Intellicheck Inc (IDN) 2005 Q4 法說會逐字稿

Good day and welcome to Intelli Check 2005 year end earning conference call. [OPERATOR INSTRUCTIONS] At this time for opening remarks and introductions I would like to turn the call over to Mr. Steven Axelrod with Wolfe, Alxelrod, Weinberger and Associates. Please go ahead, sir.

Thank you very much. Good morning ladies and gentlemen and welcome to Intelli-Check's 2005-year end earnings conference call. Following remarks from the Company there will be a question and answer session.

We would like to ask that questions be brief so that all telephone participants will have an opportunity to ask questions. If you have additional questions you are invited to press star 1 again. This call is recorded and is copy righted as was mentioned earlier, therefore cannot be recorded, transcribed or rebroadcast without Intelli-Check's permission. You participation implies consent to our our recorded 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 would 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 expressions 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 those projected in the forward-looking statements.

Additional information concerning forward-looking statements is contained on the heading of risk factors listed from time to time in the Company's files where the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements, that being said, I would like to now turn the call over to our host Mr. Frank Mandelbaum. Frank?

Thank you, Steve. Good morning everyone and thank you for joining us for your year end conference call. With me today on the call are Ed Winiarz our Senior Executive Vice President and CFO, Russ Embry, our Senior Vice President and Chief Technology Officer, and Todd Liebman our Senior VP of Marketing and Operations.

Ed will go over the highlights of our financials we were released earlier today which we will-- be followed by Todd who will give overview of our marketing and sales operations to date and what we expect going forward, and after we complete the formal part of our presentation we will all be available to take calls and questions. With that, Ed?

Thanks, Frank. Good morning everyone. I would like to discuss some of the pertinent financial information contained in our 10-K for the year ended December 31, 2005, as Frank mentioned which we filed this morning. Reported revenues for 2005 more than doubled to approximately 2.4 million compared to approximately 1.1 million for 2005. Actual sales bookings in 2005 almost doubled as well as to approximately 2.6 million from last year's sales bookings of 1.4 million.

For those who may be confused with the terminologies of revenues and sales booking, I would like to clarify for you. Revenue is computed under our revenue recognition policy where we defer a portion of our sales shipped during the period that primarily relates to the value of our software maintenance upgrades that covers a 1 year period after shipment and includes the recognition of a portion of the maintenance fees from products shipped in prior periods. Sales bookings represent shipment of products in contracted services without consideration of any deferrals. As of year end 2005, we had a backlog, which represents products and services of non cancelable sales order not yet shipped of approximately 536,000. If you inter our sales bookings are your backlog the total is approximately 3.1 million a number we previously disclosed when we announced we exceeded our goals of 3 million in booked orders for 2005.

The increase of both revenue and sales bookings is a result of our success in penetrating certain key markets and includes a large order from a significant retailer during the second quarter of 2005. Todd will walk you through some of the details of our current pipeline of sales and opportunities and successes and why we remain extremely optimistic about our expected future sales growth later in the presentation. Our gross profit percentage excluding inventory write downs in 2004 increased to 68.8% for 2005 compared to 64.8%, for 2004. This percentage increase resulted primarily from a large portion of our 2005 sales from our software only products and services as compared to our mix of sales in 2004.

Total operating expenses amounted to approximately $5 million for 2005. This was a decrease of approximately 2.4 million from the prior year. This decrease was primarily related to a decrease of our legal fees of approximately 800,000 related to the Tricom patent litigation and a decrease of our non-cash compensation expense related to the charge for extension of stock options in 2004, of approximately 1.4 million. If you exclude all non-cash expenses, total operating expenses was approximately 4.6 million for 2005, compared to approximately 5.2 million for 2004.

For the reasons prior stated we reported a net loss for 2005 of 3.2 million or $0.31 per share compared a a net loss of 6.9 million or $0.79 per share for 2004. At this point I'd like to review the Company's liquidity and capital resources. Net cash including cash equivalents and short-term marketable securities and investments increased for the year ended 2005 by approximately 1.3 million primarily as the result of the completion of our product placement in August where we received net proceeds of 4.4 million offset by our net cash using operating activities of 3.1 million resulting mostly from the net loss of approximately 3.2 million during 2005.

As of March 27, 2006, we had approximately 5.1 million in cash, cash equivalents and marketable securities. Our cash is invested in short-term investment grade CD's, government securities and bonds. Therefore our ratio of current assets to current liabilities for the year ended 2005 remains strong at 4.63 to 1. Our cash expense burn rate for 2005, which excludes any margin on sales and the resulting commission due on such sales and excluding capital expenditures on average was about 390,000 per month. Including expenses related to our patent suit. We do expect cash expense burn rate for 2006 to increase to approximately 425,000 per month due to the expected requirement of staffing and related expenses due to anticipated growth of our business.

We anticipate that our current available cash on hand, cash resources from expected revenues from the sales of our products including the sale of our units in inventory and the licensing of our technology will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. However, we may need to raise additional funds to finance more rapid expansion or acquire complementary businesses or necessary technologies as Todd will explain, we have be actively marketing our newly announced products and technologies for licensing and integration into other complementary systems and technologies as well as in stand-alone applications. The potential opportunities for these markets could result in additional cash flow for the Company.

I'll now turn the discussion to Todd, our Senior VP of Marketing and Operations.

Thanks, Ed. I'm very pleased to say we had a very strong fourth quarter and fiscal year in 2005, Intelli-Check. We topped the 1 million mark in booked sales for the fourth quarter and exceeded our previously stated goal of 3 million for booked orders for the year.

I believe it is obvious we have gained significant traction and momentum in the marketplace in 2005 and that we expect to continue in 2006 and beyond. The key aspects to our success last year were broadening our strategic focus on productivity enhancement applications while continuing to stress the importance of the verification benefits of our products specifically in this retail and financial commercial marketplaces the introduction of several key new products, diversifying our revenue model to include transactional and subscription based revenue models and continuing to sign up lighthouse accounts.

Our sales booking goal for 2006 is to exceed 6 million of which the majority will come from the commercial side. We do not expect major government funds will to be allocated for mandated initiatives where our technologies embedded until the fiscal year 2007 budget begins in October of 2006. Based on the booked orders to date and the current pipeline we are confident that we will be able to reach this goal of doubling 2005's booked orders numbers. Let me explain to you why we are optimistic this evidence from the strategic direction of our Company that one of our focuses is on customers and products that can benefit from our productivity enhancement and work flow applications. There is a clear-cut and measurable ROI for our customers when analyzing the productivity benefits from our solutions. We have seen this multiple times In 2005, with many of our key customers that we signed up ranging from financial services, to the automotive, to the issuance of instant credit vertical markets.

We expect this momentum to continue this year. 2005 marks the introduction of several new key products for Intelli-Check. During the second quarter we introduced the first every hand-held device we have ever marketed. This product provides our customers with a truly mobile device that they can put in the palm of their hands. It has integrated 2 dimensional bar code reader and a clip on mag stripe peripheral.

During third quarter of 2005 we incorporated our technology into the Verifone Omni 37 XS terminal and added it to our product line. This was a key product introduction for us as it provided Intelli-Check with the replacement product for our legacy ID check 1400 terminal. We have had excellent reviews from this product from our customers and we are currently working on porting our software over to the new VerixV platform from Verifone that will provide us with yet another Verifone terminal to sell at a lower price point.

We expect to introduce this new Verifone solution during the second quarter this year. However, the most exciting product that we introduced last year came during the fourth quarter it is a browser helper object, that allows us to integrate our core ID check technology into a browser-based application without any integration efforts from the software developers who developed the application.

We can simply map the field contained in a driver's license to the appropriate field contained in the web browser through a sophisticated graphical user interface we developed this is critical for us because in the past we were reliant on application developers to integrate our software developers kit. We now have eliminated this time-consuming step for virtually all browser-base applications. We expect a full commercial release for this product within the next four weeks.

As I have stated in previous calls we truly have started to diversify our revenue model. We now have customers generating revenue through both transactional revenue models as well as subscription-based models. In fact, certain subscription-based models are generated more than $ 1,000 per year per system for the use of our software we are excited about these revenues models and will continue to aggressively pursue them as a major part of our strategy in 2006. During the fourth quarter we continue to sign up key accounts, in fact, we brought on yet another financial services fortune 100 company.

The company implemented our technology in early 2006 in a major theme park as the results to date have been excellent. We are encouraged that this account will be a major opportunity for us in 2006, we have several other high-profile accounts that are at various stages through the sales process that we expect to turn into booked orders in 2006. They include customers from the shipping logistics vertical market, the automotive market, as well as the wireless industry. I would like to switch gears and provide you with a brief update on the specific vertical market we are targeting. I would like to begin with the retail vertical market. We saw tremendous traction for Intelli-Check in this market in 2005.

We signed up many of the leading financial services company that service this market specifically in the issuance of instant credit. Our products and solutions have been demonstrated to a number of tier-one retailers through various partners with strong reviews. In fact, we have had three successful store grand opening launches using our key off technology for issuing instant credit over the past month with a major department chain retailer, we have two more tier-one scheduled to launch with our technology during the second and third quarter of this year. All of these launches are in a limited number of locations so they can accurately measure the success and determine how it affects their business processes. We expect several other launches to take place this year in the retail vertical market. We had a very successful launch in early 2006, with another financial services company for the issuance of instant-- for the instant issuance of their co-branded airline credit card.

Our technology is currently running in a number of major U.S. airports. The results have been very successful to date and we expect our solution to be deployed at several other airports during 2006. We continue to make progress in the financial services vertical market. One of the key factors for implementing our solution into banks and credit unions is for our application to be fully integrated into their existing products. We have determined that banks and credit unions are not interested in yet another piece of software running on their computers.

Therefore, integration of our product becomes critical this is where we believe our new browser helper object will become important,. This new product will allow us to integrate into the banks and credit unions existing applications without any assistance from the developers of our core software. We have been targeting credit unions that use browse-based applications and plan on implementing our solution into field trials in the second quarter. In addition, we continue to gain traction with Fidelity National Services formally Certegy Check Services in both their casino cash management business as well as their check authorization business. We have continued to make steady progress with Verifone, although progress has been slower than expected due to a variety of reason we are now fully integrated into their value add provider program.

Verifone staff is now fully trained and certified in our product. In fact, we have signed up two key resellers from Verifone sales channels through a series of web [NR]- that Verifone recently hosted featuring our product We have several other promises leads and expect the Verifone channel to begin generating sales for us in the second quarter. One of the slow-downs was the introduction of the new VerixV platform in our need to integrate into this product line, this new lower-cost terminal is being widely accepted by the sales channel.

We continue to forge ahead in the age of verification market and we continue to sale our product to bars, night clubs and casino's With the introduction of the new Verifone VerixV platform we expect to have a product that will compete on the low earned of the prices. However, until legislation has passed that mandates the use of age-verification technology the market will be fragmented. The partnership with Verifone provides us with the feet on the street to be able to attack this diversified market.

We also continue to market and sell our product into the access-control market we have been working with a number of visitor-management partners you have integrated our technology. In fact, our most recent partner who has a web based product was able to use our browser helper product and integrate our ID check technology and go live into a major New York City building in less than a day. Three key pipeline opportunities for us in 2006 are with a major wireless carrier, a major shipping logistical carrier as well as one the largest auto rental companies in the U.S. All three of these opportunities are at varying stages of the sale cycle and have the potential to convert into sales in 2006.

In addition, we are optimistic that the recent strategic partnership agreement we announced with Metrologic will provide us with multiple additional distribution channels for our bundled solutions. We continue to work all of the opportunities very closely. I want to switch gears for a moment and discuss the government opportunities we have two key initiatives that are underway, the first one is the first responded program which is part of the department of homeland security. This is the program that will involve hand-held devices running our software as well as additional applications. We are still working closely with the government and various partners on this opportunity.

Our recent partner agreement with [Intermec] a provider of rugged hand-held computers to the government fives us further penetration into these space. We expect that we will see a revenue opportunity from this sometime in 2006. The second initiative deals with the requirements of FIPs 201, which evolved from HSPD 12, the program that calls for government employees and contractors to be issued a new interoperable Credential that will allow them access to any government facility.

There are approximately 90 million new government IDs that are required to be issued starting in June 2006. We have partnered with Anteon to provide them with our technology for the front end credentialling. Anteon has been activity demonstrating this technology throughout the DC area over the past few months with positive reviews. A revenue model is predicated on a percentage of the sale price of each government ID. Therefore, we only need to capture a small percentage of the 90 million IDs for this program to be very successful.

RSPs for the various departments are beginning to hit the street. We believe that we potentially could see revenue from this program beginning later in 2006. I believe it is evident on the commercial side that we have made significant progress in the last year. We expect this momentum to continue and we are very optimistic about the future. On the government side, we need to work with our current partners to try and tap the large opportunities that exist because of the announced wins and potential revenue that can evolve from the business models associated with each one together with the growing pipeline of new opportunities and government programs which our technology is an important component we remain optimistic that 2006 will be a great year for Intelli-Check.

I would now like to turn the call back over to Frank.

Thank you, Todd. That completes the formal portion of this call. We will now open, operator, the call to questions.

Thank you. [OPERATOR INSTRUCTIONS] We'll pause for just a moment to assemble the queue. And we'll take our first question from Robert Lambert of RLR Capital.

Good morning. Congratulations. It's nice to see real progress. When I was returning from Florida about a month or so ago, I was in the Philadelphia airport and when I was in the airport, I passed an area where I could apply for a credit card, it's a new U.S. air Master Card, which was terrific, because I was able to just swipe my driver's license. Todd is that us involved with that?

Well, the only way I can answer that is obviously, you had an idea that it was Intelli-Check's technology, but beyond that we can't really comment, but we can't argue with what you saw and you saw our name and it's prominently, with the technology. So we're excited about that opportunity and many others but we can't give too many specifics because of confidentiality but I can't argue with what you saw with your own two eyes and you'll see our technology more and more places throughout the U.S. in major places that you go because these are the type of high-profile accounts that we're beginning to win and generate significant revenues off of.

Great. Thanks.

Our next question will come from John Bindle of Hermadgen Capital.

One of my partners was recently in Las Vegas, a week or so ago and he was at a Alamo Car Key Off and he saw the Intelli-Check on the system and we spoke with the woman, and she said it cut the processing time in half, and he asked how many they were she said she didn't know but she understood there would eventually be in them all. And I have seen nothing out there either in the press release or you all talking about the rental cars having this. But it makes a lot of sense especially if it cuts the time on n half. Can-- can you comment on this.

Again, your partner saw it with his own two eyes it is Intelli-Check technology out there it is in the public domain we can't comment on that any further than I can confirm what you saw was Intelli-Check because it was and you saw it with your own two eyes we're very optimistic about this there's articles written not mentioning Intelli-Check but Alamo mentioned in the USA today and some other publications. Again we're optimistic about these opportunities, were in vary advance stages of them and we're optimistic that they are going to be successful, as the person said the goal obviously is to roll these out nationwide would would be very, very large installations for Intelli-Check and we're optimistic about them and some of the stats you quote about cutting times in half are very accurate and we're going to wait and see how these play out. But these are all opportunities that Intelli-Check is involved in we can't comment on them any further. Other than what you saw was our name and that's our technology but we're going to wait and see how they play out over the next several months.

Would you not expect without you having to name Alamo that this would not spell over if Alamo has it why wouldn't AVIS or Hertz, that makes a lot of sense again, I guess what I'm trying to get out of you is that no restriction that you only can service Alamo and not service Hertz.

That's correct we have no restrictions we actually have recently brought on a very key person on to the sales side who has got tremendous experience in the travel sector. I worked with him in a previous life he grew one of the largest key off businesses and is helping us market to the travel sector so this is a sector we believe in. So were not restricted in any way shape or form by going after anybody and I think we have got some absolutely key people that we have brought on board to help us penetrate this market and we're excited about the opportunities and this one that you mentioned is just we think is the tip of the iceberg of what could really take off over the next year or so in the travel sector for us. Remember it is's a key market why you can't go anywhere without having to produce your driver's license, end of story.

One last thing, would you expect or would you expect that somehow the publicity because according to my partner he said the woman said I don't know it was half or three-quart quarters of people come up and use the kiosk in order to be able to do it. So I would think that somewhere along the way that someone's got to be able to write about it and once it's named-- again, I don't know whether any publication has mentioned Intelli-Check and this is the first I have heard about it when he got back.

We certainly think there will be publicity on these and others as the projects roll forward. So were not concerned about this where some of other opportunities, vertical markets there's a lot more concerned about privacy. The travel sector I think will be able to talk more about what we're doing, but you kind of hit on something, real quickly, John. We' a tremendous push towards self-service and that's something we're actively pursuing right now. Because people are so comfortable going into grocery stores. When ever you get on an airplane your using a kiosk so there is a lot more self serve applications out there today so we are targeting that very closely with your technology today.

Thanks a lot. Good job.

Thank you.

Thank you we will now go to Sam Bamberg of Bayberry Capital Management.

Sam Bamberg. Good morning. How are you?

Good.

Can you tell me mix of software and hardware in the fourth quarter.

We do not break down segment reporting so that's not a number that we're prepared to give at this point, Sam.

Okay. Can you--

But as-- as I said there-- there's a larger portion of software sales made than in the past.

Okay. And we got to the Tricom patent litigation, has there been a court date set on that? Is it sometime in April or has it been pushed more forward.

What has recently happened is the district court has removed it from the court out on the island. It is now in the eastern district, and there is a pretrial conference date set for April 12. So it's moving closer to adjudication than it was. The stalling tactics seem to have been court-mandated to end.

What did you say your litigation costs are on a monthly basis or legal fees at this point?

Well as Ed pointed out, the legal fees have dropped dramatically this year to last year because a lot of it is behind us. We just stated that our burn rate including legal fees would go up to 395,000, I believe, but we did not break down the actual amount that we have budgeted for legal this year.

Can you break that out?

Not at this point, no.

Okay.

We do expect it to be a smaller portion than last year.

Okay. The fortune 25 company that was supposed to integrate your software into platform, has that taken place already?

All I can tell you is that we are doing tremendous amount of work with this company every single day we have launched with them in several places. We have gone live with them with their customers, so that's all I can really say so I think the answer is we-- we have processed transactions with them so we're well on our way and we're doing a tremendous amount of custom development with them literally every day to continue to move the ball forward. But we have launched several applications so that is really one of the company we're referring to.

Todd, sometimes in the future will there be some of press release on this particular company.

I don't think there will be a press release on this particular company what I think will happen is there may be a press release in the future on specific accounts that chooses to roll our technology out and we may be able to get some press that way.

Sam, can you limit it we're taking--

Sure. One last question. Thank you Frank. One last question. Can you give us any guidance or tell us how the first quarter of '06 is doing? Frank?

We will not give guidance at this point we have given guidance for the sales for the year but we will not give quarter-to-quarter guidance.

Okay. Thank you very much keep up the good work.

Thank you.

Thank you and we'll now hear from Daniel Morris of RF Laugherty.

Good morning. Everyone. Good quarter. Could you, Todd, we have been talking about the wireless initiative for quite a while. Could you talk about, where we're at with that at this point.

Yes, that's a good question. Basically the slow-down really has been a couple of things there was a project that really got in front of us on coup. All at the end of the day some of it had to do with which type of hardware they were going to implement into their stores. We had various hardware options that we proposed. That we have partnered with, whether it's a Metrologics or symbols a partner of our which we said or some others and on the retail side it makes sense to go with a pistol-grip scanner, so we had to change and do some software rework for them and we're hoping to get it back into their stores with new hardware options sometime in the second quarter, this is the kind of a store of the future that we are talking with that they want to put it into as possible so we're actively working with them. We're making progress. It's gone a little slower than we thought but it primarily centers around what hardware platform they are going to use. And how that changes the dynamics within the store.

Okay. Thank you.

You're welcome. But it's still an active opportunity.

OPERATOR INSTRUCTIONS] We'll take our next question from Richard Carp with Gunn Allen Financial.

Good morning. Gentleman, and congratulations on closing up strong last year. Actually my question has been answered. What did you say the guidance was for the sales for the quarter.

We didn't give guidance for the quarter. We stated that we expected booked orders for the year to be in excess of 6 million.

Okay. Well, as far as the-- thing that I find very strange and I thought maybe you might want to give me your ideas as to why. You signed a bunch of contracts going in-- towards the end of the year showing a lot of strength but yet the stock came down to a 52 week low. You did a financing with a group, it was an institutional financing I believe but yet signing all of the agreements the stock came down and touched below I believe 3 bucks. As far as any other reasons except for year-end selling for tax loss is there any other reason why you could see why the stock has pulled down to that level.

To the extent that I'll comment to the action on the stock, we found out after the fact that the placement that we did there was leakage of almost 90% of the shares that were placed. We do have some good holders, very good holders and still remaining, but most of them sold the stock. One sold because they liquidated the fund and the others just followed suit, and that in our opinion is what drove the stock down to though lows when the selling finished, the stock has recovered, and that's all I'm comment as to why we believe the stock went down. We know for a fact by the transfer sheets that this stock was sold.

I will say it has been nice to get faxe's down from my clients coming out of Newday with the performance of Intelli-Check so far this year. I hope it continues and congratulations.

Thank you, Rich.

Thanks.

Our next question will come from private investor Mr. John Slattery.

Good morning gentlemen. Nice Year end. Based upon your earnings project-- on your book revenue projections of 2006 of $6 million would it be safe to say that at that number your company will be profitable.

We will not comment on the-- what it will be. We expect substantial improvement. We have only given guidance on the top line. We will say at that number, the results of operations will be dramatically improved from even this year, but we're not going to comment on what it will be at the end of the year. Of course everything is predicated upon the mix of sales in that period, and we're still looking out to that number.

Well, then you say your burn rate is what, approximately 390,000 a month.

I said the burn rate for 2005 is 390 and we expect it to go up slightly.

And what do you expect it to be for 2006.

425,000.

425,00 so a little simple math there, 6 million in booked revenue if you book it all for the year-- I mean we got to be close, within a hair of being profitable. What would you say about a government contract, if we got one this year, what would be the potential for that? Are you looking for that to happen this year or do you think it's still out there because Congress can't get it's act together.

On the government side we know it's coming, we just can't put a finger on what day it's coming or what month it's coming it depends on when the new budget gets enacted even though this budget is October . This past year they didn't finish it until January. So there are requirements out there for credentially of a document which in most cases is a driver's license, that's what we do that's what are patents cover. We are optimistic about these programs. We still don't know. Any one of those could be quite substantial in volume. Quite substantial.

All right. One last question then, sir. We-- we have already heard from people on the call that you are at Philly Airport with US Air and Alamo Rent-a -Car we have heard about Target stores. How do we get some respect from the street, I mean we are doing business fortune 25 and, fortune 100 companies and nobody knows and still our stock is still suspect constantly.

I don't know what you mean by suspects.

There's always innuendoes put out there by shorts. Our sales are starting to really explode and we're not getting any real coverage. What are you doing to generate some interest from the street.

What we're doing is exactly what we have always done. We go out we meet with people and we tell them the opportunities and we let people judge for themselves. But we're very optimistic as to the future of Intelli-Check.

Thank you very much.

[OPERATOR INSTRUCTIONS]. And we will now hear from Andrew Boyd. [Inaudible]

Gentlemen, several analysts seem to be concerned that the story isn't widespread, and why are we dancing around all of this-- all of these numbers and everything? The stock is misunderstood in my opinion and this is only my opinion is because it's unanalyzable. You guys mentioned one thing and that was 90 million of these universal IDs to get into defense department installations and you said that you would get a percentage of the sales of those independent indication cards. That's what I remember any way. When you talk about Alamo, you talk about Target, you talk about the Philly airport. We never can figure out if you are going to get paid per swipe. How you are going to get paid. If this is a raiser. Razor blade concept.

So as a consequence if somebody wants to do some number crunching, albeit, they can come up with some model of what your revenue could conceivably be at some point in time. We don't have any of that information so we can't do any analysis, and stocks that can't be analyzed don't go up. So I-- I don't get that. Let me ask you one more and then I'll go away. These partnerships the one you called strategic the other you called merely a simple partnership today. Does any money exchange hands in these quote partnerships, or are these just fishing licenses that you guys say you can use that if you want you don't have to use this. Is there any real obligation on anybody's part to do anything about this? That's all I got.

Well I'll answer that question for you to the extent that it's answerable. One, everyone of the partners that we sign up doesn't sign up at the level-- excuse me-- that these are done with the intention of not using the technology, whether it be a Verifone that we have announced, whether it be the financial services company, they all use it. Each model stands on it's own. As Todd pointed out, some of the models we get over $1,000 a year per system and that's a subscription model per month. That's over $100 a month. Other models like Certegy we previously announced are a transaction-based model, where we get a transaction fee. The financial services company is a combination-- they buy hardware from us and they also pay us a transactional fee. So each one is different. As Todd also stated we swinging more toward a transactional or subscription model, rather than an outright sale. So we believe that we have given sufficient information contrary to what you believe, where people can go out there and based upon the margins that we generate, and the guidance we have given to date and model it. We're not saying that it can't be much higher. Any of these government programs in and of themselves could be substantially when they hit greater than what we have given in guidance.

But we haven't given any guidance of really putting a great deal in because the budget for 2007 hasn't been approved yet. So I understand the frustration that some people have, but we in other areas are restricted by the kind of agreements that we sign-- we would rather have the business and not have to put out a press release even though we would like to announcing it, all initiatives that people have seen are us. We never announce them because we're not allowed to by the agreement, but people see what they see, these are all very substantial companies with very, very substantial marketing approach. So, yes, we do believe that what we announce will create revenue opportunities for the Company whether it's Intramec or Metrologic or anybody else, if you notice when Intramec signed with us they put out the press release and I would submit if someone were to call their IR department they would tell you how excited because they have seen the same government opportunity we have. And we're pleased to be partnered with companies of the [ilk]

I respect your answer and I don't mean to be argumentative.

I just trying--

Any axis as a friend of the company, I'm not a short seller or anything like that but when you speak about these things, if you are going to get a penny a swipe that's dramatically different than if you are going to get a nickel or something like that and somebody talked about sales exploding well a sales explosion on a $ 1 million base on stock like this that' got 12 million shares outstanding selling at 6 is hardly-- this is a basesy, basic comparison. Once again, unless we get some kind of-- I mean, am I supposed to look at Alamo's rentals and figure out whether they have-- and get a penny a swipe or get a dime a swipe how-- how are you supposed to come up with numbers here.

We haven't announced anything we have just commented on what somebody saw.

I understand that.

What that model is because we're not in a position. We have only commented that somebody said they saw it. Yes that is us. Beyond that I will not comment.

Okay. I appreciate it. Thank you.

You're welcome.

And at this time there appears to be no further questions I would like to turn the call back to Frank Mandelbaum for any closing remarks.

Thank you, operator. That concludes our year-end report. We thank you all for AP tending and we look forward to giving you good news going forward. Thank you all.

This concludes our teleconference. We thank you for your participation, and have a good day.