Jason Hart - Chief Executive Officer Brian Nelson - Chief Financial Officer.

Bryan Prohm - Cowen & Company Scott Matusow.

Welcome to the Q2 2014 Identive Earnings Conference Call. My name is Alexandra, and I will be your operator for today’s call. With me on the call today are Jason Hart, CEO of Identive; and Brian Nelson, CFO. In a moment we will hear remarks from both of them and then we will take questions from sell-side analysts and registered investors.

Before we begin, please note that during this call, we will also be making reference to non-GAAP results or projections, including non-GAAP gross margin, operating expenses and adjusted EBITDA.

A complete reconciliation between each of these non-GAAP measures and the most directly comparable GAAP financial measure is included in today’s press release, which is available on the website at www.identiv.com. In addition, during our call today, we will be making forward-looking statements.

Any statement that refers to expectations, projections or other characterizations of future events, including financial projections and future market conditions is a forward-looking statement. Actual results may differ materially from those expressed in these forward-looking statements.

For more information, please refer to the risk factors discussed in the documents filed from time-to-time with the SEC, including the annual report on Form 10-K for fiscal year 2013 and our subsequent quarterly reports on Form 10-Q. Identive assumes no obligation to update these forward-looking statements, which speak as of today.

At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. Now it is my pleasure to turn the call over to Jason Hart. Mr. Hart, you may now begin..

Simplification focused growth. Thanks Alexandra, I know that's a mouthful to get out. Hello everyone. Well as you've seen if you look to the press release Q2 was a pretty reasonable quarter as we began to see many of the changes that we implemented in Q4 and Q1 have begun to tight effect.

We saw an increase in revenue year-over-year and quarter-over-quarter. We outperformed the sectors growth rate. So again pretty reasonable result given the current state of changes within the business. I want to thank all of the team that contributed to that and the continuing growth.

While at the same time we’ve been focused on the quarter and the revenue growth we’re also being focused on the restructuring and the simplification phase of the business. And that has resulted in ongoing reduction in our expense base and Brian is going to talk to that little bit later when we get to the financial section of the discussion.

In addition to the operating business we also expended substantial time and a lot of one-off expense to address the company’s NASDAQ compliance requirements. Again, I know many of the shareholders on this call and many of the staff internally were very pleased that we were able to remain as a public company and I want to thank everyone involved.

We had a tremendous shareholder turnout for and support with more than 96% of the shareholders voting for the changes that were needed. But that did take considerable time in Q2. So even in amongst all of the major operational moves and the organizational restructuring we did continue to fine tune in to the department.

And we do foresee further improvement in the operating expense and margin over the course of the next couple of quarters. This is as a result of the changes that we did make in Q2 and that Brian will allude and talk specifically about some of those including the factory consolidation and some of their sale force focuses that we put in place.

All-in-all, busy but solid quarter with underlying indicators trending in the right direction; revenue increasing, operating expenses decreasing and greater visibility in to our forward pipeline has been strengthening.

We did have a first full quarter of a global pipeline management system and support from the sales organization, retraining of the sales organization and that’s begun to give us a higher level of confidence in to our forward predictions. We’ll talk about those after the financial section.

I would say that at this point with only the margin trailing, the other underlying indicators, the margin has begun to get a lot of focus from our financial team and from me. And we do, I feel, have a very good handle on what needs to happen there and again Brian will cover some of the activities that we are seeing, that will address the margin.

But overall as I said trendlines coming in the right direction. Some notable activities in Q2, of course we launched the new company vision Trust Your World vision. It was a consolidating event. We used it to bring together all parts of our business, our sales organization, our partners, our customers.

We wanted people to understand the focus of the new company. And our marketing team, our new EVP and Chief Marketing Officer did a phenomenal job in getting that launched. Still more work to be done there and it’s an evolution.

But in the three month period we’ve managed to retrain more than 70 of their resellers, we are trained, completely retooled our sales force, conducted global activities, lot of work to get us focused around a single vision Trust Your World. We launched our new information and premises product to address the post password era.

You’ve seen this problem at companies like eBay and EMC. Obviously the infamous NSA Snowden issue target and so on and we will publicly experience this problem. Together with launch of our new partnership with Verizon we’ve been able to deliver some early wins in our information technology area that would address this post password era problem.

We see this as an expanding market, just a phenomenal growth market. But Q2, early days, initial relationships, initial product launches. So early results trending in the right direction. We all saw the appointment of Jim Ousley.

We as the company has began to really get some notoriety in and amongst the industry we’ve been able to attract some luminaries to our Board. Jim Ousley was the former CEO of Savvis, one of the premier data center high security data providers. So Jim joined our Board. If you look at his resume you’ll see he has some extensive experience.

I am pleased to augment the current strength we have on the board with Jim’s appointment. Jim formally took the position in early August. We also saw a strong investment in our technology. The company had lagged behind, in my opinion, in our compliance with some of the modern standards for our premises business.

We saw that and identified that back in Q4 as one of the major problems that was affecting our premises margins and our premises sales, coupled with the company's need to invest further into the Washington DC market but we addressed both of those in Q2 with the launch of our new FICAM compliant product line, our new uTrust reader product line, all of which bring to the market the strongest levels of security of any product in its sector.

So again extremely pleased there but we are not done. We have further work to do with our FICAM and our various fine government compliances. And we expect that, that will help us in Q3, Q4 and going into 2015 as we bring the most innovative product in this sector to market. We do see that as a strong baseline indicator for the company's health.

We also have resolved our liquidity challenges. We felt that, that was something that unfortunately wasn't picked up as much as we would have liked, tremendous amount of work went into that as some of you on this call know in Q1. We saw the benefits of that in Q2 with having a strong cash position. Brian will talk about that in a moment.

The cash position really gives us some comfort that we have the firepowder to be able execute on the present activities that we have in the business. The regaining of NASDAQ minimum bid compliance as I mentioned was also another major activity, was scaring shareholders.

We believe we've now solved the two primary shareholder concerns and we've begun to focus and deliver the underlying trend lines to show that -- to restore some credibility to the business in terms of its operating numbers. We launched the new Identive Channel Alliance Network.

We believe that and I'll talk about this post Brian's discussion on the finances that forward growth out of our strategy has to be with our partners.

And it will come from our partnerships with companies like Verizon as well as our traditional partners of which we have more than 150 and that number was growing everyday as we are getting -- again a lot more attention and people wanting to work with us.

We were granted three new patents in the period again, just reinforcing the innovation that we have in the company, pleased and extremely proud to be working with some of the most innovative people in the industry.

We augmented the current people we have with some new hires that have come to us, senior people, people bringing innovation and the creation of our new Chief Technology Officer Innovation group which is focused on our forward thinking technology and products for our customers, and beginning to allow us to become a strategic adviser to many of the global 1,000.

So at this point I am going to hand over to Brian and once we have done that we'll come back and have a brief discussion on the forward path of the company.

I think certainly everyone on the senior management team realizes that getting us back to EBITDA zero is a necessary step for credibility but it is not the thing that is going to drive our growth and unlock the shareholder value that we believe is currently locked in this business.

Then after the brief discussion we will also hand over to Q&A, as Alexandra mentioned. So with that I would like to hand over to Mr. Nelson.

Brian?.

Thank you, Mr. Hart. Now looking at our financial results -- before getting into the numbers please note that the reported numbers for Q2 and Q1 2014 and the comparable quarter of Q2 '13 reflect only our continuing operations.

Revenues in the first quarter of 2014 were $22.3 million as compared with $18.2 million in the first quarter of 2013, an increase of 23%. The strong performance also reflects a sequential increase of 32% from the $16.9 million reported in Q1.

As a reminder we began reporting in four new segments in Q1 '14; these are credentials, identity, premises and all other. Approximately 59% of our second quarter 2014 revenue or $13.2 million was derived from sales in our credential segment. This compares to revenue of $8 million in the second quarter of 2013, a 65% year-over-year increase.

The growth in Q2 credential revenues resulted in a sequential increase of 84% from the $7.2 million revenue reported in the first quarter of 2014.

Again as in Q1 ’14 the growth year-over-year and sequentially is primarily a result of the increased demand for our credentials to support electronic gaming, transit ticketing and other internet of things applications.

Our premises segment provided $4.6 million revenue in the second quarter, up 33% sequentially from $3.5 million in the first quarter of 2014 and an increase of 9% or approximately $375,000 from the comparable quarter in 2013.

The growth in the quarter is primarily a result of the company’s continued investment in sales and marketing efforts in the U.S. federal government sector. Revenue from our identity products was $3.8 million in the second quarter, a decrease of 24% from the second quarter 2013 revenues of $4.9 million.

Sequentially our identity product revenue decreased 25% from the $5 million in the first quarter of 2014. The decreases sequentially and year-over-year reflected the delay in completing two significant orders to U.S. government entities. We expect that revenues in this segment will recover in Q3 ’14 coinciding with end of government’s fiscal period.

Revenue in our all other segment, which represents sales of our digital media and CHIPDRIVE products, decreased approximately $300,000 to $0.7 million from $1 million in the comparable quarter of 2013 and decreased $500,000 sequentially from the second quarter revenues of $1.2 million in Q1 of 2014.

Our non-GAAP gross profit margins was 42% in the second quarter of 2014 as compared to 46% in the year ago quarter and with 41% in the first quarter of 2014.

The decrease in sales of our higher identity products, the higher concentration of sales in our credential products, lower manufacturing overhead utilization all were contributing factors in the change in our margins in the period year-over-year, while a recovery in our credential and identity margin improved the sequential results.

We believe our gross profit margin can improve going forward based on our consolidation of manufacturing facilities, our continued and renewed focus on selling higher value and higher security trust solutions and our focus on the higher margin premises business.

The consolidation of our manufacturing facilities were substantially completed at the end of second quarter and we believe it will lower our overall production-related overhead in the second half of 2014.

Turning now to our operating expenses, our non-GAAP operating expenses in the second quarter were $9.76 million or 43.8% of revenue, compared with $9 million in the prior quarter, 53% of revenue as well as $9 million in the quarter a year ago or 49% of revenue. R&D expenses were $1.6 million in the quarter ended June 30, 2014 or 7.5% of revenue.

This compares to $1.4 million in the prior quarter, a sequential increase of 16% and compares to $1.7 million in the same quarter of 2013, a 6.1% year-over-year decrease. Fluctuations in our R&D spending are primarily a result of timing of our development projects as well as our headcount utilization.

We expect R&D spending to remain relatively unchanged as a percentage of revenue as we continue to invest in our development projects. Sales and marketing expenses were $5.5 million or 25% of revenues in the second quarter, an increase of $755,000 sequentially and $1.2 million over the comparable quarter in 2013.

This level of spending reflects our continued investment in sales and marketing personnel as well as our renewed focus on program spending and partner related events. We expect to continue our focus on selling and marketing as we invest in our revenue growth.

G&A expenses were $2.58 million in the second quarter or 11.5% of revenue as compared to $2.9 million or 15.8% of revenues in the comparable quarter of 2013 an approximate 11% decrease year-over-year. G&A also decreased sequentially by $300,000 or 10% from last quarter.

We expect to continue to see this decrease as a percentage of revenue as a result of the actions we have previously initiated and our continued focus on cost reduction measures. Our non-GAAP operating expenses in Q2 '14 exclude charges for restructuring in addition to other items normally excluded from our non-GAAP results.

I'll touch on the restructuring in a few moments.

Based on our activities we recorded negative adjusted EBITDA of $400,000 in the second quarter of 2014, an improvement of approximately 70,000 or 7% as compared with a negative adjusted EBITDA of $470,000 in the comparable quarter of 2013, also an improvement of $1.6 million or 80% as compared to the negative adjusted EBITDA of $2 million in the first quarter of 2014.

Our strong revenue performance and cost reduction measures contributed to these improvements. Touching on other items on the income statement. Interest expense of 500,000 is lower both sequentially and comparably and primarily relates to the outstanding debt under the Opus facility and our related party liability.

As a reminder the interest expense in Q1 '14 reflects a $1.6 million non-recurring, non-cash charge associated with the payout of the Hercules Technology debt in that quarter.

Restructuring charges of approximately $600,000 are primarily related to the severance related to our workforce reduction in the second quarter as we continue to focus on consolidating our manufacturing in to Singapore, the operations, corporate accounting, marketing and other related functions into the U.S.

and reducing the company's overall base cost structure. We substantially completed the process of closing our production facility in Germany at the end of the quarter and have centralized our production in Singapore.

We do continue to evaluate our worldwide headcount and related infrastructure and have taken further actions in Q3 to streamline our operations and reduce our operating expenses. Now turning to the balance sheet, I will be comparing our position at June 30, 2014 to that at the quarter-end March 31, 2014.

Our reported cash and cash equivalents were $12.5 million at June 30, 2014 as compared to $12 million at March 31st, an increase of approximately $500,000.

Notable sources of cash came from additional draw down of $2 million on our credit facility with Opus Bank as well as $1.6 million in proceeds from the utilization of our Lincoln Park Capital Equity facility. At June 30 the company has $6 million outstanding on the $10 million revolving credit line with Opus.

Major uses of cash in the quarter included the pay down of approximately $1.1 million in accounts payable, approximately $700,000 in accrued compensation and other accrued expenses, as well as the servicing of our related party liabilities and interest associated with our financial liabilities. More details on those will follow in a moment.

Working capital, defined for this purpose as our accounts receivable plus our inventories, less our accounts payable improved to $13.1 million at June 30 as compared to $11.9 million at March 31st.

This is primarily due to a $1.1 million decrease in accounts payable, a nominal decrease in inventory, slightly offset by a nominal increase in accounts receivable.

With respect to our receivables, our day sales outstanding decreased to 49 days in the second quarter from 67 days in the first quarter as we experienced significantly higher turnover activity and improved collection efforts in the quarter. Inventories remained fairly flat at $10.2 million at June 30 and March 31, 2014.

Our turnover was approximately 3.75 for the quarter ended June 30 as compared to 2.95 for the quarter ended March 31, an improvement of 25% as we focus globally on our supply chain.

Some of the other noteworthy line items in the balance sheet are as follows; as I noted in my discussion of working capital, accounts payable decreased to $10.1 million at June 30 as compared to $11.2 million at March 31.

Our accrued compensation decreased from $3.1 million to $2.8 million in the quarter, primarily reflecting the payment of prior period variable compensation accruals. Our other accrued expenses and liabilities decreased to $4.3 million at June 30, compared to $4.7 million at March 31, 2014.

This net change reflects payments for professional feels and other accrued expenses. Our liability to our related party decreased from $6.6 million to $6.5 million, which reflects the periodic payments made during the quarter partially offset by the accretion of interest.

Our long-term financial liabilities increased by approximately $2 million to $15.6 million reflecting the additional drawdown under the credit facility with Opus Bank and accretion of certain deferred cost. The company reaffirms its guidance for fiscal year 2014 of revenues between $80 million and $90 million.

We also expect that we will achieve adjusted EBIDTA neutral or better on a quarterly basis as we exit the fiscal year. That concludes our financial discussion. And I’ll pass the call back to Jason..

Thanks Brian. In the first half of the year we’ve addressed liquidity, we have substantially improved the cash position of the company, we have addressed our trading compliance with NASDAQ and as you’ve seen we have implemented some extreme simplification, focusing the business on the growth identity markets.

All-in-all I think a reasonable and pretty good job. We have also won some partnerships with some heavy hitting channel partners like Verizon and some others that we can’t mention. That has really positioned the business for where I think our focus is now turning, which is growth. We also know that getting back to EBIDTA neutral is about credibility.

And the hardest part of that job does lie in front of us and that is unlocking and creating the shareholder value by delivering this growth. So now I would like to spend just couple of minutes and discuss some of things that we are implementing and have implemented to help up deliver the growth that we think is here in this market.

Innovation is the key to driving any new business. We believe that Identive is really a bit start-up. It’s a start up that has some great credibility coming from its two decades of traditions. But we are at an interesting period in time where we’ve seen this evolution where the password is no longer good enough.

We’ve seen the evolution where the physical access credential is no longer good enough. And majority of our customers are at an intersection in their history where they are replacing and having to replace both.

Identive is extremely well positioned both in terms of its prior history and its legacy customer relationships as well as the injection of a lot of new innovation to be able to solve this problem. We’ve been able to partner with some incredible strategic like Verizon, again early, but we are beginning to see some early success.

We’ve began to partner with some of the larger gaming vendors who, believe it or not, are implementing digital technology in to their product lines. Again showing us some early success as the Internet of things grows.

We’ve applied the same password technology to the physical access world that I mentioned and aligning ourselves with some of the heavy hitting industry trends that you are seeing from Google with some of their acquisitions like Nest. So we're right in the foray with some of the big clients.

Our early indications are that from our pipeline that we're beginning to get a lot more interest in more strategic accounts, that's good news. The approach of modernizing the technology coupled with delivering the credibility with our fundamental financials, I think is going to drive the business through Q3, Q4.

We will continue to drive in sales and marketing, I hear my sales team cheering and the marketing team expressing gratitude. But we then see like finance guys giving him thumbs down but the reality is that we do think we have the right product.

We have some evolving new product to be launched, we have a sales and marketing focus to be able to deliver and execute on the growth.

We think now that we are coming back to a baseline EBITDA, that the real challenge for us for the next two quarters in 2015 is how do we outpace the industry growth, how do we demonstrate to our holders and to our Board and to our staff that the company is positioned to be able to deliver on that growth.

With the early investments and the early signs that we're seeing from Q1, Q2 it's looking like the strategy we implemented continues to be the right one. Again not taking our eye off the ball in terms of cost but we are certainly seeing that some prudent investments in our expense base is making sense.

We have seen new project wins in the Middle East, South Pacific in Asia. We've seen new wins here in the United States, again giving us confidence that the pipeline and the markets are beginning to recover for us. But again a tale of caution there is still risk and we do see our projects moving around, so we expect to be lumpy.

The way we are implanting change to deal with this in Q3, Q4 is to push hard on our commodity products because these are the products that keep our revenue flowing every month, they are very predictable. We have made a strategic investment in our inside sales organization.

We have begun to invest in our long-term sales because we believe that, that's where the high margins come from. It also where our partners are. So as you can see while we have made great progress over the last couple of quarters by simplifying focus the management's attention is now extremely focused on growth.

I've often remarked internally that Identive is a $400 million company, when you look at comparables. It's just the quite frankly we are in the penalty box because of the company's prior performance. And my job as coach is to get us out of the penalty box and coach the team towards a victory.

And I think we have got the right team, we're at an interesting intersection in the market where the timing of the post password era is upon us with the technology and the patents that we have that will -- that have allowed us to position the business to be a dominant player in this space.

So at this point in time I would like to hand back to the operator to coordinate any specific questions that you may have.

Alexandra?.

(Operator Instructions). And we have a question from Bryan Prohm from Cowen & Company. Please go ahead..

Hey good afternoon Jason and Brian thanks for taking the questions..

Hi Bryan..

Hey, so first congratulations on the positive changes in the quarter and the strong revenue growth. It looks like the revenue upside is largely again in the credential segment, 65% growth that's up from last quarter, if I recall correctly.

Brian, you cited a number of end markets, so when we work through your comment on the call today it sounds like this growth is sustainable, may be this growth rate is sustainable over the near term and may be this is a revenue line that could even accelerate further from here in terms of the year-over-year growth momentum?.

So Bryan, I think as you know we are trying to be extremely cautious in the numbers and expectation that we give to the street. And the reason is frankly the company has had such a poor history of predictability. We’ve had couple of quarters where things have been pretty good. We are seeing the early investment in sales and marketing have some effect.

The credential business is absolutely an excellent business for us. And we do see seasonality in that business. But we also see seasonality in the other parts of the business particularly the high margin premises business.

So I am expecting from a forward pipeline that you are going to see the mix change a little bit and while the top line number may not change, the bottom line margin I am expecting will move. So for now what we’ve done is provided or reaffirmed the revenue guidance that we previously guided.

And of course, things could widely beyond and things could be the other way. At the moment though, all indications are that we are on track..

Right.

But you are confident that either the high end or low end of that annual guidance, $80 million to $90 million you can still get adjusted EBIDTA breakeven because of the mix shift that’s anticipated, is that right way to characterize the back half?.

Yeah. And I want to be clear we think we can get to adjusted EBIDTA on run rate basis..

Correct. I apologize. Yes. That’s right..

But absolutely that is the goal we currently see that as the likely outcome..

All right.

So hey, Jason with all the changes what is the greatest impact them so far of improving your visibility into backlog? I mean does it give you greater confidence the growth story and the growth momentum longer term or near term?.

Actually there is lot of things going on. I think anyone who took on this problem would have realized it’s a multi facet problem. And with so many spinning plates, the first thing we had to do was to understand what all those spinning plates were.

We’ve got a really good handle now on and we will not represent that the company is well oil machined in every respect. We are still and Brian and his team going through and cleaning up and consolidating lots of activities. But we’ve got a really good handle now on where the expenses are. Most of what we are doing is now fine tuning.

We’ve completed the large wholesale structural changes with some big things like the factory consolidation, the changes in our European workforce, changes in our U.S. workforce and so forth. So those activities, as we sit here today complete fine tuning still to occur. And so in answer the question what is the one thing it wasn’t a one thing.

The visibility to the expense side important, the consolidation of the sales force to get a forward pipeline was -- had now given me more confidence in knowing what’s going on, discussions with our strategic partners, the augmentation of our sales force and some upgrades to the sales organization where now they had a full quarter to be involved and understand the business and be report back in is giving me stronger credibility with them, that we actually have a better handle not perfect but we have a much better handle now on what our forward revenue looks like certainly for the next two quarters.

In to 2015, we are looking at market trends predominantly and some guidance that we are getting on the long term sales pipeline data. Some of our deals as you may know have a 12 month to 18 month sales cycle. And so as we began to see some of those we are now getting more visibility.

Our partnerships, the ones that I can’t mention and plus obviously the one with Verizon, have also begun to give us some more confidence that we’ve got more sales people on the street that are incented to sell. So we created a new business development group focused entirely on those partners augmenting these sales activities.

That's giving me more confidence as well that we have forward visibility. So it's multi-facet problem but again work-in-progress but I am becoming more and more confident on the forward numbers..

Great, hey so one follow up there on the [partnership] fees.

So if these strong partnerships evolve and more of them become transparent, should we look at this as basically, this is an investment year in the partnerships and that return comes in '15 as part of the long-term growth strategy or what are the inflection points likely to arrive around the partnership momentum and what you've done? Thanks..

Okay. So again multi-faceted answer for you Bryan sorry. The partnerships will be how we grow the revenue substantially in a short period of time. The business does not have the capital and it is not management's intent to build an extremely large sales force in front of revenue. We just don't have the capital or access to capital to do that.

Our goal is to partner heavily and put our eggs into the baskets of much larger players where we become a part of their solution or part of their offering. In addition to augmenting our current sales organization to directly influence our strategic customers, so becoming a trusted adviser because we are experts in the field.

It's tough to have a partner be an expert for the space that we're in. So in becoming that trusted adviser to our strategic customers and delivering through either one or multiple of 150 resellers or throughout large OEMs, we expect to actually drive more revenue.

Now it does mean we give up the piece of the pie, but that the pay-off for that of course is access to the thousands of additional sales people around the world. Early indication is that, that is the right strategy.

We are seeing a stronger forward pipeline, yet to be proven that it closes and we are yet to have good historicals on closure rates but as an aside as I mentioned to you once before I've done this before, seen it a few times. This is probably -- I am more confident in than I've seen any of the other partner led organizations. So, yeah -- that helps..

Okay, great. No, that helps very much. Thanks for taking the questions, Jason and Brian and I'll pass on. Thanks..

I am surprised you didn't ask me anything about NFC, thanks Bryan..

The next question comes from Scott Matusow. Please go ahead..

Hi, guys. How are you doing, it sounds you had a good quarter there, congratulations..

Thanks Scott..

A couple of questions I heard Brian talking about partnerships and how those things are going, I guess you are going to go that way and take that business far more to partners. Is there -- it’s going to be that way, is there any time that you foresee in the future that the market is actually going to know some of these partners.

I think you have to keep it quiet for certain reasons but can we expect to hear something, any given time about which partners they are?.

Yeah apart from the Verizon one which we have disclosed because of the -- quite frankly the strategic investment that we've made in the current expense base, the service that's including standing up datacenters, the others are -- one of them is a retail channel and we can talk a little bit about the fact that we have seen a phenomenal growth from them in the credential sector in the last number of months.

They will probably become known, but it will up to them disclose it just because of the arrangement we have with them. We are working to formulate other relationships and it is a key part of our forward strategy.

The technology that we've developed for both government and international and domestic government as well as some very large technology companies that are currently customers is extremely applicable to many of our traditional competitors.

And we’ve taken the route of opening up that technology to open up other markets and begin to look at key strategic partnerships that companies that may have in the past been considered competitive to us. But frankly, I’ll look at this market as a growth opportunity.

We are years in front of others and this is a play for us to grow market share in combination with people who already have those customer relationships. So I can see some really good win-win and that’s what we are working on to explore right now..

That sounds really interesting.

As you talk about going ahead with the plan of going with partners I guess I could assume at some point obviously you’d like to get, a few years down the road I mean that’s a long way down, but may be take some of that money from the partners and may be go on your own at some point and do anything?.

Given the company size and given the fact we are so far in front technologically but our access to market is limited by our capital, partnership route is the most logical route. And in doing that you have to go in to these relationships in good faith. And the good faith is that, that your strategy it -- we won’t navigate partners that we work with.

So it’s important that’s what we become. Now in terms of the size of these Scott, they are not little. We are not looking to do relationships with small companies. The organizations we are talking to are substantially larger.

And frankly look at us as an incredibly interesting innovative technology company now, given that we own everything from the manufacturing of IOT devices all the way through to providing the identity and security in credentials for many governments around the world. They look to us to help them drive more revenue in their own product set.

So short answer is yes, we will maintain direct relationships with strategic customers. We are up front of those with the partners. But if a customer wishes to procure through partner we would help that happen, so that we are not competitive..

That sounds good. One last question for you, I see your videos on YouTube about the Trust Your World.

Am I getting this right that your main business plan here is to synergize everything in to kind of almost like a one stop shop that you are going to handle different areas of IOT and almost in a synergy and provide the synergy to your partners in that way?.

Yeah. It’s a one stop shop for Identive. If you think about some of the big challenges in front of us, we have mobility, we have many, many senses that are being deployed under this Internet of things strategy from lots of different companies.

We see ourselves as pieces of the pie for companies that want to implement security in those devices and provide identity in those devices. We launched our Identive Trust Service which is a webbed service infrastructure that third parties use to interface with using an application programming interface.

And then we were able to deliver small transponders that have security technology in them all the way through to premises technology that have the same technology through the consumers that need to get rid of user names and passwords, be it with key [fobble] card or just on a mobile. So the fundamental technology is the same.

We’ve just applied it in the three areas that we talk about, everyday items premises and information..

Very exciting. And thanks for taking my questions. I think the future looks good for you guys, wish you continued success and hope next quarter we’ll hear some better stuff from you..

Thanks Scott..

We have no further questions at this time..

Terrific, excellent. I want to thank everyone for their time. Thank you to the team for their effort through Q2, keep up the good work. And we look forward to talking to you everyone when we report back on our Q3 earnings in the few months..

Thank you everybody..

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect..