services has begun integration of our ID-Check technology into their system, and Sivault Systems Incorporated has successfully integrated our ID-Check technology into a demo system.

ID-Check PDA, which is designed to run on hand-held personal data assistance devices, such as the Actim and IPAC has been released and is currently being modified to provide additional functionality, such as single age and verify only modes of operation. We are continually evaluating the potential of putting our patented ID-Check technology to other operating systems, such as UNIX and [indiscernible] derivatives. As new jurisdiction formats are made available or changed, they are being incorporated into our technology.

We also receive frequent inquiries from companies interested in licensing our technology for use in their applications. We will continue to strategically evaluate licensing opportunities. The Company continues to monitor the market and react to changing needs as they develop.

I'll now turn the call over to Ralph Thomas, our Senior Vice President of Sales and Marketing, who will share with you the Company's sales prospects, as well as some of the opportunities now presented to Intelli-Check with the introduction of our new products.

Thank you, Russ, and good afternoon, ladies and gentlemen.

In Q3, we received initial orders from the University of Texas, Heinegen [ph], The State Department, and future orders are looking very promising from all three.

Based on our new products and pricing, we are also beginning to once again enjoy new business from existing customers, such as Cisco Systems, for example. Taking that point one step further, I have in my hand a purchase order that I just received for over $200,000, in just Intelli-Check's software license revenue. Per the request of our existing customer, who is licensed to resell our software, I'm not at liberty on this call to disclose the name of the their new customer, who will be utilizing our technology to support capturing market data on a hand-held computer. I am hopeful that I'll be able to share that with you on our next call.

In the interim, this order illustrates, unlike the past, we are trending towards a genuine hardware and platform independence, as well as becoming more and more software centric. In the area of visitor management, we have several new prospects coming from our recent direct mail and telephone follow-up campaign. We have actually closed orders for Aragon Refinery and Shell Oil to date, and we are continuing to follow-up by phone to selected individuals and companies earmarked from the various mailing lists we obtained.

Additionally, in Q3 to amplify what was stated in our recent press release, we secured and began two very important pilots with substantial in counts. We satisfactorily completed one pilot, and are very close to finishing the final stages necessary to begin deploying a third pilot, with a major merchant processor in this calendar quarter.

As to anticipated Q3 revenues, we experienced a modest shortfall. This was based on three delayed opportunities in excess of over $300,000 in total. Two of these opportunities were DMVs, and we hope to close them in Q4, or at the very latest, in Q1 of 2005.

The third pertains to a large convenient store chain. Concerning this particular account, all the pilot stores gave our PDA product great reviews, and it performed close to flawlessly. Based largely on these results, and our solicitations, 147 franchises out of 239, opted in to obtain our PDA product under the terms presented to them by their company.

Unfortunately, we are still waiting for a long overdue purchase order, and are continually being told, as recently as prior to this very meeting by their management representatives, this will be forthcoming.

In the area of financial services, we demonstrated the beta version of our new IDENTITY-PASS offering at the recent CUNA show, and it was very well received.

As Russ stated, Sivault has successfully integrated and has developed a simple demonstration capability using their signature verification product and our technology. And we are actively working with them and other biometric, as well as web-based solution providers to integrate into an IDENTITY-PASS environment for new account applications and enrollments, in addition to alternative solutions, such as check and debit card processing.

I am now able to say we will be able to more fully concentrate on pure selling activities in the balance of Q4 and in Q1, as all our present products in the overall mix have been fully tested, priced, made deliverable, shippable and supportable from the actual software seat license to the DCM ID-Check for PC, ID-Check for PDA, IDENTITY-PASS, ID, ID-TRAVELER, right down to our jurisdiction and software upgrades.

Also, because of reaching this important milestone, we'll be able to better focus our efforts towards building upon present opportunities, and in adding more selling relationships with both application solution providers, and complementary technology providers, in order to create and close more account and revenue generating opportunity going forward.

I will now turn it over to Frank Mandelbaum, who will speak about our federal government initiatives, and our progress in that area.

Thank you, Ralph.

Before I get into that, I would just like to clarify some of the questions that have come into the Company based upon false and erroneous information that has been put up on either websites, Bloomberg, et al.

One, Wachovia Securities, back on September 29th, had erroneously reported that the Company was in Chapter 7. The Company is not in Chapter 7, and as everybody has been made aware of by Ed in his presentation, has a strong capital position at this time.

The other erroneous information had to do with the alleged sale by myself of over half a million shares of stock, as reported by Bloomberg. They have since made that correction, as has Wachovia, that never took place. I've sold no stock.

And the other one is inquiries we've gotten as to the relationship of the Company and any ramifications to it from this alleged problem that Shemano, our underwriter of the most recent public offering had. One, we had our relationship and the underwriting with Shemano Group. Shemano Group, as far as we know, and counsel has informed us, has a separate relation from Shemano Capital Advisors, and therefore there are no ramifications to the Company as the issuer, and we are at no risk from any problems that Shemano Capital Advisors may have.

Having clarified those three points, let me talk a little bit about some of the government initiatives.

As you all know, and as we stated in the past, the Company cannot quantify anything about the government initiatives in actual dollars and tell you when they're going to hit.

In the Twick program, our technology is being tested for utilization in that program. In the registered travel program, we have been informed by one of our partners that they have sold our technology to one of the two people who were awarded the technology grants for the registered traveler. So we are involved in the registered traveler, where our technology is being evaluated for the Twick program. We certainly remain very embedded in the Decas [ph] program, and if you look at the latest, the federal identity initiative, we are specked out in that right now.

So whereas we have not generated any tremendous revenue to-date from these programs, because they haven't been funded, and we stated that on the last call, that even though they're in the billions of dollars, very little money has been actually expended to date. However, we do expect to see some large expenditures coming that way, and with the introduction of our ID-TRAVELER, and the new IDENTITY-PASS technology, we believe that under HSPD-12, as stated by the government for credentialing, that the Company has very valid and applicable technology to meet those initiatives.

Having stated that, I will now close the formal part of the presentation, and would be more than pleased to answer any questions that you may have. [Begin Q-And-A]

[OPERATOR INSTRUCTIONS]

We'll go first to the site of Trey Snow from Priority Capital.

Hi. I don't believe the press release has hit the wires yet for your earnings so I'm flying a little blind with this question, but in terms of your inventory, how much of that represents the older generation models of hardware?

This is Ed Winiarz. Of the inventory which we reported which was about 347,000, about 170, 180,000 of that, I believe was to the old inventory.

And you still -- you still have conviction that those can be sold with margin?

Yes.

Okay. And given that you have, you know, the purchase order in hand, and a couple of these near-term opportunities that seem virtually certain, can you, at this point, provide any type of guidance for fourth quarter, or even first quarter?

It has been the Company's policy not to provide projections, only guidance in initiatives, sales opportunities. Ralph, do you have anything to say on that?

Well, as Ralph just stated, we received just today, Trey, an order for over $200,000 for software alone. That will be reported probably as a sale, but it may not be recognized as all revenue in the quarter. We have several other initiatives that if they hit, would substantially make up for the shortfall in the last quarter, and then some.

But as far as the true guidance, quite frankly, besides the initiatives I said, the legislative initiative that's going on in government, not so much for federal purposes, but to prevent underage drinking, will be introduced, we believe into the Congress as soon as the new Congress is seated, and if that moves along, that would open up, we believe, a $2 billion market on age verification, which, of course, has not really grown to date for the reason that the model needs a little enforcement because when we go out there, and it's a market that we've stated on many calls we don't chase. They come to us, because candidly, if you go to the onesies and twosies, and could we get the sales up, absolutely?

But we would lose a lot more money by putting a lot more feet on the street to go out there to generate those sales. So for the kind of sales that we believe that this technology can generate, we don't chase the age verification market at all.

It comes to us when they have a brand to protect, or anything else, they select us for their technology. But that initiative could develop toward the end of last year.

We can't quantify when it's going to pass, but from all indications from the people who will be sponsoring it, it looks like it has an excellent chance of passing, which would now put some teeth into the legislation, given affirmative defense and a tax credit for the utilization of verification technology.

Should that happen, that's a multi-billion dollar market, and we're not saying we're going to get the whole thing, but if we get a good piece of it, since we have the best technology going, it would be very dramatic at that time for the Company. But as far as giving quarter- to-quarter guidance, we have not, as yet, done that, nor will we until the backlog starts to build, at which time we would change the policy.

Okay. That's understandable. Is the software that you're going to be selling, is that going to be done primarily as a license sale, or will there be any deferred component in terms of maintenance?

Yes, they're included in that number that Ralph presented. Was some ongoing maintenance, so we wouldn't recognize the whole amount immediately.

Okay. But for modeling purposes, a great deal of it would be, right?

A good portion of it, yes.

Okay. And is the majority of the sales -- let's just year-to-date, that's almost all been in the age verification side of the business?

No, quite the opposite. The age verification business has not been the leader in terms of the significant opportunities. I think Frank said it before that we are trailing in that area, and candidly, the bigger companies are not the early adopters, the smaller companies are, and we just don't have enough feet on the street to be able to go after the smaller adopters. So most of the focus has been on the major opportunities with document verification, and integrating our technology into other personal solutions.

Okay.

If I can add, the transaction, you know, candidly, if you look at the numbers, and you say past is prolog, we don't believe so. Because this order that Ralph had shown me today for over $200,000 for software, that's a licensee that we signed up in September of 2002, and this is the first revenue coming out of that because of all of the developments, but it is a significant first step. This isn't somebody that we just pulled out of the hat. This is going on for nearly two years, and finally they crack the whip and integrated our technology into one of their particular --

Applications.

-- applications.

It's been a long wait, so be looking forward to seeing something hit.

Okay.

Thanks.

You're welcome.

We'll go next to the sight of Richard Carp [ph] from Gund Allen Financial.

Good morning, gentlemen. Actually I have questions for a couple of different ones. From the presentation you just gave, I would assume, Frank, you're in charge of the government end, and Ralph is in charge of the corporate end, as far as business, right?

Well, right now, we're all interchangeable. Okay? But primarily, the government, since it's a long sales cycle, and not to burden sales with those things, they're really done under the -- my auspices, with some of our consultants, and Ralph is somewhat involved in that.

All right. I'm going to start off with way back when we did a testing with a quasi-government agency. That test has to have been over for a long period of time now, and I want to know when was it concluded, the success of the test, and if since we haven't had an order, is there a reason why we haven't had an order?

Well, I'll add to that part. The answer is the test was very successful. However, in the quasi-government agency, they came up with a business model where they wanted $13 just for the use of their brick and mortar per -- let's call it verification. What ended up happening is other government agencies went to them and said the model doesn't work. They were willing to pay substantially less. They would not change their model for core spaces, and therefore to date, after being a year and a half or two, they've sold under 1,000 of these systems because they stood firm at the price of 13, and other government agencies refused to pay it.

So it's not that we lost the opportunity, or that anybody else took it away from us, or that we didn't perform on that, it's just that the business model, when all was said and done, nobody wanted to pay $13 that this quasi-government agency wanted for their part. So if they change their model, I believe that it will get legs again, but at this particular point, with that $13 fee that they refused to change, it's really not going anywhere.

Frank, another question, because this is prior to Ralph coming in. There was a gentleman who worked as a consultant for you, who has passed on, who was great gentleman. Jerry Berlin. And I know that he had bought in, as far as he had a lot to do with the CUNA contract, or agreement that you have. What kind of business is CUNA done with us in all this time? What kind of expenditures have we had with them?

To be candid, the business from CUNA to date has not been very satisfactory, to speak of. As a matter of fact, there hasn't been much to speak of at all. However, we believe that with the new product called IDENTITY-PASS, we have something that will definitely be of interest to them, and I think we'll be able to move forward and utilize that relationship and realize what we had hoped to realize from the very beginning. I'll tell you why.

The number one reason was the Patriot Act compliance, and one of the things that the credit unions, as well as the financial institutions were looking for is not only the ability to verify the driver's license, but to record additional information about the individual from an ID standpoint, and we can do that with IDENTITY-PASS. We can do that electronically.

We can record the entire record of the individual, and also automatically go through a betting process of question and answer, and in the background do a check against OFAC, which if you look at the Patriot Act compliance requirements, fully supports all four things that they're looking for. And we're going to try to put that on a transaction model basis, and bring it forward, and hopefully pick two or three major credit unions as pilot locations to get the product going forward.

All right. Now, the order that you had mentioned that you had received today, did I hear correctly that was through an affiliate or a client of Cisco? Is that what you had said?

No, Frank is correct. This is a company that we have been working with for quite some time. They are actively involved in the hand-held business, and they are going to be using our software as part of a market data capture application with a very, very big company that I'm not at liberty to discuss, but I think you'll be all well pleased when you find out who it is, hopefully on the next call.

And that is a first order?

Well, first order beyond basic development type stuff, yes.

All right. You know, Ralph, you've been with Intelli-Check for just over a year now, and when you first came in, you talked about changing your sales and marketing, that you had a platform that you were going to be going with, and in this time, I've heard of testing. You've answered a lot of the questions that I had before I even get a chance to ask them, but I would have to assume that when you speak about the convenience store chain, when you were talking about that with 174 of 239 opting, I would have to imagine that was the merchandise chain?

No, that's a convenience store chain, and I wish I could tell you the name, but I can read from a letter sent out in the middle of August to all of their franchises which may give you a little satisfaction. And I quote " XYZ is happy to report the successful completion of of our ID-Check age verification pilot with Intelli-Check Incorporated. The month-long pilot was conducted at several locations on Long Island through July, with excellent results. The ID-Check solution will soon provide you with an excellent tool to ensure legal protection against the potential sales of any age restricted product. XYZ is pleased to be in a position to facilitate offering you this added benefit. As an added incentive , XYZ will pay for the first two months of the times that the unit is the store, and for those that elect to participate in the program. To qualify, you must be used on a daily basis to provide for the restrictive sales and also during the initial 60-day period of installation, participating stores will be shopped to monitor the level of the systems used."

That's fantastic. Now, when was this test concluded?

Actually, the test went for a period of over three months.

When did it conclude?

It concluded in October.

Okay. And --

And candidly, we were supposed to be installed in the month of October. That was the original game plan.

What was the delay?

They're telling us the delay is management, at a corporate level. And they're just telling us that they just move this slowly, and it's going to happen.

All right. Now, you say 174 of 239, but how many convenience stores are in this chain?

Thousands.

50,000, 2,000?

Try five.

5,000. And you also did a mail out. I think you brought this up. You had a 16,000 mail out, right, when you first came in you did a mail out?

We did a mail campaign on the age verification business.

Were you happy with the results of that?

Well, it's early, but, no, I'm not happy with the results. We are continuing to follow up on that, and have found that on the East Coast, we've had good response, on the Texas area, we've had good response. On the West Coast, and also border, you know, which is up by the Vancouver area, we've had good results. But middle America hasn't produced anywhere near what we had hoped for.

Also, that's not age verification, I just want to quantify that. That is access control, visitor management.

The last two questions I have, and then I'll obviously leave the phone for other people to ask questions. On the border security. Accenture had won the bid for the border deal, and then President Bush came out and stated he would not cut out a check to a non U.S. company for that amount, since it would have been the largest check. I never heard if anything, if they were going to go with the next bid, if they were going to make the bidding process take place again. I know that bid took place in June. It was supposed to have started already, and obviously didn't.

Were we involved with that whole scenario? And who is -- since they've never announced if they're going with the next bid, do you have any information if they're going to go to another bidding process?

The answer is that Congress attempted to halt that award to Accenture. However, after meetings, and whatever, that is Accenture's award, and nobody has challenged it to date, so the answer is yes, there will be no further bid. It is Accenture's .

And are we involved with that?

We are not, at this point, directly involved with Accenture, but we believe that we are involved with some of our partners who are involved with Accenture. But I can't quantify it as yet because the original U.S. visit, they only funded it to the extent of $10 million and I understand they've cut that to $6.5 million this year. So there is no real great money. It is a $15 billion program, according to what the government projects over a five-year span.

Right. The travel program that was won by EDS and UNISYS, that were also awarded out in June that was supposed to have started in July, the last information I got, there was only one airport that was funded. Are we with with both companies, and have they been funded since?

There were five airports. EDS has two, UNISYS has three. One of our partners has sold the technology, including our technology, to EDS, which we believe is being utilized in that program.

We continue to have discussions with the other. At this point Pilot, Woody, but nothing has been done to date, because candidly, if you look at it, the way they selected the model, as to who will be chosen, you really don't need much credentialing at this point. What they came to us is to scalability, because if you pick someone who flies at least once a week, a minimum of 200,000 miles a year, and has been doing that, and that's who you are enrolling, they weren't that concerned with the credentialing piece, but they are concerned as it goes scalability.

So the answer is we are certainly being considered for the technology on that, and I believe we are being used in one of them right now.

I do apologize, because I did have one more question.

All right. This is the last one, Rich.

The major retail you were testing with, is the testing over? At what point, what's the success on it so far?

Success has been very, very good. They have just recently ordered five more systems. They're very, very pleased with it. And they have asked us for actually enterprise licensing, so we're in the process of putting that together for them.

When is this testing supposed to be over?

Probably in the beginning of Q1.

All right. I apologize to everybody else on the line for asking so many questions. Thank you, gentlemen. Have a great day.

Our next question comes from the site of Morton Linger from Linger Partners Incorporated.

Good afternoon. Are you aware, and have you been made aware that Intelli-Check equipment is in target, at least in Long Island? Is that the major retailer? And if so, could you discuss the scope of your initiative with the target?

Mort, let me answer that for you. There is a limitation to what we can say. The answer to your question -- we are aware of all of the initiatives that are taking place right now, because they're coming out of the Company. However, we have a -- in certain of our agreements, where you and others may think nothing has been happening, and we're not moving the ball down the road getting toward the goal line, or across the field, we have what's known as no publicity clauses, and we really can't talk very highly about -- all I'll say is what you've seen with your own eyes. We won't comment any further on that, but to say that anything that you see in the Company is totally aware of, the Company is involved in it, but we are restricted by the agreement from going into too much detail on what we're doing. All we can safely say is that we are in a test with a major mass merchandise retailer, and Ralph has said it's going very well.

And it's only one retailer, what massive retailer?

Well, I can throw this in, and I think it's fair to say, that if we disclose, then we stand a chance of basically walking away from this opportunity. It's in that particular level. I'm sorry, Mort.

All right. Okay. Thank you.

Okay.

[OPERATOR INSTRUCTIONS] We'll go next though site of John Hoot from CSSB [ph].

Hi, Frank. Two questions for you. The first is how is our Decas [ph] program going? Can you give us any insight as to what [indiscernible] that is working there and the cross credentialing. And Ralph, in regards to the drinking awareness initiative, do you have plans in putting together a new product that would have both a scanner and a PDA system, so you could have a hand-held device for that application

Which one do we do first.

I'll do the Decas one first for you, John. The Decas program is the test ended October 30th. We are, as you can see, if you go look at the website, or whatever, very embedded into that program. They are currently evaluating the results of the test. The biggest problem, as I stated on other calls was the firewall issue and the time to get in and out that we have nothing to do with, as far as that goes. The other part is in there. We're working on that. We know our technology worked very well in that program, because if you look at the latest on the DeCAs, and the FIX, you will see us listed with Lockheed, Anthion, Northrop, EDS, et al, on one side of the page, and everybody else is on the other side of the page. So we're part of that initial--call it core technologies that are being utilized. As I said earlier, we can't put a time frame on the Decas program, but we are optimistic when it rolls out that we will play a very significant role in that particular for the credentialing part. I'll let Ralph answer the second part.

In order to capitalize, John, on the age verification initiative, we believe we have to have three different offerings.

One of course is the ability to integrate within the point of sale environment, and we clearly have the capability to do that. We have an excellent stand alone product in the PDA that we offer today, we are working with our primary supplier, vendor, out in California, on what would be considered to be a mobile or a portable unit.

I'll ask a follow-up, Frank. How is your initiative with Epson proceeding?

On the Epson initiative, when I went out and spoke at their--call it conference, it was decided that on the check 21, it was something they were interested in. Okay? We have not moved that, neither have they, because they move very, very slowly, being owned by a Japanese company, but we do have ongoing relationships with them. But I cannot at this time, as I said before, all we had-- we don't have any formal agreement with Epson to this date, and anything we do in discussions we have with them are strictly without any agreements in place, John.

Thank you.

We'll go next to the site of the Sudir Kakar [ph] from -- he's a private investor.

Yes, good afternoon. I am not to happy about what is going on in this situation right now. I'm seeing lots of noise out there, you are talking about the stock going down because somebody has been making these bogus rumors that don't make no sense at all, and I go into my friend's store on Long Island, and he's selling your unit right there, he's using your unit in this convenience store. And you know the name, it's very easy to talk to, you just have to put a couple of numbers together. I am not understanding what is going on here. I am not liking the way my stock has been going down. Can you talk about that?

Well, one, we run the Company, we don't run the stock. So to take any step to talk about the price action of the stock, I had mentioned some of the things that could have negatively impacted the stock, some of this information. As far as the trading activity, or the price of the stock, the Company has absolutely no control over that. We attempt to keep the shareholders as informed as we can on activities that take place. As one of the questions came up before where somebody obviously saw something with their own two eyes, we've never said anything specifically, because we can't. And much as we would like to, to do anything, to us, the more important part is to secure the business, rather than survive on press releases and news. Where we have news and we're allowed to put it out, we will do that.

Excuse me, sir. Unfortunately these press releases, or this news, these bogus rumors that are out there are influencing the company in some respects. You must understand that, right? I mean if your stock is having problems, and your company is having problems, you not selling product. Obviously the people that you want to do business with can see that because your stock is going lower, and your stock has gone down 20% in the last couple of weeks, and there are people creating rumors out there constantly that your company has got problems, and I want to know what is the truth and what is not the truth.

Well, we've told you what the truth is earlier in the call, and the Company continues -- when it puts out any news or puts out a press release, they are all factual. We do not respond to rumors. That's a very bad habit to get into rumors. The only thing I mentioned the three earlier because the Company has received calls on this specifically, where it can correct the rumor, such as the erroneous reporting on Bloomberg, the erroneous letter that Wachovia, it does that. But when rumors are circulated for whatever purpose, to drive the stock down, whatever, that is not anything that is it is our intention to ever respond to every rumor that goes out there.

And what can you tell me that would make me feel comforted about what I think is going to go on for the next year?

Well, I think you heard what Ralph said. You just heard it came in after we had approved the press release, this order for a couple of hundred thousand dollars just walked in the door, was in the mail. We would have put it in the press release. So things are started to gel on the business side beyond the fact that they're also gelling as far as having a whole suite of products that we believe fits what is required out there in credentialing.

There doesn't appear to be any further questions. I would like to turn it over to management.

Well, we thank you all for participating. We hope the call was informative, and we are welcome anybody that has any additional questions that they would like answered, you can feel free to call the Company. If it's in our province to answer, we would be delighted to do so. Thank you all for participating.

That concludes today's call. You may now disconnect. Have a good day.