Item
1. DESCRIPTION OF BUSINESS
Overview
Centergistic
develops, installs and services business performance and intelligence management
software used in customer call/contact centers. We are a California corporation
originally founded in 1972 as Account-A-Call Corporation. We initially developed
proprietary software and hardware which facilitated the collection and
processing of data from multiple telephone switches (PBX’s) and allowed our
customers to track and manage telephone calling patterns. From this technology
and the expertise developed to support it, a strong core competency of data
collection, integration and analysis evolved. In 1991, we introduced our
flagship AgentView product which is currently installed in approximately 3,500
locations around the world. The software monitors customer communications,
transactions and service performance. The call accounting business entailed
large scale computer centers from which data was collected nightly from various
client PBX’s located throughout the country. By collecting, processing and
analyzing the data collected, we were able to produce reports which analyzed,
tracked the routing and priced every outbound telephone call made by our client
companies. The business was operated essentially as a subscription, service
bureau-based business.
In
1993,
we opened our wholly owned subsidiary, Centergistic Solutions Latin America,
in
Mexico City. This subsidiary is a distribution company that sells, not only
our
products but other products, mainly to telecom equipment providers in Mexico,
Latin and South America.
By
1999,
we were operating and supporting two divergent businesses; call accounting,
whose revenues had been slowly eroding for years, and contact center performance
management systems, whose markets and applications were increasingly in demand.
After choosing to focus all of our attention on the growing contact center
market, we sold our call accounting business and used the proceeds to expand
our
flagship AgentView product and develop our new CenterStats product. To emphasize
our new focus, we changed our name to Centergistic Solutions, Inc.
In
2001,
we completed the development of our new CenterStats product, and began selling
and installing it at client facilities in 2002. Our AgentView and CenterStats
products help companies improve productivity by providing an integrated, unified
view of critical information. This information is provided in the form of real
time “smart” alerts and sophisticated reporting tools.
Further
information about the company and our products and services can be found at
our
web site: www.centergistic.com.
The
Market
Our
products are targeted at the growing number and increasing complexity of
customer contact centers, addressing management’s need to integrate performance
data generated by operations, reporting and CRM (Customer Relationship
Management) systems.
Over
75%
of all transactions between businesses and with the public interact with a
call/contact center. These interactions take place by telephone, email, web,
web
chat, and fax. They are used for making reservations, ordering, fulfillment,
customer support, order tracking, comparison-shopping and product search. The
new “multi-media” enabled call/contact centers handle an average of 10 million
transactions per day and are growing, both in number and in complexity, with
the
new mix of choices available to customers.
There
are
more than 78,000 contact centers in the U.S. and more than 100,000 worldwide.
These numbers are projected to grow to 92,000 and 130,000, respectively by
the
end of 2004. A 2002 research study from Ovum predicts that contact center
capacity worldwide will nearly double within five years, growing from 7.3
million seats in 2001 to over 13 million early in 2006. Seats in multi-channel
contact centers will also increase as a percentage of total contact center
seats, from 18% in 2001 to 51% in 2006, representing growth from 1.3 million
multi-channel contact center seats to 6.8 million. Moreover, many of the
existing contact centers will need system upgrades and
enhancements.
The
traditional contact centers are becoming multi-channel contact centers, which,
in addition to handling traditional inbound and outbound phone calls, must
respond to e-mail, faxes, internet-telephony, and, sometimes, surface mail.
The
Internet allows customers to communicate with a company twenty-four by seven,
and receive an immediate notice of receipt with a detailed follow up, usually
within 24 hours. The increase in volume of written communication (e-mail, fax,
mail) allows management to even out workloads over peak calling periods. This
allows for different staffing levels than those needed to maintain a “call only”
center. The evolving multi-channel contact center can become more efficient
and
less costly to staff when properly upgraded to multi-channel
capabilities.
The
job
of managing the customer relationship has, in turn, become more complex. More
options for customers create more queues and require different skill sets to
handle efficiently. More information about customer demographics and transaction
profiles has compelled management to try to identify and tailor service levels
to the type of customer. Performance information must be available in real
time
and must be combined and sorted in a way that empowers agents and their managers
to take appropriate actions and make the right decisions.
The
systems currently used in the contact centers are of many types, varying from
homegrown legacy systems to single-vendor systems. Few of these systems are
Internet-enabled and, therefore, will need to be upgraded to perform as
efficient multi-channel contact centers.
Several
industries have emerged and grown in response to these needs and changing
environments. These industries represent software, technology and services.
Three industry segments, in particular, contain products and services that
fall
within Centergistic’s target market. These segments are: Customer Relationship
Management (CRM), Business Intelligence (BI) and, to a more limited extent,
a
third “information technology” category referred to as AIM (Application
Integration and Middleware). While CRM and BI cover most of the target market,
it is important to note the growth of the emerging AIM market, since sales
of
Centergistic products are attracting increased attention by IT and system
integration professionals as well as contact center managers.
The
markets for our products are large and growing. A 2002 Forrester Research report
predicts the global CRM sector will grow to $101 billion by the year 2007.
According to a 2003 article in Datamonitor, the global market for BI
applications is currently $4.5 billion and will grow to $7.8 billion by
2005.
Gartner/Dataquest
issued a research brief, “Application Integration, Middleware, and Portal
Markets Set for Strong Growth,” in late June, 2002, predicting expansion of the
global AIM and portal markets from $5.1 billion in 2001 to $10.5 billion by
2006. In 2002 alone, this market was forecasted to grow almost 17 percent to
reach $6 billion. In a slow economy, expenditures on CRM software appear to
be
one area that is prospering, because it produces cost reductions
quickly.
Our
software, using sophisticated algorithms, allows call/contact centers to improve
performance and thereby customer satisfaction by providing the best possible
service, while maintaining the most economical use of resources and overhead.
The value behind what we term “The Centergistic Solution” is the real time
availability of performance metrics derived by selecting sub-sets of data from
critical sources throughout the contact center. These sub-sets are then combined
to form a new superset of “smart” performance metrics. Alert thresholds and
user-defined filters are applied to create a unique information set, profiled
to
each viewer. The resulting benefit of this information is faster and more
accurate anticipation of clients’ needs, more rapid response to service and/or
revenue goals and across-the-board performance improvement through integrated
real time and historical reports and analytics.
Our
flagship product, AgentView, is a real time performance monitoring and reporting
system that is currently installed in over 3,500 contact centers throughout
the
world, including Fortune 1000/FTSE 500 companies such as British Telecom,
Barclay’s Bank, ABN-AMRO, MicroSoft, and American Express.
Our
CenterStats product is a new enterprise-wide performance reporting system which
is currently installed in eleven contact centers in the U.S. CenterStats
incorporates a digital executive dashboard component and enables “drill-down”
analytics and historical reporting for true company-wide visibility and
performance analysis. It is a ready-to-install information system that is
compatible with all new and legacy systems, and can be installed without
disruption to existing systems and hardware. Notable CenterStats accounts
include Kaiser Permanente, 20
th
Century
Fox and Petro-Canada.
Our
Business Strategy and Marketing
Recognizing
the significant potential for both AgentView and CenterStats, over the past
two
years, we streamlined our company to focus on the two management information
software product lines. We cut costs wherever possible and spent any available
operating cash on maintaining operations. We also reduced our marketing and our
sales force to bare maintenance levels during this refocusing.
Our
existing presence in U.K. and European markets positions us to leverage our
market share in the high-growth E.U. contact center marketplace through
implementation of our strategic marketing and sales plan. Implementing our
aggressive sales and marketing programs will require additional direct and
distribution sales personnel. Much of the framework is already in place to
enable rapid hiring, training and deployment of a larger, more skilled sales
force. We have experience in these markets finding geographic pockets of
opportunities, and we understand the science of packaging our products for
distribution. We have the market and industry knowledge and experience, lacking
only the funding to quickly move our plans into action.
Our
marketing plan allows for added marketing and product management personnel
and
programs to enable us to extend our reach, broaden the sphere of influence
of
existing programs and add new ones directed to a more sophisticated buyer with
higher purchase authority and more influence throughout the enterprise. New
advertising, public relations, brand building and global distribution
capabilities will be expanded in a systematic and consistent manner to support
our strategic plan.
Our
Products and Services
AgentView
Our
flagship product, AgentView, is currently installed in over 3,500 contact
centers throughout the world. Its strength is its ability to collect from
diverse ACD (automatic call distributors) types and other applications, systems
and databases found in today’s contact centers. The AgentView system utilizes
sophisticated threshold filters, providing managers, supervisors and agents
with
evolving real time information on all aspects of the contact center. The system
is used to measure and take actions to improve performance.
AgentView
is unique in its ability to collect critical subsets of data from virtually
any
data source, create filters and real time alert thresholds, and publish the
enriched information to virtually any output media for twenty-four by seven
global access. Because of this “open” approach to information, AgentView stands
apart from hardware manufacturers and “one stop” application vendors in that it
is not centric to a particular system or application. This is attractive to
contact centers with applications that span a variety of brands and
manufacturers. These centers do not want to replace existing legacy systems.
They want to collect and integrate information from those already existing
systems within the center because they work and are costly to
re-create.
Architecturally,
AgentView is comprised of a core system, which includes a data collection
engine, a desktop metric ribbon (AgentLink), an advanced threshold template
and
a performance indicator (PI) building capacity. Modules can be added to
AgentView to enable information to be published to a web page, wireless hand
held device, plasma or LED (light emitting diode) display. A recently released
module, SnapView, provides snapshot reports that allow the comparison of actual
performance against forecasts or benchmark goals. Additional data sources can
be
added to provide greater performance visibility over multi-media transactions.
Additional contact center locations can also be added for centralized
performance reporting. We also offer professional services to provide training
and assistance with building smart metrics.
These
metrics consist of the combination of two or more data elements to form a more
refined metric. An example of this could be combining information from a
financial or sales database with an ACD metric to form a “$$ waiting to be
answered” as opposed to the more static metric of “Number of calls waiting to be
answered”.
AgentView
features an open architecture, enabling it to work with many types of LED
wallboard displays. Third party systems integrators and developers can use
our
proprietary HTML-like language, which we refer to as LTML, to interface their
applications to LED displays using simple English sentences instead of complex
codes. LTML is manufacturer-independent, which means that a single LTML
statement will drive LED displays from a mix of different manufacturers, saving
time and effort. In essence, LTML’s universality could be compared to the way
Microsoft Windows enables programs to be run on the hardware of various computer
manufacturers. This breakthrough technology is in the preliminary patent stages.
AgentView
includes the following significant features:
|
|
·
|
Open
architecture and collections technology to accommodate multiple locations
and multiple data sources without adverse impact on the
network.
|
|
|
·
|
ODBC
data collector (OmniCollector) to collect and combine data from disparate
data sources.
|
|
|
·
|
System
reliability for virtually flawless
performance.
|
|
|
·
|
Cross-brand
collection aggregation, alerting and reporting technology, not centric
to
any hardware or ACD manufacturer.
|
|
|
·
|
Targeted
and profiled real time alerts, which provides multiple levels of
alarm
conditions.
|
|
|
·
|
Combine
metrics across disparate sources for unified
viewing.
|
The
AgentView products are available in English, Spanish and Portuguese with
provisions for additional translations as more international distribution is
achieved. Our clients include:
·
British
Telecom
·
NatWest
Bank
·
Cable
& Wireless
·
Barclays
Bank
·
ABN-AMRO
Bank
·
Esso/Imperial
Oil
·
American
Express
·
Citicorp
·
Anheuser
Busch
·
MicroSoft
In
2003,
we introduced a portion of our newly developed CenterStats technology into
our
AgentView product and packaged it as AgentView Enterprise Performance Management
(EPM) (in the U.S.). The expanded performance capability resides fully on the
CenterStats platform and allows access to incrementally more data sources and
provides broader publishing capabilities. EPM provides a new sales opportunity
for distributors to revisit existing clients and may lead to future sales of
fully loaded versions of CenterStats.
We
offer
our AgentView products with a variety of annual support arrangements that are
a
source of recurring revenue for us. Typically, users pay 18% to 25% of the
initial license fee for annual support charges.
CenterStats
Our
newly
released CenterStats architecture is a powerful enterprise information system
that combines critical real time alarms with historical information for a
360-degree view of an organization. The system allows the user to define key
subsets of information from any data source to review on a regular
basis.
Data
sources could include:
·
Financial
·
Inventory
·
Sales
·
CRM
·
Business
Intelligence
·
Internet,
e-commerce systems
·
Supply
chain, MIS
·
Human
Resources
·
Any
other
open data source
Categories
listed above would include such manufacturers as Nortel, Avaya, SAP, Siebel,
Cisco, Remedy, SalesLogix, PeopleSoft, Genesys and others. Each of these
applications produces hundreds of reports and voluminous databases, often
cumbersome and slow to respond. Senior managers, however, want to quickly access
only certain key sets of information from each. The CenterStats architecture
maps this selected information to the CenterStats database where it is combined
with other key subsets from other sources, forming a new superset of rich
information. Critical metrics can be displayed instantly on virtually any
pre-determined schedule. This information then can be sent to the user’s desktop
in the form of a “dashboard” of real time and historical information. It also is
retrievable from any wireless device or browser. CenterStats is best deployed
as
a management information tool, ideal in companies where important information
must be readily accessible and quickly interpreted.
CenterStats
provides these features without disruption to existing systems and hardware.
This allows a company to retain legacy systems and applications without
undergoing expensive infrastructure re-design. The ability to access mission
critical, strategic information anywhere, anytime is extremely important to
the
successful management and growth of today’s companies.
Core
to
CenterStats architecture is the ability to collect data from multiple and
diverse systems across the enterprise. Our CenterStats architecture
patent-pending technology enables companies to extract critical subsets of
information from virtually any application, database and/or system throughout
the enterprise. CenterStats is non-intrusive in that it sits apart from the
data
sources so that it does not in any way alter or impair the backend system.
All
this is accomplished without having to dismantle the system or impeding its
operation. This allows companies to retain valuable legacy systems and
applications, while getting state-of-the-art transmission of vital performance
metrics across the enterprise. A separate database, created from the collection
subsets, allows the user to combine information from these disparate sources
and
create real time alerts that are profiled to meet performance metric goals.
Additionally, this same collected data is archived to create meaningful
historical reports that are enriched by combining critical information
together.
The
information gathered together is presented to the user by way of a powerful
visualization engine that enables viewing of information together over virtually
any media. CenterStats provides a measurable improvement in performance, and,
we
believe, demonstrates a valuable return on investment.
The
CenterStats engine has virtually no limit to the type or volume of data it
collects. CenterStats can compare and model the assembled information into
meaningful real time metrics and reports, with the users selecting only the
information they want. This enables employees at all levels to simultaneously
understand and interpret performance measurement as it pertains to their
particular business issues and goals. We are not aware of any competitive system
or application that offers such refined collection, real time profiling and
alerting capabilities.
The
unique flexibility of the CenterStats architecture has enabled us to create
an
application developer “tool kit” based on our OmniCollector- engine and
DataStor--storage and real time filtering/alerts technology. This tool kit
could
be used as a stand-alone utility by information technologists, developers,
or
systems integrators to collect, filter and publish virtually any data from
any
system and in any industry. The flexibility and portability of this technology
has already sparked the interest of some developers and systems integrators
who
are seeking ways to connect data from various systems in vertical industries
such as manufacturing. It is worth noting that, as other markets of opportunity
open, we believe our technology is positioned to exploit them.
Our
CenterStats architecture includes the following significant
features:
|
|
·
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Data
collection architecture
:
The
CenterStats engine has virtually no limit to the type or volume of
data it
collects. The strength of CenterStats is not only in what it collects
but
how it collects. Because it is not centric to a certain industry
or
market, there are no design limits on the type of data collected.
It can
therefore fit into virtually any
industry.
|
|
|
·
|
Real
time data collector/alarms
:
The CenterStats real time data collector is not only powerful, but
unique
in that it collects data in intervals as frequent as needed (or is
available). Alarms data is taken directly from the source and is
not
impaired by having to move through duplicated databases. Real time
information is constantly updated with each refresh cycle. Furthermore,
users can set different types of data to refresh every second, others
every hour, day, etc., since mission critical data may be needed
more
frequently than other types of information. Different individuals
can
receive different alarms.
|
|
|
·
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Refined
information databases
:
The database created on the CenterStats server is comprised of only
information that is identified as being critical to the user. Unlike
other
systems, which replicate entire databases, CenterStats only brings
together information that is already identified as being useful.
This
results in an “intelligent” database that allows faster throughput and
more refined data mining. The database created by CenterStats is
literally
a new information set, whose access can be user defined and automated.
The
result is the right information, delivered to the right individual
at the
right time.
|
|
|
·
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Expertise
in telecommunications and ACDs
:
The CenterStats collectors are able to connect and extract data from
the
most popular ACD/Contact Center
systems.
|
In
addition to its broad functionality, CenterStats’ ability to access information
from diverse systems, legacy or new, will be increasingly important. We have
already invested the resources to make it easier to deploy collector interface
by developing vendor independent connector modules. These modules allow for
quick implementation of data acquisition and loading interfaces for increased
reliability, flexibility scheduling and management options.
We
believe that this unique transparent sourcing capability will be increasingly
valuable as corporate consolidations or acquisitions bring together more
non-homogenous systems. We believe that CenterStats is the fastest, easiest
and
most cost effective solution to bring such diverse systems together as a unified
management resource.
CenterStats
is currently installed and being used by the following clients:
|
|
·
|
County
of Fairfax, Virginia
|
Professional
Services
We
offer
consulting services to complement our product offerings. Our Professional
Services Group provides contact center systems design, integration, and
implementation as well as ongoing training.
As
we
continue our strategy of adding locations and data sources to existing clients
and transitioning them to the new CenterStats architecture, the opportunity
for
added consulting services is expected to rise. The process of identifying key
performance metrics and creating new reports is ideally suited to our
consultants who have the knowledge of the products and understand the needs
and
issues of the contact center.
Our
Professional Services Group generates incremental revenue, develops customer
loyalty, and is an important source of market intelligence for
Centergistic.
Marketing
and sales
Marketing
We
have
sold our data management system products primarily through distributors of
related automatic call distribution (ACD) systems and hardware. Since the sale
of our Account-A-Call unit in September 1999, we have operated with a
streamlined sales force of two people in the United States and five in Mexico.
One of our two U.S. salespersons focuses on direct sales to end-users and the
other is focused on relationships with distributors in the U.S. and abroad.
The
five
Mexico-based salespersons focus on both distributors and end-users throughout
Mexico and South America, and also offer a small line of administrative software
products that is not cost-effective for us to sell in the U.S. In March 2002,
we
added two people to our California-based sales staff in order to begin
development of our direct sales force that will be necessary to support our
strategic marketing plan. At present, the corporate marketing function and
associated services are performed by a senior marketing manager.
We
promote our products at general telecommunications, computer telephony, contact
center, and Customer Relationship Management (CRM) shows throughout the U.S.
and
abroad. We have a print advertising campaign and a monthly direct mail “Fresh
Start” program that reaches over 1,000 top prospects with each mailing. We also
have an active web site, which describes our products and permits our
distributors to order additional copies of the product or to expand an existing
license by simply entering purchase requests. Distributors are automatically
issued a key code to permit upgrades of licenses without the intervention of
any
personnel.
We
espouse a customer-driven marketing philosophy. AgentView clients have been
instrumental in effecting many of the enhancements to this product line over
the
years. We regularly visit our clients, and conduct focus group sessions to
keep
abreast of their changing environments and needs. As an example, the AgentView
Web publishing capability was developed to meet real world needs of customers
for twenty-four by seven internet access to metrics and reports. We believe
this
gives us a competitive advantage over other vendors sharing this market
space.
Our
customers regularly receive communications in the form of targeted direct mail
programs, special electronic sales memos, monthly technical webinars and a
monthly electronic newsletter, The RealTime Reporter™.
Marketing
Plan
To
date,
no advertising of any kind has been undertaken for our new CenterStats product.
Our limited marketing department of one full time professional and a part time
intern requires added resources to execute our strategic marketing plan. Our
sales staff currently operates without a sales manager. The two person staff
is
fully involved in selling the AgentView product line and also attempting to
transition some existing AgentView clients over to the more robust CenterStats
platform. Clearly, substantial resources are required to build a sales force
and
rollout the CenterStats product.
The
initial part of our strategic plan calls for assembling a direct sales team
to
focus on the U.S. market. The second part of the plan is to enhance our already
highly successful distribution capability by replicating current relationships
such as those we have with British Telcom, BellSouth and Rockwell with other
major contact center providers such as Verizon, Siemens and SBC.
To
execute the sales/distribution plan, we intend to initiate a professional search
for a Senior Sales V.P. with prior experience in building a sales force and
selling to high level corporate executives in Centergistic’s Fortune 1000/FTSE
500 market space. This Vice President will be tasked with building selected
geographic regions in the U.S. and staffing them. Each region will be comprised
of a sales team including a senior salesperson/supervisor, two other sales
people and one pre-sales engineer.
In
the
distribution segment of this plan, the newly hired Vice President of Sales
will
add resources with a distribution manager and a distribution account
representative to be placed in each regional sales office, with an additional
distribution account representative to be located in the U.K. A distribution
pre
sales engineer will also be hired to work directly with the distribution manager
to focus on key major accounts. The plan also calls for the addition of two
distribution sales representatives in the Latin America Division to serve the
growing markets in Brazil and Argentina.
Heretofore,
all marketing activities have revolved around the selling of the AgentView
system into the contact center industry. The new marketing plan addresses the
need to increase our sphere of influence in terms of reaching a new, more
sophisticated buyer, building brand awareness, creating a strong value
proposition and executing programs that will support a strong product launch
of
CenterStats. Additionally the plan allows for the packaging of the CenterStats
architecture for distribution in the U.S., in Latin America, through
Centergistic Latina America, in Europe through Dacon and British Telecom, and
in
other emerging markets such as India.
The
plan
will involve the expansion of some existing programs such as print advertising,
trade show participation and web-based promotion, along with the addition of
new
programs and promotions. Additional programs will be added in the areas of
marketing research and public relations activities. These programs must be
international in scope to ensure uniformity of the brand and value proposition,
along with closed loop coordination of efforts.
Successful
execution of this plan calls for the addition of two product specialists who
will focus exclusively on the CenterStats product line. These individuals will
be responsible for product positioning and promotional programs. They will
work
closely with the VP of Sales to ensure all efforts are coordinated and maximized
for hand off to sales and distribution channels. They will also be responsible
for gathering customer research and working with development to make sure
downstream enhancements and added interfaces are profitable to produce and
supported by client demand.
Sales
In
the
last three years, 75%-90% of AgentView sales have been made through a network
of
distributors who are major providers of telecommunications hardware, software,
and support services. In approximately 80% of the installations, the AgentView
system is delivered with the contact center hardware and software.
We
have
developed a strong platform for international sales of our products, especially
in Europe and Latin America. In Europe, we use our U.S.-based sales force to
develop close ties with our distributors who have established a significant
market presence for AgentView.
Our
largest re-seller, Dacon, who sells to British Telecom (BT), located in the
United Kingdom, accounts for over 2,000 existing AgentView installations. The
AgentView system is represented as a line item on the BT ordering sheet. When
a
real time system is needed AgentView is the default choice, in the form of
a
“checked box” on the order form. The solid relationship between Centergistic and
BT is further evidenced in the commitment to add CenterStats as a new “line
item” to their order sheet as BT’s recommended enterprise reporting dashboard
tool. Centergistic, in conjunction with our European distributor, has recently
qualified CenterStats at the BT labs in Burmingham, U.K.
The
following table lists our largest distributors and the revenue generated from
each over the past two fiscal years:
|
Distributor
|
|
FY2007
|
|
FY2006
|
|
|
Dacon
(British Telecom)
|
|
$
|
757,931
|
|
$
|
399,466
|
|
|
America
Latina Tecnologia
|
|
|
31,568
|
|
|
358,524
|
|
|
Alcatel
|
|
|
176
961
|
|
|
82,367
|
|
|
Avaya
de Mexico
|
|
|
98,762
|
|
|
255,222
|
|
|
Aspect
|
|
|
37,579
|
|
|
60,939
|
|
|
Siemens
de Mexico
|
|
|
156,758
|
|
|
91,714
|
|
|
Surtronics
|
|
|
268,262
|
|
|
0
|
|
In
addition to our existing distributors, we plan to generate additional revenue
through direct sales efforts. These efforts will include selling additional
locations and subsidiaries as well as additional data sources of existing
customers. We believe that successful implementation of this strategy will
not
only increase revenues but will also gain greater visibility of our products
and
provide a sort of “critical mass” that will facilitate transitioning to our new
CenterStats enterprise-wide system.
Over
the
past year, we have been steadily attracting the attention of a higher profile
client, as evidenced by our recent contracts with Anheuser Busch and American
Express. Both of these clients have a high degree of potential for sales of
additional locations and data sources. We have installed our software into
several locations of these two customers which, we believe, potentially may
become the corporate management performance reporting standard. We believe
that
if this occurs, it would generate significant revenue opportunities from all
the
company locations and related companies.
We
plan
to sell our new CenterStats product through three channels: approximately 40%
through our direct sales staff to end-users; approximately 40% through large
systems integrators (e.g. EDS, Perot Systems, Unisys, IBM Global Services,
Accenture) and about 20% through equipment distributors. As of the date of
this
filing, we have not entered into any agreement or had any discussions with
any
of the above-named or other large systems integrator.
The
European contact center market is projected to grow to $10 billion by 2005,
and
we believe we are well positioned to share in such growth. In Latin America,
we
have relied on our wholly owned subsidiary in Mexico City to build distributor
and end-user relationships. Latin American contact centers have been expanding
with the growth in regional telecommunications capacity, and we believe that
our
Mexico-based sales staff is making good progress outside Mexico, in large
markets like Brazil and Argentina.
Competition
AgentView
AgentView,
our primary software product for the past four years, currently is installed
in
over 3,500 contact centers worldwide. Competitors can be divided into the
following categories:
ACD
Low-End Embedded Software
:
The
largest number of these software products can be found embedded as a component
of the “reporting” module of the major ACD manufacturers. The ability to send
statistics from the ACD to a display, such as an LED wallboard, is now
considered a mandatory capability of today’s sophisticated ACDs. These products,
by design, lack sophistication and were created to provide rudimentary
statistical output from the ACD primarily for display to a supervisor screen
or
a 1-2 line LED wallboard. The ACD manufacturers have strategically opted to
offer more robust real time monitoring through partner relationships with third
party vendors, such as Centergistic. All of these installations present
excellent upgrade opportunities for our AgentView product.
Small
Low-End Software Providers
:
In
addition to the bundled ACD statistical packages, there currently exist over
40
small companies, ranging in annual revenues from $1 million to over $5 million,
providing low-end real time contact center statistical output. These niche
players often distribute their products through VARs (value added resellers)
and
distributors, or align their product with a particular CRM manufacturer, service
provider or within a vertical market. The average unit sale for these products
falls between $1,000-$3,000. While there are no published revenue numbers for
this highly fragmented sub-set of the industry, the overall size of this level
of the market has been estimated at $100-$150 million.
Higher
Level Software Providers
:
There
are approximately seven vendors who provide software with marked value added
features and functionality. Some of these vendors are themselves visual display
manufacturers (high definition screens, multiple line wallboards, gas plasma)
who have developed statistical software as a component to drive display sales.
This software requires a degree of sophistication to support some of the
graphics capabilities, but lacks the advanced thresholding and filtering
capability, not to mention the multi-source collection technology, of AgentView.
Contact centers with embedded ACD software or visual display driven software
continue to turn to Centergistic because they recognize the following
limitations:
1.
Not
as
flexible in collecting across multiple ACD brands;
2.
Lack
of
sophisticated threshold alerting and key performance indicator (KPI)
building;
3.
Unable
to
collect and combine metrics from other media such as e-mail, IVR,
Workforce
Management
systems, CRM systems, Web service, etc;
4.
Weak
capability to create “smart” metrics as combined performance
indicators;
and
5.
Lack
of
publishing options such as ability for metrics to be browser-viewed and
accessible via
wireless
devices.
A
few of
these vendors have more robust capabilities providing more sophisticated
threshold and KPI creation. They publish information to a variety of devices
and
claim to be able to collect and combine data from various systems. At this
level, our two primary competitors are Symon Corporation and Inova Corporation.
Both of these companies offer products with closed systems restrictions which
we
believe may be seen as limiting by companies in dynamic environments where
changes in software are routine.
CenterStats
We
are
not aware of any system that provides the breadth of data acquisition and
loading functionality and flexibility on a real time basis as CenterStats.
Given
the limited functionality and high cost of the competitive data systems, none
are viewed by us as direct competition from a user benefit
standpoint.
In
addition to having limited or constrained functionality or feature sets, some
of
the competing products are proprietary and, therefore, are unable to accept
data
from outside systems. For example, Avaya’s CenterVU Analyst is only effective in
a complete Avaya system. BI (Business Intelligence) competitors, MicroStrategy
and Cognos, have powerful data mining, cube analysis and ad hoc query
capability, but they lack the ability to capture perishable data, along with
the
filtering and alarms technology necessary to support real time reporting
applications. Furthermore, these companies are recognizing the growing
importance and purchasing clout of today’s mission critical contact centers. In
addition to our strong real time architecture, Centergistic has something else
that many of the BI giants lack--- a multi-faceted understanding of the
technology and telecommunications-based infrastructure that is unique to the
contact center.
Neither
MicroStrategy nor Cognos products are as cost effective as CenterStats. The
unique architecture of CenterStats is built around a combination of standard
components and core technologies. Open standards allow CenterStats to integrate
easily with input-end data sources and output-end interfaces.
Intellectual
Property
We
rely
primarily on a combination of copyright, trademark, trade secret and
confidential information laws and employee and third-party non-disclosure
agreements and other methods to establish and protect our proprietary rights.
There can be no assurance that these protections will be adequate to protect
against technologies that are substantially equivalent or superior to our
technologies. We currently have one patent application pending for
“
Method
and System for Managing Real Time Data”. This application is related to the
Provisional U.S. Patent Application entitled, “Information Management Systems”
No. 60/353,646 filing date January 31, 2002. There can be no assurance that
our
patent application will result in any patent being issued. If issued, any patent
claims allowed may not be sufficiently broad to protect our technology. In
addition, any patent may be challenged, invalidated or circumvented and any
right granted thereunder may not provide meaningful protection to
us.
The
following table sets forth a list of our trademarks, both registered and
unregistered, that are currently being used in the conduct of our
business.
|
Registered
Trademarks
|
|
Unregistered
Trademarks
|
|
Centergistic
Solutions
|
|
AgentView
Enterprise
|
|
CenterStats
|
|
AgentView
Enterprise EPM
|
|
AgentView
|
|
AgentView
Web
|
|
AgentLink
|
|
AgentView
WAP
|
|
|
|
PowerUser
|
|
|
|
Advanced
Threshold Handling
|
|
|
|
Performance
Indicator Builder
|
|
|
|
CenterStats
OmniCollector
|
We
have
not conducted an exhaustive search of possible prior users of the unregistered
trademarks listed above and, therefore, it is possible that our use of some
of
these trademarks may conflict with others.
We
enter
into non-disclosure and invention assignment agreements with certain of our
employees and enter into non-disclosure agreements with certain of our
consultants and subcontractors. However, there can be no assurance that such
measures will protect our proprietary technology, or that our competitors will
not develop software with features based upon, or otherwise similar to our
software or that we will be able to prevent competitors from developing similar
software.
Risk
Factors
Any
investment in our common stock involves a high degree of risk. Investors should
consider carefully the risks and uncertainties described below, and all other
information in this Form 10-KSB and in any reports we file with the S.E.C.
after
we file this Form 10-KSB, before deciding whether to purchase or hold our common
stock. Additional risks and uncertainties not currently known to us or that
we
currently deem immaterial may also become important factors that may harm our
business. The occurance of any of the following risks could harm our business.
The
trading price of our common stock could decline due to any of these risks and
uncertainties, and investors may lose part or all of their
investments.
We
have experienced losses in the past, anticipate losses for the foreseeable
future and may never achieve profitability.
We
generated net income of $335,452 for our fiscal year ended June 30, 2007, but
as
of such date our accumulated deficit was $2,732,902 and we have experienced
losses in recent past fiscal years. We expect that our operating expenses will
increase significantly as we continue to expand our business. As a result,
we
will need to generate significantly more revenues from sales of our new
CenterStats product to achieve profitability. We have a limited operating
history with our new CenterStats product and we are not able to estimate when,
if ever, our revenues will increase sufficiently to cover these expenses. We
cannot assure you that our revenue will grow in the future. If revenues grow
slower than we anticipate, or if operating expenses exceed our expectations
or
cannot be reduced accordingly, or if we cannot obtain additional capital, our
business, operating results and financial condition will be materially and
adversely affected, which could cause you to lose all or part of your investment
in our common stock.
We
have not generated any significant revenues from the sale of our new CenterStats
product and if we are unable to increase sales, our business, operating results
and financial condition will be materially adversely
affected.
We
began
marketing our CenterStats product in March 2002. Our marketing efforts to date
have been very limited because we lack sufficient capital to implement our
sales
and marketing strategy. Revenues for our fiscal year ended June 30, 2007 were
$3,087,144.
Our
future revenues will depend significantly on our ability to penetrate the
call/contact center or business intelligence software market space. We have
developed a sales and marketing strategy to achieve revenue growth, but we
need
additional capital to implement it. If we are not successful in selling our
products in our targeted market due to insufficient additional capital or other
factors including competitive pressures or technological advances by others,
our
business, operating results and financial condition will be materially and
adversely affected.
We
will need additional capital to implement our current business strategy, which
may not be available to us, and if we raise additional capital, it may dilute
your ownership in us.
We
believe that the proceeds of our anticipated capital raise or sale of the public
shell, together with cash generated from operations, will be sufficient to
meet
our anticipated needs for business expansion, capital expenditures, working
capital and general corporate purposes for the foreseeable future, but no less
than a period of 12 months after the date of this report. Thereafter, we may
need to raise additional funds.
If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of our shareholders will be reduced,
shareholders may experience additional dilution and such securities may have
rights, preferences and privileges senior to those of the Common Stock and
may
have covenants which impose restrictions on our operations. There can be no
assurance that any necessary additional financing will be available on terms
favorable to us or at all. If adequate funds are not available or are not
available on acceptable terms, we may not be able to fund our marketing needs
or
expansion, to take advantage of unanticipated acquisition opportunities, to
develop or enhance services or products or to respond to competitive pressures.
This inability could have a material adverse effect on our value, prospects,
business, results of operations and financial condition.
Our
quarterly operating results, revenues and expenses may fluctuate significantly
which could have an adverse effect on the market price of our common
stock.
Our
operating results, revenues and expenses may fluctuate significantly from
quarter to quarter due to a variety of factors including:
·
market
acceptance of our CenterStats product,
·
the
timing, size and execution of orders and shipments,
·
lengthy
and unpredictable sales cycles,
·
the
timing of introduction and market acceptance of new products or product
enhancements by us or our competitors,
·
product
and price competition,
·
the
relative proportions of revenues derived from license fees and services,
·
changes
in our operating expenses,
·
our
success in increasing our direct sales force,
·
our
success in maintaining relationships with our third-party distributors and
adding new ones, and
·
fluctuations
in general economic conditions.
We
believe that period-to period comparisons of our results of operations are
not a
good indication of future performance. There can be no assurance that future
revenues and results of operations will not vary substantially. It is also
possible that in future quarters, our operating results will be below the
expectations of public market analysts and investors. In that event, the trading
price of our common stock may fall.
The
loss of Dacon PLC as a customer would materially adversely affect our business,
operating results and financial condition.
We
sell a
substantial portion of our products to Dacon PLC, which is based in the United
Kingdom and has been a distributor of our products for the past 13 years. For
the fiscal years ended June 30, 2007 and 2006, Dacon accounted for 25% and
13%,
respectively, of total net revenues, and for 26% and 8% of total trade
receivables at June 30, 2007 and 2006, respectively. The loss of Dacon PLC
as a
customer would have a material adverse effect on our business, operating results
and financial condition.
We
face risks associated with operations in Mexico, Latin America and South America
which could adversely affect our business, operating results and financial
condition
.
We
derive
a substantial portion of our revenues from sales to customers in Mexico, Latin
America and South America. For the fiscal years ended June 30, 2007 and 2006,
these customers represented approximately 37% and 49%, respectively, of our
total net revenues.
We
face
certain risks inherent in conducting business internationally, and such specific
risks in Mexico, Latin America and South America as languages and cultural
differences, legal and governmental regulatory requirements and potential
political and economic unrest. Any of these factors could seriously harm our
ability to generate future revenues from these customers, and, consequently,
our
business, operating results and financial condition.
We
operate in a competitive business environment and if we cannot compete
effectively, we may face price reductions and decreased demand for our
products.
The
market for our products and services is intensely competitive and subject to
technological change. Competitors vary in size and in the scope and breadth
of
the products and services they offer. We encounter competition from a number
of
sources, all of which offer performance management reporting systems to the
call/contact center market. We expect additional competition from other
established and emerging companies as the market for performance management
reporting solutions and complementary products continues to develop and expand.
We encounter competition in the United States for our AgentView product from
a
number of sources, including Symon and Innova, all of which offer performance
management reporting systems to the call/contact center market. Some of our
current and many of our potential competitors have longer operating histories,
greater name recognition, larger client bases and significantly greater
financial, engineering, technical, marketing and other resources than we do.
As
a result, these companies may be able to respond more quickly to new or emerging
technologies and changes in customer demands or to devote greater resources
to
the development, promotion and sale of their products than we can.
In
addition, current potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
the
ability of their products to address the needs of our prospective customers.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and acquire significant market share. We expect that the call/contact
center market will continue to attract new competitors and new technologies,
possibly involving alternative technologies that are more sophisticated and
cost-effective than our technology. New product introductions by our competitors
could cause a decline in sales, a reduction in the sales price, or a loss of
market acceptance of our existing products. There can be no assurance that
we
will be able to compete successfully against current or future competitors
or
that competitive pressures faced by us will not materially adversely affect
our
business, financial condition and results of operations.
We
rely in part, on third-party distributors to market and distribute our products,
and their failure to do so successfully could significantly harm our ability
to
maintain and expand our customer base, which would adversely affect our
operating results and financial condition.
Our
sales
and marketing strategy includes channels of third party distributors. We have
developed a number of these relationships and intend to develop new ones. Our
inability to attract new distributors or their inability to penetrate their
respective market segments or the loss of any of our third-party distributors
as
a result of competitive products offered by other companies, or products similar
to ours that are developed internally by them or otherwise, could harm our
ability to maintain and expand our customer base. Our ability to achieve revenue
growth in the future will depend in part on our success in developing and
maintaining successful relationships with these third-party distributors. If
we
are unable to develop or maintain our relationships with these third-party
distributors, our operating results and financial condition will
suffer.
We
must increase our direct sales force to sell our products, and if we are unable
to hire and train new sales personnel, our future growth will be
impaired.
Our
direct sales force currently consists of three persons. Our sales and marketing
strategy includes increasing the level of direct sales. Our ability to achieve
revenue growth in the future will depend on our ability to recruit, train,
and
retain qualified direct sales personnel. If we are not able to obtain additional
capital, we will not be able to increase the size of our direct sales force.
Even if we are successful in obtaining additional capital, there is no assurance
that we will be successful in recruiting and retaining qualified sales
personnel. Our inability to increase the size and productivity of our direct
sales force could impair our growth and adversely affect our operating results
and financial condition.
If
we fail to keep pace with rapid technological changes in our industry, we could
lose existing customers and be unable to attract new
business.
Our
market is characterized by rapidly changing technologies, frequent new product
and service introductions and evolving industry standards. The introduction
of
products embodying new technologies and the emergence of new industry standards
can render our existing products obsolete and unmarketable in short periods
of
time. We expect new products and services, and enhancements to existing products
and services to continue to be developed and introduced by others, which will
compete with, and reduce the demand for, our products and services. Our future
success will depend, in part, on our ability to enhance the performance features
and reliability of our current products and introduce new products that keep
pace with technological developments and emerging industry standards and to
address the increasingly sophisticated needs of our customers. We may have
to
raise additional capital to successfully improve the features and reliability
of
our products and services. We may not be able to obtain the capital or obtain
it
on terms acceptable to us. There can be no assurance that we will be successful
in developing, marketing and selling new products or product enhancements that
meet these changing demands, that we will not experience difficulties that
could
delay or prevent the successful development, introduction and marketing of
these
products or that our new products and product enhancements will adequately
meet
the demands of the marketplace and achieve market acceptance.
We
may lose sales, or sales may be delayed, due to the long sales cycle for our
products, which would reduce our revenues.
Our
customers generally involve many people in the decision to purchase our products
and consulting and other services. As a result, we may wait many months before
a
sale can actually be completed. During this long sales cycle, events may occur
that affect the size or timing of the order or even cause it to be canceled.
For
example, our competitors may introduce new products, or the customer’s own
budget and purchasing priorities may change. If these events were to occur,
sales of our products may be cancelled or delayed, which would reduce our
revenues.
If
we do not retain our senior management and other key employees, we may not
be
able to successfully implement our business strategy.
Our
future success depends to a significant extent on the continued services of
our
senior management, particularly, Ricardo Brutocao, Chief Executive Officer,
and
David Cunningham, President, Chief Operating and Financial Officer, and other
key personnel, particularly, Rama Iyer, Vice President, Technology and Product
Management. The loss of the services of any of these persons could have a
material adverse effect on our business, results of operations and financial
condition. We have no employment agreement with Mr. Iyer. We do not maintain
“key person” life insurance for any of our personnel at this time but may decide
to in the future. Competition for qualified personnel in our industry is intense
and we compete for these personnel with other companies that have greater
financial and other resources than we do. Our future success will depend in
large part upon on our ability to attract, retain and motivate highly qualified
personnel, and there can be no assurance that we will be able to do so. If
we
have any difficulty in hiring needed qualified personnel, our business,
financial condition and results of operations could be materially adversely
affected.
Our
success depends on growth in the telecommunications industry.
While
the
Company as a whole is not dependent upon the telecommunications industry, our
AgentView legacy products are substantially positioned in the sector. Our
business would be adversely affected to the extent that the telecommunications
industry continues to contract through consolidation and advances in technology,
or does not achieve sustainable growth, particularly usage by companies who
use
multiple software applications. A number of factors may inhibit the
telecommunications industry’s growth, including:
·
financial
difficulties and bankruptcies of major providers such as Global Crossing and
Worldcom;
·
competitive
concerns centered around large-scale price cutting;
·
reluctance
of industry companies to place purchase orders for capital expenditures; and
·
lack
of
increasing customer demand for premium and high-speed services.
If
these
conditions continue to occur in the future, the telecommunications industry,
as
well as the purchase of our products by it, could grow more slowly or
decline.
Our
limited ability to protect our proprietary technology and other rights may
adversely affect our ability to compete.
We
rely
on a combination of trademarks, copyrights, trade secret laws and contractual
provisions to protect our intellectual rights. We also have a patent pending
for
an information management system. We cannot assure you that our patent
application will result in any patent being issued to us or, if issued, that
any
patent claims will be of sufficient scope or strength to provide any meaningful
protection or any competitive advantage to us. There can be no assurance that
these protections will be adequate to prevent our competitors from
misappropriating our technology, or that our competitors will not independently
develop technologies that are substantially equivalent or superior to our
technology. To protect our trade secrets and other proprietary information,
we
require employees, consultants and others to enter into confidentiality
agreements. We cannot assure you that these agreements will provide meaningful
protection for our trade secrets, know-how or other proprietary information
in
the event of any unauthorized use, misappropriation or disclosure of such trade
secrets, know-how or other proprietary information.
If
we are found to infringe the proprietary rights of others, we could be required
to redesign our products, pay royalties or enter into license agreements with
third parties.
Although
we have never been the subject of a material intellectual property dispute,
there can be no assurance that a third party will not assert that our technology
violates its intellectual property rights in the future. As the number of
software products in our target market increases and the functionality of these
products further overlap, we believe that software developers may become
increasingly subject to infringement claims. Any claims, whether with or without
merit, could:
·
be
expensive and time consuming to defend,
·
cause
us
to cease making, licensing or using products that incorporate the challenged
intellectual property,
·
require
us to redesign our products, if feasible,
·
divert
management’s attention and resources, and
·
require
us to enter into royalty or licensing agreements in order to obtain the right
to
use necessary technologies.
There
can
be no assurance that third parties will not assert infringement claims against
us in the future with respect to our current or future products or that any
such
assertion will not require us to enter into royalty arrangements (if available)
or litigation that could be costly to us.
A
large percentage of our stock is owned by relatively few people, including
officers and directors, and their interest may be different from and conflict
with yours.
As
of
June 30, 2007, our officers and directors beneficially owned a total of
8,474,686 shares (including shares issuable upon exercise of options, warrants
or convertible securities beneficially owned by them that are exercisable or
convertible within 60 days after June 30, 2007), or approximately 70% of our
outstanding common stock. If you purchase our common stock, you may be subject
to certain risks due to the concentrated ownership of our common stock. For
example, these stockholders, if acting together, would be able to influence
or
control matters requiring approval by our stockholders, including the election
of directors and the approval of mergers, acquisitions or other extraordinary
transactions. They may also have interests that differ from yours and may vote
in a way with which you disagree and which may be adverse to your interests.
The
concentration of ownership may have the effect of delaying, preventing or
deterring a change of control of our company, could deprive our stockholders
of
an opportunity to receive a premium for their common stock as part of a sale
of
our company and might ultimately affect the market price of our common
stock.
Future
sales of shares of our common stock which are eligible for sale by our
stockholders may decrease the price of our common stock.
We
had
10,724,312 shares of common stock outstanding on June 30, 2007. An additional
2,214,710 shares underlying options and warrants outstanding on June 30, 2007
will be restricted securities if and when they are issued. Restricted securities
may be sold only if they are registered under the Securities Act or if an
exemption from the registration requirements of the Securities Act is available.
Generally, stockholders may sell restricted securities without registration
after holding them for one year and subject to certain volume limitations.
Actual sales, or the prospect of sales by our present stockholders or by future
holders of restricted securities under Rule 144, or otherwise, may, in the
future, have a depressive effect on the market price of our common stock. A
decline in the price of shares of our common stock might impede our ability
to
raise capital through the issuance of additional shares of our common stock
or
other equity securities.
There
is a limited market for our common stock and we cannot assure you that a market
will be sustained.
Our
common stock has been trading in the over-the-counter market on the OTC
Electronic Bulletin Board. If an active trading market is not developed and
sustained, it may be difficult for you to sell your shares of common stock
at an
attractive price or at all. We cannot predict the prices at which our common
stock will trade. It is possible that in future quarters our operating results
may be below the expectations of public market analysts and investors and,
as a
result of these and other factors, the price of our common stock may
decline.
No
dividends anticipated to be paid.
We
have
never paid any cash dividends on our common stock and we do not anticipate
paying cash dividends on our common stock in the future. The future payment
of
dividends is directly dependent upon our future earnings, capital requirements,
financial requirements and other factors to be determined by our Board of
Directors. It is anticipated that future earnings, if any, which may be
generated from our operations will be used to finance our growth, and that
cash
dividends will not be paid to our stockholders.
We
are in default on a note payable.
We
are in
default under a note payable to a former employee in connection with a stock
repurchase agreement that requires monthly payments of $2,750. The current
balance of the note is $18,022 and our last payment on the note was made in
August 2004. The note is secured by substantially all of the Company’s
assets.
Special
Note Regarding Forward-Looking Statements
This
Report contains certain forward-looking statements that involve risks and
uncertainties. We use words such as “anticipate,” “believe”, “expect”, “future”,
“intend”, “plan”, and similar expressions to identify forward-looking
statements. These statements are only predictions. Although we believe that
the
expectations reflected in these forward-looking statements are reasonable,
we
cannot guarantee future results, levels of activity, performance or
achievements. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this Report. Our actual results
could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks faced by us and described
on
the preceding pages and elsewhere in this Report.
We
believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to predict
accurately or over which we have no control. The risk factors listed above,
as
well as any cautionary language in this Report, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we described in our forward-looking statements. Before
you
invest in our securities, you should be aware that the occurrence of the events
described in these risk factors and elsewhere in this Report could have a
material adverse effect on our business, operating results, financial condition
and stock price.