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To: Paul R who wrote (7018)	7/30/1998 9:31:00 AM
From: Jeffrey S. Mitchell	Respond to of 10786

Re: Conference call notes Anticipate double digit growth 80% being done in-house in the US 100% from audits ALYD have done, they've found something wrong 40% sales from overseas Add'l staff in France - Italy Germany soon Europe and Brazilian marketplace will explode Hoping for home runs off-shore Significant interest in Pacific Rim: China and Malaysia Expand beyond Y2K - language conversions Growth based on sales effort, not price increase Not seeing average price increase for Y2K work yet Why not analysts coverage: went on road show -- 100% theme, want life after 2000 evidence, not story -- looked at 100s of companies -- definitive acquisition within a month or so SmartCode invented to bring people off the mainframe -- used for Y2k then distributed network, minis, pcs -- install networks, web-commerce, e-commerce telephony, call centers, data mining, data warehousing ERP, supply chain management EDS and Cambridge doing it Trial 9/9 - Bob personally indemnified the company Customer profile impressive 8 companies represent 50% of quarter, 7 were existing contracts Why pick ALYD? 90% convinced in-house will not work. ALYD do it for a living and its hard. Y2K is not just a technical issue. ALYD is only company that can do many languages on many platforms. Think evidence of problems in Feb March of '99 after trying to patch failures in Jan and Feb. New VP of Sales, Rich McCann(?) of Kodak. How does ALYD get paid? Hard to know how the quarter is going since never know when code will come in. 40% delivery, 40% when completed, 20% on acceptance Q&A Otto Grote: Derby Securities Projecting Q4 for tax provision, 36% effective rate some IBT shielded Overseas don't have luxary of doing it in-house Euro: Not fixed like Y2K, good for bodies. Companies claiming life after Y2K is Euro are lying. Fundamentally different process. Looking at e-commerce not Euro for future. Bruce Vogenitz: Gardner-Lewis Forecasting extremely difficult because of F100 companies give code whenever they want to. Say next week and could be in six weeks. Diluted shares decreased because cancelled the treasury shares early in 2Q. Sales cycle is shortening. Probably around 60 days. Doing an audit for a large company. IT dept kicking and screaming things were fine. Begrudgingly gave ALYD 10,000 lines. ALYD found 3 showstopper errors. 6 other errors. IT wouldn't touch code again because sick of it. Threatened not to do other projects. Lawyers asked "Draft" be put on report for legal reasons. Code shelved so all those errors are just sitting there. Damian Rinaldi - First Albany Partner relationships CPWR Chuck Boris(?) - new head of strategic alliances 20 deals pendings for alliances with system integrators ? Several deals for home runs 50-100M lines off-shore Stuart Goldberg - ? Capital Head count - 325 static Any new offices? Italy and Germany # lines of code remediated: Misleading to say since priced different .40 COBOL, RPG/PL1 .55-.60 , .90-1.00 others Not discounting anymore See no increase coming in price this year 6-10 jobs end to end done this last q Drivers of revenues: fixed price .85 of every dollar drops to bottom line Talked to one company 300M lines and just doing an assessment; want one vendor. Could be a home run 42M lines YTD completed - Jeff

To: Paul R who wrote (7018)	7/30/1998 9:37:00 AM
From: JDN	Read Replies (2) \| Respond to of 10786

I listened to the CC. Overall I think it went well. Especially interesting to me was his SCARY story about a company (large) who KNOWS their code has many errors but refuses to fix it at this time. Even SCARIER is fact that FAA has some code supplied originally by IBM who told them POINT BLANK code will NOT WORK ie needs remediation. FAA instead hired some retired programmers who said it would. Gruder's point was, even for us we find remediation quite difficult, what could those people know about it and how could FAA refuse to fix what the supplying vendor has told them is BROKE. I for one AM NOT flying anywhere around 1/1/2000. Some interesting facts which Gruder told us where that any home runs will now likely come from Europe, if at all. USA will likely be singles, and doubles (his words). Secondly, within about a month may be able to announce an acquisition expect to use convertibles and equity to do it. Doesnt want it to be dilutive. Finally, I think he said they are sticking by the latest estimate of sales of 50-60 million for the year. Since costs are fixed at about 6.7 million per quarter you can figure the profit from there. JDN