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This interview is a small excerpt from a comprehensive interview published in The Wall Street Transcript as part of the Technology Sector, available at (001-212-952-7433) or http://www.twst.com/sectors/techno.html

TWST: It is often helpful, even though we’ve interviewed you in the past, to start off the interview with a quick overview of the company, including your products, services and core markets.

Mr. Zouker: The Company deals with high risk security and high-tech security. We’ve done it for the last 20 years. We were called in for the Lockerbie Pan Am bombing in the 80’s, for the Gulf War special security problems, and of course in the aftermath of 9/11. Basically the U.S. Government had problems with high-risk situations and called on our help. We started the business, as you know, in Europe, giving security to American carriers—American Airlines, United, US Air, all the main U.S. carriers flying to Europe and from Europe to the U.S. We provided the services in Europe, when Europe was considered high-risk. The U.S. was not considered a high-risk country prior to 9/11, so the regulations here in the U.S. were a little bit different than those in Europe, and in Europe there was substantially higher security. So we developed our systems with the support of the FAA, which was in charge at the time. We developed computer systems which evaluated the passengers before they came into the airport, getting the information from our computers, sending it back to the airline computers, and basically screening the passengers, identifying their identity before they arrived to check in. This is the system we used in Europe prior to 9/11. Mostly after 9/11, the U.S. government changed priorities and the U.S. became a high-risk area too. So we started implementing part of our systems with the FAA, then with the TSA as the newly formed government agency. The industry was highly regulated by the government prior to 9/11. After 9/11, all the regulations were imposed by government agencies, and the airlines or those who give services to the airlines have to adhere to those guidelines and those functions. For example, before 9/11 it was permissible for passengers to come into airports with knives. Government regulations would allow you to go into an airport or an airplane with a knife up to four inches long. After 9/11, it changed and you’re not allowed to do that any more. Those who changed it were the government. So a lot changed after 9/11, and systems and regulations that were high-risk, like in Europe, started to be implemented. Another change, with the formation of the TSA, the government took over all our manpower positions, the checkpoints. Basically the government took over our entire business. From ICTS’s point of view, we used to have close to 10,000 employee positions that were taken over by the government. A substantial part of our business was taken, or simply appropriated by decree, by the end of last year, and this imposed many changes in the company. For example, respecting our position in Europe, we sold most of our operation there two years ago, but we left the people that were partners in working with the local authorities in Holland and other places. We continue to service American carriers and others. Obviously we’re not going out and doing supervision at the airports. Lately we just got a new contract in Schipol airport in Amsterdam and this involves substantial manpower, but that’s in Europe. In the U.S., we started prior to 9/11 as a matter of fact, with tests in improving security without harassing the passengers. Most of the time, if you increase security, it takes more time for the passengers to be screened, checked and rechecked. We believe that the answer lies in implementing high-tech security, which means basically “borrowing” the time before the passengers arrive to the airport. The airlines and other agencies have a lot of information about the passengers before they arrive. They buy tickets on international or domestic flights where you can see a lot of information about the passenger. And so with the permission of the passenger, if the passenger will allow it, the government will also follow. Then you can create a system where a lot of the questions and identification of the person can be done before the passenger arrives at the airport. If you can gather the information in a manner that is smart and store this information in a format that can talk with other computers at the airport, then you can speed up the process for the passengers. This way, very ordinary information is known about some passengers, and we believe that a lot of passengers will be ready for that, because we can save a lot of time and hassle and they have nothing to hide.

TWST: Could you briefly outline what that product does, and your hopes for it to make air flight safer?

Mr. Zouker: We are doing what we’ve done in Europe in the past with the authority of the European authorities and the American authorities. Basically, the night before the flight, an international flight, we have all the information in the computers of the airlines about the passenger. When you go international, we have your passport, your name, your itinerary, where you’re coming, where you’re going, frequent travel information, so that is enough information. You don’t have to ask because it’s there. So we would download this information, assess it, compare it to the watch list, the FBI watch list, or any other that the government wants. After assessing the information, we have enough time to do it, we automatically send back a signal to the airline computers to verify that this passenger has been checked. If you have enough information about him already, he is cleared, and if you don’t have enough information, it doesn’t mean that he is a threat, just that we do not have enough information about him. So we have to do a more thorough check by questioning him on his arrival at the airport or going through his luggage. Because of this system, which we developed in Europe, we were able to implement high security measures with American carriers going from Europe to the U.S. After 9/11, we’ve gathered enough experience and methods to use this system in such a way so that the passengers are really getting much better security, while still giving us much more time to assess the threat, and without so-called harassing the passengers while they’re in the airport. Their valuable time while they’re in the airport is not being wasted on things we can do prior to their arrival. So what we thought is, to go to the next level, basically have this information on a smart card given to the passenger. It’s very important, this element. We do not want to create a “Big Brother” watching, or information storage. We do not store in any computer anywhere any information at all about the passenger. What we are doing is putting all the inclusive information on the passenger’s own card so that the passenger can go through the airport smoothly, and so that his card is clearing the way for him and talking to other computers where necessary. It’s the passenger’s own information. We are coding in his birthday, frequent traveler statistics, passport, his picture and I.D. and biometrics on a smart card which belongs to the passenger. We do not store this information. We do not hold this information. This is the passenger’s own information, and we give it to him in a manner that can expedite his travel in the airport Basically what we’re doing, is speeding up known information. And those who are known, we know about them, you know, he’s an executive in IBM, or he’s a government official, or maybe he’s a police officer, we have enough information about the person; we say okay, we just do a routine check, you know, maybe somebody gave him without his knowing something which could be a hazard to others, and then we let him go through. Those who we do not have enough information about, it doesn’t mean they are bad, it doesn’t mean that they’ve done something which they were not supposed to do, but we do not have enough information. So we talk them to get this information in a polite manner. They keep this card, not us. So next time they arrive, all that we have to do is to make sure that the man or woman who is coming with the card is the same person who it was issued to originally. That’s the biometrics part, to make sure it’s the same person. And the second thing we’re checking is that nothing changes, for example their status from the last time they traveled. It takes 30 seconds and you’re good. So we started in Europe first, with US Airlines going from London to the U.S. Then the second step was Continental Airlines, a flight going to Tel Aviv. Now in the third stage, already in operation, we’re doing round-trip Continental flights from Newark going to Amsterdam and from Amsterdam to Newark. So the passenger can use this card on the round trip. And we are in negotiations to extend our program in the US, first to international flights and then to domestic flights as well.