In Re: iPass, Inc. Securities Litigation 05-CV-00228-Declaration Of...

COOLEY GODWARD LLP ATTORNEYS AT LAW

PAL P ALTO

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725153 v3/PA FREEMAN DEC ISO DEFS’ REQ FOR JUD NOTICE

ISO MOTION TO DISMISS SAC C 05 00228 MHP

COOLEY GODWARD LLP WILLIAM S. FREEMAN (82002) ([email protected]) MARY BETH O'CONNOR (228591) ([email protected]) JEFFREY M. KABAN (235743) ([email protected]) Five Palo Alto Square 3000 El Camino Real Palo Alto, CA 94306-2155 Telephone: (650) 843-5000 Facsimile: (650) 849-7400

Attorneys for Defendants iPASS, INC., KENNETH D. DENMAN, DONALD C. McCAULEY, ANURAG LAL and JON M. RUSSO

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

In re iPASS SECURITIES LITIGATION Case No. C 05 00228 MHP

CLASS ACTION

This Document Relates to:

ALL ACTIONS

DECLARATION OF WILLIAM S. FREEMAN IN SUPPORT OF DEFENDANTS’ REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF MOTION TO DISMISS SECOND CONSOLIDATED AMENDED COMPLAINT Hearing Date: July 31, 2006 Time: 2:00 p.m. Courtroom: Hon. Marilyn Hall Patel Trial Date: Not yet set

Case 3:05-cv-00228-MHP Document 59 Filed 05/01/2006 of 2

COOLEY GODWARD LLP ATTORNEYS AT LAW

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725153 v3/PA 1. FREEMAN DEC ISO DEFS’ REQ FOR JUD NOTICE

ISO MOTION TO DISMISS SAC C 05 00228 MHP

I, William S. Freeman hereby declare:

1. I am an attorney licensed to practice law in the State of California and a member

of the bar of this Court, and I am a partner with the firm of Cooley Godward LLP, attorneys of

record for Defendants iPass, Inc. (“iPass”), Kenneth D. Denman, Donald C. McCauley, Anurag

Lal and Jon M. Russo. I state facts in this declaration of my own knowledge.

2. Attached hereto as Exhibit A is a true and correct copy of iPass’s press release

dated April 22, 2004.

3. Attached hereto as Exhibit B is a true and correct copy of the transcript of iPass’s

April 22, 2004 conference call.

4. Attached hereto as Exhibit C is a true and correct copy of iPass’s Form 10-K for

the year ended December 31, 2003, filed with the Securities and Exchange Commission on March

30, 2004.

I declare under penalty of perjury that the foregoing is true and correct. Executed on May

1, 2006.

/s/ William S. Freeman

Case 3:05-cv-00228-MHP Document 59 Filed 05/01/2006 of 2

EXHIBIT

A

iPass Press Release Page 1 of5

PEWass,

Press Release

iPass Reports First Quarter 2004 Results

First Quarter Revenues $40 .7 million, up 8 .5% over Prior Quarte r

REDWOOD SHORES , Calif . - April 22, 2004 - iPass Inc . (Nasdaq : IPAS) todayannounced financial results for its first quarter ended March 31, 2004 . iPass is a leadingprovider of services and software which allow an enterprise's mobile workers to connecteasily and securely to their corporate networks .

Revenues for the first quarter ended March 31, 2004 were $40 .7 million, representing a33% increase over revenues of $30 .5 million for the same period last year and an 8 .5%increase over revenues of $37 .5 million for the quarter ended December 31, 2003 .

"This is a strong quarter for iPass," said Ken Denman, iPass Chairman and CEO. "Thequarter represents the achievement of increased revenues and profitability, and continuedstrong free cash flow generation . Our best-of-class secure connectivity solution, partnershipsand unmatched geographic presence all contributed to our success in the first quarter of2004 . Additionally, we added nearly a dozen more Forbes Global 2000 customers andseveral key strategic partners, while surpassing half a million unique active users in a singlemonth for the first time, further evidencing our continued business momentum ."

GAAP Results : Operating income for the first quarter 2004 was $7 .1 million, representing a61% increase over operating income of $4 .4 million for the same period last year . Netincome, calculated on the basis of generally accepted accounting principles (GAAP), for thefirst quarter 2004 was $4 .7 million, or $0.07 per diluted share, based on 66 .0 million fullydiluted shares outstanding, compared with $2 .3 million, or $0 .04 per diluted share, based on55 .9 million fully diluted shares outstanding, for the first quarter 2003 .

Non-GAAP Results : The following numbers are non-GAAP financial measures and excludenon-cash amortization of stock-based compensation . Investors are encouraged to refer tothe table that reconciles the company's GAAP results to its non-GAAP results in the back ofthis press release . Non-GAAP net income for the first quarter 2004 was $5 .5 million, or$0 .08 per diluted share, based on 66.0 million fully diluted shares outstanding, comparedwith $3 .3 million, or $0 .06 per diluted share, based on 55 .9 million fully diluted sharesoutstanding, for the same period last year .

Business Highlight sBusiness highlights for the first quarter 2004 included :

The company added 11 more Forbes Global 2000 customers to its growing customerbase .The company reported that there were 521,000 distinct end users of its services in themonth of March 2004 compared with 341,000 in March 2003 and 447,000 inDecember 2003 .In March, iPass integrated T-Mobiie's North American network of over 4,000 Wi-Fihotspots at important airports as well as Borders Books and Music, Kinko`s andStarbucks across the United States . The combination of the largest commercial Wi-Fi

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Wass Press Release Page 2 of 5

service in the United States with the world's largest virtual network represents a majorstep toward the adoption of Wi-Fi by the enterprise .

• Also in March, iPass integrated the growing footprint of Cometa Networks hotspots atvenues such as Barnes & Noble Bookstores and Tully's Coffee Shops .

• iPass surpassed 10,000 broadband access points in 30 countries, including over 8,600active Wi-Fi hotspots and Ethernet service in the rooms of over 1,300 hotels .

• iPass entered into an agreement with Unisys Corporation, in which Unisys will becomea reseller of iPass' global enterprise connectivity services . Unisys will resell the iPassservice in conjunction with its own managed security services offerings for VPN, anti-virus protection and authentication . Unisys managed security services addressenterprises' requirements to provide customers, partners and other users withubiquitous yet highly secure access to information and resources .

• The company ended the first quarter with $147 million in cash, cash equivalents andshort-term investments and no debt . This total compares to a balance of $139 millionat the end of the December 2003 quarter . During the first quarter, this balanceincreased by $8 million due principally to strong positive cash flow from operations .

Company ProjectionsThe following statements are based on information available to iPass today, and thecompany does not assume any duty to update these numbers at any time during the quarteror thereafter. These statements are forward-looking and actual results may differ materially .

For the quarter ended June 30, 2004, the company projects revenue growth ofapproximately seven and one half to eight percent over the March quarter . For the quarterended June 30, 2004, the company projects fully diluted GAAP earnings per share to beapproximately $0.08 . Fully diluted non-GAAP earnings per share, for the same period, areprojected to be approximately $0 .09 . The difference between projected fully diluted GAAPearnings per share and projected non-GAAP earnings per share of $0 .01 is based onexpected amortization of stock-based compensation of $645,000 for the second quarter of2004, divided by an expected 66 .6 million fully diluted shares outstanding, resulting in the$0 .01 difference.

Conference Cal lThe company will host a public conference call today to discuss its financial results andoutlook and current corporate developments at 5 :00 p.m. Eastern Time (2 :00 p .m . PacificTime) . This call is being webcast by CCBN and can be accessed athttp ://investor .ipass .com/phoenix.zhtmI?c=91479&p=irol-Calendar . The webcastwill be available until the company's next earnings call .

A taped replay of this call will be available for two weeks following the call . The dial-innumbers for the replay are 888 .286 .8010 (U .S . and Canada) and 617 .801 .6888(International) . The ID number for the call is : 73072415 . The webcast is also beingdistributed over CCBN's Investor Distribution Network to both institutional and individualinvestors . Individual investors can listen to the call through CCBN's individual investorcenter at www .fulidisclosure .com or by visiting any of the investor sites in CCBN'sIndividual Investor Network . Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents ( www.streetevents.com) .

About iPass Inc.iPass Inc. delivers enterprises simple, secure and manageable connectivity services formobile workers as they move between office, home, and remote locations . iPass combinesits global network of dial-up, Ethernet and the world's largest Wi-Fi footprint with support forcampus wireless LANs and home broadband connections to deliver a unified andcomprehensive solution . The award-winning iPassConnectTM user interface, centralize d

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iPass Press Release Page 3 of 5

management, leading security features and powerful policy enforcement have made iPassservices the choice of hundreds of Global 2000 corporations including General Motors, DowCorning and Underwriters Laboratories . Founded in 1996, iPass is headquartered in RedwoodShores, Calif., with offices throughout North America, Europe and Asia Pacific .

iPass® is a registered trademark of iPass Inc .

iPass' projections of future financial results are forward-looking statements . Actual resultsmay differ materially from the expectations contained in these statements due to a numberof risks and uncertainties including : volatility in the telecommunications and technologyindustries, which may make it difficult for iPass to expand its services ; rapidly emergingchanges in the nature of markets served by the company, which may not be compatible withthe company's services ; and increased competition, which may cause pricing pressure onthe fees iPass charges . Detailed information about potential factors that could affect iPass'business, financial condition and results of operations is included in the company's AnnualReport on Form 10-K under the caption "Factors Affecting Operating Results" in"Management's Discussion and Analysis of Financial Conditions and Results of Operations,"filed with the Securities and Exchange Commission (the "SEC") on March 30, 2004 andavailable at the SEC's website at www .sec .gov. The company undertakes no responsibility toupdate the information in this press release if any forward-looking statement later turns outto be inaccurate .

iPass provides non-GAAP net income and non-GAAP earnings per share data as additionalinformation for its operating results. These measures are not in accordance with, or analternative for, GAAP and may be different from non-GAAP measures used by othercompanies . iPass believes that this presentation of non-GAAP net income and non-GAAPearnings per share, excluding the effect of amortization of stock-based compensation,provides additional useful information to management and investors . Specifically,amortization of stock-based compensation is a non-cash expense, and managementcurrently expects that once the company's deferred stock-based compensation reflected onits balance sheet is fully amortized, iPass will not, absent changes in financial reportingrequirements, report additional stock-based compensation expense . Consequently,management excludes the effect of amortization of stock-based compensation for budgetingpurposes, as well as analyzing the underlying performance of the company . Managementbelieves that although GAAP measures are important for investors to understand, providinginvestors with these non-GAAP measures provides investors additional important informationto enable them to assess, in the way that management assesses, both the current andfuture operations of iPass .

iPASS, INC . AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS;Unaudited, in thousands, except share and per share amounts )

Revenues

Three Months Ended

March 31 ,

2004 2003

$40,695 $30,49 8

Operating expenses :Network access 9,052Network operations 4,73 5Research and develcT ent 3,21 0Sales and marke'i-. 3 11,54 4General and a- . . .__ ..at _ 4,227

A ortizatic . . ._ compensation (a) 787

Total operat- xp 33,55 5

Operating incom e

Other income (expense`, net

7,14 0

491

7,081

3,233

2,246

9,712

2,86 1

975

26, 1 0 8

4,390

(119 )

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Wass Press Kelease Page 4 of 5

Income before income taxes 7,631 4,271

Provision for income taxes 2,934 1,961

Net income $4,697 $2,310

Net income per share :Basic $0.08 $0 .17

Diluted $0.07 $0 .04

Number of shares used in per share calculations :

Basic 59,345 , 997 13,863,164Diluted 65,972,452 55,923,204

A reconciliation between net income on a GAAP basis and Non-GAAP net

income is as follows :

GAAP net income $4,697 $2,310

is Amortization of stock based compensation 787 975

Non-GAAP net income $5,484 $3,28 5

A reconciliation between diluted net income per share on a GAAP basis and

Non-GAAP diluted net income per share is as follows :

GAAP diluted net income per share $0.07 $0 .04

Per share effect of amortizatio n

of stock-based compensation 0.01 0.02

Non-GAAP diluted net income per share $0 .08 $0 .06

iPASS, INC . AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

March 31, December 31 ,

2003 2003

(Unaudited )ASSETS

Current assets :

Cash and cash equivalents $34,734 $45,64 6

Short-term investments 112,326 93,639

Accounts receivable, net 23,268 20,65 8

Prepaid expenses and other current assets 3,029 3,310

Deferred income tax asset 14,361 17,34 1

Total current assets 187,718 180,594

Property and equipment, net 10,199 8,288Other assets 1,178 1,235

Total assets $199,095 $190,117

LIABILITIES AND STOCKHOLDERS' EQUIT Y

Current liabilities :Accounts payable $8,843 $7,42 1

Accrued liabilities 10,966 10,97 4Total current liabilities 19,809 18,39 5

Total liabilities 19,809 18,39 5

Stockholders' equity :Common stock 61 6 0

Additional paid-in capital 230,639 229,02 6

Notes receivable from stockholders (2,611 ; ( 2,831 )

Deferred stock-based compensation (3,450) (4,326 )

Accumulated other comprehensive income 282 12 5Accumulated deficit (45,635} (50,332 )

Total stockholders' equity 179,286 171,722

Total liabilities andstockholders' equity $199,095 $190,117

Editorial Contact sInvestors: Media:Bryan R. Parker John Sidline


Wass Press Release Page 5 of 5

Director of Finance & IR Public Relations Manager650-232-4170 650-232-4112ir@ipass .com pr@ ipass.com

Copyright 2005, iPass Inc ,


EXHIBIT

F,]

FINAL TRANSCRIPTM as f

IPAS - Q12004 Wass Inc . Earnings Conference Cal l

Event Date/Time: Apr . 22 . 2004 / 5 :00PM ETEvent Duration : 32 mi n

OVERVIE W

WAS reported 1Q04 revenue of $40 .7m, as 33% increase over 1Q03 and 8 .5% increase over

4Q03 . GAAP net income was $4 .7m or $0.07 per diluted share . 1Q04 revenue exceeded

projections made on IPAS' last call . In 2Q04, mgt. expects revenue growth of 7 .5-8% over 1Q04

and fully diluted GAAP EPS of $0 .08 . Q&A focus : guidance and customers .

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1mm-w+~'

C 2004 Thomson Financial . Republished with permission . No pa rt of this publication may be reproduced or transmitted in any form or by any means without theprior wri tten consent of Thomson Financial .

FINAL TRANSCRIPTIPAS - 412004 iPass Inc. Earnings Conference Cal l

CORPORATE PARTICIPANT S

Bryan Parke riPass Inc. - Director of Finance and Investor Relation s

Ken Denma niPass Inc. - Chairman, President, CEO

Donald McCauleyiPass Inc - CFO, VP

CONFERENCE CALL PARTICIPANT S

Rick Lacoste-Analyst

Peter Kupe rSG Cowen - Analyst

Vance Edelso nMorgan Stanley - Analyst

Tim Klasel lThomans Weisel Partners - Analyst

Ga ry Grantley- Analyst

Our presentation today contains forward-looking statementsabout events and circumstances that have not yet occurred .

Statements containing words such will, expects and believes,

and other statements in the future tense, are forward-lookingstatements . Actual outcomes and results may differ materially

from the expectations contained in these statements due toa number of risks and uncertainties . These risks and

uncertainties are set forth in our press release of today, aswell as in our annual report on Form 10-K under the caption

-- factors affecting operating results -- and management's

discussion and analysis of financial conditions and results ofoperations, filed with the Securities and Exchange

Commission on March 30, 2004, and available at the SEC'sWeb site, www.sec .gov. [Pass undertakes no responsibility to

update this information if any forward-looking statementlater turns out to be inaccurate.

The press release that announced our results is available on

our website, www.iPass .com in the press room section underpress releases . And the current report on form 8-K furnished

with respect to our press release, is available on our websitein the Investors section under SEC filings .

PRESENTATIO N

Operator

Good day, ladies and gentlemen, and welcome to the Q1

iPass Inc . earnings conference call . My name is Chris and I willbe your coordinator for today . At this time, all participants

are in listen-only mode . (Operator Instructions) . I would nowlike to turn the presentation over to your host for today's call,

Mr . Bryan Parker, Director of Finance and Investor Relations .Please proceed, sir .

Bryan Parker - iPass Inc. - Director of Finance and InvestorRelation s

Good afternoon, everyone, and thanks for joining us on this

conference call to discuss our financial and operating resultsfor the first quarter of 2004 . Joining me on the call our Ken

Denman, Chairman and CEO of iPass ; and John McCauley,Vice President and CFO .

The date of this call is April 22, 2004 . Before I turn the call overto Ken to discuss our results for the quarter I would like to

bring the following to your attention . This call is the propertyof iPass, and any rev. crding, reproduction or transmission of

thi< corference cat; :ne expressed prior written

In addition, in this earnings call we will provide non-GAAPfinancial results. The reconciliation of these measures to GAAP

measures is setforth in the tables that reconcile our non-GAAPresults to GAAP results in the press release and form 8-K

located on our website as I just described . This earnings callis also being recorded for replay and is being webcast, and

will be available on ourwebsite for one quarter until the nextquarter's call .

With that, I am pleased to turn it over to Ken Denman .

Ken Denman - [Pass Inc. - Chairman, President, CEO

Good afternoon. Thank you forjoining us to review our resultsfor the first quarter 2004 .

Q1 was a very solid quarter for iPass . The March quarter was

marked by accelerating revenue growth, and continued

profitability and free cash flow generation .

During the course of our formal remarks, Don will take youto through financial highlights, and then I will wrap up our

presentation with a summary of business highlights. We will

then have a Q&A opportunity to address questions you mayhave .

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FINAL TRANSCRIPTWAS - Q12004 Wass Inc . Earning s Conferenc e Cal l

During the first quarter, we have continued to experiencesubstantial momentum in our business, and have further

solidified our position as the leading provider of services and

software, which allow enterprises' mobile workers to connecteasily and securely to their corporate networks .

We continue to deepen our place of importance within the

enterprise by providing them with software and services thatallow them to safely and securely create and manage their

own ubiquitous IF network.

million representing 51 (ph) percent increase over GAAP

operating income of 4 .4 million for the same period last year .

Net income, again, on a GAAP basis for the first quarter was$4.7 million or 7 cents per diluted share -- based on 66 millionfully diluted shares outstanding, compared with 2 .3 million

or 4 cents per diluted share based on 55 .9 million fully dilutedshares outstanding for the first quarter of 2003 .

Now, let's turn to a review of our non-GAAP results, which we

previously referred to as pro forma .During the first quarter we experienced strong momentum

-- both in terms of new customer acquisitions as well asdeployment of new customers . Customer acquisition was

strong across all sides of the Company and industrycategories, and was headlined by adding nearly a dozen more

Forbes Global 2000 corporations in the quarter .-

We also substantially accelerated growth of unique activeusers of our service -- setting a record for new users added

and surpassing 500,000 users in a month for the first time .

For a closer look at the financials, I will now turn the call over

to our Chief Financial Officer, Don McCauley . Don ?

Donald McCauley - iPass Inc . - CFO, VP

Thank you, Ken. As Ken mentioned, our first quarter was a

strong quarter .

Our revenues of $40 .7 million for the first quarter representgrowth of 33 percent overthe prioryear, and 8 .5 percent over

the prior quarter.

We're pleased to report that our first quarter revenues

exceeded the projections we provided to you on our lastearnings call .

For the first quarter of 2004 international revenues comprised

40 percent of our total revenues, with U .S . revenuesaccounting for the remaining 60 percent . This represents a

shift of 1 percent from U .S . to international in terms of the

mix of our revenues driven by strong growth in Europe andJapan .

Now, for a discussion of our results . First, our results in

accordance with generally accepted accounting principles .Our GAAP operating income for the first quarter was a $7 .1

The following numbers are non-GAAP and exclude non-cash

amortization of stock-based compensation . This is the onlyreconciling item between GAAP and non-GAAP net income

in earnings per share . Non-GAAP income for the first quarterwas 5 .5 million or 8 cents per diluted share, based on 66

million fully diluted shares outstanding, compared with 3 .3million or 6 cents per diluted share based on 55 .9 million fully

diluted shares outstanding for the same period last year .

Now fora discussion of our operating expenses.

Network access expenses in the first quarter were 22 .2 percent

of revenues, compared to 23 .2 percent in the same quarterlast year . This 1 percent decrease was primarily due to our

ability to purchase network access from additional networkservice providers at a lower-cost, and to renegotiate lower

rates with a number of our existing network service providers .

Network operations expenses were 11 .6 percent of revenuesin Q1 compared to 10.6 percent of revenues in the samequarter of last year . This 1 percent increases is in line with our

guidance provided last quarter, and reflects our increasedefforts related to expanding our service offerings andbroadband footprint .

R&D expenses were 7 .9 percent of revenues in Q1, comparedto 7 .4 percent of revenues in the same quarter last year . This

0 .5 percent increase is in line with our guidance from lastquarter . This increase relates to deepening our policy

management and security capabilities and ongoing expansion

of our service .

Sales and marketing expenses were 28 .4 percent of revenuesin the March quarter compared to 31 .8 percent of revenuesin the same quarter last year. The 3 .4 percent decrease is

reflective of continued leverage of these expenses againstthe larger base of revenues .

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FINAL TRANSCRIPTIPAS - Q12004 iPass Inc. Earnings Conference Cal l

And finally, general administrator expenses were 10 .4 percent

of revenues in the first quarter compared to 9 .4 percent ofrevenues in the same quarter last year . This 1 percent increase

principally reflects the additional cost of being a publicCompany .

compensation of $645,000 for the second quarter of 2004,

divided by an expected 66 million fully diluted shares

outstanding, resulting in the 1 cent difference.

Now, I would like to turn the call back over to Ken .

Overall, compared to the first quarter of last, total operating

expenses decreased from 85 .6 percent to 82 .5 percent ofrevenues . This overall decrease of 3 .1 percent reflectscontinued improvement in our operating leverage .

The Company entered the quarter with $147 million in cash,

cash equivalents and short-term investments . This totalcompares to balance of 139 million at the end of the

December quarter. This $8 million increase in the quarter wasdue principally to strong positive cash flow from operations .And we had no debt on our balance sheet .

Before I get to our financial projections, I'd like to spend a

moment reviewing an important nonfinancial metric -- thenumber of distinct end users of our service . At iPass, we count

users on a conservative basis, counting only users whoactually use the service during the month and generatedbilling for us .

In the month of March 2004, there were 521,000 distinct end

users of our services, compared with 341,000 for the sameperiod last year -- and 447,000 in December 2003 .

In addition, in the first quarter, we added 11 more Forbes

Global 2000 customers to our growing customer base .

And finally, a discussion of the Company's projection s

The following statements are based on information we haveavailable today, and iPass Inc does not assume any duty to

update these numbers at any time during the quarter orthereafter . These statements are forward-looking and actual

results may differ materially.

For the quarter ended June 30, 2004, the Company currently

projects revenue growth of approximately 7 .5 to 8 percentover the March quarter, and fully diluted GAAP earnings per

share of approximately 8 cents . Fully diluted non-GAAP

earnings per share for the same period are projected to beapproximately 9 percent cents .

The difference between projected fully diluted GAAP earningsper share and pro;^e_ sed non-GAAF earnir7s per s - rc c` 1cent is based on : . . _xl . _. .- ,Jc,, c, :

Ken Denman - iPass Inc. - Chairman, President, CEO

Thanks, Don . I would now like to take you through thehighlights for the quarter.

For starters, we saw great growth during the quarter in newcustomer acquisitions . Our customer list continues to growat an impressive rate . These customer wins continue to benames you know. These are examples of wins that result from

not only providing the leading secure enterprise Connectixconnectivity solution today, but providing customers and

prospects a clearvision of how we will enable them to create,integrate and manage their own ubiquitous IP network .

A few of the many deals we closed during the quarter include-- Seagate, a leading manufacturer of storage products ;

Discover, a large Financial Services Company and leadingcredit card provider; Siemens, Siemens represents a significant

win for our European and Asia-Pacific team . Siemens is in

approximately 300 locations, in 49 countries and offerscustom-made industry service and IT solutions designed to

increase the value of the entire production chain . We alsoclosed a significant photo imaging concern with operations

throughout the world . As well as one of the world's largest,processed food manufacturers . Additionally, we closed one

of Europe's leading operators of publishing services . Itsactivities include science and medical, legal, education, and

business publishing .

We also added two important new channel partners .(indiscernible) OEM, who is one of the world's largest PC

manufacturers; and Unisys, a large systems integrator to bring

further leverage to our sales model .

We will provide you with additional color on the OEM channelpartner in a separate press release. You'll see why, and I think

you'll agree, that we should be very excited to have them as

a partner . And you'll also see why we believe it's a verysignificant deal for our business going forward. Our deal with

Unisys, on the other hand, is also significant . I will take youthrough that briefly now .

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0 2004 Thomson Financial . Republished with permission . No part of this publication may be reproduced or transmitted in any form or by any means without theprior written consent of Thomson Financial .

FINAL TRANSCRIPTIPAS - Q12004 iPass Inc. Earnings Conference Ca l l

(Pass entered into an agreement with Unisys Corp . in whichUnisys will become a reseller of iPass' global enterprise

connectivity services. Unisys will resell the iPass service inconjunction with its own managed security services

businesses offerings for VPN, antivirus protection andauthentication .

Unisys managed security service address enterprise's

requirements to provide customers , pa rt ners and other userswith ubiquitous yet highly secure, access to information an d

resources .

QUESTIONS AND ANSWER S

Operato r

(Operator Instructions) . Rick Lacoste .

Rick Lacoste - - Analyst

Good job, guys . The need for further buildout of broadbandfrom here, do you have new goals in mind? Congrats . I amgetting there a quarter early . What should we be expectingthe rest of this year ?

Now, let me turn yourattention to the broadband arena, and

update you on our progress in this impo rtant area .

We have surpassed 10,000 broadband access points in 30countries including 8,600 Wi-Fi hotspots and ethernet service

in rooms of over 1,300 hotels . We incorporate thesebroadband access points into our service -- we incorporated

these broadband access points into our service -- excuse me-- a full quarter earlier than we set forth last quarter . As areminder, this total is up from 5,000 at the end of 2003 .

Additional highlights from the first quarter of '04 include --

in March, iPass integrated T-Mobile's North America network

of over 4,000 Wi-Fi hotspots at important airports as well asBorders Books and Music, Kinko's, Starbucks -- across the

United States .

The combination of the largest commercial Wi-Fi service inthe United States with the world's largest virtual network

represents a major step closer to the adoption of Wi-Fi by theenterprise .

Also in March, iPass integrated the growing footprint of

Cometa networks hotspots at venues such as Barnes & NobleBookstores and Tully's Coffee Shops.

In closing, we're pleased with our results for the quarter . Webelieve we have significant momentum heading into the

second quarter . We continue to believe our progress on theWi-Fi front means that no one is better positioned than iPass

Inc to benefit from Wi-Fl as it becomes adopted on awidespread basis by the Enterprises .

That concludes our formal remarks. And I would like theoperator to open the call for questions . Operator?


Clearly, there is need to continue to buildout broadbandfootprint . We -- we're beginning to get to the space that Iwould call a critical mass . We are not there yet . It's still in frontof us. But, whether the number is 20,000, 25,000, or 30,000we need to get there .

So, we're going to continue to drive forward.

I would tell you, Rick, that we have thousands of venues undercontract, not yet in our service . So, we still have work ahead

of us. And we're going to be going after it aggressively .

We plan to be the leader. We are believe we are the leader,

in terms of business-oriented broadband footprint . And that'sthe business we're in . So we're going to keep going after it .

And while I'm not giving you a specific number, I think it'smuch larger than where we are . And we're going to keep afterit .

Rick Lacoste So, guidance that you gave us last quarter

regarding spend at R&D and network buildup - any change

to what we're expecting given that you got here a quarterearly?


No . No change, Rick. We're going to continue to drive forward .Obviously, we're always going to continue to figure out how

to improve - how to get more efficient and how to sort ofincocate (ph) efficiency into our process. That's also part ofour job .

But, we're not - we're not going to change the guidance at

this point .

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FINAL TRANSCRIPT!PAS - Q12004 iPass Inc. Earnings Conference Cal l

Were also focusing on new services . And I would just remindyou of that . Part of that guidance was that we were not only

going to get the footprint build, but were also going tocontinue to roll out new services . And so the bottom line i s-- the guidance is not changing there .

Rick Lacoste - - Analys t

Okay, good . Did you give any numbers associated with new

customer wins, other than -- you added a number of Global

2000. But in terms of potential end- users ?

Ken Denman - iPass Inc. - Chairman, President, CE O

No. That's not -- we'd never (multiple speakers) projections

on those, Rick.


number of broadband (multiple speakers) is it venue, is it(multiple speakers )

Ken Denman - iPass Inc. - Chairman, President, CE O

It's clear -- this is a really good question, Rick . Because it's notactually about numbers -- pure numbers, per se, it's much

more about the quality of the venue that you're going after .Particularly as it regards the enterprise . Because they are veryfocused on the airports, the hotels, the conference centers,

the convention centers, the train stations -- there's a secondorder of what I would call real estate that is associated with

some very strong brands, whether it's a Starbucks or a Kinko's .That more about the Windshield Warrior (ph), and then

moving about all the places that they work and live .

But the first order -- the first thing that the corporate IT teams

are worried about are -- those venues where their people are

captive, they have their productivity tool, and they need tobe productive.

Is the marketing success that you are realizing associated ortied to the fact that you have proven you're ahead of schedule

on buildout of broadband ?


What I would tell you is that -- a significant part of our

dialogue and sales cycles -- they, again, for our core offering-- a significant part of the dialogue with customers is about

broadband . It is an important element in most of thediscussions with the corporate IT teams - ClOs that we talk

to . They are thinking about in terms of their own needs . Insome cases, for campus Wi-Fi . Butthey are clearly focused on

how and where the service is available for their users as theymove around the world, and they're asking us a lot of

questions about how do they make it seamless, easy-to-use,and most importantly, how do we deliversafely and securely?

I continue to be impressed with how we may spend as much

as 50 percent of sales cycles talking about broadband with a

particular customer .

Rick Lacoste - - Analys t

Okay . So if you were to aggregate those wants and desires

of these new customers and prospective customers, would

you prioritize what it is you want to do in terms of broadban dit wertherex" ' en `hs'Sowe - ireallylook

n s >nes you a'e a e - ' ; , ro r to be a

Again, we're very focused on a particular genre of venues .We're not out with a shotgun here .


Right . It makes sense . Thanks .

Operator

Peter Kuper, SG Cowen & Co. securities .

Peter Kuper - SG Cowen - Analyst

Actually (indiscernible) focus on the guidance . Thinking about

the model, we talked before about customer rollouts and ittakes at least six of not nine months to get customers to really

kick in here . So with the kind of better new users goingforward here, 7 .5 to 8 percent guidance sequentially -- a little

(indiscernible) what I was thinking of from a modeling pointof view. Give a little more color on what we're seeing from

rollout versus customer spend ?

And along those same lines --full-year guidance? Because at

this rate we're going, the first half the year we should get toanywhere nearthe midpoint of the total range, we got to get

a little bit of ramp up in the end of the year, right ?

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FINAL TRANSCRIPTIPAS - 47 2004 iPass Inc . Ea rnings Conference Cal l

Donald McCauley - iPass Inc. - CFO, VPbe in a lot of venues as well . Have you given the number of

hotspots associated with Cometa ?

Hey, Peter, this is Don . Were not making any change to ourannual guidance at this time . We are comfortable with ourQ2 guidance . Were really pleased with the new users weadded in the quarter and especially for the fact that we were

able to get $3 .2 million of new revenues in the quarter . Youknow, from those users .

As you know, this is all about usage, and usage builds over

time . So, were comfortable with our guidance, pleased withthe users we have in the first quarter , and I think we will just

leave it there .

Peter Kuper - SG Cowen - Analys t

Okay. But just -- on the overall (indiscernible) historically, last

year, sequential growth would decline as the year goes on --

a lot of large numbers, but also ramp out, etc . Was a similartrend this year, you think, or how are we going to look for the

building trend here, just from a modeling point of view ?

Donald McCauley - iPass Inc . - CFO; VP

Well you know, we don't give any guidance . Particularly asto additional new users. We give it at the top line .

You know, I think that the number of new users in a quarteris not a function of history or anything else . It's a function ofwho we're working with at the time, and if we're mutually

successful getting their users onboard the server . So, we'vetaken all that into consideration in our guidance . And wereally don't have any more subguidance to give on that point .

Peter Kuper - SG Cowen - Analyst

Okay . Thanks .

Operator

(Operator Instructions) . Vance Edelson, Morgan Stanley .

Vance Edelson - Morgan Stanley - Analys t

Congrats on a solid quarter . Most of my top questions have

been answered but, can you comment on the number ofCometa hotspots? For T-Mobile, it's 4,000 . Cometa seems to

Donald McCauley - iPass Inc. - CFO, VP

I don't think we've actually published the number, Vance . But,I will check on that and come back to you . But I don't thinkwe've actually put those out . And I would be hesitant to say

something of the cuff on the phone here . Without makingsure that I would not compromise Cometa .


Okay . And is it safe to say for both Cometa and T-Mobile theseare growing numbers of hotspots or are they pretty muchdone ?

Donald McCauley - iPass Inc . - CFO, V P

That is really one of the exciting things I think in this wholearea . We, of course, continue to chase new providers, Vance,and that's important as we grow out our footprint .

But we're now seeing a stable base of providers who are

committed to the space, who are organically growing theirfootprint. And I thinkthat's going to be a very important storyas the year goes forward, as existing providers who know the

game, who understand they are competing on the quality ofthe user experience, and who already have procedures or

process for a safe and secure experience . They're picking upmore venues . Or they'll they are rolling up other venues that

were previously operated by other providers .

But, for the most part, the thing that I'm excited about is thefact that they are aggressively pursuing new venues, and in

particular, airpo rts, hotels, conference centers , conventioncenters , train stations -- as I mentioned . And so we will seeorganic growth from our existing providers . And I think that'sa big deal .

Vance Edelson - Morgan Stanley - Analyst

Okay. And I know this has been asked in the past, but I think

it's becoming more relevant. On the broadband revenuepercentage -- it's still small . But you mentioned you're gettingto the critical mass now with the 10,000 broadband access

pc ts, such that you can proudly present the broadban di to your customers . And your customers, meanwhile ,

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FINAL TRANSCRIPTIPAS - 012004 iPass Inc Earnings Conference tal l

our starting to express interest . So, can you state a broadband

revenue percentage now? Or when do you think it becomessignificant enough that you can start telling us how much in

revenues is being generated that way?

Operator

Tim Kiasell, Thomas Weisel Partners.


Well, everything you said was correct in terms of our feeling

and optimism for the business . It's still a relatively small

portion of our total revenues . And, we don't feel it'sappropriate to break it out separately at this point .

At what point in the future -- whether that's 2005 or not, I

won't say . But I will say that we continue to be impressed andexcited with the underlying period to period growth that we

are experiencing . And what we see here is a business -- thisis becoming a business over time . And that is very exciting .


Okay . And then just a quick housekeeping question . Youadded the eleven Forbes Global 2000 customers during in

the quarter . Can you recap for us the total number of Forbe s

Global 2000 that you have now ?


I think it's about 215 now .

Vance Edelson - Morgan Stanley-Analys t

Okay, great. As far as the annual outlook, I know we touched

on this earlier, but revenue guidance -- we're still thinking180 to 190 ; and EPS non-GAAP 36 to 38 . Does that seem

reasonable ?


We're not updating those estimates at all, Vance . Those

remain the estimates .


Okay. Terrific . Congratulations again .

Tim Klasell - Thomans Weisel Partners - Analys t

Firstly, just sort of a - some housekeeping stuff . Network

access costs - what should we be expecting there goingforward ?


Well, network access costs this quarter, Tim, as a percentageof revenues ticked down a tenth of a percent . And, as we have

always said, in the longer term, we think this is headingtoward a number like 20 percent several years out . In periods

as small as one quarter to the next, I think a pattern like we'veseen here -- we don't see a lot of quarter to quarter change .

I think you're seeing it staying relatively stable in recent

quarters. And, so, I would not have any better guidance thanmaybe to look at the actual numbers .

Tim Kiasell - Thomans Weisel Partners - Analys t

Okay, good enough . Then, what is your plans around CDMA,Wannamax (ph) and some of the other networks out there?

As far as getting those onto your dialer? Have you have anythoughts on that so far?


Absolutely . Let me just jump into that . Because I think it's animportant question . Just as we're not a Dial Co., I would saythat we're not a Wi-Fi Co ., per se. We are all about providingthose kinds of connectivity and those kinds of access

methodologies that are important to our users . And it's clearthat there will be others -- and that there are others -- that

our customers have interest in .

GPRS and 3G, we plan to incorporate into our service thisyear. We're already beginning to work, from a technical

standpoint, being close to friends in the industry . As well as

technical and standards bodies that are pushing forward80216 our WiMax, because we do think that that could be an

important access methodology in the future . And we want

to be prepared . And our motto is -- we want to have it theresort of -- a year before our customers know they need it . And

in large numbers .

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FINAL TRANSCRI PTWAS - 012004 iPass Inc. Earnings Conference Cal l

So, again , GPRS and 3G were focused on for this year. 1 XRTT

I would include in that group . And we are , from a technicalstandpoint, mining our Ps and Qs on 80216 -- what we alsohave to think about and spend time with thoughts such as

ultra-wideband . I don't know -- Ultra-wideband may be morea personal area network kind of stuff . But Roy Albert, our Chief

Technology Officer and our architects spend time workingwith folks that are talking about those technologies as well .

One, I think that we talked about before, Ken - is with regards

to the competitive landscape? Just sort of with (indiscernible)

missing their quarter and - but they still have some newannouncements on the table, I'm just wondering if you have

seen any changes over, say, the quarter to quarter of whoyou're competing against? Is more fiber link, (indiscernible)

is the mix still the same, are there a lot of pricing pressures?Sort of what are you seeing right now ?

So, the answer is -- absolutely, Tim . We have a product

roadmap for some of those technologies for this year . And

were looking at some of the stuff that is further out as well .


Okay, good, and then one final question here . What shouldwe expect for ARPUs going forward? And was there any

impact is quarter on ARPUs with your on-campus roamingproduct .


Tim, starting atthe end, the on-campus roaming productjustbeing rolled out kind of as we speak this quarter, so no impact

last quarter.

As for bigger picture of ARPU -- when I look at ARPU going

over the last year, year and a half. And one of the ways I lookat it is to kind of take the average number of users in a quarter

-- remember users streaming during a quarter . I'd say a prettysteady progression of about 3 percent per quarter . And that

is what we had this quarter . So, I see kind of a continuationof a trend that looks like it's going to lay (ph) here for while .


Okay, great, thanks a lot .

Operator

Gary Grantley .

Gary Grantley - - Analyst

Nice quarter . I have got just a couple of quick questions --most of my questions have already been answered .

Ken Denman - iPass Inc. - Chairman , President, CE O

Well, I would say that the landscape in terms of the peoplethat we see in the competitive setting has not fundamentally

changed . The people we tend to go head-to-head with forthe Forbes Global 2000 are typically the large carriers -- the

AT&T's the MCI's and (indiscernible) Wireless, etc . Those arethe people that we tend to see in those big deals . And those

are the people that we tend to be displacing .

More in the midtier, we will run into people like fiber link . And

to a lot lesser extent, GRIC. We do understand that GRIC ispositioning hard, that they are going to go attack th e

enterprise space very aggressively .

We don't see them that often . We maybe see them a few more

times in the last quarter . But, frankly, it's not a dramaticallydifferent landscape than we have seen over the last few years,

quite frankly . The landscape -- it is a competitive landscape .But it's always been a competitive landscape . So, the basic

answer to your question, Gary, is more of the same, frankly .

Gary Grantley Okay . Alright. Good quarter. Thanks a lot, youguys .

Operator

(Operator Instructions) . And, sir, there are no further audioquestions at this time .

Bryan Parker - iPass Inc. - Director of Finance and InvestorRelation s

Thanks very much for your attention and for getting on the

call everyone . And we will see you in a quarter .


Thanks, guys.

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FINAL TRANSCRIPTIPAS -Q1 2004 iPass Inc. Earnings Conference Cal l

Operator

Ladies and gentlemen, thank you for your participation in

today's conference . This concludes the presentation . You may

now disconnect .

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EXHIBIT

C

FINA L T RANSCRIP T

IPAS - 02 2004 iPass Inc . Earnings Conference Cal l

OVERVIE W

Revenue for 2Q04 is less than IPAS had originally expected . The demand for Co .'s offerings

remained strong, and IPAS added many new customers in 2Q04, including 14 new Forbes Global

2000 customers . During 2Q04, IPAS continued to make progress in the government sector . Co .

continues to leverage its investments in R&D . Q&A Focus : Sessions, broadband, guidance, &

pricing .

Event Date/Time : Jul . 27 . 2004 / 5 :30PM ETEvent Duration : 50 mi n

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prior written consent of Thomson Financial.

FINAL TRANSCRIPTj IPAS - 02 2004 iPass Inc. Earnings Conference Cal l

CORPORATE PARTICIPANT S

Bryan Parker

iPass Inc. - Sr. Director of Finance & tR

Ken DenmaniPass Inc. - Chairman & CEO

Don McCaule yiPass Inc. - VP & CFO

CONFERENCE CALL PARTICIPANT S

Phil WinslowCredit Suisse First Boston - Analyst

Vance Edelso nMorgan Stanley - Analys t

Tim Klasel lThomas Weisel Partners -Analyst

Rob Owen sPacific Crest Equities -Analys t

PRESENTATIO N

Operato r

Good day, ladies and gentlemen, and welcome to the iPassInc . Q2 2004 earnings conference call . My name is Rachel andI will be your coordinator for today . At this time, allparticipants are in a listen-only mode . We will be facilitatinga question-and-answer session towards the end of today's

conference . (OPERATOR INSTRUCTIONS) . As a reminder, thisconference is being recorded for replay purposes . I wouldnow like to turn the presentation over to your host for today'scall, Mr. Bryan Parker, Senior Director of Finance and Investor

Relations. Please proceed, sir .

the express written consent of iPass is strictly prohibited . Ourpresentation today contains forward-looking statements

about events and circumstances that have not yet occurred .Statements regarding our projected financial results for the

third quarter of this year, statements containing words such

as will, expects, believes, and should, and other statementsin the future tense are forward-looking statements . Actualoutcomes and results may differ materially from theexpectations contained in these statements, due to a number

of risks and uncertainties . These risks and uncertainties areset forth in our press release of today, as well as in our

quarterly report on Form 10-Q under the caption "Factorsaffecting Operating Results and Management's Discussion

and Analysis of Financial Conditions and Results ofOperations" filed with the Securities and Exchange

Commission on May 14th, 2004, and available at the SEC'swebsite at www.SEC .gov. iPass undertakes no responsibility

to update the information on this conference call, if anyforward-looking statement later turns out to be inaccurate .The press release that announced our results is available onour website, www.iPass .com in the press room section under"Press Releases," and the current report on Form 8-K furnished

with respect to our press release, is available on our websitein the Investors Section under SEC filings . In addition, in this

earnings call, we will provide non-GAAP financial results . Thereconciliation of these measures to GAAP measures is set

forth in the tables that reconcile our non-GAAP results toGAAP results in the press release and Form 8-K, located on

ourwebsite, as I just described . This earnings call is also beingrecorded for replay, and is being webcast and will be available

on our website for one quarter until the next quarter's call .

With that, I am pleased to turn it over to Ken Denman .

Ken Denman - iPass Inc. - Chairman & CEO

Bryan Parker - iPass Inc. - Sr. Director of Finance & IR

Good afternoon . Again, I'm Bryan Parker, Senior Director of

Finance and Investor Relations with iPass . Thank you forjoining us on this conference call to discuss our financial and

operating results for the second quarter of 2004 . Joining me

on this call are Ken Denman, Chairman and CEO of iPass andDon McCauley, Vice President and CFO . The date of this call

is July 27, 2004 .

Before I turn the call over to Ken to discuss our results for thequarter, I would like to bring the following to your attention .Thy-- cai, is the any re, :>rc

Good afternoon , and thank you for joining us to review ourresults for the second qua rter 2004 . As you may rememberfrom our June 30 call , our revenue for the second qua rt er isless than we had originally expected . The long-term growthdrivers of this business , including expanded broadbandcapabilities and significant operating leverage, remain inplace , despite the operational decision related to our softwareclient optimization initiative , which targeted reduction of oursoftware client footprint and access rate reductions , as wellas the effects of ce rt ain Internet worms and viruses, whichaffected revenue this qua rt er. Don, our Chief Financial Officer,

will d cuss the s financial results in more detaily

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FINAL TRANSCRIPTIPAS - 02 2004 iPass Inc. Earnings Conference Cal l

The demand for our offerings remains strong . In fact, weadded many new customers in the quarter, including 14 new

Forbes Global 2000 customers . In addition, we are also seeinggood progress on the broadband front, including adding

3000 broadband access points in the quarter. Broadbandrevenues forthe June quarter continue to demonstrate strong,

positive momentum. Moreover, we continued to strengthenour position with enterprises by providing them with software

and services that enable them to safely and securely createand manage their own ubiquitous IP networks. For this end,we announced our policy orchestration initiative, which is a

broad initiative designed to provide enterprises with greatersecurity, policy management, and enforcement capabilities .Broadband represents the next phase of growth for thisCompany . The new services that will be introduced around

our policy orchestration initiative are focused on providingiPass with a place of central importance in the enterprise . Webelieve this place within the enterprise looks in beyond themethod of connectivity, whether the connection be dial,

broadband, or otherwise . We are working towards creatingthe need for enterprises to opt for all connections to the

corporate network to come through the Pass service . We

believe we can monetize these services on a price-per-seator subscription basis . This should enhance our revenue mixovertime .

I have more exciting news to share with you at the end of thecall as to our expanded offerings and customer base . I'm sureyou will be very interested as I further detail some of thepositive momentum the business is experiencing . During thecourse of our formal remarks, Don will take you through ourfinancial results. Then I will wrap up our presentation with asummary of business highlights and a discussion of wherewe are taking the business longer-term . We will then have aQ&A opportunity to address questions you may have .

For a closer look at the financials, I will now turn the call overto our CFO, Don McCauley .

Don McCauley - iPass Inc . - VP & CFO

optimize our dial network and software; and two, the effectsof certain Internet worms and viruses . As we previouslyexplained, during the first quarter, we took actions designedto optimize our dial access platform. In preparation for ourbusiness to become less reliant on dial access in the future,

we took steps to consolidate portions of our dial network .These steps were undertaken in order to optimize software

client footprint size, and reduce our dial access rates . Webelieve these actions had an adverse impact on user behavior,

and resulted in fewer sessions and less use of revenue thanwe were expecting . Once we were able to determine the

effect, we reversed this decision and restored our dial networkfully to its original state .

The second identified factor in Q2 were Internet worms and

viruses, principally the Sasser Worm and its variants thatstarted around the first of May. These affected some of our

users in a similar way to the worms that hit during the thirdquarter of 2003 . By the end of June, this negative impactended .

Since we reversed our actions related to the dial initiative,

and now that we've closed the books fortune and the quarter,and been able to complete more analysis, we have seen some

bounce-back of these sessions in revenues. While we don'thave conclusive data that explains why we haven't seen more

bounce back, it certainly seems that our revenues are beingaffected by additional factors, as well .

In light of this analysis, our view of revenue growth in Q3

remain cautious . Many of you have asked if some portion of

our Q2 revenue shortfall, which we have not specificallyidentified in our analytical work, and slower Q3 revenue

growth, could be due to other factors such as free Wi-fi, homebroadband use, or the slowing of dial usage, generally . It will

take more time to gain perspective to know the true natureof any impact, and whether these effects are a blip or a trendand to what extent . What we do know is that we are seeingfewer sessions than expected . These factors, taken together

with the seasonality factors of the latter half of the year, formthe basis for our caution.

Thank you, Ken. Revenues for our second quarter ended June

30th, 2004 came in at $40.4 million, which was 22 percentover the prioryear, but 1 percent below Q1 . The $40.4 millionfor Q2 is within the range of the $40 million to $40 .5 million

that we provided on our last call with you on June 30th . Webelieve that the majority of the Q2 revenue shortfall of

a r $3.3milliionfrom ouroriginal gL dance rangetors -one, anop _- . '

We do believe, however, that going forward, broadband

revenue growth, our new services, including the recently

announced policy orchestration initiative, over time, willrepresent significant growth drivers for the business . Ken willcover these concepts in more detail momentarily .

~ Qom, €r e n ~' )n 'rir rised41 percent of our1 t°;e __ ;ocountino fnr th e

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FINAL TRANSCRIPTr IPAS - 02 2004 iPass Inc. Earnings Conference Cal l

remaining 59 percent. This represents a shift of another 1percent from U .S . to international in terms of our revenue

mix . This was driven by strong growth in Japan and Europe .

Now l would like to discuss our operating results . First, ouroperating results in accordance with generally acceptedaccounting principles. GAAP operating income for the secondquarter was $7 .2 million compared to $5 .6 million for thesame period last year . Net income, again on a GAAP basis, forthe first quarter, was $4 .5 million, or 7 cents per diluted share

based on 65 .9 million fully diluted shares outstanding,compared with $3 million or 5 cents per diluted share basedon 57 .1 million fully diluted shares outstanding for the secondquarter of 2003 .

Now let me turn to a review of our non-GAAP results . The

following numbers are non-GAAP and exclude non-cashamortization of stock-based compensation . This is the onlyreconciling item between GAAP and non-GAAP net incomeearnings per share. Non-GAAP net income for the second

quarter was $5 .1 million or 8 cents per diluted share basedon 65 .9 million fully diluted shares outstanding, compared

with 3 .9 million or 7 cents per diluted share, based on 57 .1million fully diluted shares outstanding for the same period

last year .

including the development of our second-generationbroadband-enabled client software, and deepening our policy

management and security capabilities . The current level of

R&D spending is in line with the levels we discussed with youearlier this year, when we said that we would increase R&D

spending levels to as much as 8 .4 percent of revenues. In lightof our recent announcements related to policy orchestration,

and our continuing expansion of our services in securitycapabilities, we plan to increase R&D spending to

approximately 9 percent of revenues going forward. -

Sales and marketing expenses were 27 .9 percent of revenuesin Q2 compared to 28 .4 percent last quarter, and 30 .6 percentin the same quarter last year . The decrease of approximately0 .5 of 1 percent since last quarter and approximately 2 .75percent from last year are reflective of continued leverage inthese expenses against an increasing base of revenues over

time .

General and administrative expenses were 10 .6 percent of

revenues in the second quarter, compared to 10.4 percent inthe first quarter and 10 percent of revenues in the same

quarter last year . These increases principally reflect theadditional costs incurred during our first year of being a public

company .

Next, I would like to review each of our operating expenses .Network access expenses in the second quarter were 22 .8percent of revenues, compared to 22 .2 percent in our first

quarter this year, and 21 .9 percent in the same quarter lastyear. The increases of approximately 0 .5 of 1 percent sincelast quarter and 1 percent since last year, are primarily dueto a change in the mix of our network access to include a

higher portion of broadband access relative to narrowbanddial access .

Network operations' expenses were 11 .6 percent of revenuesin Q2, the same level as Q1, compared to 10 .3 percent ofrevenues in last year's second quarter . The increase ofapproximately 1 .25 percent over last year is related to our

efforts to expand our service offering and broadbandfootprint, and is in line with what we discussed with you at

the beginning of this year, where we signaled that we would

increase network operations spending levels to as much as11 .8 percent of revenues.

R&D expenses were 7 .8 percent of revenues in Q2, compared

to 7.91 .-ert,- Ci ~d 7 .2 percent in the second quarter c`

Ic 15 - 'I

Overall, compared to the second quarter last year, total

operating expenses decreased from 83 percent to 82 .2percent of revenues this year . This decrease of nearly 1

percent reflects continued improvement in our operatingleverage .

We ended the qua rter with $ 162 million in cash, cashequivalents , and short-term investments . This total comparesto a balance of 147 million at the end of March. The $15million increase in cash this qua rter was due principally tostrong positive cash flow from operations , and also includedapproximately $5 million related to sales of shares throughour employee stock option and stock purchase plans and the

repayment of shareholder notes . We continue to have nodebt on our balance sheet .

Before I get to our financial projections , l would like to review

an impo rtant non-financial metric that we have previously

shared with you, as well as provide you with an additional

new metric to help you better track our business . First, the

number of distinct end-users of our se rv ice in the month of

June, 2004 was 52 71 com ; ared v. . th 369,000 for the same

Fe .. . ~~ 2 4.The new metric

. .. ,, . . . - ., . f .; _ : . ?r session, . As you

1!1; -ia

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FINAL TRANSCRIPTIf IPAS - Q2 2004 iPass Inc. Earnings Conference Cal l

know, our usage revenues are earned on a session-by-session

basis . In conjunction with our distinct end-user data, we thinkthis new data on user sessions will provide a greater degree

of visibility to aid you in understanding our business . We have

listed out the number of user sessions for this quarter andthe previous 5 quarters in our press release under the heading,

"Non-financial Metrics ." The user session stats for the periodswe have been discussing today are -- for Q2, 20 .9 million

sessions ; for Q1, 20 .6 million sessions ; and for Q2 last year,16 .2 million sessions.

My final topic is our Company's projections . The followingstatements are based on information we have available today,

and iPass does not assume any duty to update these numbersat any time during the quarter or thereafter. These statements

are forward-looking, and actual results may differ materially .

For the quarter ended September 30th, 2004, we currentlyproject revenue growth of approximately 3 percent to 6

percent overtheJune quarter, and fullydiluted GAAP earningsper share of approximately 6 cents . Fully diluted non-GAAP

earnings per share for the same period is projected to beapproximately 7 cents . The difference between projectedfully diluted GAAP earnings per share and projected

non-GAAP earnings per share of 1 cent is based on theexpected amortization of stock-based compensation of

$480,000 for the third quarter of 2004 divided by an expected66 .3 million fully diluted shares outstanding, resulting in the

1 cent difference .

Now, I'd like to turn the call back over to Ken .


to scale our sales effo rts . For example , SAIC, a new systemsintegration pa rtner, was quite active in our customer

acquisition efforts during the quarter . Going forward, webelieve that SAIC is going to greatly assist us in penetrating

the government sector.

During Q2, we continue to make progress in the government

sector . Specifically, we were awarded a Department ofDefense blanket purchase agreement . This blanket purchase

agreement will streamline the procurement process . Movingforward, any Department of Defense or federal agency within

the Department of Defense, will have convenient access topurchase iPass . This win gives us further reason to be excited

about the government sector of the iPass business . This is athinly penetrated sector for iPass, and we believe there is

significant upside for us in this sector of the market. Ourcurrent customers in this segment include -- the Federal

Emergency Management Agency, or FEMA; the Environmental

Protection Agency, or EPA; and the U.S. Treasury . On anotherchannel front, we have already begun our joint training with

IBM, and expect to be driving sales with them by year-end .

Lastly, we continue to expand our international sales footprintin the quarter, adding sales professionals in Australia,

Germany, France, Hong Kong, and Korea . We also signed animportant new channel partner during the quarter . We

entered into a partnership with Fujitsu Services, Ltd ., one of

Europe's leading IP infrastructure management servicescompanies to offer iPass Corporate Access as part of a

comprehensive mobility solution portfolio to its enterpriseclients . As a further indication of its confidence in the

capabilities of the iPass service, Fujitsu Services is alsodeploying the iPass Corporate Access service to its entire

workforce of 14,500.

Thanks, Don . Now I'd like to review the highlights from the

quarter and provide you some thoughts on the future of thebusiness . Our customers continue to embrace our value

proposition . The second-quarter provides evidence of thisproposition, as we saw our customer list continue to grow.

We are still experiencing strong customer acquisition acrossa number of industry categories . During the quarter, we added

14 more Forbes Global 2000 customers to our growing

customer base . In addition, our renewal rate with existingcustomers also continues at an impressive pace . In fact, during

Q2, we were especially proud of re-signing General Motorsto a new term agreement . We are making good progress withour channel partners, leveraging their soles reach to drive our

custc eras : i- e_ sv, l! be an area for ir Drs

A few of the many additional customer deals we closed duringthe qua rter include -- British Petroleum , one of the world's

largest producers of oil, gas, and petrochemical ; aninternational financial institution with global operations in

insurance , investment banking , and asset management ; theworld ' s largest tire manufacturer ; MAN, Maschinenfabrik

Augsburg-Nurnberg , or, as they are known , the MAN Gruppe

-- is one of Europe ' s leading suppliers of capital goods andsystems in the fields of commercial vehicle construction,

mechanical , and plant engineering ; the largest producer and

deliverer of pizza and related fast food items in the UnitedStates; PeopleSoft, a leading developer and marketer of

enterprise softv . :re pro .cts and services ; Yamanouchi, a

o- : : riny;andBost~ ~_ .

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FINAL TRANSCRIPTi IPAS- 02 2004 iPass Inc . Earnings Conference Cal l

Now, let me turn your attention to the broadband arena, andupdate you on our progress in this very important area . Wehave surpassed 13,000 broadband access points in 40

countries, including more than 11,200 Wi-fi hotspots andethernet service in the rooms of over 1800 hotels . Secondly,we successfully tested the coexistence of browser-basedGIS-based, and 802 .1 X authentication at the CommunicAsia

conference in Singapore together with Intel and otherpartners, paving the way for faster adoption of the 802 .1 Xsecure authentication standard at public hotspots .

Radisson SAS announced that it is requiring all its hotelproperties to offer iPass-ready broadband service . iPassexpanded its relationship with Yahoo! broadband mobile .Under the expanded relationship, over 600 Japanese Wi-fi

hotspots owned by Softbank BB will become available to iPass

customers. Finally, we also signed an agreement with SBCCommunications where iPass customers will get access toSBC's FreedomLink Wi-fi hotspots.

Now that we have reviewed the quarter and discussed a fewof the factors that make us optimistic about our future growth

prospects, let me now discuss briefly a few of our thoughtsabout the future of the business . First, we believe broadband

will continue to grow and be an absolute cornerstone of ourgrowth moving forward . In addition to driving footprint, we

are currently driving hard to deploy our newest broadbandclient, which provides increased security and improves

ease-of-use in the broadband study to further drive adoption

of our broadband services. We continue to believe ourprogress on the broadband front means that no one is better

positioned than iPass to benefit from broadband when itbecomes adopted on a widespread basis by enterprises .

As exciting an opportunity as broadband represents, there

are also other reasons we are excited about the future of thebusiness. For instance, we continue to leverage our

investments in R&D . We have a software platform throughwhich we can derive service offerings . We can deliver newservices through the integration of new technologies to ourplatform, rather than having to build them from the ground

up . The introduction of our new services, like i-Wireless LAN,

Endpoint Policy Management, for example, is deepening ourvalue proposition within the enterprise by providing

additional functionality to our platform. As a matter fact, we

will launch our second generation of these offerings with ourfall release .

to improve these offerings to be able to deliver exactly the

value customers tell us is impo rtant to them . We are helpingenterprises with security , solution interoperability issues, andimportant problems we have always helped them with -- but

in addition , we have now expanded our role as broadbandmobility moves to the home and to the corporate office . Theincredible shrinking corporate network is a real phenomenon .

Mobility makes the Endpoints and/or devices key to the

security equation . Accordingly, the introduction of our policyorchestration platform is a game-changing event for theCompany . Through this platform, we will offer avendor-neutral, technically integrated approach, better

aligned with the desire of the enterprise to close the gaps onsecure connectivity while continuing the use of their

best-of-breed security choices. Services expected to beavailable under this platform include -- Endpoint, Self

Quarantine, dynamic policy retrieval, assessment verification,and coordinated enforcement. Moreover, these new servicesshould assist our enterprise customers in guarding againstfurther Internet virus attacks, and disrupting the usage

patterns of our users .

In closing, there are a few key areas of focus for /Pass overthe

next 18 to 24 months that I would like to bring yourattentionto . First, the continued expansion of our broadband footprint.We expect to get to 20,000 ASAP, and we also know that weneed to move to 30 and 35,000 and beyond . This will be an

ongoing evolution, and a very important evolution, becausethe broadband footprint must be as ubiquitous over time as

dial is today . Continue deployment of our newest broadband

client and service to the embedded base of customers thathave not yet turned on broadband for their users is the nextimportant area for us to continue to focus on . We are viscerallyfocused on this . We have a huge base of customers who wemust turn our service offering up in . And while most of ournew customers are taking broadband right out of the boat,

we have a huge opportunity mining our embedded base ofcustomers and getting the new broadband client turned upwith them. Third, continued growth of our Forbes Global 2000customer base . You will be able to track this metric right alongwith us . Obviously, we are still thinly penetrated here, withlots of upside -- and that's the good news .

And finally, gaining traction with our orchestration platformamongst our customer base, as we demonstrate our unique

ability to enable the protection of corporate endpoints ordevices, such that iPass becomes the corporate standard for

connectivity within these - . We want the iT team s

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FINAL TRANSCRIPT1 IPAS - 02 2004 iPass Inc. Earnings Conference Cal l

of our enterprise customers to say to their users, if you don't

use iPass, you don't connect . That is our vision .

That concludes our formal marks, and I would like the operatorto open the call for questions . Operator.

QUESTIONS AND ANSWERS

Phil Winslow - Credit Suisse First Boston - Analys t

All right, great. And then one thing -just looking back to -

if you want to think of it as session lengths - I remember onyour pre-announcement, you talked about you saw a lot of

people getting kicked off very quickly . When you look at sortof - if you want to think of it as median session length versus

mean session length, did you see any noticeable changeduring the quarter?

Operator

(OPERATOR INSTRUCTIONS) . John Rizzuto, CSFB .

Phil Winslow - Credit Suisse First Boston -Analys t

Hi, guys . This is actually Phil Winslow for John . I just have acouple questions relating back to your statement that you

really have not seen the kickback up in user sessions thus farthis quarter as you had expected . What do you think is -- arethe reasons for that ?

Ken Denman - iPass Inc . - Chairman & CEO

Well, let me say this, we have seen fewer sessions than wehad expected in the June period . We saw less bounce-back

than we expected . And we have seen a few -- we are seeing-- fewer sessions than we had originally expected so far this

quarter . Having said that, when we think about what theunderlying implications of that are, one of the things we

would point to is that primarily in North America, is wherewe are seeing fewer sessions than expected . If we look outsideof the U .S ., Europe and Japan are still growing along the linesthat we had expected . One of the implications of that might

be that we are seeing more broadband proliferation withinthe U .S ., and I don't think that's new news. And so that's onepossible implication .

I would also point out though, Phil, that since I came to the

Company, we have been very, very focused on this issue ofmaking sure that we were ready for the transition to

broadband . And if you look at our broadband footprint, SkyWire, for instance, says that iPass has 5 0 percent of the U .S .market covered . And we are aggressively growing that

broadband footprint from there . So in the long-rum - I cannottell you exactly when the crossover point is as sort of

customers migrate from dial to broadband . But in the longrun, I think we are going to be very, very well positioned .


Yes . Specifically, we talked about - if you go back to our

previous conversation, we talked about the 2 implications or

the 2 impacts of the quarter--the 2 sort of majority impactsto the quarter -- the one was the dial optimization initiative,

and the other was the impacts of the Sasser worm. And oneof the ways that we see that kind of impact within our

business is we see an increase in very short sessions . Oursession lengths in general have been very consistent overthe

last couple of years . And in both August and May, what wesaw really as a result of the fact that users devices - the

operating systems were being attacked, and the performanceof the device was being degraded, and eventually, the

machines begin to just reboot, and then eventually fail . So

that rebooting can lead to very short session lengths . We seeit in our data . So that was mainly a May phenomenon, and

then we also saw it again in August . We are now back to sortof our traditional session lengths .

Operator

Vance Edelson, Morgan Stanley .


A few questions -- I will ask them one at a time . Youmentioned the continued strong momentum for the

broadband revenues, so if we've got continued strongmomentum, then presumably, its getting to the point where

its worth quantifying . Can you do that all -- maybe as apercent of revenues?

Ken Denman - iPass In c. - Chairman & CEO

Vance, we are seeing continued strong growth and strong

momentum in revenues . They are not at the point yet wherewe feel like we should be talkin c_ -gym. However, Iwould say based on what we arc believe that i n

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FINAL TRANSCRIPTIPAS - Q2 2004 iPass Inc. Earnings Conference Cal l

the first half of 2005, we certainly will be in that position . So

that would be my response to that one . I think we aredirectionally correct and headed there .


Okay. And along the same lines, if the network access expense

was up due to the broadband mix, but the broadband mix isstill too small to quantify, then is it safe to say that as

broadband does become large enough to quantify, it's goingto have quite an impact on the network access expense line-- is that going to go up dramatically ?

Don McCauley - iPass Inc. - VP& CFO

Hi, Vance, this is Don . You know, at this early stage, as we'vetalked about, you know, broadband margins are nowhere

near the margins we overachieved over a long period of timein dial . You know, eventually, we think that probably evens

out . But in the short run, if broadband revenues continue to

grow at the kind of pace we've seen recently, it would havesome impact on the network access margins . And by and

large, it accounts for the difference this quarter, which is about0 .5 percent.


And Don, on the sales and marketing line, I can see that'sgoing down as a percent as you get more scale . But it also

went down in whole dollars . Is that also just related to betterscale giving you a better ability to cut costs there? Or was

there just less in the way of selling opportunities?

Don McCauley - iPass Inc. - VP & CFO

Well, part of it is continued leverage in the model, as you

pointed out . And part of it, frankly, is less revenues than we

had been expecting -- part of sales expenses related to

revenues .



Right - on the operating model side, principally, we are sayingthat R&D, which was at 7 .8 percent, would go up more like 9

percent . By and large, that's the main increase . The thing we

just discussed a minute ago about broadband, if that growthcontinues a pace -- that would have some small impact on

network access as well . And I think if you actually takeearnings per share currently, I think it's like 6 .8 cents . So it

doesn't take all that much to round down to the next penny .


Hey, Vance, on the - was that your last question, or -

Vance Edelson -Morgan Stanley-Analyst

I have one more for you, Ken, actually.


Okay, well, go ahead . I actually wanted to piggyback on the

first question that Don answered, which was the question onnetwork access margins - and sort of implications of

broadband and just to remind you of that, it's something

we've talked about before, that while the network accessmargins associated with broadband today are lower, just as

they were years ago in dial, obviously, that's going to changeover time. But even at the lower margins today, if you

compare a broadband session at a lower margin to a dialsession at a higher margin, we effectively are seeing more

absolute margin dollars dropping through to the bottom-line .So I just wanted to remind you of that, of that equation .


Okay, thanks; that's a good point . And on the broadbandfootprint, if it's eventually headed to 35,000 access points and

beyond, what is the approximate time frame for that? BecauseI am just thinking if it takes us into 2006, would be missing

the boat a little bit if Wi-fi is possibly becoming a reality in

'05 ?And just my last question -- the guidance calls for EPS to

decline by a penny in the third qua rter despite the revenues

going up 3 to 6 percent . So what is it happening on the

expense ie? Does ± at mean you have increased R&D or ac_' ._ - ( . -, . 11 1


t^r©, we ce r?air~ly are goinct t . k e . ; 'vinct as fast as hur lyg ._ there, Anc : . ,

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FINAL TRANSCRIPT1PAS - Q2 2004 i Pass Inc. Earnings Conference Cal l

associated with those targets, we expect to be charging

towards the 30,000 - certainly it's our hope to be charging

towards that in '05 . And so clearly, we don't want to miss theboat . We are driving as fast as we can . And I would also point

out, Vance, as you know, that we are second to none in thisregard . So we won't be missing the boat relative to any other

players in the marketplace. We have the world's largestbroadband network today, and we expect and believe that

we can continue . And one of the nice things about our model

is we have increasing credibility on every front . The more

footprint we have, the more providers want to work with us,

the more technology capability we demonstrate, such as whatwe did with CommunicAsia and with Intel and others, around

802 .1 X integration with GIS and browser-based -- you know,

as we demonstrate capability, more and more players, both

on the footprint and the technology side, work with us . So

we actually have building momentum behind us. Take your

point -- absolutely -- we need to be at 30,000 sooner ratherthan later . And it is to get there before '06; we shall see .

On the inbound side, so to speak, we had a good deployment

quarter in Q2. We continued to sign accounts . We have a goodpipeline going forward. So all the normal stuff in terms of

anticipating new users coming out of the contracts we signedfrom the last 4 to 6 quarters is all behaving, I would say,

normally. And the fewer users that we saw in the month of

June -- you know, I think most of that was probably causedby the dial access initiatives, the worms and viruses and so

forth .

Tim Klasell - Thomas Weise! Partners - Analys t

Okay . I know you guys sort of count in the last month of the

quarter. How did June month look relative to the May month ?


It was up .

Operator

Tim Klaseli, Thomas Weisel .

Tim Klasell - Thomas Weisel Partners -Analys t

My first question has to do with the user growth . Had sort ofslower than anticipated user growth here. And you mentioned

signing new customers and very high renewal rates . Is it a

rollout issued? Or can you walk us through -- only 7000 - youhad a rather anemic user growth this quarter ?


Thanks for getting a word like "anemic" in there . We really

appreciate that. (Laughter)

Tim Klasell - Thomas Weise! Partners -Analys t

Lower than normal, let's say .

Don McCauley - iPass Inc . - VP & CFO

You know, we discussed it a little bit on June 30th, and I think

it came to pass that when we saw -- to the extent we sawfewer sessions in usage, indeed, we saw `ew users, as well,

you know as the -n =-c ss initiativesors, as well,

Tim Klasell - Thomas Weisel Partners -Analyst

Okay.


(Indiscernible) just piggyback on Don's comments and remindyou that--we have --there are a large group of our customers

that we don't see every month. So to the extent that we havean impact on customers like we believe that we had, there is

a good chance that we sort of eliminated the opportunity forsome of our users to work with us within the quarter . And so

we may have had - it's the implication, we may have had animpact on that number. We certainly believe that we did .

Tim Klasell - Thomas Weisel Partners -Analyst

Okay, good . Well as long as we are on that subject, you aregoing to be adding in a new dialer here this fall . And what

are you doing to make sure that -- if you took out a fewnumbers, and that caused a lot of disruption this last quarter,

what's going to be done with the new dialer to make sure

that we don't confuse your installed base with the new dialer ?

Ken Denman - iPass Inc . - Chairman & CE O

Okay, Tim -- a c uple of things I want to c r fy on the front

end, First of , ' i ..,e y, ., know ,

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FINAL TRANSCRIPTIPAS - 42 2004 i Pass Inc . Earnings Conference Cal l

we are in the broadband world, and we are not always dialingBut that's beside the point .

The phenomenon that impacted our users' ability to use in

the second quarter had much more to do with the phonebook and changes that were made to the phone book as

opposed to the dialer itself, excuse me, the client itself . We

are bringing to the market a new version of our client, whichbasically leverages the same phone book server technology .

So those are two separate things.The client isjust an upgradeof our current client . You know, we are improving the client .

We are adding things like GPRS, access and CDMA access, 3Gaccess. So we are adding more capability to our existing client .

That's really the focus here . And of course, we have a veryrigorous regime of QA . We do the full range of regression

testing across languages, across OS's, and that's just the waywe've always run the business . But there's a distinction

between our client software and our phone book software ;and I want to just make it clear that in the previous incident

that we had in Q2, that was more around actions that we took

with the phone book service .


Tim, just to clarify one little point on that -- when we roll outa new client software , we really do that one customer at a

time.


Well, I think, Tim, that we have, I would say, a majority of

customers contracts that allowed for it, but a minority ofcustomers that have actually gotten past a kind of a pilot

phase in terms of actual deploying it. (multiple speakers) andkeep in mind that there is a lot of scrutiny around all the

security issues to do with Wi-fi and so forth ; and these are the

same customers that take us a good long time in the salescycle in the first place . So they are pretty deliberate . So I would

say it's definitely less than half in terms of actual users thatare out there equipped and ready to go . But ahead of that, a

lot of the customer contract stuff is in place, you know, as webegin the process with them .


Tim, to really go one step further, one of the things that I was

driving at in my comments that may have caused your

question is, we also on top of that want to go back to thosecustomers and make sure that they have the Next Generationclient up and running . We actually have our Next Generationclient in the market today, currently . And while we are

bringing another version of that client out in the fall, we havethe sort of Generation 2 client in the marketplace that's

getting great (ph) reviews . We want that client deployed tomore of our customers who are currently sitting on our 2X

platform rather than our 3X platform .

Tim Klasell -Thomas Weisel Partners -Analyst

Okay .

Don McCauley - iPass Inc. - VP & CF O

And the phone book kind of actions and the dial initiativesin the quarter were something that affected everyone at once .

Tim Klasell - ThomasWeisel Partners - Analys t

Okay . So if there is any issue, it would be relatively minor, andyou guys could catch it . So good -- that's very helpful .

Let's jump back to a question I keep asking -- have you ever

looked into your installed base and tried to figure out what

percentage of your users do not have broadband as part oftheir contracts?

Operato r

(OPERATOR INSTRUCTIONS) . Rob Owens , Pacific Crest .

Rob Owens. Hey, good afternoon, guys, Rob Owens . Any

chance, given what you are seeing in the business right now,that you might expect sessions to be down quarter over

quarter in Q3? Or should we see growth in that number?

Don McCauley - iPass Inc . - VP& CFO

Hi, Rob ; this is Don . In general, absent any disruption from

something like a virus, sessions track very, very closely torevenues . So as a general matter, I would expect sessions t o

track revenue growth .

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FINAL TRANSCRIPTWAS - 02 2004 iPass Inc. Earnings Conference Cal l

Rob Owens - Pacific Crest Equities - Analys t

Okay . And then your phone book changes during the quarter,

were those all domestic, or were there some international, as

well ?

Don McCauley - iPass Inc . - VP& CFO

They are principally domestic.

today, we still have a number of important customers who

are ISP's and carriers and you have people like T-online (ph)in Europe - I could give you examples in Asia . The punch line

here is that a good portion of that sort of legacy business,which is shrinking now, because we have focused in the last

4 years heavily on the enterprise space -- a good portion of

that business is international . So to the extent they - theramifications of worms and viruses, we do see kind of a

disproportionate impact internationally .

Rob Owens - Pacific Crest Equities -Analys t

Okay. So if I look at your international revenue growth, then,

I think it was 2 percent sequentially . And some of the weakestyou've seen . Do you think that was primarily virus-related,

then? Or is it some of these other extraneous factors you aretrying to get your arms around ?


Can you repeat your question, Rob? I didn't --

Rob Owens - Pacific Crest Equities -Analyst

Yes, (multiple speakers) . That's okay ; my phone might be

cutting out; sorry . So if these phone book changes weredomestic, yet as I look at your international revenue, it was

probably the weakest it's been quarter over quarter, I thinkup 2 percent . And as I look at the dollar change, quarter over

quarter, it was fairly weak . So obviously, the phone bookchanges wouldn't have impacted that . So do you think that's

all virus-related? Or is this other types of factors ?


Well, we did have -- the dial access initiative was more North

America than outside, but it did have a component outsideNorth America . And the virus hit everyone . So that may

account for it . As well as, we said that there is a componenthere that we -- our analysis -- we didn't isolate every factor

here, and there may very well be other factors that play here.

Ken Denman - iPass Inc. - Chairman & CE O

I would also add, Rob, if you think about our -- the genesis ofthe business, the ea . d.: , s -- n - st r~,-d 3ff really from a

channel pers ec r ISP's and

carrie- A . i ,sia. And


Rob, this is Don -- (indiscernible) just one thought occurredto me while Ken was speaking, and that is that when we

classify our revenue you know by international, that includes-- those are companies headquartered internationally . But

they do have -- some of them, a significant corner of their

revenue is traveling to North America . So when we say theeffect was more North America, it includes the international

customers traveling to North American .


But North America is a destination .


It does bleed over .

Tim Klasell - Thomas Weisel Partners -Analys t

Okay . Great, thanks . And then on these major renewals thatyou did during the quarter, what's pricing look like versus

your original contracts? Are you having to give any types ofterms or anything to retain these customers ?


Well, you know, we have gone over this quite a bit in the lastyear in terms of se tt ing an expectation . We typically do

provide a discount on renewals . And the discount,year- to-date, is pretty much right on track with what our

expectation was . (multiple speakers) and by the way, the main

reason we do that -- is just remember the way the dynamicworks . When a customer signs their first contract, they

p ically make a commitment for something lii half of whati ;y the time th ' r _ .. s

ig,wewl j . 'ome t

Milo "Zan ----

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FINAL TRANSCRIPTIPAS - 02 2004 iPass Inc . Earnings Conference Cal l

they were when they started with us, and so they can earn abetter discount by increasing their commitment level kind

of up to their current business level . So that's kind of a normal,

expected thing that we build into our model .

Operator

At this time, there are no further questions . Mr. Denman,would you like to make any closer remarks at this time ?


Yes . Thank you, very much for joining us on the call . I justwant to remind you of the comments that I made regarding

our progress on the broadband side. I think Vance highlighteda very important point that I will use as part of this close,

which is, we clearly understand the importance of makingbroadband ubiquitous -- ubiquitously available to our

enterprise users ; getting to the 30 to 35,000 range as soon aspossible is certainly a focus for this business ; continueddeployment of our newest broadband clients and service toour embedded base of customers, and this is very important

for all of us to remember--we have a huge base of customersfor whom we can drive new services to . We continue to enjoygreat success signing up Forbes Global 2000 customers . If

you just look at our success over the last several quarters, it

is clear that we are able to go into some of the biggestcompanies in the world and continue to earn their business .

Operato r

Ladies and gentlemen, thank you for your participation Intoday's presentation . This does conclude your conference,

and you may now disconnect . Have a great day .

DISCLAIME R

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And finally, we are positioning this business for strong future

growth with the policy orchestration platform that leveragesour strong capability in the authentication layer, our strongsort of network of networks,if you will ; our strong relationshipwithin it, security point solution providers; and then taking

the fact that the corporate network is shrinking, and mobilitynow is making those endpoints very, very important to the

overall security game . And our ability -- understanding thestate of the security application that is running on that device,

and understanding the state of the network accessconnectivity to that device, allows us almost uniquely, we

believe, to sit above the device, if you will, and orchestrate

policies on behalf of the corporate IT team . This is a veryimportant space for us . It's a very important positioning, and

we believe it will be the way that we will create anenvironment where corporate IT teams will say to their user

eventually, if you don't connect through Pass, you don't

connect to our corporate network .

Thanks, v- ; - ,

WL 1:streetevents@thomson .com 617.603.7900 www.streetevents .co m

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