Intellicheck Inc (IDN) 2006 Q2 法說會逐字稿

Good day, everyone, and welcome to Intelli-Check's 2006 earnings conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Adam Lowensteiner. Please go ahead, sir.

Thank you very much, Amy Jo. Good afternoon, and thank you all for joining us for Intelli-Check's quarterly conference call to discuss the results for the second quarter and six months results ended June 30, 2006. By now, all of you should have had the opportunity to review the press release discussing the financial results. But if you have not, please call Wolfe Axelrod Weinberger Associates at 212-370-4500 and we'll immediately send it to you either by fax or e-mail.

Before I turn the call over to our host, 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 any other similar expressions as they relate to the Company or to 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 under the heading of the risk factors listed from time-to-time in the Company's filings with the Securities and Exchange Commission.

We do not assume any obligations to update the forward-looking statements. That being said, I would like to turn the call over to Mr. Frank Mandelbaum, Chairman and CEO of Intelli-Check. Frank, please proceed.

Thank you, Adam. Good afternoon, ladies and gentlemen and welcome to Intelli-Check's second quarter conference call. On behalf [INAUDIBLE-BACKGROUND NOISE] Thank you for joining us this afternoon.

Present with me today are Ed Winiarz, our Senior Executive Vice President and CFO; Todd Liebman, our Senior Vice President of Marketing and Operations; and Russell Embry, our Senior VP, Information Technology and Chief Technology Officer. As part of this presentation, Ed will discuss our results of operations for the period ending June 30, 2006, which we released earlier, and then Todd will bring you up to date on our sales and marketing initiatives.

After our formal presentation, we all will be pleased to answer any questions that you may have. I will now turn the call over to Ed Winiarz who will discuss the highlights of the results of operations for the periods ending June 30, 2006. Ed?

Thanks, Frank. Good afternoon, everyone. I would like to discuss some of the pertinent financial information that is contained in our 10-Q for the second quarter ending June 30, 2006, as frank mentioned, which we filed earlier today. Reported revenues for the second quarter 2006 decreased to approximately $718,000 compared to approximately $997,000 in 2005.

Actual sales bookings were, or total shipments in 2006 also decreased to approximately $851,000 from last year's second quarter sales bookings of $1,145,000. To refresh your memory, during the second quarter of 2005, we made a very large sale to a significant retailer that accounted for a large portion of the revenue and sales bookings.

After taking into account the significance of this large sale in the previous year, we believe that it's evidence that the 2006 quarter has seen a continuation of the expansion of our customer base and the contribution of sales bookings arising therefrom, as compared to prior years. There is further evidence of this as sales bookings for the six months in 2006 increased as compared to 2005, which included a large sale to the significant retailer.

During the first six months of 2006, the total of our new non-cancelable orders that were either shipped or included in our back log was almost $2 million. As a result, at the end of the second quarter 2006, our backlog, which represents products and services of non-cancelable sales orders not yet shipped increased to approximately $835,000.

Todd will walk you through some of the details of our current pipeline of sales opportunities and successes, and why we remain extremely optimistic about our future sales growth and the goal of meeting our previously-announced sales bookings projection for the 2006 year later in the presentation.

Our gross profit percentage decreased to 67.9% for the six months, 2006, compared to 83.1% for 2005. In 2005, the gross profit percentage was favorably impacted by that large software-only sale. Even though we didn't have this large software-only sale in 2006, the gross profit percentage for 2006 was still quite strong. It's to be noted that as a result of our increases licensing revenues, we're experiencing increased sales for upgrade and maintenance programs that have very high margins.

Total operating expenses amounted to approximately $1.5 million for the second quarter 2006, compared to approximately $1.1 million for 2005. This increase of approximately $400,000 was primarily related to an increase of our legal fees of approximately $200,000 relating to the Tricom patent litigation and $193,000 of non-cash stock option-based compensation expense, primarily related to the change in the accounting rules and reporting the expense of the granting of stock options to employees and directors.

If you exclude all non-cash expenses, total operating expenses was approximately $1.1 million for the second quarter this year, compared to approximately $1.0 million for the same quarter last year. For the reasons prior stated, we reported a net loss for the second quarter of 2006 of approximately $938,000, or $0.08 per share, which included non-cash expenses of approximately $264,000, compared with a net loss of approximately $182,000, or $0.02 per share for 2005, which included non-cash expenses of $73,000.

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 six months ended June 2006 by approximately $696,000, primarily as a result of the net cash used in operating activities of $950,000, resulting mostly from the net cash loss of approximately $1.4 million for the period, partially offset by an increase in deferred revenues of approximately $296,000 from shipments of a product not recognized under our revenue recognition policy.

As of August 9, 2006, we had approximately $4.65 million in cash, cash equivalents and marketable securities. Our cash is invested in short-term investment grade CDs, government securities and bonds. Therefore, our ratio of current assets to liabilities as of the second quarter ending June 30, 2006, remains strong at 3.4 to 1.

Our cash expense burn rate for the first quarter 2006, which excludes any margin on sales and the resulting commissions due on such sales and excluding capital expenditures, on average was about $390,000 per month, including the expenses relating to our patent infringement suit.

We do expect our cash expense burn rate for the remainder of 2006 to increase to approximately $425,000 per month caused by the expected increasing in staffing and the related expenses due to the anticipated growth of our business. We anticipate our current available cash on hand, cash resources from expected revenues from the sale of our products, including the sale of our units 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.

However, we may need to raise additional funds to finance more rapid expansion or acquire complementary businesses or necessary technologies. As Todd will now explain, we have been actively marketing our newly announced products and technology for licensing and integration into other complementary systems and technologies, as well as stand alone applications.

The potential opportunities in these markets could result in additional cash flow for the Company. I will now turn the discussion over to Todd, our Senior VP of Marketing Operations.

Thanks, Ed. I'm very pleased to say we had a strong second quarter and first half and continue to be pleased with the results of the year-to-date. As Ed pointed out, when you take into account the period last year, we had a very large sale to one customer and for the first half of the year, our book sales were above those of last year. It's evident we're seeing major contributions to book sales from many customers, which is actually a positive development and moves us in the direction that we're striving for to have all of our vertical markets contribute to our growth.

We continue to see a strong mix of sales from a variety of commercial customers that proves the success and momentum we're seeing in the commercial marketplace for our products. Just to reiterate our previous guidance, our booking sales goal for 2006 remains at $6 million, of which the majority will come from the commercial side.

We don't expect major government funds to be allocated for mandated initiatives, where our technology is embedded until the fiscal year 2007 budget scheduled to begin October 2006 this past, but continue to actively pursue opportunities in the government sector.

I would like to now take a few minutes to bring you all up to speed on the sales and marketing activities that have taken place over the past new months. I will start with a quick update on the sales force. I'm very pleased to announce that we have brought on a new member to work closely with senior management for the government vertical market. With all the recent activity in the federal space, we're pleased to have added this position to the sales force.

From the product development side, I would like to further update you on two new products we discussed on our last call. First is our ID-Check BHO. 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 on the part of software developers who develop the application. I am also pleased to say this product is in full production release and we have been actively selling it to a variety of vertical markets. The reviews to date have been fantastic and we'll continue to market this product very aggressively.

The second product to update you on is our new ID-Check Portal product. This is a brand new product that we recently released. It is a browser-based product that runs in Internet Explorer, that first allows for a swipe of the driver's license to verify the authenticity of the encoded media. Assuming the driver's license passes our patented process, it will then populate the form on the screen and at this point, the customer can add two additional layers of in-person proofing; the first being a detailed report that attempts to match address, telephone number, date of birth and driver's license number from over 200 public data bases.

It also checks the Office of Foreign Assets Control, better known as the OFAC watch list, to see if there is a match. The second phase allows for our question generator that will ask up to five questions about the individual and attempt to further prove their claimed identity. Both the detailed report and question generator are transactional-based, so they will provide an ongoing revenue stream for Intelli-Check.

We're actively marketing this product to the financial services and real estate markets and the feedback has been very positive to date. To increase our marketing efforts, we have recently begun an extensive campaign on Google, Yahoo! and MSN for paid key word searches. We are currently being matched to over 90 key words that pertain to various vertical markets we sell to.

Although we're very early in the marketing campaign, I am confident the web is the right place to be spending advertising dollars, as it is the first media that most businesses go to today to learn about the products they're looking to purchase. We'll continue to monitor the success of this program closely over the next few months so we can properly allocate the appropriate number of marketing dollars to this initiative. In addition, for the first time during my tenure, we'll begin to do a small amount of print advertising and a very specific targeted publication for one of our vertical markets.

The initial ads are set to begin running next month and will continue for four consecutive months, after which we will study the results closely to determine the next steps for print advertising. We're also still refining our newly-launched website, including our soon-to-launched e-commerce store and our new customer site, which is set to launch later this year.

I want to switch gears for a moment and bring you up to speed on the various markets and initiatives we're currently working on. We continue to make excellent progress with our multiple financial service customers, as well as to bring on additional Fortune 500 financial service companies to our customer mix. Our most recent initiative in this vertical will center on instant decisioning for the student market at various colleges and universities throughout the United States.

We also have a variety of proposals submitted with other key players in the industry who are looking for driver's license verification technology based on the inroads we have made in the market. We continue to be actively engaged in a number of custom software development projects to allow our customers to begin to actively roll out the technology to their Tier 1 retail customers.

We have completed first-generation kiosk and handheld application for multiple customers that will allow our customers to apply for instant credit on the spot. In addition, we continue to work with our customers on the long-term goal of integrating our technology into the retailers' point-of-sale systems. We expect to continue to roll out our technology for the issuance of instant credit with a number of significant retailers over the next several quarters. On the access control side of the business, we're continuing to partner with multiple players in the industry.

We recently brought on yet another new partner in the access control side, [TouchCom Inc.] They're another leading provider of visitor management systems, targeting class 1 office buildings and office parks across the U.S. We also continue to market the high-risk targets, such as oil refineries and power plants. We expect this line of business to continue to grow as customers improve their access control security.

On the financial services side of the business, we have made significant strides over the past few months. We recently announced our strategic partnership with FSCC, a leading provider of shared branching services for the credit union marketplace. Our initial installs took place today with one of their key customers so we can refine the product offering and after receiving feedback, prior to the full rollout, which we expect to begin later this year.

We're also beginning to work with some key banking core processors and data service providers who are interested in integrating our technology, namely our ID-Check BHO product, which, as I mentioned earlier, doesn't require any programming resources. On the VeriFone side, we have signed up our first ISO and they plan to begin the rollout of the product to their sales force within the next week or so. We also have several other ISOs that we are in the final stage of contract negotiations.

The relationship and integration with VeriFone platform has opened a number of opportunities to us that we would not have otherwise been able to work with had we not pursued this integration and relationship. For example, we're currently in discussions with two major financial service providers for integrating our ID-Check technology into their existing VeriFone products for the issuance of instant credit.

They currently use keyboards attached to the VeriFone terminals for manual entry of the applicant's information. They're interested in implementing driver's license swipe to speed up the transaction, as well as add an additional layer of security to the transaction. These two players alone have 15,000-plus and growing, VeriFone terminals in the marketplace that are potentials for our technology.

Based on our pricing model, we believe this potential initiative has the ability to provide significant revenue to the Company.

We continue to sell our product for age verifications to bars and night clubs. However, we plan to de-emphasize our marketing efforts in this vertical as the sales are not growing nearly as quickly as some of our other key vertical markets. We feel we can reallocate these resources to provide better returns for our shareholders. As we have mentioned in the past, if legislation is passed mandating the use of age-verification technology, sales to this market will spike and we'll act accordingly to capitalize on the opportunity.

That being said, with the horrific murder of an underage teenager in New York City a few weeks ago after a night of drinking, there is talk among New York City legislators to mandate age-verification technology. We're monitoring the situation very closely and will actively attempt to capture the market should New York City or any other jurisdiction pass any laws mandating the use of such technology.

We are working with a variety of other Fortune 500 companies on commercial projects where the key emphasis continues to be productivity enhancement. Customers we are working with range from shipping and logistic companies to auto rental to wireless industry. All the projects we have discussed in the past continue to move ahead. We're also seeing a fair amount of interest in the travel and shipping and logistics sectors.

Our initiative in the car rental market continues to be successful and we have two key opportunities on the shipping and logistics side that deal with combating the unknown shipper issue these companies face. We have key initiatives in both markets and remain excited about the potentials that they bring. We're confident that a number of these pipeline opportunities will convert into bookings and revenues sometime later this year.

We're still actively pursuing two key government opportunities before us. The first one is the first responders program, which is part of DHS. This is the program that will [INAUDIBLE] handheld devices running our software, as well as additional applications. We're still working closely with the government and various partners on this opportunity, particularly Intermec. We expect that we will see some revenue from this opportunity later this quarter and next with much more coming in 2007 as the fiscal 2007 budget is passed.

The second initiative deals with the requirements of FIPS 201, which evolved from HSPD-12. This program calls for all government employees and contractors to be issued a new interoperatable credential that will allow them to access any government facility. There are approximately 90 million new I.D.s that are required to be issued after October 27 this year to all government employees and contractors. We have partnered with Anteon, now a part of General Dynamics, Northrup-Grumman, and we have further reached into the space by the introduction of our technology to other integrators of our licensees to provide them with our technology for the front-end credentialing part of their solutions.

As an example, it's our technology that is being used to screen driver's licenses as part of the enrollment process in the Registered Traveler program that is receiving a lot of press at the Orlando airport. We believe that we could potentially see revenues from HSPD-12, FIPS 201 initiatives beginning later in 2006.

We also have a number of smaller initiatives that are just getting underway with the recent addition of our new government sales person. We believe that these will begin to gain traction later this year. In light of these developments, we expect the momentum we have built up during the first six months of this year to continue and we're very optimistic about the future.

Because of the announced wins and the potential revenue that can evolve from the business models associated with each one, together with the growing pipeline of new opportunities and government programs in which our technology is an important component, we remain optimistic for the rest of 2006 will make for a great year for Intelli-Check. I would now like to turn the call back over to Frank. Thank you, Todd. This concludes the formal part of our presentation. We will now be pleased to answer any questions that anybody may have.

Thank you. [OPERATOR INSTRUCTIONS] We will pause for just a moment. Our first call comes from Robert Lambert of RLR Capital.

Hi. Good afternoon, Frank, Todd, and Ed. Nice quarter but, you know, I was wondering, your guidance is calling for $6 million in bookings, and I think if my math is right, we have done about $1.5 million. How do we, how do we get that $4.5 million in this next six months, and if that's the case, that would be pretty significant run rate? Could you comment on that, and then I have another question?

All right, the first answer is the book sales for the six months, as Ed pointed, out are $2 million which leaves $4 million to meet the quota for the year which we're still confident of meeting and, Todd, do you want to comment? Before Todd, that you do, you're right that the run rate at the end of the year would be quite substantial, based upon that number coming in the last six months. Todd, do you want to address that if you could?

I think we have been making steady progress and we continue to see a phenomenal pipeline out there and we're still optimistic for $6 million for the year. Last year, we did real well in the second half of the year when you take out the large order for the significant retailer that we discussed. So, all I can tell you is the pipeline's never been better at Intelli-Check. We, literally, have not lost one account that we have been talking about on the conference calls, whether its the large wireless company, the auto rental company, or shipping and logistics.

They all continue to move forward, they are talking very positive. We've just got some phenomenal opportunities on the financial services side that are mind-blowing, we're talking literally with Fortune 100 companies. I would like to say it's the law of large numbers that we have so many opportunities out there for us to reach that $6 million number. We just have to get a couple of these to turn over.

The one issue, you know, I will say is that, obviously, as we move closer to the end of the year, the retailing sector begins to slow down a little bit because with the holiday season, it's their biggest time. We're pretty optimistic on what we have out there, whether it's, you know, retailing, shipping and logistics, and travel industry, you know, we're pretty confident. As Frank pointed out, the number was right around $2 million for the first six months. We're well on our way and we're confident and excited about what lies ahead of us.

That sounds encouraging and if I read you right, that doesn't, you're not really including much government here because government's more at the very end of the year in 2007, is that correct?

I think that's an accurate statement from what we've said. Yes.

The other question I had was just own personal, because I kind of watch our stock a little, and we had, Frank, some unusual trading in the stock a couple of weeks ago. Can you comment on that?

We did have some unusual trading that was pointed out to me by the specialist. We had some steady, what was called short exempt sales. A short exempt sale, according to the American Stock Exchange is someone who can deliver the shares either through an excise or a warrant, either through a conversion of a convertible debenture or any other form. It could be unregistered stock that they want the legend to be taken off.

Looking at the transfer sheets and looking at the history of the Company, we felt that it was a little bit unusual that somebody would do that, particularly in the way that they were selling where they get 5,000 off at one price and then put 5,000 and $0.05 lower and they'd get that off, put 5,000 in and we have just asked the American Stock Exchange to take a look at that to see whether or not that was truly a short exempt sale.

I see. And -- and one further question, I don't know if you saw it or not this weekend, but "Meet the Press" had on our former governor here of New Jersey, Keane, who had to do with Homeland Security, and they had a really good discussion about how slow things have been implemented by government in reference to airports and homeland security. At least from that, listening to "Meet the Press", they spoke about no more pilots and that they're ready to go, so is that what you're hearing, you know, as far as Washington -- do you feel now there is more urgency to get some of these programs now to really get going?

Well, I did not see the program, Bob, but I will say we remain optimistic based upon all of the intelligence we get out of the government sector that things will happen. Don't forget, we do have that deadline date of October 27 for compliance with HSPD-12 and we don't see any slippage on that date.

Oh, good. Thank you.

Okay.

Now we'll hear from [Sam Bergman] of [Bayberry Capital.]

Good afternoon, Frank, Todd, Ed. How are you?

Let's not forget Russ is on the call.

How are you doing?

How are you? Several questions, first one, can you give us an update on the Tricom patent suit?

The Tricom patent suit is exactly as stated in the 10-Q that was filed today. The most recent developments are the fact that they asked for a Markman Hearing. The judge asked us to put in papers on both sides, those are all in, we're waiting for her ruling. We feel they have waived the Markman Hearing by never having brought it up. What the Markman Hearing means for those of you who are not familiar with patent law, patents have multiple claims. In the claim construction, they try to ascertain which claims are applicable to this particular case.

The fact that they never brought it up, our patent counsel feels they waived it, motion papers are in, we're waiting for the judge's ruling. Additionally, there is a motion before the judge to potentially look at the issue of a conflict of interest because the patent counsel for our, the defendant in this case, Tricom, acquired or merged with another firm where one of our original patent attorneys now work.

Aside from that, it's strictly motion practice. We had asked the judge for an expedited hearing for this summer and she told us it would not be before the beginning of the spring, so we're looking to move this to trial; however, we have to go with the court's calendar.

So, are you expecting that run rate of $200,000 of attorney fees, or legal fees, per quarter going forward?

There are times that we're more busy than others, so it's very difficult to say what it will be for that quarter. We have allocated the funds to bring this to coverage, but it's very difficult for us to determine what it's going to be. Right now, we're very quiet, we're waiting for all of these things to happen.

Okay. Can you tell me how many additional financial institutions were picked up as new customers this quarter?

Sure. We picked up, I would say we picked up two new ones real solid last quarter, obviously, two huge ones, and we have got, you know, another blockbuster presentation coming up next week, I really see the biggest one of them all, or one of the biggest ones in the specific market we're going after. The interest level is there. I have to tell you, I was thinking about this before.

If we can outline here or reveal to all who all of our customers are in the amount of resources and time they're spending on these projects, I think it would give you guys a completely different perspective. Unfortunately, we can't do that because they all feel it's a competitive advantage. We're moving off to every single one, they're all going to be on an equal playing field, which is good for us. I would say we picked up two serious brand new ones, between last quarter and the beginning of this quarter.

In other words what, is the payback back to the Company on these large contracts. Is it licensing fees or other revenues?

It's both -- I mean it's -- these contracts are a combination of typically licensing fees or subscription fees for our software and hardware sales that are involved. It's really all the above. It could be transactional fees but most of the ones we've been structuring are either a license fee or a subscription-based fee for our software. And there is also quite a bit of custom software development work that starts with all of these guys.

So In other words, Todd, the two financial institutions that were picked up this quarter, we should or should not expect an announcement of a contract with either one of them going forward?

You could see -- it all depends. A lot of it is project-by-project basis, so that is not going to be an announcement of a contract but, you know, certainly one of them in particular, we're starting to have a discussions with about a very long-term, large-scale contract and I assume that if that came to fruition you would see some announcement about that.

Sam, let me comment a little on that. You know, we're dealing with Fortune, very, very large companies, Fortune 50s and above. When they say no publicity, unfortunately, if you folks new the names of these companies, we believe that there would be more interest in the Company, but I have said this before and I will repeat it. When we -- the bottom line is going to be what we take down, that will be our report card eventually. The report card is starting to fill in.

When these large companies tell you no publicity, we blink first. So, even though we signed up the two new very large accounts, we have not put out any release on it because we're prevented to by the way of the agreement where they believe they have a competitive advantage.

And we would rather have the business, which will contribute toward the numbers we're looking to make for the rest of the year than have the press release. We would like to have both but when it's a choice of one or the other, we take the business.

Thank you very much.

Okay.

Now from Hermitage Capital, we'll hear from John Bendall.

Hey, guys, you answered the question about the run rate. I don't guess you would go further than comment if $6 million is the number, gross this year. You have a run rate of 8-plus, actually, it worked out a little more than that. Would you -- what would -- what you would be happy to see on the bottom line?

Well, I think it's obvious, John, that if we're projecting approximately $4 million in book sales to the end of the year, even if you divide it in half, they're going to be pretty strong quarters and at the rate, and if it becomes a progressive number to get there, you're right. As was, Mr. Lambert before, the run rate at that point would be substantial, which would be a good segue into next year where we expect some pretty dynamic things to be happening, particularly in the government side.

So, you know, when people look at it and say $6 million, expecting a million and a half, a million and a half, a million and a half, that is never going to happen. That's a no-growth scenario. We're growing, as Todd pointed out, and Ed did, we're starting to see multiple revenue opportunities from a lot bigger mix.

Last year's quarter was skewed, granted it was skewed to the upside and we took it by a very large sale that we worked on for four and a half years until we landed it, and now, we have made up for that number by having all these new accounts Todd spoke about clicking.

So the fact that our book sales number for the six months exceeded last year, if you were to take out that large number, we're probably up on comparable sales, several hundred percent over last year, x that one, granted we have it, it's part of our record and we can't do away with it, nor would we ever want to. But the comparative, even though my first blush, looks negative. Quite frankly, Todd pointed out, he's very pleased, we're very pleased. The Board's very pleased at the numbers that came in and they were quite strong and very high margins continue.

Right. The other thing is, Frank, given the fact we have had so much in the last three or four days, with what has happened in London and I have asked for some time, and one of our consultants who has done some work in Washington, I won't embarrass you because they have told us, or it's been, you know, chit-chatted around with some of the companies and parts of the government that are expected and maybe they are doing business with you.

But given the publicity out there every night from border crossings to London, it doesn't take a rocket science to understand they keep showing a driver's license which, we all know means nothing if it's not a real driver's license. Why is it that -- what are you doing, I mean it's great to have those numbers and they will catch up, but those numbers will expand by someone saying, you know, we didn't even know Intelli-Check existed.

We better have that system, whether it's a nuclear plant in Colorado or Virginia or whatever, what are you doing to really get this out to the media? It's a media event. We see things, everything in the morning from barbecue sauce to rainwear, and yet, here is a major, major story that I can't believe, as the guy said awhile ago about "Meet the Press," why don't we see something out there?

It doesn't have to be just Intelli-Check, but it's certainly seems like it would be something that where, it's Intelli-Check along with two or three others, and Anteon, it's certainly worthy of, not only the television media but the real print media. I don't mean trade magazines. What are you doing to let the -- I won't say the public -- let the world know there might be a system that saves their lives?

Well, John, to answer that, it's really a two-part answer. First part is the Company is actively, with their financial consultants, looking to talk to the media, et cetera. We do have a lot out at this point. I can't say specifically what it is and when we expect that to happen. We're actively looking in that market. As a matter of fact, you know, to point out something. I was in Washington this past Friday for multiple meetings in the government space, and, you just take, had this conference call taken place a few weeks ago, we would not have known offhand very quickly that we are part of the Registered Traveler. Lots of publicity on that.

But, we found that out, let's say secondhand, because our licensee is in there with our technology. They just buy the products from us but they didn't tell us where it's being used. If anyone goes down to Orlando right now and wants to be part of the Registered Traveler, and that's by a company called Verified I.D., and you walk up to the kiosk, the top part of the kiosk you will see an Intelli-Check device and we're doing the screening for the driver's license.

So, carrying that a step forward, I was in D.C. on Friday as I said, and I met with some of the other major integrators that requested a meeting with us. And they had our technology, they were not aware of it, in their labs testing through other licensees, but they want to also work directly with us.

So, as far as being recognized by the government, believe me, the government and their integrators well-know who we are. If we were as well-known in the investment community, we would do very well. But this is happening.

We do have a campaign to attempt to get more recognition in the print media and TV, et cetera, we're working on that daily. We can't say we will be successful or unsuccessful, but we're addressing that issue every day because you're very correct.

That this is a very hot-button issue, whether it's the drinking in New York where that poor girl was murdered, or where they're talking about legislation, I have a meeting request for right after Labor Day to go up to Albany and discuss it, so we're pretty well-known. We'll get the story out. We're working on that and that's one of our priorities going forward.

All right. I think it's very important, Frank. I think it doesn't take a rocket science, you know, to know that this is necessary. And, again, you know, we don't read about it when people say I haven't seen anything, and I think one thing leads to the other. I hope that is something going forward that we get to see a little bit more, the media with Intelli-Check. Anyway, I like the sound of that $8 million, $10 million run rate. Thanks.

[OPERATOR INSTRUCTIONS] We'll hear from [Jason Schwartz] of [Jay Goldman].

Thanks, guys, most of my questions were answered. But if you were to take out the big retailer from second quarter, what would your second quarter revenue number have been?

We haven't disclosed what the revenue from the significant retailer was.

Okay.

It was substantial.

Okay. And of your sales bookings numbers for the first half, how much of it were part of maintenance contracts and how much were new business?

I would say it's probably -- of the revenues?

Yes.

Probably at least 10%.

Okay.

Jason, I think you will start to see that number grow, though, over time because our business is shifting more towards larger accounts.

Okay.

Where maintenance is a more viable option. The problem is when you sell to bars and night clubs, and [onesies], [twosies], which is a lot of our installed base from years ago, it's much more difficult to get them to sign on for upgrade plants because they're not dealing with an enterprise.

If they are in the State of New York, and New York hasn't changed their driver's licenses, and 95% of their business is New Yorkers, they are not interested in paying, when you're dealing with these huge multinational, or huge U.S. companies with a footprint. They don't care. They know upgraded software and maintenance is a part of the deal and I think you will start to see that become more and more a critical part of our revenue stream and more sizeable.

Great, and I guess one other question, did you have any deals over $100,000 or $200,000 in the quarter? How -- what was the linearity like in the quarter? Should we expect, obviously, your guidance expects it to grow over the next couple quarters. Is there one big deal that contributed a large part of your number for this quarter?

We had disclosed in the Q for the six months, there were a couple of customers that accounted for over 40% of the revenues, not bookings, revenues.

Okay. Great. Great quarter, guys.

Thank you, Jason.

Moving on, we'll hear from [Mark Collato] who is a private investor.

Yes, gentlemen, good afternoon. Can you discuss, a couple of years ago, there was a government program that was done, I think it was a Childhood act of 2004, what was going on with that and could you discuss, when you spoke about this short sale, this potential short sale, are there any debentures outstanding, or anything of that nature that would allow someone else to do something of that nature?

Well, one, I can't answer the first, about that child act. I'm not really familiar with that, but as far as the -- there are only, and the Company's opinion, and I'll answer the second one where I have knowledge. Going back to the transfer agent and looking at the people who are eligible to do a short exempt who might have had, let's say, legended stock in that kind of quantity, it was quite a bit of stock that was sold that way, there were only four people who have stock that is not in street name. If it's in street name, you press a button and it gets transferred. What a short exempt sale does it gives somebody an extra week or so to deliver the shares.

To designate a stock short exempt, you have to be able to exercise, simultaneously, a key word, a warrant or option. Ed has verified to me nobody did that. You can do it if you had a convertible, if anyone looks to footnote 7 to our 10-K, we have no convertible debentures so it can't be that.

The people who are eligible to do a short exempt because they might have legended stock, there are only four people that have that kind of size that could have done that, including myself and nobody has sold. So --

So what you're saying --

We're asking them to take a look at it because it didn't make sense and particularly, the manner in which it was sold, where every time you sold 5,000, you put it in lower than your last sale. If you were truly long, it's counted to whatever I know about a trade or an owner of a stock, why would he want to get less money for every sale he made if he still has long stock left? I can't comment any further than to say we have asked the American Stock Exchange to look into that sale. It seemed unusual based upon the facts that the Company had at its disposal.

Then what you're saying is if they orchestrated a sale on this matter, they would have to complete that transaction within what? One day, 72 hours? We would have to ask for their stock and, thereby, close out the position. So it sounds like you're saying these potential sales may have the illegal, may have, I'm going say may have been illegal and that was the case. This gentlemen, or what -- whoever the people are are potentially illegally short against position?

I won't go to say what my personal feelings are. I will just reiterate that we have asked the American Stock Exchange to look into that unusual form of trading to determine on their part whether or not that was properly executed.

Mr. [Collato], was there anything further?

No, thanks.

Thank you. We'll now hear from Trey Snow of Priority Capital. Mr. Snow, your line is open. Hearing no response, I will turn the call back over to you gentlemen for any closing remarks.

Frank?

Hello. Does anybody else have any questions that they would like to ask? If there are none, we'll conclude. Operator, you want to do one quick sweep?

Absolutely. [OPERATOR INSTRUCTIONS] We do have a follow-up question from Mark [Collato.]

Yes, gentlemen. You talked about several financial firms, could you give us a basic analysis? In your discussions that you said you had Fortune 50 or Fortune 25 companies. Can you tell us how many companies you really have bona fide agreements with and what the total number of all of them are?

I would say we have bona fide agreements --

In the financial services only?

No, all together. You said two financial services but I want to look at all Fortune 50, or Fortune 100 companies. Could you give us a rough number?

I don't know the Fortune numbers off the top of my head. I would say -- I mean we have, are working very, very closely generating revenue from three significant and the fourth one will be generating revenue, I would say in the next week or so, very confident in that. I would say there is, therefore, all Fortune, I think they're all Fortune 100, one is an international company but has a huge U.S. presence and they would be a Fortune 100 company in the U.S.

I would say four Fortune 100 and I would say we have two or three more that are in negotiation/discussion phases that I would hope that, you know, in the next quarter, we would close at least one or two of them. So, I would say, you know we're tracking very, very well and there is not that many and we're really locking up the market from the real key players in the issuance of instant credit. That's the people we're dealing with. Not just a pure financial services company.

And the last question, to sum up, can you tell us what this deadline in October means to us as far as the the program that's going into effect with the government?

Frank?

HSPD-12 mandated that there would be an interoperatable identification across all spectrums that had to be, a plan had to be in place by October 27. There is money in the budget, hasn't been passed yet and there is some leftover money that we could see, but that will not slip.

That is going to require, as Todd pointed out, the issuance of approximately 90 million new I.D.s in both the government employees and the government contractors. There will not be any slippage, one of the things that the FIPS 201, which is the way you verify it, requires is the verification of breeder documents and it lists them: Driver's license, state-issued, non-driver I.D., military I.D -- that's what we do. We expect to participate.

We're part of the solution by some of the major integrators and, who are looking to play in that space, and we're also part of the initiative with other integrators through, let's say, licensees of ours who are embedded with them with our technology. So, we expect to see a good amount of success in that space once it really rolls out.

Mr. Mandelbaum, what exactly does that mean? Does it mean that the government is mandating that the first responders, whoever these people are, have to be identified?

Don't call them the first responders.

All right. I thought they were the same thing.

No, no, it's different.

What is the program October 27, you said 90 million people?

By October 27, every government agency has to have a plan in place to issue this new interoperatable identification card. That's what that is. That's entirely different than first responders even though they'll also have to comply in the issuance of the first responders with the requirements of FIPS 201, they are two different programs. They are not the same.

Thank you.

Gentlemen, there are no further questions. I will turn it back over to you for any closing remarks.

That will conclude our second quarter conference call. We thank you all for attending and listening, and we're looking forward to having some dynamic news as we move forward over the next six months. Thank you all for being with us.

That does conclude today's conference. We do thank you for your participation.