Revenues for the quarter ended March 31, 2007 were $14.9 million, compared to $11.1 million for the quarter ended March 31, 2006, representing annual revenue growth of 34%. Revenues for the quarter ended December 31, 2006 were $14.6 million.

Net loss for the quarter ended March 31, 2007, decreased to $3.4 million, or $0.08 per diluted share, compared to a net loss of $8.3 million, or $0.18 per diluted share for the three months ended March 31, 2006. Net loss for the December 2006 quarter was $0.03 per diluted share.

Second Quarter Financial Highlights:

• Gross Margins were 62 percent or $9.2 million for the second quarter ended March 31, 2007 and compares to 59 percent or $6.5 million for the second quarter in 2006.
• Total operating expenses for the three months ended March 31, 2007 were $14.5 million which compares to $15.6 million for the quarter ended March 31, 2006.
• During the second quarter 2007, net loss decreased to $3.4 million compared to a loss of $8.3 million reported for the second quarter of 2006. Net loss during the quarter excluding amortization of intangibles and technology as well as stock based compensation was $2.3 million compared to a loss of $6.2 million for the same quarter ending March 2006.
• Cash and cash equivalents (including short-term investments) were $130.7 million for the quarter ending March 31, 2007.

"The company continues to execute against its plan as it moves toward operating profitability and continues to show revenue expansion. The results of the second quarter in 2007 reflect solid growth in our enterprise markets where we saw a strong uptake of our Smart Employee ID solution," said Jason Hart, ActivIdentity's CEO.

"We have focused the business on our primary markets in government and enterprise and we continue to see the early results in our revenue and pipeline. We believe the company is at a critical inflection point as the market is growing and ActivIdentity is able to leverage its previous investments with a first to market position," stated Mr. Jason Hart.

Second Quarter Business Highlights

• During the quarter, the company successfully secured sales to large international police organizations and various international government defense organizations.
• Also, during the second quarter, ActivIdentity was recognized by the U.S. Department of Commerce for "Excellence in Innovation".
• In February, ActivIdentity announced the release of its new "ActivIdentity Solutions for Microsoft(R)" product line, including support for enterprises deploying Microsoft Windows Vista(TM). The ActivIdentity Solutions for Microsoft product line builds upon the company's strong heritage in securing international governments, offering enterprise customers a suite of fully-integrated products designed to address the most stringent identification, security and compliance requirements.

Third Quarter Business Outlook

ActivIdentity anticipates that revenues for its third quarter of fiscal 2007 ending June 30, 2007 will range from $15 to $16 million, with a loss of between $0.06 and $0.09 per basic and diluted share. Cash, including short term investments, is expected to decrease to between $128 million and $129 million.

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