Gar Jackson – Investor Relations William Roof – President and CEO Bill White – Chief Financial Officer

Greetings, and welcome to the Intellicheck Q1 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gar Jackson, Investor Relations. Thank you, Mr. Jackson, you may begin.

Thanks Michelle. Good afternoon, and thank you for joining us today to discuss Intellicheck's results for the fiscal first quarter ended March 31, 2017. Joining me on today's call are Dr. William Roof, Intellicheck's President and CEO; and Bill White, Intellicheck's Chief Financial Officer. Following their prepared remarks, we will open up the call for questions. Before we get started, 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 are 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 headings of Safe Harbor statement and Risk Factors listed from time to time in the company's filings with the Securities and Exchange Commission. Statements made on today's call are as of today, May 10, 2017. Management will use the financial term adjusted EBITDA in today's call. Please refer to the company's press release issued this afternoon for further definition, reconciliation and context for the use of this term. I will now introduce Dr. William Roof, Intellicheck's Chief Executive Officer. Dr. Roof?

Now turning to our first quarter results. Today, we will present corporate earnings information for the quarter ending March 31, 2017. About 6 weeks ago, we announced our 2016 financial results and articulated our expectations for 2017. We've included our belief that we would turn EBITDA positive in late 2017 or early 2018. We explained that our business pipeline continues to grow and that our revenues have been delayed by external factors. We also have stated that our revenue delays were just that, delays, and that we had not lost any forecasted business. I've defined the factors behind the revenue delays including numerous cybersecurity audits conducted by our clients and partners, and we passed with no major issues, and some important product enhancements our clients requested to help them fight fraud and comply with government regulations more effectively. We maintain our belief in our forecast that Intellicheck will turn EBITDA positive in late 2017 or early 2018 and we now believe that our outlook is even stronger than we communicated on our fourth quarter call. Feedback from our investors after our last earnings call was quite positive and it expressed appreciation for the level of detail presented during the call. Several investors asked that, on this call, I explain the significance of our partnerships with financial institutions and with inlets. I'll explain the importance of these 2 relationships later during this call. We will now Chief Financial Officer, Bill White, who will now review the financial results for the quarter ending March 31, 2017. Bill?

Thank you, Bill, 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, 2017, which we released a short while ago. We anticipate that our quarterly report on Form 10-Q will be filed with the SEC later today. I'll begin with our first quarter results. Revenue for the first quarter ending March 31, 2017 was $713,000 versus $951,000 for the same period last year. Our SaaS revenue was approximately $270,000 for Q1 2017, or almost double of what we had of SaaS revenue in Q1 of 2016 of $138,000. The company's booked orders for the three months ending March 31, 2017 was approximately $510,000 versus $1,134,000 in March 2016. We continue to maintain high gross profits with a gross profit percentage this quarter of 84.6% versus 82.8% for the quarter ending March 31, 2016. We remained focused on controlling expenses. Operating expenses, which consists of selling, G&A and research and development expense decreased by approximately 47% to $1,543,000 for the three months ending March 31, 2017 from $2,936,000 for the three months ending March 31, 2016, a $1,393,000 decrease. The company posted a 56% improvement in net loss to $937,000 for the three months ending March 31, 2017 compared to a net loss of $2,143,000 for the quarter ending March 31, 2016. Adjusted EBITDA for the quarter ending March 31, 2017 improved 58% to a negative $739,000 compared to a negative $1,744,000 in the quarter ending March 31, 2016. Interest and other income was negligible for the quarter ending March 31, 2017. I'd like to now focus on the company's liquidity and capital resources. As of March 31, 2017, the company had cash of $2,300,000, working capital, defined as current assets minus current liabilities, of $1.7 million, total assets of $13.6 million and stockholders' equity of $12.1 million. During the three months ending March 31, 2017, the company used cash of $789,000 compared to a net cash used of $1,879,000 for the same period last year. Net cash used in operating activities was $817,000 for the three months ending March 31, 2017 compared to $769,000 for the same period in 2016. Net cash provided by investing activities was $4,000 for the quarter compared to a net cash used of $13,000 for the three months ending last year, 2016. And we generated cash of $24,000 from financing activities during the quarter compared to a net cash used in financing activities of $1,097,000 in the same period last year. We have a revolving credit facility with Silicon Valley Bank that allows for a maximum borrowing under the facility of $1 million and are secured by collateral accounts. The facility bears interest at prime lending rate and is payable monthly with principal due upon maturity on October 5, 2017. As of today, there are no amounts outstanding under the facility, and the unused and available amount is $1 million. We currently anticipate that our available cash as well as expected cash from operations and available under the revolving credit facility will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. In October 2016, we renewed Intellicheck's shelf registration statement on Form S-3 with the Securities and Exchange Commission, and we've been notified by the SEC that, that statement is effective. As of March 31, 2017, we had a net operating loss carryforward of $7 million. We reiterate our outlook to be EBITDA positive in Q4 of this year or Q1 of 2018 and we believe we have a solid pipeline of pilot programs and are focusing on converting those and controlling expenses. I'll now turn the call back over to Dr. William Roof, CEO.

[indiscernible] to have an idea of how different this company is now when compared to the company two years ago or even onw year ago. We began by installing a new culture of professionalism, mutual respect and a winning, positive attitude throughout the company. We reduced company staff size by 50% and reorganized the company and its structure along functional lines. We transitioned our Vice President of Sales position to Paul Fisher, who sourced, hired and trained a new seasoned and dedicated sales force that is demonstrating results with key clients in our market verticals. We transitioned to as Software-as-a-Service model. In implementing this model, we were successful in moving a large majority of our legacy enterprise clients to the new SaaS model. We focused our development resources on our new product line for our commercial markets. We right sized the company's product offering from 24 to 5 main products based upon clearly defined and sizable markets that include: Age ID, with Age ID Mobile and Age ID Woodstock; Guest ID; Law ID; Retail ID, that includes Retail ID, Retail ID Mobile, Retail ID Online and Retail ID Light and Defense ID. We completely rebranded the company. We dropped Mobilisa from our brand and from all company communications. At the shareholder meeting last week, it was made official when the shareholders voted to change our corporate name from Intellicheck Mobilisa to Intellicheck passed overwhelmingly. So we will begin with the legal name change process now. We branded the company and products to provide a clean, clear understanding of what we do to our clients and investors. We developed all new logos, website, sales and marketing collateral, graphics, trade show booths, demonstration systems and extensive social media presence and other initiatives that communicated our brand and company messaging. We developed the company's first repeatable sales process and formal sales training program since the merger of Intellicheck and Mobilisa in 2008. Today, we believe our sales pipeline has more opportunities than ever before with many of them game changing. We implemented a new modern finance and accounting system. We sourced and hired a new Vice President of Product Development, Frank Lubin. We focused our Chief Technology Officer and IP expert, Russ Embry, on new IP generation and on our IP legal initiatives. We divested our wireless group, so that we could focus on our core business of threat identification and identification authentication. We negotiated with the former CEO, who owns the Port Townsend, Washington office and leased it back to the company, to end the lease and we consolidated the corporate headquarters into our Jericho, New York operations. We filed the two patent infringement law suits to begin aggressively protecting the company's intellectual property. We purchased approximately $1 million of Intellicheck stock from the former CEO and later resold the shares at a profit to the company. We worked through a long, involved process to become an approved Nlets partner, making our Law ID business scalable and secure. We negotiated a product development deal with Visualant for next generation authentication technology. In previous addresses to our shareholders, I focused on 5 main areas and talked about progress in each area. Those being, resources, markets, products, processes and intellectual property. I will briefly discuss these areas. Resources. As our client base continues to grow, our SaaS model will continue to drive monthly revenues. With our SaaS model in place, we are already seeing higher gross margins and expect to see sustainable revenue growth both sequentially and quarter-over-quarter. We are on schedule to finish our Nlets implementation later this month as we complete rigorous security audit requirements. Nlets is the National Law Enforcement Telecommunications System, owned and managed by law enforcement representatives of all states and U.S. territories, with a charter to process and share law enforcement data among the states and territories. We will establish our law enforcement data center with Nlets, where we will have access to all 50 states law enforcement networks from a single location. As we add new law enforcement agencies to our client base, this will mostly occur via Nlets, with virtually no requirements for Intellicheck to install hardware at law enforcement facilities around the country. Our new law enforcement subject matter expert, Michael McDonald, continues to align law enforcement agencies and Nlets, so we will be ready to onboard new clients as soon as we complete our Nlets requirements. We covered our markets in detail about six weeks ago. So we will provide a brief update at this time, beginning with retail. We see continued momentum within our retail vertical with our Retail ID products. Retail ID pilot results continue to excite retailers and exceed their expectations regarding fraud reduction and account acquisition. We have completed pilots with several retailers and are currently in the onboarding process. In many cases, these pilots are the result of our efforts with the financial institutions that underwrite the retailers private label credit cards. The fraud savings results of these pilots are significant, and we expect to accelerate our efforts with the financial institutions with the goal of providing our services to their retail credit card clients. Some of our clients understand their fraud losses and elect to work with us directly. One of America's largest department store chains has completed both their intensive security audit of Intellicheck and their in-store pilot, we expect full store rollout to begin shortly. Annual recurring revenue for our software licenses with this client alone is estimated at over $875,000 at a high margin. We hope our investors have also seen press releases noting a prominent regional jeweler and major northeast furniture retailer that have successfully completed pilots and are now progressing into major deployments. In our financial services vertical, we are conducting our first Retail ID Online pilot. Retail ID Online addresses the online purchase fraud problems that have increased over the past few years. This will be our first implementation of Retail ID Online to fortify a client's e-commerce web presence. This same financial services provider is scheduled to pilot our Retail ID Mobile application in their fraud operations this month and has introduced us to 5 of their retail customers for immediate Retail ID Mobile pilots. We also see increased adoption of Retail ID on-premise products, those being Retail ID, Retail ID Mobile and our brand-new variant, Retail ID Light. We are actively engaged with 5 of the top 15 credit card issuers in the markets we serve. We mentioned 6 weeks ago that a top-5 credit card issuer selected Intellicheck and asked that we work with one of their current vendors to integrate our authentication products. We expect the integrated product to provide an extremely powerful anti-fraud tool for financial institutions and retailers. Product integration is complete and we are working with our partners to define the product rollout schedule. As mentioned previously, we believe that the first 4 retailers this financial institution selected for product installation have the potential to generate approximately $4 million in annual high-margin revenues for Intellicheck. We are currently working with another top-5 credit card issuer that already uses our solutions in its retail bank fraud and disputes operations and with the home loans fraud investigations team. We are excited and optimistic about our business relationships with some of the largest banks and retailers in the country, and with the fact that our products have performed so impressively. Why is our relationship with financial institutions important to achieving our objectives? Our relationships with financial institutions provide several benefits and use cases for our products. We work with financial institutions directly to reduce fraud perpetrated by counterfeit IDs used to access their credit instruments and we work through financial institutions to reach their retail clients to mitigate credit fraud with branded credit cards underwritten by the financial institutions. Financial institutions offer our Retail ID product to retail merchants who bank with them, essentially playing the role of channel partner that increases our velocity to market in the retail vertical as opposed to Intellicheck's staff marketing our products to retailers directly, 1 brand at a time. With online and card not present transactions, our Retail ID online product provides significant fraud production to banks and merchants doing business with unknown and unseen individuals online. Additionally, banks can deploy our Retail ID product in their brick-and-mortar banking operations to prevent fraud and to satisfy the federal identification authentication requirements. Turning now to Age ID. We see significant opportunities for our Age ID product to target the alcohol control market. We believe that our efforts in the alcohol control market are resulting in positive momentum with both commercial and government clients. As we mentioned 6 weeks ago, we are beginning Q2 pilots with a National concession vendor at major sports and entertainment venues using our Age ID authentication solution. Just this past weekend, we successfully completed our first sports venue pilot, a second venue is underway and we look forward to additional scheduled pilots with this customer in the coming weeks. Another national concession vendor executed contracts in the first quarter for custom development and an initial 500 Age ID license purchase. We are excited to be providing ID authentication at their first major venue in early June. As noted, we are finalizing pilot planning with other clients and look forward to success during these product evaluation periods. We continue our discussions with all alcohol authorities in the United States including the 17 states and jurisdictions that control the sale of spirits and wine. As we stated six weeks ago, currently, Mississippi, North Carolina and Ohio are our clients, and we are at various stages of the sales cycle with the remaining states. We are seeing success with non-controlled states as we complete pilots with a number of states and look forward to generating revenue as a result of these pilots. Our Age ID application is currently in pilot in other states. In Q1, we added alcohol authorities in 3 additional states and have successfully completed a pilot in the Pacific Northwest, that we expect will be deployed to all 80 of their agents state-wide. At Intellicheck, we take corporate social responsibility seriously and we are pleased that our Age ID product plays a role in stopping the tragedies associated with underage drinking and over-serving of alcohol. Many of you and you know someone whose life has been changed by alcohol related automobile accidents. In my college days, 2 close friends both experienced significant personal losses, one lost his mother and the other his sister to drunk drivers. We believe our efforts and investment we made in Age ID will help reduce such tragedies. Dan and Gary, if you're listening today, I haven't forgotten. Our law enforcement initiatives are moving forward on schedule. A few months ago, we welcomed Mike McDonnell as our new Business Development Manager for Law Enforcement Solutions. Mike has been a great addition to the team and is currently managing all aspects of our Nlets partnership. As we mentioned 6 weeks ago, we became an Nlets strategic partner in October and are currently implementing our software and servers at the Nlets Phoenix network operations center and expect this test to be completed in late May. We currently have a backlog of over 25 agencies and police departments that are awaiting completion of our Nlets integration. Why is our partnership with Nlets important to law enforcement business? Simply stated, Nlets carries the status of a law enforcement agency, and therefore has access to all state and federal law enforcement databases from a single location in Phoenix. Our Law ID product, awarded a top safety product last year by Law and Order Magazine, is only authorized to connect to law enforcement databases from an authorized law enforcement agency. Without a central access point like Nlets, we would be required to establish multiple system installations at law enforcement agencies across the nation, one at a time. This model is barely scalable and nearly cost prohibitive, while the Nlets model gives us access to all law enforcement agencies from a single installation point. The defense market continues to present organizational changes and budget uncertainty. As we move into the mid-year, we expect to gain a better understanding of the government's priorities for identity authentication. We understand that the administration and Congress will increase funding for the Department of Defense by an additional $80 billion. And we believe a meaningful portion of this funding will be used to enhance security at critical facilities and military installations. Intellicheck plans to aggressively market our Defense ID solution to military installations that have not yet deployed a comprehensive physical access control system or are not scheduled for such a system for years. Intellicheck has narrowed its focus at the state and local level to law enforcement and specific facilities within the Department of Defense, and we are currently engaged with several law enforcement agencies and Defense Department facilities. We continue to pursue an opportunity with the federal government to provide our technology to enhance critical facility security. This is a slow process as the appointees and the new administration settle into the new rules. Our product development velocity continues to be high. We have significantly increased the addressable market for our mobile platform software by moving Age ID, Retail ID and Law ID to Android operating systems to support market segments that prefer Android over iOS. Currently, Intellicheck supports numerous client-paid pilots for our Retail ID and Age ID products in various stages of the pilot process. The composition of clients range from large financial institutions to major national retailers. The pilots, to date, have exceeded expectations with ROIs yielding quick payback times as our products reduce fraud. The relationships we have been building with major financial institutions and credit card issuers are beginning to show results. We continue to strengthen and enhance these relationships by working closely with our clients to enhance our products. We continue to enhance our internal processes. We believe our new sales and product development processes are returning the value we expected, specifically, our product development processes that have been the foundation for passing the rigorous client audits we have undergone over the past several months. Our customer relationship management system and process now provide the company with a realistic achievable pipeline and enhanced visibility by our management team. We believe our new social media capability is driving increasing numbers of visitors to our website. You can find us at IntellicheckIDN on Facebook, Twitter, Instagram, LinkedIn and other social media outlets. We also began increasing our website multimedia content and ask that you visit Intellicheck.com to see and hear the latest Intellicheck news. The rigorous security audits we underwent and those that are in process provided a foundation for upgrading and enhancing our business processes. Our processes are better, stronger and more easily articulated than in the past. Our client see that we understand their challenges and are completely supportive of their objectives. Intellectual property. We received numerous inquiries about our current patent infringement cases. As with any legal proceeding, we will not divulge any information that is not in the public domain. We have other legal initiatives that we are considering, all pertaining to patent infringement. In some cases, we have notified the alleged infringers and have asked to meet with them prior to filing any lawsuit. These cases take time, and we will keep you updated on the progress via press release when appropriate. Turning now to our outlook and time line for positive EBITDA. We currently have several security audits underway as prerequisites to system installation and subsequent revenue generation. In one of our clients, the vendor security risk management program consists of security risk assessments and due diligence achieved by reviewing the vendor's organizational, personnel, technical and physical security standards. The objective of the review process is to assess security risk, information security controls, systems and processes. It is a thorough and detailed process and we have met or exceeded the standards in previous audits. Six weeks ago, we addressed our investors and projected that Intellicheck would achieve EBITDA positive status in Q4 2017 or early 2018. We continue to stand by that projection. As we've stated previously, it is important to acknowledge and understand that we have not lost any business that formed the basis of our profitability projection. Additionally, we expect our 2017 expenses will be lower than 2016, even as we continue to add personnel to support company growth. We also expect to see revenue conversions from our active and scheduled pilots that include nationally recognized retail and banking clients. Fundamentally, our business opportunities are more robust now than they were in 2016. We believe our long-term visibility of revenue-producing clients is clear and these clients want and need our products. We see the fundamentals of our business and our business trajectory as solid and exciting. As we move forward, we have incorporated unforeseen delays into our forecasts as with all other challenges, the mission of our management team is to identify and implement solutions that are reasonable with expectations of measurable returns. We also continue to develop key partnerships with firms that provide synergistic technology. Although, our previously forecast revenues move out later in the year, our expectations of follow-on business, not previously forecast, are higher than before we began the partnerships. We recently added an Investor Relations firm to assist with investor communications. Intellicheck is pleased to announce the addition of Global IR Group to support our investor communications objectives. Mr. Gar Jackson, who has worked with us in the past, will work with Intellicheck to support our investor community communications. Additionally, you might recall that we recently implemented an e-mail initiative that pushes e-mail notices of company activities, so those who subscribe to the service. I hope to see more and more investors visit our website, subscribe to the service and become more familiar with and excited about our products. We find that investors who regularly visit intellicheck.com and are knowledgeable and current on our product offerings often introduce us to potential clients and partners. We appreciate these introductions and believe that more such initiatives would be valuable to the company. In general, we continue to implement our plan, and we believe and expect that plan to work and bring us to profitability. We also continue to follow our previously identified five pillars, those being: to operate as efficiently and effectively as possible; to focus on developing our key competencies into world-class products; to manage our product offerings with the goal of focusing on value and scalability to our client base; to establish a position of market recognition and leadership based upon our core competencies and world-class products; and to define, implement and nurture a culture that supports this transformation. We continue our optimistic outlook. We expect our momentum to increase going forward. We believe we are on schedule for EBITDA breakeven and long-term profitability starting later this year or early in 2018. In summary, thank you for your attention today. As we stated previously, we will announce via press release closed deals that are generating revenues. All other nonmaterial information that may be of interest will be posted to our website. Our outlook is optimistic and we look forward to our next call with our shareholders. I'll now turn the call over to the operator, who will facilitate questions from our shareholders. But first I will read question that was sent by e-mail to our Chairman, Mike Malone and his response. We received an e-mail question from one of our long-standing investors about the possibility of selling the company. This response comes from our Chairman. The directors are always willing to entertain acquisition offers that increase shareholder value. That said, the directors are focused on helping Bill Roof improve and grow the sales force, which in turn, would increase revenues, earnings and shareholder value, which we believe, at this time, to be in the best interest of our shareholders and the company. Operator, we are ready to take some questions now. Thank you.

[Operator Instructions] There are no questions at this time. I would like to turn the call back over to Dr. Roof for closing comments. : :

Thank you very much for joining us today. We look forward with great optimism toward Q2 and look forward to speaking with you then. Thank you very much.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.