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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NUMBER: 000-29678

SCC COMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 84-0796285
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)

6285 LOOKOUT ROAD 80301
BOULDER, COLORADO
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (303) 581-5600

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

As of July 31, 1999, there were 11,050,235 shares of the Registrant's Common
Stock outstanding.

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INDEX

PART 1 - FINANCIAL INFORMATION

Item 1 - Financial Statements

Balance Sheets as of June 30, 1999 (Unaudited) and December 31, 1998

Statements of Operations for the three-months ended June 30, 1999 and
1998 and the six-months ended June 30, 1999 and 1998 (Unaudited)

Statements of Cash Flows for the six-months ended June 30, 1999 and 1998
(Unaudited)

Notes to Financial Statements (Unaudited)

Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

Item 2 - Changes in Securities and Use of Proceeds

Item 3 - Defaults on Senior Securities

Item 4 - Submission of Matters to a Vote of Security Holders

Item 5 - Other Information

Item 6 - Exhibits and Reports on Form 8-K

Signatures

SCC COMMUNICATIONS CORP.

BALANCE SHEETS
(dollars in thousands)

June 30, December 31,
1999 1998
------------- ------------
(Unaudited)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................. $ 3,839 $ 10,266
Short-term investments.................................................... 14,251 7,761
Accounts receivable, net of allowance for doubtful accounts of
approximately $100 and $50 in 1999 and 1998, respectively................ 2,860 4,820
Unbilled project revenue.................................................. 1,046 1,035
Prepaids and other........................................................ 820 484
Deferred income taxes -- current portion.................................. 2,108 2,025
-------- --------
Total current assets..................................................... 24,924 26,391
-------- --------

PROPERTY AND EQUIPMENT, at cost:
Computer hardware and equipment........................................... 24,735 23,687
Furniture and fixtures.................................................... 866 800
Leasehold improvements.................................................... 905 920
-------- --------
26,506 25,407
Less -- Accumulated depreciation.......................................... (13,350) (11,056)
-------- --------
Total property and equipment............................................. 13,156 14,351
-------- --------

OTHER ASSETS............................................................... 98 112
LONG-TERM INVESTMENTS...................................................... 1,002 2,054
DEFERRED INCOME TAXES -- NONCURRENT........................................ 1,851 1,504

SOFTWARE DEVELOPMENT COSTS, net of accumulated amortization of $460 and
$346 in 1999 and 1998, respectively...................................... 897 683
-------- --------
$ 41,928 $ 45,095
======== ========

The accompanying notes to financial statements are an integral part of these
balance sheets.

SCC COMMUNICATIONS CORP.

BALANCE SHEETS
(dollars in thousands)

June 30, December 31,
1999 1998
------------- ------------
(Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................................................... $ 529 $ 1,211
Payroll-related accruals............................................................. 729 734
Other accrued liabilities............................................................ 1,547 2,546
Property and other tax liabilities................................................... 764 696
Current portion of capital lease obligations......................................... 1,788 1,618
Deferred contract revenue............................................................ 794 1,908
-------- -------
Total current liabilities.................................................... 6,151 8,713

LONG-TERM DEBT:
Capital lease obligations, net of current portion.................................... 2,521 2,791
-------- -------
Total liabilities............................................................ 8,672 11,504
-------- -------

STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; 15,000,000 shares authorized; none issued or
outstanding........................................................................ -- --
Common stock, $.001 par value; 30,000,000 shares authorized; 11,050,235 and
10,886,353 shares issued in 1999 and 1998, respectively............................ 11 10

Additional paid-in capital........................................................... 43,662 43,320
Stock subscriptions receivable....................................................... (37) (59)
Accumulated deficit.................................................................. (10,380) (9,680)
-------- -------
Total stockholders' equity................................................... 33,256 33,591
-------- -------
$ 41,928 $45,095
======== =======

The accompanying notes to financial statements are an integral part of these
balance sheets.

SCC COMMUNICATIONS CORP.

STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Unaudited

Three Months Ended June 30, Six Months Ended June 30,
----------------------------- --------------------------
1999 1998 1999 1998
-------------- ------------- ------------- -----------

REVENUE:
Data management services.............................................. $ 8,068 $ 7,947 $ 15,548 $ 15,481
Licenses and implementation services.................................. 121 1,409 257 1,778
----------- ---------- ----------- ----------
Total revenue.................................................. 8,189 9,356 15,805 17,259
COSTS AND EXPENSES:
Cost of data management services...................................... 6,176 5,220 11,847 10,039
Cost of licenses and implementation services.......................... 47 542 100 674
Sales and marketing................................................... 1,421 1,192 2,701 2,036
General and administrative............................................ 1,183 1,184 2,561 2,330
----------- ---------- ----------- ----------
Total costs and expenses....................................... 8,827 8,138 17,209 15,079
----------- ---------- ----------- ----------
INCOME (LOSS) FROM OPERATIONS........................................... (638) 1,218 (1,404) 2,180
OTHER INCOME (EXPENSE):
Interest and other income............................................. 262 34 535 64
Interest and other expense............................................ (146) (316) (261) (646)
----------- ---------- ----------- ----------
INCOME (LOSS) BEFORE INCOME TAXES....................................... (522) 936 (1,130) 1,598
PROVISION (BENEFIT) FOR INCOME TAXES.................................... (188) 65 (430) 112
----------- ---------- ----------- ----------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM............................. (334) 871 (700) 1,486
LOSS FROM EARLY EXTINGUISHMENT OF DEBT.................................. -- (1,442) -- (1,442)
----------- ---------- ----------- ----------
NET INCOME (LOSS)....................................................... $ (334) $ (571) $ (700) $ 44
=========== ========== =========== ==========
Dividends accrued on Series D, E and F
mandatorily redeemable convertible preferred stock.................... -- (171) -- (355)
Common stock warrant put price adjustment............................... -- (28) -- (77)
----------- ---------- ----------- ----------
NET LOSS APPLICABLE TO COMMON STOCK..................................... $ (334) $ (770) $ (700) $ (388)
=========== ========== =========== ==========
NET INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM (Note 2):
Basic................................................................. $ (0.03) $ 0.25 $ (0.06) $ 0.46
=========== ========== =========== ==========
Diluted............................................................... $ (0.03) $ 0.09 $ (0.06) $ 0.16
=========== ========== =========== ==========
NET INCOME (LOSS) PER SHARE (Note 2):
Basic................................................................. $ (0.03) $ (0.29) $ (0.06) $ (0.17)
=========== ========== =========== ==========
Diluted............................................................... $ (0.03) $ (0.06) $ (0.06) $ 0.01
=========== ========== =========== ==========
SHARES USED IN COMPUTING NET INCOME (LOSS) PER SHARE (Note 2):
Basic................................................................. 10,951,832 2,650,544 10,921,227 2,301,596
=========== ========== =========== ==========
Diluted............................................................... 10,951,832 9,327,102 10,921,227 9,245,783
=========== ========== =========== ==========

The accompanying notes to financial statements are an integral part of
these statements.

SCC COMMUNICATIONS CORP.

STATEMENTS OF CASH FLOWS
(dollars in thousands)
Unaudited

Six Months
Ended June 30,
-------------------
1999 1998
-------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................................... $ (700) $ 44
Adjustments to reconcile net income (loss) to net cash provided by
Operating activities --
Amortization and depreciation...................................................... 2,516 2,045
Amortization of note payable discount.............................................. -- 148
Write off of note payable discount................................................. -- 1,282
Accretion of and interest accrued on investments................................... (177) --
Loss on disposal of assets......................................................... 36 --
Deferred income tax benefit........................................................ (430) --
Provision for estimated losses on contracts........................................ -- 9
Provision for doubtful accounts.................................................... 50 --
Change in --
Accounts receivable.............................................................. 1,910 (1,857)
Unbilled project revenue......................................................... (11) (182)
Prepaids and other............................................................... (322) (381)
Accounts payable................................................................. (252) (96)
Accrued liabilities.............................................................. (612) 465
Deferred contract revenue........................................................ (1,114) (1,206)
------- -------
Net cash provided by operating activities...................................... 894 271
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................................................ (1,141) (972)
Purchase of marketable securities.................................................... (5,261) --
Software development costs........................................................... (328) (103)
------- -------
Net cash used in investing activities.......................................... (6,730) (1,075)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable.................................................. -- (4,986)
Principal payments on capital lease obligations...................................... (956) (808)
Exercise of stock options............................................................ 255 20
Proceeds from initial public offering, net of underwriter's discount................. -- 23,436
Costs related to initial public offering............................................. -- (239)
Proceeds received from employee stock purchase plan.................................. 88 --
Payments received from stock subscriptions........................................... 22 --
------- -------
Net cash provided by (used in) financing activities............................ (591) 17,423
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................... (6,427) 16,619
CASH AND CASH EQUIVALENTS, beginning of period......................................... 10,266 2,503
------- -------
CASH AND CASH EQUIVALENTS, end of period............................................... $ 3,839 $19,122
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest............................................. $ 228 $ 635
======= =======
Cash paid during the period for taxes................................................ $ 211 $ 86
======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
Dividends accrued on Series D, E and F Convertible Preferred Stock................... $ -- $ 355
======= =======
Property acquired with capital leases................................................ $ 856 $ 3,369
======= =======
Accrual of costs related to initial public offering.................................. $ -- $ 720
======= =======

The accompanying notes to financial statements are an integral part of
these statements.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The unaudited financial statements included herein reflect all adjustments,
consisting only of normal recurring adjustments, which in the opinion of
management are necessary to fairly present the Company's financial position,
results of operations and cash flows for the periods presented. Certain
information and footnote disclosures normally included in audited financial
information prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission's rules and regulations. The results of operations for the period
ended June 30, 1999 are not necessarily indicative of the results to be expected
for any subsequent quarter or for the entire fiscal year ending December 31,
1999. These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1998,
which are included in the Company's Annual Report on Form 10-K.

NOTE 2 - EARNINGS PER SHARE

"Basic income (loss) per share" is determined by dividing net income (loss)
available to common shareholders by the weighted average number of common shares
outstanding during each period. "Diluted income (loss) per share" includes the
effects of potentially issuable common stock, but only if dilutive (i.e., a loss
per share is never reduced). The treasury stock method, using the average price
of the Company's common stock for the period, is applied to determine dilution
from options and warrants. The if-converted method is used for convertible
securities. Potentially dilutive common stock options that were excluded from
the calculation of diluted income per share because their effect is antidilutive
totaled 1,072,924 for the three months ended June 30, 1999, and 1,132,317 and
178 for the six months ended June 30, 1999 and June 30, 1998, respectively.

A reconciliation of the numerators and denominators used in computing per
share net income from continuing operations before extraordinary item is as
follows:

Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- ---------------------------
1999 1998 1999 1998
------------ --------------- ------------ -------------

Numerator:
Net income (loss) before
extraordinary item (numerator for
diluted income (loss) per share)..... $ (334,000) $ 871,000 $ (700,000) $1,486,000
Dividends on Convertible
Preferred Stock.................... -- (171,000) -- (355,000)
Common stock warrant put price
Adjustment......................... -- (28,000) -- (77,000)
----------- ---------- ----------- ----------
Numerator for basic income (loss)
per share............................ $ (334,000) $ 672,000 $ (700,000) $1,054,000
Denominator for basic income =========== ========== =========== ==========
(loss) per share:
Weighted average common shares
Outstanding........................ 10,951,832 2,650,544 10,921,227 2,301,596
=========== ========== =========== ==========
Denominator for diluted income
(loss) per share:
Convertible Preferred Stock........... -- 5,712,531 -- 5,949,238
Weighted average common shares
Outstanding........................ 10,951,832 2,610,622 10,921,227 2,286,129
Options issued to employees........... -- 823,827 -- 822,831
Putable common stock warrant.......... -- 180,122 -- 187,585
----------- ---------- ----------- ----------
Denominator for diluted
income (loss) per share..... 10,951,832 9,327,102 10,921,227 9,245,783
=========== ========== =========== ==========

Income (loss) per common share was computed as follows:

Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
-------- -------- -------- --------

Basic income (loss) per share:
Income (loss) per share before
extraordinary item....................... $(0.03) $ 0.25 $(0.06) $ 0.46
====== ====== ====== ======

Net loss per share from extraordinary item $ -- $(0.54) $ -- $(0.63)
====== ====== ====== ======
Basic net loss per share $(0.03) $(0.29) $(0.06) $(0.17)
====== ====== ====== ======
Diluted income (loss) per share:
Income (loss) per share before ======
extraordinary item $(0.03) $ 0.09 $(0.06)
====== ====== ====== $ 0.16
======
Net loss per share from extraordinary item $ -- $(0.15) $ -- $(0.15)
====== ====== ====== ======
Diluted net income (loss) per share $(0.03) $(0.06) $(0.06) $ 0.01
====== ====== ====== ======

NOTE 3 - REPORTABLE SEGMENTS

The Company has two reportable segments, data management services and
licenses and implementation services. The Company measures its reportable
segments based on revenue for each segment and costs directly related to each
segment. General and administrative, sales and marketing and other costs are not
measured by segment. Data management services include the provisioning of an
outsourcing solution for 9-1-1 data management to customers, including ILECs,
CLECs and wireless carriers. Licenses and implementation services include the
licensing, customization and installation of the Company's 9-1-1 software
solutions. Substantially all of the Company's customers are in the United
States.

These segments are managed separately because the nature of and resources
used for each segment is unique. Data management services include ongoing data
management and monitoring of systems and other enhanced services. Under data
management services, the customer's data is transferred to the Company's systems
and the Company owns the systems used to manage the data. Under licenses and
implementation services, the customer performs data management and systems
monitoring activities. The customer also owns the hardware, licenses the
Company's software and maintains the data on its internal systems under this
segment.

Revenue and costs are segregated in the Statement of Operations for the two
reportable segments. The Company does not segregate assets between the segments
as it is impractical to do so.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS
THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS" CONTAINED
HEREIN.

Overview

SCC is the leading provider of 9-1-1 operations support systems ("OSS")
services to incumbent local exchange carriers ("ILECs"), competitive local
exchange carriers ("CLECs") and wireless carriers in the United States. The
Company manages the data that enable a 9-1-1 call to be routed to the
appropriate public safety agency with accurate and timely information about the
caller's identification and location. The Company was incorporated in July 1979
in the State of Colorado under the name Systems Concepts of Colorado, Inc. and
was reincorporated in September 1993 in the State of Delaware under the name SCC
Communications Corp. Prior to 1995, substantially all of the Company's revenue
was derived from the sale of software licenses and related implementation
services to ILECs and public safety agencies. During 1994, the Company began
investing in infrastructure to provide its 9-1-1 OSS solution to telephone
operating companies seeking to outsource such operations. The Company signed its
first 9-1-1 data management services contract in August 1994 and added to the
number of records under management in subsequent years. The Company began to
recognize revenue from wireless carriers in the third quarter of 1997.

SCC's data management services revenue is derived from contracts with
ILECs, CLECs and wireless carriers pursuant to which the Company provides an
outsourcing solution for its customers' 9-1-1 data management. Revenue included
in data management services generally includes a non-recurring initial fee for
the design and implementation of the 9-1-1 OSS, conversion of the customer's
data to the Company's systems, hiring and training of personnel, and other costs
required to prepare for the processing of customer data. Non-recurring fees are
recognized on the percentage-of-completion method over the period required to
perform the tasks necessary to prepare for the processing of customer data. The
Company also generally receives a monthly service fee based on the number of
subscriber records under management, which is recognized in the period in which
the services are rendered. Data management services revenue also may include
revenue from enhanced products and services, which are recognized in the period
in which the services are performed. Related costs are expensed as they are
incurred. Data management services revenue comprised 98% and 90% of the
Company's total revenue in the six months ended June 30, 1999 and 1998,
respectively.

SCC's licenses and implementation services revenue is derived from
contracts with ILECs pursuant to which the Company provides a 9-1-1 software
license or related products and services such as implementation, training,
software enhancements and interfaces to its customers' systems. Licenses and
implementation services revenue is recognized using the percentage-of-completion
method. The related costs include third-party licenses, direct labor and related
expenses, and are expensed as incurred. Subsequent to system installation, the
Company provides its customers with maintenance services that are recognized
ratably over the related contract period on a straight-line basis. The Company's
licenses and implementation services revenue is derived from a limited number of
customers and consequently the concentration of customers can result in
quarterly fluctuations based on the timing of the signing of new contracts and
completion of existing contracts. Margins on such contracts also may fluctuate
based on the elements included in the contract. Licenses and implementation
services revenue comprised 2% and 10% of the Company's total revenue in the six
months ended June 30, 1999 and 1998, respectively.

During the six months ended June 30, 1999, the Company recognized
approximately 82% of total revenue from Ameritech, BellSouth Inc. and U.S. WEST,
each of which accounted for greater than 10% of the Company's total revenue in
such period. During the six months ended June 30, 1998, the Company recognized
approximately 86% of total revenue from Ameritech, AT&T, BellSouth Inc. and U.S.
WEST, each of which accounted for greater than 10% of the Company's total
revenue in such period. In the third quarter of 1998, one of the Company's
licenses and implementation services customers, Bell Atlantic, who merged with
Nynex, announced its decision to standardize its 9-1-1 hardware and software
platform utilizing non-SCC systems that had been used by Nynex prior to the
merger. This transition will occur over the course of 1999, during which time
SCC will continue to support the systems installed in Bell Atlantic and will co-
operate fully to ensure a smooth transition of these systems. Bell Atlantic
comprised approximately 8% of the Company's total revenue in the year ended
December 31, 1998. See "Factors that May Affect Future Results -- Reliance on
Significant Customers."

As of December 31, 1998, the Company had net operating loss carryforwards
of $8.5 million available to offset future net income for U.S. federal income
tax purposes. Thus, the Company's income tax provision for past fiscal years
consisted of alternative minimum taxes, state income taxes in states where the
Company has not had net operating loss carryforwards to offset net income, and
foreign taxes. As of December 31, 1998, the Company reversed all but $450,000 of
the valuation allowance on its deferred tax assets as the Company believes that
it is more likely than not that such tax benefits will be realized. The Company
evaluates the valuation allowance each accounting period and adjusted the
valuation allowance for the utilization of the net operating loss carryforward
for the six months ended June 30, 1999. There is no assurance that the Company's
remaining deferred tax benefit will be offset by future taxable income or will
not be restricted in the future due to transactions entered into by the Company
or changes in tax legislation.

In June and July 1998, the Company completed an initial public offering of
its common stock, which generated proceeds of $26.0 million, net of the
underwriter's discount and other estimated offering costs and including the
exercise of the underwriters' overallotment option. See "Liquidity and Capital
Resources."

Historically, substantially all of the Company's revenue has been generated
from sales to customers in the United States. However, the Company has generated
revenue in Canada and intends to enter additional international markets, which
may require significant management attention and financial resources.
International sales are subject to a variety of risks. See "Factors That May
Affect Future Results -- Risks Associated with International Sales."

Although the Company experienced a profit in 1998, the Company generated a
net loss of $700,000 in the six months ended June 30, 1999 and has experienced
significant fluctuations in its quarterly results. The Company's operating
results may continue to fluctuate as a result of many factors, including the
length of the sales cycles for new or existing customers, the size, timing or
duration of significant customer contracts, fluctuations in number of subscriber
records under management, timing or duration of service offerings, rate of
adoption of wireless services by Public Safety Answering Points, efforts
expended to accelerate the introduction of certain new products, ability of the
Company to hire, train and retain qualified personnel, increased competition,
changes in operating expenses, changes in Company strategy, the financial
performance of the Company's customers, changes in telecommunications
legislation and regulations that may affect the competitive environment for the
Company's services, and general economic factors. The Company's contracts for
data management services generally include a non-recurring initial fee, and
therefore, the Company may recognize significantly increased revenue for a short
period of time upon commencing services for a new customer.

The Company's expense levels are based in significant part on its
expectations regarding future revenue. The Company's revenue is difficult to
forecast because the market for the Company's services is evolving rapidly and
the length of the Company's sales cycle, the size and timing of significant
customer contracts and license fees and the timing of recognition of non-
recurring initial fees vary substantially among customers. Accordingly, the
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected shortfall in revenue. Any significant shortfall could therefore
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the Company hired a significant number
of employees in 1998 and expects to continue hiring additional employees during
1999. The Company expects that this increase will affect the Company's operating
margins for the short term. There can be no assurance that the Company can
resume reporting operating profits, and failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998

Revenue

Total Revenue. Total revenue decreased 12%, from $9.4 million in the
second quarter of 1998 to $8.2 million in the second quarter of 1999.

Data Management Services Revenue. Data management services revenue
increased 2%, from $7.9 million in the second quarter of 1998 to $8.1 million in
the second quarter of 1999, representing 99% and 85% of total revenue for such
periods, respectively. Data management services revenue increased due to
increased monthly fees due to an increase in the number of contracts and records
under management for ILEC and CLEC customers. These increases were partially
offset by monthly minimum fees from a wireless carrier in the second quarter of
1998 that expired at the end of 1998 and a decrease in non-recurring fees
related to wireless and enhanced services.

Licenses and Implementation Services. Revenue from licenses and
implementation services decreased 91%, from $1.4 million in the second quarter
of 1998 to $121,000 in the second quarter of 1999, as the Company had no
licenses and implementation services contracts in process during the second
quarter of 1999 other than warranty contracts.

Costs and Expenses

Cost of Data Management Services. Cost of data management services consists
primarily of labor and costs of interconnection with customers' systems and the
Company's infrastructure. Cost of data management services increased 18%, from
$5.2 million in the second quarter of 1998 to $6.2 million in the second quarter
of 1999, representing 56% and 75% of total revenue for such periods,
respectively, and 66% and 77% of data management services revenue in the second
quarter of 1998 and 1999, respectively. The dollar increase was due to the
reallocation of resources from licenses and implementation services to data
management services, increased depreciation expense and telephone lines to
accommodate growth in the Company's wireless and wireline operations and
additional headcount and related costs incurred in anticipation of growth for
both wireline and wireless services. The percentage increase occurred primarily
because the rollout of the Company's wireless and enhanced services has been
slower than anticipated, although the Company has built the infrastructure to
service the anticipated demand. In addition, in the second quarter of 1998, the
Company recorded monthly minimum fees from a wireless customer which expired at
the end of 1998.

Cost of Licenses and Implementation Services. Cost of licenses and
implementation services consists primarily of labor, license fees for third
party software and related expenses. Cost of licenses and implementation
services decreased 91%, from $542,000 in the second quarter of 1998 to $47,000
in the second quarter of 1999, representing 6% and 1% of total revenue for such
periods, respectively. Additionally, cost of licenses and implementation
services revenue represented 38% and 39% of licenses and implementation services
revenue in the second quarter of 1998 and 1999, respectively. The dollar
decrease occurred because the Company had no licenses and implementation
services contracts in process during the second quarter of 1999 other than
warranty contracts.

Sales and Marketing. Sales and marketing expenses consist primarily of
expenses related to salaries and commissions, travel, trade shows and sales
collateral. Sales and marketing expenses increased 19%, from $1.2 million in the
second quarter of 1998 to $1.4 million in the second quarter of 1999,
representing 13% and 17% of total revenue in such quarters, respectively. The
dollar increase was due to the addition of marketing personnel, the creation of
a government affairs department to interpret and influence legislation primarily
related to the Company's wireless operations and related legal expenses,
addition of sales staff for enhanced services and an increase in tradeshow
expenses.

General and Administrative. General and administrative expenses consist
primarily of expenses related to the Company's information systems, finance,
human resources, legal, executive and financial planning departments. General
and administrative expenses remained constant at $1.2 million in the second
quarter of both 1998 and 1999, representing 13% and 14% of total revenue in such
quarters, respectively. The Company experienced increases due to (i) the
addition of information technology staff and related expenses, (ii) increased
legal and accounting costs related to quarterly and annual reporting
requirements as the Company became a publicly traded company in June 1998, (iii)
increased legal staffing and other fees related to regulatory and legislative
issues concerning the implementation of the Company's services in the State of
Texas and (iv) the creation of an investor relations department. These increases
were offset by a decrease in expenses related to the resignation of the
Company's chief operating officer and chief financial officer.

Other income (expense), net. Net other income (expense) consists primarily
of interest expense from the Company's borrowings and leases for capital
equipment, offset by interest income earned on the Company's cash balances. Net
other expense was $282,000 in the second quarter of 1998 compared to net other
income of $116,000 in the second quarter of 1999, representing (3)% and 1% of
total revenue for such periods, respectively. The dollar increase in net other
income was primarily due to a decrease in interest expense related to the
repayment of certain bank debt and capital leases that were outstanding in the
second quarter of 1998 and interest earned from the investment of funds received
from the Company's initial public offering in June and July of 1998.

Provision (Benefit) for Income Taxes. The Company's income tax provision
was $65,000 in the second quarter of 1998 compared to a net income tax benefit
of $188,000 in the second quarter of 1999. The Company recorded an income tax
benefit in the second quarter of 1999 as it believes that it is more likely than
not that the net operating loss carryforward generated will be utilized against
future earnings.

Extraordinary Item. The Company recorded a charge of $1.4 million in the
second quarter of 1998 related to the write-off of the remaining debt discount
and other costs associated with the early extinguishment of the Company's bank
debt.

Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

Revenue

Total Revenue. Total revenue decreased 8%, from $17.3 million in the six
months ended June 30, 1998 to $15.8 million in the six months ended June 30,
1999.

Data Management Services Revenue. Data management services revenue remained
constant at $15.5 million in the six months ended June 30, 1998 and in the six
months ended June 30, 1999, representing 90% and 98% of total revenue for such
periods, respectively. Data management services revenue increased due to
increased monthly fees caused by an increase in the number of records under
management for ILEC and CLEC customers. These increases were offset by monthly
minimum fees from a wireless carrier in the first six months of 1998 that
expired at the end of 1998 and a decrease in non-recurring fees related to
wireless and enhanced services.

Licenses and Implementation Services. Revenue from licenses and
implementation services decreased 86%, from $1.8 million in the six months ended
June 30, 1998 to $257,000 in the six months ended June 30, 1999, as the Company
had no licenses and implementation services contracts in process during the six
months ended June 30, 1999 other than warranty contracts.

Costs and Expenses

Cost of Data Management Services. Cost of data management services
increased 18%, from $10 million in the six months ended June 30, 1998 to $11.8
million in the six months ended June 30, 1999, representing 58% and 75% of total
revenue for such periods, respectively, and 65% and 76% of data management
services revenue in the six months ended June 30, 1998 and 1999, respectively.
The dollar increase was due to increased depreciation expense and telephone
lines to accommodate growth in the Company's wireless and wireline operations
and additional headcount and related costs incurred in anticipation of growth
for both wireline and wireless services. The percentage increase occurred
primarily because the rollout of the Company's wireless and enhanced services
has been slower than anticipated, although the Company has built the
infrastructure to service the anticipated demand. In addition, in the first six
months of 1998, the Company received monthly minimum fees from a wireless
customer which expired at the end of 1998.

Cost of Licenses and Implementation Services. Cost of licenses and
implementation services decreased 85%, from $674,000 in six months ended June
30, 1998 to $100,000 in the six months ended June 30, 1999, representing 4% and
1% of total revenue for such periods, respectively. Additionally, cost of
licenses and implementation services represented 38% and 39% of licenses and
implementation services revenue in the six months ended June 30, 1998 and 1999,
respectively. The dollar decrease occurred because the Company had no licenses
and implementation services contracts in process during the six months ended
June 30, 1999 other than warranty contracts.

Sales and Marketing. Sales and marketing expenses increased 33%, from $2.0
million in six months ended June 30, 1998 to $2.7 million in the six months
ended June 30, 1999, representing 12% and 17% of total revenue in such periods,
respectively. The dollar increase was due to the addition of marketing
personnel, the creation of a government affairs department to interpret and
influence legislation primarily related to the Company's wireless operations and
related legal expenses, addition of sales staff for enhanced services and an
increase in tradeshow expenses.

General and Administrative. General and administrative expenses increased
10% from $2.3 million in the six months ended June 30, 1998 to $2.6 million in
the six months ended June 30, 1999, representing 14% and 16% of total revenue
for such periods, respectively. The Company experienced increases due to (i) the
addition of information technology personnel and related expenses, (ii)
increased legal and accounting costs related to quarterly and annual reporting
requirements as the Company became a publicly traded company in June 1998, (iii)
increased legal staffing and other fees related to regulatory and legislative
issues concerning the implementation of the Company's services in the State of
Texas and (iv) the creation of an investor relations department. These increases
were partially offset by a decrease in expenses related to the resignation of
the Company's chief operating officer and chief financial officer.

Other income (expense), net. Net other expense was $582,000 in the six
months ended June 30, 1998 compared to net other income of $274,000 in the six
months ended June 30, 1999, representing (3)% and 2% of total revenue for such
periods, respectively. The dollar increase in net other income was primarily due
to a decrease in interest expense related to the repayment of certain bank debt
and capital leases that were outstanding in the second quarter of 1998 and
interest earned from the investment of funds received from the Company's initial
public offering in June and July of 1998.

Provision (Benefit) for Income Taxes. The Company's income tax provision
was $112,000 in the six months ended June 30, 1998 compared to a net income tax
benefit of $430,000 in the six months ended June 30, 1999. The Company recorded
an income tax benefit in the six months ended June 30, 1999 as it believes that
it is more likely than not that the net operating loss carryforward generated
will be utilized against future earnings.

Liquidity and Capital Resources

Since its inception the Company has funded its operations with cash
provided by operations, supplemented by equity and debt financing and leases on
capital equipment. As of June 30, 1999, the Company had $19.1 million in cash
and cash equivalents and investments in marketable securities.

In June 1998, the Company completed an initial public offering of 2,100,000
shares of its Common Stock, which generated proceeds of $22.5 million to the
Company, net of the underwriter's discount and other offering costs. The
Company used approximately $4.4 million of the proceeds to repay its bank loans
and $160,000 for the related prepayment penalty. In July 1998, the underwriters
of the Company's initial public offering exercised their over-allotment option.
Under the over-allotment option, the Company sold an additional 315,000 shares
of its Common Stock, generating net proceeds of $3.5 million.

The Company repaid $956,000 and $1.3 million of other bank debt and capital
lease obligations during the six months ended June 30, 1999 and 1998,
respectively. Additionally, the Company used $1.5 million and $1.1 million
during the six months ended June 30,1999 and 1998, respectively, for the
purchase of capital assets and software development. The Company anticipates
that its level of spending for capital expenditures will continue during 1999,
although it currently has no material commitments for capital expenditures.

The Company has a line of credit with a bank equal to $2.0 million, which
is available to meet operating needs. The interest rate on amounts borrowed
under the line of credit is equal to the bank's prime rate or the one, two or
three month Libor rate plus 2.25% per annum. The line of credit matures April
15, 2000 and is collateralized by certain assets of the Company. As of June 30,
1999, no borrowings were outstanding on the line of credit.

The Company believes that the remaining net proceeds from its initial
public offering, together with cash generated from operations, will be
sufficient to fund its anticipated working capital needs, capital expenditures
and any potential future acquisitions through at least the next twelve months.
In the event the Company's plans or assumptions change or prove to be
inaccurate, or if the Company consummates any unplanned acquisitions of
businesses or assets, the Company may be required to seek additional sources of
capital. Sources of additional capital may include public and private equity and
debt financings, sales of nonstrategic assets and other financing arrangements.

Year 2000 Capability

Many currently installed computer and software products are coded to accept
only two digit entries in the date code field. These date code fields will need
to accept four digit entries to distinguish twenty-first century dates from
twentieth century dates. As a result, by the end of 1999, computer systems
and/or software used by many companies may need to be upgraded to comply with
such "Year 2000" requirements. Significant uncertainty exists in the software
industry concerning the potential effects associated with such compliance.

The Company uses off-the-shelf and custom software developed internally and
by third parties for its production systems. The Company has completed its
assessment of and is implementing a plan for the programming and testing of its
internally developed software to make it Year 2000 compliant. In addition, the
Company has identified which of its third party production systems it believes
have date-sensitive applications to determine where Year 2000 issues may exist.
The Company has contacted the third-party suppliers and has received responses
from most of those

suppliers, including the suppliers that the Company considers critical. The
Company has received patches for the systems that are not Year 2000 compliant
and has installed approximately half of them. The Company intends to complete
the installation of such patches by the end of the third quarter of 1999.

The Company estimates that its total costs to convert its production
systems to be Year 2000 compliant, including primarily internal labor, third
party hardware and internal and third party software costs, will be
approximately $400,000, of which approximately 95% has been incurred. The
Company expects to complete the conversion of its production systems in the
third quarter of 1999. However, there can be no assurance that unidentified Year
2000 problems will not cause the Company to incur material expenses in
responding to such problems or otherwise have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
to the extent that such software and systems do not become Year 2000 compliant,
there can be no assurance that potential systems interruptions, the Company's
potential inability to meet its contractual obligations or the cost necessary to
update such software will not have a material adverse effect on the Company's
business, financial condition and results of operations. Certain of the
Company's current contracts with its customers require that the Company warrant
Year 2000 capability by a certain date. Any failure to achieve Year 2000
compliance by such date could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company has completed its assessment of its information technology
("IT") and non-IT systems. Non-IT systems include fax machines, photocopiers,
telephone switches, security systems and other common office devices. The
Company's assessment included contacting third party suppliers regarding Year
2000 compliance. Patches are installed or are scheduled to be installed by the
end of the third quarter of 1999. Failure of one or more of these internal
systems to become Year 2000 compliant could impair the Company's ability to
communicate with its customers and perform critical business operations and
could cause the Company to process information manually or limit access to data.

The Company is developing contingency plans with respect to Year 2000
issues for certain of its systems and is continually monitoring the risks
involved. Some of these contingency plans include manual processing until such
time that the system becomes compliant. The Company will freeze all software
changes in the fourth quarter of 1999 and perform recontamination testing of its
production systems to ensure that any changes made to the systems since the last
Year 2000 testing have not impaired the Year 2000 compliance of the systems. To
supplement the Company's normal on-call procedures, key employees of the Company
will be on site where critical systems are located through the Year 2000
changeover. The Company is also making support arrangements with its critical
third party suppliers to ensure that support is available if unanticipated
problems arise.

Although the Company expects to identify and resolve all Year 2000 issues
that could materially affect its business operations, the Company believes it is
not possible to determine with complete certainty that all Year 2000 issues will
be identified or corrected in time. If the costs to convert the Company's
systems to be Year 2000 compliant are greater than anticipated or if the
Company's systems do not contain all necessary date code changes in time, there
is no assurance that system interruptions or an inability to meet contractual
obligations would not occur or that such occurrences would not have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors -- Year 2000 Capability."

Recently Issued Accounting Pronouncements

Statement of Financial Accounting Standards No. 133

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). The Statement establishes
accounting and reporting standards for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. It requires an entity to recognize all derivatives as either assets
or liabilities in the statement of financial position and measures those
instruments at fair value. In June 1999, the FASB issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - An
amendment of FASB Statement No. 133" ("SFAS No. 137"). SFAS No. 137 delays the
effective date of SFAS No. 133 to financial quarters and financial years
beginning after June 15, 2000. The Company does not typically enter into
arrangements that would fall under the scope of Statement No. 133 and thus,
management believes that Statement No. 133 will not significantly affect its
financial condition and results of operations.

Statement of Position 98-9

In December 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-9 ("SOP 98-9"), "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions." SOP 98-9
amends certain paragraphs of Statement of Position 97-2 ("SOP 97-2"), "Software
Revenue Recognition," to require the application of a residual method of
accounting for software revenue when certain conditions exist. SOP 98-9 also
amends Statement of Position 98-4 ("SOP 98-4"), "Deferral of the Effective Date
of a Provision of SOP 97-2" to extend the deferral of the application of certain
passages of SOP 97-2 provided by SOP 98-4 through fiscal years beginning on or
before March 15, 1999. All other provisions of SOP 98-9 are effective for
transactions entered into in fiscal years beginning after March 15, 1999.
Earlier adoption is permitted, however, retroactive application is prohibited.
The Company believes SOP 98-9 will not materially impact its financial
statements.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Significant Fluctuations in Quarterly Results of Operations

The Company has experienced fluctuations in its quarterly operating results
and anticipates that such fluctuations will continue and could intensify.
Fluctuations in operating results may result in volatility in the price of the
Company's Common Stock. Although the Company was profitable in five of its last
eight quarters, there can be no assurance that the Company's profitability will
continue in the future or, if the Company is profitable, that its levels of
profitability will not vary significantly between quarters.

The Company's expense levels are based in significant part on its
expectations regarding future revenue. The Company's revenue is difficult to
forecast because the market for the Company's services is evolving rapidly and
the length of the Company's sales cycle, the size and timing of significant
customer contracts and license fees and the timing of recognition of non-
recurring initial fees vary substantially among customers. Accordingly, the
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected shortfall in revenue. Any significant shortfall could therefore
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the Company hired a significant number
of employees in 1998 and expects to continue hiring additional employees during
1999. The Company expects that this increase will affect the Company's operating
margins for the short term. There can be no assurance that the Company can
continue to report operating profits, and failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Based on all of the foregoing, the Company believes that future revenue,
expenses and operating results are likely to vary significantly from quarter to
quarter. As a result, quarter-to-quarter comparisons of operating results are
not necessarily meaningful or indicative of future performance. Furthermore, it
is possible that in some future quarter the Company's operating results will be
below the expectations of public market analysts or investors. In such event, or
in the event that adverse conditions prevail, or are perceived to prevail, with
respect to the Company's business or generally, the market price of the
Company's Common Stock would likely be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Lengthy Sales Cycle

Potential customers of the Company typically commit significant resources
to the technical evaluation of the Company's services and products and the
Company typically spends substantial time, effort and money providing education
regarding the Company's 9-1-1 OSS solution. The evaluation process often results
in an extensive and lengthy sales cycle, typically ranging between six months
and two years, making it difficult for the Company to forecast the timing and
magnitude of sales contracts. Delays associated with customers' internal
approval and contracting procedures, procurement practices, and testing and
acceptance processes are common. For example, customers' budgetary constraints
and internal acceptance reviews may cause potential customers to delay or forego
a purchase. The delay or failure to complete one or more large contracts could
have a material adverse effect on the

Company's business, financial condition and results of operations and cause the
Company's operating results to vary significantly from quarter to quarter. See
"-- Significant Fluctuations in Quarterly Results of Operations".

Reliance on Significant Customers

The Company historically has depended on, and expects to continue to depend
on, large contracts from a limited number of significant customers. During the
six months ended June 30, 1999, the Company recognized approximately 82% of
total revenue from Ameritech, BellSouth Inc. and U.S. WEST, each of which
accounted for greater than 10% of the Company's total revenue in such period.
During the six months ended June 30, 1998, the Company recognized approximately
86% of total revenue from Ameritech, AT&T, BellSouth Inc. and U.S. WEST, each of
which accounted for greater than 10% of the Company's total revenue in such
period. The Company believes that these customers will continue to represent a
substantial portion of the Company's total revenue in the future. Certain of the
Company's contracts with these customers allow them to cancel their contracts
with the Company in the event of changes in regulatory, legal, labor or business
conditions. The Company's contracts with these customers expire between 2002 and
2005. The loss of any of these customers would have a material adverse effect on
the Company's business, financial condition and results of operations. Two of
the Company's significant customers, Ameritech and US West, have entered into
merger agreements with companies that are not customers of the Company. The
Company cannot predict what effect, if any, these acquisitions will have on the
Company and there can be no assurance that these acquisitions or any future
consolidation in the telecommunications industry will not have a material
adverse effect on the Company's business, financial condition and results of
operation. None of the Company's major customers has any obligation to purchase
additional products or additional services beyond those currently contemplated
by their existing contracts. Consequently, the failure by the Company to develop
relationships with significant new customers could have a material adverse
effect on the rate of growth in the Company's revenue, if any. If the Company
fails to monitor and maintain adequately the quality and expand the breadth of
its services and products, advance its technology or continue to price its
services and products competitively, one or more of its major customers may
select alternative providers or seek to develop services and products
internally.

Dependence on Key Personnel; Recent Management Turnover

The Company's future success depends in large part on the continued service
of its key management, sales, product development and operational personnel,
including George Heinrichs, President, and on the Company's ability to continue
to attract, motivate and retain highly qualified employees, including technical,
managerial and sales and marketing personnel. However, competition in the
recruitment of highly qualified personnel in the software and telecommunications
services industry is intense and has become particularly significant in the
Denver metropolitan area. The inability to hire and retain qualified personnel
or the loss of the services of key personnel could have a material adverse
effect upon the Company's current business, development efforts and future
business prospects. If such personnel do not remain active in the Company's
business, the Company's operations could be materially adversely affected. The
Company's Chief Operating Officer, John Sims, resigned from the Company
effective February 26, 1999 and the Company's Chief Financial Officer, Nancy
Hamilton, resigned from the Company effective May 20, 1999. There can be no
assurance that the Company will be able to replace Mr. Sims or Ms. Hamilton
within a reasonable timeframe or that the Company will not experience
significant interruption in its business as a result of their departures. Ms.
Hamilton has an agreement with the Company providing for payments subsequent to
the termination of her employment. The Company currently maintains a key person
life insurance policy with respect to Mr. Heinrichs. The Company is the named
beneficiary of this policy, which is for $3,000,000.

Rate of Adoption by Public Safety Answering Points

The Company expects the percentage of the Company's revenue derived from
the management of 9-1-1 data records for wireless carriers to increase.
Recognizing the public safety need for improved wireless 9-1-1 service, the
Federal Communications Commission (the "FCC") issued Report & Order 94-102 (the
"Order") on June 12, 1996, a directive that mandated the adoption of 9-1-1
technology by wireless carriers in two phases. Phase I requires wireless
carriers to provide to requesting PSAPs at the time of a 9-1-1 call, the
caller's telephone number and location of the receiving cell site. However,
under the FCC rules, wireless carriers are not required to provide Phase I and
Phase II service without adequate cost recovery. Wireless carriers are required
to comply with Phase I within six months after the PSAP request. Both the Senate
(S.800) and the House of Representatives (H.R. 438) have passed legislation
which is intended to accelerate wireless 9-1-1 deployment. This legislation is
still being considered by Congress and has not been signed into law. Moreover,
even if it does become law, there is no assurance that it will have the desired
effect of accelerating wireless 9-1-1 deployment. The Federal Communications
Commission ("FCC") in order to accelerate implementation of Phase I, is also
holding forums, meetings and is requesting reports and comments from public
safety, carriers, and vendors on the issues surrounding wireless 9-1-1
implementation. However, due to cost recovery, liability and operational issues,
there are very few live Phase I markets. Phase II requires wireless carriers

to locate a 9-1-1 caller to within 125 meters, subject to FCC guidelines.
Wireless carriers must comply with Phase II mandates for requesting PSAPs by
October 1, 2001. However, the FCC is currently accepting Phase II waiver
requests from wireless carriers, which may result in compliance date extensions.
The Company believes that the technological challenges confronting wireless
carriers attempting to comply with the Order will encourage them to outsource
their 9-1-1 services. If many wireless carriers decide not to outsource such
services, the Company's business, financial condition and results of operations
could be materially and adversely affected. The number of PSAPs demanding
services complying with the Order from wireless carriers has been less than
anticipated by the Company. If the rate of adoption by PSAPs continues to be
slow because of cost recovery, liability or operational issues, extensions
granted by the FCC or other reasons, the Company will experience a delay in
receiving revenue under its current wireless contracts that, because the Company
has already incurred costs in expectation of such revenue, could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Dependence on New Products and Services; Rapid Technological Change

The market for the Company's services is characterized by rapid
technological change, frequent new product or service introductions, evolving
industry standards and changing customer needs. The Company is prepared to
rollout its Emergency Warning and Evacuation System, which will allow PSAPs to
call all numbers in a given area and warn of imminent danger. The Company
intends to begin offering its Subscriber ALI product, which will allow
subscribers to enter personal information into their 9-1-1 records in 2000. The
introduction of products and services embodying new technologies and the
emergence of new industry and technology standards can render existing products
and services obsolete and unmarketable in short periods of time. The Company
expects other vendors regularly to introduce new products and services, as well
as enhancements to their existing products and services, that will compete with
the services and products offered by the Company. As a result, the life cycles
of the Company's services and products are difficult to estimate. The Company
believes that its future success will depend in large part on its ability to
maintain and enhance its current service and product offerings, to develop and
introduce regularly new services and products that will keep pace with
technological advances and satisfy evolving customer requirements, and to
achieve acceptable levels of sales of its new services and products through its
current customers that resell the Company's solutions to their subscribers.
However, there can be no assurance that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of such new services and products or that its new
services and products will adequately meet the requirements of the marketplace
and achieve market acceptance. Announcements of currently planned or other new
service and product offerings by the Company or its competitors may cause
customers to defer the purchase of existing Company services and products. The
Company's inability to develop on a timely basis new services or products, or
the failure of such new services or products to achieve market acceptance, could
have a material adverse effect on the Company's business, financial condition
and results of operations. The development of new, technologically advanced
products and services is a complex and uncertain process requiring high levels
of innovation, as well as the accurate anticipation of technological and market
trends. There can be no assurance that the Company will successfully develop,
introduce or manage the transition to new services and products. Furthermore,
services and products such as those offered by the Company may contain
undetected or unresolved errors when they are first introduced or as new
versions are released. There can be no assurance that, despite extensive testing
by the Company, errors will not be found in new services and products after
commencement of commercial availability, resulting in delay in or loss of market
acceptance and sales, diversion of development resources, injury to the
Company's reputation or increased service and warranty costs, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Significant delays in meeting deadlines for announced
service or product introductions or performance problems with such products or
upgrades could result in an undermining of customer confidence in the Company's
services and products, which would materially adversely affect its customer
relationships as well.

In addition, the Company plans to introduce transaction-based services and
software products to industries different from those the Company has
traditionally supported. There can be no assurance that the Company will be
successful in developing and marketing these new services and products or that
its current or new services and products will adequately meet the demands of its
new markets. Because it is generally not possible to predict the time required
and costs involved in reaching certain research, development and engineering
objectives related to entering new markets, actual development costs could
exceed budgeted amounts and estimated development schedules could require
extensions. Furthermore, there can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of these services and products. If the Company is
unable to develop and introduce new services and products to these new markets
in a timely manner, or if a new release of a product or service to such new
markets does not achieve market acceptance, the Company's business, financial
condition and results of operations could be materially adversely affected.

Dependence on a Single Service Offering; Sustainability of Growth

The Company currently derives substantially all of its revenue from the
provision of its 9-1-1 OSS solution to ILECs, CLECs and wireless carriers.
Accordingly, the Company is susceptible to adverse trends affecting this market
segment, such as government regulation, technological obsolescence and the entry
of new competition. The Company expects that this market will continue to
account for substantially all of its revenue in the near future. As a result,
the Company's future success will depend on its ability to continue to sell its
9-1-1 OSS solution to ILECs, CLECs and wireless carriers, maintain and increase
its market share by providing other value-added services to the market, and
successfully adapt its technology and services to other related markets. There
can be no assurance that markets for the Company's existing services and
products will continue to expand or that the Company will be successful in its
efforts to penetrate new markets.

Fixed Price Contracts and Other Project Risks

During the six months ended June 30, 1999 and the year ended December 31,
1998, approximately 87% and 80%, respectively, of the Company's revenue was
generated on a fixed price per subscriber basis. The Company generally enters
into contracts with a ten-year term for wireline data management services and
with a two- to five-year term for wireless base services and clearinghouse
services. In addition, the Company has a contract with a state agency. The
Company generally receives a fixed monthly fee based upon the number of
subscribers and upon the services selected by the customer. Therefore, the
Company's failure to estimate accurately the resources required for a fixed
price per subscriber contract could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

The Company provides 9-1-1 OSS services that are critical to the public's
perception of its customers. The Company's failure to meet a customer's
expectations in the performance of its services could damage the Company's
reputation and adversely affect its ability to attract new business, and may
have a material adverse effect upon its business, financial condition and
results of operations. The Company has undertaken, and in the future may
undertake, projects in which the Company guarantees performance based upon
defined operating specifications. Unsatisfactory performance may result in
client dissatisfaction and a reduction in payment to, or payment of damages by,
SCC, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.

Because the Company's services and products are utilized by its customers
to provide critical 9-1-1 services, the provision of services and licensing of
software by the Company may entail the risk of product liability and related
claims. The Company's agreements with its customers typically require the
Company to indemnify its customers for the Company's own acts of negligence. The
Company currently has product liability insurance that, subject to liability
limitations and customary exclusions, covers claims resulting from the failure
of the Company's services or products to perform the function or serve the
purpose intended. To the extent that any claims are not covered by such
insurance, the Company's business, financial condition and results of operations
may be materially and adversely affected by a successful product liability
claim.

Emerging Telecommunications Market and New Carriers; Regulatory Uncertainty

The Company provides its 9-1-1 OSS solution to telecommunications carriers
in the wireline and wireless markets. Although these markets have experienced
significant growth and have been characterized by increased deregulation and
competition in recent years, there can be no assurance that such trends will
continue at similar rates or that the Company will be able to market and sell
effectively its products and services in such markets. In addition, many of the
new entrants in the telecommunications market are companies that lack
significant financial and other resources. To cultivate relationships with such
new market entrants, the Company may be required to offer alternative pricing
arrangements, which may provide for deferred payments. However, there can be no
assurance that the Company will be able to develop such relationships or that
new carriers that become customers of the Company will gain market acceptance
for their telecommunications services. If the Company permits customers that do
not have adequate financial resources to pay the Company for its services on a
deferred basis, the Company ultimately may be unable to collect payments for
such services. Because the Company historically has depended on a limited number
of long-term customer relationships, the failure of the Company to develop
relationships with, make sales to, or collect payments from new
telecommunications carriers, or the failure of the Company's customers to
compete effectively in the telecommunications market, could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the telecommunications industry is experiencing
substantial consolidations and changes that are unpredictable, and any such
consolidation or change could have a material adverse effect on the Company's
business, financial condition and results of operations.

9-1-1 services generally are funded by a locally imposed fee per subscriber
per month. A portion of this tax is paid to the local carrier providing the
9-1-1 services. The Company generally receives a monthly fee per subscriber from
its customers for management of 9-1-1 data records, allowing the carrier to
match its fixed revenue stream for 9-1-1 services with a fixed cost for record
management. Changes by local governments in the funding mechanism for 9-1-1
services or the parties responsible for the provision of such services could
have a material adverse effect on the Company's business, financial condition
and results of operations.

The market for the Company's services and products has been influenced by
the adoption of regulations under the Telecommunications Act of 1996 (the "1996
Act"), the new duties imposed on ILECs by the 1996 Act to open the local
telephone markets to competition, and the requirements imposed on wireless
carriers by the Order. Therefore, any changes to such legal requirements, the
adoption of new regulations by federal or state regulatory authorities under the
1996 Act or any legal challenges to the 1996 Act could have a material adverse
effect upon the market for the Company's services and products. Although the
1996 Act was designed to expand competition in the telecommunications industry,
the realization of the objectives of the 1996 Act is subject to many
uncertainties, including judicial and administrative proceedings designed to
define rights and obligations pursuant to the 1996 Act, actions or inactions by
ILECs and other carriers that affect the pace at which changes contemplated by
the 1996 Act occur, resolution of questions concerning which parties will
finance such changes, and other regulatory, economic and political factors.

The Company is aware of certain litigation challenging the validity of the
1996 Act and the local telephone competition rules adopted by the FCC to
implement the 1996 Act. The U.S. Supreme Court in AT&T v. Iowa invalidated the
unbundling requirements adopted by the FCC while upholding a portion of the
FCC's local competition rules. However, the Regional Bell Operating Companies
("RBOCs") have agreed to comply with the invalidated unbundling requirements
while the FCC drafts and proposes new rules to comply with the decision of the
Supreme Court. Such litigation may serve to delay implementation of the 1996
Act, which could adversely affect demand for the Company's services and
products. Any delays in the deadlines imposed by the 1996 Act, the FCC or the
Order, or any invalidation, repeal or modification in the requirements imposed
by the Act, the FCC or the Order could have a material adverse effect on the
Company's business, financial condition and results of operations. Moreover,
customers may require, or the Company otherwise may deem it necessary or
advisable, that the Company modify its services and products to address actual
or anticipated changes in the regulatory environment. Any other delays in
implementation of the 1996 Act, or other regulatory changes, could materially
adversely affect the Company's business, financial condition and results of
operations.

The Company signed a contract to provide 9-1-1 data management services to
the General Services Commission ("GSC") which contract was assigned by GSC to
the Advisory Commission for State Emergency Communications ("ACSEC") for the
State of Texas. As this is the first time that a state entity has endeavored to
centralize 9-1-1 OSS and data management services with a neutral third party,
federal and state regulations governing 9-1-1 service provisioning, which have
typically applied to certified telecommunications providers, are being
challenged and clarified for the first time. The Company completed the field
trial required under the contract in July 1999 and is in the process of
submitting its report on the field trial to the ACSEC for approval. Prior to
commencement of the field trial, SBC Communications, Inc. ("SBC"), which has
historically been responsible for the provisioning of 9-1-1 OSS, data transport
and data management services in the State of Texas, challenged whether the
Company has a right to access SBC's source systems and 9-1-1 database and
whether they are obligated by law to unbundle components of their network
functionality. However, an interim agreement among the involved parties was
reached that allowed the Company to perform the field trial to test the
interfacing technology in the Houston area. As part of the interim agreement,
the legal challenges and all related proceedings have been placed in abeyance
pending the outcome of the field trial. In addition, SBC filed a tariff
regarding its portion of the unbundled services. The outcome of the tariff
filing is uncertain. The Company believes that these legal and technological
issues and their associated cost implications are likely to be readdressed by
the Public Utilities Commission of the State of Texas ("PUC"), which is expected
to decide on these matters by the end of 1999 if not resolved earlier by the
parties through other means. The Company believes that the services that it will
provide under its contract with the General Services Commission are permitted
within the scope of the existing regulations and that the outcome of the matter
before the PUC will be favorable to the Company and the ACSEC. However, there
can be no assurance that the PUC will decide in favor of the Company and the
ACSEC or that SBC will not resume its desire to pursue this legal challenge on a
longer term basis, thus causing further delay of the commencement of the
services by exercising its right to appeal a PUC decision that favors the
Company or the ACSEC. If the PUC does not decide in the Company's favor or
places contingencies on the manner in which the services are provided, the
Company may be prohibited from delivering its services to the State of Texas,
may expend significant resources to appeal the PUC's decision or may expend
additional costs in redesigning the methodology by which the services are
provided. In addition, if SBC exercises its

right to appeal, the Company may be required to spend significant resources in
defending its right to provide its services in the State of Texas.

Risk of System Failures

The Company's operations are dependent upon its ability to maintain its
computer and telecommunications equipment and systems in effective working
order, and to protect its systems against damage from fire, natural disaster,
power loss, telecommunications failure or similar events. Although all of the
Company's mission-critical systems and equipment are designed with built-in
redundancy and security, there can be no assurance that a fire, natural
disaster, power loss, telecommunications failure or similar event would not
result in an interruption of the Company's services. Any damage, failure or
delay that causes interruptions in the Company's operations could have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, any future addition or expansion of the
Company's facilities to increase capacity could increase the Company's exposure
to damage from fire, natural disaster, power loss, telecommunications failure or
similar events. There can be no assurance that the Company's property and
business interruption insurance will be adequate to compensate the Company for
any losses that may occur in the event of a system failure or that such
insurance will continue to be available to the Company at all or, if available,
that it will be available on commercially reasonable terms.

Management of Change

The Company has expanded its operations rapidly over the past several
years, placing significant demands on its administrative, operational and
financial personnel and systems. Additional expansion by the Company or
additional demands placed on the Company as a result of becoming a public
company may further strain its management, operational, financial reporting, and
other systems and resources. There can be no assurance that the Company's
systems, resources, procedures, controls and existing space will be adequate to
support such expansion of the Company's operations. The Company's future
operating results will depend substantially on the ability of its officers and
key employees to manage changing business conditions and to implement and
improve its management, operational, financial control and other reporting
systems. In addition, the Company's future operating results depend on its
ability to attract, train and retain qualified consulting, technical, sales,
financial, marketing and management personnel. Failure to hire, train or retain
qualified personnel necessary to keep pace with the Company's development of
products and services could have a material adverse effect on the Company's
business, financial condition and results of operations. Continued expansion
will require the Company's management to: enhance management information and
reporting systems; standardize implementation methodologies of SCC's NDSC;
further develop its infrastructure; and continue to maintain customer
satisfaction. If the Company is unable to respond to and manage changing
business conditions, the quality of the Company's products and services, its
ability to retain key personnel and its business, financial condition and
results of operation could be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Highly Competitive Market; Competition

The market for 9-1-1 OSS solutions is intensely competitive and the Company
expects competition to increase in the future. The Company believes that the
principal competitive factors affecting the market for 9-1-1 OSS services
include flexibility, reliability, manageability, technical features, wireless
support, performance, ease of use, price, scope of product offerings, and
customer service and support. Although the Company believes that its solution
competes favorably with respect to such factors, there can be no assurance that
the Company can maintain its competitive position against current and potential
competitors, especially those with significantly greater financial, marketing,
support service, technical and other competitive resources.

The Company's principal competitors generally fall within one of three
categories: internal development departments of major carriers or consulting
firms that support such departments; relatively smaller companies that offer
applications with limited scope; and larger companies that are either in the
process of entering the Company's market or have the potential to develop
products and services that compete with the Company's service offerings.

A number of companies currently market or have under development software
products and services to provide 9-1-1 administration. The Company competes with
a few smaller companies, including XYPoint Corporation, for the provision of
9-1-1 data management services to wireless carriers, although the Company
expects more significant competition in the future. Mergers or consolidations
among these competitors or acquisitions of these companies by larger competitors
would make them more formidable competitors to the Company. There can be no
assurance that the Company's current and potential competitors will not develop
products and services that may be more effective than the Company's current or
future 9-1-1 solutions or that the Company's technologies and offerings will not
be rendered obsolete by such developments.

Finally, there are a number of companies that market and sell various
products and services to telecommunications carriers, such as billing software
and advanced telecommunications equipment, that have been broadly adopted by the
Company's customers and potential customers. In addition, vendors of
telecommunications software and hardware in the future may enhance their
products to include functionality that is currently provided by the Company's
solutions. The widespread inclusion of the functionality of the Company's
service offerings as standard features of other telecommunications software or
hardware could render the Company's services obsolete and unmarketable,
particularly if the quality of such functionality were comparable to that of the
Company's services. Furthermore, even if the 9-1-1 functionality provided as
standard features by telecommunications software or networking hardware is more
limited than that of the Company's services, there can be no assurance that a
significant number of customers would not elect to accept more limited
functionality in lieu of purchasing additional products or services. For
example, Lucent Technologies offers carriers software systems with functionality
similar to the Company's services. Many of these larger companies have longer
operating histories, greater name recognition, access to larger customer bases
and significantly greater financial, technical and marketing resources than the
Company. As a result, they may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products and services, than the
Company. If these companies were to introduce products or services that
effectively compete with the Company's service offerings, they could be in a
position to substantially lower the price of their 9-1-1 products and services
or to bundle such products and services with their other product and service
offerings.

For the foregoing reasons, there can be no assurance that the Company will
be able to compete successfully against its current and future competitors.
Increased competition may result in price reductions, reduced gross margins and
loss of market share, any of which could materially and adversely affect the
Company's business, financial condition and results of operations.

Dependence on Proprietary Rights

The Company's success and its ability to compete depends significantly upon
its proprietary rights. The Company relies primarily on a combination of
copyright, trademark and trade secret laws, as well as confidentiality
procedures and contractual restrictions to establish and protect its proprietary
rights. There can be no assurance that such measures will be adequate to protect
the Company's proprietary rights. Further, the Company may be subject to
additional risks as it enters into transactions in foreign countries where
intellectual property laws are not well developed or are difficult to enforce.
Legal protections of the Company's proprietary rights may be ineffective in such
countries. Litigation to defend and enforce the Company's intellectual property
rights could result in substantial costs and diversion of resources, and could
have a material adverse effect on the Company's business, financial condition
and results of operations, regardless of the final outcome of such litigation.
Despite the Company's efforts to safeguard and maintain its proprietary rights,
there can be no assurance that the Company will be successful in doing so or
that the steps taken by the Company in this regard will be adequate to deter
misappropriation or independent third-party development of the Company's
technology, or to prevent an unauthorized third party from copying or otherwise
obtaining and using the Company's technology. There also can be no assurance
that others will not independently develop similar technologies or duplicate any
technology developed by the Company. Any such events could have a material
adverse effect on the Company's business, financial condition and results of
operations.

As the number of entrants to the Company's markets increases and the
functionality of the Company's services and products increases and overlaps with
the products and services of other companies, the Company may become subject to
claims of infringement or misappropriation of the intellectual property rights
of others. In certain of its customer agreements, the Company agrees to
indemnify its customers for any expenses or liabilities resulting from claimed
infringements of patents, trademarks or copyrights of third parties. In certain
limited instances, the amount of such indemnities may be greater than the
revenue the Company may have received from the customer. There can be no
assurance that third parties will not assert infringement or misappropriation
claims against the Company in the future with respect to current or future
product or service offerings. Any claims or litigation, with or without merit,
could be time consuming, result in costly litigation or require the Company to
enter into royalty or licensing arrangements. Such royalty or licensing
arrangements, if required, may not be available on terms acceptable to the

Company, if at all, and could have a material adverse effect on the Company's
business, financial condition and results of operations.

Risks Associated with International Sales

Although substantially all of the Company's revenue is generated from sales
to customers in the United States, the Company has generated revenue in Canada
and intends to enter additional international markets, which will require
significant management attention and financial resources. International sales
are subject to a variety of risks, including difficulties in establishing and
managing international distribution channels, and in translating products and
related materials into foreign languages. International operations are also
subject to difficulties in collecting accounts receivable, staffing, managing
personnel and enforcing intellectual property rights. Other factors that can
adversely affect international operations include fluctuations in the value of
foreign currencies and currency exchange rates, changes in import/export duties
and quotas, introduction of tariff or non-tariff barriers and economic or
political changes in international markets. There can be no assurance that these
factors will not have a material adverse effect on the Company's future
international sales and, consequently, on the Company's business, financial
condition and results of operations. Furthermore, any inability to obtain
foreign regulatory approvals on a timely basis could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview".

Risks Relating to Potential Acquisitions

As part of its overall strategy, the Company regularly evaluates
opportunities to enter into strategic acquisitions, including potential business
combinations and significant investments in complementary companies, assets,
products and technologies, although the Company has no present arrangements,
commitments or agreements with respect to any acquisition. Acquisitions involve
a number of operating risks that could materially adversely affect the Company's
business, financial condition and results of operations, including the diversion
of management's attention to assimilate the operations, products and personnel
of the acquired companies, the amortization of acquired intangible assets, and
the potential loss of key employees of the acquired companies. Furthermore,
acquisitions may involve businesses in which the Company lacks experience.
Because management has limited experience in acquisitions and the Company has no
experience in integrating acquired companies or technologies into its
operations, there can be no assurance that the Company will be able to manage
one or more acquisitions successfully, or that the Company will be able to
integrate the operations, products or personnel gained through any such
acquisitions without a material adverse effect on the Company's business,
financial condition and results of operations.

Year 2000 Capability

The Company uses off-the-shelf and custom software developed internally and
by third parties for its production systems. The Company has completed its
assessment of and begun implementing a plan for the programming and testing of
its internally developed software to make it Year 2000 compliant. In addition,
the Company has identified which of its third party production systems it
believes have date-sensitive applications to determine where Year 2000 issues
may exist. The Company has contacted the third-party suppliers and has received
responses from most of those suppliers, including the suppliers that the Company
considers critical. The Company has received patches for the systems that are
not Year 2000 compliant and has installed approximately half of them. The
Company intends to complete the installation of such patches by the end of the
third quarter of 1999.

results of operations. Certain of the Company's current contracts with its
customers require that the Company warrant Year 2000 capability by a certain
date. Any failure to achieve Year 2000 compliance by such date could have a
material adverse effect on the Company's business, financial condition and
results of operations.

The Company has completed its assessment of its information technology
("IT") and non-IT systems. Non-IT systems include fax machines, photocopiers,
telephone switches, security systems and other common office devices. The
Company's assessment included contacting third party suppliers regarding Year
2000 compliance. Patches are installed or are scheduled to be installed by the
end of the third quarter of 1999. Failure of one or more of these internal
systems to become Year 2000 compliant could impair the Company's ability to
communicate with its customers and perform critical business operations and
could require the Company to process information manually or limit access to
data.

Potential Volatility of Stock Price

Prior to the Company's initial public offering in June 1998, there was no
public market for the Company's Common Stock. Since completion of the Company's
initial public offering, average daily trading volume has been relatively low.
There can be no assurance that an active public market for the Company's Common
Stock will develop or be sustained. The trading price of the Company's Common
Stock could be subject to wide fluctuations in response to variations in
operating results, announcements of technological innovations or new products by
the Company or its competitors, changes in financial estimates by securities
analysts, and other events or factors. In addition, the stock market has
experienced volatility that has particularly affected the market prices of
equity securities of many high technology companies and that often has been
unrelated to the operating performance of such companies. These broad market
fluctuations may materially adversely affect the market price of the Company's
Common Stock.

Control by Existing Stockholders; Effects of Certain Anti-Takeover Provisions

Members of the Board of Directors and the executive officers of the
Company, together with members of their families and entities that may be deemed
affiliates of or related to such persons or entities, beneficially own
approximately 37.2% of the outstanding shares of Common Stock of the Company as
of August 9, 1999. Accordingly, these stockholders are able to influence
election of all members of the Company's Board of Directors and influence the
outcome of corporate actions requiring stockholder approval, such as mergers and
acquisitions. This level of ownership by such persons and entities may have a
significant effect in delaying, deferring or preventing a change in control of
the Company and may adversely affect the voting and other rights of other
holders of Common Stock. Certain provisions of the Company's Amended and
Restated Certificate of Incorporation, Amended and Restated Bylaws, Delaware law
and equity incentive plans also may discourage certain transactions involving a
change in control of the Company. This level of ownership by such persons and
entities, when combined with the ability of the Board of Directors to issue
"blank check" preferred stock without further stockholder approval, may have the
effect of delaying, deferring or preventing a change in control of the Company.

No Dividends

The Company has not paid any cash or other dividends on its Common Stock,
nor does it expect to pay dividends in the foreseeable future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of the Company due to adverse
changes in financial and commodity market prices and rates. The Company is
exposed to market risk in the areas of changes in United States interest rates.
These exposures are directly related to its normal operating and funding
activities. Historically, the Company has not used derivative instruments or
engaged in hedging activities.

INTEREST RATE RISK

The company renewed its line of credit in the second quarter of 1999. The
related interest rate is variable based on the lender's prime rate or the Libor
rate, and, therefore, is affected by changes in market interest rates. At June
30, 1999, no amounts were outstanding under the company's line of credit. In
addition, the Company invests excess funds in high-grade bonds and commercial
paper on which the Company monitors interest rates frequently and as the
investments mature. The Company does not believe that reasonably possible near-
term changes in interest rates will result in a material effect on future
earnings, fair values or cash flows of the Company.

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings.

None.

Item 2 - Changes in Securities and Use of Proceeds.

On June 29, 1998, the Company consummated its initial public offering (the
"Offering") of its common stock, par value $.001 per share (the "Common Stock").
The estimated net offering proceeds to the Company after deducting the foregoing
discounts, commissions, fees and expenses were $25,988,400, of which $3,510,400
relates to the exercise of the underwriters' over-allotment option on July 22,
1998. Through June 30, 1999, the proceeds of the offering have been applied as
follows:

Aggregate offering price $28,980,000

Direct and indirect payment to others for:
Underwriting discounts and commissions 2,028,600
Other offering expenses 963,000
Construction of building and facilities 300,000
Capital lease payment to receive discount 2,878,500
Repayment of indebtedness 4,610,000

None of such payments were direct or indirect payments to directors,
officers, general partners of the Company or their associates or to persons
owning 10% or more of any class of equity securities of the Company or to
affiliates of the Company. The Company expects to use its remaining net proceeds
for product development and general corporate purposes, including working
capital. A portion of the net proceeds also may be used for the acquisition of
businesses, products and technologies that are complementary to those of the
Company. The Company invested approximately $15 million of the offering proceeds
in an investment portfolio consisting mostly of high-grade bonds and commercial
paper.

Item 3 - Defaults on Senior Securities.

None.

Item 4 - Submission of Matters to a Vote of Security Holders.

None.

Item 5 - Other Information.

None.

Item 6 - Exhibits and Reports on Form 8-K.

(a) Exhibits.

None.

(b) Reports on Form 8-K.

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

SCC Communications Corp.
(Registrant)

August 12, 1999 \s\ George K. Heinrichs
- ----------------------- -----------------------------------
Date George K. Heinrichs, President
and Chief Executive Officer

August 12, 1999 \s\ Carol Nelson
- ----------------------- -----------------------------------
Date Carol Nelson, Chief
Financial Officer