Greetings, and welcome to, the Intellicheck Q4 and 2016 Year End Earnings Call. At this time, all participants are in a listen-only mode. A 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, Dr. Bill Roof, Chief Executive Officer for Intellicheck. Thank you, Dr. Roof. You may begin.

Thank you for joining us today for the 2016 fourth quarter and fiscal year 2016 conference call to discuss Intellicheck Mobilisa’s results for the fiscal quarter ending December 31, 2016 and for the fiscal year 2016. In a moment, Intellicheck’s CEO, Dr. Bill Roof, will lead today’s call. Following management’s prepared remarks, we will open up the call for questions. Before I turn the call over to Dr. Roof, 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, 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 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’re inherently susceptible to uncertainty and changes in circumstances. And the Company undertakes no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements whether resulting from 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 SEC. Management will use financial terms such as EBITDA in today’s call. Please refer to the Company’s press release for further definition of the context of this term. I would now like to introduce Dr. Bill Roof, Intellicheck Mobilisa’s Chief Executive Officer. Dr. Roof?

2016 was a major transition year for Intellicheck. We’ve continued our aggressive Company reorganization and branding initiatives, purchased nearly 1 million shares of Intellicheck stock from a former CEO and closed the Port Towns and office, moving the corporate headquarters back to Jericho, New York. In 2016, we designed, developed and released new products for our retail market, identified and secured pilot agreements in our new market segments and began pilot planning and implementations with our clients. In 2016, we hired a new Vice President of Sales who sourced, hired and trained a new dynamic sales team, and we hired a new Vice President of Engineering to lead our product development efforts. In 2016, we also identified new markets for existing products and identified new government clients who need our current products. We work towards and achieve partnership with NLETS, the National Law & Enforcement Telecommunication System whereby we can access all state law enforcement networks from a single secure location. The NLETS partnership is critical to our law and enforcement and defense markets, especially considering worldwide concerns pertaining to hacking and cyber security. Every day we continue to see the fallout from much publicized breaches and cyber security; hacking by hassle organizations and an overall perception that data safeguards are not fully capable of identifying and stopping cyber attacks. This has caused within our markets a heightened awareness of vulnerabilities and the need for stronger measures to protect personal information. The cyber security related events of recent months give us a strong belief that our technology solutions are needed to help companies across our market verticals address costly challenges at this critical time. In addition to cyber attacks against our government data sources, we see multiple incidents of widespread hacking and comprise or personal data having dramatic and expensive impact on a variety of high profile financial institutions and iconic brands. Intrusions and fraud impacting profitability and consumer confidence for these businesses continues to heighten market concerns of network and data security, engineering processes and physical security of facilities. The results understandably include new approaches to data protection by our clients. I will provide more detail about the effects of our clients elevated cyber security efforts after we hear from our Chief Financial Officer, Bill White. Bill will now review financial results for the quarter ending December 31, 2016 and the fiscal year ending at same date. Bill?

Thank you, Bill, and a good day, to our shareholders, guests and listeners. I would like to discuss some of the financial information for the fourth quarter and the fiscal year ending December 31, 2016. We anticipate that our Form 10-K will be filed with the SEC this afternoon as well. I’ll begin with our fourth quarter results. Revenue for the fourth quarter ending December 31, 2016 was $733,633. The Company’s booked orders for the three months ending December 31, 2016 was approximately $521,000, 71% of our bookings were attributable to our commercial products. Gross profit, as a percentage of revenue, was 80% for the three months ending December 31, 2016. Operating expenses, which consists of selling, general and administrative and research and development expense, was $1,697,000 for the three months ending December 31, 2016. Adjusted EBITDA was a loss of $852,000 for the quarter and net loss for the three months ending December 31, 2016 was $1,550,000 or $0.10 per diluted share. Turning now to our full year results. Revenue for the full year ending December 31, 2016 was $3,839,000. Our gross profit, as a percentage of revenue, was 80% for the year ending December 31, 2016. Operating expenses for the fiscal year 2016 again which consists of selling G&A and research and development expenses, amounted to $8,819,000 for the full year. Adjusted EBITDA was a loss of $4,379,000 for fiscal 2016, and the Company had a net loss for the fiscal year of $5,735,000. Bookings for the year ending December 31, 2016 was $3,672,000 and our backlog at 12/31/2016 was $133,000. I’d like to take a moment to comment on some additional financial metrics. In 2016, interest and other income was insignificant. At December 31, 2016, the Company had cash and cash equivalents of $3.1 million, working capital…

Thank you, Bill. We live in a dynamic world of cyber threats that our clients must address. Failure to do so could have devastating results for their businesses and stakeholders. You may recall that in 2015 and into 2016, our retail and hospitality clients were involved in the transition from the old style chipless credit cards to the EuroPay, MasterCard and Visa or E&B chips credit card system. This was a tremendous drain on the information technology resources and budgets, resulting in lengthened sales cycles in the retail and hospitality verticals. Likewise, in 2016, our clients again diverted their information technology resources to address the threat of hacking into personal information held by the client, specifically information pertaining to store credit cardholders, customer loyalty members and other services provided by retailers that require collecting and storing personal information. In previous addresses to our shareholders, I focused on five main areas and talked about progress in each area; those being resources, markets, products, processes and intellectual property. Again, we will address each in time. Resources, we have evolved the Company to a SaaS business model as evidenced by our increases in gross margins, and we believe our key resources are now in place and focused on revenue generation. We are fortunate to be agile, enabling us to respond to client’s request for product derivatives that bolster our offerings and provide real, measurable value to our clients. NLETS is making significant strides and I am excited to report that we are on schedule to finish our endless implementation as we complete rigorous security audit requirements. NLETS is a national law enforcement telecommunication system, owned and managed by law enforcement representatives of all states in U.S. territories; with the charter to process and share law enforcement data among the states and territories. We…

It's actually Alex Silverman. The 16 law enforcement agencies that you say are signed up and ready for Nlets. What do they represent in terms of annual revenue?

Right now it appears that it depends on how many licenses they buy, Alex. And that depends on which parts of the police departments they decide to outfit with Law ID. Some police departments decide to go with their mobile data terminals that are in the cars, they won’t be issuing. But as far as we can tell, this appears to look like something about $0.5 million a year with potential if they rollout throughout the departments.

So, all 16, if they rollout through all departments, is about $0.5 million a year?

That’s what it appears to be right now.

Secondly, within the quarter, the $733,000, how much of that was recurring revenue?

About 75%, Alex.

According to last quarter’s conference call, 75% of the $2 million was also recurring. So what changed?

There’s less military sales.

So they were contracts that were cancelled?

No they are not contracts that were cancelled. There is less military sales this quarter than last quarter.

When we have a military sale that comes along with an annual maintenance fee; and when the maintenance fees are paid for the year and if we don’t have any new sales then we don’t have the recurring maintenance fees associated with it.

So recurring is really just for one year?

It’s signed up at the end of the year, that’s the way the defense budget works. Typically, we’ll resign existing customers, expect we haven’t had any drop off, and they will get a one year maintenance fee. And the maintenance is put into categories you have a platinum maintenance, a gold maintenance and so forth. If we don’t have any new sales, then the recurring portion of that, which would be the annual maintenance fees, will show up.

How much of that $733,000 was SaaS?

I don’t have that number broken out. I can get back to you on that, Alex.

Going forward, that would be a very helpful number since Bill Roof mentioned that the focus for this Company is the SaaS business?

Yes, we’ll make sure that happens.

Our next question comes from the line of Anthony Marchese, a Private Investor. Please proceed with your question.

First of all, Bill, I think you do a merciful job in honesty of presenting the Company, so I appreciate the level of detail. I know it takes more time, but I think that shareholders and potential shareholders will get a tremendous overview of the Company. So I do appreciate that. Two questions, first with respect to breakeven, and I realized you don’t know exactly where the revenue will come from. But what level of revenue would that imply whether its fourth quarter or first quarter. What levels of revenue is implied by net income or EBITDA breakeven?

About $2.2 million, Tony, per quarter on a quarterly basis.

So that would be -- obviously, I can do the math, almost $9 million. So you need about $9 million -- it implies about $9 million run rate in order to be -- annual run rate to be breakeven?

Yes, depending on the margins, but assuming the margins that we're going to maintain above that, yes.

So that would be, I guess, a significant -- almost 2.5 times that you did this year. Am I correct? So that or two times what you did this year, so that would be fairly significant. Second question I have for you is, and I think it goes to Alex Silverman’s point, 16 police departments, that’s tremendous amount of activity on-boarding, so on and so forth. It sounds like you get a lot of bank for your buck when you sell retail clients or bank. Could you just go through with us in terms of where do you see the greatest amount of bank for the buck, so to speak, and maybe I am saying it incorrectly. But I think you know what I'm saying. In other words it takes a tremendous amount of effort to sell 16 deployed police departments. With one, it sounds to me and may be you can go through, with one bank one retailer, you have significantly more than $500,000 per year. So, do you understand where I'm going with this?

Absolutely, Anthony. Each one of our verticals had its own unique sales cycles and own unique sales challenges. And so I'll start with the police departments. Before we were an Nlets rep, we had to go police department by police department. Now that we're an Nlets partner, we can get to the state switch and to the police departments through their state Nlets representative; and so essentially Nlets will function as a channel partner for us. It does take a while to rollout to get the first connection to each state. But after that, we expect it to be very quick. And I said that in the call here. Its different than retail. Retail has its own issues, and you’ve heard them. We're in five different security audits, and they take a long time. They have come about recently. And we can get to a bank and we can get to a financial institution, and they can say we love you and we can go competitive and win. But then they've got to roll it out to their -- help us roll it out to their clients, their clients are each different. So if we go to AAA bank and they’ve got 1,000 retailers; each one is going to be different to get installed and trained; each one has its own IT section; they have priorities; they’re doing other things. And so it's just as difficult but in a different way to rollout to retail as it is to police. We think retail is a bigger market. We like the diversification that law enforcement gives us because that law enforcement market helps us get into federal government budget, as well as state and municipal budgets, very different than your commercial world in retail and Age ID. I hope I answered your question with that.

It just seems to me, you take a credit card processor or like even a customer like a Capital One. I mean they have thousands of accounts, and I realized that each one has its own intricacies. But once you're in the system, now you potentially are exposed to significant numbers of clients whereas it seems like with -- and again I’m not suggesting you shouldn’t be in police area, and maybe I’m using them as the whipping boy. But all I’m saying is that, it seems like once you’re into a retailer or rather a bank who then can in essence vouch for you with their retailers that yes, it may take more time, and you’re dealing with more nuances of each retail. But the market is significantly, it seems to me, significantly larger in the retail space than for example in the law enforcement space. And more importantly, in my opinion, a retailer sees the clear economic benefit of using your product; they can save money; they can go to their superiors and say look I can save ex-amount of dollars here. So I’m not so sure that in some of the other verticals, the ROI, if you will, is as clear. So that’s what I am saying.

I think that was really well put, Tony. And to be answer to you, right. The retail vertical is going to be big, we expect. And so, when I talk about the security audits, we’re having three types, Nlets is doing one, so that’s a government or pseudo government operation. We are getting audited by individual retailers who are very, very large and we’re getting audited by financial institutions. The financial institutions, once we pass their audit then they can channel us after the retailers. So we like those types of security audits, because we know that once we pass that, they can go to the retailer and say; okay, we’ve checked them; their data secure; they’re not going to be hacked; when they’re on our network and obviously going to cut backdoor into our network; and they’re free to go sell it. We agree with you. We think that using a financial institution as a channel partner after we passed their security audits, is really the top priority to go. And there is an ROI. We have enough data over the last year to show some tremendous ROIs in retail and banking. The ROI and law enforcement is they just stop a bad guy from getting on to a facility or did you save an officer or citizens like, because you had information in your hand in five seconds instead of waiting five minutes to go back to your car and call dispatch. So the ROIs are very hard to measure in the law enforcement defense world, but they’re clearly obvious to the client. And that’s why they’re interested in our product.

Our next question comes from the line of Jim Kennedy from Marathon Capital. Please proceed with your question.

Question on your trials for online fraud ID. Can you talk a little bit more about that? Is that process, have you completed some trials there? Is that part of the auditing process? What have been the results? Can you talk a little bit more about what you’re doing online?

We can talk about that, Jim. And actually, I’m going to ask Paul to jump in here, our VP of Sales. Paul?

Hi Jim, thanks Bill. On the online ID pilot, the first pilot will go live the beginning of -- end of April beginning of May. There is a specific amount of development that has to occur, and that you have a card not present transaction with a remote user. So we’ve shored up the authentication process and are happy to go live with one of these major banks that we’ve been discussing here at the end of April beginning of May.

When you talk about a major bank, so that would, that trial would be in conjunction with a retailer, or retailers?

That’s correct. The initial approach is one retailer. But given a short period following that we should move that to many retailers just for that one institution and then also carried over to the retailers’ direct market and also the financial services direct market.

So have there been any, what we would call trials, yet in terms of trying to determine the effectiveness of the technology online?

No, we’ll know that as this product begins, probably end of the May, we’ll have hard statistics on fraud savings.

So they think what within about a 30 day period, they’ll have enough knowledge to determine whether or not it works?

We’ll have initial evidence end of May, that lifecycle for our credit card payment or process, specifically 60 to 90 days. But we’ll see counterfeit IDs fake credentials being presented at that time and we can associate to preliminary numbers in the bank.

We have a follow-up question from the line of Anthony Marchese. Please proceed with your question.

Thanks for the update on the patent infringement. You mentioned that you were directed to sit down, and I guess my question two folds; one, how long ago you directed to do that; and secondly, just because you direct both parties. Isn’t that something mean that you’ve actually sat down or that both parties are anxious to sit down. Can you just potentially give us a little more clarity on timing and way you are? And I’m not suggesting anything more specific than just an overview.

We have discussion recently, and we expect to have more discussions down the road. So as recently as last week, we sat down and met with one of the dependence. So we’ll keep everybody posted as we have progress, as we can.

There are no further questions in the queue. I’d like to hand the call back over to management for closing comments.

Thank you, everyone for joining our call today. We’ve received notice that apparently part of the call was very fuzzy, we apologize for the electronics here. Not sure what caused that. But we hope you were able to gleam the information from the fuzzy phone system. We appreciate all the support that we have from our shareholders. We are working very hard to bring some of this revenue back in that have been pushed out due to security audits and other issues with IT teams not being available with our customers, and with federal budgets. Lot of this hit us at the same time. I want to reiterate the good word is that we haven’t lost any business. In fact our pipeline is bigger than it was three months ago and six months ago, and more solid. And we believe that we’re still on track for even a positive end of this year early 2018 due to some of the delays we had experienced over the last quarter or so. We appreciate you joining us today and we look forward to speaking with you soon. Thank you.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines, at this time. And have a wonderful day.