Intellicheck, Inc. (IDN) Q2 2012 Earnings Report, Transcript and Summary

Greetings and welcome to the Intellicheck Mobilisa Second Quarter 2012 Results call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kenna Pope with Intellicheck Mobilisa. Thank you, Ms. Pope, you may begin.

Thank you and welcome, everyone. Thank you for joining us today for our 2012 second quarter conference call to discuss Intellicheck Mobilisa's results for the fiscal quarter ending June 30, 2012 and to discuss other business developments. In a moment, I will call upon our CEO to lead today's call and introduce the other 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 through 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, encourage 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 financial results, 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. With that out of the way, I would now like to introduce Mr. Steve Williams, Intellicheck Mobilisa's Chief Executive Officer, to preside over today's call. Steve?

Thank you, Kenna. Welcome everyone to the Q2 2012 results for Intellicheck Mobilisa and we're glad you joined us. Let me first begin by introducing our board of directors: our Chairman, Dr. Nelson Ludlow; General Buck Bedard; Ms. Bonnie Ludlow; Admiral Mike Malone; Mr. Woody McGee; and Mr. Guy Smith. Our management team: myself, Chief Executive Officer, Steve Williams; our Chief Financial Officer, Bill White; Mr. Russell Embry, our Chief Technical Officer; and Ms. Bonnie Ludlow, our Senior Vice President. Let me first begin with an overview of our Q2 2012 results. Revenues are up 9% to $3.44 million. It is our fifth quarter in a row with positive EBITDA and in Q2 we saw government identity systems rise 23%. Our net income for 6 months was up $659,000 and our adjusted EBITDA for 6 months was up $658,000. Our new bookings were up 40% for Q2. Let me now go through each of the divisions and talk briefly of some significant accomplishments through the quarter. In our Commercial Identity Systems, we have -- our focus remains on credit card issuance, loyalty, loss prevention, hospitality and banking operations as we move from what we call the back of the bank with credit card issuance to the front, our teller transactions and banking operations. During this period, we released a new product. The new product is price competitive with products we previously sold. This particular product [indiscernible] IM1750, not only uses our patented technology to read and parse or scan a barcode, but also captures an image of the driver's license, something our commercial clients have asked for for about 4 years. We now have that device in production and available for sale. Our second business unit, Government Identity Systems, our focus remains on access control, visitor and vendor validation or checking for a bad guy. We'll continue to look for new federal facilities and agencies. We now have over 100 locations and we're expanding to state and local. 2 announcements we made this quarter, Lenel certification. That's significant for us because we had previously did Lenel certification for our TWIC reader, which I'll expand on in a little bit but most recently announced a new certification with Lenel, one of the world's premier access control systems, so that we will integrate with legacy systems, most importantly on several of the federal agencies that use a prox card as their entry badge. That's a significant opportunity for us and resulted in Q2 last year in an award of a contract, with the certification this year, a new award of contract for that type of a reader. Remaining in the Government Identity Systems regard to transportation worker identification credential, we saw a port sale this last summer resulting in $1.1 million. It's the largest port sale by any company to date and we will continue to see that space grow as many of our competitors have left this space and we are by far and away the market leader in TWIC mobile reader sales. The third business unit, our Wireless System, our focus remains on the Autonomous Active Sensor System, utilizing our trademark Wireless Over Water technology. We will focus on both environmental and security. We recently deployed our 10th buoy and that's all the buoys we are required to build under our current Navy contract, so our system is fully operational and we're finalizing as we go do our demonstration. Most recently is our market development. We did a conference on the West Coast on small vessel threat conference where we physically deployed a buoy to the conference in the water in the Puget Sound so that many of our future stakeholders could actually touch the buoy. We have developed both a federal and commercial market for this buoy system as well as an international space as we work through exportability both through the State Department and the Department of Commerce. Now I will ask our Chief Financial Officer, Bill White, to give you an overview and some more details on the quarter. Bill?

Yes, thank you, Steve, and a 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 second quarter ending June 30, 2012 which we released this morning. We anticipate that our complete quarterly report on Form 10-Q will be filed with the SEC this afternoon. As Steve mentioned, revenues for our second quarter ending June 30, 2012 increased 9% to $3,441,000 compared to $3,165,000 for the previous year. Identity System revenues increased 12% to $2,838,000 compared to $2,535,000 last year. There were increases in both commercial and government sectors during the quarter. Wireless revenues decreased 4% or $27,000 to $603,000 from $630,000 last year. Total book orders increased 40% quarter-over-quarter. Book orders for the 3 months ending June 30, 2012 were approximately $3,064,000 compared to $2,188,000 in 2011. Gross profits, the company continues to maintain high gross margins. Our gross profit was $2,230,000 for the quarter or 64.8% as a percentage of revenues. For the 3 months ending June 30, 2011, gross profit was $2,148,000 or 67.9%. The change reflects higher equipment sales as a percentage of total revenue this year compared to last. Equipment revenues yield slightly lower margins than our other product offerings. Operating expenses, which consist of selling, general and administrative and research and development expenses, increased $148,000 or 7% to $2,169,000 for the 3 months ending June 30, 2012, from $2,021,000 from the 3 months ending June 30, 2011. Approximately $73,000 of this increase or 49% is attributable to a credit and stock-based compensation expense in 2011 that was due to a reduction in force. Net of this effect, the increase in operating expense was 3.7% over the prior year. Adjusted EBITDA for the quarter ending June 30, 2012 was $355,000 compared to $337,000 in quarter -- June 30, 2011. The company posted a net income of $61,000 for the 3 months ending June 30, 2012 compared to a net income of $125,000 for the quarter ending June 30, 2011. As of June 30, 2012, our backlog was approximately $918,000 compared to $773,000 for the same period last year, a 19% increase. I'd like to move now and talk about the 6-month results ending June 30, 2012 and 2011. Revenues for the 6 months ending June 30, 2012 were $6,151,000 compared to $6,021,000 over last year, or a 2% increase. Our gross profits current year 6 months ending June 30, 2012 were $4,188,000 compared to $3,884,000 last year. That's an 8% increase. Gross margins this year for the 6 months ending, 68.1% compared to 64.5% last year. Operating expenses decreased 8% for the 6-month period to $4,112,000 from $4,462,000 last year. Adjusted EBITDA was $669,000 this year compared to a negative $19,000 last year. Net income for the 6 months of $76,000 compared to a negative $583,000 or a net loss of $583,000 last year. I'd like to now move and talk about the company's liquidity and financing. As of June 30, 2012, the company had cash and cash equivalents of $1,593,000, working capital defined as current assets minus current liabilities of $2,631,000, total assets of $23,342,000 and stockholders' equity of $19,885,000. The company has not used -- utilized any bank financing in 2012. During the 6 months ending June 30, 2012, the company generated net cash of $199,000 compared to a net use of $14,000 for the 6 months ending June 30, 2011. Cash generated from operating activities was $244,000 in 2012 compared to a use of $13,000 in 2011. We used cash of $56,000 in investing activities in 2012 compared to $33,000 in 2011 due to slightly higher capital expenditures. Cash provided by financing activities was $12,000 in 2012 compared to $32,000 in 2011. During 2011, the company entered into a 2-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 June 30, 2012, there were no outstanding borrowings and unused availability under the facility was $1.5 million. We currently anticipate that our available cash as well as expected cash from operations and availability under our revolving credit facility will be sufficient to meet our anticipated working capital requirements for at least the next 12 months. We currently have effective a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission. Under the shelf registration statement, the company may offer to 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 1/3 of the market cap held by non-affiliate shareholders in any 12-month period. I'll now turn it back over to Steve.

Thank you, Bill. A quick market overview of IDN. As of 7/27/12, our price was $1.46. Our 52-week high is $1.96. Our 52-week low is $0.81. We have 27.5 million shares outstanding with a market cap of $41.2 million. Management holds 45% approximately and our average daily volume is about 25,000 shares. Let me highlight some of our growth initiatives and address some of our recent announcements. Something we've talked about for a while now is a distribution model to increase our sales and marketing capability. Our recent announcement with a large provider of hardware, that we would license our software, has multiple facets with regard to revenue generation, the first being the license itself, that the hardware manufacturer can license our software. What it does for us is it now allows us access to other distribution channels. Not only to this vendor but others. It's our new model. Sell a seat license, also sell the hardware as well as use the sales or vendor channels or the channel partners to help sell to the end users with established relationships from the large hardware manufacturers. Then we would also get recurring revenue on those licenses. So it's a 3-pronged approach on a seat license, an enterprise license and hardware sales, by effectively using other partners' distribution channels. That's a very exciting opportunity for us. Top line growth. We continue to focus on that. We saw a small, incremental increase this quarter at 9%. Obviously our goal is to continue to grow that top line which will ultimately fall to the bottom line and we're going to do that by increasing our organic sales force as we continue to look for the right people. Our new product launch, as I mentioned on that piece of hardware, we currently are looking to move that into banking operations and many of our retailers have shown a desire to also capture an image of a driver's license. So we find that as a potential market for future growth on hardware sales. Our cell phone applications continue to get developed. I recently at the board, I demonstrated the initial capability to scan and read a driver's license from a cell phone. We're going to make that more robust and applicable to many cell phones because all of us have a cell phone and obviously we could benefit from having a cell phone app around our patented technology. Let me review Q2 2012 in the last 6 months. Our revenue is growing and we're up 9% for the quarter. We're focused on our top line growth. We will continue to grow our sales and distribution force through our partners and through our organic sales team. We launched new hardware with our image captured driver's license capability and software products on our cell phone and our bookings were up 40% with Q2. With that, I'd like to turn it back over to the operator and welcome any questions you may have. Operator?

[Operator Instructions] Our first question is coming from the line of Walter Schenker with MAZ Partners. Please state your question.

I'm not sure I followed the discussion you just had on the announcement this week with your arrangement with a significant hardware manufacturer. I understand that their sales force now may be selling your software. Is there a part of the agreement that your software is automatically included in some of their hardware or when they sell the hardware, the purchaser of their hardware optionally gets to add your and who pays license and seat fees if someone does use it?

Walter, let me try to explain. Rather than talk to specific terms of that agreement, I'll talk in generalities as I'm not allowed to disclose exact terms, but it'll answer your question. The agreement that we announced, much like other agreements, is selling software, a seat license. So what we would do is we would be the provider of a seat license that would be incorporated into a piece of hardware. It's what we talked about doing a year ago where there's a variety of vendors out there to sell hardware to read driver's licenses. So effectively, we would license that software on the per seat basis to a hardware vendor. What that then does is it develops the market. For instance, a certain piece of hardware that's scanning a barcode only reads a fraction of the driver's license in existence so then the sales channel or the channel partners, what they want to do is sell a complete solution. It's what we do. So then the sales channel, it's not part of the agreement, could sell an enterprise license and they would do that by getting some points, 5 or 10 points, off the 1/2, the 3/4 of the million dollar enterprise license. So effectively, the hardware announcements we make going forward will be a small dollar figure relative to just the seat license embedded in a piece of hardware. The channel would then be rewarded to come to us to buy the enterprise license much like we've done in-house for years with our organic sales force. In addition to the updates to any software that was sold either through a licensing agreement or through the enterprise, so it creates a very approach to revenue generation. Does that help you understand?

Yes, somewhat. It's part 2 of the same question. Given that this develops as you hope it does, at what quarter might we see an impact on revenues?

Again, not to this specific agreement but in the other agreements we're working on, the other vendors, you should start to see it in Q3 at a smaller amount. I think you'll see the real impact moving forward in Q4 and Q1 next year.

[Operator Instructions] Our next question is coming from the line of Gunnar Hansen with Sidoti & Company. Please state your question.

I guess just a couple questions, clarification questions. Could you guys go over each business segment revenue growth for the quarter? I think I missed that.

I'll ask Bill. Do you have those numbers readily available there?

Yes, Steve. The Identity System revenues increased 12%, Gunnar, to $2,838,000 compared to $2,535,000 last year. There was a $27,000 decrease in Wireless revenues from $630,000 last year to $603,000 last year.

OK, got you, and then I guess just going back to this recent hardware agreement. It sounds like some of the revenues will start to trickle in, I guess in the third quarter and then kind of pick up a little bit in the fourth and a little bit more thereafter. What sort of dollar figures are we talking here? Can you guys talk a little bit more about that?

Yes, we don't really disclose dollar figures because next quarter, if we make it, you guys will say go bigger. If we don't make it, you'll say you guys didn't make it. So we don't disclose dollars, as we get closer to the end retailers, because they're going to have some restrictions, I suspect, on what we can and can't disclose, but for us, to give you an example, what the salespeople focus on the commercial side are enterprise licenses. It's our bread and butter, it's where we make our most money, it's software. So the software I sold to a partner [ph] at Wal-Mart is the same one I would sell to any Tier 1 retailer going forward. So what excites us is it allows us to use the thousands of people that are already in the channel of another hardware vendor or some hardware vendor that have established relationships with the Tier 1s, and I'll give you an example. In almost every case where we go in to sell an enterprise license, I need to bring in my hardware vendor with me in order to close the deal to get the hardware sales and I use one in particular with AT&T, one of our biggest clients. They remain one of our largest clients and we had to use the hardware vendor with us to get price exceptions and to create a solution that was feasible for the Tier 1 retailer, AT&T. So we will use those relationships to further what we've been trying to do with our sales force of 12 or so people. We will effectively use those people to go out to the Tiers 1 while we're there. I'd love to give you numbers but unfortunately, we don't give guidance in that regard.

Right, got you, and then maybe just talk a little bit about some of the SG&A expenses in this latest quarter and I guess probably some of that is related to some of the sales force ramp up or talk a little bit about that?

Yes, I mean, the most -- the numbers that Bill disclosed, there was a change based on some former employees and the way we had done accounting with regard to stock-based compensations that were reversed out as a result of their departure. Actually, if you take that out and though I love my new CFO, I mean, there's a headhunter cost associated with a recruiter to get us a new CFO, which we gladly paid. So other than that, actually expenses are down but those were the 2 big changes for the quarter and remember, we're only talking about 100K. We're not talking about millions and we will see, or we can sustain significant growth without including, increasing SG&A substantially.

The next question is coming from the line of Amy Norflus with Neuberger Berman. Please state your question.

A few questions. Number one, you spoke about the prominent hardware manufacturer. Can you talk a little bit about the competition and probability of doing business with them?

Absolutely. So the theory on the distribution model was that we would get one of the larger companies to agree to and acknowledge -- not acknowledge, but accept that we have the patented technology and frankly, what comes with that patent is one, protection, and two, the ability that we're the Association of American Motor Vehicle Administrators Library. We have the best software, we have the best technology, and that gives them the ability to do that. Now that we've partnered with one of their competitors or a competitor, the other competitors reached out to us immediately saying we want to license with you, as well. So what it effectively did is it created a snowball effect that's an opportunity for them as competitors, they want to neutralize the field because right now, one hardware guy has a hand up on the other and we've already seen interest from all the competitors in that space and there are only a handful of really large ones and we know them all and we are discussing that with all of them.

Okay, so if you do sign these people up, can you talk a little bit about the recurring revenue stream that you would have -- and I guess it wouldn't be with these manufacturers, it would be with your end customer?

Exactly. So what would happen would be we would sell a license on a per-unit basis and then most of these guys, if not all of them, they're hardware guys. They don't want to get into software and recurring revenue with that regard, so what would happen is we may sell the seat license to the hardware guys who would then sell it and pay us. The recurring revenue is based on they have to keep it updated every year and in those cases, the Tier 1 retailer or we've built a web application so that they would come directly to us on those purchases. So the recurring revenue just on those initial licenses could be substantial relative just the initial software and again, it's recurring revenue. So we don't do anything special for the next retailer that signs up. It's the same software that we sell to our existing clients. They just pay for the software update and download it like everyone else.

What about the hardware that's already in force?

The negotiations with all distribution parties is we would go in and retrofit the hardware that exists in the field today with our software that would give them the license protection for the patent as well as generate revenue for us. So we've always prided ourselves as you don't need to be unique. We can go into any legacy system, help you update the firmware so that you can use our technology.

So it's imperative that they need to have some sort of update because I guess this information changes daily.

Exactly. They, in most states, change every 4 or 5 years, some a little longer than that, but frankly, a lot of people like to get the updates as soon as they're in the field. So, over time we've seen our own clients, they maintain that, and the big Tier 1 guys, they don't want their software out of date and once they've integrated, they don't remove it from the system. It's cheaper to keep it in place.

And then my last question. So for a Tier 1 retailer to roll this out, it must be expensive.

It's not expensive, actually, and it's one of the reasons we license with a hardware guy. Some of the cases in the CapEx were significant and it kept some of the Tier 1 folks from initially rolling it out. With this new license agreement, you don't need to buy the enterprise license initially if you don't want to. Obviously there's some that still will but some of the smaller companies tend to want to go slowly. We have one in particular that didn't buy an enterprise license initially but now over time, it would've been a lot less expensive for them to do that. So in both cases, we've built a business model that will benefit IDN whether they do the enterprise license or a per seat license.

[Operator Instructions]. Our next question is coming from the line of Robert Edmonds [ph], a private investor. Please state your question

Gentlemen, can you discuss the learning curve that you have to instruct the employees on the hardware side, what they have to amass and can you also attract the kind of customers that this hardware manufacturer is going after and how it fits with your present scheme of clients and if you can discuss with us some of the main clients like Target and Wal-Mart, anyone else we might know of that you can address their names?

Yes, absolutely. Let me start first with the employees. There's no learning curve. It's a technology that's been around since the patents -- with the IDN IPO in '99, and it was based on those patents on reading driver's licenses. So it's very simplistic to understand. There's really not a learning curve for the channel. If somebody -- I mean, it's vendors, the partners we have, have been our partners for years and that's what we're doing. With regard to the client base or our clients, we have always had -- Target was around since the merger 4.5 years ago. We've since added Wal-Mart, Chase, GE and we continue to expand on the client base. So from our profile and Tier 1, Toys R Us, they're folks that have been around several years for us. Our Tier 1 base is very well known. We're actually starting to realize benefit from the brand, from our technology. People know who we are, what we do, and what we've provided over the years. It's very easy to go into another Tier 1 retailer, and when you say Wal-Mart's our customer or Target's my customer, Toys R Us is our customer, you don't really have to prove yourself. Most recently, I think last year, we made an announcement with Motel 6. We've started to see development in those areas with regard to other hospitality areas because I did several interviews, that it's kind of a sticker of approval that you've done a flagged named motel system that they recognize. Most recently, one of our salespeople attended one of the trade shows, same show we were at a couple years ago. We couldn't get an appointment with any of the main chains. This year, very different story. It led with, "Oh, you guys did Motel 6. We need to talk." So it's really something called crossing the chasm. You get the early adopters who then say, "Well, I'll take a risk because I want to be the leader," and then you have the early adopters that go and then the majority moves in on the curve, so that's where we are on hospitality. So our Tier 1 client base is still growing every day and there was a third one. Robert, what was the middle one I missed?

Sorry, I forgot. The only other thing -- I wanted to find out with the hardware manufacturers, are the companies they're going to be going on. Obviously, Tier 1, are they national, international, opportunities international? Do we have any problems to worry about?

That's it, thank you for reminding me. Yes, exactly. So we're not -- one of the things that changed years ago for us, we moved away from the ABC liquor store down the street. Now effectively with this new agreement, they can buy our software through the hardware manufacturer. We won't have any overhead on that. It'll just be a software license, so that moves us into a space we -- we'll let somebody else service that. The reason we signed the agreement is every time I go to a Tier 1, I got to reach back out to one of the hardware guys because we want to provide a solution. I don't just want to say here's my software license and go away. I want to be a solution. When they need something fixed, I want to be the place they call, so that's what this is about. These are about the Tier 1 guys. It's an international company. All the companies we're talking to are like that are international. We're not trying to sell a license to someone that's going to cost us $100,000 to integrate with and result in $20,000 in revenue. That's not what we're doing. All the people that we know are international-level companies. They sell hardware all over the world and though I mentioned exportability on the buoy system, we've also applied with our attorneys for exportability on our software on reading driver's license. Obviously in the international space, we would have to add additional reading capabilities, as a lot of countries – well obviously, countries outside the U.S. don't have U.S. driver's licenses, so we'll look for exportability on both the driver's licenses as well as buoys.

Our next question is coming from the line of Steve Rudd [ph] with USIP. Please state your question.

You mentioned that you did a shelf registration. Could you give us an idea of what the earliest you think you would do an issuance based on that and I think you mentioned it's up to $25 million -- I haven't looked at it -- but give us an idea of what sort of size you might have in mind?

Yes, absolutely. The shelf actually was put in place, a lesson that we learned after a stock bump several years ago from an underwear bomber where our stock traded 10 million shares and we jumped over $4 a share. We put -- we at the merger, Nelson, our Chairman, when he was CEO, put that in place so that if we had another stock bump like that that if we wanted to take some money off and go do some other things like acquisitions, it would be in place. We currently don't have any plans in place to use that shelf. It was kind of a -- it was put in place in case we did decide to do a raise, whether it be an acquisition or growth or something like that, but right now we currently do not have a plan in place to exercise it. It will expire next year if we don't. We would intent to extend that if that were the case and we haven't used it. But right now we have no current plans to use the shelf.

Our last question is a follow-up from Amy Norflus with Neuberger Berman. Please state your question.

Can you talk about what the state and local authorities are doing with regards to cell phones and capturing data and give us some idea of the revenue model and what to expect and when a rollout and all that stuff?

Sure. So the state and local market for us has been a -- we've been trying to figure out how to penetrate that space. What we came up with was what I was discussing earlier about the cell phone application that state and local could get in and buy our system. The challenges in the federal space, a base will spend $300,000 to $500,000 initially to get a large capital expenditure to buy hardware. That's hard for state and local, if not impossible. So we developed the cell phone application to do that. It's not quite where we want it to be yet. As we get it more solid, we will start to do that, use cell apps more often. We have several state and local law enforcement agencies that actively participate. We can do all that on our current handheld readers. We just want to make it less capital intensive upfront for state and local. We think that will open up that market space for us. So for that there is a lot of sworn officers out there, we will continue to try and develop that market space but we still have a ways to go on development to get that product as sound as we want it because we want it like our other products. We don't want people fumbling and trying to figure out how to use it. It has to be a solid product when we deploy it

Got you. All right, can I ask one more or we're out of time?

Absolutely, go ahead.

With regards to the government business, can you give us any update with what's happening, budgets and if there is any money left and what you're seeing over there?

Yes, I think you saw -- actually we saw the reverse of what's going on here in Washington, D.C., though I call this home, last quarter we did $1.1 million in Hawaii and you saw government ID went up as well as bookings. We're not experiencing those issues. Obviously, the larger companies would. But, making a change of $1 million or $2 million isn't going to save the budget. So we haven't really seen a negative effect and, frankly, we don't really get that from any of our clients that, you know, that we're losing money, we've got to cut purchases. We haven't experienced that.

So actually are you seeing an uptick? Do you see that people have extra budget -- I mean, there's extra money on the budget that they can spend?

They will never admit to they have extra money, but it's end of fiscal year, and we're going to try and find every bit that they want to spend quickly.

We do have a follow-up question coming from the line of Steve Rudd [ph] with USIP. Please state your question.

Sure, so our backlog was $918,000 at June 30. New bookings for the quarter were up 40%. We're 30 days forward from there. What do we look like right now?

Yes, unfortunately, we wouldn't disclose anything on the call that we haven't disclosed already. So we don't have any reason to believe we're going to have a bad quarter or a good quarter and we haven't disclosed anything. As soon as we have anything material, obviously we would put out a release.

Okay, all right. The part that I didn't like is you said we don't have any reason to believe we'll have a good quarter. The part of not believing you'll have a bad quarter I can get. But I think -- let me just put it this way. We have nothing that tells us that things are worse than what we just saw.

Exactly. I mean, when I say with a bad quarter or good quarter, if we had something that slipped dramatically, if we had -- the part that gets me excited when I put out press releases that have $1.1 million in them. So obviously on the call I wouldn't be able to disclose if I had a -- this wouldn't constitute a releasable event, is my conference call as we discovered last quarter.

There are no further questions at this time. I'll now turn the floor back over to Steve Williams for closing remarks.

Thank you. Well, thank you everyone for joining. If you have any questions, please feel free to call us or call IRG directly and we look forward to the next quarter's conference call. Thank you.

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