Intellicheck Inc (IDN) 2012 Q3 法說會逐字稿

Greetings and welcome to the Intellicheck Mobilisa's third-quarter 2012 results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Enrique Briz, DGI for Intellicheck Mobilisa. Thank you. You may begin.

Thank you, operator. Good morning, and welcome, everyone.

Thank you for joining us today for our 2012 third-quarter conference call to discuss Intellicheck Mobilisa's results for the fiscal quarter ending September 30, 2012, and to discuss other business developments. In a moment, I will call upon our CEO, Mr. Steve Williams, to lead today's call and introduce the members of the Intellicheck 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 statement. 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 expressions, 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 following financial term, adjusted EBITDA, in today's call. Please refer to the Company's press release issued this morning for further definition of and context for the use of this term.

I would now like to introduce Mr. Steve Williams, Intellicheck Mobilisa's chief executive officer. Steve?

Thank you, Enrique. Good morning, good afternoon to some of you, and thank you for joining for our call.

Let me first begin by introducing our leadership -- our board of directors, chaired by Dr. Nelson Ludlow, General Buck Bedard, Miss Bonnie Ludlow, Admiral Mike Malone, Mr. Woody McGee, and Mr. Guy Smith. The members of the management team, myself, the chief executive officer, Steve Williams; the chief financial officer, Mr. Bill White; the chief technology officer, Mr. Russell Embry; and our senior vice president, Miss Bonnie Ludlow.

Let us begin with an overview of the quarter results. Our revenues are $2.12 million. Net income for the nine months is a loss of $306,000. Adjusted EBITDA for nine months is $567,000.

Let's go a little deeper into the three business units. Our focus on commercial identity systems continues to be on private label credit card issuance with some of the major banks. Our secondary focus is loyalty programs, as well as loss prevention. As you've heard in previous quarters, we continue to pursue hospitality as we announced last year with Motel 6, and we'll continue to grow that business. In the most recent of banking operations, which we announced in Q1, and the most recent award in commercial identity systems was the license agreement, though not associated with a dollar figure, is designed to incorporate our software into the tier-one retailers of hardware.

Our government identity systems, our focus remains access control, predominantly in military installations. We still operate numerous federal facilities around the country and are expanding into state and local markets with our fugitive-finder capability. This quarter, we added two additional military installations for Q3.

In the wireless space and some of our newest products, we still look to our Autonomous Active Sensor, our Aegeus, our buoy system. As you'll notice from this image and in the previous slides, this was Hurricane Sandy, which affected many of you. Our buoy system remained deployed during that, and we captured real data with live video, as well as weather data during that storm.

We completed our US Navy demonstration in September. It's significant because not only is it now a research and development product, it is actual, live system. The earlier slide showed the actual demonstration in the multiple cameras from the buoy system detecting both security, as well as environmental and radiation-type detection. Our market development continued to look to an international presence. We've recently completed our review with our legal analysis, our legal team for export-ability, and we've identified the system in its configuration. We will look to export the system.

With the overview of the company, I'll now ask Bill White, our chief financial officer, to provide the financials. Bill?

Thank you, Steve. Good day to our shareholders, guests, and listeners.

I'd like to discuss some of the financial information that was contained in our press release for the third quarter ending September 30, 2012, which we released this morning. We anticipate that our complete quarterly report on form 10-Q will be filed with the SEC early next week. Revenue for our third quarter ending September 30, 2012, was $2.123 million, compared to $3.595 million for the previous year. Identity system revenues decreased to $1.572 million, compared to $3.421 million last year, while wireless revenues increased to $551,000 from $174,000 last year. Book orders for the three months ending September 30, 2012, were approximately $1.353 million, compared to $6.185 million in 2011.

The Company continues to maintain high gross margins. Our gross profit was $1.567 million for the quarter, or 73.8% as a percentage of revenues. For the three months ending September 30, 2011, gross profit was $2.320 million, or 64.5%. The change reflects higher equipment sales as a percentage of our total revenue in 2011, as compared to 2012. Operating expenses, which consist of selling, general, and administrative, and research development expenses, decreased $62,000 to $1.948 million for the three months ending September 30, 2012, from $2.010 million for the three months ending September 30, 2011.

Adjusted EBITDA for the quarter ending September 30, 2012, was a negative $102,000, compared to a positive $610,000 in the third quarter ending September 30, 2011. The company posted a net loss of $381,000 for the quarter, compared to a net income of $306,000 for the quarter ending September 30, 2011. As of September 30, 2012, our backlog was approximately $300,000 compared to $3.3 million for the same period last year.

Our nine-month results are as follows. Revenues for the nine months ending September 30, 2012, were $8.275 million compared to $9.616 million. Gross profit of $5.755 million, compared to $6.204 million for the nine months ending September 30, 2011. Gross margin in 2012 for the nine months was 69.5%, compared with 64.5%.

Operating expenses, $6.060 million compared to $6.472 million in the nine months ending September 30, 2011. Adjusted EBITDA was a positive $567,000 for the year, compared to $591,000 last year. Net income or loss of $306,000 for the nine months ending 2012, as compared to $277,000 loss September 30, 2011. Interest income and expense were negligible for the quarter, and we still have a net operating loss carry forward of approximately $38 million.

Now I'd like to focus on the Company's liquidity and capital resources. As of September 30, 2012, the Company had cash and cash equivalents of $2.738 million; working capital, which is defined as current assets minus current liabilities, of $2.644 million; total assets of $22.473 million; and stockholders' equity of $19.628 million. The Company has not utilized bank financing in 2012.

During the nine months ending September 30, 2012, the Company generated net cash of $1.343 million, compared to $26,000 for the nine months ending September 30, 2011. Cash generated from operating activities was $1.284 million in 2012, compared to $45,000 in 2011. We used cash of $71,000 in investing activities, compared to 2011 of $46,000, due to slightly higher capital expenditures. Cash provided by financing activities was $130,000 in 2012, compared to $27,000 in 2011.

During 2011, the company entered into a two-year revolving credit facility with Silicon Valley Bank. The maximum borrowing under the facility is $2 million. Borrowings under the facility are subject to certain limitations based on percentage of accounts receivable as defined in the agreement and are secured by substantially all of the Company's assets. As of September 30, 2012, there were no outstanding borrowings, and unused availability under the facility was approximately $700,000.

We currently anticipate that our available cash, as well as the expected cash from operations and availability under our revolving credit facility will be sufficient to meet our anticipated working capital and capital expenditure requirements for the next 12 months. We currently have in effect a universal shelf registration statement on form S-3 with the Securities and Exchange Commission. Under the shelf registration statement, the Company may offer and sell from time to time in the future, in one or more public offerings, its common stock, preferred stock, warrants, and units. The aggregate initial offering price of all securities sold by the Company will not exceed $25 million, and pursuant to SEC rules, the Company may only sell up to one-third of the market cap held by non-affiliate stockholders in any 12-month period.

I'll now turn it back over to Steve.

Thank you, Bill.

The quick market overview in the slide, we reached our 52-week high during the third quarter. Market cap was at $40 million, and our average daily volume is at $21,000. Let's talk a little bit about some of the growth initiatives. As we've spoken before, we focus on trying to grow our revenue. We're doing that through our sales force and licensing and distribution agreements. We previously announced the initial distribution agreement or a license agreement for our software, and we are excited because that opens several opportunities for us. It allows us to be able to, one, license our software into the hardware vendors, as well as use their existing channel partners to help take us to market.

We continually explore and exploit the cell phone market and the application. As a Software Company, we look for several opportunities in both the cell phone and tablet markets. The third is the buoy commercialization. The picture on the right of that slide is actually in the middle of the storm. That plank that you see from the buoy is actually several miles away from the buoy. So, as you see, the buoy is not a concept, it's a reality.

With that, operator, we'll welcome the questions from our investors, and we'll turn it over to you for questions.

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

One moment while we poll for questions. Our first question comes from the line of Walter Schenker with MAZ Partners. Please proceed with your question.

I guess, good afternoon. Two different questions, though they're interrelated. Could you give us some better color? This quarter was a spectacular decline from what we've seen over the last few quarters. The backlog is now almost nonexistent. And give us a better color as to why you went off a cliff. The second part of the question is, why should we have confidence, as we look to the fourth quarter and the first quarter into next year, that the status quo is not going to continue? Are there any hard, as opposed to hopeful, reasons why revenues and earnings should recover as we go forward?

Thank you, Walter. Let me begin with the couple of very real -- Backlog is an issue in that we're predominantly a product company. In this particular case, backlog was reflected in the buoy contract we won in September of last year. So that's why you see a difference in buoy backlog, or, excuse me, in backlog that dropped from $3.3 million to $300,000. Should we move forward, as we move forward with the buoys, our goal, as you saw in our press release, will to be increase backlog to avoid cliffs. And I can assure you that the insiders, as well as our other investors -- no one's happy with the revenue, and most predominantly me. So that's a very real concern, and one of the ways we can help address that and norm out the curb, if you will, will be to increase backlog, and we can do that through long-term buoy orders, as well as some of our licensing distribution agreements. So that's one.

Regarding color, nothing's really changed as far as the Company's perspective regarding products. The reasons I showed you some of the buoy pictures, so people don't think that it's just hype. It's real. The buoy's real. The distribution agreements are real. Are they moving as quick as we like? Absolutely not. Would we like to norm it out so we have constant, significant, sustainable growth? Absolutely.

So nothing's changed. Our products are as stable as they ever have been. And what I envision, it was about 1.5 million. What we see are some movement in the government space, identity specifically, to what we call an enterprise solution. In other words, rather than being able to sell base to base to base, we'll start to pursue an entire government agency, type of solution. So we will partner with those and take those. So hopefully that answers some of your question, and like our investors, we are not happy with the results of the quarter.

And on the licensing and software side, how high a conviction am I supposed to have that that's going to turn around on the commercial side?

Yes. I think it's less of a turnaround and more of a start. It took us 1.5 years to get that first distribution agreement in place. Our CTO is on the line. We delivered the first product, and it sometimes is the case with a larger tier one, that, rather than start to worry about a little [guy] start to see our revenue, they already have three to five other ideas they want to try, but we don't want to try other ideas. We want to start revenue. So it's expanding opportunity, but the immediate target is to get revenue moving.

And we will begin to see that in the fourth quarter or not until next year?

Well, unfortunately, we don't provide projections or numbers on forecasts.

Okay. Thank you.

Thank you, Walter.

Our next question comes from the line of Amy [Norquist] with Pilot. Please proceed with your question.

Yes. Following up from Walter's question, can you go into a little bit more detail about the Motorola contract or, I'm sorry, the licensing software contract? And not specifically as to when you might get revenue, but just talk about the opportunity in the markets, number of units, profitability, pricing. And then if you could do the same with the Chase banking deal, that would be great.

Sure. So let me talk about the way we license to hardware vendors. So on a hardware vendor, the way we would do it, we just license our software. We're not focused on the guy that's trying to create a new tethered scanner or an untethered scanner or whatever peripheral you choose. We're focused on tier-one folks that sell several units into the market space. Otherwise, there would be too much to man our support operation to do that. So it's somewhat of a three-pronged approach. The first approach would be to license the software to be included in the unit. The second one would be to create a joint product that would include both their hardware and our software that we would jointly market together. And the third one is, the hardware guys traditionally do not want to work in the software space, so when it moves to what we call an enterprise license and much what is our bread and butter is that they would then hand the opportunity to us where that we would go in and sell an enterprise license with our organic sales team. So that's the particular one.

With regard to banking operations, our focus is enterprise license and software, as you saw, I think it was in Q1, and we still need to move forward on selling hardware across the board. As we've identified with several banks, we've been in the banking operations for many years, and we have operated in 1000's of them across the country, if not across the world. So what we've done is, we see a real opportunity and beyond our credit card initial capabilities into banking operations, whether it be identity or efficiencies, that's where we're moving. And that would include both a software component as well as the hardware component. We had mentioned several years ago, we did that with another bank and have been very successful in moving them and having them move into some of their other retailers.

Okay. Jumping to the hardware vendor with the enterprise license, is it going forward, is it for units that are already in force? Can you tell us as to what's entailed with what's going on there?

Yes. The agreement is to license to them and to their hardware, but as far as the enterprise license, that would be directly to us. But as far as numbers and forecasts, we wouldn't provide those.

Okay. Can you talk about the potential opportunity for this to become recurring for the --? (multiple speakers)

Absolutely. That's a great question. So let me help some of our investors a little more clarity. So as a model across the board, as a company, we've traditionally recognized about a 20% revenue recognition on our enterprise license. It will be the same thing with the license on what we called an embedded solution to hardware. So there would be an up-front fee that they would pay, and then they would pay the recurring fee each year after that so that we would recognize, on the average, about a 20% recurring on each license sold. So, though the initial license is significant, enterprise is really significant on a per-seat basis. Our recurring revenue obviously could also result in significant.

Would there be any recurring revenue from the two contracts that have been signed that we know about, with the banking and the hardware business?

All contracts or recurring revenue or other significant material we would obviously put out a press release and identify to investors.

All right. I'll jump back in queue.

Okay, thank you.

Our next question comes from the line of [Sandra Haynes], a private investor. Please proceed with your question.

Yes. My name is Sandra (inaudible). Hello? Are you hearing me?

Yes, ma'am. We can hear you.

Okay. In late September, you sold nearly 200,000 shares for more than $350,000. You also exercised options at about $100,000. That means you took a profit of about $0.25 million. My real complaint is you did this only six days before the end of the quarter. Can you tell us today that this is a terrible quarter? I'm wondering, if this maybe is a little bit of insider information, and why did you dump your stock like this?

Thank you. I appreciate the opportunity to answer that call, and obviously I don't have to, but the way I run the Company is the same way I run my life in a transparent situation. So if you will look at the merger 4.5 years ago, I had options that were expiring. About two years ago, we were faced with a similar situation. If you look at my filings just after the last conference call, I filed what's called a Form 144 declaring that I needed to sell shares in order to cover my options. So it wasn't as taking a profit. It actually was the acquisition of additional shares, so I actually acquired more shares than I sold. I have to pay my taxes, and I could have sold an additional 80,000 shares when the price was still continuing to rise. I didn't. I absolutely would have not -- I would have preferred to sell no shares, but I had expiring options, so I, in fact, paid the Company for my share. But I do thank you for that question because it does provide the opportunity to answer to others that had that same question.

Okay. Is it likely that your taxes are not $0.25 million, and that it happened so late in the obviously known to you in a failed quarter, or during a failed quarter?

Ma'am, absolutely not. That had nothing to do with it. Absolutely, I'd purchased of additional shares and paying my taxes.

It just seems ominous to me that this happened at this time. Okay. Thanks for commenting, though.

Absolutely. Thank you.

(Operator Instructions)

Our next question comes from [Mark Agada], a private investor. Please proceed with your question.

Yes, gentlemen, we're stuck down here down in the middle hurricane central, so our service has been going in and out, and I had to get back on the line. Would you mind summarizing why we should be bothering to stick around here and see this turn that you've been talking about for the next 2 years? Can you give us some color or salient points on why, after six or seven years, individual investors should stick around? I'd appreciate that.

Yes. Absolutely. We obviously, through the earnings call, we wouldn't comment on why you should or shouldn't invest, we're providing the results of the quarter. So that's a decision that you will have to make on your own, but --

No, what can you comment on? How about that? I mean, you say that all the time. But it's -- the Company hasn't done very well over the last 2 years, and obviously you can detect the frustration from a lot of people on this call.

Absolutely. As are we. We are very much frustrated and would obviously like to see the Company performing better.

All right. So how about some color? What's going on that you can talk about?

We just presented the earnings call, as well as the capabilities of the Company, so that's what we would add to this call.

And again, I just told you that --

Let me refer you to DGI and Enrique, who's on the call. The IR firm is available to take your calls any time. If you would like an explanation on the Company and how it's performing or, more importantly, the product and capabilities, they'll be happy to either schedule a conference call with you, or I'll be happy to attend during one of our non-deal road shows to meet with you and/or your investors to present the Company.

Our next question comes from the line of [Bruce Lavine], a private investor. Please proceed with your question.

Yes, good afternoon. I have come across an article recently, Popular Science, about your buoy system. Can you elaborate a little bit more on where these could actually be, I guess, placed because I'm looking beyond, I guess, the continental US? And has there been any interest as a result of the Popular Science article that's been written on the Company? Because that's what I've been basically following for your company.

Great. Thanks for the question. For most of our investors, if you're not on our distribution group, again, contact DGI, and they'll be happy to add you to our list. The Popular Science article you're referring to covered Aegeus, and we're very proud of that article. It resulted in, not only notoriety, but significant questions internationally as well as domestically on the acquisition of the system. So we've been in discussions with many countries around the world. They're all talking about backlog. Previously our goal here is to develop that market so that we have a backlog order so we don't realize quarters like we did this quarter, and so the Popular Science has really gotten us national as well as international interest on the capability. And that's why we included some photos from the system during the recent hurricane and the Navy demonstration to show the capability. So thank you very much for the question.

Okay. Can I ask one followup question?

Absolutely.

Okay. The other question on the buoy is, if there's been other interest from other countries, in what capacity? Is it environmental, is it security, or is it basically everything?

A little bit of everything. We have seen a couple of interesting things early on, as in any research and development. We had a lot of interest from the environmental community, and I would say, during the demonstration, and most of our answers most recently is about security. So the system has an ability that one of our callers asked, actually, when we were first developing this system, to develop a security invisible force field around the country, though that might have been a bit of a stretch. People now do see the ability of the system to be put around an island, if you will, or around oil drillings or gas drillings to provide security. Or in the Coast Guard's case, it would provide the capability, something that we learned recently, that if they get a call, and it's distress signal in an emergency, one of the things that they get quickly is they have to go out there. They don't have a choice. They have to validate there is a distress. So there's the cost savings efficiency capability for them that if they had eyes on, if you will, a buoy somewhere in the Puget Sound or the Potomac River, they could see that area several miles away, they could save a lot of money by not having to generate a boat in response. We have seen it grow, mostly security and efficiencies, for some of our end users.

All right. Now that you've mentioned, the radiation detectors were mentioned on the buoys. Would that be the capability of monitoring shipping containers that are coming into the continental US or basically anywhere? Because I know in the state of New York, Schumer has been talking about the containers, that basically everything can't be checked as it comes in.

Yes. Absolutely. The system, as we currently have deployed, uses a radiation detector similar to the Department of Energy, or exact same one, actually, so that the Department of Energy plant would, if they had a problem, the sensors usually trace for matter on the ground, would sense a leak or a problem. The buoy is sensor agnostic, so, if it were to detect radiation through containers and maybe some brilliant company out there developed it, we've generated the ability for it to communicate, generate power, sustainment, and remain in place for an extended period of time. So those are all markets that are yet to be explored.

Okay. Thank you very much.

Thank you.

Our next question comes from the line of [David Rich], a private investor. Please proceed with your question.

Can you hear me?

Yes, sir.

Okay. I haven't talked on this call for a long time. This is disgusting. I'll be straight up about it. I've been in this job for eight years. You have under-performed every single quarter. The conference calls have had no encouragement whatsoever. Put this company up for sale. Go sell the buoy system. Do something for us, and that sale that you sold at $1.95 was so -- I can't even handle how you could do that. You did it last quarter, too. You did it last year. All of you were just selling stock, and we shareholders are stuck. And this report tells us that this stock is going to zero unless you guys get on the stick. Why are you paying a PR firm $100s of money? Get rid of these people. They've done nothing for you. I could say a lot more; I'm not going to. I'm just telling you, call up somebody and unload this company. And the mere fact that you even said you're going to do a secondary is absolutely -- I know you keep that [on the shelf]. You've put it on there every week. That ruined the stock two years okay; it's still ruining the stock. Well, of course now you couldn't do a secondary if you wanted to. I don't think you have any answers to what I said. But I think you've got to know how upset every single one of us who have fought and helped you and bought stock, and here we are stuck. I'm finished.

Okay, let me address one of your points. We did not say we're doing a secondary, and we're required by the SEC to disclose that we have a shelf registration.

Our next question comes from the line of [Vladimir Spiro], a private investor. Please proceed with your question.

I wanted to ask you, I think you made a statement a few months back that this company's just scratching the surface as far as business goes. And I was just wondering what you were trying to articulate with that statement.

Vladimir, I don't recall the specific statement you're referring to.

It was recorded. It's, you know -- I try -- sorry. On Yahoo Finance.

Yes, unfortunately, I can't comment regarding a specific statement. I don't recall that specific statement.

What I am asking you, if you can recall or not, what do you think -- What kind of upside is there for the Company?

Kind of the three areas we went over. In the buoy, the wireless, it's the buoy system. The commercial identity is the distribution agreement we mentioned. And then, on the government identity space, is the cell phone applications.

And does the Company having any traction in this driver licenses?

Absolutely. We have several 1000's seats of the driver's license. We have 10 US patents, 2 Canadian patents, and 1 UK patent in reading driver's licenses. So the license agreements that you've seen us announce are agreements because of our patents. So yes, we are recognized as the leader in driver's license reading and scanning capability.

Thank you.

Thank you.

Our next question comes from the line of [Howard Dorse with Wonder Lake Securities]. Please proceed your question.

It's Howard Ralph. Steve, I think you've got a fire storm here. Client of mine called me up to follow up the young lady from Pilot Advisors. One was, is this the 10d5-1 plan?

It is not.

Okay. Secondly, when did your options expire? This is a client -- (multiple speakers)

Yes, the options expire, I believe, in Q1 next year. And as you know, the two windows between then and now on expiration were the end of that quarter, Q3, and the next 15 to 30 days before the end of Q4.

Again, this comes from a friend of mine who's a client who's a significant owner. Do you think this was a good choice in terms of when you sell it? He certainly would like to, obviously, ask the question, what did you know about this quarter and when did you know it?

Absolutely.

Because it really looks ugly, Steve. It truly does.

Yes, let me address that. So obviously I didn't do anything to trade based on information I had regarding the operation of the Company. And as I mentioned to the lady -- and I don't believe she was a Pilot, I believe she was a private investor -- the 144 was filed after last conference call when we came out of the blackout period.

Right.

So those shares, they are available for trading at that point. But I had nothing to do with that, and also, if you look at our historicals, we traditionally do well Q3, due to government sales -- defense ID, fugitive finder -- because it's the end of their fiscal year. So I absolutely did not, and if you -- the stock price actually continued to move up during that period of time.

Let me also come back to the [sun a] buoys. I've listened to the call very carefully. I still would like a little bit more guidance. You've talked in the past about certainly potential in the Caribbean. Where do you stand in terms of some additional information on that, or anyplace else? Do you have permission to sell? You've got your licenses?

Yes. Great question. So let me explain a little bit more on the international market. So during our research and development, we had to get the okay from both the Navy as well as Commerce and State. We went through what's called their ETN certificates and their licensing agreement. So we have to identify a configuration, which we have done, that does not require licensing, and that's been submitted. So the guidance from counsel is we do not have a stop; we can sell abroad. There will be, obviously, certain components that we'll not be able to export. There will be some certain that will need a license. But the buoy system, as it is today, without those components, and I'll use widget X, the buoy is operational and available to sell internationally, with obvious exceptions in certain countries -- they're excluded by the State Department. So to answer your question, yes, we've been cleared to sell abroad.

My last question, to wrap it all up in terms of this, how optimistic are you in terms of achieving sales? And just as a tangent to that question, what dollar amount per buoy could we be talking about?

Yes. Good question. I'm not going to state specific to quarter one, to quarter two, whatever. But am I optimistic? Absolutely. The buoy system, if you see it, I'll be happy to come visit you and/or your clients for the non-deal road show. It sells itself when you see it. Four years ago when we built it, people told us we couldn't put a camera on it. Do I think it's a market that's yet developed? Yes. It basically -- What we have done is created a tower in the water. The ability to generate power. And you don't have to take my word for it. Back to your first question, as I mentioned earlier, if I was selling shares to take profit, I could have sold another 80,000 shares. I didn't because I believe in this company. I believe in the stock, and I believe it will go up.

Our next question comes from [Michael Nagy], a private investor. Please proceed with your question.

Yes. Good afternoon or morning, gentlemen. I've been a shareholder for quite a while. And I'm thinking, I'm sure a lot of people's feelings and emotions are what they are, but I still have confidence in the Company because you guys are still liquid. And in a bad economy, down economy, the fact that we are liquid, I think that speaks volumes. You cut operating expenses, so I think that's a good thing. You look all across the market and everyone's taking hits, so we're still well above where we were a couple years ago when we hit below $0.50 per share. Anyway, keep up the good work, because I believe in what you guys are doing. Thank you.

Yes, I thank you for the comments, so let me add a little bit. Of course, we're all upset, as you all are, on the sales revenue. The good thing is, 1.5 years ago, we changed some of our cost structure that we're only down 110 EBITDA, and we're still up for the nine months. Are we happy? Absolutely not. But will we continue, and do we believe in our products? Absolutely.

Our next question comes from the line of Arthur Winston of Pilot Advisors. Please proceed with your question.

This is not a question but an observation and a comment. I think that it shows -- This pain for shareholders, in more or less low character, for you and all these other people who don't work and just sit on the conference, call it work, and they get paid by the Company to sit there and really not explain what's going on in the Company and not answer these questions. I mean, you're not kidding anybody but yourself. I'm finished. Thank you.

Our next question comes from the line of [Joad Jurini], a private investor. Please proceed with your question.

Hello. Steve?

Yes, sir.

One of the issues that came up was the sale of stock, but one thing I think should be noted is you still hold 450,000 or 460,000 shares, am I correct?

You're correct. My share position actually is larger than it was previously.

Except there hasn't been any sales of your personal stock holdings. It was only exercised options.

Actually I sold shares that I held to buy the options, correct.

Correct. Okay. I just wanted to clarify that. Thank you.

Thank you.

There are no further questions at this time. I'd like to hand the floor back over to management for closing comments.

Thank you, operator. And we look forward to seeing you on the next conference call in the beginning of the year. Thank you.

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