Revenue for the fourth quarter of 2006 was $17.9 million, compared with $9.4 million for the fourth quarter of 2005 and $12.9 million for the previous quarter ended June 30, 2006. Net loss for the fourth quarter of 2006 was $0.3 million, or $0.01 per basic and diluted share, compared with a net loss of $10.1 million, or $0.23 per basic and diluted share, for the same period in 2005. The Company's net loss for the third quarter of 2006 was $5.3 million or $0.12 per basic and diluted share.

Gross margin for the fourth quarter ended September 30, 2006 was 72 percent compared to 58 percent for the quarter ended September 30, 2005, and 55 percent for the quarter ended June 30, 2006.

Total operating expenses for the quarter ended September 30, 2006 were $14.6 million compared to $16.6 million for the quarter ended September 30, 2005 and $14.4 million for the previous quarter ended June 30, 2006.

Cash used in operations for the quarter ending September 30, 2006 was $3.6 million compared to $3.0 million for the same quarter in 2005 and $1.2 million for the previous quarter ended June 30, 2006.

"The fourth quarter ended a year of revenue growth and improved operational efficiencies for ActivIdentity. I am delighted by the support of our staff and executives who have worked together to implement changes, focus our business and deliver on our plan for 2006," said ActivIdentity Chief Executive Jason Hart.

"In fiscal 2007 we plan to grow our top line revenue by focusing on our market strength and experience in providing employer to employee smart ID solutions and government to citizen ID solutions, while building our business together with our key partners. In addition we plan to continue to concentrate on simplification to increase our operational efficiencies," Hart continued.

"We are encouraged by the positive trends in the business and expect these trends to continue into our next fiscal year. Although we expect the business will continue to be subject to seasonal variations, we believe it will generally grow inline or better than our market sector," Hart added.

Financial Highlights:

• Revenue: ActivIdentity's 90 percent quarterly year-over-year revenue growth in the fourth quarter of fiscal 2006 was the result of several factors, especially growth in the government sector. Additionally, the Company increased deferred revenue by $5.2 million during the fourth quarter of 2006. For the fiscal year 2006, ActivIdentity generated revenue of $53.4 million, an increase of 27 percent from $42.2 million for the year ended September 30, 2005.
• Net loss: ActivIdentity's net loss per basic and diluted share of $0.01 for the fourth quarter of 2006 concluded a year of steady earnings improvement. For the fiscal year 2006, the Company posted losses of $22.5 million, or $0.50 per basic and diluted share, compared with a net loss of $47.9 million, or $1.11 per basic and diluted share, for the fiscal year 2005.
• Cash Position: Cash (including short term investments) at the end of fiscal year 2006 was $128.0 million.

Operational Highlights:

• Customer Base: ActivIdentity closed 14 significant wins to new and existing customers in the quarter. The Company sold its smart employee ID and citizen access card solutions to a broad base of customers across multiple vertical markets in the fourth quarter of 2006; in particular, sales to the government sector grew.
• Key Partnerships: ActivIdentity continued to leverage its strategic relationships during the fourth quarter, delivering on new major projects in the U.S. and Europe with EDS, Novell and Unisys.

First Quarter Business Outlook

The company expects first quarter 2007 revenue to be in the range of $13.5 million to $15.0 million with a loss of between $0.08 and $0.11 per basic and diluted share. Cash (including short term investments) are expected to increase to between $128 million and $130 million.

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