Good day, ladies and gentlemen, and thank you for standing by. Welcome to the I.D. Systems fiscal year end 2010 results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions.] As a reminder, this conference is being recorded. I would like to introduce your host for today, Mr. Jeffery Jagid, chairman and CEO. Sir, please go ahead.

Thank you. Welcome everyone to I.D. Systems' fiscal 2010 year-end results conference all. Thank you for joining us today. I’m Jeffrey Jagid, the chairman and CEO of I.D. Systems. With me are Ned Mavrommatis, our CFO; Darryl Miller, our chief operating officer; and Ken Ehrman, the president of I.D. Systems. I will provide a brief overview of the quarter and year ended December 31, 2010. Ned will detail our financials. Darryl will update you on our operations, with a particular focus on the performance of our Asset Intelligence business, and Ken will review additional highlights of 2010. We will then open the call to your questions. Before we begin, let me reiterate the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The following discussion contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to, the impact of competitive products, product demand and market acceptance risks, fluctuations in operating results, and other risks detailed from time-to-time in I.D. Systems’ filings with the Securities and Exchange Commission. These risks could cause the company’s actual results for the current fiscal year and beyond to differ materially from those expressed in any forward-looking statements made by or on behalf of the company. For the fourth quarter ended December 31, 2010, I.D. Systems revenues increased sequentially from the third quarter by 11% to $7.2 million. For the full year, our revenues increased to $25.9 million, compared to $10.3 million for 2009. These gains reflect the acquisition of our Asset Intelligence business unit in January 2010, which contributed $15.2 million of our revenue for the year. With its high margin service subscription model, Asset Intelligence also contributed significantly to our solid overall gross margin: 56% for both the fourth quarter and full year. We are pleased by…

Thank you Jeff, and hello to everyone on the call today. As Jeff noted, our revenue for the fourth quarter ended December 31, 2010 increased to $7.2 million, up 11% sequentially from $6.5 million for the third quarter of 2010, a sales of systems and services increase across both the industrial vehicle and trailer fleet management markets. During the fourth quarter, revenue from the industrial vehicle business was $3.6 million compared to $2.8 million in the prior year fourth quarter and the third quarter of 2010. And although it did not have an immediate impact on fourth quarter revenue, units sold by our Asset Intelligence business unit in the fourth quarter was higher than the first three quarters of 2010 combined. This will have a positive impact on future periods. Deferred revenue at the end of the year was $6.8 million, up from $4.3 million at September 30. Gross margins were strong for both the fourth quarter and the full fiscal year at 56%. Non-GAAP net loss for the fourth quarter, which excludes stock-based compensation and depreciation and amortization, decreased 68% to $1.3 million, or $0.12 per basic and diluted share, compared to non-GAAP net loss of $4.1 million, or $0.37 per basic and diluted share for the fourth quarter of 2009. Excluding stock-based compensation and depreciation and amortization, operating expenses for the fourth quarter were $5.5 million. We expect that number to remain flat in early 2011 and decrease [inaudible] market share. 2010 was a year of two halves. For the last six months of 2010 our non-GAAP net loss decreased 62% to $2.4 million compared to a non-GAAP net loss of $6.2 million for the first six months of 2010. Also, for the last six months of 2010 we generated positive cash flow from operating activities of $1.9…

Thanks Ned, and thanks everyone joining us on the call today. The primary focus of I.D. Systems operations in the fourth quarter was to continue driving sales growth while reducing costs, improving our service metrics, and overall customer satisfaction. We surpassed not only our sales targets for the fourth quarter, but also our aggressive cost reduction targets for the year. We decreased our annualized operating cost by more than $8 million compared to our costs at the time of the Asset Intelligence acquisition, with more than half of that amount coming from a reduction in the number of contractors who support our IT infrastructure and ERP systems. To continue our pursuit of operational efficiency in the fourth quarter, we consolidated our contract manufacturing resources and incorporated Lean Six Sigma methodology to manage our processes. This transition will be completed in the first quarter of 2011, which should result in a reduction in our manufacturing costs, improved quality, and a decrease in order fulfillment time for our customers. In addition, we expect to further streamline I.D. Systems operations as we implement a greater number of our newly launched PowerBox vehicle management systems. As Ken will discuss, PowerBox is designed for simplified installation and operation, with virtually no requirement for I.D. Systems support resources. I'd like to provide you with some additional details on the Asset Intelligence business. Asset Intelligence delivered very strong sales in the fourth quarter. The division sold more units in the quarter than all of 2009, representing a solid basis of recurring revenue going forward. Our fourth quarter success was driven by, for the most part, Asset Intelligence product development in 2010 to VeriWise Track & Trace system, a high quality but very affordable location tracking system for drive-ins, flat-bed trailers, chassis, and containers. Track & Trace is…

Thank you Darryl, and thanks again to everyone joining us on the call today. I.D. Systems' industrial vehicle management business, like our Asset Intelligence business, experienced a surge of activity in the fourth quarter and second half of 2010. We believe this reflects a loosening of supply chain technology budgets and the release of pent-up demand in the industrial markets we serve. As the economy continues to improve, we hope to see this trend continue. Among the new customers who acquired our industrial vehicle management systems in 2010 were Big Lots, Canada Post, Campbell Soup, Cargill, General Mills, Handy Hardware, Hormel, Starbucks, Southern Wine, Xpedx, and the Red River Army Depot. Our development of new customers was facilitated in many cases by our growing relationship with the Raymond Corporation, a leading industrial truck manufacturer. We executed a marketing agreement with Raymond in 2010, certified our system for integration with their vehicles, and are working closely with Raymond to promote our solutions through their national account sales organization and dealer network. Existing customers who expanded their deployments of I.D. Systems wireless vehicle management technology in 2010 included American, American Eagle, Audi, Ford, Procter & Gamble, Nestle, Walgreens, and Walmart. I'd like to emphasize a few quick points about some of this repeat business. Ford and Walgreens have begun to upgrade our systems in North America, where we are deployed across their enterprises. We think this clearly reflects the ongoing long-term benefits provided by our technology. In addition, Ford Europe has begun to expand its use of our systems. Procter & Gamble selected I.D. Systems as its preferred global supplier of industrial vehicle management systems in 2010, which we expect to provide us with new opportunities for growth in the future. Nestle, which deployed our technology initially in their water business, began…

Thank you Ken. Now we are pleased to open the call for whatever questions you may have. Thank you.

[Operator Instructions.] And our first question comes from the line of Morris Ajzenman of Griffin Securities. Morris Ajzenman – Griffin Securities: Well, congratulations on the top line. Starting to see some traction there. Just two questions at this point. The first one, I guess this will go towards Ned. Looking at the SG&A specifically, in the third quarter, on $6.5 million in revenues, SG&A was approximately $4.4 million. So now in the fourth quarter you had a $700,000 gain approximately on the top line. SG&A rose to $5.7 million from $4.4 million. Just help me understand that higher rate. What's that all about? Is that one-time in nature? What happened between the third and fourth quarters sequentially when you guys have been really focusing on taking costs out of the business?

Sure. I think your numbers are a little bit off. If you exclude stock-based compensation and depreciation and amortization, SG&A was $4.8 in the third quarter, and it went up to $5.5 in the fourth quarter. And we did have some what I will call one-time expenditures in the fourth quarter. We put some commission plans in place to reenergize the team, that we pay some commissions in the fourth quarter, which would actually get benefit in 2011, because some of that revenue's going to be recognized in 2011, but we did pay some of the commission in the front. That was the major increase if you exclude depreciation, amortization, and stock-based compensation. Morris Ajzenman – Griffin Securities: I understand that, but I'm looking at the 10-Q, the GAAP numbers. The GAAP numbers had SG&A of $4.4 million. And then your GAAP numbers here right now are $5.7 million, so I'm looking at all in.

Okay, if you look at the GAAP numbers, the major increase, which was about $700,000, was depreciation and amortization. During the fourth quarter, we finalized the purchase price allocation of Asset Intelligence and we had a large number of the money that we paid going to customer [lease] and that gets amortized over five years, which is a short time period. So we had a catch up entry in depreciation and amortization in the fourth quarter. Morris Ajzenman – Griffin Securities: Okay, that explains it. So then just kind of guide me, both on a non-GAAP and GAAP basis, both numbers. What should SG&A run rates then be, using - I forgot what you said already what the pro forma number was, first the $4.4 GAAP. The $5.7 million GAAP number, what was the pro forma number?

Sure. I'm going to give you a number for total operating expenses, so it would include SG&A and R&D, okay? So excluding stock-based compensation and depreciation and amortization, the run rate is $5.5 million. That includes SG&A and R&D. That's total operating expenses. Then we would expect to have approximately $600,000 per quarter in depreciation and amortization and another $300,000-$350,000 per quarter in stock-based compensation. That would be the run rate for 2011. Morris Ajzenman – Griffin Securities: Perfect. Thank you. One last question. That helps clarify this a lot. The other question is you had numerous wins over the past couple of months, really to you credit, and I guess many of us are just waiting to see a win that becomes much more meaningful in rolling out to numerous distribution centers for any one customer. Any feel if we can see any of that near term happening, where a win becomes rolling out to 20, 30, 40 DCs rather than one or two or three?

Let me take a stab at that. With the introduction of PowerBox, we're working to become less reliant on those large revenue contributions from a single source. Having said that, the PowerBox offering absolutely complements what it is we're doing with the PowerFleet product line, which is the more sophisticated sort of enterprise technology. So the short answer is yes, in our forecast there is revenue contribution from system expansion and further penetration of the existing accounts, but again we are working to become less reliant on that in order to achieve a more predictable revenue run and sort of growth rate. Morris Ajzenman – Griffin Securities: I said two questions, but one last one. You touched on PowerBox. Could you give us some more feel, anything specific that's happening over the next couple quarters, that can help us understand how the acceptance is occurring there?

Yes, we're kind of at the tail end of the beta of PowerBox. We've begun the introduction of PowerBox to the channel, so as you know we have some very nice relationships with some channel partners. We've begun to introduce PowerBox. It's getting a fairly positive reception, which is exactly in line with what we would expect in light of the market research that we had done in order to justify the development of PowerBox. And our internal plan for 2011 relies on revenue contribution from PowerBox and we feel confident that we'll be able to achieve that.

And our next question comes from the line of Matthew Hoffman of Cowen and Company. Matthew Hoffman – Cowen and Company: I'm trying to get to the EPS number, Ned, and I think this time you've got a $0.12 number on the front page, a loss of $0.12, and the model's coming out at a loss of $0.20. You did mention the one-timers on D&A and then a sales incentive we'll call it, for the fourth quarter. Do you think that is entirely the $0.08 difference between the loss of $0.20 and the loss of $0.12? And if not, is there something else in there that is different in the 4Q calculation of EPS versus 3Q?

No. Like I said, between third quarter and fourth quarter, the major difference was those two items, the depreciation and amortization. We had a one-time catch up, and the sales incentive. Matthew Hoffman – Cowen and Company: All right. So I'm taking $700,000 off the SG&A number, just here in the model, and R&D, so that gets you down to SG&A at about $5 million, R&D $1.1 rounded, to $6.1, minus stock-based comp of $376,000, so it's rounded to $400,000. You still end up about two or three hundred over. And should we assume that that two or three hundred is the additional selling costs associated with AI equipment up front?

It's [inaudible] in that. I'm not sure exactly with your numbers, but it's a little bit less than that. Can you repeat your question of what numbers you're trying to figure out? Matthew Hoffman – Cowen and Company: I'm taking the GAAP SG&A number of $5.7, and then taking out the $700,000 in additional D&A?

Yes. Matthew Hoffman – Cowen and Company: What was the D&A the quarter before? Was it $100,000, $200,000?

$400,000 in the quarter before. Matthew Hoffman – Cowen and Company: So it's an incremental of $300,000. Just having a tough time trying to get to the actual pro forma EPS.

Oh, I'll give you that. So the net loss was $2.6 million GAAP. You have to back out $988,000 for depreciation and amortization, and $376,000 for stock-based compensation, and that comes out to $1.3 million. That's the non-GAAP loss, which is $0.12 per share. And if you look at our press release, there's a reconciliation of GAAP to non-GAAP on page four. Matthew Hoffman – Cowen and Company: Okay. Then we'll go through that. Let's move on. The deferred revenue, you called it out in your prepared remarks. It looks like it's primarily hardware-driven at this point. Is that accurate? Any services in that number?

There's a small amount of services, of pre-paid maintenance, but it's primarily hardware sales for Asset Intelligence. We, as I said in my prepared remarks, we had a very strong quarter and we saw deferred revenue go from $4.3 million in September to $6.8 million in December. So although those strong AI sales did not have an immediate impact in our fourth quarter revenue, because we defer and amortized our revenue, it would have a positive impact on the future periods. Matthew Hoffman – Cowen and Company: Is it going to be a four-year amortization? What's the lifespan of the deferred units?

Yeah, on average it is about four years. Matthew Hoffman – Cowen and Company: You gave a number also for - it was $3.6 million - and I didn't catch whether that was for PowerFleet, VeriWise, or can you go through the revenue splits by VeriWise or AI and PowerFleet?

It was 50-50. Revenue was $7.2 million. $3.6 was contributed by our industrial vehicle business, which was up from $2.8 in the previous year and also in the third quarter, and the other $3.6 was from Asset Intelligence and VeriWise. Matthew Hoffman – Cowen and Company: And on a sequential basis, the PowerFleet goes up $500,000-$600,000 sequentially?

In comparison to the previous quarter? Matthew Hoffman – Cowen and Company: Correct.

Yeah. It was $2.8 in the previous quarter, and $3.6, so it was an $800,000 increase. Matthew Hoffman – Cowen and Company: And the services component of PowerFleet was about the same sequentially?

Oh, that was combined. If you want the breakdown between products and services, product revenue for PowerFleet went up from $1.9 to $2.5, and services went up from $883,000 to $1 million. Matthew Hoffman – Cowen and Company: Perfect. I guess the last line of questioning is on the balance sheet. A lot of moving pieces here sequentially, and I want to make sure I understand what's going on. First, your A/R went up appreciably here, $2.3 million, a little bit more than sales. So what's going on with A/R. Looks like you pulled from inventory and the deferred costs go up, prepaid goes down. Again all of those were pretty steady items over the last three quarters. What's happening there with the balance sheet? Just take me through.

Are you comparing year-end December 31, 2009 to year-end December 31, 2010? Matthew Hoffman – Cowen and Company: No, I was doing a sequential. Now there's the possibility we - [Laughter] - well, we can go ahead and take that offline.

Because if you're comparing '09 to 2010 it is not a fair comparison because Asset Intelligence was not included in the numbers, and that is why you see the significant changes. If you compare it to the third quarter you'll notice that the balance sheet is in great shape. If you look at the cash flow, we were able to reduce inventory significantly. We had a major benefit, approximately $2.8 million. Receivables were reduced. So I would probably not compare 2009 to 2010 because the '09 numbers did not have Asset Intelligence. Matthew Hoffman – Cowen and Company: All right. We'll take it offline, and we'll look through the model together. Good, that's it for today. Thanks and good job on the top line guys.

Thank you. And our next question comes from the line of Walter Schenker of MAZ Partners. Walter Schenker – MAZ Partners: In responding to Morris's question, Ned, you laid out a general expense model of $5.5 million of operating expenses, stock-based compensation, D&A. Those are before R&D expenses?

No, that's all in. Walter Schenker – MAZ Partners: And the second question, the moderate increase, or the compensation increase in the fourth quarter for the sales force, is a change in the basic compensation structure, or a non-recurring type thing because you ran some sort of program to incentivize them?

That's exactly right. Walter Schenker – MAZ Partners: And just as an overview comment, clearly the company at this point has stopped hemorrhaging, but cannot - or it doesn't look like there's a dramatic ability - hopefully there's a moderate ability - to continue to cut costs, which means to get from here to any meaningful level of profitability, not cash flow but actual profits, requires some pretty good increase on the top line. AI is a very stable business. Growing, but relatively stable. Sequentially it will grow, but not by leaps and bounds. Therefore, the only way we get to dramatically - my term - higher revenues is in the traditional I.D. Systems business. Can PowerBox, given its model, get you there? Or do you need people like Walmart and the Post Office or some of the other larger companies to go from small numbers of units to 20, 30, 40, 50 type units a year?

Let me handle that. It really is a combination of Asset Intelligence - so you're right, it is a fairly steady business, but as we saw in the fourth quarter, there is opportunity for significant growth. And your remarks are absolutely right. The expense structure - we're pretty lean right now. There's not a lot of room for significant cost cutting initiatives at this point. So yeah, in order to achieve profitability, we do have to grow the top line. As I started to say, it would come from really a combination of Asset Intelligence, PowerBox, and also to your question, PowerFleet. So one thing we've seen is that by leading -in many instances when we lead with PowerBox, it gives our account executives in certain cases an ability to start talking also about PowerFleet. And one sort of unanticipated ancillary benefit of having the PowerBox product offering is that it's leading to some more sales of PowerFleet and we would very quickly get to our revenue targets with continued enterprise-type adoption like a Walmart, for example, of PowerFleet. That's reliant on any individual part, but really all three parts, if you will, PowerBox, PowerFleet, Asset Intelligence, there is revenue contribution from the product Ken described called SafeNav, in our model going forward. But really the combination of those product offerings that would result in a growth on the top line, which you're absolutely right is needed in order to achieve profitability. Walter Schenker – MAZ Partners: And last question, for the few of us who were at the annual meeting who are not part of management, one part of a give and take of a discussion - actually it was one of the directors - was the potential need, opportunity, whatever word you want to put, for this company to make additional acquisitions to get to a higher revenue stream. Can you just give us your thoughts as to how attractive that is at this point, or something you're seriously looking for?

You know, I will comment on that, Walter, and I don't mean to - you know, you and I have had this conversation before. I don't want to go down the wrong path here. But I will tell you that we are very pleased with the AI acquisition. We think that it was a great transaction for our shareholders. We think obviously we could do a lot more on the top line with the acquisition. We're working on that. But we think we've done very well integrating that business in a relatively short period of time. As a result of what I believe to be success, although obviously our goal is to generate profits - we certainly haven't done that yet - we are open to a proactive strategy to accelerate the growth of the business through inorganic means. Having said that, we're not currently in the throes of, you know, a negotiation for an acquisition. But it does remain, I think, an important part of the story here. So I don't know if that answers the question, but that's our philosophy on it.

And our next question comes from the line of George Melas of MKH Management.

First, on the AI business, it seems like you've had very strong sales in the fourth quarter. Can you give us a little bit of color? Is there some seasonality to those sales? Is the fourth quarter usually pretty strong? Does something else happen, or do you sort of see an acceleration of the business, partly for the new products that you have?

That's a good question. Thanks for asking, George. And let me give you a little color on the fourth quarter sales. The fourth quarter traditionally in the transportation industry is not a strong quarter for the business. Typically everybody's out running their trailers and they don't have the resources for the labor or the assets to do any significant installs. What the significant change was for us was the release of our low-cost GSMD 100 new MPI. And what that is is that's the device that came out underneath the trailer that's relatively low cost. There's not a full solution that monitors whether the trailer is loaded or unloaded, but it gives you basic tracking information through a terrestrial communication platform and very easy to install. Approximately half of our sales in the fourth quarter were attributed to that new product launch and that positioned us for the results that we had.

And this new product launch is really driven by hardware, sort of a new hardware that you developed?

Exactly.

Okay, great. And is your sense, would you see a pipeline, did you grow there, or was there just like a huge number of deals that closed and the sales were sort of, in a way, unusual. Do you see sort of a positive trend continuing there?

No, I think that was a stronger start than what we may see in subsequent quarters, but I see that product continuing to gain traction in the field. It's one particular product that opens up some new market space for us. We've traditionally played where our core competency is in providing solutions for our customers. This provides solutions for our customers in low-cost tracking as well. So that will continue to provide attraction for us as we go forward. Approximately half of our units in 2011 will be attributed to this particular hardware product in terrestrial communication. The reason we had such a strong start is we did a lot of presales through our demos with our customers and customers were kind of waiting for that product as we delivered and commercialized it.

And maybe a question on the PowerFleet and PowerBox side of the business. Do you see selling PowerBox mostly to some of your existing customers? For example, if we take a very large customer that you have, which is Xerox, which I understand has implemented in only one DC. Is that one way - is PowerBox a way to go back to Xerox and say - I understand that they're very happy with PowerFleet, but is there a way to say, look, you have more DCs, it's easy to implement, why don't you try that?

I definitely believe that by having PowerBox and PowerFleet it expands our ability to both attract new customers as well as penetrate our current customers, because they can look at where they achieve the benefits and then we can focus them on the elements of PowerBox that help attribute those benefits. So it definitely gives us more to talk about when we're talking about expansion within an existing account.

And then maybe continuing on that, it seems like the relationship with Raymond is quite significant. Could you have a similar relationship with their [inaudible] branch, or somehow that would be difficult given the relationship that you have with Raymond?

That's a good question. They are competitors, obviously, because they both sell industrial trucks, but they don't exactly target the same industry. So we do have relationships. We are getting business through our Yale and Hyster relationship as well as Raymond. And when we are trying to sell PowerBox, the channel we're looking to penetrate is both the Yale, Hyster, and Raymond channel. So because of those relationships, hopefully it's going to make the introduction of PowerBox through those channels easier.

Thank you. And our next question is a followup from the line of Matthew Hoffman from Cowen and Company. Matthew Hoffman – Cowen and Company: Ned, a couple of followups here. First, the balance sheet. You made me doubt my numbers here. But I was looking at 3Q '10 versus 4Q '10 comparison on A/R. So again, we're just going to compare the sequential changes in accounts receivable versus the sequential changes on the income statement.

Sure. Matthew Hoffman – Cowen and Company: A/R is up $2.4 million. Generally that would be a negative here for cash flow, but you had a decent OCF quarter. You recognized $800,000 from inventory. Your deferred costs go up by about half a million dollars as well. Prepaid goes down. So I'm just trying to make sense of that big A/R number versus the other perhaps helpers here on the balance sheet, but still trying to reconcile the changes because those items did shift around a lot. So just step us through what happened on the balance sheet, and what the dynamics were, line by line, if you wouldn't mind.

Well, accounts receivable, that's a big number, Matt. And what happens is the AI new unit sales, although we do not recognize any of that revenue, we invoice and collect that. So because of the strong fourth quarter in new unit sales, we had a large amount of new invoicing that went out and that's why the accounts receivable went up. So it doesn't really affect the cash flow, because you don't recognize the revenue, but you do invoice those new hardware sales, and that's where you saw an increase in A/R. Matthew Hoffman – Cowen and Company: Okay, so in this case there's no revenue attached to the A/R. You simply put it on the balance sheet because in this case there is a P.O. that's been written?

We basically received orders for new hardware, we shipped the hardware. We invoiced the customer. However, we do not recognize that revenue under AI. We actually defer it so it goes into deferred revenue. Matthew Hoffman – Cowen and Company: Okay. No part of it was - okay, we'll just leave it at that. That helps with that. The second - I want to come back to the amortization and the EPS because I did not exclude amortization from my number in the third quarter, and now to exclude the amortization - the full amount of the amortization gets us to $0.12, but without it it's another $300,000. So I just want to make sure I have the amortization right. The absolute number for 3Q, so I get a solid compare here. And I went back to the last press release and didn't have an amortization number. What was the actual number for 3Q '10 for amortization?

Could you repeat the question, Matt? What were you looking for? Matthew Hoffman – Cowen and Company: What was the absolute amortization number for 3Q '10?

$477,000 was the total depreciation and amortization for the third quarter, and it was $988,000 for the fourth quarter. Matthew Hoffman – Cowen and Company: Now on a moving forward basis, as we put numbers in a box for first call, do you want the full amortization number excluded? Or do you want the $600,000 run rate? How do you want that modeled moving forward?

In my personal opinion, I think you get a better feel for the business if you exclude depreciation and amortization and stock-based compensation. You get a much better feel on how the true business is doing. Matthew Hoffman – Cowen and Company: All right, so that's a change from historically, where we haven't excluded amortization. I haven't, from what I submitted, but it's better to get these things cleaned up on the call than -

The reason being is prior to the Asset Intelligence acquisition, the depreciation and amortization for I.D. Systems core was minimal. But now, because of the amortization of the intangibles, it will be $600,000 per quarter going forward, so it's a significant number. And I think by excluding it you get a much better feel for the true SG&A of the business. Matthew Hoffman – Cowen and Company: Good, good. No, it makes sense. I just want to make sure I have the numbers in the right place so that things work in the model. All right, thanks, and good job again guys.

[Operator Instructions.] Our next question is a followup from Morris Ajzenman of Griffin Securities. Morris Ajzenman – Griffin Securities: I'm also going to go back to the SG&A number, just for clarity's sake. I just want to make sure I have the full process correct here. $4.4 million on a GAAP basis in the third quarter, $5.7 million on a GAAP basis in the fourth quarter. So SG&A all [inaudible] $1.3 million, and then Ned you told us that D&A, a component of that increased $700,000. Correct so far?

D&A in the third quarter was $477,000 and it was $988,000 in the fourth quarter. Morris Ajzenman – Griffin Securities: So it increased not $700,000, it increased $500,000?

Correct. Morris Ajzenman – Griffin Securities: Okay, so I had $700,000 initially. So D&A - on the $1.3 million increased sequentially, $500,000 D&A, correct?

Right. Morris Ajzenman – Griffin Securities: So then I get $1.3 million left increase in SG&A on a GAAP basis. Is the bulk of that due to the sales incentive?

Well, about $100,000 is due to stock-based compensation, and then there's a big percent of it is due to the sales incentive. Morris Ajzenman – Griffin Securities: A large portion of that. Just correct me if I'm wrong on this, you say you don't expect that to repeat in the near quarters? Is that correct or not?

That is correct. So if you look at our total operating expenses - just want to repeat this more - excluding depreciation and amortization and stock-based compensation, will be approximately $5.5 million going forward. We will have $600,000 in depreciation and amortization and approximately $300,000-$350,000 in stock-based compensation. Morris Ajzenman – Griffin Securities: Understand. But I just wanted some clarity. From the third quarter to the fourth quarter a large chunk of that incremental $800,000 increase beyond the D&A was sales incentive.

A large percent of that, yes.

And our next question is also a followup from the line of George Melas of MKH Management.

[inaudible] talking a bit about the airport business. I think at this point you have two major customers, American Eagle and American Airlines. I think it must be hard to run the business possibly with just two customers. How do you see that business evolving? There's not that many customers in the states. There's not that many large airlines? Can you tell us a bit about what your plan is there?

I'll try to be brief because I think we even have some followup calls. But basically what we're trying to do is get a new technology adopted in the industry. It has taken time, as you know, but with the use of our system every day by both American and American Eagle Airlines, as the word gets out in the industry about all of the benefits that they're getting, which have been enumerated on a number of calls in the past, we're hopeful that we're going to start seeing expansion to the other airlines. Needless to say, it's a pretty significant market opportunity for us with nearly a million vehicles at airports in the US alone. So we're just at the tip of the iceberg in this industry. But what's nice is it's the same technology as PowerFleet and PowerBox.

Can you tell us how many [inaudible] luggage carriers you're installed on at American Eagle or Airlines?

It's north of 500 I'm pretty certain, but I'm not sure of the exact number.

And our final question for today comes from the line of Mike Wagner, a private investor.

Great quarter. I was really happy with it.

We appreciate that.

I have two questions. Number one is we're70% through Q1. Do you expect sequential top line growth in Q1?

Let me handle that. We don't give that level of guidance at this point. Ultimately we intend to move in the direction of being able to give guidance, but we're still in a mode where there's some lumpiness and unpredictability. So we've done a lot, I think, to mitigate that issue, but we haven't turned the corner yet to the point where we're comfortable giving quarterly revenue guidance.

Okay. Then the second question is during the November analyst day, I think it was Jeffrey, you talked about the rental car opportunity, and you stated that you expected to have some clarity on whether or not there would be a larger implementation of that opportunity by the end of January. Do you have any material update on the rental car opportunity? In terms of a potential larger implementation?

Are you reading from a transcript of comments that I made?

No, I listened to the analyst day call.

We're pretty excited about what's going on on the car rental industry. If you follow the industry, what you'll see is there's a move by the top car rental companies toward a concept called car sharing, which a good way - I don't want to get too mired down in the detail, but a good way of thinking about that is like the Zip Car model. And many of the large players are moving toward that model. And in order to do so, it's very much technology-reliant and technology-driven, and based not only on our patent portfolio but on the success that we've had - although it's been small from a revenue standpoint, it's been fairly significant for other reasons. We think we're very well-positioned to capitalize on the growth that's expected in that industry, primarily around car sharing. Having said that, we don't have significant resources at our company devoted to selling that technology. So there's not a very large expense below the gross margin line allocated towards selling of the car rental technology because it's very tight knit and a market that's controlled by a few players, so you don't really need a sales force. So we are focused on it. It's not a huge drain on our resources. And we do, and I think we have disclosed this publically, we do have an ongoing program that we're working on with a major car rental company for both automated rental and return as well as car sharing. But we're sort of precluded from disclosing much more than that.

Okay, so there's no timeline commitment that you can share on the call I guess?

Let me say that we're optimistic, but I cannot unfortunately give you guidance as to timing.

In terms of quantifying that opportunity, how many units for the check-in, check-out could you potentially have with this customer?