UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-31685
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MCC TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA 88-045-4570
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
122 PILLING ROAD, GIBSONS, BRITISH COLUMBIA, CANADA V0N 1V3
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(Address of principal executive offices)
(604) 922-1972
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(Issuer's telephone number)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
3,000,000 common shares issued and outstanding, as of October 31, 2000
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Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The Company's financial statements are stated in United States Dollars (US$) and
are prepared in accordance with United States Generally Accepted Accounting
Principles.
DISCLOSURE
To: The Shareholders of
MCC Technologies, Inc.
It is the opinion of management that the interim financial statements for the
quarter ended September 30, 2000 include all adjustments necessary in order to
ensure that the financial statements are not misleading.
Vancouver, British Columbia /s/ Lael Todesco
Date: October 27, 2000 Director of the Company
<PAGE>
<TABLE>
<CAPTION>
MCC TECHNOLOGIES, Inc.
(A Development Stage Company)
INTERIM BALANCE SHEET
(Unaudited)
September 30, 2000
(Expressed in U.S. dollars)
September 30 March 31
2000 2000
<S> <C> <C>
ASSETS
Current
Cash in bank or on hand . . . . . . . . . . . . . $ 1,295 $ 6,730
Other
Licence agreement . . . . . . . . . . . . . . . . 5,000 5,000
----------------------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . $ 6,295 $ 11,730
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable. . . . . . . . . . . . . . . . . $ 2,706 $ 750
Shareholder loan, without interest or stated
terms of repayment . . . . . . . . . . . . . . . 23,964 5,832
--------------------------
26,670 6,582
Stockholders' Equity
Common stock
100,000,000 Common shares authorized with
$.001 par value
3,000,000 Shares issued and outstanding . . . . 3,000 3,000
Additional paid in capital. . . . . . . . . . . . 4,500 4,500
----------------------------
7,500 7,500
Deficit accumulated during the development stage. (27,875) (2,352)
(20,375) 5,148
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . $ 6,295 $ 11,730
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
MCC TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
For the Period From Inception (February 26, 1998 to September 30, 2000)
(Expressed in U.S. dollars)
Additional
Common Shares Paid In Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balance, February 26, 1998 . - $ - $ - $ - $ -
(Date of inception)
Issuance of stock at $0.25 . 3,000,000 3,000 4,500 - 7,500
per share for cash
Net loss for the year. . . . - - - - -
Balance, March 31, 1998. . . 3,000,000 3,000 4,500 - 7,500
Net loss for the year. . . . - - - (100) (100)
Balance, March 31, 1999. . . 3,000,000 3,000 4,500 (100) 7,400
Net loss for the year. . . . - - - (632) (632)
Balance, March 31, 2000. . . 3,000,000 3,000 4,500 (732) 6,878
Net loss for the quarter . . - - - (25,523) (25,523)
Balance, September 30, 2000. 3,000,000 $ 3,000 $ 4,500 $(26,255) $(18,755)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
MCC TECHNOLOGIES, INC.
(A Development Stage Company)
INTERIM STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
For the Period From Inception (February 26, 1998 to September 30, 2000)
(Expressed in U.S. dollars)
6 Months 6 Months Accumulated
Ended Ended Feb 26, 1998
Sept. 30 Sept. 30 To
2000 1999 Sept. 30, 2000
<S> <C> <C> <C>
Revenue. . . . . . . . . . $ - $ - $ -
Expenses
Filing fees. . . . . . . . 500 632 1,132
Software development . . . 18,132 18,132
Professional fees. . . . . 6,891 6,891
Net Loss . . . . . . . . . 25,523 632 26,155
Accumulated Deficit,
Beginning of Period. . . . 732 100 -
Accumulated Deficit
End of Period. . . . . . . $ 26,255 $ 732 $ 26,255
Net Loss Per Common Share. $ 0.0009 $ 0.0000 $ 0.0009
Weighted Average Number of
Common Shares Outstanding. 30,000,000 30,000,000 30,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
MCC TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
For the Period From Inception (February 26, 1998 To September 30, 2000)
(Expressed in U.S. dollars)
6 Months Year
Ended Ended
Sept. 30 March 31
2000 2000
<S> <C> <C>
Cash Flows to Operating Activities
Net loss for the period. . . . . . . $ (25,523) $(2,152)
Non-cash working capital items . . . 20,088 550
(5,435) 1,602
Cash Flows from Investing Activities
Due to shareholder . . . . . . . . . 832
Licence agreement. . . . . . . . . . -
Cash Flows from Financing Activities
Common Stock . . . . . . . . . . . . - -
Net Change In Cash . . . . . . . . . (5,435) (770)
Cash, Beginning of Period. . . . . . 6,730 7,500
Cash, End of Period. . . . . . . . . $ 1,295 $ 6,730
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MCC TECHNOLOGIES INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
(Unaudited)
September 30, 2000
1. Development Stage Company
MCC Technologies, Inc. herein "the Company" was incorporated on February 26,
1998 pursuant to the laws of the State of Nevada.
The Company is a development stage company specializing in software development
in interactive voice response (IVR) technology, targeted at public transit,
public paratransit and public utilities.
In a development stage company, management devotes most of its activities to
establishing a new business. Planned principal activities have not yet produced
significant revenue. The ability of the Company to emerge from the development
stage with respect to its planned principal business activity is dependent upon
its successful efforts to raise additional equity financing and to develop and
market its technology.
2. Summary of Significant Accounting Policies
(a) Year end
The Company's fiscal year end in March 31.
(b) Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenditures during the period. Actual
results may differ from those estimates.
(c) Financial instruments
The Company's financial instruments consist of cash which approximates carrying
value.
(d) Foreign Exchange
All of the Company's transactions have been in U.S. currency. The Company's
anticipated market is the US. Therefore, the Company's exposure to foreign
currency exchange risks is currently considered minimal.
(e) Income Taxes
Since the Company is in its development stage and has no income, no income tax
expense is reported on the financial statements.
<PAGE>
MCC TECHNOLOGIES INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
(Unaudited)
September 30, 2000
3. Common Stock Transactions
The Company was incorporated with authorized capital of 25,000 shares of common
stock, no par value. On March 3, 1998 the Company issued 30,000 shares for
cash.
On February 28, 2000 the Company approved a forward split of 100 for 1 of the
issued and outstanding shares. At the same time the Articles of Incorporation
were amended to increase the authorized capital stock to 100,000,000 shares with
a par value of $.001. These financial statements give retroactive affect to the
stock split from date of inception.
4. Licence Agreement and related party transaction
On March 1, 2000 the Company entered into a software licencing agreement with a
shareholder whereby it was granted the non exclusive right to market within
Continental North America, IVR computer software. The Licensor will receive 15%
of gross annual sales of the product, which is the technology and intellectual
property necessary to promote, market, sell and supply the computer software.
The agreement may be terminated by the Company at any time after a 14 day notice
period. The agreement may be terminated by the Licensor under certain
conditions as stated in the licence agreement.
ITEM 2. PLAN OF OPERATION.
There have been no material developments since the Company filed its Form 10-SB
Registration Statement on October 4, 2000.
General
Prior to February 28, 2000, the Company operated as a development stage company.
On February 28, 2000, the Company began operations (and continues to operate) as
a software company specializing in the development of interactive voice response
("IVR") software and multimedia automated information software, primarily for
the public transit and utilities industries.
Under the terms of a licence and marketing agreement, dated March 1, 2000 (the
"Licence Agreement"), between the Company and Peter Thompson, the Company
acquired a non-exclusive licence to develop, market, sell and support multimedia
automated traveller information ("ATIS") software used to provide information to
users of fixed route public transit systems (such as bus, ferry and commuter
rail) and of customer-scheduled transit systems (including paratransit
operators, taxi cab, ambulance, transportation shuttle and limousine service
providers). The Company also provides multi-modal information systems in
metropolitan areas. Multi-modal information systems combines the ATIS software
applications with other operational data such as traffic conditions, flow
monitoring and real time parking information, thereby delivering a complete
"one-stop-shopping" source of traveller information.
The Company paid Mr. Thompson a cash payment of $5,000 and has agreed to pay him
a royalty of 15% of the gross annual sales of the Company's ATIS software. Mr.
Thompson agreed to provide the Company with the ATIS
<PAGE>
software source code and operations manuals and to actively participate in the
further development and enhancement of the software and the overall operation of
the business of the Company.
IVR Software Generally
IVR software is used by businesses and other entities that have a need to
provide information to their customers on a continual basis. By implementing an
IVR software system, businesses and other enterprises can use a standard
telephone network to provide automated voice responses to repetitive and
standard questions from their customers and/or users. IVR software can also be
used in conjunction with customer service representatives, such that routine
questions and requests for information are performed by the automated voice
response of the IVR software system and unusual questions or requests are
handled by live operators or customer service representatives.
Businesses and other enterprises currently implement IVR software in order to:
- increase capacity in handling routine questions and requests for
information;
- decrease operating costs in providing responses to such routine questions
and requests for information by reducing the amount of time required by live
operators or customer service representatives; and
- improve customer service levels by providing prompt responses to such
routine questions and requests for information.
Industry Description
Interactive voice processing systems are designed to serve the needs of
organizations that require an efficient, cost-effective means of delivering and
communicating information, responding to standard requests or questions and
completing business transactions in a timely manner. Voice processing typically
utilizes a telephone system connected to an external computer which contains
data and information being requested by callers. These systems use specialized
computer hardware and software to store, retrieve and transmit digitized voice
messages and to access information on computer databases. Using speech
recognition software and touchtone or voice commands, along with a combination
of passwords, account numbers and codes, callers can search for or request
information from the computer's database and have information read back in voice
form over the telephone. Voice processing systems have recently evolved and are
now capable of providing information not only through voice messages through the
telephone but also by providing information through the Internet, fax, pagers
and Telecommunications Devices for the Deaf (TDD). Voice processing systems are
widely used for functions such as reporting account balances, confirming
schedule information, reserving appointments for various services, checking
inventory, determining delivery dates for products or otherwise obtaining
standard information, and range from small systems with basic features utilizing
a few phone lines to larger, more complex systems with hundreds of telephone
lines.
In an attempt to capture a segment of the IVR software market, telephone
service/equipment suppliers and computer manufacturers have entered into the
market. Telephone manufacturers have added more intelligent features to their
telephone equipment to automate more complex caller requirements like voice mail
and caller routing. Computer manufacturers have added telephone-based call
handling and switching capabilities to permit remote connectivity and access
between various telephone and computer networks. This convergence of computer
and telephone technology has led to the emergence of standards which are
intended to govern the design and functionality of both computer and telephone
switching hardware.
The market for simple IVR software applications will likely be dominated by
telephone service and equipment suppliers, who will include such simple IVR
systems with their telephone equipment. More complex applications, however,
will likely run on personal computing technology, which will be supplied by
software vendors such as the Company.
The Company's Software
<PAGE>
The Company's ATIS software technology is used in both fixed route transit
applications, such as bus, ferry and commuter rail, as well as for customer
scheduled trips offered by service providers including paratransit operators,
taxi cab, ambulance, transportation shuttle and limousine service providers.
The Company also provides multi-modal information systems in metropolitan areas.
Multi-modal information systems combines the ATIS software applications with
other operational data such as traffic conditions, flow monitoring and real time
parking information, thereby delivering a complete "one-stop-shopping" source of
traveller information.
The Company's fixed route ATIS software permits travellers seeking
transportation information, such as route descriptions, stop locations,
departure times and other information regarding their travel plans to access
this information through the telephone, via the Internet or through other
automated information technologies. The information provided is current and
up-to-the-minute (real time), as the Company's ATIS software is connected
directly to the scheduling database which contains the transportation provider's
operating information.
The Company's ATIS software technology is designed to be compatible with and to
connect to other information technologies via Internet compliant standard
interfaces and open platform design. For example, where the transportation
provider includes global positioning satellite based automated vehicle location
information, a person seeking bus times will be advised when the bus will
actually arrive at a designated stop, rather than when it is scheduled to arrive
at the stop.
For customer scheduled and demand applications, the Company's ATIS software will
permit a customer to schedule a trip, confirm or cancel a scheduled trip or
provide notification of the arrival of the transit vehicle for the scheduled
trip. All of these functions can be performed automatically over the telephone,
Internet and/or fax without the need for human assistance.
The Company's ATIS software technology improves the service delivery of both
fixed route and customer scheduled transportation operators by enabling
operators to offer customer service 24 hours per day, 7 days per week and by
automating most customer inquiries. Superior customer service is delivered to
users at a fraction of the cost of human operators, one of the highest cost
factors to transit operators in delivering customer service. As a result, the
Company estimates that the transit operator will recover the cost of the ATIS
software within six to eight months of installation through savings to the
transportation operator.
The Company has created proprietary communications technology called the
"iEngine" which permits simultaneous public access to transportation information
via whatever medium the user selects. The media choices range from interactive
media such as cellular or fixed-line telephone, the Internet, email or a kiosk
to one-way (passive) media such as fax back, FM radio, TV or automated signage.
The Company is in the process of building proprietary interfaces with the four
major suppliers of scheduling databases in North America: Trapeze Software
Group, GIRO, Multisystems Inc. and Mantech Systems Inc.
The Company intends initially to market its ATIS software to the transit,
paratransit and utilities industries. However, enterprises such as brokerages,
banks, airlines and retailers use similar software platforms to provide
interactive voice responses for applications including stock quotes and trading,
home banking, travel planning and shopping, and are potential target markets for
the Company in the future.
The Company integrates state of the art innovations and advances in information
and computer technology into its ATIS software applications. Its technology is
designed to be "open" with respect to both its architecture, and existing and
anticipated standards. The Company's software applications are compatible with
virtually any DOS, Windows, OS/2 and UNIX operating system based-network, will
run on most personal computers and will connect with most standard- telephone
switches. This adaptability provides optimum flexibility and power to the
customer and ensures compatibility with changing hardware requirements. To
achieve its "open" structure, the Company has integrated the following three
innovations into its software products:
Compliance with Telephony Standards such as TAPI and TSAPI
<PAGE>
Telephony Applications Programming Interface ("TAPI") is Microsoft's application
for interfacing Windows-based computer applications with telephone systems.
Telephone Services Applications Programming Interface ("TSAPI") is Novell's
application for interfacing telephone systems to Novell networks.
Both TAPI and TSAPI are standards which define the criterion for integrating a
telephone with a personal computer within or outside of a computer network. In
short, the standard describes the interconnectivity of all types of computer and
telephony hardware that could be used in any of the Company's current or future
software applications. The Company monitors all standards development in the
computer telephony sector to keep its software products compliant with such
standards. The Company's products are already compliant with TAPI and TSAPI,
both of which will likely govern future IVR software systems.
Network Connectivity
All of the Company's software applications are intranet and internet compatible
and can easily plug into the existing communications capabilities of both
Windows and OS/2 operating systems. Once connected to a Windows or an OS/2
based computer system, the Company's software applications can emulate the
terminal of the transportation provider, thereby providing dynamic, real-time
interactivity with the transportation provider's host database. Through such
terminal emulation, the Company's applications offer the following advantages
over those of its existing competitors:
- transactions between the Company's software and the transportation
provider's host software is in real time with no additional overhead in database
management; and
- no modifications are required to the existing host software as the
Company's software is able to emulate any other workstation on the computer
network.
JAVA Scripting
JAVA is a software language which permits programs to be developed that will run
on virtually any operating system platform including Windows, OS/2 or UNIX.
JAVA software can also operate with software code written in other software
languages such as "C" and "C++". Additionally, JAVA-based applications allow
distributed processes to be run independently over a network, further permitting
the Internet to be used as a medium to connect geographically separated
components of the Company's software applications. Specifically, voice and
telephone-based information can be more readily accessed from information
sources located virtually anywhere in the world.
Upgrades and Support of the Company's IVR Software
The Company's existing management team supports and services all of its IVR
software products. If an existing customer has a support contract with the
Company, it will receive any upgrades to the IVR software application running on
that operating system as part of that support contract. If there is no support
contract, the customer will continue to receive support for its IVR software but
will be charged on a per hour basis for all repairs and custom upgrades or
enhancements.
Target Markets
The Company's target market for its IVR software is focussed primarily on the
public transit and utilities industries. Public transit and utilities companies
generally purchase and utilize IVR software for two reasons:
- to reduce operating costs involved in providing responses to standard
questions and requests for information; and
- to improve customer service by providing such standard or routine
information in a timely and efficient manner.
IVR software technology automates repetitive and standard questions and requests
for information, which represent the majority of calls to public transit and
utility companies. The versatility of the technology permits full integration
<PAGE>
with operators so that routine calls are handled automatically using IVR
software and the more difficult calls are transferred to human operators, who
are usually available during business hours.
RISK FACTORS
Much of the information included in this Quarterly Report includes or is based
upon estimates, projections or other "forward-looking statements". Such
forward-looking statements include any projections or estimates made by the
Company and its management in connection with its business operations. While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect the Company's current judgment regarding the
direction of its business, actual results will almost always vary, sometimes
materially, from any estimates, predictions, projections, assumptions, or other
future performance suggested herein. The Company undertakes no obligation to
update forward-looking statements to reflect events or circumstances occurring
after the date of such statements.
Such estimates, projections or other "forward-looking statements" involve
various risks and uncertainties as outlined below. The Company cautions the
readers that important factors in some cases have affected and, in the future,
could materially affect actual results and cause actual results to differ
materially from the results expressed in any such estimates, projections or
other "forward-looking statements". In evaluating the Company, its business and
any investment in the Company, readers should carefully consider the following
factors.
History of Losses
The Company has had a history of losses and expects to continue to incur losses,
and may never achieve or maintain profitability. The Company has incurred
losses since it began its operations as an IVR software development company,
including a loss of approximately $2,352 through the year ended March 31, 2000.
As of March 31, 2000, the Company has an accumulated deficit of approximately
$2,152. The Company expects to have net losses and negative cash flow at least
through March 31, 2002, and expects to spend significant amounts of capital to
enhance its products and technologies, develop international sales and
operations, and fund research and development. As a result, the Company will
need to generate significant revenue to break even or achieve profitability.
Even if the Company does achieve profitability, it may not be able to sustain or
increase profitability on a quarterly or annual basis. If the Company does not
achieve and maintain profitability, the market price for its common stock may
decline, perhaps substantially.
Limited Operating History
Due to the Company's limited operating history, there is little information upon
which to base an evaluation of its business and prospects. The Company's
prospects must be considered in light of the risks, uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development. Some of these risks and uncertainties relate to the Company's
ability to develop, market, sell and support its IVR software, and to attract,
retain and motivate qualified personnel. The Company cannot be sure that it
will be successful in addressing these risks and uncertainties, and its failure
to do so could have a materially adverse effect on its financial condition and
continued operations. In addition, the Company's operating results are
dependent to a large degree upon factors outside the Company's control,
including among other things, increased competition and the acceptance and
continued use of IVR technology. There are no assurances that the Company will
be successful in addressing these risks, and failure to do so may adversely
affect the Company's business and financial condition.
Difficulties Associated With Growth Management
The Company may encounter difficulties in managing its growth, which could
prevent it from executing its business strategy. The Company's ability to
achieve its planned growth is dependent upon a number of factors including, but
not limited to, its ability to hire and retain suitable employees, the adequacy
of the Company's financial resources and the Company's ability to develop,
market, sell and support its IVR software. The Company's anticipated growth
will likely place a significant strain on its resources. To accommodate this
growth, the Company must implement or upgrade a variety of operational and
financial systems, procedures and controls, including the improvement of its
accounting and other internal management systems. There can be no assurance
that the
<PAGE>
Company will be able to achieve its anticipated goals or that it will be able to
successfully manage its operations. The Company's systems, procedures and
controls may not be adequate to support its future operations. If the Company
fails to improve its operational, financial and management information systems,
or to hire, train, motivate or manage its employees, its business may be
adversely affected. Failure to manage anticipated growth effectively and
efficiently could have a materially adverse effect on the Company.
Acceptance of IVR Software
IVR software may not achieve widespread acceptance by businesses in general,
public transit and utility companies in particular or telecommunications
carriers, which could limit the Company's ability to expand its business. The
market for IVR software is relatively new and is rapidly evolving. The Company's
ability to generate revenue in the future depends on the acceptance by both its
customers and their end users of its IVR software and IVR technology in general.
The adoption of IVR software could be hindered by the perceived costs of this
new technology, as well as the reluctance of enterprises that have invested
substantial resources in existing call centers to replace their current systems
with this new technology. Accordingly, in order to achieve commercial
acceptance, the Company will have to educate prospective customers, including
large, established telecommunications companies, about the uses and benefits of
IVR software in general and its IVR software in particular. If these efforts
fail, or if IVR software does not achieve commercial acceptance, the Company's
business could be harmed.
The continued and future development of the market for the Company's IVR
software is also dependent upon:
- the widespread deployment of IVR applications by third parties which is
driven by consumer demand for services having an IVR component;
- the demand for new uses and applications of IVR technology;
- adoption of industry standards for IVR and related technologies; and
- continuing improvements in hardware technology that may reduce the costs
of IVR software solutions.
Technological Changes
The IVR and communications industry within which the Company operates is
characterized by rapid technological change. The development of new technology
by the Company's competitors may render the Company's IVR software technology
obsolete. Competition in the IVR technology industry is based largely upon
technological superiority. Accordingly, the success of the Company will depend
upon its ability to continually enhance its current IVR software products, to
develop and introduce new products that keep pace with technological
developments and to address the changing needs of the marketplace. Although the
Company expects to devote significant resources to research and development
activities, there can be no assurance that these activities will result in the
successful development of new IVR technologies and IVR software products or the
enhancement of existing technologies and products. In addition, there can be no
assurance that the introduction of products, services or technological
developments by others will not have a materially adverse effect on the
Company's operations.
Fluctuation of Quarterly Results
The Company's ability to accurately forecast its quarterly sales is limited, as
a result of which, the Company's quarterly operating results may fluctuate
significantly. The Company expects its results will vary significantly from
quarter to quarter in the future. These quarterly variations may be caused by a
number of factors, including:
- delays in customer orders due to the complex nature of large telephony
systems and the associated implementation projects;
- timing of product deployment and completion of project phases,
particularly for large orders;
- delays in recognition of software license revenue in accordance with
applicable accounting principles;
<PAGE>
- the Company's ability to develop, introduce, ship and support new and
enhanced products, such as new versions of its IVR software that respond to
changing technology trends, in a timely manner, as well as its ability to manage
product transitions; and
- the amount and timing of increases in expenses associated with the
Company's growth.
Due to these and other factors, and because the market for IVR software is new
and rapidly evolving, the Company's ability to accurately forecast its quarterly
sales is limited. In addition, in the near future, most of the Company's costs
will be related to personnel, facilities and research and development, which are
relatively fixed in the short term. If the Company does not generate
significant revenue in relation to its expenses, it may be unable to reduce its
expenses quickly enough to avoid lower quarterly operating results. The Company
does not know whether its business will grow rapidly enough to absorb the costs
of its future employees and facilities. As a result, its quarterly operating
results could fluctuate and this fluctuation could adversely affect the market
price of the Company's common stock in the future.
In addition, the Company expects to experience seasonality in the sales of its
products. For example, it anticipates that sales may be lower in the first
quarter of each year due to patterns in the capital budgeting and purchasing
cycles of the Company's current and prospective customers. The Company also
expects that sales may decline during summer months, particularly in Asian and
European markets. These seasonal variations in the Company's sales may lead to
fluctuations in its quarterly operating results. Because the Company has
limited operating results, it is difficult to evaluate the degree to which this
seasonality may affect the Company's business.
Effect of Lengthy Sales and Implementation Cycles
The Company's products often have long sales and implementation cycles and, as a
result, its quarterly operating results and its stock price may fluctuate. The
sales cycles for the Company's IVR software products will likely range from
three to eighteen months, depending on the size and complexity of the order and
the services to be provided by the Company.
The purchase of the Company's products requires a significant expenditure by a
potential customer; accordingly, the decision to purchase the Company's products
typically requires significant pre-purchase evaluation. The Company may spend
significant time educating and providing information to prospective customers
regarding the use and benefits of its IVR software products. During this
evaluation period, the Company may expend substantial sales, marketing and
management resources.
After purchase, the expenditure of substantial time and resources to implement
the Company's software and to integrate it with the customer's existing systems
may be required. If the Company is performing significant professional services
in connection with the implementation of its software, it will not recognize
software revenue until after system acceptance or deployment. In cases where
the contract specifies milestones or acceptance criteria, the Company may not
recognize services revenue until these conditions are met. The Company may in
the future experience unexpected delays in recognizing revenue. Consequently,
the length of its sales and implementation cycles and the varying order amounts
for its products make it difficult to predict the quarter in which revenue
recognition may occur and may cause license and services revenue and operating
results to vary significantly from period to period. These factors could cause
the Company's stock price to be volatile or to decline.
Response to Rapid Changes in the IVR Software Market
In the event that the Company fails to respond to rapid changes in the market
for IVR software, the Company may experience a loss of revenues. The IVR
software industry is relatively new and rapidly evolving. The Company's success
will depend substantially upon its ability to enhance its existing products and
to develop and introduce, on a timely and cost-effective basis, new products and
features that meet changing end-user requirements and incorporate technological
advancements. If the Company is unable to develop new products and enhanced
functions or technologies to adapt to these changes, or if it cannot offset a
decline in revenue from existing products with sales of new products, the
Company's business would likely suffer.
<PAGE>
Among other things, commercial acceptance of the Company's products and
technologies will depend on:
- the ability of the Company's products and technologies to meet and adapt
to the needs of its target markets;
- the performance and price of the Company's products as compared to its
competitors' products; and
- the Company's ability to deliver customer service directly and through its
resellers.
Possibility of Software Defects
Any software defects in the Company's products could harm its business and
result in litigation. Complex software products, such as the products offered
by the Company, may contain errors, defects and bugs. With the planned release
of any product, the Company may discover such errors, defects and bugs and, as a
result, its products may take longer than expected to develop. In addition, the
Company may discover that remedies for errors or bugs may not be technologically
feasible. Delivery of products with undetected production defects or
reliability, quality, or compatibility problems could damage the Company's
reputation. Errors, defects or bugs could also cause interruptions, delays or a
cessation of sales to the Company's customers. The Company may be required to
expend significant capital and other resources to remedy these types of
problems. In addition, customers whose businesses are disrupted by these
errors, defects and bugs may bring claims against the Company which, even if
unsuccessful, would likely be time-consuming and could result in costly
litigation and the payment of damages.
Dependence on a Limited Number of Customers
The Company anticipates that it will depend on a limited number of customer
orders for a substantial portion of its revenue during any given period. Loss
of, or delays in, a key order could substantially reduce the Company's revenue
in any given period and harm its business. Generally, customers who make large
purchases are not expected to make subsequent equally large purchases in the
short term. As a result, if the Company does not acquire a major customer, if a
contract is delayed, cancelled or deferred, or if an anticipated sale is not
made, the Company's ability to generate revenue could be adversely affected.
International Operations
Sales to customers outside the United States and Canada may account for a
significant portion of the Company's revenues in the future, which would expose
the Company to risks inherent in international operations. The Company would be
subject to a variety of risks associated with conducting business
internationally, any of which could have a materially adverse effect on the
Company's business. These risks include:
- difficulties and costs of staffing and managing foreign operations;
- difficulties in establishing and maintaining an effective international
reseller network;
- the burden of complying with a wide variety of foreign laws, particularly
with respect to intellectual property and license requirements;
- political and economic instability outside the United States;
- import or export licensing and product certification requirements;
- tariffs, duties, price controls or other restrictions on foreign
currencies or trade barriers imposed by foreign countries;
- potential adverse tax consequences, including higher marginal rates;
- unfavorable fluctuations in currency exchange rates; and
<PAGE>
- limited ability to enforce agreements, intellectual property rights and
other rights in some foreign countries.
In order to increase the Company's international sales, it must develop
localized versions of its products. If the Company is unable to do so, it may
be unable to increase its revenue and execute its business strategy.
The Company intends to expand its international sales, which will require the
investment of significant resources to create and refine different language
models for each particular language or dialect. These language models are
required to create versions of the Company's products that allow end users to
speak the local language or dialect and be understood and authenticated. If the
Company fails to develop localized versions of its products, its ability to
address international market opportunities and to develop its international
business will be limited.
Industry Standards
If the standards employed by the Company are not adopted as the standards for
IVR software, businesses might not use the Company's IVR software for delivery
of applications and services. The market for IVR software is new and emerging
and industry standards have not yet been firmly established. The Company may
not be competitive unless its products support changing industry standards. The
emergence of industry standards, whether through adoption by official standards
committees or widespread usage, could require costly and time consuming redesign
of the Company's products. If these standards become widespread and the
Company's products do not support them, its customers and potential customers
may not purchase its products. Multiple standards in the marketplace could also
make it difficult for the Company to insure that its products will support all
applicable standards, which could in turn result in decreased sales of the
Company's products.
Protection of Proprietary Technology
Any inability to adequately protect the Company's proprietary technology could
harm its ability to compete. Its future success and ability to compete depends
in part upon its proprietary technology and its trademarks, which the Company
attempts to protect with a combination of patent, copyright, trademark and trade
secret laws, as well as with its confidentiality procedures and contractual
provisions. These legal protections afford only limited protection and may be
time-consuming and expensive to obtain and/or maintain. Further, despite the
Company's efforts, it may be unable to prevent third parties from infringing
upon or misappropriating its intellectual property. Although the Company
intends to file U.S. and Canadian patent applications, it does not currently
have any issued patents. There is no guarantee that patents will be issued with
respect to its current or future patent applications. Any patents that are
issued could be invalidated, circumvented or challenged. If challenged, the
Company's patents might not be upheld or their claims could be narrowed. The
Company's intellectual property may not be adequate to provide a competitive
advantage or to prevent competitors from entering the markets for the Company's
products. Additionally, the Company's competitors could independently develop
non-infringing technologies that are competitive with, equivalent to, and/or
superior to the Company's technology. Monitoring infringement and/or
misappropriation of intellectual property can be difficult, and there is no
guarantee that the company would detect any infringement or misappropriation of
its proprietary rights. Even if the Company did detect infringement or
misappropriation of its proprietary rights, litigation to enforce these rights
could cause the Company to divert financial and other resources away from its
business operations. Further, the Company licenses its products
internationally, and the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States and Canada.
Infringement by the Company on Other Intellectual Property
The Company's products may inadvertently infringe upon the intellectual property
rights of others, and resulting claims against the Company could be costly and
require that the Company enter into disadvantageous license or royalty
arrangements. The software industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of patent
infringement and the violation of intellectual property rights. Although the
Company attempts to avoid infringing known proprietary rights of third parties,
it may be subject to legal proceedings and claims for alleged infringement by of
third-party proprietary rights, such as patents, trade secrets, trademarks or
copyrights, from time to time in the ordinary course of business. Any claims
relating to the infringement of third-party proprietary rights, even if not
successful or meritorious, could result in costly litigation,
<PAGE>
divert resources and management's attention or require that the Company enter
into royalty or license agreements which are not advantageous to it. In
addition, parties making these claims may be able to obtain injunctions, which
could prevent the Company from selling its products.
Cash Requirements
The Company's cash requirements for the period ending September 30, 2001 are
estimated at $1,000,000, in order to finance the continue research and
development of its ATIS software, and to finance an advertising and marketing
campaign. The Company currently has limited funds available, and anticipates
that it will raise additional capital through a private placement of its equity
securities and/or debt financing.
Research and Development
To date, the Company has not expended significant funds on research and
development. The Company anticipates that it will spend approximately $350,000
on research and development (including the continued development of its ATIS
software) through September 30, 2001.
Purchase of Significant Equipment
The Company does not intend to purchase any significant equipment through
September 30, 2001.
Employees
Over the twelve months ending September 30, 2001, the Company anticipates an
increase in the number of employees it retains, as it intends to hire one
qualified accountant, one person to perform clerical and administrative tasks,
two software engineers and two sales and marketing personnel.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company knows of no material, active or pending legal proceedings against
it, nor is the Company involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any director, officer or
affiliate of the Company, or any registered or beneficial shareholder is an
adverse party of has a material interest adverse to the Company.
ITEM 2. CHANGES IN SECURITIES.
The Company did not issue any securities during the quarter ended September 30,
2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K
<PAGE>
The Company did not file any reports on Form 8-K during the quarter ended
September 30, 2000.
Financial Statements Filed as a Part of the Quarterly Report
The Company's unaudited financial statements include:
Balance sheet
Statement of Operations and Accumulated Deficit
Statement of Changes in Stockholders' Equity
Statement of Cash Flows
Notes to the Financial Statements
Exhibits Required by Item 601 of Regulation S-B
Exhibit Description
Number
(3) Articles of Incorporation and By-laws:
3.1 Articles of Incorporation effective February 26, 1998 (incorporated
by reference from the Company's Form 10-SB, filed on October
4, 2000)
3.2 By-Laws effective February 26, 1998 (incorporated by reference from
the Company's Form 10-SB, filed on October 4, 2000)
3.3 Certificate of Amendment of Articles of Incorporation, filed March
27, 2000 (incorporated by reference from the Company's Form
10-SB, filed on October 4, 2000)
(10) Material Contracts
10.1 License Agreement between the Company and Peter Thompson, dated
March 1, 2000 (incorporated by reference from the Company's Form
10-SB, filed on October 4, 2000)
(27) Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MCC TECHNOLOGIES, INC.
By: /s/ Lael Todesco
Lael Todesco, President/Director
Date: November 11, 2000
By: /s/ Peter Thompson
Peter Thompson, Secretary/Treasurer/Director
Date: November 11, 2000
