Robert Fink - Hayden Investor Relations Arie Trabelsi - President and CEO Simona Green - CFO Ordan Trabelsi - President, SuperCom North America.

Josh Elving - Feltl and Company Josh Nicolaus - B. Riley Brian Abrams - Lazarus Tony Polak - Aegis Capital Debra Fiakas - Crystal Equities Research Albert Jones - Jones Capital Management.

Good day and welcome to the SuperCom Limited's First Quarter 2015 Results Conference Call. Today’s conference is being recorded. At this time, I'd like to turn the conference over to Mr. Rob Fink of Hayden Investor Relations. Please go ahead sir..

Thank you and good morning everyone. Thank you very much for joining us today for SuperCom’s first quarter 2015 results call. Joining us on the call are Arie Trabelsi, President and Chief Executive Officer; Simona Green, Chief Financial Officer; and Ordan Trabelsi, President of SuperCom North America.

Our press release detailing the first quarter results crossed the wire at approximately 08:45 AM Eastern Time this morning and is available on the Company's website at supercom.com. Following comments by management, we will open the floor for questions.

In addition, we encourage you to visit the Company’s website for further information regarding SuperCom's solutions, services and products. Before we start the call, I’d like to point out that this conference call may contain certain projections and other forward-looking statements regarding future events or future performance of the Company.

These statements are only predictions and SuperCom cannot guarantee that they will in fact occur. SuperCom does not assume any obligation to update that information.

Actual events or results may differ materially from those projected, including as a result of changing market trends, reduced demand and the competitive nature of the security system industry, or due to risks identified in the documents filed by the Company with the Securities and Exchange Commission.

In addition, following the Company’s disclosure of certain non-GAAP financial metrics in today’s earnings release, these non-GAAP financial metrics will be discussed during this call. Such non-GAAP metrics are used by management to make strategic decisions, forecast future results and evaluate the Company’s current performance.

Management believes that the presentation of these non-GAAP figures help investors understanding and assess the Company’s ongoing core operations and prospects for the future. Unless otherwise stated, it should be assumed that the financials discussed in this conference call will be on a non-GAAP basis.

A full reconciliation of non-GAAP to GAAP financial metrics is included in today’s earnings press release. At this time, I would now like to turn the call over to Ordan Trabelsi. Ordan, the floor is yours..

Thank you, Rob. Good morning everyone and welcome to SuperCom's first quarter 2015 earnings conference call. I'd like to begin my prepared remarks with a highlight and overview of the first quarter and then I'll turn the call over to Simona Green our CFO who will review the financial results for the quarter ending March 31, 2015.

Following Simona's review, Arie will provide closing statements and open the floor for questions. We executed well in the first quarter in accordance with our business plan. Quarterly revenues increased 45% from the first quarter of last year and we generated $0.23 of non-GAAP earnings per share representing 77% increase year-over-year.

Our EPS increased sequentially as well improving 35% from the fourth quarter of 2014 along with non-GAAP operating income and EBITDA which are also up year-over-year and sequentially. We achieved this growth while maintaining lean operations and achieving an EBITDA margin of 40%.

Operationally, we advanced our long-term growth strategy and made significant progress to strengthen and expand our EID business in order to accelerate growth while developing our M2M division which leverages our legacy RFID technology into an innovative fully connected fleet of solutions, and our M-Pay division which offers a new suite of secure mobile payment solutions that allow us mobile payments anywhere with any phone and no additional hardware needed.

During the first quarter, we recognized revenues from deployment and new contract win and generated recurring revenues from existing customers. The deployment of new systems for the two large customers we announced in 2014 are progressing and we remain on track with our implementation plan.

In our businesses the sales cycle for securing orders with large government agencies can be long typically involving our Request for Proposal or RFPs competitive bid process. Once a bidder is selected contract negotiations and other final steps take place.

So far in 2015 we have been notified by several government agencies that we have been selected as the bidder of choice for a number of these competitively bid contracts and we are in negotiations with potential customers now.

While the likelihood of securing a contract increases significantly following an RFP award, there are a lot of moving pieces impacting timelines involving the process and no guarantees that the program will move forward as expected even though we actively support the process where we can.

As a general practice we announce new wins once a new contract is signed and/or a significant milestone achieved grants us high confidence in future revenues. Taking a conservative approach announcing new wins is a best practice and helps us as a Company avoid risk should a contract be delayed or negotiations break down.

This is typical practice for large government contractors so as to maintain these involve an appropriate expectations with our shareholders. I will say that as we move through 2015 our optimism has only increased and we remain confident in our ability to achieve our full year outlook.

The $12 billion overall EID market continues to grow and in particular the $1.5 billion adjustable market that SuperCom is primarily focused on would pertain to developing countries and international tenders between $10 million and $200 million is experiencing very rapid growth that is outpacing what we are seeing in the larger and more developed markets.

As we've explained on previous calls, while every contract and customer are different, typically over 50% of our revenue from a new contract is recognized in the first nine months of the implementation phase following the announcement of a new contract.

Then over the course of the next nine to 15 months we will recognize the vast majority of the contract balance.

After the implementation is completed and our customer actually begins delivering ID credentials to their citizens we typically start to receive recurring revenues from that contract that includes software licensing, maintenance and consumables.

Typically, we will generate between 20% and 30% on average of the initial deployment contract value as recurring revenues every year. This is of course in addition to the initial stated amount which is recognized during the implementation phase.

I do want to point out that there is some seasonality associated with the portion of our recurrent revenues, particularly as it relates to consumables of identification documents that are related to travel which is historically slower at the first two quarters of the year.

There are also various seasonality drivers which impact the distribution of deployment revenues throughout the year as portrayed in 2014. Also as revenues from deployment are also based on milestone completion it is hard to predict deployment revenues on a quarterly basis.

I'd also like to point out that gross margins of our recurrent business that has already reached a steady state can be significantly higher than those during the implementation phase which typically range between 50% and 70%. As we continue to win more new government customers our base of recurring revenue will grow and with it so will our margins.

In the EID division as we discussed on previous calls, we plan to grow organically by adding new EID government customers and by offering more services to each of these existing customers.

The beauty of our platform is that it is modular and highly scalable, so for our customers it is very easy and cost effective to add an additional module or program to an existing deployment platform which can serve as an additional revenue center for our government clients and increase their ROI.

We continue to be encouraged by the number, quality, stage, size and time of opportunities we have in our sales pipeline.

Today we have a large amount of open proposals in various stages in many countries around the globe and we believe we are well positioned to achieve our stated goal to secure at least one to three new deployment contracts a year also in 2015.

The number of advance paged tenders in our pipeline increased during the first quarter which adds to our confidence.

In addition, and as a result of successful integration of SuperCom and the SmartID division in 2014, the current deployment of multiple, significant new projects in parallel and our healthy balance sheet and growth prospects, we are now well positioned to work on larger tenders, which as two standalone businesses were not previously in the position to handle.

Based on our success in 2014 and our current visibility following the close of the first quarter, we remain optimistic about SuperCom's future in our fast growing market. In addition, we are increasingly optimistic about opportunities in our M2M and M-Pay divisions.

By leveraging our existing expertise, our robust innovative solutions in the two respective rapidly growing markets represent a significant upside opportunity for SuperCom.

As we have discussed on previous calls, SuperCom has invested many years developing proprietary active RFID technology for the machine-to-machine or M2M space, technology that has unique capabilities. We’ve been selling these components for over seven years to customers around the world.

In recent years we have shifted our business model to focus on a fully connected solution offering rather than a simple component sale which in some cases allows us to generate hundred times the revenue of the component sales with very high margins every year by adding cloud software and selling them with the fully connected solutions.

We have been very excited by this shift. During the first quarter of 2015 we continued to advance marketing efforts of our PureSecurity Electronic Monitoring for public offender suite.

[Indiscernible] addressing prison overcrowding and specialties [ph] by offering a digitalized, cost effective alternative to monitor juvenile pre-track and low risk offenders.

We are advancing discussions with several potential customers in the U.S., Latin America, Europe and Asia who have issued tenders and we have actively progressed in, in the public safety segment. These tenders range in size from annual recurring revenues of hundreds of thousands of dollars to millions of dollars.

Given our progress and communications with government customers, we are expecting to secure new contract wins this year in this space. These new contracts will in turn allow us to bid much more effectively and rapidly ramp associate revenues in upcoming years.

Turning to M-Pay, a recent report by Future Market Insights indicated that the mobile payment market is expected to exceed $2.8 trillion in 2020 from $400 million in 2014 a CAGR of 39%.

We believe that SuperCom's SuperPay suite of mobile payments solves the major challenges in this fast growing market and will allow mobile payment ubiquity in different parts of the world.

We have started with emerging countries due to our strong relationships and influence in some of those regions, although the technological [ph] solutions provides immense value also for developed markets such as the U.S.A. and Western Europe by allowing secure mobile payments with any mobile phone anywhere and without the need of additional hardware.

SuperCom is in discussion with some partners and organizations around the world to provide end-to-end turnkey solutions to various financial ecosystems. The market reaction for our solution is very encouraging as we've been incorporating some of the products in current ongoing contract implementation.

We are pleased with the progress we are making in each of our four divisions and remain vigilantly focused on operating efficiencies which has been part of our DNA since the beginning. In doing so, we are able to utilize revenue growth to increase our margins and at the same time invest more in R&D and a strong future for SuperCom.

Now I'll turn the call over to Simona Green our CFO for an overview of the first quarter.

Simona?.

Thank you, Ordan. I will now walk you through our financial results for the quarter ended March 31, 2015. Revenues for the first quarter of 2015 were $7.7 million compared to $5.3 million in the first quarter of 2014.

I will be presenting the rest of the financial results on a non-cash basis which excludes the non-cash income tax benefit we had in 2013 and other note-related expenses such as depreciation and amortization and stock based compensation expenses.

For a full reconciliation from GAAP to non-GAAP numbers, you can refer to the press release we issued this morning. Our gross margin in the first quarter of 2015 was 70%, a decrease from the 84% in the first quarter of last year and slightly below the 71% margin in the fourth quarter of 2014.

Please bear in mind that the shift in gross margins relating to the proportion of revenue it is recurring and the portion which is derived from the deployment of new contracts. The recurring element tends to be at a very high gross margin, while new contracts and initial installations tend to be lower gross margins.

On a normalized basis, as we continue to grow, we expect our gross margins to trend around the 70% mark. Operating income in the first quarter of 2015 was $3.1 million or 40% of revenues compared to operating income of $1.8 million last year, and also an increase from $2.1 million in the fourth quarter of 2014.

Net income was $3.5 million for the first quarter of 2015 compared to $1.7 million in the first quarter of last year. Earnings per share were $0.23 in the first quarter of 2015 and increased compared to both, $0.13 in the first quarter of 2014 and $0.17 in the fourth quarter of 2014.

EBITDA for the first quarter of 2015 were $3.1 million and increased compare to the gross EBITDA of $1 million in the first quarter of 2014 and $2.3 million in the fourth quarter of 2014.

Turning to the balance sheet at the end of the first quarter, we had $4.2 million in our cash and cash equivalents, a decrease of $0.6 million from the beginning of the year. A few weeks after the close of the quarter the company collected an additional $4 million in cash from customers.

Trade receivables net gain by the end of the quarter and cash is mainly [indiscernible] and cash collection which were received after the process closed. We significantly increase our working capital to over $18 million at the end of March 2015, this is $5 million at the end of the first quarter of 2014 and $50 million at the end of 2014.

Shareholders equity increase to $31 million at the end of the first quarter up from $20 million at the end of the first quarter of 2014. With that I conclude the financial summary and now I will hand it over to Arie.

Arie please?.

So, before we open the call for questions I would like to reiterate our outlook for the year 2015. For the full year ended December 31, 2015 we expect revenue growth to exceed 40% or $26 million on a year-over-year basis. Additionally we anticipate non-GAAP EPS for the year 2015 to exceed $1.2 per share.

As Ordan indicated earlier on the call, we are excited and highly optimistic about SuperCom’s future and I would like now to open the call for questions.

Operator?.

Thank you. [Operator Instructions] And we’ll take our first question from Josh Elving with Feltl and Company..

Arie, nice job with the overview on the outlook today, I think that was very helpful. Couple of questions, I wanted to see if I could get just a little bit more color on some of the progress you have made in the electronic monitoring space.

I think the comments in the prepared remarks was that you had been selected, does that seem to suggest that you won contracts, or you won bids, but the contract details have not been ironed out or that just that they are not material enough to announce individually at this point?.

We’ve been selected as part of the RFP bidding processes. We tend to announce things only once the contract is signed or we have high confidence in the action of the government. We are still in final stages and we haven’t yet announced this accordingly..

Okay.

And then you made a comment about still being comfortable with the few contract wins this year, is that related specifically to new government deployment or any type of additional like follow on offering or follow on contract?.

We are focused on new deployment of system. It could be to an existing customer and it could be to new customers. So as long it is a new deployment or the current revenues are the core element we would like to see in the business..

Okay.

And then a question for Simona, Simona I missed what you had said, I had a question about the restricted cash on the balance sheet, did you suggest that that $4 million converted to free cash?.

Yes, exactly, it was received [indiscernible] at the end of the quarter, the first quarter..

Okay.

And then may be a little bit color on the increase in the receivables line?.

Josh a clarification, the $4 million additional cash not essentially related to the restricted cash flows on the balance sheet, it was received several weeks after..

So did that potentially come out of the receivables line and the trade receivables line that converted to cash?.

Yes, yes, the $4 million was really receivable converted to cash in the first week or two from the end of the quarter, nothing has to do with restricted cash..

Right. Thank you very much..

Thank you..

And we will now go to Brian Abrams with Lazarus. And Brian we are not able to hear you, could you please check you mute function? [Operator Instructions] And we’ll take our next question from Josh Nicolaus with B. Riley..

Oh I just wanted to clarify some of those are, yeah, you stated well, yeah, security monitoring space as well, is that correct?.

Can you repeat here the beginning of the question, can you repeat that please?.

Yes, so for the RFP awards the company has received some of those I presumed as well in the EID space as well as the security monitoring space, is that correct?.

Yes, we are calling generally across our division..

Okay.

Right, and anything you could give us as far as the average potential size of the award for the ones that you have been, that you did when the RFP award?.

We are sorry, at this stage we cannot provide any more core information about this contract. Once they will be signed we will announce it indeed..

Yes, and then just speaking in generality, last question is whenever you do get an RFP award, I think you realize that there is still contract negotiations and things like that, but how much more likely is it that you ultimately do receive an award once RFP has been granted compared to just putting in a bid?.

When you receive an award from an RFP, it effectively states that you are the best bidder in terms of technology and your offering, your solution, your proposal.

Different probabilities are associated with different tenders, some tenders that very likely means that you are going to turn into contract and others there are more moving parts and more difficulties associated with it, so it’s hard to give just a general number..

In general once you've been selected we do receive an award or [indiscernible] for a negotiation to contract is made in a few weeks or more than that, and again if there is no obstacle at this stage and we sign a contract and [indiscernible]..

Thanks guys..

Thank you..

And I will now take Kevin Didi [ph] with [indiscernible]..

Hello gentlemen and nice job in the quarter. Ordan, you are really very careful to make the point that your position has advanced with some of your customers that you are working with. And I mean, I interpret those comments as being very bullish and congratulations on that, but it just doesn’t seem to fit well with your guidance range.

If your position is advanced and you have more contract wins coming you would think that you would be more inclined to perhaps raise guidance, so I am just wondering if you could talk to that a little bit?.

Our guidance is on a conservative nature. We like to take into account that we have very high visibility for like wins in 2014 that are being deployed, recurrent revenues and other things.

There are very large vendors out there and some were performing very well off and when those are, if and when those are finalized we will announce those and that will exceed our guidance first, so we don’t take guidance into account at this stage..

I think it is important to make sure that although we selected some tender we have to remember that some of them have some short term delivery or implementation and some other especially is a very large contract may take more time to nine months to deploy them.

And I believe the transfer fees are more confident with a much higher number objective in the later part [indiscernible]..

Okay, can you speak to some of the new RFPs that you won or at least been requested to participate in, can you give us some idea on how many are new customers and may be relate that to where you were in the first quarter last year, so we can get an indication of your sales and marketing effectiveness and addressing new customer opportunities versus expanded opportunities within your existing customer base?.

Okay, first of all I will say that if you compare to last year’s first quarter of 2015 we are in different position.

At the beginning of last year we were more with customer that tends together with this [indiscernible], but at this time we expand our position of present in some other area and especially we are investing more [indiscernible] in Asia which is very fast growing market for us in all divisions and the sensing we are in Europe especially for that division, so right now we are being very active around the world and I will say that we are right now making major sales and marketing efforts in many countries of the world I will say that it is much different and it cannot even compare to what we had last year.

And we stopped to see some benefit as well from these efforts as much we see more opportunities around the world scenario that we didn’t have any [indiscernible] product and we believe that some [indiscernible] contract and again the most important thing that this last year at the end of the year we were concentrating more on tenders and revenue from the EID.

Right now we see a bright future and elsewhere have been selected as a winner for the [indiscernible] division and we still like to [indiscernible] and what we mentioned on the conference call that we will see more revenues in addition is being implemented as we see now..

Okay, thanks for the color, I know you also made a point of being in a position to address larger opportunities and I am wondering if you can talk about a little bit why do you feel SuperCom's position now is coming from, I guess from a bigger foundation where the opportunities or the particular tenders that you go after you feel that you will be received as being likely competitor versus say where you were when you held the year end call?.

Okay, first of all, last year we [indiscernible] last year for about stronger that [indiscernible] it will be included in R&D that is supported much lighter operation and development.

Second thing is that right now we have a much similar balance sheet I believe [indiscernible] and due to much many as the customer needs we are still with great cash flow operations and right now what we see that the tender that we are able to bid for them easily and be able to [indiscernible] and I think the customers see that as well.

In addition to that it is that we feel that we acquired some operation or [indiscernible] corporation we see that is very easily to obtain this kind of operation more on the gross company will come to us and not just work with them because [indiscernible].

So, right now we feel very strong and we easily compete and beaten a very large company which is under is going to increased with time passed and as our operation with other will increase..

Okay, can you give us an idea where your head count is now, I mean we were almost through the second quarter and I am just kind of wondering where headquarter where your head count is and how that changed versus say at the end of last year?.

I think that, our head count is about 120 employees, but some stopped contracting working on the [indiscernible] working on the [indiscernible] and most of them are being traded on the sales and marketing, engineering, [indiscernible] and on R&D and if I compare it to last year we are about 50% higher than two quarters ago..

Okay..

But that is to continue, but it is not to take our margin on the contrary. We are working very hard to select the best people and we are very happy that we have the best people on board to perform at this time..

Right, so where do you see head count going through the balance of the year and address some of the new tenders that you are hoping to win?.

I will say that that right now when we have new tender or new contract in many cases what we do incorporate in the target country and we hire people in the target country to perform this operation.

We believe that the head count here in the company we do not believe that will increase much more especially in the EID platform there other division, which are interesting and developing very fast we will see additional hiring especially in this other market, new development market.

So I would say that probably by the end of the year we will be around 160 people in the company that are still right now, but if we have very large contract [indiscernible] arrangement in the target country to perform these contracts..

Okay, so now last question for me, it’s more on a strategic level, the EID is driving the majority of your business right now, and I am kind of curious on how you plan on balancing resources with an increase in M2M and M-Pay and of course the offender business, the electronic tracking.

I think, I mean obviously there are great opportunities in each of those businesses I am just wondering how you plan on balancing them as they start to grow?.

Okay, it’s a great question, I would say that due to the [indiscernible] the market connectivity in many cases we are, our market so our customers understand.

But the EID anecdotal point, general governments, so our bigger development fair market [indiscernible] people working and especially in the same area.with different area with customer in the same area.

Project management which includes LV and complicated IT which [indiscernible] kitchen [indiscernible] there would be almost are the same project management division and what we are [indiscernible] is the same of the group of excess engineers and now these are able to develop specific application if it is required by each division and especially their support and implementation as significant period.

So we don’t see any program implementing one contract in the EID and use multiple people that are on board implementing contract for project in the M2M division.

There are differences, there is a special knowledge, special platform for each one than the majority of that force that you need here are similar because we are talking about very complicated IT system that are [indiscernible]..

Very good, thank you very much for addressing my questions, I appreciate that..

Thank you..

And we will now go to Brian Abrams with Lazarus..

Hi, guys, is my line clear and can you hear me okay?.

Yes..

Thank you, great. Congratulations on all the continued progress, glad to see it. You mentioned increased confidence in your outlook for 2015 which is great to hear and in the past you mentioned some longer term goals.

I think when sales might get into the 100s of millions of dollars, I am wondering if you feel as confident as ever about those long term outlooks as well, if you could speak to that as far as the kind of multiyear potential?.

I don’t think that we fear there is a chance of [indiscernible]. We feel that some of our growth engine are falling in the [indiscernible] slowly been we see a good reaction for the market, so we don’t see any reason to reduce any of the long-term estimate that we identified.

We believe that we will reach the point that [indiscernible] would come from that division may be faster than we anticipated in the past..

Great, and to that longer term outlook also if we could, I wanted to see if you could expand a bit on the M2M business and M-Pay and so on, in terms of the potential for that over again a multiyear timeline, how big of a business do you think that could be and what do you think the timing of the ramp up will be?.

Okay, first of all, for the M2M, at the end it’s a very large division [indiscernible] it is one of the market that in general in many countries growing fast in the multiple years, six to five years, and it can reach to $100 million contract, there are some contract in the past that $100 million and even higher.

We were bidding on tenders that even in the range of $50 million and we believe that those numbers went up. As the U.S. market I believe is about $4 billion a year and huge numbers are filled up.

So there is a large market which is growing very fast and we are getting market share as fast as we can and right now we believe that an excess position to get our market shares and more possible there in the project.

So the market is there for our product and solution are excellent and being purchased by our customers those as we see from the last tenders and election of government.

So we are very optimistic about the addition in there sensing with normal payment, is another payment which you see is in our solution being tracked by others or our customers and we'll look together with some additional provides M-key [indiscernible] and as a result I mentioned earlier, if you look at the big market is really born.

I just listen their approval and everybody is working for the pricing and this work because then if you look at the market, that is going to be $2.8 trillion by year 2020, many companies are looking at that and we believe that there is some special solution across our, really because of no [indiscernible] actual debt we are looking on EBITDA, our product will develop and aim to be mostly and informed the payment as we believe that pointer, we viewed this as a major adventure also the major events or for the [indiscernible] Western Countries.

So we are, there is some truth is there and we believe good revenue from there. We are already implementing some of our solutions in current contract improvement as we suggest this to incorporate our solution into those contracts and provide our customers will get a pretty good clearly mobile payment to help their citizens..

Great. Thanks so much guys. Keep up the good work..

Thank you..

And we will take Tony Polak with Aegis Capital..

Good morning..

Good morning..

Could you comment on the past, have you been selected for contracts and then not signed or is everything that you’ve been selected for, have you actually ended up signing?.

See it is general when you have been selected – care is short, sometimes it could be very long and but we believe that at the end of the day, you have signed a contract even a delay will pop up for different reasons and we are seeing care to eliminate the obstacle and sign the current entity.

But in general in government select, it is going out to a very several process without tender when you select huge they know what they do and they could choose the question here..

Okay.

In the last quarter was there any sales in the M2M or EID business?.

I will say just yes, there were sales in our business [indiscernible]. We say that we will announce when [indiscernible] so right now even if we have sales in terms of that division we would not announced that in each case and I was hoping that once could have been a large one that we have been selected now and the near future..

Okay.

But there was some sales in both those divisions in the first quarter?.

There were, yes..

Okay.

Can you give us any type of is it hundreds of thousands or less than that, can you give us any ballpark on that?.

No it’s above, but again it's as I said [indiscernible] million dollars that is the reason we have not announced..

Okay..

Also small orders, small orders are not the same, we will announce something if it has significant size or significant strategic value to the market and to not create noise with investors..

Okay..

[indiscernible] for example we will be very happy we have small contract even of $1 million contract in the market or divisions that are new for us, so it is going to be very important we may not announce it but it is very important for us on achieving the goals and mentioning that in this market, but in general we – a level of $10 million [ph] we announced [indiscernible]..

Okay, great. Thanks great quarter..

Thank you..

And we will take our last question from Debra Fiakas with Crystal Equities Research..

Thank you for taking my questions, actually I'd like to perhaps knit together a little bit better, the comments you've made in, to the last two questions regarding M-payments. You made the point during the opening remarks that you had begun integrating the M-payment technology into some existing EID contracts.

And my question was and I just want to confirm that I've heard correctly, in your most, the comments that you just provided to the last person that it actually received some sales associated with M-Pay after incorporating them into the EID contract?.

Okay. What I would like to clarify this point. In every EID contract or most of them there is a stage of payments where it is launched to [indiscernible] license or an EID has to pay for these services.

In the past we provided this service by correcting our success to some other banks or credit cards or solution reform, these kinds of service points, [indiscernible] we are incorporating our solution into the system itself. It will be able to use mobile phone or mobile payment to pay for the services being provided by the government.

So we are using [indiscernible] to incorporate our great solution and servicing. By that, we are letting government to have more citizens using mobile payment, therefore services using cash because most of the countries in the major countries in Africa or in South America are using cash which is very problematic in this country..

Okay.

So it’s not exactly an order from your government customer as much as you were just using the technology to facilitate an existing contract with the government entity?.

Yes, we are not doing anything without our customer approval. I mean provided our customer want this kind of service and we are doing this service for the government.

I want to say that once we incorporate that at the same time that the citizen has a mobile payment [indiscernible] in his phone he can use it for not only paying for [indiscernible] government, but he will be able to use the same mobile phone and the same service to pay for mobile services and by that out technology and our solutions being used wider..

I did think this question was around M-Pay and EID in terms of....

I see. But I could not quite understand the comment that is why I asked for clarification, I appreciate that.

But then just continuing with M-Pay, I think you mentioned earlier in your comments that you had been in discussions with some potential partners – could you give us just a little bit more color on what those potential partners might be? I know you can’t name them, but perhaps you could just describe the kind of entity that you might be partnering with?.

Okay.

In general when you want to provide an internal solution you may talk with banks, you talk with credit card, whether you may talk with fund and organization they are too large to find mobile payments method to perform mobile pay, and for example you could be a mobile carrier that would like to use our technology in order to implement our mobile wallet in their business.

So we are discussing in prices there and then we believe that once we are going to be implemented or secured to an agreement we will probably will announce it..

Okay, excellent and then just a couple of housekeeping questions in regard to operating expenses, the comparison of this quarter to the previous quarter of course looks very favourable.

But I did wonder about the research and development commitment and what kind of budget the spending went down this quarter, but I wondered if this is something that we are going to see, reduced spending or if you have plans to pick up the pace as the year goes by?.

Okay. First of all I see that the percentage you see right now I think it is similar to what we did the last quarter it is about $2.5 million or $2 million a year in R&D, this is one thing.

So in the important thing that we must mention is in many cases some R&D is also implemented under contract we implement contract for global men or some of our customers in just some of the [indiscernible] we’re doing it for customers, but therefore being used as part of our product.

Now in comparison to, if you see our first quarter of last year what we had in the first quarter 2014 was [indiscernible] we had about $800,000 we used from previous..

[Indiscernible] was evaluated an effect in the first quarter decrease in the P&L in the first quarter of 2014 for the R&D..

So, yes, so naturally [indiscernible] last conference when you fix several months earlier than that, that we are wining and so we started developing the solution for our customers that because [indiscernible] of the customers will be [indiscernible] we put it out and that said and once we get the contract in the first quarter of 2015, we closed [indiscernible] group, there is R&D, so the R&D further you will see the jump.

So if you eliminate the $800,000 in the fiscal last year you will see that we actually have a role in R&D from this quarter comparison to last quarter, I think that is over 50% increase in R&D in comparison to last year..

Okay. Thank you so much for the clarification and really along these similar lines it looks like you got a little bit more out of your sales and marketing dollars this quarter than in the past.

Is there some kind of one-time or one-off situation that is impacting sales and marketing or are you finding greater efficiencies as it would seem to suggest by this quarter?.

This really is, as I said earlier we are increasing our sales and marketing, sales was dramatically both geographically and also for the other division.

So [indiscernible] our second marketing group is almost twice in headcount than we compared to last year and in addition to that what you see is that when revenue is going up, sales and marketing from the commission is going up as well..

Okay. So I think from a [indiscernible].

And then one last question if you wouldn’t mind Simona, during your comments, your opening comments you mentioned that you anticipated that the gross margin would trend along a certain line and unfortunately I couldn’t hear the number, if you could just repeat that gross margins number?.

Yes, it was 70% basically this is what we estimated going forward based on the [indiscernible] project and – projected. 70% yes..

Okay, thank you very much. I appreciate it..

Thank you, Debra..

Thank you, Debra..

And we will take a question from Albert Jones from Jones Capital Management..

Thanks for taking my question, little late in the call so forgive me if this has been addressed, what is the, did you guys finally acquire provision yet and you mentioned that in the press release or anything?.

It is actually, you know cyber security is something very concentrated, but the real answer for that is that we are in the final stages of getting it. There are some delays but there is no change in our intention to close the deal and we believe that it will be completely in the [indiscernible] in the near future..

Okay.

Is there a contingent on you guys signing a certain agreement or a certain, getting a certain contract, is that a little bit of a hold up there?.

No it has to do more with something starting on the billion stage, but I will say that although we did not close the deal, we are working in full force in the cyber security, we are developing products, we are hiring people and we are proposing solution to our customers, both existing customers and new customers, enhancing our products and providing the new solution as well..

Okay.

So we are expecting that to close soon?.

Yes..

Okay. Thank you, that's all I have..

Thank you..

Ladies and gentlemen this does conclude today’s conference. We thank you for your participation and you may now disconnect..