Revenue for the first quarter of 2007 was $14.6 million, compared with $11.5 million for the first quarter of fiscal 2006 and $17.9 million for the previous quarter ended September 30, 2006. Net loss for the first quarter of 2007 was $1.39 million, or $.03 per basic and diluted share, compared with a net loss of $8.6 million, or $0.19 per basic and diluted share for the same period in 2006. The Company's net loss for the fourth quarter ended September 30, 2006 was $0.3 million or $0.01 per basic and diluted share.

Gross margin for the first quarter ended December 31, 2006 was 69 percent compared to 62 percent for the quarter ended December 31, 2005, and 72 percent for the quarter ended September 30, 2006.

Total operating expenses for the quarter ended December 31, 2006 were $13.7 million compared to $16.1 million for the quarter ended December 31, 2005 and $14.6 million for the previous quarter ended September 30, 2006.

Cash and equivalents (including short-term investments) increased during the quarter by $7.9 million to $136.0 million compared to an $8.5 million decrease in cash and equivalents for the quarter ending December 31, 2005 and a $9.0 million decrease in cash and equivalents for the previous quarter ended September 30, 2006.

"I have been pleased with the way the company has regained focus in the past year and this has translated into increases in our sustainable revenue while simultaneously reducing our operating expenses," said Jason Hart, chief executive. "Even though our first quarter is traditionally impacted by cyclical factors, I'm pleased with the significant progress we achieved in year-over-year revenue growth and continuing expense reduction.

"We have focused our sales efforts on increasing our market share lead in providing our Smart Employee ID badge solutions to our large commercial and global government customers. We not only continue to experience sales success with world government organizations, but are seeing an increase in private sector enterprises looking to include our government grade identity assurance as a component of their security posture. I believe the company is now at an inflection point and is positioned for growth."

Financial Highlights:

• First quarter revenues grew 27 percent over the same quarter in 2006.
• Q1 Operating expense of $13.7 million was a 14.5 percent reduction over Q1 2006 operating expense of $16.1 million.
• Cash and equivalents (including short-term investments) increased by $7.9 million.

Operational Highlights

The company has now completed the implementation of a new Oracle ERP and CRM replacing multiple redundant systems and manual processes. This is intended to provide improved management visibility and operational efficiency.

ActivIdentity has announced new solutions for corporate enterprise delivered through partners including Citrix, Microsoft, Novell, and Sun. These new solutions leverage the company's reputation and experience in providing government strength identity assurance solutions.

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