4Q07 conference call, 03/13/08

Jerry Feeney: Thank you. Good afternoon everyone: [disclaimer][Review of Press Release]

Steven Sprague: Thank you Jerry. And, thank you everybody for joining us on today's call. We appreciate your interest and your support.

Let me start by just articulating that I really believe the hardware security market is now appearing with some substantive strength. I'd like to bring a couple of examples to that, and also talk a little bit about I think what's driving that, and then we'll get into discussing the current enterprise sales, some of our recent announcements and conclude with some our future developments that we're working on.

So let me start by articulating that the hardware security which is really now embodied in both the form of the Trusted Platform Module and hardware in the Seagate Full Disk Encrypting Drive is really something that's going to become a necessity for everyone.

We've seen some very interesting developments over the course of the last few months, which really are embodied in the form of some of the very large systems integrators who have contacted us and said, "We now need to know about this, because our customers are asking about it. We need to understand how do we implement it; how do we turn it on; how do we leverage hardware security, both in the form of the TPM and in the form of the Full Disk Encrypting Drive." In many aspects the larger systems integrators have had greater interest in the TPM side than in the data protection side, on the drive side.

We've also seen interest from a number of the large accounting firms and some of the big consulting organizations as well. And I really think that this is being driven by the fact that their customers are beginning to look at the platform at large and say, "Wow, we have Trusted Platform Modules on almost every one of our laptops. How do we leverage this technology?"

And so people have either seen something that's been written or heard about how they can enhance the security of their authentication and data protection, using the Trusted Computing Group Standards. And we are definitely seeing a substantive increase in the level of interest from the people who I believe influence the market's adoption on a broad basis of these technologies.

Having said that, I also think that a couple of weeks ago we had a very significant event happen from an attack side on the software solutions. I'm sure most people have either heard of or seen coverage on the cold boot attack, where the Princeton engineers successfully were able to extract key information out of the memory of a computer. Now, there was a certain amount of sensationalism around the fact that I can take a Freon can, turn it upside down and spray it on a memory chips, and cool them down, and isn't that exciting. The reality is however that that while makes for good press coverage, the real break was that PCs that are left in standby mode, where the memory of the computer has power continuously to it, are at risk. And in many aspects, if you close the lid on your computer and look, if the little light's on on the back of your computer, therefore it's in standby mode, then that's an indication that the keys that you use for authentication, to connect to your wireless, to connect to your email, if you have full disk encrypting software deployed, are potentially at risk. And the solution to this problem is now to put any software keys that you have on a platform and hold them in hardware, in the form of a TPM, and/or for data protection leverage Seagate's Full Disk Encrypting hard drive as a component to secure the keys and encryption engine for data protection in the drive.

And so it becomes a very interesting challenge because most organizations today are deploying encryption not only to protect data, but also to prove that data was protected in the case that a laptop was lost. And now to not only do they have prove the encryption was present they also need to prove the state of how the machine was powered off.

And we provide a solution in what we're shipping today with the Seagate Full Disk Encryption solution that completely eliminates that problem.

And so we've seen, certainly some customers aren't paying attention to it. There are also, I would say, some very large customers who are very focused on the fact that their systems are at risk. They didn't really understand how easy it was to break. Almost everyone understood that keys held in memory were at risk. I don't think anyone really appreciated the fact that in a dorm room in Princeton with no equipment you could in essence read all those keys out of a reporter's laptop, which is in essence what was done, and was done in the period of a single interview, so call it an hour or two.

So this is something that I think will really help our market in driving the adoption of hardware to protect the keys and information that's within the platform. Hardware is a very well understood science. We use it everyday in the form of our cell phones, set top boxes, etc.

So let me talk a little bit about some of the key developments since our last call. It's been awhile and it's always a broader period at this time of the year.

So really the most important event is that Dell began shipping Seagate's Full Disk Encrypting Hard drives as a standard factory install versus a custom configured image. That happened, really was completed by the beginning of January. We were hoping actually at the Q3 call that this would have happened a number of weeks earlier, but for a variety of reasons it took until after the holidays to get it fully completed.

What that means now is that you can go to any Dell website, anywhere in the world and order a Latitude 630 or Latitude 830, and when you go to customize that PC you're offered a Seagate Full Disk Encrypting Drive as an encrypted drive option. The pricing varies depending on which website you go to but it's typically in the $60 to $100 option. And when you order that drive it comes completely preconfigured in the machine with our software installed. Wave is paid on every drive. We're paid a little more than $7 per drive when that drive is actually ordered.

And we then work with the customer either before they order machines or after they order the machines to up sell them on our server software. And we'll talk some more about how those actual enterprise upgrades are going.

As part of this availability of the Seagate drive, on a very broad basis, Dell ran an advertising campaign around the theme of The World's Most Secure Notebook which was pretty broadly available. It was in the Sunday New York Times; it was on the back of The Wall Street Journal's first section as a full page; in Fortune; in a couple of other places. And we really, that was, very helpful to us. I think it helped to signal not only to the Dell sales force, but to customers, and to others that this is a technology that's important to Dell, and important to the customer, and really provides a solution where if you combine Dell's existing security practices with Wave's software, with a Seagate drive, you really can produce a very secure notebook in the market.

Another major event that was announced was we renegotiated our Dell contract. During the period of 2007 Dell re-competed their business around security software in the, across the board. We successfully won that business. We were also able in that negotiation to be able to increase our pricing, really to provide additional functionality. We think that there's a tremendous opportunity to even more broadly enable these platforms and demonstrate the differentiation that we help to bring to our partners in offering a full secure solution on the platform. So we were very pleased to successfully achieve that. We look forward to shipping with them for the ongoing future. The current contract extension extends through 2011. Having said that that gives them the right to buy our software. There is no specific obligation that they ever have to, but we are today carried across their commercial line. So all of Optiplex, all of Precision, all of Latitude. If you buy one of those machines our software comes preinstalled and is available for you to take full advantage of the hardware security components within your platform.

We also announced a relationship with NEC Computer in Europe. They are bundling our software with Seagate Full Disk Encrypting Drive. We help to manage the Trusted Platform Module as well as the Full Disk Encrypting Drive. We are pleased to have added NEC. And they've begun commercial shipments, and they're really just supplying the first machines into the market.

We also announced a distribution agreement with Frontline, that brings us we think much stronger Asian distribution. They have been through training. We have a number of customer opportunities that we're pursuing with them today. We are very pleased to be partnered with them. Frontline was actually recently acquired by British Telecom. So today we have I think a very strong partner in Asia who is helping to distribute our technology into the market.

We also announced that we've exceeded over 20 million copies of EMBASSY Trust Suite that have been shipped to market. That's the full version of our software that's in the box. It provides a very strong suite of capabilities. Anyone who has EMBASSY Trust Suite can now leverage their TPMs in connection with networking equipment like VPNs and wireless access points and other things, provides the basic tools for how I manage and take control of the Trusted Platform Module.

So beyond the EMBASSY Trust Suite, we supply a suite of server products. And the primary purpose of the server product is to both manage and control the Trusted Platform Module and manage and control the Seagate Full Disk Encrypting Drive. We've built a single server that does both, so a customer who invests in our server infrastructure gets management for all their client hardware devices. We think that's a very valuable differentiation for us in the market. We have support today to manage our client software across a multitude of different platforms in the market and provide a solution that an enterprise really can deploy against a mixed environment of not only machines that they bought and acquired from Dell, but machines that they bought and acquired that many not have had our software shipped on them originally.

We have a number of accounts that have matured. I thought I'd highlight a few accounts. We have a number of new large companies. We have a manufacturer with over 17,000 employees who is now buying drives and Wave's software. We have another opportunity that is in Europe where a company with over 25,000 employees is buying Full Disk Encryption as part of their new machines in the form of the Seagate Drive and as well as our server software with every one of those units. We have a multi-national that's US based that has 27,000 employees that we also recently just added under contract. In general, most of these organizations are not going out and buying 10,000 new laptops at a chunk. What they do is, they typically buy a few dozens of seats or a few hundred seats. They use that as a pilot test. The pilot test matures into a decision that their standard machine image is coming with a Full Disk Encrypting Drive from Seagate, and therefore with every one of those machines they buy a server license as well. That's a very typical process we see for a large customer. We have actually quite an array of pilots going on, and I'll talk about those in a minute.

We also have some smaller customers that are in deployment. Where systems have been shipped. The customers have installed them. They're operational today.

We have a couple sort of medium size health care providers. We actually just began deployment to an opportunity that's in Eastern Europe that was brought in through Dell.

We have a number of government opportunities that we're pursuing as well. There are a couple that are full installations running today. We have a number of legal firms and others in the market that are in the process of deploying the solution.

So we're seeing a very horizontal approach to customers who are buying the solution.

The other thing that I think is also very important is that we see reorders on this. So it's not just securing a customer for the first time, but how did they feel when they deployed the technology? What it operational? Did it server their needs? And, were they comfortable to reorder additional units?

We have a customer today that has over 500 seats installed who is reordering. We have another one with over 200 seats installed who is reordering. So we this on a continuous basis. It's now numbering in more than a single hand of accounts that are reordering on a pretty consistent basis new machines, because they basically made the drive standard as part of their image.

I think it's also important to articulate here how the Dell procurement works, if anybody hasn't had experience with buying Enterprise machines from Dell. Most of us have had the consumer purchase experience where you go to a website, you configure your individual PC with all the different options that you want. What Dell does that makes it very easy for their customers is they allow you to have a custom web interface into Dell where you can configure a preferred unit and then save those settings, so that if you want to order ten more of that same unit you don't have to go through and re-configure each time. And typically once those units are packaged up, a customer who is ordering hundreds or thousands of them, will then negotiate pricing with Dell for that fully packaged unit. And so we have a number of customers who have Full Disk Encryption as a standard component on their preferred page. They have our EMBASSY client software, as well the EMBASSY Remote Administration software and maintenance, as a standard component of their buy. So when they purchase a laptop that entire suite of software is automatically purchased every time they add another machine.

So that's important to us because the more customers we can move into that mode the higher the probability that we can predict what next month's revenue or next quarter's revenues are against these customers who are on a reorder basis. That hopefully will ultimately make up a very large chunk of our revenue. It almost looks as recurring revenue, although it's really purchases of new machines. And that should remain as the case until we fully saturate an account, which I think is generally reasonable to consider that it should be somewhere between a minimum 30 months / maximum probably 48 months kind of period, as you think of a 2 1/2 to 4 year life for a typical machine.,

One of the things that's very exciting to us is that we have evaluation kits that are out in the marketplace today. These are evaluation kits that are both supplied by Wave and/or supplied by Dell. We actually handle all the logistics support for them, so we ensure which customers have them. We support the customers directly. This is where a Dell salesperson today, if they have an account that's interested in Full Disk Encryption as part of a new machine, we can tomorrow morning have on your desk a server and a client preconfigured so that you can fully evaluate the Seagate Full Disk Encrypting Drive, its attachment to the server. You can do things like delete the drive, etc. We really take the busywork out of setting up a bench-scale test system and provide it to you preconfigured. Ultimately, then the customer sends those machines back to us. We repackage them and send them out to another account. We have today about 60 kits that are assembled, most of which are out in circulation in some various form and available to the Dell guys to distribute.

We today have some, I thought I'd just highlight some of the larger accounts. We have a company that has 120,000 employees with 25,000 laptops. They have systems in test. We have another one that is an 85,000 employee organization with 25,000 laptops in evaluation. A 45,000 employee firm with 15,000 laptops. Another customer who I don't know what their total employee count is, but they are consuming about 10,000 PCs per month right now, and they're also in full evaluation. And, a 110,000 employee firm that could actually represent for us a 40,000 unit opportunity this year, if they decide to carry it all the way through.

I'll use that one as an example where I would say we're really past the first phase. They took an evaluation kit. They were comfortable with it. We've provided them with server software. They've now set up inside their lab an infrastructure. They are in the process of educating senior management on their desire to make Full Disk Encryption and the use of the TPM as a standard component in their deployment of new machines. And, they've given us a time table that says that early summer is their decision point. So I would certainly hope that early summer doesn't turn into September. But we'd like to see that they continue down the path that they're on. That they select our software and FDE drives as part of that. We're very excited to be working with them to help them accomplish this.

We also have an organization that I'll highlight differently, which is one who has a fully deployed test at this point in time to evaluate TPMs for 25,000 machines they already have in their enterprise. And that's also very exciting for us to see, because with 20,000,000 seats of client software out there, as we unlock the value for people to understand why they should use their TPMs, we generate around $50 per seat in revenue to Wave every time one of these customers upgrades.

And so it provides for us almost $1 billion of potential upgrade as the world learns to take advantage of the hardware security they already own, that's built into their machines.

I will say that this is not without its challenges. I just met with a firm the other day that's a very large organization and top management was unaware, while they were excited about what TPMs were, they were unaware that all of their laptops had TPMs in them already. They were thinking it was a new technology that they were buying, and they were somewhat surprised to discover that all of the machines that they had purchased for the last couple of years had TPMs in them.

So we continue to fight the challenge of just raw education about this market. It is getting better, there's no question about it, but I'm continually surprised by the number of people who have a technology broadly deployed in their enterprise that they could use today, that they just don't know is already in the platform.

So let me talk a little bit about government. We have as we have talked about in past calls, Wave has put a lot of energy into our government relationships. We have a couple of deployments that are up and operational. Software has been delivered. Customer is happy. They are using Seagate drives today to protect information in the government. We have opportunities that have some pretty good scale to them, both inside the DoD and within the Federal side of the government, actually most specifically within the Department of Homeland Security. Having said that, the really big opportunity within DoD is that they standardize on TPM management using Wave tools. And I would say that we're making solid progress on that. It is, as I think I said in the last call, something where we continue to advance their engineering, I think we've made really positive progress over the course of the last four or five months. We're not yet at the point of a negotiated contract for server-buy. I think the first thing everyone would like to see is a number of more regional level installations before we go to a full enterprise wide buy, as a step of adoption.

So we're looking towards that. We think we've identified a few customer places where that will happen. I think we have really good support from the people who have to influence these decisions. There's also a growing level of interest around hardware-based Full Disk Encryption within government. We're excited to see that. There are certainly some challenges around making sure the technologies are all certified and approved and have all the little stars and stamps they are supposed to have in order to be deployed in a sort of broad opportunity. We know how to get them delivered today and have permission granted for someone to deploy, but that's not saying we would see yet in a very large scale. So we're working towards it with good scale. Certainly our hope is that sometime in 2008 every laptop that gets procured has at least the recommendation of hardware full disk encryption as an option or even better as a requirement. There really is no reason why the Federal government shouldn't be putting a Seagate drive in every laptop procured. It's the best solution that's available out there. It will do the best at protecting intellectual property, both within the government and from outsiders. So we're making solid progress on it. We are very active in it. And I think we're, I think we can see the light at the end of the tunnel pretty strongly at this point.

The other point I would make in government is machine identity, the concept of the TPM turned on to give the machine strong identity is gaining good traction. We have a couple projects underway with the right type of contractors to help specify these pieces. We're working hard to have our technology specified into these contracts, so as ultimately they mature into orders, we're hopefully as broadly written into the contract as is practical. And overall, I would say the progress is solid, but it moves at a government pace.

We also put out an announcement today, just before the quarterly call. We have successfully executed an arrangement with Lenovo for them to sell our software on machines that carry the Seagate drives. So the ThinkPad platform has had the Seagate drive as an available option for a little while now, although it's had no software. And we've had a number of enterprise customers who are Lenovo customers request the software support. So we've gone through a fairly comprehensive certification program and test program to make sure our software installs and deploys correctly on the Lenovo platforms. Lenovo sales folks now have the ability to offer our software and sell it with those platforms as an option. It will not be bundled like we have as a relationship with Dell, where they pre-configure it. So it's really an aftermarket installation by the customer as opposed to a preconfigured option. And we think it's a great first step with Lenovo in offering this solution into the marketplace. Clearly we hope that they are, that they see good progress with customers and with our solution and certainly we'd love to continue to expand the availability of our software to any OEM's customers. So, this is a full enterprise version of the EMBASSY Trust Suite with Trusted Drive Manager installed and they have the ability to offer our server software to those customers as well.

We have a few identified accounts that are Lenovo accounts today. So hopefully we'll actually begin this process of offering software to those customers basically imminently. The process to enable it is all set up at this point in time. So we're very pleased to show that and to have that relationship in place.

Let me talk a little bit also about just sort of future directions, and I, I'll be a little cautious here. We're starting to see greater competition in this marketplace and Wave has some pretty clear paths that we're going down from a development perspective both in new features and new functionality. And I think we will continue to sort of slow down the amount of information that we provide broadly to the market about where we're going in the future as we see more competition begin to appear. Competition in this space is very healthy. Having an organization like Infineon announce that they are going to provide server management for their TPMs is great. I mean in general they're providing a solution, we have yet to see it operational, assuming that it does what their press release said, that will bring them up to a point that's similar to where Wave was a year ago / eighteen months ago, where TPM management is part of the solution.

We really think you need both. You need both Trusted Platform Modules and you need Full Disk Encryption because the synergies between the two technologies are very strong. And in many aspects things that you'll see from us in the future are the use of integrity measurements that the TPM can perform to assure that a PC has a Seagate Full Disk Encrypting Drive before you're allowed to download data from a server. I think this is an important point, which is, we're really at the beginning of this curve of how do you use all these parts together. What you want is strong authentication and identity of the machine and of the user, presence that there is a data encryption device present in my laptop, before I'm allowed to extract any sensitive data from one of the corporate servers. And that way, IT can prevent me from logging in to that server with one of my kids laptops that doesn't have a Full Disk Encrypting Drive, downloading data, and now we just went and lost the 300,000 job applications that were stored on the server, because I was going to work on them over the weekend.

So it's really a challenge to bring those parts together. Show the synergy of those pieces. And this is an area where Wave has a tremendous headstart. We have great intellectual property. We have some of the best people in the world on our team. And we're working very hard to make sure that we provide a full service solution to our customers.

We're also building support for Intel's platform. Intel announced their Danbury technology last fall. We're part of that launch announcement. We're in the middle of building all the bits and pieces. We're quite excited about what that brings to the PC in bringing data encryption on the motherboard side instead of the drive side. And we already have full support for Intel's integrated TPM, which is actually a TPM functionality as part of the Intel chipset. And today we support that functionality. We have reference capabilities for it. And, we're actually working with third party customers on it today already.

And so last couple of points. Our eSign division which does electronic signatures is having very good results within a number of different areas. We're seeing a lot of interest actually from the mortgage business. You'd think the mortgage business is completely upside down with all the current fiascos that have gone on in the mortgage market, but actually it turns out that improving the process around loan modifications is something that has become very important to the industry. And improving the integrity and compliance of the mortgage application is moving towards electronic signing. And actually eSign is in a fantastic position to support a number of accounts on that, and I think you'll see some significant progress from that over the course of the next few months.

We also have a number of accounts in different, other, industries that are using electronic signing. I would say the one important thing to understand as to why we continue to pursue signing is that the basis of every account that you have starts with filling in a form that says "this is who I am." And so we really see the whole process of signing a contract with a service as the starting point for identity. And identitiy is clearly one of the areas where TPM plays in the long haul. It's not something that you and I or anyone else is doing with a TPM today. But as we continue to see the presence of this hardware identity capability in the platform moving forward, it provides a tremendous capability.

And finally, WaveXpress. I would say video is still a pretty tough market. We have presence in the video space within Microsoft Windows Media Center. I think we have one of the leading services. Anybody who has a machine running Vista should go to Windows Media Center and click on the TVTonic button, which is the WaveXpress brand. I think you'll find one of the best video experiences that you have on the internet today, especially on a laptop. We have over 70,000 subscribers that are actively using the service today. We continue to maintain it in a development basis. We have an ad serving relationship that's just forming that will bring some early revenue to it. We have some really interesting partner opportunities that are sitting in front of us, that are what drive us to continue to invest in this. Clearly content is going to play a very major role in the consumer side of the deployment of the security technologies, both in the form of storage and in the form of authentication. And our investments there put us in the middle of that conversation with very strong credentials, so that we don't surface only as an enterprise security company, but we're somebody who can supply a PC manufacturer, really completely across the board, with services in the corporate side and ultimately to the consumer side.

So finally, I'll conclude my prepared statements with we've had a number of investors who've actually introduced us to either their companies or companies they know, many of whom are out buying Dell machines. We will do anything we can to help anybody who would like to bring us a customer. We think that everyone should be out there buying a laptop with a Full Disk Encrypting Drive. It is the best way to protect your data. If you have any thoughts as to somebody you know who would be interested, don't hesitate to send me an email. We're happy to follow up on them. We have a pretty full book of leads, but I will say that we've also had some great successes in customers that have brought to us recently by investors, and everybody who has a share in this company, this is the best way you can help benefit the value of your shares. This is all about driving the business at this point in time. We are very focused on the enterprise side. I think we're making tremendous progress. If you asked my sales guys they would tell you that they're very excited about the prospects that they're pursuing and that sit in front of them. Our pipeline continues to grow. It is great to spend, I don't know I spend now probably close to half my time talking to customers, which is really a wonderful opportunity to evangelize this technology and to close some business deals.

So thank you everybody for your attention. I know this has been a fairly long speech here. But we're open to questions and I'll try to answer as many questions as possible, and I'll try to keep it quick. Thanks.

Questions and Answers

Ronald Meyer, REM Financial: Hi Steven. A couple of questions for you. Most of us aren't overly concerned about the fourth quarter revenue but we are hoping for some guidance on quarter one, which is close to ending now, and what sales are looking like for quarter two and beyond. So based on fourth quarter numbers of about $2 million in revenue is it reasonable to expect say $4 million in revenues for quarter one?

SKS: I think it's too strong for quarter one. We're not done with the quarter yet. Let me be very clear to say that. I know kind of how January looks from my OEM partners. I'm not really sure how February looks, and clearly have no picture yet for March.

Having said that, the predominant sales we are seeing today are in pilot volumes. Some of them are to some very large customers as I've articulated, that have the capacity to order thousands of units. But to date my orders are either a 20 unit pilot, or they've gone and ordered 200 or 300 units for a specific group. A number of them have indicated that they've now standardized Full Disk Encryption as part of their procurement. And I'm beginning to get a better picture of when those volumes are actually showing up and when their budgets are.

So, there are some fairly good sized opportunities that we are still hoping to close within the scope of Q1. But I would say that Q1 is still a pilot development quarter, and we see the volume that comes in in Q2. I know of customers that have the capacity on thousands of units. We have to see those orders materialize.

The OEM channel is in place to fulfill. We certainly have had multiple thousand unit orders. Some of those have not yet purchased server software yet. We find that we trail about four to six weeks after somebody has gone out and bought a thousand laptops with an FDE drive and doesn't know what an FDE drive is and then they get to call us. It takes us at least a month and a half before we've matured them into an order for the server.

So if I look at the units that I'm piloting today, I probably have somewhere between five and nine million dollars of business that's circled, assuming those customers carry forward, and then go and order the units. But I don't think you'll see it as strong in Q1. Knock on wood, there are a couple of transactions that could drive numbers much more strongly, but not as high as what you talk about.

Meyer: So you're seeing that happening really in Quarter 2. That's what you're saying.

SKS: Yes. quarter two has a number of customers that could drive me to a really good number in quarter two. They have to close. Right? I'd like to see a few accounts where they order two thousand units every month. And it's just every month because I could give you a much greater reliability then obviously if you're ordering a couple thousand units every month. Having said that I'll just put a caveat in it.

I met with customers last week that are claiming that they'd like to close an order perhaps before the end of the quarter that are capable of a hundreds of thousands of dollars of transaction, that doesn't necessarily mean that all their t's are crossed and their i's are dotted to get their transaction done.

I think if you ask the sales guy, he would say, "Yes, it's going to happen in April, but I'm not sure it's going to happen in March."

Having said that we're all driving to make if it's possible and we can bring it in in March, great. But I think from all of us, the goal here is to go get that transaction closed and there's more than one.

So we have, I think, the business is forming up really nicely. But I'm not there yet, where I've put out a press release that says, "Hey, we've closed a million dollar transaction with somebody." We're still working towards that. I think there is some great opportunities for that. So that all figures into this picture of how much money do you raise, how much cash do you have, how much sales do you need, etc. And I would say that today we're in a position where you have to be pretty lucky to not have to raise additional capital, based on what you have, just looking at Q2, but it's possible.

Meyer: Regarding that recent private placement, which got us about $3.5 million from the remaining shelf, can we deduce from that that since you didn't utilize all the remaining shelf that you're [] bring in sufficient revenue by the end of quarter two to meet our cash needs on an ongoing basis?

SKS: So I think the right decision was to be lean. That in the pricing that's in the market today with where we are and the news flow that we have sitting in front of us - you know even just the knowledge that we've been working towards a relationship with Lenovo for quite awhile, and working to get it public in the market, but just couldn't get it done prior to closing a financing transaction with enough level of certainty - So I think all these things are hopefully very beneficially to showing everyone that we're really well connected at this point in time and making good progress. So I think the right solution is to be lean on the cash side. This is balanced of course by the current market conditions which would say, "Gee wouldn't it be great if you had a very large pile of gold bricks in the corner." So I think we're at the right balance. Having said that, we're certainly considering the fact that the company also ought to probably maintain good access on a shelf basis. We have about $5.3 million left on the existing shelf. I can make a pretty strong argument that we ought to go register another shelf, just to have it as available access for a variety of different things we look at going forward.

Meyer: You don't see a problem in accessing capital then in the near future?

SKS: I don't see a problem with accessing capital; it's always a question of price. We had more access to capital in this last round of transaction, than we chose to take.

Meyer: What of the number of Dell laptops that have been sold FDE in the last quarter, to what percent has Wave been able to sell the ERAS? And what are your expectations for next quarter?

SKS: So as I just said, and maybe after this question we'll let somebody else ask a question.

Meyer: Sure.

SKS: We're seeing in the 75 to 80%, even as high as 85%, attach rate. The reason it's not easy to say a specific number is that I have accounts who have gone out and bought, I don't know, we just had one the other day, who bought, you know, 3,000 machines and has no clue that there is a server.

So, if I take a snapshot at any one point in time, I would say the number of ERAS server seats to drives sold is probably less than 50%. We just looked today. But if I go back and say how am I doing against the machines that didn't know about a server that were sold six weeks ago, that number comes way up.

Right? So realistically, anybody who is deploying this, unless they're deploying it to a small office with four or five people, you really want to be buying the server. For two reasons. One is password management, make sure I can recover the password because otherwise all you can do is throw the drive away; you can't even reformat it. And the second one is, I really need compliance. I need to be able to show that a lost machine was encrypted.

So I would say we're having very good success on the ERAS server side. It does take a little time. This is a brand new technology. I mean, we all get it. Anybody who has paid attention to this gets it. [crosstalk] software-based encryption. That doesn't mean that the first time some CTO or CIO who is running 40,000 machines isn't going to just run out there and say, "whoo ooh, let's put it on everything tomorrow," without even looking at it.

Meyer: But your expectations are very high then, in the 80% area once people know about it?

SKS: Absolutely, I think that that's our experience today. So if I basically look and say for example of machines we've sold up until middle of January, we have a very high attach rate of the server software against the machines that were sold through then.

Meyer: Okay. Thank you very much Steven.

SKS: Thank you.

Abbie Patton, Nagathor Capital: Hi Steven, nice to speak with you again.

SKS: Pleasure to talk with you.

Patton: I have a couple of quick [] questions. One, if you could give us a better understanding as to, not so much how the pilot tests are going, but what are the learnings that you are gleaning across the broad swath of pilot tests that are going on, I guess both in North America and Europe? And then two, could you speak at all upon the incremental competition coming to market? Who you are seeing, how concerned you are, and whether or not that is changed materially. I think you said it sort of changed. But give it an order of magnitude as to how that's changed and why you think that is.

SKS: Sure. So from a "what are we learning from the pilots" perspective, I would say that it comes into a couple of different categories. One is, what's the customer really looking for. We have a variety of different kinds of customers. Customers who have never seen encryption stuff before. And, they've got a machine. They think it's cool. And, their boss has said encrypt all their hard drives, but they've never deployed software encryption before. In that case, we're really in an educational mode and what we're finding from the customer is that they don't know anything about this stuff.

They think it's a standard IT process and they don't understand it's a regulated process. And so things that they would do, if you would just apply it to another industry it instantly become true. We check the structural integrity of all the airplanes but we forgot to write it down.

Great. You laugh but I can't tell you the number of people that are like, "Oh yeah. We're just going to deploy it. Throw it out there and then we don't really care." Because that's how IT has approached many of these type of technologies in the past. This is all of a sudden a technology where some point the legal team around the CEO and the Chairman of the Board are going to ask you to prove that it is there and they have no concept of what that really means.

We also see customers who have already deployed software based encryption. So they have a mental image of a lot of different features and functions which in many aspects they don't need with hardware. And so sometimes we have some difficulty in dispelling their, you know they've written down their spreadsheet of requirements list and so that can be challenging. And I think we've taken a slightly different approach now in how we sell against the software solutions. It's really around the amount of time to configure and the return on investment side, and that approach is working quite well. So that's a whole separate category. I would say that's the place where we lose business.

Patton: Okay.

SKS: We walk into a customer they have XYZ. It doesn't matter which brand. They have XYZ software full disk encryption deployed. They've just finished a multi-hundred thousand dollar licensing contract for that software. They really want to buy hardware 'cuz it's faster, cheaper, and easier, but they can't break their software contract. We've had two or three accounts like that.

And the final case, I would say, is the sophisticated customer who's inside a really large organization. And there the parts we are learning is that no two back office IT systems are the same. And we might have a server that we think runs really nicely in most environments and we're consistently amazed by how people strap things together. And so we've done, I think, a very good job of keeping those customers happy, but sometimes that can be a real fire drill exercise where you walk in and they have twenty-seven Active Directory infrastructures combined into forests, etc. and then you wonder why your stuff doesn't work perfectly the first time out. And I would say that we've gotten way better with that over the course of the last month. Where I think Day One we walked in and we assumed our stuff was broken, because we didn't have as much experience with it. Where today I think we have a much higher level of confidence in our infrastructure and we can point out what needs to be fixed in order to make it properly function. And so it's a little bit more of a debate today.

We're at the smaller end of the debate side.

Patton: Right.

SKS: But it's still a discussion. On the competition side...

Patton: If I could just interject, very very quickly, a quick one, going back to the pilot, can you give us a better sense as to by vertical, by industry vertical, what the pilot programs in aggregate look like?

SKS: It's completely horizontal.

Patton: Okay.

SKS: I'd love to be able to tell you it's vertical. It just isn't. One day we're talking health care; the next day we're talking manufacturing; the next day we're talking to automotive; the next day we're talking to pharmaceuticals. It's just... everybody has the same problem. If I lose my laptop and it's got all my boss' data on it, I'm in trouble.

And I would say that we are clearly into the core meat of the encryption market, in that everybody wants go light up encryption. They're going to buy software. They're going to buy hardware. They're going to buy everything. So we're not like at the very early stages of adoption where you're only talking to early adopters of a new technology. This thing is everywhere.

Patton: Okay. Thank you.

SKS: On the competition side. So competition in the form of the TPM side we've certainly seen two announcements out of Infineon. One was that they're building back office software. And the second one is that they are building support for Intel's iTPM.

So the fact that they're building back office software hopefully validates the fact that we've been building it for a couple of years now. It's a necessary component. You really can't light up TPMs in a broad manner if you don't have some way to control them. So this brings two solutions to the market. The solution that Wave's building and the solution that we have yet to see operational out of Infineon, that I'm sure will be part of what HP offers to the market.

In that context, it certainly is competition, but I'm very confident in the fact that by bringing both pieces - management of the FDE side and management of the TPM side one server, that we really, we're a year and a half ahead of where they are. They are building the same support we had a long time ago.

So we're trying to move the market to a point where "Well, of course you have to manage all of your hardware devices, not just one of them." So they're going to have to continue down that path. And they don't really have expertise in that space.

The second piece, actually it was sort of curious to note that they sold off their drive controller chip business the other day [laughing] So I just thought that was an interesting side note. You know if they were thinking of aggregating all the parts together, they got rid of one of the pieces.

The second piece is announcing support for Intel's iTPM. If they didn't have that they'd have to close their software group. Their customers, who use Infineon chips, are going to have a mixture with Intel's iTPM for sure. And if they didn't have a single software stack to support both implementations they would have ceded the whole market to us. So that certainly wasn't surprising. A little surprised that it took them as long as it has to announce it. iTPM was announced back in August. And so they just finally announced support for it. We've been out for the last six months talking to OEM customers. So I'm sure we've created some pressure on them.

Patton: Right. Okay great. And, does this at all change your posturing towards HP?

SKS: No. I actually have a variety of accounts today where the enterprise is deploying HP, wants Seagate drives and Wave software. We're fairly far down the path with a couple, and we have a couple of others. So we're putting some pressure on HP. I think that they're going to have to figure out some kind of solution around Seagate's drives. Obviously, we'd like to be that supplier. We certainly haven't announced anything on that front yet, and I don't want to overly set expectations on it. It's.. HP has built a very proprietary set of software around their tools and Wave really has a much more open solution. This goes to the enterprise. You could take the Dell's software stack that comes with a Dell machine and run it on an HP platform. You cannot take the HP ProtectTools platform and run it on a Dell. It doesn't work.

Patton: Right.

SKS: And that's very important when you're the corporate IT guy, because you want one system, one help desk, one management counsel. You don't want 23 of these things.

Patton: Great. Thank you.

SKS: Thank you.

Howard Halpern, Taglich Brothers: Good afternoon.

SKS: Hi Howard. Thanks.

Halpern: First question about, it goes more into the evaluation and the testing. I guess we go back to the customer you said has a 110,000 and 40,000 laptop opportunity. To gain some perspective, when really were you first introduced to the customer, began the pilot and if all things go according to plan, they may deploy it in early summer. Just to get an idea of the general length of time it will take for a pilot to ...

SKS: Specifics around that customer, I think our first conversations with them were back in the December time frame. I went and saw them for the first time in January, and that was when we were just getting pilot equipment into their hands, so they could actually evaluate it, see how it worked, etc.

Since then, so the way their organization is structured, they have a whole team whose whole responsibility is "what are the machines we are going to buy next year?" And so they're focused on, as I said, sometime in the summer time frame, their next procurement. And in essence they're defining what those machines are that they're going to buy. So, what software, what hardware, how much memory, what ports, does it come with a broadband card, etc. In many aspects they look like on a miniature scale the defense department's procurement where they do a consolidated buy, where they sort of look around all the different divisions of Army and say, "We want to buy 70,000 laptops in May. Here's the definition of a mid-sized laptop. And so, how many do you want everybody?" And so this is just a corporate variant of that same kind of program.

So where we are today is that the team that is to recommend a specific platform has made their recommendation and now it's up to the production IT folks to accept that recommendation, and then I believe it goes through the order process.

So, we're kind of in that, in the middle of, the end of step one, into step two which is the production people signoff and say "Yep, this is all the stuff we want." And assuming they all sign off and say "This is want we want," then it ultimately goes to procurement and somebody goes and buys it. And I would say that they've quantified to us that the scope of the opportunity is sort of 40,000 machines. They could easily in today's market become 20,000 machines, right? But from our perspective I think we've a good job of winning the first stages. They looked at a variety of solutions. They selecting this technology. So, I think we're making pretty good progress. And, this is probably one of the more formulized programs that we're involved in, but it's very similar in other large organizations. It just might not be as big a team of people selecting the new hardware.

Halpern: Okay. At rate now are you getting calls for evaluation kits?

SKS: We hear from it's probably close to ten new customers a week that I would say are strong, qualified opportunities in the marketplace. Let's just say, what's an opportunity defined as, let's say a 1,000 unit median size. Clearly there are some smaller, some bigger, but 1,000 seats is probably a reasonable assumption on it.

And the pace of that, the acceleration of that has been growing. So one of our challenges has been in the staffing side of this is how much do you staff against that now versus how much do you wait until you get completely run over with a truck.

Halpern: Right. Is it the staffing capacity constraints of building the evaluations really what we are talking about?

SKS: No. So, Seagate actually funded a whole bunch of evaluation kits. So we have, I think today, 50 pairs, 50 or 60 pairs of client-server. They are available in Europe. They are available in the US. We have not opened up a program in Asia yet. And they go in and out the door every day.

Halpern: Okay. And I guess going back to your announcement today with Lenovo. This really {} opens up the landscape for you to deal with Lenovo customers, basically.

SKS: What it means is that a Lenovo customer from Lenovo can buy a solution.

Halpern: Okay.

SKS: They don't have to. It's not that the Lenovo guy is carrying a little Wave brochure and drops it on the desk and says, "Okay, thanks for buying Lenovo equipment, now call Wave."

Halpern: Right.

SKS: You can procure the whole solution through Lenovo.

Halpern: Okay. And going back to the third quarter, just to give some perspective, I guess you announced relationships with Convergent Computing and Safend. How are those relationships going? How has that been working out for you?

SKS: They're fine. Convergent is a combination consulting company and distributor out on the West Coast. And so we have a number of accounts that we are working with Convergent today.

And on Safend I don't know that we've actually distributed any Safend software to date. We have a couple customers that are interested. It provides additional port-locking capabilities. Like how do I remotely turn on and off my USB ports. I think that becomes something becomes of interest especially as these programs gain in more distribution strength. But we have a good relationship with them. We are certainly offering the technology to customers.

Halpern: Okay. Thanks.

SKS: Thank you.

Paul Rodriguez, DMFG: Hi Steve, just a couple of questions regarding Dell. If you could, just some clarification.

SKS: Sure.

Rodriguez: Are you getting a push from the sales groups with inside of Dell? What's kind of the status of that? I mean outside of the events you talk to [] run a big organization. I was wondering about that. And then on the issue of...

SKS: So it's all about training of a sales force. Do they know it's an available option? And how do they promote it? And I would say that it ranges in the Dell sales force from people who are actively out there getting their customers to buy the entire packaged solution - Full Disk Encryption, our server product, etc as part of an order - to folks where the customer has to drag it out of them kicking and screaming because the sales person has no idea about it.

Having said that we have done a lot of work over the course of the last really now six months to educate the sales force; to make sure they have the right materials; that it's on their internal systems.

We were just a few weeks ago at one of their sort of nationwide sales training events to help educate the sales force. We had a bunch of great ord- leads slash orders that came out of that. So our, the best thing you can do with a Dell sales guy is help him to win a piece of business and then he's off to add your stuff in the next order and the next order and the next order.

Rodriquez: Right. And as a follow up, I just wanted to understand this a little better. On the configured page that you were referencing early what are the logistics of that. You have visibility in how those are being ordered off their site. Did I understand that right?

SKS: So this is true for a small company, Wave has a preferred Dell page. Basically you get your own version of the Dell website inside your organization and you get to configure machines. So for example, somebody can set up four different configurations -. the cheap laptop, the medium laptop, the whoopdedoo laptop and the ruggedized laptop - and configure those with software, memory, cases, batteries, extra chargers, whatever it is that your purchasing group decides is the standard configuration that they want every employee to have. And so that way when they go back and somebody calls up and says, "Hey will you order me 25 new laptops, because the sales group's laptops are falling apart, they can just go push "medium sized laptop" times 25 and it comes configured the same way they ordered it last time.

Rodriguez: Okay.

SKS: So that's really a customization for the individual purchaser. Wave has no specific visibility into it at all. It is an important sales process step for us, because if we get to a point where the customer has added all of our stuff to their premier page and has priced it, then we get much more confident that their future orders will include all those pieces.

Rodriguez: Okay. And hence the visibility that you are referencing.

SKS: Right.

Rodriguez: Okay. Okay. And last question, you mentioned about the compromise on the encryption from the Princeton University event. Just out of curiosity in your discussions with customers over the past couple of weeks, have you seen any pause in orders, or heard about a pause in orders, against these software encryption players? Just out of curiosity.

SKS: I don't know that I can really comment on that. I don't know that I have specifically, have they stopped ordering software as a result of that. I can say we've seen a significant up tick in the interest in the hardware conversation.

Rodriguez: Got it. Okay.

SKS: And I would say that most customers are shocked to understand their VPN and wireless keys are equally at risk.

Rodriguez: Right.

SKS: So in many aspects, the reporting around the story, while interesting, focused way too much on the little spray can.

Rodriguez: Sure. Yes.

SKS: And the sort of running joke inside Wave right now is that you know when you put your laptop to sleep the little LED stays on to tell you that it's still in stand-by mode... that that's the hacking indicator light.

Rodriguez: Okay. Well thanks. Appreciate your time. Thanks. Good quarter.

SKS: Thank you.

Larry Gordon, Private Investor: Hi Steven.

SKS: Hi there. How are you?

Gordon: Good. How are you doing?

SKS: Good.

Gordon: Well, looks like we are getting a little traction at least. Not a much as you and I would like, but we're starting to get some traction. Just a couple questions. I'll throw them out and let you answer them as you get to them. You mentioned at SRA a few weeks ago, a couple of weeks ago, that you think we're going to be doing 30 to 60 million for this year. If we're not going to hit four in the first quarter, are you looking for half of that 30 to 60 to come in the last third quarter or fourth quarter or both. And is 30 million a pretty good number for the year, as far as you're concerned, as what you said a couple of weeks ago? And let me just throw out the rest of the question and you can answer them all at one time. As far as the first quarter, all of the quarters are relative as orders come in and sales come in, and this first quarter shouldn't be any different than the fourth quarter. And, I know you said you didn't think we'd do 4 million in the first quarter, but can you at least, with only two weeks to go in the quarter, can we anticipate at least a double digit increase in quarter one over quarter four? And my last part of my question is, I notice we've hired an extra 20/25 employees, what exactly are they doing? What is their function? So those are my questions.

SKS: Okay. Alright. I'll try and address them all here.

So the first point is, how should we forecast this business? So there are two ways to approach this. One is how do I incrementally grow this quarter into next into next into next, sort of standard organic growth. And the other side is, why don't we take a macro look at it and talk to all our various partners and see what they are going to think they are going to ship in volumes and how excited are they about this.

So that's where I'm caught in a dilemma. I think on one end of the spectrum our major partners in the market view this as a multiple million unit market opportunity even in 2008, and I'm sitting here having shipped a bunch of pilots going okay how do I get to multiple millions of units. And the answer at the end of the day is that there are some very large organizations out there that move millions of machines and they're helping to distribute this. So the distribution channels are in place to be able to support a 5 to 10% adoption rate of FDE drives in laptops. It's not beyond the pale of reality. And so the question is what do the metrics of that mean? And that is what I tried to explain at SRA. A 5% adoption rate in laptops of Seagate drives would generate for us a $30 million year.

Now having said that. A 3 tor 4% turn on rate against last year's 20 million units of ETS shipped would also generate a $30/40 million year.

Gordon: Are these realistic for this year?

SKS: Well you know I look at it and say, "What would stop somebody from turning on the 20 million seats that are already out there?"

[crosstalk]

SKS: You only need 5% right? I mean we don't need 95%, we need 5% right?

Gordon: Is that realistic?

SKS: Is it realistic?

I have to believe it's realistic. Okay? Having said that do I have transactions in hand that say it's a defined event? No. But do I have customers I didn't know about a month ago who I'm talking to today about turning on 25,000 seats. The answer is yes. And it doesn't take too many of those to get to the 2 to 300,000, 400,000 seats that takes to drive those kind of numbers.

So we're adding new customers with scale just about weekly. And we closed another small customer this morning. We received a purchase order from them.

So the flow of business is consistent and growing. And the scale with which this opportunity to get to it is large. And I think we have to go be prepared and build towards that.

That doesn't mean you just assume it's going to happen tomorrow and close your eyes. You have to go work at it.

Let me answer the staffing piece and I'll come back to the first quarter piece.

On a staffing basis, what are we staffing/ We're staffing really I would say in the three core areas: engineering, customer service and support, and my sales team. And within sales, I actually will toss in what I call my field application engineers who do a ton of our selling.

They are the guys that go out in the field and show you actually how to plug it all in and make it work. Typically in a pre-sales mode, although they also, they play a role in post-sales today too.

We have a pretty good chunk of business development that's going on with other partners that is requiring us to staff teams to build the infrastructure that those partners need. We're underway on those. Some of those are contracts that have revenue associated with them. And you'll see them as they materialize into the market. But it's building infrastructure and support for other large partners. I want to be careful in getting out ahead of myself, because some of these may take quarters before those customers become public. So do not expect something tomorrow morning. But they're the type of relationships that give us just amazing competitive advantage because we have the type of cross platform support that's needed in the marketplace.

So we continue to staff on an engineering basis. To do that we are early in this market, as everybody knows, and the opportunity is to go build those relationships before anybody knows there is a relationship to build. And we have been successful in some of the more recent contracts in getting a little bit of non-recurring engineering so it helps soften our pure investment in partners that have yet to sell something. But all of them will require more investment from Wave than we will receive from the partner in the early stage. But ultimately what brings the whole market together. So I think we have the right staffing levels associated with those folks. We have a list that's longer of things we'd like to do than we are actually capable of doing and we're letting the customers help define what things get worked on next, so we try and balance that a little bit with things we think the market needs - that we have to invest in.

And so finally Q1. I think I've talked pretty broadly about Q1. We're, the revenues in Q1 are driving on the pilot side. It's about closing the customer relationships and driving those as they order units in the marketplace. I think we're in a good posture on them. We do have a couple large pieces of business that we are in negotiation on now, which I'd love to see close, but I don't want to predict that they are going to close...

Gordon: ... so up to this point, there's been revenues coming in for two and a half months, are we on par with quarter four or ahead?

SKS: We're ahead of quarter four.

Gordon: We are ahead of quarter four. And that's good. That's all I want to know.

One last thing, is the ultimate goal with Lenovo to get them to eventually bundle our software like Dell does? Is that a possibility down the road?

SKS: We'd like every OEM to bundle our software.

Gordon: I mean, if we started with Dell without the bundle and we got there. Do you think that...

SKS: I'll just... we're very pleased to have this level of relationship with Lenovo. Obviously any customer that come along that wants to package our software with their machine, that's certainly the goal for the team. I'm not going to make any projection around what Lenovo is thinking. We're very pleased to be supporting them today.

Gordon: Okay, terrific. Thank you. Keep going.

SKS: Thanks.

Barry Claremont, Private Investor: Good afternoon Steven. I have one basic question for you about financing, but before that I just want to clarify one thing that I thought I heard you say during the earlier part of the call. You said that you have a customer that was consuming 10,000 PCs per month?

SKS: Yep.

Claremont: What do you mean by consuming? They're using or they...

SKS: They are buying new machines. Today.

Claremont: So you expect them to buy 120,000 laptops a year.

SKS: Uh. No. So the customer today is in a procurement mode buying machines.

Claremont: Okay. Alright.

SKS: I think it's unfair to assume that that's... so I don't know the total employee count. I do have a sense of what their total volume of new machines coming in is.

Claremont: Okay. Looking at the SEC filing that you had regarding the financing. You said in there you expected to need to raise or through sales another $12.7 million to last another year. And you also said that you had enough cash to get yourselves through the end of May. Based on that, when I do some calculations of what you had for cash on hand at the end of the year, what you just received, and what your current burn rate is, in order to get through the end of May it looks like your loss per month is really not going to go down between January and May, or very little.

SKS: For that calculation the only revenue we assume is revenue we have in hand. So don't assume that... if tomorrow somebody bought a million dollars worth of enterprise software from you, it's not included in that calculation.

Claremont: Okay. When you say ...

SKS: In other words you can count on... you can count on our OEM licensing business. The probability that we get either thrown out of the box tomorrow, or that Dell stops shipping machines tomorrow is pretty low. So high probability that you'll do the couple million dollars worth of licensing business that's been the OEM licensing. That's independent of whether or not you close additional enterprise sales.

Claremont: Okay. When you say...

SKS: If you were to ... so in essence if you were in April to close $2 million worth of enterprise business, then you could lengthen the runway by that $2 million of enterprise business.

Claremont: Understood. When you say you did this based on business that you have in hand, I hope this is a little more accurate than your statement that you made saying you were going to hit breakeven in Q2 of last year with business in hand.

SKS: So let me comment on that. So we knew we were going to ship 20 million copies of the client software. Who could possibly have imagined that out there today in the world are tens of millions of PCs who could secure their authentication and access to the network, who haven't turned it on yet. Now, they're getting around to it. They are starting to turn it on now. It's not that they're not going to turn it on. They will.

But, yeah, in 2006 when we made that original estimate that said by May of last year we should reach breakeven, it was based on an assumption that we could go from 0.5% to 2% to 3%, not to 30%, to 3% turn on rate of server against the clients shipping. So we shipped the volume on clientside. And to be fair, I think from a prediction perspective, any one of us who'd sat down at the beginning of this curve and said, "We are going to put 20 million branded copies of Wave software out there. We think we could get to a 3% attach rate of servers." Even if 97% of the people never turned it on, right? That that would have been considered a reasonable assumption in the marketplace. And all you had to do was go talk to a few enterprises, and they'd say, "Yep, security is a problem for us. We think security in a standards space is a good idea." It has taken way longer than we expected to get the first customers to convert, and I think the primary reason for that is that the world doesn't know it's there.

Claremont: Right. So what I'm getting at though is your latest prediction about business in hand is not anything with those types of assumptions. It's just basically based on Dell's shipping...

SKS: I have an existing contract. They're shipping this many units. Go read their 10K.

Claremont: Okay. That is all I wanted to know.

The last question I have for you has to do with that private placement. Based on what you said earlier I believe you're saying that there was actually, you could have sold more stock, you had subscribers out there for more than the $3.5 million and you actually shot them down.

SKS: I had the opportunity to sell more than $3.5 million, and I think that right now at the prices we are at, based on the deal that is out there, we made the right decision.

Claremont: Well, does the opportunity mean that you were trying to sell 5 and you only got 3 1/2 or you had subscriptions for 4 or 5 or some other higher number and you said "No, I'm not going to sell that much."

SKS: So all this is dependent on pricing and terms and other components that are in there. So at the end of the day we agreed to a deal for which the subscriptions against that agreed deal were filled in. So I won't say that I had subscriptions that I walked away from, but we definitely had the opportunity for more investment in that transaction pricing than we took.

Claremont: Okay. Great. Thank you for your time.

SKS: Thank you.

Walt Paulson, Private Investor:

And maybe after this we'll try and wrap it up. I'm looking at my clock. It's like six o'clock, so I'll take this question, but then after this if anybody has additional questions I'm more than happy to try and address them on email or feel free to give me a call as well.

Paulson: Steven, all my questions were answered. I was a little slow on the draw on the button.

SKS: Oh no. Now you've got to make up a question, or we can go...

Paulson: No that was it. Thanks though.

SKS: Thank you. Well I just say thank you everybody. I really appreciate your support and your interest. We are making good progress and we have customers that are enthusiastic and excited, and I think the marketplace here is getting to be more predictable. So we have a couple big transactions we're still working on this quarter. The quarter is not done with yet. We're hoping to bring those in. We'll see how that progresses. And we think the rest of the year is going to be a very exciting time for Wave. So thank you for your interest and your support and I look forward to talking to you again.