Intellicheck Inc (IDN) 2009 Q2 法說會逐字稿

Welcome to the Intelli-Check Mobilisa second quarter 2009 financial results conference call. (Operator Instructions) A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, James Carbonara, Investor Relations for Intelli-Check Mobilisa. Thank you, Mr. Carbonara, you may begin.

Thank you. Good morning and welcome, everyone. Thank you for joining us today for our 2009 second quarter conference call to discuss Intelli-Check Mobilisa's results for the fiscal quarter ended June 30, 2009 and to discuss other business developments. In a moment, I will call upon our CEO, Dr. Nelson Ludlow to lead today's call and introduce the other members of the Intelli-Check Mobilisa management team who will be participating in today's conference call.

Before I do that, I will take a few minutes to read the forward-looking statements. Certain statements in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. When used in this conference call, words such as will, believe, expect, anticipate, encouraged and similar expresses as they relate to the Company or its management, as well as assumptions made by and information currently available to the Company's management, identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs about future events.

As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances. And the Company is under no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of such changes, new information, subsequent events or otherwise. 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.

Management will use the defined financial term adjusted EBITDA in today's call. Please refer to the Company's press release, issued this morning, for a further definition of and context for the use of this term. I would now like to introduce Dr. Nelson Ludlow, Intelli-Check Mobilisa's Chief Executive Officer to preside over today's call.

Thanks, James. Good afternoon and good morning to our West Coast shareholders. On the call with me today is Steve Williams, our Chief Operating Officer; and Peter Mundy, our Chief Financial Officer. And we're all sitting here in Manhattan in New York City. Our second quarter revenue was above $3.9 million. That resulted in a 45% increase as compared to second quarter of last year. Net income was above $450,000 in profit, resulting in a $0.02 earnings per share. Adjusted EBITDA was $831,000. And further, we have developed our recurring revenue stream to roughly 17%. So in terms of revenue and profit, this was the Company's best quarter to date.

All three of our product lines; wireless security, government identity and the commercial identity group, were all up in revenue for Q2 compared to the same quarter last year. We closed a major commercial contract with a telecommunications provider, of which we already invoiced $1.13 million and have new work in Q2 and continue to make additional sales to them under this agreement. We installed defense ID at Parris Island Marine Corps Base and Army's Fort Sam Houston. Please note, that last week's announcement of Fort Benning, Georgia project for roughly $800,000, that will post for Q3 and is not included in these numbers that we announced for second quarter. Now, the wireless team made significant progress on the Littoral Sensor Grid project, building a Homeland Security protection zone of buoys with advanced sensors. That project is going well.

As I mentioned on our first quarter call, my strategy for the Company in 2009 is to increase our top line revenues and to take the steps necessary to make that happen. In order to do this, we have added some expenses to the Company, hiring additional sales and development staff, built new products and we've started several pilot projects. So the results are, expenses are up 11%, while revenue is up 45%. We also were named among the top 50 fastest growing public companies with headquarters in Washington State. We ranked sixth, up from 44 the previous year, beating other companies such as Amazon, Microsoft and Starbucks. In fact, of the nonbiotech companies, Intelli-Check Mobilisa was listed as the number one fastest growing public Company in Washington State for 2008.

We launched a new product called Scan-In, it speeds up and improves the hotel check-in process. Our product can both read a driver's license and scan a credit card and speeds up the overall check-in process, reducing the time customers have to stand in line. The product was released at HITEC or the Hospitality Industry Technology Conference or trade show in Anaheim, California in June. Also this quarter, we announced three major seaports, two in the top 10 of all US seaports. Started testing our mobile TWIC reader, and I and others in our sales staff have met with administrators of many leading seaports who are likely to start testing our mobile TWIC reader.

Another accomplishment was the resolution of the longstanding litigation between us and TriCom Card Technologies, where they recognized the validity of our patents. So, I'll let Pete Mundy, our Chief Financial Officer, provide some more color on the quarter's financials. Pete?

Thank you, Nelson. Good day to everyone. I'm pleased to discuss some of the financial information that was contained in our press release for the quarter ending June 30, 2009, which we put out this morning. We anticipate the complete quarterly report on Form 10-Q will be filed with the SEC this afternoon. Revenues for our second quarter ending June 30, 2009 increased 45% to $3.918 million, compared to $2.710 million for the previous year.

Total booked orders were above $2.67 million in the second quarter of 2009, compared to approximately $956,000 in the second quarter of 2008. As of June 30, 2009, our backlog, which represents noncancellable sales orders for products not yet shipped and services to be performed, was approximately $7.3 million at June 30, 2009, compared to $10.8 million at June 30, 2008. Our gross profit percentage as a percentage of revenues was 66.5% for the three months ended June 30, 2009, compared to 63.2% for the three months ended June 30, 2008. Our gross profit percentage as a percentage of revenues was 66.5% for the three months ended June 30, 2009, compared to 63.2% for the three months ended June 30, 2008. The gross profit percentage is expected to decrease slightly as we increase revenues, including more hardware in our product mix.

Operating expenses, which consist of selling, general administrative and research and development expenses, increased 11.3% to $2.153 million for the three months ending June 30, 2009, from $1.935 million for the three months ended June 30, 2008. As the Company experiences sales growth, we expect that we will incur some additional operating expenses to support this growth, including the hiring of additional sales persons and increases in our marketing costs, such as participation in more trade shows and the generation of marketing materials. Research and development expenses also should increase as the level of research and development projects increase and we continue to integrate the additional products and technologies with our patented ID-CHECK technology.

Interest income for the period was negligible. Adjusted EBITDA for the quarter ending June 30, 2009 was $831,000, compared to $249,000 in the quarter ending June 30, 2008. Our net income was $452,000 or $0.02 earnings per diluted share for the three months ended June 30, 2009, as compared to a net loss of $212,000 or $0.01 per diluted share for the three months ending June 30, 2008. For the six months ended June 30, 2009, revenues increased 56.4% to $6.040 million, from $3.863 million in the first six months of 2008. Adjusted EBITDA increased to $615,000, compared to $31,000 in the previous year period. There was a net loss of $105,000 or $0.00 per share, compared to a net loss of $664,000 or $0.03 per share for the first six months of 2009 and 2008 respectively.

Now, I'd like to focus on the Company's liquidity and capital resources. As of June 30, 2009, the Company had cash and short term investments of $2.474 million. Working capital, defined as current assets minus current liabilities of $2.605 million. Total assets of $24.690 million. And stockholders equity of $20.817 million. The Company currently has no bank financing or no long-term debt. During the three months ended June 30, 2009, the Company used net cash and short term investments of approximately $350,000. Capital expenditures were $98,000 and there were no stock option exercises that occurred during the second three months of 2009. We currently anticipate that our available cash and short term investments, as well as cash from the operations, will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. I'll now turn it back to Nelson.

Good job, Pete. I continue to believe in the importance of the TWIC program, the Transportation Worker Identification Credential Program. Intelli-Check Mobilisa saw the value of the TWIC program early on and we've won three pilot projects for the TWIC Reader at major seaports and we are receiving numerous calls from ports about the TWIC Reader. I'm very excited about this project and we're going to continue to keep pushing on that. This quarter, also, saw introduction of our latest commercial product for the hospitality industry, Scan-In. And we've also developed and are preparing to release a new product, Assure-Scan, a product for pharmacy applications. As you can see, we're increasing our emphasis on sales and business development. And so, I'd like to turn it over to Steve Williams to describe our new projects. Steve.

Thank you, Nelson. We continue to build all three product lines, wireless security, government identity and commercial identity. As you heard last quarter, the wireless products group continues to successfully develop the Floating Area Network or FAN, the Littoral Sensor Grid or LSG, and the Radiation Hazard Modeling Software Tool or RADHAZ.

These developments are continuing with great success. Littoral Sensor Grid continues to be expanded, with new buoys having been installed and still more to come. With our partner, the University of Washington Advanced Physics Lab, we are creating the world's most advanced buoyed communication system, that allows for realtime monitoring of anything that is above, on or below the surface of the water. You can see video from the buoy's camera as well, monitor the environmental conditions around the buoys by visiting our Website at buoy.icmobile.com We have expanded our use of wireless over-water technology on our buoys. We are now expanding our efforts to include using a buoy for emergency communication nodes.

The Radiation Hazard Modeling Tool or RADHAZ continues to show promise with regards to expanding our market to areas other than the United States Air Force. We have seen significant interest in the ability to incorporate the ability to measure the effects of radio frequency on personnel in the field but to also use our tools to incorporate buildings and layer output on Google Earth for an even greater application. We continue to research additional opportunities for both our RF modeling application, AIRchitect and RADHAZ.

Our government identity systems continue to expand. As Nelson mentioned earlier, second quarter saw two new major contract awards, Fort Sam Houston in Texas and Parris Island Marine Base in South Carolina. In addition, our past customers have continued to purchase expansion equipment and subscriptions. We continue to see new bases purchasing this quarter. We have also partnered with several large integrators to pursue capturing large groupings of installations, rather than pursuit of single installations. TWIC continues to garner interest from the ports around the nation. and we continue to pursue sales and pilot testing on the programs. We are being tested at three major seaports and are in discussion with another port to buy Readers to start a test that would be funded by the Department of Homeland Security.

Our commercial identity system has strengthened its position with tier 1 retailers and financial institutions. And now, hospitality and in the near future, pharmacies. As Nelson mentioned, this quarter, our commercial product line had a significant win. Garnering an approximately $4 million to $5 million in definite delivery and definite quantity, or IDIQ contract, with a major telecommunications company. Our relationship with this company is solid and we anticipate further collaboration to develop additional solutions. BJ's Wholesale Club has been in development phase for a period of time and they recently moved from pilot to deployment for loyalty and credit card applications. They're growing to one of our top 10 customers.

Our financial institutions create opportunities in a couple of areas, with a variety of form factors, from loyalty programs to credit card applications. We continue to work with Barclay's, GE Money and JPMorgan to support their partners and in discussion with several other financial institutions to offer similar products and support. We are also excited about the new release of Scan-In, our ID CHECK technology designed specifically for the hospitality industry. Scan-In has recently started a pilot test at a national hotel chain and shows great promise.

Our latest product about to be is Assure-Scan. Building on our ID CHECK technology, we have developed a product to help pharmacies track pharmaceutical sales and helping pharmacies comply with state and federal laws. The product scans the ID and tracks the amount out of controlled drug purchased to be within legal limits. If above the limits, it notifies the pharmacist. We are very excited about the prospects of both new products. As with government identity systems, our current customers continue to purchase additional or recurring consumables in the commercial identity product lines. Thank you and I'll turn it back to Nelson.

Thanks, Steve. As you can see, all three product lines increased in revenue and I'm even more excited about the new products that we're developing. So, let's talk about the market and the potential and why I am so excited about Intelli-Check Mobilisa. Now, the Company's main products are defense ID for the military and the government markets and our ID CHECK software for retailers and banking. And we've recently developed or are developing new products for seaports, TWIC, hospitality and the medical markets for pharmacies. So, let's look at those market sizes and typical estimated contract values. I think this information will be helpful to investors.

Now, the military market is approximately 270 US military bases located in the continental US. And we are currently in approximately 70 bases. Average base purchases are approximately $250,000 with recurring revenue while some of the larger bases, such as Fort Benning last week, we announced they purchased about $800,000 of products and services.

Our ID CHECK software is being used as an enterprise license at five tier one retailers and with several other major tier one retailers using it in a different fashion. Now, we offer solutions that are priced by contact point or by an enterprise license to integrate our software into the Company's point-of-sale or POS. We've more than doubled our commercial identity sales staff. Major retailers use our software for loyalty cards, for credit card applications, consumer fraud prevention, for many different purposes. And we believe we are the market leader in this space, as well as the military space. Our solution provides a complete 50 state solution, comprehensive service and support and our own key patents surrounding this technology. One of the key features, of course, is our 24/7 help desk.

Let me talk about the retailers. There are about 228 tier 1 retailers. Those are companies that do over $1 billion in annual revenue. And approximately an additional 324 tier two retailers. Now, our contract values vary from mid six figures to a mid seven figure, depending ton the retailers numbers of point-of-sale, how they use it and whether it's only software or there's also hardware and an installation component with it as well. We are also received a recurring revenue stream for updates to our driver's license database from the retailers. Now, I'm excited about our new products, the mobile TWIC Reader and Scan-In. There's approximately 180 US seaports that could use the TWIC Reader. I presented our product in an evaluation recently at a major seaport and our strengths were many. We were in the very first round of ICE, initial capabilities experiment, approved products by Homeland Security. So, we were essentially the first mobile reader product approved by DHS for TWIC.

Not only does our product read and evaluate the cardholders TWIC card but it also allows for mobile registration for the user into the major security systems, such as Lanel and AMAG are two of the big ones. Further, our product reads the TWIC card plus it reads the driver's license, which differentiates our product from the TWIC only solutions. We are being tested at three major seaports and are in discussion, as Steve said, with another major port to buy Readers to start an official test that would be funded by the Department of Homeland Security. The price points and margins are approximately the same as our defense ID equipment. However, seaports have many more traffic lanes than a military base. And therefore, we expect the typical seaport to be two to three times as large as sale as a typical military base. Again, there's a recurring revenue stream for data subscriptions for the driver's license updates and the service and support.

Now, the Scan-In product, it's a recently released product that we just released in June. And I am pleased that we're already in a beta test in a major hotel chain. According to the Bureau of Labor Statistics, there's about 62,000 hotels in the United States and scanning equipment and software is approximately $1,000 per point for the hotels. And there's also a recurring revenue for updates for that product. Now, we're about to introduce our Assure-Scan product for pharmacies. This is a new market that we will evaluate. There are more than 56,000 pharmacies in the United States. The National Association of Chain Drugstores or NICDS reports there's about 39,000 pharmacies operated by a traditional chain pharmacy, supermarkets, mass merchant. Then, there's about 17,000 others that are independent pharmacies. This product will be priced competitively and will be in a similar price and margins and recurring revenue stream as to our hospitality Scan-In product.

We have other products and markets that we are looking at and you will see that Intelli-Check Mobilisa is going to be adding new products and development and sales staff, as Pete mentioned, as we continue to grow the Company. I'm a big believer in Jeffrey Moore's book "Crossing the Chasm." And in his thesis, the goal is to become a market leader in one market and then you expand into other markets or you build new products to serve that existing market. That is exactly our plan. And I think you can see that in how we're growing all three product lines and you can see we're adding new products.

So let me recap, we posted record revenue, record profit. We added new sales staff and we continued sales to the US military. We are seeing new business opportunities in hospitality, in pharmacy and seaports. And Q3 is already started out well for us. So on a final note, our annual shareholders meeting will be held October 27 in New York City. And we hope many of you will be able to join us in person or listen to the call. And I'd like to now open it up for questions and James.

We would now like to address any questions you have. Out of respect for other listeners, please state your name, organization and try to clearly and succinctly state your comment or question.

(Operator Instructions). Our first question comes from the line of Richard [Carp] with Rockwell Global Capital. Please proceed with your questions.

Well, first and foremost, congratulations, guys. Great quarter. You guys just ever since your entry into the Company, Dr. you have just done exactly what you said you were going to do. And I commend you and I congratulate you all on a great job. My questions, one, is regards to the TWIC program. The TWIC program testing, if I remember correctly, had started up in the beginning of last quarter. How long is that testing for before you get either a yea or nay from them? That's one question. The second, the only problem that I have that or I see lack of is, attention to the stock. You guys are doing -- in an economy that's been poor, you're increasing revenues, you're increasing your earnings per share, fantastic. There's not that many companies out there doing it. But you don't have any analysts following. You don't have volume in the stock, which again, goes back to PR and getting out there. So, what are you doing in regards to that? Those are my two questions.

Richard, this is, Nelson. Thank you. Definitely, this is a team effort and I'm very happy with the team we have. And I think, as we mentioned, we've added to sales staff, which to me was kind of a no brainer. I'm very glad we did that. And I think you saw that we increased our costs a little bit, 11% in expenses but revenue was up 45%. That couldn't have been more textbook if we tried.

Regarding the TWIC program, the very first one I think we announced was on April 1. I believe, the very beginning of last quarter. That is a small port that is -- well, I don't want to say small. Medium sized port that is not in the top ten of US seaports. And they've given us a lot of feedback. They have not purchased it yet but I'm happy with that one because of the -- that helped us build out the other two. The test is approximately a 90 to 120 day test. The difficulty with the TWIC program is getting funding for it. There is not a Congressional mandate or law that says they have these Readers. What's nice is, Steve Williams mentioned, that we're talking to another seaport, which is an official Homeland Security test. In addition to the three ports that are already testing our equipment.

Each step leads to the next step. So, the fact that they were testing, that's what led to this Homeland Security test. We do well on the Homeland Security test, hopefully, they'll get some funding and they'll start pushing or requiring. Governments float, there's no way around it. This is very similar to how we rolled out the military bases. It was hard work. We had to keep pushing. And by the time they do get their funding, you have to have already been there, already be tested, already know them, already proven system. That's not the kind you just start building a TWIC Reader, which I think one company did try to mention on their conference call, that they were going to do that. That to me seems late in the game. I don't have a specific time of when they're going to buy but we're going keep the pressure up and this is not uncharacteristic for a government program.

Attention to stock, volume, analysts, same deal there. We're increasing the energy, we're increasing the emphasis on it. We hired the Investor Relations Group, also within the last quarter. So, we've only had about one quarter of having them on our team to help push that. Let me tell you a couple of things that they have done for us. Most of our press in the past, frankly, was press releases. We've got a lot more press now. I've been interviewed by radio, we've been interviewed by trade journals, been interviewed by magazines. Just this morning, we were sending photos for a Washington technology piece on our product. So, we continue to do that. It's going to take more energy.

The reason that we're holding this call in Manhattan is the -- after this call for today and the rest of the week, we're going to be meeting with investors up here. With several one on one meetings with them. And if there's people on the call that want to meet with us, contact our Investor Relations Group and we'll do that. I think one thing you can't see, is we can see who are the people on the call. And I'm pleased to announce there's more people on this call and there's new people on this call. So, it may be not happen as fast, as quick as some of the shareholders would like but we're just going to keep the pressure up until we do get more people following us. We're doing a good job. We've got to continue to get the word out.

Thank you. Our next question comes from the line Ernie [Caponigro,] private investor. Please proceed with your question.

Yes, good afternoon, gentlemen. This is Ernie Caponigro. Congratulations on your latest quarter. Any time, any company, in this environment can come out and say that it had record earnings and record profits, somebody should stand up and take notice. But then again, maybe you become a ward of the government and somebody else will notice you. I've got a couple of quick questions for you. Maybe you can allow me a follow up. Can you some color to the total amount of customers that you have total? And some specific details on this telecom deal and what you think you can get out of that marketplace? And at the same time, can you tell us any other progress that you might be having with the government? And what are other the government programs we have besides the TWIC contract going on? It's been awhile since we've talked about that.

Okay, Ernie. Very nice to hear you on the call. With regard to total customers, that's why I tried to recap and do something different we haven't done in previous conference calls. I tried to break out each market, tell you exactly how many locations we're at and who the possible size of the market could be. Obviously, somebody isn't going to get 100% market penetration. But I wanted to give you some ideas of what they were. So, military bases 270. Just in the continental United States, we're at 70 of those. Retail stores, we are at five enterprise licenses. We're probably at another five to 10 in different various forms of tier one but there's 228 tier one retailers that do over $1 billion, at 324. So, we're at five major enterprise license ones. The previous ones that we've mentioned before were Target and Toys "R" Us. A couple of these companies -- LL Bean was one of those.

The telecom company that you asked about, they are a major one. They're, obviously, one of the big ones that everybody has heard of. They won't let us use their name but you know what? We still have a press release with their concurrence to mention it. And here's what it's used for, there's a lot of different applications, including if you go in to get a new account, instead of having to stand in line so long, you can scan the driver's license and it speeds that process up. Every time I've stood in line at a cell phone company it takes a long time. So it is a good contract, it's approximately a $4 million to $5 million value contract. It is what's called an indefinite delivery, indefinite quantity. But we're pretty confident about it. We have a good relationship with them. And this Q2, they already bought a little over $1 million worth of products, software and services and are already starting to roll it out. So, the contract technically last three years but I think you're going to see most of the equipment probably roll out before then.

And let me see if there any other items that Ernie asked about. Government progress, I think we mentioned the TWIC program and we're continuing to put in the military sales. Recently, we've got the Navy and the Army authority to operate. And then, just recently, the Air Force also gave us some more updates on their authority to operate. So, that's still all moving along.

Thank you. Our next question comes from the line of John Bendall with Hermitage Capital Management Limited. Thank you. You may proceed with your question.

Hi Nelson.

Hi, John.

Could you give us a little idea on the Fort Benning contract? That was a big dollar amount. A couple of questions on that. Can you expand a little bit on on the margins on something of that size, number one? And number two, is that base about as big as you can get? And how many of those size bases are still out there that can support $700,000 to $900,000 revenue for you guys?

Yes, John, Fort Benning is one of the larger bases. It's not the largest. There are several other large bases along those lines. They have equipment at the visitors center and they have equipment at their lanes of traffic to come in. If you took an average of bases between $250,000 to $300,000, which is what we state, we've had cases where a very small little Air National Guard Base up in Long Island, maybe they'll purchase for $60,000 to $70,000 because they only buy one or two devices. The margins on the equipment is approximately 50%. We do get a recurring revenue stream for a monthly -- for the database update and we also provide training, installation, we get paid for that. So we get a pretty healthy recurring revenue rate out of that. Steve, have you got any other?

No, and John this is Steve. What we're seeing is and something I mentioned is, a lot of our bases are either adding to what they already had, so we're seeing an increased deployment of application, from only at the gate but they could also be used in a roving patrol situation, special events. We recently just did a graduation ceremony for the Marine Corps. So what's happened is the product is coming into its maturity, so that the end user or the client also understands other applications where they can deploy the system.

And so, that Fort Benning, for example, is not being currently used in roving or car patrol. So, this could be a whole new area. So, it would not be unexpected that Fort Benning may buy additional equipment. In fact, almost most of our customers, in fact, do that. So, that would not surprise me a bit to sell additional equipment to Fort Benning.

And if you were to ask us the same question two years ago, our average base was roughly $100,000 to $150,000. So it's already moved to $250,000. So, this has been coming for awhile.

And then, just to directly add because somebody had a comment before that said something about that that was the largest base in the military and you'll never see a contract any bigger. That's not the case at all. There are several other large bases and as you saw, we're only at 70 of the 270. So, there's still other bases out there.

Thank you. (Operator Instructions). Our next question comes from Ernie Caponigro. Please proceed with your question.

Let's try again. It's Ernie Caponigro. Sorry, gentlemen. I had asked a follow up but I got cut off by the operator. Can you go back and give us some idea on the telecom deal, how many potential customers might walk up the door like that? And going back to the driver's license business, with the DMV's all over the country, are we still doing anything in that respect? And as far as the applications with banking and finance, are we seeing any changing there? Their stocks of some of the major banks have doubled and tripled in the last couple of months. So, have they starting to get some religion and looking at ways to cut their losses on fraud? Thanks a lot. And can you guys expand on insiders are able to buy any stock right now?

Okay, Ernie. Let me try to make sure I get these things. Regarding the telecom deal, they have -- this company has over 10,000 branch locations and they're going be rolling this out throughout the country. So people that are on the line if you visit your -- one of these stores and you see a driver's license Reader equipment in there and I believe one of the things is branded with Intelli-Check Mobilisa right on it. So you're going to see our name and logo right on it, if you look for it. And that's going to be rolling out over the next few months. So, there's a lot of stores for them to add to.

DMV's, yes we are -- several of the DMV's do use our equipment to do that. We are one of the test lab for The American Association of Motor Vehicle Administrators. We work with the state DMV's. They're our partners. And L1 is one of our partners as well. In fact, they often -- since they most the driver's licenses, we work with them closely. And they're one of our better customers that sometimes either resell equipment or provide equipment and services through us to the DMV. So, often when you see something at a Department of Motor Vehicles, there's a high likelihood that that's one of our products or software inside it.

The bank and financing, that one is continuing to grow. You saw that we did a case study by FiServ and FiServ our partner in this. I like partnerships, particularly, when somebody is the market leader in a space and FiServ is. We're not going to go door to door to each bank but they have successfully sold and installed over 200 banks our product for new accounts. That continues to grow.

For insider trading, currently we are, the directors and officers, are still in a black out period but that is being lifted as of Thursday morning. So we usually have a 1.5 day type of block period. So we're going to be -- that's going to be lifted. Well, let me just say one thing because I have talked to several shareholders before and I know it's an old adage that you want to see insiders bought. That makes sense, I understand that. But let me just throw one thing out there, all of the officers that are in the Company, I don't think any of them are millionaires or multimillionaires, the rich guys. They're believers in this Company, they all work hard. They have kids that go to college. So if you're expecting they're going put a huge amount in, I wouldn't track -- don't make that direct assessment to see that. These guys believe and every one of them has bought. To my knowledge nobody has sold since Frank Mandelbaum has passed away. And we still -- we're big believers in this Company. So while our insider trading may be small, it's not that our belief in the Company is less.

Thank you. (Operator Instructions). We have a follow up question from the line of Richard Carp. Please proceed with your question.

I forgot to -- it came back in my memory. You said that you just started with the hotels but awhile back, you guys actually had, I don't know what it was being used for but it was at the MGM in Vegas. Where I would think that not only for the hotels but also for the cashiers, where you cash in all your chips when you're a winner, that it would be of good use there. You are not at this point in time allowed to say what hotel you're working with but the truth of the matter is you guys were or had, I don't know if you still have, a unit at the MGM. Do you still have that there?

Yes, Richard. Yes, we to. We still have that there. But let me tell you one difference that's kind of before and after type of thing. Outstanding technology, you can adapt something and put it in a hotel. It can count chips, it can do that. What we have done differently, in this case, is we designed a product specifically for a market and we branded it with a name. The product before didn't have a name. This product works with all the different property management systems, the PMS's. It's a piece of hardware, it's software, it's a combined system. It's part of our help desk. It's a new offering. So there's a little bit of difference. Rather than showing, yes, there is some technology and it could do it, now we have a very clean, very nice product that we are marketing. And with sales folks, particularly, going after that market. Ryan Anderson is our Vice President for Hospitality Programs. He's does lead that group. And so, yes, we were at MGM before and the technology was there. I think we've kind of moved it up a couple of clicks towards a really product now.

Thank you. Our next question is a follow up from John Bendall. Please proceed with your question.

Nelson, what I was trying to get at on the last one. When they make a decision at something as big as Fort Benning, does that final decision come within the base itself, or has it got to come from outside, wherever outside is located?

John, good question. We've primarily sold base by base in the past. The largest one was we did three bases at once one time. Fort Benning made their decision on their own. So, that was a unique base. We are working with the Defense Department to, I'll say, go service by service and not Defense Department all as a group yet. But the Army is working on a program, the Air Force is working on a program and the Navy is as well, to actually try to install regions or being service-wide. We're plugged in tight in on that, as can possibly be. Government moves slow or slower, let's say. And so we're tracking it, they're not quite there yet but all three of those programs exist and that's going to probably be the future. They're going to shift it to -- we keep selling base by base to putting out an RPP and have people actually bid. And if the government puts out an RPP, we welcome that. We want them to do that and we would compete because we think the best product and best value.

Just how long did it take you all on the Fort Benning from beginning to end, Nelson?

John, this is Steve. Fort Benning was actually a very quick procurement. Somewhere in the 30, 60, 90 day window is normal. It's somewhat dependent on the government fiscal year and funding. But in Benning's case, that was a large procurement and it wasn't very protracted at all. It actually moved very, very quickly. And as you can imagine, once they give us the order, they expect it delivered and installed immediately, which we did. So, that's kind of the norm installation by installation. But these bigger integrators, the bigger things that we're talking about, rebuilding fences and all of that, those are a little longer lead and several of them, like Nelson mentioned, we've been working over a year now.

Okay. Well, thank you very much.

Thanks, John.

Thank you. Our next question comes from Kent [Beckman] with [SPD] International Logistics. Please proceed with your question.

Yes, I just have one question about the sales force. In your last conference call, you said you were going to hire six new people. I think you hired four at the time. I was joust wondering what percentage of sales people will be allocated toward the commercial government and the water sector?

Kent, we have a -- 2/3 of our sales staff is commercial -- I'd say 3/4 is commercial. 1/4 is government. And we have no sales people that are full time, let's say, to wireless. That doesn't mean Steve Williams and I don't work that and we are actually recruiting someone right now to be kind of a senior guy for our wireless business development. That's going to be the areas, to everyone on the call, We've got very good technology, we've got good products, in my opinion. And you're seeing us increase on marketing, increase on sales, increase on business development. And that's why our cost went up a little bit, like 11%, but you saw the revenue went up too. So, it's stepping on the gas pedal. We are spending a little bit more gas but the speed is coming up too. So, that's what we want.

Thank you. Our next question comes from the line of Ernie Caponigro. Proceed with your question.

Yes, guys, I just wanted to ask a real quick question. I just thought about this when you hung up. I think on some paperwork that you had put out like a year or two ago, that you said you were actually responsible for nailing over 25,000 known bad guys or for lack of a better word, wanted people. Is there any kind of number updated that you can give us on that now and what was maybe some flavor or idea of the kind of people that you've procured using the technology?

Ernie, the latest -- the last number that we had was over 60,000. One of the worst gangs in the United States had some people going to Quantico. And those guys were posing as moving van workers and they went onto the base. And the reason they were posing as workers was they could case people's homes and steal things. And our system, with the help of the Marines using our system, they scanned these guys' ID cards and they were on major wanted lists. And they were able to apprehend them right there. On our Website, are some other ones being used in courthouses. The Marshalls used our system in the state of Ohio, sheriffs offices. There's a lot of different areas. Law enforcement is one possible area but the military bases. It's well over 60,000 that they've stopped.

Thank you. Ladies and gentlemen, at this time there are no further questions. I'd like to turn the conference back to management for any closing remarks.

Well, I'd like to thank everyone for being on today's call. We're making progress, we're going to continue to keep working hard. I can asure you that the management team and Board of Directors, we are united in the direction we want to move the Company and you can see that we are making progress. I appreciate the shareholders' loyalty and their questions and their involvement in this. This is a team effort. You're invested in it. We're invested in it. And I'd like you to work with us and the IR firm. If there are opportunities that you see, let us know. If there are investors that we should speak to, let us know. If there's press opportunities, call us and let us know because we're all in this together and we want to continue the progress and get the word out. So, you're part of that and appreciate your time.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.