Question listing:

As to why ANC didn't do a financing in the spring or summer of 2000, the answer (in so many words) is that the markets were so fluid at the time that they (and a lot of other companies) were caught off guard. There probably only was a 4 month window (it is rare that financings get done in the summer) and many of the financings that got done during that window were already in progress prior to that 4 month window. To have benefited from the run-up, ANC would have had to have gotten a financing done from a standing start during that 4 month period, which would have been virtually impossible. That's the explanation, but it is still disappointing it didn't occur.

3. To your knowledge, what is the percentage share ownership of: (i) retail investors; versus (ii) bank, asset manager, and other institutional ANC shareholders?

The vast majority of the shares are held by retail investors. ANC has over 8,000 shareholders, which is an extremely broad distribution of its shares. No exact percentages were given.

4. To your knowledge, is the percentage share ownership of bank, asset manager and other institutional players growing or declining?

According to Eric, there has been institutional interest from time to time. My sense is that the percentage ownership of institutional shareholders is static or declining.

6. Is ANC currently considering a private placement by any of its technology partners (i.e., Siebel, MSFT, Sybase, Whitecross). Has ANC tried to get these companies to invest in the past?

This question wasn't asked, or addressed, but my sense is that the answer is no. Eric is loathe to do any type of equity financing at the current prices, whether with a strategic partner or otherwise, and Eric has the luxury of not having his back to the wall on the financing issue. Whitecross has its own issues, they're the 'defaulting' technology partner referenced in the Annual Report. Although Apps did say ANC and Whitecross are trying to work things out. Sybase has gone through some organizational change and didn't want to 'cough up the coin' as Apps put it, for further development work by ANC and therefore things are quiet on the Sybase front, although Apps said they could heat up in the future. Microsoft and Siebel both have lots of dough, but nothing specific, or otherwise, was mentioned in terms of them being interested in making a strategic investment in ANC at this stage.

8. What does ANC view as the function of its CFO? At many "micro-cap" companies, CFO's play more than one role. In addition to keeping the books of account, they also play a corporate finance role? Does ANC's CFO have the necessary business network to play a corporate finance role?

It's clear that Apps has a very high regard for Lon Vining' s abilities. I have no reason to disagree with him - Vining seems competent. . My sense is that Apps is clearly leading any type of corporate finance initiatives on ANC's behalf. He made the point that his background is in corporate finance, and he knows the 'lay of that land.'

He did mention that he has a 'name' or reputable US investment bank (who is very familiar with the data mining space ( I'll bet its Lazard Freres), chasing him to give that investment bank the mandate to ferret out suitable acquisitions that ANC might like to make. Apps mentioned that he is not adverse to going down that road and raised it as an example of how ANC is appearing on the 'radar screen' of knowledgeable investment banking institutions. Knowing a bit about the M&A game myself, I also know that 'buy' mandates sometimes have a way of turning into 'sell' or 'merger' mandates, which is not bad for any of us assuming the price is right. Our protection here is that ANC management owns 7 million shares, so there's no chance they're going to sell into a 'low-ball' bid.

9. Has ANC considered an issuer bid (i.e., stock buy-back)?

Question not asked, or dealt with, although I doubt they are considering a stock buy-back. Apps stated at the meeting that if he had the money, he'd hire 16 more sales staff, which, in my mind, means their intention is to plow free cash flow back into operations, and not devote it to buying shares back. That's the rights answer as far as I am concerned.

10. Please comment on the fact that ANC's shares are trading at less than 50% of their 1999 high and at only at 4% of their 2000 high?

He's as disappointed as any of us given that, as he said, he owns 3 million shares and was buying at 3 dollars last March, and 75 cents more recently in January.

I don't get the sense that Apps is independently wealthy and his salary at ANC is by no means excessive. As he explained (without being whiney), the dollars he invested were his own and this meant he would have to sacrifice in other areas of his life - he wasn't just toying around with play money.

Apps made the point that in his view, ANC 's stock is way 'oversold' i.e . seriously undervalued. As parisfan noted, Apps said it's trading at approx. 2.5 times trailing 2000 revenues, which is very low for tech companies.

11. What is ANC management's rationale for engaging in the dilutive process of adding options before considering other avenues?

Joe Martin took the helm for this question and said that it's a cheap way of attracting and retaining talented people. Apps also took a crack at the question and stated in a somewhat more spirited fashion that the options are for present and future employees, and that management needs the flexibility of options to keep and get good people. He indicated that it was not a given that all 5.7 million options are going to be granted, the actual number granted from time to time being a board decision. Any decision to issue options will be exercised judiciously.

12. What is the status of the following proposed ANC products?

(i) KnowlegeServer for PeopleSoft; (ii) VisibleWeb; (iii) VisibleWarehouse; and (iv) KnowledgeExplorer.

I asked Apps this question (verbatim as set out above) and the answer was really quite interesting.

With respect to the 'visualization products', being VisibleWeb and Visible Warehouse, they are on the very backburner. To paraphrase Apps, 'our product development plate is currently full'.

With respect to KnowledgeExplorer, he said that this was a 'thin client interface' ?? (or something to that effect as I don't understand the technical stuff) and as such, was a natural adjunct to their product devoplement agenda. He gave the impression that this product would be coming out shortly. As I understand it, KnowledgeExplorer has something to do with Microsoft's Internet Explorer, so stay tuned, it should be interesting.

The most interesting response (actually non-response) came with respect to KnowledgeServer for PeopleSoft. Apps tried to skip over that product altogether. When I pressed him on it, and reminded him that the November, 2000 issue of KnowledgeNet stated that KnowledgeServer for PeopleSoft would be out by the end of the first calender quarter (ie March 31,2001) he denied that the KnowledgeNet said that (it does, check it out under Product Update) and then when I pressed further, he curtly said it was a 'work in progress' and gave the distinct impression that the either didn't want to, or most likely couldn't, talk about it any further. I didn't want to torment him any more (the 54 questions being enough for one day), so I dropped it. My hunch is that something material is in the works between ANC and PeopleSoft and it's too early for Apps to talk about it. I think the early reference in the KnowledgeNet Report was probably a miscue on ANC's part and they're being very careful not to disclose until PeopleSoft provides authorization to do so. This is all just a guess on my part.

14. In the company's November '99 press release and in its fiscal 1999 Annual Report, ANC announced the entering into with Sybase of a Development Services Agreement in connection with Sybase's Industry Studio Warehouse initiative. What is the current status of the ANC's relationship with Sybase?

Apps explained that ANC completed its work under the Development Services Agreement with Sybase over the course of fiscal 2000. When that work was completed and it came time to negotiate for further development work to be done, Sybase had undergone some organization changes (maybe ANC lost its 'champion' at Sybase) and they 'refused to cough up the coin' as Apps so indelicately, but accurately, put it (which I take to mean Sybase refused to pay ANC what it wanted). So the 'net-net' is that things with Sybase are not proceeding at this time.

The positive 'spin' on 'L'affaire Sybase' is that Apps is serious when he says that ANC will no longer 'give away' its technology, and if push comes to shove, he'll l walk if he feels that they won't be paid fair market value. The other angle may be that given ANC's close relationship with Microsoft, ANC didn't really care about the relationhsip with Sybase (ie it was a 'throw away') and perhaps from a sensitivity point of view , the chump change that Sybase was offering wasn't worth it if Microsoft was going to get its nose out of joint because ANC was doing development work for a competitive database provider.

The negative (no 'spin' required) is that ANC is currently not doing development work for Sybase.

15. What are the details of ANC's current relationship with Microsoft?

From Anc's perspective, the company has focused its software engineering efforts primarily on leveraging Microsoft applications, tools and technologies. Windows is ANC's reference platform; SQL Server is its reference database;

From Miscrofsoft's perspective, as Apps pointed out, being the largest software company in the world, it could have chosen any datamining company it wanted, to deal with. Microsoft chose Angoss....period......full stop. That answer to me is very compelling, both in terms of its simplicity and its accuracy.

From Microsoft's customers' perspective, Apps made the point that Microsfoft, being the largest software company in the world, has a number of corporate clients who follow very closely the 'hot' new areas that Microsoft is getting into, and they often seek Microsoft's advice on who the leaders are in these emerging areas. With Microsoft now very publicly telling the world that dataming is important, Apps forsees a dialogue taking place between Microsoft and its corporate customers, as to who the leaders are in the datamining space. Hopefully ANC, given its strong relationship with Microsoft, will be front and centre in those discussion.

Apps mentioned that Knosys and its relationship with Microsoft is, in the OLAP field, the best example of what ANC is hoping to achieve with Microsoft in the datamining field. He stated that ANC, with respect to datamining, is where Knosys started about two years ago in the field of OLAP, all in relationship to Microsoft. I've checked out the Knosys website and they clearly have a very strong relationship with Microsoft on the OLAP side. Unfortunately, they're a private company so revenue figures aren't readily available. ANC has also in the past mentioned that it has done joint presentations with Knosys to Microsoft. Definately something to follow-up on.

16. What was the rationale for a "royalty fee" licensing arrangement with Microsoft in connection with the SQL Server Datamining SDK?

Leads, glorious leads.....leads.....leads....and more leads!

In all seriouness, the analogy that is sometimes used for the Dataming SDK is that of 'training wheels', or as I like to think of it, a 'training bra'. Both training wheels and a training-bra have what the auto manufacturers refer to as 'built-in obsolescene' i.e. they're not meant to last forever i.e you grow out of them in short order. In fact, rumour has it that the only person from my Junior High School days who is still wearing a training bra is the poor guy who, with surgical assistance, ended up becoming a girl!

It's actually kind of neat. The Dataimining SDK, which is now available for download from Microsoft's website (Note that Microsoft doesn't call ANC's product a Datamining SDK, it calls it 'DataMining Consumer Controls') In order to download the DataMining SDK, you've got to first enter into a Licence Agreement with ANC, which is also available for download from the Microsoft website. The Datamining SDK is meant to train and get developers (who either work in-house for large corporations and develop software applications for internal use, or who work for corporations who develop software applications for sale to third parties) comfortable with the idea of adding 'intelligence' or analtyic (datamining) capabilites to the software applications they develop. However the Datamining SDK only gives them a taste. In order to get the full meal, they've got to go ANC and buy, all at a very reasonable price, the full-blown KnowledgeStudio SDK. But hey, why does ANC have to wait for the developer to call? It doesn't. When the License Agreement with ANC is entered into by the developer via Microsoft's website, ANC now has the developer's contact coordinates and ANC can be proactive and make the contact first.

17. What are the prospects of ANC for future direct revenue generating (as opposed to lead generating) initiatives with Microsoft?

Do you ever watch those nature shows on the Discovery Channel? The ones that sometimes profile the world's most voracious predator, the Great White Shark, are really interesting. In those shows do you ever notice that there are those little pilot fishies that spend their whole lives, in relative safety and comfort, doing nothing more than following the Great White around? Those little fishies can survive by living off the scraps that are left behind after the Great Sea Monster is finished devouring his prey. Now the Great White coud care less about those pilot fishies (although they probably are useful for scratching his back at night in those oh so hard to reach places) and he certainly doesn't hunt for the direct benefit of those little 'hangers on', but one of the indirect and unintended benefits is that those pilot fish get fed each and every day by 'man's worst nightmare'

In my experience, the 'laws of the jungle' are equally applicable to the laws of business. That should come as a surprise to nobody, as businessmen generally exhibit behavioural patterns strikingly similar to those of a baboon! But think of Microsoft as a Great White Shark (you'd have no problem convincing the Department of Justice of that one) and think of ANC as a little pilot fish. At the end of the day, Micrsoft couldn't give a rats asz about ANC and has no current need to enter into direct licesning arrangements with ANC; but as long as Microsoft finds ANC useful (i.e. by ANC providing world class leading edge affordable datamining software to Microsoft customers so that Microsoft can sell more databases) then ANC can lead a very prosperous corporate existence existing alongside Microsoft.

The direct answer to the question is that there have been some direct revenue generating transactions with Micrsoft. In October, 1999 it was announced that Microsoft licensed ANC's KnowledgeStudio SDK and in September ,2000 it was announced that ANC entered into a Development Agreement with Microsoft to develop the Dataiming SDK. ANC is getting paid directly by Microsoft for that development work.

18. What is the ANC's current relationship with Broadbase Software. ANC's May 2000 news release indicated that Broadbase would initially be licensing ANC's server products, and ANC hoped that the licensing relationship would extend beyond this to other ANC products. Has that happened? If not, in your view, why not?

His description of the relationship with Broadbase was quite interesting. He said they originally approaced ANC to do a licensing deal, when Broadbase's stock was over 100 dollars, which only could have been during the internet bubble last spring. Apps went on to say that the discussions about a licensing deal eventually lead to Broadbase suggest that a takeover of ANC would be more desirable. Broadbase's pitch was "hey, we each hold the keys to the submarine" to which Eric says he replied "thanks, but no thanks - I don't know about you guys - but I hold the keys to the entire fleet"

A little deeper drilling into this one is required . Broadbase, until recently, has been a leader in e-CRM ie customer relationship management using the Web. They've got a pretty good customer list and they were flying high last spring. ANC, as we all know, has excellent anaytic technology both for Web and non-Web applicaitons. Broadbase's comment about keys to the submarine could only have meant that if we combine our leading technology in Web CRM, with your (ANC's) leading technology in Web analytics , togerher we'll be the 'King of the World' (to follow along with the nautical theme). Red Eric's comment about being the skipper of the entire fleet, can only mean that that he told Boadbase "hey, I can license my technology to you, to your competitors, to Siebel, to Peoplesoft, to whoever ,in both Web and non-Web applications, so you need us more than we need you. Goodbye and Have a nice day!" As Eric went on to explain at the AGM, Broadbase got Broadsided (my words not his) by the internet buble bursting and (I'll continue along with the nautical theme) hit an iceburg and sunk quicker than the S.S. Titanic. The way our Skipper described it at the AGM, Broadbase has recently been forced to enter into a 'mutual suicide pact' (Eric's words not mine) and merge with Kana at a price per share equal to one-half of the cash which will be held by both companies (ie one half cash value)! This would lead anyone who looks at it come to the conclusion that neither Broadbase nor Kana, with their respective burn rates, expects that cash to be around for too long.

Apps seemed genuinely pissed with the Broadbase experience(he even implied that the licensing arrangement might just have been a thinly vieled attempt by Broadbase to 'look under ANC's hood' in preparation for a takeover bid). He says given the impending merger with Kana, Broadbase's attention is focused on basic survival and away from ANC, and he seemed to imply that we shouln't expect much from that relationship.

19. What is ANC's current relationship with Whitecross? Would you characterize the relationship as a success from ANC's point of view? Please provide details.

ANC and Whitecross first entered into a relationship in 1997, and at the time, both parties had high hopes for the success of that relationship. Whitecross is a small UK based private company which has embraced an ASP model for complex datamining, and a subset thereof, webmining. The ASP model is essentially one of a customer paying a monthly fee, and Whitecross doing all the 'heavy lifitng' on an outsourced basis. My take is that Whitecross has been having its own issues with the success of its ASP model and has approached ANC to see if it can more closely allign (read reduce) its minimum license fee payments to ANC with the revenue Whitecross is actually earning. Whitecross is the defaulting technology partner referred to Annual Report. Apps mentioned that ANC and Whitecross are trying to work things out.

20. What is ANC's current relationship with Siebel and how has that relationship either progressed or regressed over the course of fiscal 2000. Has there been any recent attempts by ANC to elicit interest from Siebel to license KnowledgeStudio with a view to integrating/bundling that product into a Siebel "Analytic CRM" product offering? If not, why not. If yes, what are the prospects for success of that initiative.

According to Eric everything is going according to plan with Siebel. ANC's strategy is clearly to play in the same sandlot with the 'big boys' and Siebel is the 'gorilla' in the CRM space as Apps stated many time. He made the point that Siebel installations in many instances cost millions of dollars and take many years to successfully implement from intial planning stages through to final installation, so we shouldn't be too hurried to see immediate KnowledgeStudio for Siebel sales (he made essentially the same point last year and definately won't be in a position to make that point next year, either his strategy will be proven to be wrong or right). Apps made the point over and over again about 'redundant functionality' and that competitors such as NetGenesis, SAS (who appears to be moving into the game), E.piphany, and Broadbase/Kana offer some form of analytic or datamining CRM product offering, but there is redundant functionality with offerings of the likes of Siebel, PeopleSoft and SAP. Apps clearly feels that the Siebel Gorilla and the others will in the not too distant future embrace e-CRM and, with its hugh installed base, blow the doors off the niche players in the market. The way Apps explained it, there is absolutely no redunadant funcitionality with KnowledgeStudio for Sieblel, it is a very complimentary pure datamining 'plug in' into the Siebel architecture and doesn't compete with Siebel in the slightest fashion. Apps strategy clearly now is to swim alongside the 'big boys' ie the Siebels, Microsofts and PeopleSofts of the world, and pay less attention to the small fries such as Whitecross, Broadbase and Sybase, although their business is always welcome. Anyway not alot we can say at this point - time will tell.....

21. What was ANC's rationale for recently "localizing" KnowledgeStudio into German? Does this have anything to do with a proposed or planned business relationship with SAP (which has its headquarters in Germany)?

The question wasn't asked, nor was it dealt with in the 'State of the Union' address.

Here's a plausible 'conspiracy theory' . SAP has chosen Microsoft's SQL Server as SAP's reference database. ANC has chosen Microsoft's SQL Server as ANC's reference database, accordingly there is a plausible link (without even having reviewed the findings of the Warren Commission) between SAP and ANC, with MSFTacting as the 'Deep Throat', or connecting link. The computer schematic would go something like: SAP = MSFT = ANC = SAP (not bad for a non-techie hoser, eh?)

22. We are now at the mid-point of ANC's 2nd quarter, how are ANC's lead (i.e., recent) revenue numbers: are they growing or decreasing? How much of ANC's revenue is derived from maintenance (renewal rate), and how much is derived from new licensing?

No specifics were given, but Apps did say in the Q&A session that he was pleased with the way things on the revenue side were progressing. He referred to the Tools business as a 'cash cow' and said that even in recessionary times, these products are attractive because they provide datamining power at a reasonable price (as opposed to SAS, where customers get soaked). He also made the point that in recessionary times, 'risk management' becomes a bigger issue for companies as they try to reduce costs through fraud and 'churn' reduction. He said that ANC's tools are perfectly suited for this. He indicated that real revenue growth will come from the Enterprise Solutions, such as Studio for Siebel and Webminer as well as from the customer referral base that the Datamining SDK bring.

In the scrum after the Q&A session, I think I heard him say that he wasn't sure if Q2 net numbers would make up for all of the losses suffered in Q1 (even if it's close I'll be happy) but he felt that there was also sufficient room to easily reduce some expenses to ensure that ANC stayed on its 'path to profitability".

23. How much of ANC's revenue is derived from existing customers and what are the reasons for not selling more to existing customers (i.e., "the mile wide, inch deep" issue of customer penetration)?

No specific numbers were provided. My sense is that historically a lot of the revenues has come new customers, e.g. there's still a lot of room to penetrate the exisitng customer list. Apps is quite proud about the breadth of ANC's customer list. He views it as a list that can be worked and upsold, as datamining becomes more top of mind in Corporate America. On that point, note that the major database vendors, being Microsoft, IBM and Oracle all in the last month have now issued press release crowing about the virutes of datamining and how their platforms support this important technology. I think he's right.

27. Who does management believe to be ANC's direct competitors and how is ANC positioning itself to overtake its competitors?

Apps view SAS as ANC's direct competitors for Analyst Tools, not SPSS, which was a surprise to many of us. Apps said in his talk and in the informal scrum afterwards that his sales guys just don't see SPSS out there. Apps stated that SPSS is adept at the PR machine, ie in giving the impression that they're doing lots of datamining sales, but Apps questioned how much of this is actually pure datamining sales, as opposed to statistical packages (which is their core business) rebranded as datamining packages for 'PR' purposes. He did say that SPSS did have some presence for its datamining tools in the UK, but this is primarily because the dataming company that SPSS bought to get into the datamining game a few years ago was based out of the UK.

On the Developer Tools side, there is no real competition.

On the Enterprise Solutions side, ie KnowlwedgeStudio for Siebel, and Webminer in particular, he mentioned NetGenesis (a Weblap product and a company that ANC had talks about collaborating with, but in the end they decided to compete with), E.piphany (the Gorilla in its space) and a new one, Quadstone (www.quadstone.com) , who call themselves a predictive marketing firm, although Apps stated that just means they're a warmed over datamining company addressing the retail marketing side, who doesn't want to use the word 'datamining'.

Apps approach with these guys is hey, Webminer is a superb very focused product, whereas you guys are trying to be all things to all people, and when the industry consolidation or shake-out occurs (it's probably happening right now) you guys, with your massive burn rates, won't be around once the big boys such as Siebel, PeopleSoft, SAP and Microsoft invade your territory.

29. What percentage of ANC's gross revenues will be allocated to R&D this year? How does this compare to ANC's competitors like SPSS and Insightful?

Apps didn't get into specific comparisons or numbers, but he did make the point that the KnowledgeStudio work bench has 50 'man years' of R&D invested in it, which is way ahead of the competition.

30. Does ANC envision layoffs in the coming months?

The short answer: No.

31. Please discuss ANC's concept of materiality as it relates to its public disclosure requirements. Has this concept changed recently in light of the recent criticisms of technology companies generally about both "delayed" and "selective" disclosure? If no, why not? If yes, please provide details.

Apps didn't deal with this question directly, but he referenced his views on the subject a few times during the Q&A session.

Some of the first questions during the Q&A session dealt with ANC's revenue growth. This, for obvious reasons, is a hot topic for a lot of people who are starting to get just a little antsey about when we're going to start seeing ANC's gross revenue numbers move north. The concern can be best summed up by the 'promise of datamining' (of which we've heard too much) and the 'reality of datamining' as a lucrative business (which we're still waiting to witness).

The introductory response was that , while he didn't want to sound legalistic or be evasive, ANC couldn't give predictions about revenues because if it were wrong, we shareholders might sue the company. I found that answer to be a bit of a 'rough start'. First of all, you've got a room full of well meaning people, many of whom have taken off work to come down and find about their company, and the last thing any of us want to hear is that we're somehow going to be in full litigation mode if ANC's 'guidance' turns out to be incorrect. Simply put, there are more delicate ways to articulate the conern.

Second of all, the concept of 'guidance' is currently recognized as a legitimate and legal way for public companies to disseminate future oriented financial information. This was not always the case, and the standards are being relaxed. These days it's done all the time, it just hapens that in these challenging times , it tends to be in the context of companies guiding their shareholders and analysts down about future results. The flip-side is that there is no logical reason why 'guidance' could not be positive, ie 'guiding ' shareholders and analysts up about future results, if that indeed is what the company is expecting.

It's actually all very quite interesting if you read a bit of the literature on the subject - it's being discussed quite a bit these day in the Business and Management schools . The thesis is that because shareholder communication has become so much more efficient (ie cheaper) through the internet, it's actually having an effect on the the accepted concept of materiality and the duty to disclose. The bar on materiality, by virtue of the efficiency of the internet and it's promulgation of more efficient stock markets through the quick dissemination of information, is actually lowering. Responsible companies are now saying reflexively that when it doubt, 'Press Release' it, or more accurately, 'Internet Release' it, as the concept of a Press Release in the internet age is a misnomer. There's no real direct transaction cost to doing it, so the transaction 'cost /benefit' impediment that used to exist when deciding whether to issue a 'Press Release' has gone by the wayside.

Anyway the foregoing is all an aside. As far as I can tell it's business as usual at ANC about material disclosure. ANC has a high level of materiality and it isn't moving from that concept, even though the concept of materiality and 'delayed' or 'selective' disclosure seems to be an evolving concept in favour of disclosing to the public as soon as possible.

32. Why does there seem to be a double standard when it comes to the public announcement of material news? Why are the announcements surrounding the development of new products such as Visible Web and KnowledgeExplorer considered material but then their actual launch or the delay of such products is not considered material enough to be included in press releases or quarterly reports? As a further example, why was the announcement of the Sybase Development Services Agreement considered material but then the update to that arrangement or cancellation of such an arrangement (if that is what indeed happened) considered immaterial?

The question wasn't asked, or dealth with in the 'State of the Union' address.

My take on it is that it is the difference between, on the one hand, the legal duty to make public announcements about 'material' developments affecting a company, and on the other hand, the option that a company has to make public announcements in the context of its ongoing public relations (PR) or marketing efforts.

The announcements concering VisibleWeb, VisibleWarehouse, KnowledgeExplorer and Sybase, were all probably public relations/marketing announcements ie they were probably not considered material to ANC's common share trading price, but they were probably all considered good things to let the public (ie shareholders, customers and competitors) know about ANC. The delay in the launch of those products , the change in the status of ANC's relationship with Sybase and even the delay in the public announcement by ANC of the Working Ventures decision (which actually was availabe to the public as soon as it was released, it's just that practically speaking , it's virtrually impossible for a layman to track it down) , are probably not, each and of themselves, material to ANC's trading price and therefore things which legally require a Press Release. From the public relations/marketing side of things, the company probably didn't want to revel in it (ie 'rub the world's nose in it') by issuing Press Releases on those subjects.

It's all a matter of style. Some public companies have a policy that if they Press Releases for good 'public relations ' type news and there's a change to that good 'public relations' type news, they Press Release the bad news to close the information loop. Most other take a more schizo approach when it comes to the public dissmenination of 'public relations'/marketing type news ie, the good news gets out, and the bad news, if legally permitted, stays in.

33. What efforts does ANC plan to make to improve its public and investor relations?

I asked our President this question.

In my view, Eric Apps is at his best when he's speaking about the prospects for ANC, it's market space, the excellent products that it has, the high quality of its employees the excellent relationships with major industry players that have been formed and the prospects for datamining in a world that is literally exploding with data. You get a real sense of his conviction and his passion for what he and his team are doing, and we all saw and heard that very clearly at the AGM. My question to him was what steps are being taken to get that message out to the investment community? He's got the pitch down pat, why isn't he making it?

To his credit, Apps acknowledged that ANC could do a better job of promoting itself and that more effort would be expended on this area in the coming year. That response was an appropriate and measured one - ANC has been focusing to date on building its business, all with very limited resources, both from a financial and manpower perspective. All legitimate points and he's got the room thinking " Eric, we look forward to the results of that more focused public and investor relations efforts over the coming year". Leave it and move on.......

...........Then he starts to ramble........and gets combatitive...... .......and gets 'off message'.........and says (paraphrasing):

"there's no way that this little company is going to hire an investor relations firm and pay them $25,000 per month plus a bunch of cheap options, and even if we did, it would be like speaking to a deaf man because the micro-cap tech markets these days are in such a slump that nobody would listen to our message anyway" and so on and so on, blah, blah blah (you get the gist) as I tuned out at that point.

This is, in my humble opinion, where improvement is required: the 'off message' rambling. In this instance, he took the most excessive example, ie ivestor relations at a cost of $25,000 per month plus a whack of cheap paper (options) and uses that as the 'straw man' to dismiss the concept, never acknowlding that there are lots of intermediate steps along the way which might be cheaper and more effective. He referenced the sorry state of the micro-cap equity market, and at that stage probably half the room is thinking, "you know what, you're right, I should dump this stock right away and get back into the blue chips".

Again I hate to sound 'preachey' and like a 'know it all' (cause believe me I'm not), but it is frustrating because it is all very solvable. Public speaking to investors is an art, it's an acquired skill set that is perfected in two ways : (i) getting out there and just doing it, over and over and over again; and (ii) coaching,- there are people in this town who can assist in developing, refining and perfecting the message and, as important, the method of delivery. And by speaking to investors I don't mean writing articles (which no doubt is an important way of communicating - and Eric is a superb writer: the KnowledgeNet stuff is first rate ) or speaking at trade industry seminars (again, very important, but for totally different reasons), it means getting the message out to the broker-dealer community, speaking at the broker lunches that are put on, securing spots on the likes of ROB TV, speaking to the financial press, all of which is very 'doable' without spending a ton of money.

A final aside and then I'm done for the day. It involves a little plug, but bear with me. I'm involved with a group called the Toronto Venture Group (www.tvg.org). It's a volunteer group that has been operating for about 10 years. We put on monthly breakfast meetings at the Toronto Board of Trade for the the business and venture capital community. At each meeting we have a keynote speaker, either a company that has successfully raised venture capital, or someone from the venture capital community. Over the years, on the entreprenuer side, we've had out to speak the likes of Phil Deck, former CEO of Certicom, K.Y. Ho CEO of ATI Technologies, Anthony DiCristafaro CEO of MGI Softaware. On the investor side we've had out Paul Cataford, Managing Director BCE Capital, we recently had out Brian Campbell, who heads the technology investment banking group at National Bank (he was formerly with Yorkton and was the investment banker on Open Text, Certicom, Genesis Microchip, Zenastra Photonics, Leitch Technologies ie some really big Cdn. tech ames). Those are some of the bigger names, we but we also have out smaller interesting 'up and coming' tech companies out to speak. We generally have 200 - 250 people out per meeting.

I've literally seen hundreds of investor presentations over the years, and what comes through time and time again, is that the best presentations are the one's, regardless of the size of the company, where (a) there is passion (and believe me, Eric's got it) and (b) there has been practice and coaching (hopefully it'll come with time).

34. What efforts will ANC be making to elicit analyst/institutional coverage of its shares?

The question wasn't asked or dealt with specifically in the 'State of the Union" address.

Apps did say in the scrum afterwards that if he were going to deal with an institution, it would be a 'blue chip' firm along the lines of CIBC World Markets, or a TD Newcrest. They've both got great research, and if a little company like ANC could get interest from those guys, that would be great.

It's an interesting issue to consider. Assuming that Smartware's normalized net income is approximately Cdn. $300,000 per annum, and using the 'rule of thumb' valuation method of 5 times net earnings (ie ensuring the purchaser a 20% return on investment) Smartware has a value of Cdn 1.5 million dollars. If ANC could find a buyer, wouldn't tha1.5 million be better used to fund ANC's datamining business? This is especially so in light of Eric's comments that if he had the resources to do so, he would hire 16 more salespeople. Again, all of the foregoing is a 'big if' in terms of finding a buyer and nothing regarding Smartware was even intimated at the AGM.

37. Please advise on the level of interest from other companies for M&A transactions with ANC?

Again, not a lot of discussion on this topic. Broadbase's desire to do a merger was discussed in Part B of the AGM questions. Apps mentioned that ANC had approached NetGenesis about 'collaborating' . The way Apps explained it, NetGensis has a strong presence in 'WebLAP' while ANC has superior technology in Webmining. The principal difference between WebLAP and Webmining is that WebLAP does not contain a predictive element to the analyisis (ie, it is backword looking in the sense that it takes information from the Web , segments it, and tells you what happened, all in a very 'user friendly' format), whereas Webmining takes data from the Web and provides analysts with the tools to predict what will happen (ie it's forward looking or predictive). The way Apps' described it, NetGenesis took a pass, and so Apps said that ANC will be competing with them. If you look at NetGenesis' recent earnings, it looks like the company is going broke. They have a very large 'burn rate' and don't have a huge amount of liquid assets. It looks like it was opportune that nothing was done with NetGenesis, if indeed they were discussing a formal merger, which Apps did not conclusively state, only that they were looking at 'collaborating'.

Aside from the foregoing, nothing else was discussed.

40. Please comment generally on the impact of mergers in the data mining industry, as they relate to ANC's partnership arrangements. Many of ANC's partners have merged with other companies that are either competitors or have alliances with ANC competitors. For example, Tantau and Eyedent, Customer Analytics, SASI, etc.

Apps dealt with this question directly as it pertained to Customer Analytics. He explained that Customer Analytics was a company run a very respected academic in the datamining field, whose name escapes me (a Spanish fellow). Customer Analytics commissioned a consulting firm to make a recommendation on the best datamining software to acquire, and the consulting firm recommended ANC, which led to a licensing deal with Customer Analytics. Apps went on to say that in June, 2000 Customer Analytics was acquired by Exchange, a CRM company, whose focus is not currently orientated towards datamining, and therefore there is no activity on the Customer Analytics/Exchage front.

In the informal scrum, I asked him very briefly about his views on Digimine's recent acquisition of CoRelation (announced the day before the AGM). Digimine has been a very interesting company to watch. It was formed by 3 ex-Microsoft employees, the most high-profile of which is Usama Fayyad, who was head of the Datamining Research Group at Microsoft before he left to start Digimine Inc, and who has been the 'poster boy' for datamining over the last number of years. Digimine has received a ton of press , raised a ton of venture capital money and has quickly ramped up to about a 100 employees. The company has gone the ASP route, i.e. they will do your datamining for you on an outsourced basis. As far as I can tell, Digimine is still bleeding a alot of cash, but it does have some very deep-pocketed supporters.

When I asked Apps about Digimine's acquisition of CoRelation, which is a small 12 person datamining tools software company, he didn't seem too concerned. He said dismissively that if Digimine were indeed intending to get into the tools business, it didn't say a lot for their ASP business model. He did say that ANC will monitor Digimine as part of its general competitive market surveillance.

My take on Digimine is that Apps is probably right when he says that their ASP model is a bust. The ASP model is attractive primarily to smaller type companies, and when Digimine started out during the internet craze, I'm sure their target was the dotcom market, which has now evaporated. However any move they make into the datamining software tools or platform market should be watched very carefully. There is no question that Digimine and Usama Fayyad have an excellent relationship with Microsoft (and they probably have an inside track with Microsoft). Notwithstanding that they appear to be bleeding money, they seem to be able to raise financing when they need to. Definately a company to watch.

43. Please explain the rationale for ANC apparently putting so much effort into partnerships (Microsoft, Whitecross, Acxiom, Broadbase, Customer Analytics, Sybase,) when they appear to have only generated approximately $320K in revenues in fiscal 2000, $180K of which appear to be doubtful accounts? Does management foresee these relationships generating "significant revenues" over the next few years? Please describe for the shareholders what management's definition of "significant" is.

The question was asked (not exactly as set out above) and wasn't dealt with by Apps in a clear or convincing manner, although he did reference the matter indirectly when he was speaking about the status of vaious partnerships. Whitecross, Sybase, Customer Analytics and Broadbase are all essentially relationships that have 'gone off the rails' in one form or another, so they weren't good for much in terms of revenue during fiscal 2000. Revenue from Acxiom was probably neglible, although he didn't mention them specifically. Microsfoft was dealt with in some detail, as described in Part B, but not in terms of revenue and the clear implication with them is that the best is yet to come.

You really got the sense in listening to Apps that his partnership strategy has changed, and ANC is really focusing on the 'big boys' now, ie the Cap Gemini Ernst & Young, Accenture or PriceWaterhouseCoopers' of the world ( or whoever this professional services firm is that they are hoping to announce a strategic relationship with shortly), the Siebels, Peoplesofts and Microsofts. I'm also personally rootingg for SAP as well, although I haven't got a clue if that is on the horizon.

44. Does Microsoft have any financial risk (i.e., through minimum purchase obligations) with ANC? Are they obligated to pay ANC for the development of the Data Mining SDK.

As far as I can tell, Microsoft does not have any financal risk with ANC through minimum purchase obligations for ANC's products. It does have some financial risk in the sense that it is paying ANC to develop the Datamining SDK for 'royalty free' distribution by Microsoft to the developer community. What risk Microsoft does have with ANC, might be more aptly be referred to as 'reputational risk', that is to say that it is putting at risk its reputation by promoting ANC's Datamining SDK on the Microsoft Website and by permitting ANC entry into the Microsoft DataWarehouse Alliance as a Gold member.

ANC lost at the trial level, and is required to issue 1,200,000 common shares against payment of $300,000 (ie 25 cents per share) by Working Ventures. According to Apps, there is no legal liability to ANC other than the delivery of the common shares against payment.

Apps went out of his way to say that there is nothing personal with Working Ventures, it's all just business and that some of the outside directors of ANC have a very good relationship with Working Ventures. What came through in the meeting is that it is very personal for Apps - he's furious with ANC and seemed (in an odd way) pleased with the fact that ANC's share price now is where it is (ie the basement) because at 34 cents, it will force Working Ventures to make a 'real investment decision' as he said.

Apps made the odd point that by refusing to issue Working Ventures the shares a year ago December, he had done us shareholders a favour, because all Working Ventures would have done was turn around and sell those shares into the market at an obscene profit to us unsuspecting shareholders. By restricting the number of shares outstanding, he seemed to be saying that he was protecting us from our urge to buy overpriced ANC shares. Not a big point, but another example of fuzzy logic and 'off topic messaging'.

46. What is the current status of the Trifox settlement. Are they in good standing with their settlement payments? Does ANC have any plans to exercise its rights under the settlement to participate in future financing transactions involving Trifox?

This question was not asked in the Q&A session, nor was it dealt with in the 'State of the Union' address. Other shareholders have commented that in the scrum, Lon Vining said that ANC has no intention of investing in Trifox (I wasn't there for all of the scrum).

One thing I did find a little strange (and not to read too much into it) was that Ken Ono, the Chief Technology Officer (and really the heart and soul of ANC's development efforts over the years) left the meeting early. Now, he might have had another meeting to go to, but it is somewaht odd because in my experience senior management usually does stick around after the meeting to 'meet and greet' shareholders. Again, I don't think much can be read into it, but it is an observation.

The issue of ANC's ability to pay competitive salaries and the associated issue of ANC's deeper pocketed competitors poaching ANC's people was dealt with indirectly through the vote on the resoultion to increase the size of the stock option plan to 5.9 million shares. The vote was handled by way of a ballot, which means that there was a formal vote count conducted by the scrutineer of the meeting, whose job it is to conduct an actual vote count if the Chairman requires it. For non-contentious matters, such as the appointment of Ernst & Young as the company's auditors, a ballot (ie vote count) is never conducted - the vote is done very quickly by way of a show of hands. The company obviously knew going into the meeting that the increase in the stock option plan was going to be contentious, and Joe Martin, the Chairman of the Board, indicated right from the start that there would be a formal vote count. Anyway, the vote on the options narrowly (I think) passed (I think it was something like 55% in favour and 45% against but that may have been the vote on the resolution to allow them to issue up to 25% of shares to do a financing, I can't remember) but in any event during Apps' pitch to the shareholders to approve the increase, he said that he needed it to ensure that he could retain as well as attract top talent, so obviously one way they are going to try to deal with 'poaching' by their competitors is to heavily incent key employees to stay by 'loading them up' (my words not Apps') with options - which makes good sense to me.

A final related issue to finding and keeping top talent is the state of the technology markets generally. In my opinion, the soft tech markets actually benefit a small company like ANC from a human resources point of view. Good people are now more readily available (hopefully at more reasonable rates) because the rabid competition for employees that was driven by the major technology companies during the boom has subsided with all the lay-offs that are happening at the those major technology companies and, for that matter, the smaller ones as well. As indicated earlier, there was not the slightest hint that layoffs would occur at ANC.

50. Eric Apps became the President of ANC during a troubled period (ie. TRIFOX, negative working capital) and did a good job in stabilizing ANC; does he see himself as the right man to lead ANC into the future (lawyer vs. technology leader)?

Questions 50 and 51 are essentionally the same, so I'll try to deal with them as one, although neither questions were specifically asked during the Q&A session.

A litle background is helpful. I first got interested in ANC during the troubled period the company was going through under what was known as the 'Lynne Stetham regime'. Lynnette Stethem was, prior to Apps' accension, the President and CEO of ANC and was the founder of the predecessor of ANC is 1984. Anyway, a very good friend of mine (still is) who, at the time was a research analyst at Cannacord Capital, said that I had to take a look at this tiny company operating in downtown Toronto with some very neat technology (essentially the company was a 'one trick pony' with KnowlegeSeeker), but he did warn that operationally the company was a complete mess. The though in taking a closer look was thats there might be a value investing opportunity (the point being that companies that have neat technology and are well run are probably correctly priced in the market). By way of further background, Griffiths and Cannacord co-led an offering of shares in ANC in 1995 (well before I had any knowledge of the company) and therefore Cannacord had a pretty good knowledge of ANC.

The way things were explained to me, during the 'Stethem regime' the company had raised a ton of dough, and had burned through most of it by spending large amounts on marketing to try to increase the awareness of datamining (there virtually was none at the time and the marketing campaign didn't help one bit - I think the expression is 'like lighting a cigar with a $100 dollar bill'). At the time, ANC was attempting to sell its product on a 'shrink wrapped' basis and through an OEM hardware strategy (ie hey, lets get the KnowledgeSeeker software pre-loaded into PC's). As it turned out, the strategy was a complete disaster (ie the shrink wrap product definately didn't make it on of the 'Top 100 ' Titles List at Circuit City) , and even if KnowlegeSeeker was 'pre-loaded' into PC's (that intiative never really got off the ground, but I think it was how James Estill came on the Board as his company ( EMJ) was and is a wholesaler of computers and peripherals) the software was so damned specialized and complitcated that nobody really knew how to use it (I'm exagerating here a little bit for dramatic purposes).

So, against the backdrop of a failing business strategy and a company that was burning through the little cash it did have at a horrific rate, Lynne Stethem appeared to be on the verge of a nervous breakdown. Dysfunctionality reigned supreme throughout the entire ANC organization and the one thing I can vividly remember is that they had some incredibly tackey 'Herb Tarlick' sales guy, who gave a whole new meaning to the saying "dressed like a truck driver going to court" It was a mess and in retrospect, was a classic example of a company going public way too early, and having millions of dollars thrown at it without having any even remotely proven business strategy.

So I call up my friend at Cannacord and say "this company is a royal p.o.s. and your're supposed to be my friend?". To which he replied, "I know, I know, but its got world class technology, really, so take some play money and give it a whirl". At that point, he didn't need to pitch me any more as I was hooked on the technology and ready to play, so I pushed my chips into the pot and said "let it ride!"

Anyway, Cannacord and Griffiths had to do something as they were looking like complete idiots to their investors, and so (I may have the order wrong) Stethem and Herb Tarlick were made to walk the plank, Apps came on the Board as an outside director who knew something about corporate finance, and this fellow ,John Mangold, was promoted from V.P. to President. Mangold actually seemed like a pretty good guy, but a bit timid ie, he didn't telegraph decisiveness or strength (and who can blame him given the mess he was left to deal with). To his credit, however, I think he was the one, together with Ken Ono, who got ANC on the KnowledStudio workbench track (ie moving the company away from being a 'one trick pony'), he successfully saw the company through the trial statge of the Trifox litigation, and he negotiated the deal with Working Ventures, which unfortunately ultimately cratered and left the company broke........

......So at that point exit John Mangold and enter Eric Apps....... who left his law practice (although not immediately) to run ANC, which is where ,from a managment standpoint, we stand today.

Any assessment of Apps' ability to effectively lead the company in the future must , in part, be judged against the backdrop of those who in the past attempted to lead the company and ultimately failed. Judged in that light, Apps' tenure has been an incredible success. The company has returned to fianancial strength and has expanded its product offering. It has broadened its partnerships as well as its business strategy, which now includes 3 very distinct business units, being Anayst Tools, Developer Tools and Enterprise Solutions. The company has also succeeded in building out its management team. All of this has been done on a very limited financial budget. Quite frankly, he's earned the right to lead the company forward and I personally think he has the right stuff to do it. Joe Martin, the Chairman of the Board, said as much (on behalf of the Board) very publicly at the AGM, stating that Eric has done a fabulous job to date.

Now having said that, is there room for improvement? Of course. I think a big area of improvement is with respect to public and investor relations . He's got to get his hands dirty, rub elbows more often with the broker/dealer investment community and yes, even experience the 'seedier side of the street' ie, by making presentations even to those brokerage firms who aren't 'blue chip'. He's got to get out there and create a buzz, tell the story with enthusiasm ( it's actually a great story and he's got one hell of a presentation). He's got to communicate more often directly with his shareholder and hold the quarterly conference calls (its cheap and easy to do) to allow shareholders to hear him and the CFO analyze quarterly results, regardless of the fact that the company is small and no analysts may be listening. If the story is as good as Eric says it is, the analysts will eventually come and in the interim, it'll be good practice for him and Lon Vining. Also don't forget that there's a potential audience of 8,000 shareholders who, if they are communicated with directly more often, may tell two friends......who may tell two friends....... and so on....... and so on. At the end of the day, even though it may be a dirty word, he's gotta get out there and promote (in the best sense of the word, of course).

Another small area is with respect to litigation - this little company has had way too much litigation! I have a sneaking (unconfirmed) suspicion that the hard-ball approach to litigation eminates from the top. Now having said that, to be fair, Trifox and Working Ventures didn't come about because of anything Apps did ( they all pre-dated him and Trifox was ultimately successfully settled), but its the decision to let those claim linger that, I think, is at issue. I personally take a very Zen-like approach to litigation, that is to say, I believe litigation begets bad Karma and that nothing good comes from it. Yes, you've got to stand up for your rights and all that other important stuff, but business is not about curing cancer and other high-minded things like that, at the end of the day it's about finding the elusive middle ground, compromising, doing deals and making money. The Working Ventures claim is a perfect example. Eric and for that matter, all of us, have every reason to be livid. ANC was at the last minute left at the alter by Working Ventures pulling of the $2 million financing at the last minute in the spring of 1998. The company nearly went broke, it lost some very good people and the whole fiasco probably put the company back 2 years in terms of its product development schedule. Could you imagine what ANC would have looked like during the tech bubble of last spring if it had had the use of that $2 million dollars for 2 years startingfrom early 1998? The company would have looked superb. Anyway, the point is that there is every reason for frustration, however, the fact is that ANC was suing a very respected, and probably the best know, venture capital firm in Canada. Prospective financiers look at that. The financing community is very small. These people speak to each on a regular basis. Litigation forces you to air your dirty laundry to a prospective investor, to which they're probably thinking, "gosh, if we don't do the deal is ANC going to sue us too?!" To get off this topic because I'm quickly becoming depressed, litigation is 100% negative energy and nothing good ever comes from it!

54. In your view, does ANC currently have "world-class" people running each of its departments (i.e., sales, development, marketing etc.)? What are the credentials needed to succeed, and does the current team possess them?

A company is nothing more than the people who work for it. If the people are no good, not even a first call product suite and all the money in the world can stave off disaster.

Apps was adamant on the point that ANC's people are first rate and are now all working very closely together as a team. The company has built out its management team to include the President (Eric Apps), the Chief Technology Officer (Ken Ono), the CFO (Lon Vining), the Director of Sales (Pav Treskin, and there are 6 sales people in total) , the VP Consulting Services (Dr. Memduh Refaat and there are 6 consultants in total), a Director of Reasearch and Development (Bob Camm, a new hire who reports to Ken Ono in order to alleviate Ken Ono's workload. I think there are about 20 developers in total), the Director of Business Development (a new hire to focus on the strategic relationships ANC has with Microsoft, Siebel, and probably the 2 new relationships yet to be announced, as well as creating new ones), the Managing Director for the UK operations (Nigel Bishop) and a Director of Services for the UK (a new hire), who reports to the Managing Director.

The foregoing to me is very exciting as it shows that the managment team is being built out in anticipation of growth. The Director of Business Development is an interesting one. I would think that the job description there is to create new relationships with partners and to ensure that ANC stays 'in the face' of its existing partners ie the Siebels and Microsfofts of the world to ensure that those relationships are properly leveraged. It's a new hire so we'll have to wait and see.

That's it for the Fiscal 2000 AGM Q&A.

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