Sibanye Stillwater Limited

Thank you, operator and welcome to everyone joining St. Bernard third quarter 2008 financial results conference call.

I am Lorie Hansberger, the IR Manager at St. Bernard Software.

Vince Rossi, President and CEO of St. Bernard Software and John Burke, Financial Adviser of the St.

Bernard will be presenting today. Before we begin, I would like to add that during the call, management will make a number of forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including future revenue guidance provided, statements of the Company's position to capitalize on a growing market and statements regarding the future demand for filtering technologies. Risk factors that could cause events or our results to differ from those expressed or implied by such forward-looking statements are described in our most recent annual report on Form 10-K, as well as other subsequent filings with the Securities and Exchange Commission.

We assume no obligation and do not intend to update these forward-looking statements. Today's call is being recorded and will be accessible on our website, www.stbernard.com in the Investor Relations section of the site.

A replay of the conference call will be available within two hours after the call through Tuesday, November 25, 2008 at 11:59 pm by dialing 877-660-6853 and entering the pass code 286 followed by 301561. The international replay dialing number is 201-612-7415.

At this time, I would like to introduce Vince Rossi, President and CEO of St. Bernard Software.

Vince?

Thanks, Lorrie and welcome to St. Bernard's third quarter 2008 financial results conference call.

Q3 2008 was an exciting time at St. Bernard that represents the third consecutive quarter where we are able to focus exclusively on operational execution versus the numerous envisioned management activities of 2007.

During Q3, we achieved strong gains growth and critically important financial management goals that have enabled us to be cash more positive for the entire quarter. Later in the call, I will go into greater detail regarding our growth and Q4 2008 guidance.

However, right now, I would like to introduce our financial adviser John Burke to review our Q3 2008 financials in more detail.

Thank you, Vince and good afternoon everyone. It is my pleasure to walk you through our third quarter 2008 financial result.

We will review several key items of our operating results as disclosed in our 10-Q to be filed on November 12, 2008. As discussed on our prior quarterly conference calls, we sold up two product lines in 2007, in order to compare the current quarter result to prior periods, it is important to note the sale of our Open File Manager product line in August of 2007.

This is the last quarter that we will need to extract the results from Open File Manager and there will be no differences between core business results and GAAP results from Q4 2008 earnings call and forward. Total GAAP revenues for Q3 2008 were $4.4 million compared to Q3 2007 of $4.5 million resulting in a 1% decrease in GAAP revenues.

In order to compare the current quarter results, it is important to extract the revenues generated from Open File Manager product line of $527,000 in Q3 2007. Excluding the legacy product line revenue, our core business revenues for Q3 2008 were $4.4 million compared to Q3 2007 core business revenues of $3.9 million resulting in core business growth of approximately 13%.

Throughout the rest of this call, I will reference core business revenue which excludes the revenues from Open File Manager within Q3 2007 GAAP revenues. The following are the results of our core business for each component of revenue: Subscription revenues were $3.5 million for Q3 2008 which result from core business subscription revenues of $3.3 million in Q3 2007 resulting in a 6% growth quarter over prior year quarter.

We anticipate subscription revenues to grow through new customer acquisition and growth within our existing customer base. Appliance revenues were $906,000 for Q3 2008 which is up from $622,000 in Q3 2007 resulting in a 46% increase quarter over prior year quarter.

We anticipate the revenues from appliances to increase in future periods. Appliance revenues fluctuate significantly from quarter to quarter based on new sales growth as well as up-sale of new appliances to our existing customer based.

We anticipate growth in appliance revenue from new and up-sale activities during 2008 and 2009 largely due to our new 8 series appliance family. Total gross margin was $3.3 million for Q3 2008 which is up slightly from $3.1 million in Q3 2007 resulting in 4% growth quarter over prior year quarter.

Although our gross margin remains relatively consistent in absolute dollar, it grew as the percentage of sales to 74% in Q3 2008 compared to 71% in Q3 2007. Due to the cost restructuring that have occurred over the last year, we anticipate gross margins to range from 70% to 75% going forward.

It is important to note that our gross margin can fluctuate significantly depending on the number of appliance sales that occurred during the period if these products have a lower gross margin compared to our other subscription services. Operating expenses were $3.8 million in Q3 2008 which is down from $9 million in Q3 2007 resulting in a 58% decrease quarter over prior year quarter.

The decrease is the result of approximately $3.3 million in impairment charges sustained in Q3 2007 and as well as the substantial cost restructuring that has taken place over the past year. The decreases drew out all operating expenses that we anticipate due to the quarters' operating expenses to be closely inline with Q3 2008 results.

In addition, our loss from operations was $509,000 in Q3 2008 which is down from $5.8 million in Q3 2007 resulting in a 91% improvement quarter over prior year quarter. Sales and marketing expenses were $1.8 million in Q3 2008 which is down from $2.8 million in Q3 2007 resulting in a 36% decrease quarter over prior year quarter.

The decrease was primarily a result of the office closures within Europe and as well as lower salaries and wages and discretionary marketing spending associated with our cost restructuring. Research and development expenses were $629,000 in Q3 2008 which is down from $1.2 million in Q3 2007 resulting in a 46% decrease quarter over prior year quarter.

The decrease was primarily a result of the reduction in headcount associated with the sale of Open File Manager product as well some downsizing associated with our cost restructuring. We anticipate research and development expenses to increase for the remainder of 2008 and so in even greater extent in 2009 as we extend the core functionality and features within our core products.

General and administrative expenses were $1.3 million in Q3 2008 which is down from $1.7 million in Q3 2007 resulting in a 22% decrease quarter over prior year quarter. The decrease was primarily a result of the reduction in headcount associated with our cost restructuring, lower audit and compliance cost and lower amortization of intangibles offset by an increase of stock base compensation.

We anticipate general and administrative expenses for the remainder of 2008 to be inline with Q3 2008 results. In Q3 2008 stock base compensation expense was $334,000 compared to $260,000 in Q3 2007 resulting in a 28% increase quarter over prior year quarter due to additional stock options granted to the employees during Q1 and Q3 of this year.

We recorded other income of $5,000 in Q3 2008 which is down from $8 million gain in Q3 2007 resulting primarily from the sale of Open File Manager product in Q3 2007. The $5,000 in other income during Q3 2008 was the result of gain on the sale of asset associated with the final payment from our Open File Manager transaction of $235,000 offset by $230,000 of interest expense.

Our interest expense was approximately $150,000 higher than normal associated with the retirement of our bridge facility in July 2008 which resulted in the expensing of the unamortized original issue discount related to the awards granted in connection with this bridge facility. We do not anticipate future gains from the sale of asset or non cash interest charges associated with that retirement.

GAAP net loss was $504,000 in Q3 2008 which is down from $2.2 million in net income from Q3 2007 resulting in 122% decrease quarter over prior year quarter. It is important to note that Q3 2007 included approximately $8 million in gain from the sale of OFM offset by approximately $3.3 million expense associated with the impairment of intangibles.

In an effort to compare the performance of the current quarter, we must extract this two nonrecurring items which would have resulted in a $2.5 million loss for Q3 2007 compared to the Q3 2008 loss of $504,000 which resulted in improvement of 80% quarter over prior year quarter. Our loss per share was $0.03 per share in Q3 2008 compared to a gain of $0.15 per share for Q3 2007.

We are very pleased with the financial execution for our plan in accomplishing our goal of achieving positive cash flow for the entire quarter of Q3 2008. We generated approximately $346,000 in positive cash flow during Q3 2008 and anticipate similar results for Q4 2008.

In connection with our recent positive cash flow position and our existing debt facilities, we believe we are well positioned to navigate through this challenging economic environment. This concludes my review of our financial results for the third quarter ended September 30, 2008.

I thank you for your time and support and I will now turn the call back to Vince.

Thanks, John. I would like to highlight a few significant achievements during Q3.

We achieved $5.1 million in gains of our core product. This is a 53% increase in gains compared to Q3 2007.

We believe this is a strong indication of the success of our sales initiative and increasing customers' acceptance of our product. In addition to this outstanding sales performance, we achieved $346,000 in positive GAAP cash flow for the quarter.

To better illustrate this achievement, I would like to describe how we manage the business internally. Within Q3 2008, we incurred GAAP cost of sales and operating expenses of approximately $4.9 million which includes non cash stock base compensation and depreciation charges of approximately $452,000 resulting in a non GAAP cash expense within Q3 2008 of approximately $4.5 million.

When compared to our billing's performance of $5.1 million, the Company's operating performance result resulted in approximately $600,000 in positive operating performance during this quarter. The continued strong management of our expenses and good expense control processes has enabled us to achieve this very significant financial milestone.

In summary, outstanding sales performance combined with continued strong operations management demonstrates the health and potential of the business. Q4 2008 guidance and our financial goals: As we look to the fourth quarter 2008, we currently anticipate revenues to be in the range of $4.6 million to $4.8 million versus core business revenues of $4.2 million in Q3 2007 or 12% growth based on the midpoint of the revenue guidance.

For 2008, we are concentrating on two fundamental goals; continued top line growth of our core business and sustaining cash flow positive operations. This concludes our prepared commentary and I would like to now open the call for questions.

Operator?

It sounds like you have reached the level on your business where you are becoming relatively self-sustainable as far as the cash flow in this recovery. How do you explain the lack of the things and the things related to stock?

Well, it is a great question. As we continue to talk to investors and investor representatives in the marketplace, the only common theme that I hear there is that, their portfolios, being in the middle of nothing short of a blood bath and so their appetites to look at other investments has been dampened considerably.

Beyond that, I do not think we have a great answer to your question. We would love some suggestions but at this stage I do believe that the commitments that we have made in the investor community over the last three quarters, we have been very diligent at delivering and you are correct, we believe that we are positioned today to be able to sustain ourselves without raising additional capital and we are being cautious in going into 2009 to try to ensure that we continue in that mode.

Well, this is a difficult market environment and I guess the company that keeps earning more and more money does not quite always take care of itself so just keep up the good work and we do appreciate it on the events.

Everyone, thank you again very much for joining the call. We look forward to chatting with you again sometime soon.

As always, we are here if you would like to give us a call on any individual questions. Other than that, we are going to continue to have our heads down and running the business.

Thank you again very much. Goodbye.