Greetings, and welcome to the Q1 2013 earnings call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Enrique Briz, DGI for Intellicheck Mobilisa. Thank you, Mr. Briz, you may begin.

Thank you, operator. Good morning, and welcome everyone. Thank you for joining us today for our 2013 first quarter conference call to discuss Intellicheck Mobilisa's results for the fiscal quarter ending March 31, 2013, 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 members of the Intellicheck Mobilisa management team who'll 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 defined 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 like to introduce Dr. Nelson Ludlow, Intellicheck Mobilisa's Chief Executive Officer. Dr. Ludlow?

Thanks, Enrique. Hello to our shareholders and investors. While we recently had a shareholders called just 6 weeks ago, this allows us to update you and provide an opportunity to speak with all of you directly and answer questions. First, let me introduce who I have with me on the call today. Our Chairman, Admiral Mike Malone, is on the call. Director Guy Smith and Woody McGee are also on the call. And the management team of Bill White, our CFO; Bonnie Ludlow, Senior Vice President; and Russ Embry, our Chief Technology Officer are also joining me. So the outline for today's call, let's one, present the financials; two, I want to discuss and talk about our new products and then; three, allow an opportunity for your questions. So let's jump into it. The revenue for Q1 was above $1.6 million, which was below the Q1 of 2012 last year of about $2.7 million. But above about 200% growth from the previous quarter Q4, which is only 528k. So we've reduced the loss on adjusted EBITDA by over $1 million from $1.68 million in Q4 last year to about 648 -- 646k adjusted EBITDA loss in Q1. P&L was about 921k loss or $0.03 EPS compared to $0.07 EPS loss just 1 quarter before. So in Q1 -- let's talk about the things that happened. In early January, we were awarded a contract by a major U.S. retail chain to deploy our ID-Check verification software, which we put out in the press release. Later in the month, we successfully completed the installation of an enterprise wireless project providing high-speed bandwidth to schools and libraries in the rural Spokane area. We're currently working on a number of wireless enterprise projects that are 3x to 4x larger in scope than that project…

Thank you, Nelson, 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 first quarter ending March 31, 2013, that we released this morning. We anticipate that our quarterly report on Form 10-Q will be filed with the SEC this afternoon. Revenues for our first quarter ended March 31, 2013, were $1,630,000 compared with $2,710,000 for the previous year. Identity system revenues decreased to $1,360,000 compared to $1,930,000 and wireless revenues decreased to $270,000 compared to $780,000 last year. In the fourth quarter of 2012, the company wrote off a receivable in the amount of $670,000 related to a wireless R&D project with the Navy. Because we received information that made it -- the collection uncertain, the company still believes that it is a valid receivable but we did write it off in Q4. Without taking into account this write-off, revenues for our first quarter ended March 31, 2013, were up $430,000 compared to our fourth quarter ended December 31, 2012. Identity system revenues increased $160,000 and wireless revenues increased $270,000 compared to fourth quarter last year. Booked orders for the 3 months ending March 31, 2013, were up $280,000 to approximately $930,000 compared to $650,000 in the first quarter of 2012. Our gross profit for the quarter was $890,000 or 55% of revenues compared to $1,960,000 or 72% of revenues for the first quarter of 2012. This decrease in percentage is partly due to lower margins on the 2013 wireless revenue and a higher enterprise license sales in 2012, which have very high margins. Operating expenses, which consist of selling, general and administrative; research and development expenses decreased $127,000 to $1,815,000 for the 3 months ending March 31, 2013, or $1,942,000…

Thank you, Bill. As several of you know, we don't give financial projections for upcoming quarters. However, over the next few weeks and months, as we formally launch our new products, you'll see us issue press releases describing the new products, their capabilities and the business models associated with them. Our goal is to build into market products that people will say just as that TV reporter said about our products a couple of weeks ago, "This is awesome, and this could actually save lives." Okay, let's take questions. We'll do our best to answer any questions that people may have. [Operator Instructions] So let's begin. Operator?

[Operator Instructions] Our first question comes from the line of Alex Iver, who's a private investor.

Alex Iver, a private investor. The question is, how far are you in the development process regarding the app, and how do you plan on marketing the app to individuals and small businesses like the bars and security companies and police departments?

Alex, this is Nelson Ludlow. Thank you, that's a very good question. As you can see, we're launching 6 new products and in reality, I mean, it could be a cool working product, because there's a step obviously, which is what you're rightly pointing out from going from a nice working software to revenue generating product. So let's talk about the 2 iPhone applications. The first one that we intend to launch is our -- a bar application, and that's one of the ones that was demonstrated on the television. The reason that we did not go after this strongly before is here was a model prior to the iPhone. It was -- we would sell a piece of hardware and most bars and restaurants are not in any chain. So you'd have to have direct sales people literally contacting bars, going almost from location to location, location, trying to sell, in reality, a low-dollar product because they probably have some low price point, pick one, $1,000, $500. And so there's not a lot of room and it would be very expensive for someone in reality to market them. But with the change in how applications are working now, most people have smartphones. Our software works on Android, it works on an iPhone. So now we can sell through known channels, such as iTunes or websites, and to market to national organizations such as restaurant owners and bar associations and alcohol distributors and work with them and market with the larger-named groups and then, that doesn't require a salesperson to go at the location to location. It's simply just downloading an app like all of us are used to. The second thing is, it gives us better customer support. Doing software as a service, if we need to do an update because Colorado changes its format, instead of us having to go to locations and update equipment such as we've had to do on some of our military business, we can actually just change it on the server end and then, it will notify you on your cellphone there's an update. It's as simple as just seeing an update. So that helps considerably. And then the best part of it is we're emphasizing a reoccurring revenue stream. And in the past, we would sell equipment, we would sell some software and then, we'd get a much lower reoccurring revenue stream. We're not -- this will be a different approach. It will be a monthly subscription. We're holding off in giving the exact price at this time until we launch. But it will help us forecast better to shareholders where our revenue is at and provide better customer service and it's just a, frankly, easier product to sell in the market.

Our next question comes from the line of Walter Schenker with MAZ Partners.

Whomever, but it's probably Nelson, in some of the prior meetings and calls, you indicated the company is making progress toward actually generating some revenues from some of the business relationships, which were announced last year and which, for whatever reason, had not yet been able to really contribute yet. Where are we now or how are we progressing with some of those opportunities?

Walter, thank you. This is Nelson. Back in July, we announced via press release, a partnership with a bar code manufacturer -- hardware manufacturer. That has not generated revenue to date, and the issue is that although we have the agreement, ultimately, we have to get our products into their product lines so that they can distribute it. It's the right thing to do. We're somewhat at the mercy of the large distributor, and we're still working that. I think, as I've said in previous calls, I think it will generate some revenue. I don't think it's a huge revenue generator, but it is some and we're continuing to work that and looking at methods to actually generate our own product into their product line.

Our next question comes from the line of Amy Norflus with Neuberger Berman.

Can you expand a little bit more and help us understand the opportunities, the implementation, the competition, the challenges on some of these new products, when they'll actually be released, potential market size? Looking at our hands around it because there are many apps that have 0 revenue and there are many apps that generate a lot of revenue. And are you in touch with the right people at the right location? So -- do you need to go to a specific cop or do you have to go a police force, do you have to LaGuardia Airport if you have go to the TSA? Who are you speaking with to get some of these apps approved and what is the process? Sorry for the long question.

No, Amy, thank you. This is Nelson. That's an excellent question. There are different markets, so let me address different ones. Let's first start off with the government. Good and bad with the government. The difficulty of the process, of course, is it's 2013, well after 9/11. What we're focusing on is TWIC card readers. The TWIC card, we've had the product out since 2008, and we got into some big-name ports, but the government has yet required TWIC cards for all of the workers, it did not require TWIC card readers. And so it's a gap in security, clearly. It's gone through a lot of discussion, and what I'm very encouraged about is recently, they've made some steps forward. One was that they, in November, sent out this Notice of Proposed Rulemaking. And this is what we and TSA intend to require. It is not voted into law yet, but we've gone to the point of this is actually the details of what we're going to require our chip operators and our ports. So the good news is Group A has 532 facilities in 38 vessels that they're going to require to have a TWIC card reader. They're going to give these guys 2 years to do that. If you do the math, estimating the size, to 10 readers in some of these facilities, that's a fairly big number. Then they have a Group B and C, which is the other ones where they're recommending and not requiring it. There is a budget there. Last year, in Homeland Security grants, ports received over $2 billion of grant money for a variety of things. To date, $151 million has been spent on TWIC card programs given to the ports. Now most of that was for card generation or teaching people…

Our next question comes from the line of Ernest Casanegro, who is a private investor.

Maybe you can explain how we can -- where do you see the greatest opportunity for us to ramp up our sales and get to some kind of a point where we're breakeven, sometime this year? And these new applications that we're making, I guess, mobile and portable, let's say, you have a typical restaurant or bar that might be scanning driver's licenses or even a commercial small store where there are several cash registers. Would they have one centralized account where each person, if they're using their own individual iPhone or their smartphone, would have to log into that system and all that information will be downloaded to a central account system? Is that the way it's working? So that anybody that's working for a particular facility could use their own smartphone to collect this information for the benefit of the owner of that operation? Is that how it's working? And what kind of real revenue stream do we -- are we trying to approach in our first year out? Just to see how this thing is working and how to breakeven as fast as possible?

Ernie, it's Nelson. Let -- okay, let's -- we'll talk about the restaurant, first of all. That's going to be one of the, probably, lower revenue streams. But what I like about it is it's probably one of the lowest costs from our point of view, of having to put it into sales. We'll work at some trade shows, we'll work with national retail associations, but we do not have to do the expensive, long process of building location to location. When we sell to the retailers, here's how the process works. We get in, we demonstrate some ROI. They're usually somewhat cautious because they're large companies. They want to talk to other people who have used it, and then, they say, "Fine. Let's get our IT department involved. The next step is they usually say, "We'd like to buy X number." They do some internal testing and then they tend to roll out to 30 stores for example. That's usually, again, not a very quick process. On average, the ones I've seen took 6 to 9 months while they're testing it out at these stores. And then, they say, "Okay, we would like to implement this more national-wide." From getting the end of those large retailers, we're talking almost 18 months. It's somewhat predictable because I can see how many we're in pilot stage and where we're at. But it's not quick. The mobile and wireless space, everything's shifting to that. It's quicker, people are used to it, we want to do that. So I think this is -- it will have a quicker sales cycle. But we'll be able to give you more specific revenues as we get into it. So right now it's very difficult to predict revenue of our old reading [ph] business. Here's why. Let's say we're working on a major retailer. Is that major retailer going to close a deal in June or is it going to close in July? We can't predict with certainty. I mean, we think we know how it's going to work out, but something can flood the canoe and that can have a big effect if we shift to this more reoccurring revenue stream and we have existing customers and we do a good job of innovating and making these products, which we're good at; taking care of the customers that we have, which we're good at, our reoccurring revenue stream is a better approach. And then, can give shareholders a better indication of where we are at revenue as we continue to add. And similar to Netflix, as they keep adding more and more clients, they can tell that to shareholders. It's easier to do the math. We're simplifying how to buy the product and we're simplifying the business model around it.

Our next question comes from the line of Amy Norflus with Neuberger Berman.

Nelson, can you give us an idea of what competition is out there and what you're seeing with regard to -- I mean, like, how proprietary is the stuff that you have? I mean, how many other people can read driver's licenses? What makes your product better than everyone else that's out there?

Good, okay. Okay, yes and I've said before -- sorry, Amy. Okay. so let's talk about that. There's really two, good different ways of reading a driver's license. You can take an image of it and you can try to optical-character read it, and there are other companies that do that. The problem with that is sometimes, it makes mistakes. It thinks it's reading the letter E but really, it's the letter F. And it makes spelling mistakes. It's also difficult because the names can be in lots of different fonts and different formats and locations. And what we do is we read a barcode, we read the magnetic stripe. And inherent into the whole concept of the barcode is error-correcting, accurate information. So if people have seen a crummy barcode that's kind of rubbed off and there's lots of gaps in it, the cool part about that is, there's still enough information to be able to validate that I have the information correct. So when we get it, we get it right the first time. And we can do it until all the back end of it -- we have 13 different patents right now in the U.S., in Europe and in Canada protecting that. So there isn't a lot of legal competitors in that space. Now let's talk about the bar applications, particularly. In the past, we have not focused on bar applications much because it was a market that we didn't think we could get into. Well, now via smartphones applications, we can. So there are a few small people that are probably violating our patents and have made a small amount of revenue to try to sell very low end because that's really all the bars are going to pay instead of equipment. The cool thing about us is we do it through the iPhone, we do it through a smartphone. There's nobody else, to our knowledge, that is on a cellphone that is reading the barcode through the camera, converting it to a barcode and then parsing it as we are pulling the information with it. And that's also what we intend to do for the law enforcement. Same thing, just with a camera on phone, read that barcode and process it. So we don't believe there's anybody doing that approach and that's frankly because of our patent.

Our next question comes from the line of Joe Bernini, who is a private investor.

I just have a couple of questions. Regarding the firearm background check process. I understand it's somewhat of a manual process, and I don't know if you've had any advances in that area? Also tying that in with the TSA and government databases. And one last question, I noticed you've mentioned last time that you've restricted some of the trading of your insiders until the SEC investigation was finalized or at least at a timeframe, do you have a timeframe before that when that expires?

Joe, thank you. Okay, let's talk first about the firearm background process. We have actually already developed an in-house demonstration of how to do that. And so we'd fill out -- what you do is you scan the driver's license, it would pull up the government form and electronically format it and be able to roll it up to the Brady Center, at the FBI Alcohol, Tobacco, Firearms, which is a joint group that does that processing for the government. That's not 1 of the 6 products we're launching. We have it technically ready to go, and we're watching what the government is going to do in this direction. We're not trying to get into this argument from either side of it politically, but when the government decides how they want to do this, and do they want go with less background checks and which direction they're going to go, we have technology that quickly, we can just make the demonstration into a working product for them. So we've done the first step and we are waiting to do the second step until they roll out, until they make a decision, rather. In the interim, we're going to go with our other 6 products and start launching them out. Regarding insider, we are still currently -- have our directors and officers in a blackout, and we're discussing removing that at some point because and, obviously, you can't stay in that position forever. And that -- we realized what -- our intention is not to stay in that forever. It doesn't make sense to the shareholders. It doesn't make sense to the directors and officers themselves. We just decided to do that for a period of time, and we have not come out of that yet. But the only guidance, I guess, I'd say on that is we don't intend to stay in it forever.

Our next question comes from the line of Ernest Casanegro, who is a private investor.

Nelson, I just wanted to follow up, I mean, we've got some great press, we've got some great product. It's just amazing that we can't get the government to get its act together and see that this product can work. What can you do to take the products that we have online that you're creating for the smartphone to go viral because, I mean, it's an app right now and what kind of publicity do you need? What kind of market do you need to get not only retail but government, local government, to find out that we have applications that can identify people as well as check out credit cards. What are you doing about that, and internally, where are we -- are we still in all the ports and airbases and the military bases that we've had over the last couple of years? What are we doing about servicing them? What's going on with that?

Okay, I'm writing that down. Okay, first of all, we are emphasizing less on the federal government. Now while we mentioned these 2 TWIC card reader, the federal government, they have a difficult task. Their view is they have to get it right before implementing it. I think the previous president said, "Parents only have to get it right once, and we have to get it right all the time." So the view, typically, from the federal government is slow and I think we'd all agree that it is slow. I mean, here we are in 2013 talking about these port readers. Nonetheless, we've already put an investment -- this is a marathon and we're here on the last few miles of it. So I believe that the government contention could really feel the pressure as well. They got to move out and that's why they put out that Rulemaking and we are right there at the front of the pack on this. So we're going to continue that. But we can't wait for that to start bringing in -- getting our products out there. Local governments, local police departments, these products in the retail space and in the bars, they're not required. They're not restricted by that. They do have the potential to go viral, and you got to get it to a tipping point. So we need to continue the publicity. We need to make the product a lower dollar, more reoccurring, less -- easier entry point. In the past, I've been with our salespeople and I've walked in to some retailers and we've said, here, buy this somewhat medium-priced software to enter but they also had to buy some special 2D barcode scanners. They said, we like your software, but that's a large outlay of CapEx cost…

Our next question comes from the line of Amy Norflus with Neuberger Berman.

Three questions. One, how do we know when you're out of the blackout from the buyback, I don't think that was addressed. Number two, can you talk about the economics of the TWIC reader and if it does pass, what is it that we sell in and how profitable it could become? And third, can you talk about the privacy issues where people are using this software on personal cellphones? Is there a privacy issue, I mean, when it -- now you're capturing sensitive data on somebody's personal hand phone that they're using?

Okay. Out of the blackout period, I don't think I have a good answer on that. I think what we'll do is the next conference call, we'll notify you and be able to help you. I don't know if we can maybe issue an 8-K. But clearly, you guys deserve to know that, and we have not come out of it, and so we'll have to figure out -- let me consult with counsel and find out a way that we can let you know. But as a shareholder, you have the right to know, I believe, and let's figure out a way we can let you know that. And we'll get that resolved by the next conference call. On this TWIC card reader. It's not going to be a huge list and we're -- we were one of the first on the previous ICE List for the mobile readers, and I think this could be a very profitable program, very similar to our military base we've seen in the past. On the privacy issues, Amy, that's a very good question. Let me -- let's start with the bar application. What we do is we record the name, we record the date and time and information that we scan, we also record an identifying feature of the card to demonstrate that, that card was presented, such as the driver's license identity number. What that allows is that if the Liquor Control Board comes in later and says, "Hey, I don't think you've scanned that person's card over there." This allows the bar owner to say, "No. I did and I have proof of that." What we are not collecting is address. We're not collecting the other information, height, weight and that type of stuff. It's not displayed on the screen,…

It seems there are no further questions at this time. I'd like to turn the floor back over for any closing comments.

Well thank you, everyone, for asking questions. They were good questions. We still have work to do, but we're making progress. And I'm very excited about these new products and the new business direction that we're heading. And we'll continue to keep you informed. Look forward to our press releases coming out on these new products, and we'll do a concerted effort to keep you informed of our progress along the way. Thank you for being on the call today.

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