MCC Overviewx - Mobile Captions Company

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14 Δεκ 2013 (πριν από 3 χρόνια και 8 μήνες)

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Confiden
tial Summary

Version 1.0 7.5.11


1


Business Overview

Mobile Captions Company is a Delaware LLC. The name was changed from another “shell” March 31,
2009. The former company was founded April 7
th

2008.

The LLC has been funded by its founders and a
few “friends” of founders.

MCC takes captions, generated by a caption provider, Hamilton Relay and conveys them to a cell phone.
The users do not pay for the service.
See network diagram, Exhibit 1. Thus, MCC has operated with two
partnerships, one with the caption provider and
with a cell phone service provider, Consumer Cellular
who sells a Nokia phone that is specially set up with the MCS application.

The caption provider, who is also the certified relay provider, Hamilton Relay, bills the states for the use
of the service a
nd then pays MCC.
MCC is paid $.35 per conversation minute used by its customers who
do not pay for the subsidized service. MCC’s cost is estimated at less than $.05/minute

which is to be
paid (but has yet to be billed) to Consumer Cellular
. So the gro
ss margin is $.30/minute.

Total contributed capital is
$106,000 made up of units and notes. In addition, there is about $500,000 of
debt to founders (in the form of notes) for salary and expenses, and about $30,000 in debt to attorney’s
and contractors.
The company has less than $2K in cash, however, no debt is currently due. The
company’s cost of doing business is small: it operates its

server at a cost of $250/month.

About June 1,

2011,

MCC launched a
version

of its handset software that runs on Andr
oid, and does not
require a partnership with a network operator. However, Consumer Cellular is planning to launch an
Android phone, and MCC intends to work with CCI to provide the MCS on the CCI Android phone, which
will consist mostly of specialized prom
otion and customer support.

The Android application has greatly
expanded MCC’s potential market and has been a success so far.

Relationship with Hamilton Relay

T
he
following

are key dates and

agreements with

respect to

Hamilton Relay:

Agreement

Date

Exhib
it

Mutual NDA

11.24.09


Letter of Intent

4.7.10


Commercial Agreement

9.7.10


MCS launched in 5 states

11.1.10


Additional states added

11.10
-
4.11


Letter/notice of contractual problem
and pulling out of HLAA conference

6.13.11


Notice of
Termination

7.1.11



As of July 1, MCS is available in 11 states and D.C.


Confiden
tial Summary

Version 1.0 7.5.11


2


Regulatory Overview

The Americans with Disabilities Act set up a system for subsidies for Telecommunications Relay Services
(TRS). The TRS

fund was set up in 1993 to bring communications services to the hearing and speech
impaired, and is funded by the carriers and administered by the FCC. In 2008 there were 17 million
minutes of communications services per month used by an estimated 150,00
0 people and subsidized by
the TRS fund. The services are free to the hearing impaired persons, but the reimbursements make
relatively low volume services profitable
. The fund’s budget for 2009 was

$861 million up from $805
million in 2008. There are also state funds for the same purpose, with a total expenditure of about $1.3
billion.

Each state contracts with (usually one) TRS provider to provide the range of TRS services within its state.
Hamilt
on Relay is one such provider, and they have contracts with 18 states and U.S. territories. In
addition, the FCC
directly funds certain services; in fact the bulk of the funding is distributed on a
national, not state basis.

The major play in the industry

is Sprint Relay which has about 30 states. AT&T
Relay has 3 states.

Technology Overview

MCC has a server on the network and an application on the handset. Together the set up calls and
convey text of the conversation to the user. The phone has a two wa
y open voice channel (both parties
can hear each other) and the app on the phone displays text to the user who is hard of hearing. The text
(captions) are generated by a third party, Hamilton Relay.


Various Issues

and rebuttals

1.

The assertion in the Term
ination Letter that the trial has not succeeded.

a.

There is no trial

launch
. The service was fully launched in November. Hamilton Relay
put out numerous press releases
, articles in their newsletter and other
representations
,
especially to the states

to that

effect.


See Attachments

b.

Trials and field tests were conducted leading up to the launch

with lots of
documentation
.

2.

The assertion that we have not achieved sufficient volume.

a.

Dixie Zeigler, Hamilton VP stated in February that even though we were behind
our
projections, we were in fact where she thought we would be volume wise.

b.

There are no volume requirements in the contract

c.

Hamilton has primary responsibility for promoting the service, but has consiste
ntly held
back,

in favor of CapTel.

d.

The business is
experiencing fast month over month growth.

Although

the numbers are
small, (MCC June
revenue was $1,300 and gross margin about $1,000) growth is
averaging 55% month over month.

Hamilton’s revenue in June is about $10,000.

NOBODY shuts down a business that

looks like this

where the incremental cost is low or
zero and the investment has been made
:

Confiden
tial Summary

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3.

Evidence that it is really about Hamilton being pushed by Ultratec/CapTel who is doing so and
interfering with our business.

a.

Hamilton has been touchy from the beginning about UT.

See email re: AARP, etc.

b.

The LOI contained a paragraph which said that we would use CapTel as a back end.

c.

There have been numerous discussions about how important UT is to them and that
they were the fi
rst priority.

d.

The letter of 6.13.11 stated that a possible
solution

to the “contractual issue” was that
we introduce a CapTel product.

i.

Dixie Ziegler stated, in a subsequent
conversation

that the real issue was that
Sprint was taking heat in New Jersey and
had spread rumors/raised questions


not in writing or in direct
conversation
. The nature of the so
-
called
questions
,
and the nature of the so
-
called contractual issues was never revealed to us.
What was
revealed

was

that this was being presented by UT (wh
o also does
business with Sprint) and unnamed “others.”

ii.


(It is possible that Sprint Relay put pressure on UT to use their clout with
Hamilton to Terminate our agreement).

e.

A few weeks ago, Sue encountered the UT people at the HLAA show and seemed to
know
what was going on, making condescending, snide remarks.

f.

The Termination letter cited interference with their Mobile CapTel product as “very
concerning”


4.

The Android application should not be an issue.

a.

They have known we were contemplating an Android app fr
om the beginning.

b.

It has the same functionality as the Symbian app.

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tial Summary

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c.

Even their letter says they received no “formal” notice; admitting that they did receive
informal notice months ago.

d.

In any case, this
should

be handled by a notice
under

the contract.

e.

As
a note, they did not specify what interference they were talking about, but one
possible item (an MCS notice on an incoming call that could not be turned off) has been
fixed.