We are a developmentstage technology company focused on providing service assurance systems products and services for the network operators in the telecommunications industry. Our target customers are telecom operators and cable operators worldwide. We focus specifically on voice services over traditional circuitswitched and managed IP networks.
Through our whollyowned subsidiary, QoVox Corporation, we design, develop and sell an active voice quality test system, capable of monitoring and providing analytical/statistical data that characterizes the connectivity and measurement of voice quality across communications networks. We are working on tools and techniques for networkwide fault identification, isolation and troubleshooting.
Communication service providers, such as telecom operators and cable operators, are challenged to deliver highquality voice services, at the lowest cost, over managed IP infrastructures and interworking with traditional circuitswitched networks. To do this effectively, service providers must monitor and measure their voice service offering, proactively detecting problems and resolving them quickly and costeffectively, ideally before their customers experience any problem or service degradation. Additionally, if customers do report service problems, operators must be able to effectively identify the cause and fix the problem. QoVox provides the systems (products) and services to address these challenges.
Datameg Corporation is a Delaware corporation that is a successor by merger as of April 27, 2005 to Datameg Corporation, which was a New York corporation incorporated in October 1982 as The Viola Group, Inc. In August 2000 the Company exchanged 90% of its common stock for 100% of the stock of Datameg Corporation, a Virginia corporation that was incorporated in January 1999. The Company subsequently changed its name to Datameg Corporation and is the successor in business operations of the Virginia Datameg and New York Datameg.
On April 27, 2005, we entered into an Agreement and Plan of Merger with Datameg Corp. NY setting forth the terms of our reincorporation from New York to Delaware. As part of the reincorporation the Company increased its authorized number of shares to 503,000,000, of which 10,000,000 are preferred shares and 493,000,000 are common stock. The Company also changed its par value from $0.01 to $0.0001 per share.
On July 1, 2005, our wholly owned subsidiary, QoVox Corporation, filed Articles of Amendment to its Articles of Incorporation, changing its corporate name from North Electric Company, Inc. to QoVox Corporation. The new corporate name better reflects QoVoxs core business of helping service providers assure the quality of Voice over Internet Protocol (VoIP) and other next generation IPbased services.
Datameg Corporation has two subsidiaries: CASCommunications, Inc., a Florida corporation, of which the Company owns 40%, and QoVox Corporation, a North Carolina corporation that the Company wholly owns. QoVox was known as North Electric Company, Inc. until July 1, 2005, when North Electric Company filed an Amendment to its Articles of Incorporation with the North Carolina Secretary of State to change its corporate name. Datameg and its subsidiaries individually and collectively are a development stage enterprise. CASCommunications is an inactive company. Datameg does not expect CASCommunications to generate any revenue in 2006.
The Company operates under the name of Datameg Corporation and trades under the symbol DTMG on the OTCBB. The Companys sole active subsidiary is QoVox Corporation, which the Company wholly owns.
QoVox focuses on becoming a provider of network assurance products and services. QoVoxs network assurance products are designed to enable communications network operators and service providers to quickly and automatically determine if their network is meeting its quality and service expectations, while lowering network operating costs. QoVox has developed their Network Assurance System that covers the existing traditional telephone networks, networks that use the same communication technology as the Internet, and converged networks comprised of both of these network types.
As of March 31, 2006, we had a total of three (3) fulltime employees and twelve (12) full or part time independent contractors or consultants. Of these, one (1) employee and one (1) fulltime contractor focus primarily on inventory management, product assembly, installation and support and maintenance, seven (7) fulltime contractors focus on continued product enhancements, three (3) full or part time contractors focus on sales and marketing and one (1) fulltime employee serves in administrative and senior management capacities at our subsidiary QoVox, Inc. The balance is comprised of one fulltime employee, our CEO, and one fulltime consultant who provides financial and accounting management services.
Recent Developments
On September 21, 2005, Neil Gordon joined our Board of Directors and was also appointed to serve on our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.
On October 7, 2005, QoVox signed a lease agreement with L.E.D. Investments, an Ohio partnership, for approximately 1,200 square feet of office space in Delaware, Ohio. The term of the lease is for 12 months beginning November 1, 2005 and ending on October 31, 2006. The terms of the lease call for monthly payments of $900. The lease was terminated March 31, 2006 without penalty.
On October 4, 2005, the Securities and Exchange Commission declared effective our Registration Statement on Form SB2 under which we registered 61,416,440 shares of our common stock for resale by 162 of our stockholders. We will not receive any proceeds from the sale of those shares.
On November 10, 2005, we filed PostEffective Amendment No. 1 to our Registration Statement on Form SB2, under which we registered an additional 7,185,000 shares for 22 additional selling shareholders. The Registration Statement, as amended, now registers a total of 68,601,441 shares offered for resale by 177 selling shareholders.
On December 29, 2005 Mark McGrath resigned as Chairman of the Board, Chief Executive Officer and President of the Company, but retained a position as a member of the Board of Directors.
On December 12, 2005 William Mortimer resigned as General Manager of QoVox, the subsidiary of Datameg Corporation, effective on Friday, December 30, 2005. On December 29, 2005, the Board accepted the resignation of Bill Mortimer as Director.
On December 29, 2005, James Murphy was appointed Chairman of the Board of Directors, Chief Executive Officer and President of the Company. Mr. Murphys compensation consists of: an annual salary of $150,000; stock options to purchase 2,500,000 shares of common stock of the Company at $.10 per share, subjecting to vesting as approved by the Board of Directors; standard Company benefits; and an annual discretionary bonus up to 75% of annual salary depending on his contribution to the Company and the Companys commercial success, as determined by the Board of Directors.
On February 16, 2006 the Company announced that it has appointed Lehman Bros. Managing Director John T. Grady Jr. to its Board of Directors.
Feb. 27, 2006 the Company announced that it has appointed Bob Nelson as Vice President, Worldwide Sales, for its QoVox subsidiary. Reporting to Jim Murphy, Chairman of Datameg, Nelson will be responsible for sales and marketing of QoVoxs VoIP quality assurance technology suite to telecommunications service providers and enterprise customers.
On March 14, 2006 the Company announced that it has strengthened its sales team with the appointment of Michael West as Senior Vice President, National Accounts, for its QoVox subsidiary.
Products in Development
Our product and product in development is the Network Assurance System.
Network Assurance System
Since the middle of 2002, our primary development focus has been on the Network Assurance System. We are designing this product to ensure the integrity and full functionality of communications networks and to quickly and automatically determine if the networks are meeting the quality and service expectations of customers. We believe that this product will enable communications network operators and service providers to quickly, efficiently and automatically determine if their networks are meeting their quality and service expectations through active testing and monitoring, automatic detection and location of errors and confirmation that any corrective actions have been successful. We are accepting customer orders that can be delivered 30 days after the order is received.
Description of Primary Industry
Public and private telephone networks are evolving from traditional telephone networks to an internetbased network infrastructure that makes more efficient use of network resources. Various new technologies are enhancing internetbased networks to provide new carrier class services while lowering capital and operating costs. These rapidly changing technological developments, coupled with increased bandwidth availability, have enabled the launch of a new generation of network services, such as internetbased telephony that permits the transfer of voice data over the internet and secure private networks for the exchange of sensitive data.
Communication service providers, such as telecom operators and cable operators, are challenged to deliver highquality voice services, at the lowest cost, over managed IP infrastructures interworking with traditional circuitswitched networks. To do this effectively, service providers must monitor and measure their voice service offering, proactively detect problems and resolve them quickly and costeffectively, ideally before their customers experience any problem or service degradation. Additionally, when customers do report service problems, operators must be able to effectively identify the cause and fix the problem. QoVox provides the systems (products) and services to address these challenges.
The next generation of networks, such as internetbased telephony, is introducing new capabilities and opportunities for the sale of new products and services. However, for network operators and service providers, the implementation of new network technologies introduces a new set of operational challenges. Many of these challenges arise from the integration of innovative communications systems technologies with existing operational infrastructure. Service providers and enterprise network operators must verify that the new technologies have been installed and are working properly within the framework of their existing network. This verification process and actions to correct detected errors can be very labor intensive and may negatively affect customers by lowering the level of quality below the service level guaranteed to customers. This network assurance market segment is the focus and target of our current and future technologies that will assist our customers in satisfying their obligations to customers with respect to agreedupon levels of service quality.
Integrated and automated network monitoring, testing and automatic detection and location of errors are essential to reliable communications on which enterprise customers depend for missioncritical business communications. Our research and development is dedicated towards products and services which will solve the challenging aspects of deploying new technologies into the advanced networks and network services of the future, and monitoring and testing those technologies.
Competition
Competition in the current communications industry is very robust, with many companies from many different backgrounds wrestling for their piece of the business.
Investors can best understand our competitive environment by considering several axes that characterize the operational support system and service assurance market:
ENTERPRISE VS. CARRIER
Different companies dominate either the market for services to enterprise or large business customers or the market for services to the public network operators or carriers. We target the carrier market segment, but focus on new technologies and service types which are typically first implemented and proven in the enterprise arena. Therefore, we anticipate that competitive threats will come both from carrier service assurance companies seeking to expand their established business and from enterprise service assurance companies seeking to take their expertise from the enterprise into the carrier domain.
DATACOM VS. TELECOM
Different companies dominate the telecom, or telephone networking sector of the communications networking business, and the datacom, or data/computer networking sector. Our target market is at the convergence of telecom and datacom in the networking world. Therefore, we expect firms specializing in the data/computer networking sector will seek to expand their market by adding telephone communications functionality to their products in the carrier network infrastructure areas. Similarly, we expect telecom infrastructure service assurance companies will try to expand into the data communications areas.
TEST EQUIPMENT VS. NETWORK MANAGEMENT SYSTEMS
The market for operational support systems is generally divided between the test equipment vendors, who make specialized equipment designed to test particular functions in a piece of networking equipment, and the network management system vendors, who make systems that provide integrative overviews of the network status. We are developing a system that will enable automation of test equipment deployed around a network. With this system in place, a network operator in a single location will have the ability to assess the networks quality of service and to identify and locate errors. This puts us in the path of potential expansion from both the established test equipment vendors seeking to expand their product line into systemslevel products, and the network management system vendors seeking to broaden their integrated control of the network to include the network test functions previously provided by test equipment vendors.
Our current strategy for competing in this complex environment is to:
remain focused on the network assurance market by ramping up our sales marketing efforts;
continue onsite product testing at strategic telecommunication service providers;
launch product development to maintain a competitive lead; and
continue to establish alliances with selected manufacturers and service providers and implement international distribution agreements to help us gain rapid market acceptance on an international scale.
Intellectual Property
Our intellectual property is in our software products and hardware configurations, which are principally protected by copyright and trade secret law. We are exploring additional protections through potential patents.
Research and Development
QoVox is now the only operating unit that is performing research and development and through which we conduct most of our business. For the years ended December 31, 2004 and 2005, our research and development expenses were approximately $1,492,000 and $947,187, respectively.
Business Overview of CASCommunications
CASCommunications, Inc., a Florida corporation in which we hold a 40% equity interest, halted development of its devices related to highspeed broadband access in 2004 due to a lack of sufficient capital. CASCommunications is inactive and we do not expect that CASCommunications will generate any revenue in 2006.
For the years ended December 31, 2004 and 2005, research and development expenses related to the development of CASCommunications technology were approximately $0 (zero) and $0 (zero), respectively.
Through our whollyowned subsidiary, QoVox Corporation, we design, develop and sell an active voice quality test system, capable of monitoring and providing analytical/statistical data that characterizes the connectivity and measurement of voice quality across communications networks. We are working on tools and techniques for networkwide fault identification, isolation and troubleshooting.
Communication service providers, such as telecom operators and cable operators, are challenged to deliver highquality voice services, at the lowest cost, over managed IP infrastructures and interworking with traditional circuitswitched networks. To do this effectively, service providers must monitor and measure their voice service offering, proactively detecting problems and resolving them quickly and costeffectively, ideally before their customers experience any problem or service degradation. Additionally, if customers do report service problems, operators must be able to effectively identify the cause and fix the problem. QoVox provides the systems (products) and services to address these challenges.
Datameg Corporation is a Delaware corporation that is a successor by merger as of April 27, 2005 to Datameg Corporation, which was a New York corporation incorporated in October 1982 as The Viola Group, Inc. In August 2000 the Company exchanged 90% of its common stock for 100% of the stock of Datameg Corporation, a Virginia corporation that was incorporated in January 1999. The Company subsequently changed its name to Datameg Corporation and is the successor in business operations of the Virginia Datameg and New York Datameg.
On April 27, 2005, we entered into an Agreement and Plan of Merger with Datameg Corp. NY setting forth the terms of our reincorporation from New York to Delaware. As part of the reincorporation the Company increased its authorized number of shares to 503,000,000, of which 10,000,000 are preferred shares and 493,000,000 are common stock. The Company also changed its par value from $0.01 to $0.0001 per share.
On July 1, 2005, our wholly owned subsidiary, QoVox Corporation, filed Articles of Amendment to its Articles of Incorporation, changing its corporate name from North Electric Company, Inc. to QoVox Corporation. The new corporate name better reflects QoVoxs core business of helping service providers assure the quality of Voice over Internet Protocol (VoIP) and other next generation IPbased services.
Datameg Corporation has two subsidiaries: CASCommunications, Inc., a Florida corporation, of which the Company owns 40%, and QoVox Corporation, a North Carolina corporation that the Company wholly owns. QoVox was known as North Electric Company, Inc. until July 1, 2005, when North Electric Company filed an Amendment to its Articles of Incorporation with the North Carolina Secretary of State to change its corporate name. Datameg and its subsidiaries individually and collectively are a development stage enterprise. CASCommunications is an inactive company. Datameg does not expect CASCommunications to generate any revenue in 2006.
The Company operates under the name of Datameg Corporation and trades under the symbol DTMG on the OTCBB. The Companys sole active subsidiary is QoVox Corporation, which the Company wholly owns.
QoVox focuses on becoming a provider of network assurance products and services. QoVoxs network assurance products are designed to enable communications network operators and service providers to quickly and automatically determine if their network is meeting its quality and service expectations, while lowering network operating costs. QoVox has developed their Network Assurance System that covers the existing traditional telephone networks, networks that use the same communication technology as the Internet, and converged networks comprised of both of these network types.
As of March 31, 2006, we had a total of three (3) fulltime employees and twelve (12) full or part time independent contractors or consultants. Of these, one (1) employee and one (1) fulltime contractor focus primarily on inventory management, product assembly, installation and support and maintenance, seven (7) fulltime contractors focus on continued product enhancements, three (3) full or part time contractors focus on sales and marketing and one (1) fulltime employee serves in administrative and senior management capacities at our subsidiary QoVox, Inc. The balance is comprised of one fulltime employee, our CEO, and one fulltime consultant who provides financial and accounting management services.
Recent Developments
On September 21, 2005, Neil Gordon joined our Board of Directors and was also appointed to serve on our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.
On October 7, 2005, QoVox signed a lease agreement with L.E.D. Investments, an Ohio partnership, for approximately 1,200 square feet of office space in Delaware, Ohio. The term of the lease is for 12 months beginning November 1, 2005 and ending on October 31, 2006. The terms of the lease call for monthly payments of $900. The lease was terminated March 31, 2006 without penalty.
On October 4, 2005, the Securities and Exchange Commission declared effective our Registration Statement on Form SB2 under which we registered 61,416,440 shares of our common stock for resale by 162 of our stockholders. We will not receive any proceeds from the sale of those shares.
On November 10, 2005, we filed PostEffective Amendment No. 1 to our Registration Statement on Form SB2, under which we registered an additional 7,185,000 shares for 22 additional selling shareholders. The Registration Statement, as amended, now registers a total of 68,601,441 shares offered for resale by 177 selling shareholders.
On December 29, 2005 Mark McGrath resigned as Chairman of the Board, Chief Executive Officer and President of the Company, but retained a position as a member of the Board of Directors.
On December 12, 2005 William Mortimer resigned as General Manager of QoVox, the subsidiary of Datameg Corporation, effective on Friday, December 30, 2005. On December 29, 2005, the Board accepted the resignation of Bill Mortimer as Director.
On December 29, 2005, James Murphy was appointed Chairman of the Board of Directors, Chief Executive Officer and President of the Company. Mr. Murphys compensation consists of: an annual salary of $150,000; stock options to purchase 2,500,000 shares of common stock of the Company at $.10 per share, subjecting to vesting as approved by the Board of Directors; standard Company benefits; and an annual discretionary bonus up to 75% of annual salary depending on his contribution to the Company and the Companys commercial success, as determined by the Board of Directors.
On February 16, 2006 the Company announced that it has appointed Lehman Bros. Managing Director John T. Grady Jr. to its Board of Directors.
Feb. 27, 2006 the Company announced that it has appointed Bob Nelson as Vice President, Worldwide Sales, for its QoVox subsidiary. Reporting to Jim Murphy, Chairman of Datameg, Nelson will be responsible for sales and marketing of QoVoxs VoIP quality assurance technology suite to telecommunications service providers and enterprise customers.
On March 14, 2006 the Company announced that it has strengthened its sales team with the appointment of Michael West as Senior Vice President, National Accounts, for its QoVox subsidiary.
Products in Development
Our product and product in development is the Network Assurance System.
Network Assurance System
Since the middle of 2002, our primary development focus has been on the Network Assurance System. We are designing this product to ensure the integrity and full functionality of communications networks and to quickly and automatically determine if the networks are meeting the quality and service expectations of customers. We believe that this product will enable communications network operators and service providers to quickly, efficiently and automatically determine if their networks are meeting their quality and service expectations through active testing and monitoring, automatic detection and location of errors and confirmation that any corrective actions have been successful. We are accepting customer orders that can be delivered 30 days after the order is received.
Description of Primary Industry
Public and private telephone networks are evolving from traditional telephone networks to an internetbased network infrastructure that makes more efficient use of network resources. Various new technologies are enhancing internetbased networks to provide new carrier class services while lowering capital and operating costs. These rapidly changing technological developments, coupled with increased bandwidth availability, have enabled the launch of a new generation of network services, such as internetbased telephony that permits the transfer of voice data over the internet and secure private networks for the exchange of sensitive data.
Communication service providers, such as telecom operators and cable operators, are challenged to deliver highquality voice services, at the lowest cost, over managed IP infrastructures interworking with traditional circuitswitched networks. To do this effectively, service providers must monitor and measure their voice service offering, proactively detect problems and resolve them quickly and costeffectively, ideally before their customers experience any problem or service degradation. Additionally, when customers do report service problems, operators must be able to effectively identify the cause and fix the problem. QoVox provides the systems (products) and services to address these challenges.
The next generation of networks, such as internetbased telephony, is introducing new capabilities and opportunities for the sale of new products and services. However, for network operators and service providers, the implementation of new network technologies introduces a new set of operational challenges. Many of these challenges arise from the integration of innovative communications systems technologies with existing operational infrastructure. Service providers and enterprise network operators must verify that the new technologies have been installed and are working properly within the framework of their existing network. This verification process and actions to correct detected errors can be very labor intensive and may negatively affect customers by lowering the level of quality below the service level guaranteed to customers. This network assurance market segment is the focus and target of our current and future technologies that will assist our customers in satisfying their obligations to customers with respect to agreedupon levels of service quality.
Integrated and automated network monitoring, testing and automatic detection and location of errors are essential to reliable communications on which enterprise customers depend for missioncritical business communications. Our research and development is dedicated towards products and services which will solve the challenging aspects of deploying new technologies into the advanced networks and network services of the future, and monitoring and testing those technologies.
Competition
Competition in the current communications industry is very robust, with many companies from many different backgrounds wrestling for their piece of the business.
Investors can best understand our competitive environment by considering several axes that characterize the operational support system and service assurance market:
ENTERPRISE VS. CARRIER
Different companies dominate either the market for services to enterprise or large business customers or the market for services to the public network operators or carriers. We target the carrier market segment, but focus on new technologies and service types which are typically first implemented and proven in the enterprise arena. Therefore, we anticipate that competitive threats will come both from carrier service assurance companies seeking to expand their established business and from enterprise service assurance companies seeking to take their expertise from the enterprise into the carrier domain.
DATACOM VS. TELECOM
Different companies dominate the telecom, or telephone networking sector of the communications networking business, and the datacom, or data/computer networking sector. Our target market is at the convergence of telecom and datacom in the networking world. Therefore, we expect firms specializing in the data/computer networking sector will seek to expand their market by adding telephone communications functionality to their products in the carrier network infrastructure areas. Similarly, we expect telecom infrastructure service assurance companies will try to expand into the data communications areas.
TEST EQUIPMENT VS. NETWORK MANAGEMENT SYSTEMS
The market for operational support systems is generally divided between the test equipment vendors, who make specialized equipment designed to test particular functions in a piece of networking equipment, and the network management system vendors, who make systems that provide integrative overviews of the network status. We are developing a system that will enable automation of test equipment deployed around a network. With this system in place, a network operator in a single location will have the ability to assess the networks quality of service and to identify and locate errors. This puts us in the path of potential expansion from both the established test equipment vendors seeking to expand their product line into systemslevel products, and the network management system vendors seeking to broaden their integrated control of the network to include the network test functions previously provided by test equipment vendors.
Our current strategy for competing in this complex environment is to:
remain focused on the network assurance market by ramping up our sales marketing efforts;
continue onsite product testing at strategic telecommunication service providers;
launch product development to maintain a competitive lead; and
continue to establish alliances with selected manufacturers and service providers and implement international distribution agreements to help us gain rapid market acceptance on an international scale.
Intellectual Property
Our intellectual property is in our software products and hardware configurations, which are principally protected by copyright and trade secret law. We are exploring additional protections through potential patents.
Research and Development
QoVox is now the only operating unit that is performing research and development and through which we conduct most of our business. For the years ended December 31, 2004 and 2005, our research and development expenses were approximately $1,492,000 and $947,187, respectively.
Business Overview of CASCommunications
CASCommunications, Inc., a Florida corporation in which we hold a 40% equity interest, halted development of its devices related to highspeed broadband access in 2004 due to a lack of sufficient capital. CASCommunications is inactive and we do not expect that CASCommunications will generate any revenue in 2006.
For the years ended December 31, 2004 and 2005, research and development expenses related to the development of CASCommunications technology were approximately $0 (zero) and $0 (zero), respectively.
