Good day, ladies and gentlemen. Welcome to the Cogent Systems’ First Quarter 2008 Earnings Conference Call. During today’s presentation, all participants will be in a listen-only mode, and following the presentation, the conference will be open for questions. If you have a question, please press * followed by 1 on your touchtone phone. If you’d like to withdraw that question, please press * followed by 2. If you’re using speaker equipment, you will need to lift the handset before making your selection. This conference is being recorded today, Wednesday, May 28, 2008. Now, I’d like to turn the conference over to Jill Isenstadt with Blueshirt Group. Please go ahead.

Good morning and thank you for joining us on today’s conference call to discuss Cogent’s first quarter 2008 financial results. This call is also being broadcast live over the web and can be accessed in the Investor Relations section of Cogent’s website at www.cogentsystems.com for 15 days. With me on today’s call are Ming Hsieh, President and Chief Executive Officer, and Paul Kim, Chief Financial Officer. After the market closed yesterday, Cogent issued a press release discussing the results for its first quarter ended on March 31, 2008. If you would like a copy of the release, you can access it online at the company’s website or you can call the Blueshirt Group at 415-217-7722, and we will fax or email you a copy. This conference call will include a discussion of non-GAAP financial measures, as that term is defined in Regulation G. The most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the company's financial results, prepared in accordance with GAAP, are included in the earnings release, which is posted on the company's website, at www.cogentsystems.com. We would like to remind you that during the course of this conference call, Cogent's management may make forward-looking statements including financial projections, statements as to the plans and objectives of management for future operations, and statements as to the company's future economic performance, financial condition, or results of operations. The company believes that its estimates and expectations are reasonable and are based on reasonable assumptions. However, risks and uncertainties relating to future events could cause the actual results to differ or differ materially from expectations. For a full discussion of the risks and uncertainties, please refer to yesterday's press release and our recent SEC filings including without limitation, the company's report on Form 10-K for the quarter ended December 31, 2007. The company does not intend and assumes no obligation to update any forward-looking statements. With that said, I'd now like to turn the call over to Cogent's President and CEO, Ming Hsieh.

Thank you, Jill, and thank you everyone for being on the call. We have three primary goals for 2008. First, we want to give more consistent results and meet or beat our guidance for the year. Second, we want to continue to strengthen our customer base while winning orders from existing and new customers, and third, we want diversify our business both through internal development and through potential target acquisition. With this goal in mind, we believe we are off to a strong start in 2008. Revenue for the quarter was $24.6 million, ahead of analysts’ estimates. Gross margins were particularly strong at above 70%, leading to a non-GAAP EPS of $0.16 per share. Revenues were driven by strong demand from the Department of Homeland Security, Morocco, Royal Canadian Mounted Police, ANP, and our pipeline of [inaudible] customers. Moving forward, we believe our position with our leading customer is secure, and we are becoming even more optimistic about demand from DHS. The continuing need for increased processing power and the 2- to 10-print conversion is driving sales at this important customer, and we continue to deploy this customer with what we believe is the largest and most efficient AFIS in the world. We think our success with DHS and our other customers is a testament to our technology superiority and our low total cost of ownership relative to our competition. We can point to multiple programs from our competitors that are either not yet operational, have performed below plan, or end up costing much more than originally forecasted. During the quarter, we were awarded a contract by the Department of State and the Bureau of International Narcotics to implement an AFIS for El Salvador National Civil Police. We also got robust followup contracts from LA County, Haiti, and RCMP, and…

Thank you, Ming. I should mention that Thank you, Ming. I should mention that, unless specifically noted otherwise, we are discussing all numbers on a pro forma or non-GAAP basis. First quarter GAAP results included $921,000 in non-cash charges related to FAS 123R regarding the expensing of non-cash stock-based compensation. In today's discussion, I will first give you an overview of our Q1 results, and then provide financial guidance for the full year 2008, and finally finish with an update on our pipeline and opportunities going forward. First quarter revenues were $24.6 million. Product revenues increased sequentially by 17%, while maintenance and service revenues increased by 3% from the fourth quarter of 2007. Revenue contribution during the quarter came from customers such as the DHS, Morocco, ANP, Tennessee, RCMP, Ohio, Los Angeles Sheriff's Department, and Pennsylvania. Gross margins were 70.4% in Q1, compared to 71.5% last quarter. Looking ahead, we continue to expect annual gross margins to be above our long term target range of 55% to 60%. First quarter net and operating income was impacted by $10 million in settlement income related to the company’s settlement agreement with Northrop Grumman. The effect on EPS was $0.07 per share. Operating expenses excluding settlement income as a percentage of revenue were 33% this quarter. In actual dollars, operating expenses excluding settlement income increased to $8.1 million from $7.8 million in the fourth quarter on higher revenues. Excluding stock-based compensation and settlement income, we now project that 2008 operating expenses will be approximately $34 million. Operating margins excluding stock-based compensation of $921,000 were 78% in the first quarter. Of the 78%, 41% relates to settlement income. We recorded $5 million in interest income this quarter. Our tax rate was at 38% during the first quarter. We anticipate the tax rate to be…

Thank you, sir. We will now begin the question-and-answer session. (Instructions). Our first question is from the line of Paul Coster with J.P. Morgan. Please go ahead.

Hi. This is actually Mark on behalf of Paul. The timing around some of the larger contracts - is there any reason to believe the FBI-NGI or the UK identity scheme might be different from – are you still thinking it’s going to be late ’08, early ’09, or…can you give us an update there?

Mark, this is Ming Hsieh. The FBI-NGI programs are not in our forecast for this year, so we anticipate a delay for the GI, so any revenue opportunity from the FBI-NGI will be next year. Regarding the UK national identity scheme, I believe the UK is accelerating the program, has selected plan contractors, and the various bidding processes have started, but for that program, we also did not forecast any revenue for this year. Anything we get will be on top of our guidance. We anticipate revenue flow will be from next year or year after.

Okay, and then can you give us the same on the new DoD biometric program?

With DoD, we expect three more contracts will be coming up sometime in June, so we believe DoD wills start spending some money this year.

Can you update us on your backlog and what that would be in 12 months?

Mark, we announce our backlog once a year when we announce our annual year-end results, so we do not disclose quarterly backlogs. Having said that, we feel very good and very confident about where our current business stands both in terms of pipeline and orders that we have on hand.

Okay, got it. And then, are you seeing any significant changes in the competitive landscape?

Mark, definitely we are watching what is happening with our competition, and definitely we are working very aggressively to bring new products to the market and increase our internal research and development effort. I think our competitive position is very good, and I think definitely we need to watch what the competition is doing.

Okay. That’s all I have. Thank you.

Thank you. Our next question is from the line of Jeremy Grant from Stanford Group. Please go ahead.

Hi, good morning guys. Can you hear me?

Yes.

Okay, good. Calling in from a cell phone. First about US Visa, looking at the Q, it looks like most of the revenues are now coming through some intermediaries, I see from DHS, instead of directly. Can you talk a little about that change?

Sure, Jeremy. This is Paul Kim. There has been any change in the partners or the go-to-market that we have for the US VISIT program. In the Q, we have exact numbers that we have to specific parties, but in fulfilling the needs of Department of Homeland Security, we shift products, we offer services directly with the Department of Homeland Security, or we use logistical partners in fulfilling their needs, so there hasn’t been any change in the way we fulfill the needs for the Department of Homeland Security, and the activity that you note with the Department of Homeland Security being very heavy in the quarter was correct. We were fortunate enough to have a lot business from the Department of Homeland Security and fulfilling the needs that they have for additional processing as well as service capabilities, and we look forward to fulfilling additional needs that they have throughout the course of this year.

Within your guidance, things are picking up towards the second half of the year. Revenue-wise, are you expecting that the pace of DHS business is going to pick up more in the second half of the year relative to the first half?

I think that’s hard to anticipate what the exact revenues will be on a quarter to quarter basis. Having said that, we do anticipate the overall business from the Department of Homeland Security - the needs for the US VISIT program to be heavier this year than it has been in the prior year.

Okay. Can you talk a bit about the RFQ that the VISIT program has put right now, looking at competitive solution or how that could impact things?

Jeremy, what you are talking I believe is a case study. The US VISIT plan contractor, Accenture, did issue a case study calling for papers for various companies to provide what each vendor’s capability is to test DHS increasing or even more demanding requirement in terms of processing power. So, there were various companies that provided their paper in compliance with DHS that went to Accenture for them to conduct some of the conversion.

Okay, so it was really more of an RFI as opposed to a direct request for quotes and put everything up for competition.

Well, this was a case study, we believe.

Okay, and then the other question I had was shifting to NGI, I think, Kim, we have talked about what architecture they would use going forward and whether there would be an opportunity for you to propose your PMA servers or whether they will be looking for a software-only solution that would run on their existing server base. Now that the IBM [inaudible] in NGIs going forward, has there been any progress how they’ll go forward on that?

Well, we haven’t seen the full impact of the piece yet. That said, we are looking forward for them to pick up studies or benchmark tests to demonstrate various technologies including software or hardware. We believe to that end the selection of the technology is going to be pretty clear. Definitely if you’re looking for the blade-based solution, that solution exists. That one is not magic. Everybody has been using the blade technology for various applications, but at the present time, there is no place in the world that you can point to for successful application for that skill using the blade yet. We are looking forward for that benchmark.

And one final question just on the handheld – you guys mentioned you are looking at some new devices. Can you talk a little bit more about what we might see?

Jeremy, the handheld device is part of the data collection device. We can develop this through our own research and development or we can purchase from the various technology partners, but our focus is at the back end. The more and more handheld devices can be developed or deployed in the field through coding or through our competitors, there will be opportunity for us for coding at the backend, so really we are looking for the backend solutions. Handheld solutions area is one we are interested in, but our main emphasis is at the back end.

Okay, thanks.

Thank you.

Thank you. (Instructions). There are no further questions at this time. I will turn it back to management for any closing remarks.

Alright. Again, thank you very much for being on the call today, and also we appreciative of your support. We are looking forward to updating you on our progress in the coming quarters. Thank you very much.

Thank you. Ladies and gentlemen, that does conclude our conference for today. If you’d like to listen to a replay of today’s conference, please dial 1-800-405-2236 or 303-590-3000 using the access code of 1115030 followed by the # key. ACT would like to thank you for your participation. You may now disconnect.