<PAGE>   1

    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1999

                                           REGISTRATION STATEMENT NO. 333-

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------

                            MCK COMMUNICATIONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                <C>                                <C>
             DELAWARE                             3661                            06-1555163
   (STATE OR OTHER JURISDICTION       (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)     CLASSIFICATION CODE NUMBER)            IDENTIFICATION NO.)
</TABLE>

                            ------------------------

                             313 WASHINGTON STREET
                          NEWTON, MASSACHUSETTS 02458
                                 (617) 454-6100
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                    REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)

                            ------------------------

                                STEVEN J. BENSON
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                            MCK COMMUNICATIONS, INC.
                             313 WASHINGTON STREET
                          NEWTON, MASSACHUSETTS 02458
                                 (617) 454-6100
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)

                            ------------------------

                                   COPIES TO:

<TABLE>
<S>                                                 <C>
              JOHN J. EGAN III, P.C.                              MICHAEL A. CONZA, ESQ.
               JOHN B. STEELE, ESQ.                           TESTA, HURWITZ & THIBEAULT LLP
              MCDERMOTT, WILL & EMERY                                 125 HIGH STREET
                  28 STATE STREET                               BOSTON, MASSACHUSETTS 02110
         BOSTON, MASSACHUSETTS 02109-1775                             (617) 248-7000
                  (617) 535-4000
</TABLE>

                            ------------------------

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
------------

    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
------------

    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------

    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                            ------------------------

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
                                                                     PROPOSED
                                                                MAXIMUM AGGREGATE           AMOUNT OF
     TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED         OFFERING PRICE(1)        REGISTRATION FEE
------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                     <C>
Common Stock, $.001 par value per share.....................       $61,920,600               $17,214
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee in
    accordance with Rule 457(o) under the Securities Act of 1933.

                            ------------------------

    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                  SUBJECT TO COMPLETION, DATED AUGUST 24, 1999

                                     [LOGO]

                                             SHARES

                                  COMMON STOCK

     MCK Communications, Inc. is offering           shares of its common stock.
This is our initial public offering and no public market currently exists for
our shares. We have applied to have the common stock approved for quotation on
the Nasdaq National Market under the symbol "MCKC." The estimated initial public
offering price will be between $     and $     per share.

                         ------------------------------

                 INVESTING IN THE COMMON STOCK INVOLVES RISKS.
                    SEE "RISK FACTORS" BEGINNING ON PAGE 4.
                         ------------------------------

<TABLE>
<CAPTION>
                                                              PER SHARE       TOTAL
                                                              ---------    -----------
<S>                                                           <C>          <C>
Public Offering Price.......................................   $           $
Underwriting Discounts and Commissions......................   $           $
Proceeds to MCK.............................................   $           $
</TABLE>

     THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

     MCK and certain of our stockholders have granted the underwriters a 30-day
option to purchase up to           additional shares of common stock to cover
over-allotments. BancBoston Robertson Stephens Inc. expects to deliver the
shares of common stock to purchasers on             , 1999.

                         ------------------------------

BANCBOSTON ROBERTSON STEPHENS

                             DAIN RAUSCHER WESSELS
                             A DIVISION OF DAIN RAUSCHER INCORPORATED
                                                               HAMBRECHT & QUIST
               The date of this prospectus is             , 1999
<PAGE>   3

                                   [MCK LOGO]
A leading supplier of remote voice access products that extend the full range of
  features and applications of PBX systems to branch offices and telecommuters
                              over data networks.

                                  CPE DEVICES

SINGLE-USER EXTENDERS provide corporate PBX connectivity
over data networks to telecommuters and remote call center
agents. Single-user models include:
                  [picture of a MCK product (a small black box) and a telephone]

     - EXTender 1000+.  An integrated access device that supports both PBX voice
       and PC data connectivity over a single traditional telephone line.

     - EXTender 3000 Series.  Integrated access devices that support both PBX
       voice and PC data over an ISDN line. The EXTender 3000 is available in
       three data network configurations.

     - EXTender 3200 for IDSL.  An integrated access device, currently in beta
       testing, that delivers voice and PC data over an IDSL network.

     - IP EXTender 4000.  This unit, currently in beta testing, delivers PBX
       voice over IP networks. The product requires an external network
       termination device such as a router, DSL modem or cable modem.

MULTI-USER EXTENDERS are CPE devices that deliver PBX functionality to a single
branch location.

     - Branch Office EXTender 6000. Each unit works with a
       customer's existing data networking equipment to
       provide simultaneous voice connectivity to the
       corporate PBX for up to 8 employees located in a
       branch office. A 4-port daughter card, scheduled for
       release, will enable this product to support 12
       simultaneous users.        [picture of a MCK product (a small black box)]

                         CORPORATE PBX GATEWAY PRODUCTS

PBX GATEWAYS, located at the corporate PBX site, interface
with the line side of the PBX and create seamless
extensions of voice, PBX signaling information and PBX
applications to our remote CPE products. These products
include:

     - PBXtender.  This unit is a high density PBX gateway
       product that can support up to 24-ports per chassis.
       This product supports the EXTender 1000+ and the
       EXTender 3000 series.        [picture of MCK product (a small black box)]

     - Branch Office EXTender 6000.  This unit, located at the corporate PBX
       site, seamlessly extends the functionality of the corporate PBX to a
       Branch Office EXTender 6000 located in a remote office.

     - PBXgateway IP.  This unit, currently in beta testing, seamlessly extends
       the functionality of the corporate PBX to a variety of our IP CPE
       devices, including the Branch Office EXTender 6000, EXTender 3200 for
       ISDL and the IP EXTender 4000. The PBXgateway IP can support up to 12
       simultaneous users across any of these CPE devices over multiple types of
       networks, including DSL and IP networks.
<PAGE>   4

Edgar description for Interior Fold-out Page:

                                   (MCK LOGO)
  CAPTION: EXTENDING THE CORPORATE PBX TO REMOTE LOCATIONS OVER MANY NETWORKS
                               Selected Examples

     The page is divided into three sections, labeled "Corporate location" on
the left, "Multi-user locations" in the center and "Single-user locations" on
the right. The diagram shows a large corporate office with a PBX connected to a
PBXgateway IP and PBXtender. The PBXgateway IP connects to a network termination
devices which connects directly, or through the Internet, to public and private
networks. The PBXtender and a non-MCK data server independently connect to
public and private networks. At the multi-user location, the diagram shows a
network termination device that connects to public and private networks,
specifically ATM, DDS, DSL, Frame and T-1. A Branch Office EXTender 6000
connects to a network termination device and multiple telephone sets connect to
the Branch Office EXTender 6000. In another multi-user location, a network
termination device connects to public and private networks over a fiber network
connection. Two Branch Office EXTender 6000s and an IP EXTender 4000 connect to
this network termination device to show a campus LAN. Multiple telephone sets
connect to the Branch Office EXTender 6000s and one telephone set connects to
the EXTender 4000. At the single-user location, the diagram shows three
single-user locations: (i) a telephone set and a personal computer connected to
an EXTender 1000+; (ii) a telephone set and personal computer connected to an
EXTender 3000, and (iii) a telephone set and personal computer connected to an
EXTender 4000 which is connected to a network termination device; each connected
to public and private networks over a traditional telephone network, ISDN and
cable or DSL networks, respectively.


<PAGE>   5

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.

     UNTIL                , 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

                          ----------------------------

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Prospectus Summary..........................................    1
Risk Factors................................................    4
Note on Forward Looking Statements..........................   13
Use of Proceeds.............................................   13
The Company.................................................   13
Dividend Policy.............................................   13
Capitalization..............................................   14
Dilution....................................................   15
Selected Consolidated Financial Data........................   16
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   17
Business....................................................   26
Management..................................................   43
Certain Transactions........................................   50
Principal Stockholders......................................   52
Description of Capital Stock................................   53
Shares Eligible for Future Sale.............................   56
Underwriting................................................   58
Legal Matters...............................................   59
Experts.....................................................   59
Where You Can Find More Information.........................   60
Index to Consolidated Financial Statements..................  F-1
</TABLE>

                          ----------------------------

     We own or have rights to trademarks that we use in conjunction with the
sale of our products. EXTender, MCK, MCK EXTender, PBXtender, PBXgateway, RVP
and Telebridge are our trademarks. All other trade names and trademarks used in
this prospectus are the property of their respective owners.

                                        i
<PAGE>   6

                      (This page intentionally left blank)
<PAGE>   7

                               PROSPECTUS SUMMARY

     This is only a summary and may not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus carefully, including the "Risk Factors" section and our financial
statements and the notes thereto included elsewhere in this prospectus. Unless
otherwise indicated, this prospectus assumes that the underwriters have not
exercised their option to purchase additional shares and that all shares of
convertible preferred stock have been automatically converted into shares of
common stock, and all common stock share information has been adjusted to
reflect a      for-one stock split of the common stock effected as a dividend on
               , 1999 and the filing of our amended and restated certificate of
incorporation.

                            MCK COMMUNICATIONS, INC.

     MCK Communications is a leading provider of remote voice access products
that enable corporations to seamlessly extend the features and applications of
private branch exchanges, or PBXs, from the corporate office to remote branch
offices and telecommuters over wide area networks, or WANs. Our EXTender
products cost-effectively deliver a unified, enterprise-wide voice network by
enabling the PBX to function as a corporate voice server that transmits
packetized voice and PBX signaling information to remote locations over
corporations' existing data networks. In addition, our products reduce the total
cost of ownership by leveraging corporations' current investment in voice and
data equipment, and streamline network administration through the utilization of
industry standard network management techniques.

     Large corporations are increasingly shifting towards a decentralized
business model of distributed work forces with multiple branch offices and
numerous telecommuters in order to realize the competitive advantages of being
located near key customers, suppliers and partners and to attract qualified
employees. We believe Fortune 5000 businesses maintain approximately 1.6 million
branch offices. According to the Gartner Group, the number of telecommuters
worldwide is expected to grow from 35 million in 1998 to 140 million in 2003.

     As corporations decentralize, they seek to extend their voice and data
networks across multiple locations due to their dependence upon company-wide
communications to facilitate internal collaboration, provide superior customer
service and maintain efficiency and productivity. Advances in data networking
technologies have enabled cost-effective, high-speed remote data access and
communications over local and wide area networks, including virtual private
networks, through the deployment of interoperable equipment from multiple
vendors. In contrast, PBX-based voice networks, which are known for their
reliability and functionality in centralized environments, have not been
efficiently extended from corporate locations to branch offices and
telecommuters due to technical signaling limitations and cost constraints. As a
result, corporations have had to deploy separate voice networks for each remote
location, limiting the effectiveness of corporate communications and increasing
the burden on systems administrators.

     Furthermore, in order to lower costs and simplify network administration,
corporations are increasingly demanding that distributed voice and data services
be offered over one centrally-managed corporate communications infrastructure.
This convergence of voice and data is made possible by the packetization of
voice and advances in Quality of Service which enable the transmission of voice
over private managed data networks and public data networks such as the
Internet. Thus, solutions for the remote voice marketplace must offer a
centrally-managed interface to corporate PBX systems and have the capability of
packetizing and transmitting PBX voice over both traditional circuit-based data
networks and emerging packet networks.

     Our remote voice access solutions enable corporations to realize the
following key benefits:

     - Full-Featured Remote Voice Access.  Our solutions seamlessly provide PBX
       features and applications to branch office employees and telecommuters
       over existing data networks.

     - Digital Line Extension Technology.  Our solutions utilize our proprietary
       hardware and software interfaces to extract voice and PBX signaling
       information from PBX digital line cards, where the rich features and
       applications of PBXs reside, for transmission across WANs.

                                        1
<PAGE>   8

     - Packet Voice Architecture.  Utilizing our proprietary Remote Voice
       Protocol, or RVP, software platform, we packetize voice and PBX signaling
       information extracted from PBX digital line cards for transmission over
       data networks to remote locations.

     - Lower Cost Solution.  Our solutions enable corporations to lower costs,
       including network transmission, network management, equipment and
       infrastructure costs.

     - Compatibility with Leading PBX Manufacturers.  Our solutions are
       compatible with the proprietary PBX protocols of Alcatel, Lucent, NEC and
       Nortel Networks, whose products collectively have a market share of
       approximately 65% in the U.S. PBX market.

     Our objective is to become the leading provider of remote voice access
solutions to Fortune 5000 businesses for their branch offices and telecommuters.
Key components of our strategy include:

     - maintaining our technology leadership in the remote voice access
       marketplace;

     - establishing our Gateway products as platforms for new voice
       applications;

     - expanding our distribution, marketing and technology relationships;

     - working with broadband equipment vendors and next generation service
       providers; and

     - targeting Fortune 5000 corporations.

     We primarily sell our products through an indirect distribution system
including the following channels: original equipment manufacturers and private
label partners, incumbent local exchange carriers, systems integrators and
distributors, telecom and datacom value-added resellers and broadband service
providers. We support our sales channels with our own internal sales
professionals as well as marketing programs, educational programs, and field and
telephone technical support.

     Our principal executive offices are at 313 Washington Street, Newton,
Massachusetts 02458 and our telephone number at that address is (617) 454-6100.
Information contained on our web site at www.mck.com does not constitute part of
this prospectus.

                                  THE OFFERING

Common stock offered by MCK.............               shares

Common stock to be outstanding after the
offering................................               shares(1)

Use of proceeds.........................     We expect to use the net proceeds
                                             to redeem our outstanding
                                             redeemable preferred stock, to
                                             repay our subordinated
                                             indebtedness, and for working
                                             capital and general corporate
                                             purposes. See "Use of Proceeds."

Proposed Nasdaq National Market
Symbol..................................     MCKC
---------------
(1) Based on the number of shares outstanding as of September 30, 1999.
    Excludes:

    -       shares issuable upon exercise of outstanding options at a weighted
      average exercise price of $    per share; and

    -       additional shares of common stock reserved for future issuance under
      our 1999 Stock Option and Grant Plan. See "Management -- Executive
      Compensation," "-- 1996 Stock Option Plan" and "-- 1999 Stock Option and
      Grant Plan."

                                        2
<PAGE>   9

                      SUMMARY CONSOLIDATED FINANCIAL DATA

     The as adjusted consolidated balance sheet data summarized below reflects
the conversion of our convertible preferred stock into                shares of
common stock upon the completion of this offering and the application of the net
proceeds from the sale of                shares of common stock issued hereby at
an assumed offering price of $     per share after deducting the underwriting
discounts and commissions and our estimated offering expenses. The number of
shares used to compute basic and diluted earnings per share gives effect to the
               for           stock split of our common stock effected on
               , 1999, and such information for the years ended April 30, 1995
and 1996 gives effect to the recapitalization that occurred during the year
ended April 30, 1997 as if it had occurred at the beginning of each fiscal year.
See Note 11 of Notes to Consolidated Financial Statements for an explanation of
the number of shares used in computing per share data.

<TABLE>
<CAPTION>
                                                                                               THREE
                                                                                           MONTHS ENDED
                                                     YEARS ENDED APRIL 30,                   JULY 31,
                                        -----------------------------------------------   ---------------
                                         1995      1996      1997      1998      1999      1998     1999
                                        -------   -------   -------   -------   -------   ------   ------
                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)          (UNAUDITED)
<S>                                     <C>       <C>       <C>       <C>       <C>       <C>      <C>
CONSOLIDATED STATEMENT OF OPERATIONS
  DATA:
Revenues..............................  $ 1,810   $ 5,339   $ 5,921   $ 7,876   $14,270   $3,116   $4,523
Cost of goods sold....................      796     2,423     2,313     2,800     5,390    1,188    1,690
                                        -------   -------   -------   -------   -------   ------   ------
Gross profit..........................    1,014     2,916     3,608     5,076     8,880    1,928    2,832
Operating expenses:
  Research and development............      266       344       815     1,758     3,349      751      964
  Sales and marketing.................       --       576     1,145     2,191     3,889      779    1,347
  General and administrative..........      626       319       607     1,485     1,617      391      494
  Transaction-related charges.........       --        --       493        --        --       --       --
                                        -------   -------   -------   -------   -------   ------   ------
      Total operating expenses........      892     1,239     3,060     5,434     8,854    1,922    2,805
                                        -------   -------   -------   -------   -------   ------   ------
Income (loss) from operations.........      122     1,677       547      (358)       26        6       28
Other income (expense)................       12         7      (343)     (595)     (207)    (129)     (95)
                                        -------   -------   -------   -------   -------   ------   ------
Income (loss) before provision for
  income taxes........................      134     1,684       205      (953)     (181)    (123)     (68)
Provision for income taxes............       13       652       302        --        --       --       --
                                        -------   -------   -------   -------   -------   ------   ------
Net income (loss).....................  $   121   $ 1,032   $   (97)  $  (953)  $  (181)  $ (123)  $  (68)
                                        =======   =======   =======   =======   =======   ======   ======

Dividends on preferred stock..........       --        --     1,144     1,380     2,163      443      601
                                        -------   -------   -------   -------   -------   ------   ------
Net income (loss) applicable to common
  shares..............................  $   121   $ 1,032   $(1,241)  $(2,333)  $(2,344)  $ (566)  $ (669)
                                        =======   =======   =======   =======   =======   ======   ======
Basic and diluted net income (loss)
  per common share....................
Shares used in computing basic and
  diluted net income (loss) per common
  share...............................
Pro forma basic and diluted net income
  (loss) per share....................
Shares used in computing pro forma
  basic and diluted net income (loss)
  per share...........................
</TABLE>

<TABLE>
<CAPTION>
                                                                   JULY 31, 1999
                                                              -----------------------
                                                               ACTUAL     AS ADJUSTED
                                                              --------    -----------
                                                                    (UNAUDITED)
<S>                                                           <C>         <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents........................................  $  3,596
Working capital.............................................     5,621
Total assets................................................     9,813
Long-term debt..............................................     2,654
Redeemable preferred stock..................................    24,003
Redeemable convertible preferred stock......................     4,799
Total common stockholders' deficit..........................   (24,750)
</TABLE>

                                        3
<PAGE>   10

                                  RISK FACTORS

     You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.

     This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.

WE DERIVE ALMOST ALL OF OUR REVENUES FROM A SMALL NUMBER OF CUSTOMERS AND OUR
REVENUES MAY DECLINE SIGNIFICANTLY IF ANY MAJOR CUSTOMER CANCELS OR DELAYS A
PURCHASE OF OUR PRODUCTS

     We have historically derived the majority of our revenues from a small
number of customers, most of whom resell our products to end users. Our business
would be seriously harmed if we do not generate as much revenue as expected from
these customers or if any of these customers cease purchasing our products,
particularly Lucent. For the fiscal year April 30, 1999, Lucent accounted for
46.7% of our revenues, and our ten largest customers, including Lucent,
accounted for 78.7% of our revenues. None of these large customers is obligated
to purchase additional products or services. Accordingly, we cannot be certain
that present or future customers will not terminate their purchasing
arrangements with us or significantly reduce or delay their orders. Any
termination, change, reduction or delay in orders could seriously harm our
business, financial condition and results of operations. Accordingly, unless and
until we diversify and expand our customer base, our future success will
significantly depend upon the timing and size of future purchases by our largest
customers and, in particular:

     - the product requirements of these customers;

     - the financial and operational success of these customers; and

     - the success of the underlying products and services that our products
       support.

     The loss of any one of our major customers or the delay of significant
orders from such customers, even if only temporary, could reduce or delay our
recognition of revenues, harm our reputation in the industry and reduce our
ability to accurately predict cash flow, and, as a consequence, could materially
adversely affect our business, financial condition and results of operations.

OUR ABILITY TO SUSTAIN OR GROW OUR BUSINESS MAY BE HARMED IF WE ARE UNABLE TO
DEVELOP AND MAINTAIN RELATIONSHIPS WITH KEY PBX VENDORS

     Our success will depend to a significant degree upon our relationships with
leading PBX vendors, including those with Alcatel, Lucent, NEC and Nortel
Networks. The PBX systems sold by these vendors account for approximately 65% of
the U.S. market for corporate PBX sales, and approximately 99% of our revenues
for fiscal year 1999 were attributable to products which interoperate with PBX
systems offered by these vendors. We may not have access in the future to the
proprietary protocols for the major PBX systems marketed by those vendors, which
access may be essential to ensure the continued interoperability of our
products. Moreover, there is no assurance that we will be able to develop
products that interoperate with PBX systems offered by other vendors.
Additionally, the standards for IP telephony equipment and data networks are
evolving and there is no assurance that our products will be compatible with any
new technology standards that may emerge. If we are unable to provide our
customers with interoperable solutions, they may make purchases from vendors who
provide the requisite product interoperability. This could seriously harm our
business, financial condition and results of operations.

     In addition, we currently have varying distribution, marketing and
development arrangements with the PBX vendors noted above. These relationships
are not exclusive and there is no assurance that we will continue to enjoy the
support and cooperation that we have historically experienced from these parties
or

                                        4
<PAGE>   11

their distribution channels. Moreover, it is possible that the PBX vendors may
seek to offer broader product lines and solutions that are competitive with our
products.

UNLESS WE ARE ABLE TO KEEP PACE WITH THE RAPIDLY CHANGING PRODUCT REQUIREMENTS
OF OUR CUSTOMERS, WE WILL NOT BE ABLE TO SUSTAIN OR GROW OUR BUSINESS

     The telecommunications market is characterized by rapid technological
advances, evolving industry standards, changes in end-user requirements,
frequent new product introductions and evolving offerings by telecommunications
service providers. We believe our future success will largely depend on our
ability to anticipate or adapt to such changes and to offer, on a timely basis,
products that meet customer demands. Our failure to produce technologically
competitive products in a cost-effective manner or on a timely basis would
seriously harm our business, financial condition and results of operations.

INTENSE COMPETITION IN THE MARKET FOR REMOTE VOICE SOLUTIONS COULD PREVENT US
FROM INCREASING OR SUSTAINING REVENUE AND PREVENT US FROM ACHIEVING OR
SUSTAINING PROFITABILITY

     The market for remote voice solutions is highly competitive. If we are
unable to compete effectively in this market, our revenues and future
profitability would be materially adversely affected. Many of our current and
potential competitors have significantly greater sales and marketing, technical,
manufacturing, financial and other resources, more established distribution
channels and stronger relationships with service providers. For instance, in
June 1999 Nortel Networks announced its intention to develop new products which
will compete directly with our products. Moreover, our competitors may foresee
the course of market developments more accurately than we do and could in the
future develop new technologies that compete with our products or even render
our products obsolete. Realizing and maintaining technological advantages over
our competitors will require a continued high level of investment in research
and development, sales and marketing and customer support. Due to the
opportunities in and the rapidly evolving nature of the market in which we
compete, additional competitors with significant market presence and financial
resources, including large communications equipment manufacturers, may enter our
market, thereby further intensifying competition. We may not have sufficient
resources to continue to make the investments or achieve the technological
advances necessary to compete successfully with existing competitors or new
competitors.

     Increased competition is likely to result in price reductions, reduced
gross margins, longer sales cycles and loss of market share, any of which would
seriously harm our business and results of operations. We cannot be certain that
we will be able to compete successfully against current or future competitors or
that competitive pressures will not seriously harm our business.

FUTURE CONSOLIDATION IN THE COMMUNICATIONS EQUIPMENT INDUSTRY MAY INCREASE
COMPETITION THAT COULD HARM OUR BUSINESS

     The markets in which we compete are characterized by increasing
consolidation both within the communications sector and by companies combining
or acquiring communications assets, as exemplified by the acquisitions of Ascend
by Lucent and Diamond Lane by Nokia. We may not be able to compete successfully
in an increasingly consolidated industry. Increased competition and
consolidation in our industry could require that we reduce the prices of our
products and may result in our loss of market share, which would materially
adversely affect our business, financial condition and results of operations.
Additionally, because we are now, and may in the future be, dependent on certain
strategic relationships with third parties in our industry, any consolidation
involving these parties could reduce the demand for our products and otherwise
harm our business prospects.

FLUCTUATIONS IN OUR QUARTERLY RESULTS COULD CAUSE THE MARKET PRICE OF OUR COMMON
STOCK TO FALL

     Our quarterly operating results have varied in the past and are likely to
vary in the future. It is possible that our revenues and operating results may
be below the expectations of securities analysts and investors in future
quarters. If we fail to meet or surpass the expectations of securities analysts
or investors,

                                        5
<PAGE>   12

the market price of our common stock will most likely fall. Fluctuations in our
quarterly results could be caused by a number of factors, including, but not
limited to:

     - the timing and amount of, or cancellation or rescheduling of, orders for
       our products, particularly large orders from our key customers;

     - our ability to develop, introduce, ship and support new products and
       product enhancements, and manage product transitions;

     - new product introductions and announcements, and reductions in the prices
       of products offered by our competitors;

     - our ability to sustain our technology relationships, particularly with
       the major PBX manufacturers and service providers;

     - availability and changes in the prices of components provided by third
       parties;

     - our ability to attain and maintain production volumes and quality levels
       for our products;

     - the mix of products sold and the mix of distribution channels through
       which they are sold;

     - fluctuations in demand for our products;

     - costs relating to possible acquisitions and integration of technologies
       or businesses;

     - telecommunications market conditions and economic conditions generally;

     - our ability to hire, train, integrate and retain new personnel; and

     - changes in the level of our operating expenses.

     Given that any one or more of these or other factors could have an adverse
effect on our business, the prediction of future quarterly results is difficult
and uncertain. In addition, some of our operating expenses are relatively fixed
in advance of any particular quarter. As a result, we may not be able to reduce
our operating costs in response to unanticipated reductions in our revenues or
the demand for our products.

OUR DEPENDENCE ON INDEPENDENT MANUFACTURERS AND SUPPLIERS COULD RESULT IN
PRODUCT DELIVERY DELAYS

     We currently use two independent manufacturers, Celestica and Electronic
Manufacturing Group, to manufacture all of our products. We are also
contemplating using an additional manufacturer to manufacture our multi-user
products. Our reliance on independent manufacturers involves a number of risks,
including the absence of adequate capacity, the unavailability of or
interruptions in access to certain process technologies and reduced control over
delivery schedules. If our manufacturers are unable or unwilling to continue
manufacturing our products and components in required volumes, we will have to
identify acceptable alternative manufacturers, which could take in excess of six
months. Furthermore, the use of a new manufacturer may cause significant
interruptions in supply if the new manufacturer has difficulty manufacturing
products to our specifications. Further, the introduction of a new manufacturer
may increase the variance in the quality of our products. In addition, we rely
upon third-party suppliers of specialty components and intellectual property
used in our products. It is possible that a component needed to complete the
manufacture of our products may not be available to us at acceptable prices or
on a timely basis, if at all. Inadequate supplies of components, or the loss of
intellectual property rights, could affect our ability to deliver products to
our customers. Any significant interruption in the supply of our products would
result in the reduction of product sales to customers, which in turn could have
a material adverse effect on our business, financial condition and results of
operations.

OUR ABILITY TO SUSTAIN OR GROW OUR BUSINESS MAY BE HARMED IF WE ARE UNABLE TO
PROVIDE ADEQUATE CUSTOMER SUPPORT

     Our ability to continue to grow and to retain current and future customers
depends in part upon the quality of our customer support operations. We have
recently entered into an arrangement with a third-

                                        6
<PAGE>   13

party customer support firm to provide some of our customer support functions.
Failure to offer adequate customer support, either directly or through third
parties, or failure to properly integrate third-party services into our customer
support framework could materially and adversely affect our reputation and cause
demand for our products to decline.

WE ARE DEPENDENT ON MARKET ACCEPTANCE OF OUR PRODUCTS

     Market acceptance of our products is critical to our future success.
Factors that may affect the market acceptance of our products include:

     - continued market acceptance of PBX technology;

     - the performance, price and total cost of ownership of our products;

     - the availability and price of competing products and technologies; and

     - the efforts and success of our indirect distribution channels.

     Many of these factors are beyond our control. We may experience failure or
delays in market acceptance of our products. Failure of our existing or future
products to maintain and achieve meaningful levels of market acceptance would
materially adversely affect our business, financial condition and results of
operations.

BECAUSE SUBSTANTIALLY ALL OF OUR REVENUES ARE DERIVED FROM SALES OF A SMALL
NUMBER OF PRODUCTS, OUR FUTURE OPERATING RESULTS WILL BE DEPENDENT ON SALES OF
THESE PRODUCTS

     We currently derive substantially all of our revenues from our product
family of remote voice access equipment, and we expect that this concentration
will continue in the foreseeable future. The market may not continue to demand
our products, and we may not be successful in marketing any new or enhanced
products. Any reduction in the demand for our products or our failure to
successfully develop or market new or enhanced products could materially
adversely affect our operating results and cause the price of our common stock
to decline. In addition, our branch office products have only recently been
introduced to the market, and we are expecting that these products will account
for a substantial portion of our revenues for the foreseeable future. Factors
that could affect sales of our products include:

     - the demand for remote access voice solutions;

     - the successful development, introduction and market acceptance of new and
       enhanced products that address customer requirements;

     - product introductions or announcements by our competitors;

     - price competition in our industry; and

     - technological change.

IF WE FAIL TO DEVELOP AND EXPAND OUR INDIRECT DISTRIBUTION CHANNELS, OUR
BUSINESS COULD SUFFER

     Our product distribution strategy focuses primarily on continuing to
develop and expand our indirect distribution channels, maintain our
relationships with large PBX vendors and telecommunications service providers,
and expand our field sales organization. If we fail to develop and cultivate
relationships with significant indirect distribution channels, or if these
distribution channels are not successful in their sales efforts, our product
sales may decrease and our operating results may suffer. Many of our indirect
distribution channels also sell products that compete with our products, and
none of our strategic or reseller arrangements are exclusive. In addition, our
operating results will likely fluctuate significantly depending on the timing
and amount of orders from our indirect distribution channels. We cannot assure
you that our indirect distribution channels will market our products effectively
or continue to devote the resources necessary to provide us with effective
sales, marketing and technical support.

                                        7
<PAGE>   14

     In order to support and develop leads for our indirect distribution
channels, we plan to significantly expand our field sales staff. We cannot
assure you that this internal expansion will be successfully completed, that the
cost of this expansion will not exceed the revenues generated or that our
expanded sales and support staff will be able to compete successfully against
the significantly more extensive and well-funded sales and marketing operations
of many of our current or potential competitors. Our inability to effectively
develop and expand our distribution channels or manage the expansion of our
sales and support staff would adversely affect our ability to grow and increase
revenues.

OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL SHARES AT OR
ABOVE THE OFFERING PRICE

     There has previously not been a public market for our common stock. We
cannot predict the extent to which investor interest in us will lead to the
development of a trading market or how liquid that market might become. The
initial public offering price for the shares will be determined by negotiations
between us and the representatives of the underwriters and may not be indicative
of prices that will prevail in the trading market. The trading price of our
common stock could be subject to wide fluctuations in response to factors such
as:

     - actual or anticipated variations in quarterly operating results;

     - announcements of technological innovations;

     - general technology or economic trends;

     - revenues and operating results failing to meet or surpass the
       expectations of securities analysts or investors in any quarter;

     - changes in general market conditions;

     - changes in financial estimates by securities analysts;

     - announcements of significant acquisitions, strategic partnerships, joint
       ventures or capital commitments by us or our competitors;

     - additions or departures of key personnel;

     - the demand for our common stock;

     - the number of market makers for our common stock;

     - sales of a large number of shares of our common stock in the public
       market after this offering or the perception that such sales could occur;
       and

     - other events or factors, many of which are beyond our control.

     In addition, the stock market in general, and the Nasdaq National Market
and technology companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of such companies. The trading prices of many technology
companies' stocks are at or near historical highs and these trading prices are
substantially above historical levels. These trading prices may not be
sustained. These broad market and industry factors may materially adversely
affect the market price of our common stock, regardless of our actual operating
performance. In the past, following periods of volatility in the market price of
a company's securities, securities class-action litigation has often been
instituted against such companies. Such litigation, if instituted, could result
in substantial costs and a diversion of management's attention and resources,
which would materially adversely affect our business, financial condition and
results of operations.

SALES TO CUSTOMERS BASED OUTSIDE THE UNITED STATES HAVE HISTORICALLY ACCOUNTED
FOR A SIGNIFICANT PORTION OF OUR REVENUES, WHICH EXPOSES US TO RISKS INHERENT IN
INTERNATIONAL OPERATIONS

     International sales represented 18.3% of our revenues for the fiscal year
ended April 30, 1999, and 13.5% of our revenues for the fiscal quarter ended
July 31, 1999. We expect sales to international markets

                                        8
<PAGE>   15

to increase as a percentage of revenues in the future. International sales are
subject to a number of risks, including:

     - changes in foreign government regulations and communications standards;

     - export license requirements;

     - currency fluctuations, tariffs and taxes;

     - other trade barriers;

     - difficulty in collecting accounts receivable;

     - difficulty in managing foreign operations; and

     - political and economic instability.

     If the relative value of the U.S. dollar in comparison to the currency of
our foreign customers should increase, the resulting effective price increase of
our products to these foreign customers could result in decreased sales. In
addition, to the extent that our customers may be impacted by general economic
downturns, the ability of these customers to purchase our products could be
adversely affected. Payment cycles for international customers are typically
longer than those for customers in the United States. We cannot assure you that
foreign markets for our products will not develop more slowly than currently
anticipated.

     We anticipate that our non-Canadian, foreign sales will generally be
invoiced in U.S. dollars, and we do not currently plan to engage in foreign
currency hedging transactions. As we expand our international operations,
however, we may allow payment in foreign currencies, and exposure to losses in
foreign currency transactions may increase. We may choose to limit any currency
exposure through the purchase of forward foreign exchange contracts or other
hedging strategies. We cannot assure you that any currency hedging strategy we
may adopt would be successful in avoiding exchange related losses.

OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY MAY ADVERSELY AFFECT
OUR ABILITY TO COMPETE

     Our success and ability to compete is dependent in part upon our
proprietary technology. Any infringement of our proprietary rights could result
in significant litigation costs, and any failure to adequately protect our
proprietary rights could result in our competitors offering similar products,
potentially resulting in loss of a competitive advantage and decreased revenues.
We rely on a combination of copyright, trademark, trade secret and other
intellectual property laws, as well as confidentiality agreements and licensing
arrangements, to establish and protect our proprietary rights. We presently have
no patents. Despite our efforts to protect our proprietary rights, existing
copyright, trademark and trade secret laws afford only limited protection. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States. Attempts may be
made to copy or reverse engineer aspects of our products or to obtain and use
information that we regard as proprietary. Accordingly, we may not be able to
protect our proprietary rights against unauthorized third-party copying or use.
Furthermore, policing the unauthorized use of our products is difficult. Some of
our contractual arrangements provide third parties with access to our source
code and other intellectual property upon the occurrence of specified events.
Such access could enable these third parties to use our intellectual property
and source code to develop and manufacture competing products, which would
adversely affect our performance and ability to compete. Litigation may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary
rights of others. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our future
operating results.

CLAIMS ALLEGING INFRINGEMENT OF A THIRD PARTY'S INTELLECTUAL PROPERTY COULD
RESULT IN SIGNIFICANT EXPENSE TO US AND RESULT IN OUR LOSS OF SIGNIFICANT RIGHTS

     The telecommunications industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of patent
infringement. From time to time, third parties may assert

                                        9
<PAGE>   16

patent, copyright, trademark and other intellectual property rights to
technologies that are important to our business, and this risk may increase as
the number of entrants in our market increases and the functionality of our
products is enhanced and overlaps with the products of other companies. Any
claims against us or any purchaser or user of our products asserting that our
products infringe or may infringe proprietary rights of third parties, if
determined adversely to us, could have a material adverse effect on our
business, financial condition or results of operations. Any claims, with or
without merit, could be time-consuming, result in costly litigation, divert the
efforts of our technical and management personnel, cause product shipment
delays, disrupt our relationships with our customers or require us to enter into
royalty or licensing agreements, any of which could have a material adverse
effect upon our operating results. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to us, if at all. Legal
action claiming patent infringement may be commenced against us. We cannot
assure you that we would prevail in such litigation given the complex technical
issues and inherent uncertainties in patent litigation. In the event a claim
against us is successful and we cannot obtain a license to the relevant
technology on acceptable terms, license a substitute technology or redesign our
products to avoid infringement, our business, financial condition and results of
operations would be materially adversely affected.

IF OUR PRODUCTS CONTAIN DEFECTS, WE MAY BE SUBJECT TO SIGNIFICANT LIABILITY
CLAIMS FROM OUR CUSTOMERS AND THE END USERS OF OUR PRODUCTS AND INCUR
SIGNIFICANT UNEXPECTED EXPENSES AND LOST SALES

     Our products have in the past contained, and may in the future contain,
undetected or unresolved errors when first introduced or as new versions are
released. Despite extensive testing, errors, defects or failures may be found in
our current or future products or enhancements after commencement of commercial
shipments. If this happens, we may experience delay in or loss of market
acceptance and sales, product returns, diversion of development resources,
injury to our reputation or increased service and warranty costs, any of which
could have a material adverse effect on our business, financial condition and
results of operations. For example, a defect in our EXTender 3000E product
caused us to cease shipments of that product for a period of time to enable us
to correct the defect. Moreover, because our products are designed to provide
critical communications services, we may receive significant liability claims.
Our agreements with customers typically contain provisions intended to limit our
exposure to liability claims. These limitations may not, however, preclude all
potential claims resulting from a defect in one of our products. Although we
maintain product liability insurance covering certain damages arising from the
implementation and use of our products, our insurance may not cover any claims
sought against us. Liability claims could require us to spend significant time
and money in litigation or to pay significant damages. As a result, any such
claims, whether or not successful, could seriously damage our reputation and our
business.

WE MAY HAVE DIFFICULTY IDENTIFYING THE SOURCE OF THE PROBLEM WHEN THERE IS A
PROBLEM IN A NETWORK

     Our products must successfully integrate with products from other vendors,
such as traditional telephone systems. As a result, when problems occur in a
network, it may be difficult to identify the source of the problem. The
occurrence of hardware and software errors, whether caused by our products or
another vendor's products, may result in the delay or loss of market acceptance
of our products and any necessary revisions may force us to incur significant
expenses. The occurrence of some of these types of problems may seriously harm
our business, financial condition and results of operations.

WE CONTINUE TO SIGNIFICANTLY EXPAND OUR OPERATIONS AND OUR FAILURE TO MANAGE
GROWTH COULD HARM OUR BUSINESS AND ADVERSELY AFFECT OUR RESULTS OF OPERATIONS
AND FINANCIAL CONDITION

     We have significantly expanded our operations, including the number of our
employees, the breadth of our product offerings and the geographic scope of our
activities. At July 31, 1999, we employed 80 employees. During the twelve months
ended July 31, 1999, we hired 28 new employees and we expect the number of our
employees to increase significantly in the future. Further significant expansion
will likely be necessary to address potential growth in our customer base and
market opportunities. In addition, substantially all of our senior management
have been with us for approximately two years. Any failure to

                                       10
<PAGE>   17

manage growth effectively could harm our business and adversely affect our
financial condition and operating results. We cannot assure you that we will be
able to do any of the following activities, which we believe are essential to
successfully manage the anticipated growth of our operations:

     - improve our existing and implement new operations, financial and
       management information controls, reporting systems and procedures;

     - hire, train and manage additional qualified personnel;

     - expand and upgrade our core technologies; and

     - effectively manage multiple relationships with our customers, suppliers
       and other third parties.

IF WE LOSE KEY PERSONNEL, WE MAY NOT BE ABLE TO SUCCESSFULLY OPERATE OUR
BUSINESS

     Our success depends to a significant degree upon the continued
contributions of our senior sales, engineering and management personnel, many of
whom perform important management functions and would be difficult to replace.
Specifically, we believe that our future success is highly dependent on Steven
J. Benson and other senior management personnel. The loss of the services of any
key personnel, particularly senior management and engineers, could materially
adversely affect our business, financial condition and results of operations.

IF WE ARE UNABLE TO RETAIN AND HIRE ADDITIONAL QUALIFIED PERSONNEL AS NECESSARY,
WE MAY NOT BE ABLE TO SUCCESSFULLY ACHIEVE OUR OBJECTIVES

     We have experienced growth in revenues and expansion of our operations,
which has placed significant demands on our management, engineering staff and
facilities. Continued growth will also require us to hire more engineering,
sales and administrative personnel. We may not be able to attract and retain the
necessary personnel to accomplish our business objectives and we may experience
constraints that will adversely affect our ability to satisfy customer demand in
a timely fashion or to support our customers and operations. We have at times
experienced, and continue to experience, difficulty in recruiting qualified
personnel. Recruiting qualified personnel is an intensely competitive and
time-consuming process. New sales personnel and marketing personnel will require
training and take time to achieve full productivity. In addition, the design and
installation of telephony solutions can be complex. Accordingly, we need highly
trained professional services and customer support personnel. We cannot be
certain that we will successfully attract and retain additional qualified
personnel. In addition, our key person life insurance policy, covering some of
our key employees, may be insufficient to cover the costs associated with the
loss of one of these employees.

IF WE OR OUR KEY SUPPLIERS OR CUSTOMERS FAIL TO BE YEAR 2000 COMPLIANT, OUR
BUSINESS MAY BE SEVERELY DISRUPTED AND OUR RESULTS OF OPERATIONS MAY BE
MATERIALLY ADVERSELY AFFECTED

     The Year 2000 problem creates a risk for us. Although most of our products
do not incorporate internal clocks, if our remaining products or our internal
computer systems do not correctly recognize date information when the year
changes to 2000, there could be an adverse impact on our operations. The risk
exists primarily in four areas:

     - potential warranty or other claims from our customers, which may result
       in significant expense to us;

     - failures of systems we use to run our business, which could disrupt our
       business operations;

     - failures of systems used by our suppliers and contract manufacturers,
       which could delay or affect the quality of our products; and

                                       11
<PAGE>   18

     - the potential for failures of our products, particularly our central
       office-based systems, due to Year 2000 problems associated with products
       manufactured by other equipment vendors used in conjunction with our
       products, which may require that we incur significant unexpected
       expenses.

We are currently evaluating our exposure in all of these areas.

     We are in the process of conducting a comprehensive inventory and
evaluation of the information systems used to run our business. We intend to
upgrade or replace systems which are identified as non-compliant. For the Year
2000 non-compliance issues identified to date, the cost of remediation is not
expected to be material to our operating results. If implementation of
replacement systems is delayed, however, or if significant new non-compliance
issues are identified, our business, financial condition or results of
operations could be materially adversely affected.

     We intend to contact our critical suppliers and contract manufacturers to
determine whether their operations and the products and services they provide
are Year 2000 compliant. Where practicable, we will attempt to mitigate our
risks with respect to the failure of our suppliers and contract manufacturers to
be prepared for any Year 2000 problems. However, failures remain a possibility
and could have a material adverse effect on our business, financial condition or
results of operations.

     In addition, litigation regarding Year 2000 compliance issues is expected
to escalate. For these reasons, the impact of customer claims could have a
material adverse effect on our business, financial condition or results of
operations.

CONTROL BY EXISTING STOCKHOLDERS MAY LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME
OF DIRECTOR ELECTIONS AND OTHER MATTERS REQUIRING STOCKHOLDER APPROVAL

     Upon completion of this offering, our executive officers, directors and
principal stockholders and their affiliates will own                shares, or
approximately      % of the outstanding shares of common stock (     % if the
underwriters' over-allotment option is exercised in full). These stockholders,
if acting together, would be able to significantly influence all matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions. This
concentration of ownership could have the effect of delaying or preventing a
change in our control or otherwise discouraging a potential acquiror from
attempting to obtain control of us, which in turn could have a material adverse
effect on the market price of the common stock or prevent our stockholders from
realizing a premium over the market prices for their shares of common stock. For
information about the ownership of common stock by our executive officers,
directors and principal stockholders please refer to "Principal Stockholders."

A PORTION OF THE PROCEEDS FROM THE OFFERING WILL BENEFIT OUR EXISTING
STOCKHOLDERS AND WILL NOT BE AVAILABLE TO FUND WORKING CAPITAL OR CAPITAL
EXPENDITURES

     Approximately $27.3 million of the estimated $          million in net
proceeds from the offering will be used to redeem our outstanding redeemable
preferred stock and retire our subordinated debt. See "Use of Proceeds" and
"Certain Transactions."

PROVISIONS OF DELAWARE LAW AND OF OUR CHARTER AND BY-LAWS MAY MAKE A TAKEOVER
MORE DIFFICULT

     Provisions in our certificate of incorporation and by-laws and in Delaware
corporate law may make it difficult and expensive for a third party to pursue a
tender offer, change in control or takeover attempt that is opposed by our
management. Public stockholders who might desire to participate in such a
transaction may not have an opportunity to do so, and the ability of public
stockholders to change our management could be substantially impeded by these
anti-takeover provisions. For example, we have a staggered board of directors
and the right under our charter documents to issue preferred stock without
further stockholder approval, which provisions could adversely affect the
holders of our common stock.

                                       12
<PAGE>   19

                       NOTE ON FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify
forward-looking statements. This prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding the
growth in the number of branch offices and telecommuters. You should not place
undue reliance on these forward-looking statements, which apply only as of the
date of this prospectus. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us and described in the preceding pages and elsewhere in this
prospectus.

                                USE OF PROCEEDS

     We estimate that the net proceeds to us from the sale of the common stock
will be approximately $          million, at an assumed initial offering price
of $          per share and after deducting the estimated underwriting discounts
and commissions and offering expenses payable by us in connection with the
offering. If the underwriters' over-allotment option is exercised in full, we
estimate that our net proceeds will be approximately $          million. We
expect to use substantially all of these estimated net proceeds as follows:

     - make a mandatory redemption payment with respect to our Series A
       Redeemable Preferred Stock upon consummation of the offering in an
       aggregate amount of approximately $19.0 million, which represents a
       redemption payment of approximately $15.0 million plus accrued dividends
       on the preferred stock, which amounted to approximately $4.0 million as
       of September 30, 1999;

     - make a mandatory redemption payment with respect to our Series C
       Redeemable Preferred Stock upon consummation of the offering in an
       aggregate amount of approximately $3.2 million, which represents a
       redemption payment of approximately $2.9 million plus accrued dividends
       on the preferred stock, which amounted to approximately $300,000 as of
       September 30, 1999;

     - make a mandatory redemption payment with respect to the Series E
       Redeemable Preferred Stock of our subsidiary, MCK Telecommunications,
       upon consummation of the offering in an aggregate amount of approximately
       $2.6 million, which represents a redemption payment of approximately $2.0
       million plus accrued dividends on the preferred stock which amounted to
       approximately $600,000 as of September 30, 1999;

     - repay $2.5 million in principal amount of the subordinated indebtedness
       held by certain of the holders of the Series A Redeemable Preferred
       Stock, which debt bears interest at a rate of 12.5% annually, and which
       must be repaid upon the completion of this offering; and

     - working capital and general corporate purposes.

                                  THE COMPANY

     We are a Delaware corporation and were formed in August 1999. Our indirect
subsidiary, MCK Telecommunications, was incorporated in Canada in 1989. As a
result of our June 1996 recapitalization, MCK Telecommunications became a
wholly-owned subsidiary of MCK Communications, Inc., a Nevada corporation. As a
result of a migratory merger effected in August 1999, the Nevada corporation
became our wholly-owned subsidiary.

                                DIVIDEND POLICY

     We have never declared or paid cash dividends on our capital stock. We
currently intend to retain any future earnings to fund the development and
growth of our business and do not currently anticipate paying any cash dividends
in the foreseeable future. Future dividends, if any, will be determined by our
Board of Directors.

                                       13
<PAGE>   20

                                 CAPITALIZATION

     The following table sets forth our capitalization as of July 31, 1999:

     - on an actual basis;

     - on a pro forma basis to reflect the conversion of all outstanding shares
       of redeemable convertible preferred stock into           shares of common
       stock; and

     - on a pro forma as adjusted basis to reflect the sale of the common stock
       in this offering at an assumed initial public offering price of
       $          per share, after deduction of estimated underwriting discounts
       and commissions and our estimated offering expenses and the use of net
       proceeds as described in "Use of Proceeds."

The adjusted information set forth below is unaudited and should be read in
conjunction with our Consolidated Financial Statements and Notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                                      AS OF JULY 31, 1999
                                                              -----------------------------------
                                                                                       PRO FORMA
                                                              ACTUAL     PRO FORMA    AS ADJUSTED
                                                              -------    ---------    -----------
                                                                        (IN THOUSANDS)
<S>                                                           <C>        <C>          <C>
Subordinated debt...........................................
Series A redeemable preferred stock, $0.001 par value per
  share: shares authorized, issued and outstanding, actual
  and pro forma; no shares authorized, issued or outstanding
  pro forma as adjusted.....................................
Series B redeemable convertible preferred stock, $0.001 par
  value per share; shares authorized, issued and
  outstanding, actual; no shares authorized, issued or
  outstanding, pro forma and pro forma as adjusted..........
Series C redeemable preferred stock, $0.001 par value per
  share; shares authorized, issued and outstanding, actual
  and pro forma; no shares authorized, issued or
  outstanding, pro forma as adjusted........................
Series D redeemable convertible preferred stock, $0.001 par
  value per share; shares authorized, issued and
  outstanding, actual; no shares authorized, issued or
  outstanding, pro forma as adjusted........................
Series E redeemable preferred stock of subsidiary, $0.001
  par value per share; shares authorized, issued and
  outstanding, actual and pro forma; no shares authorized,
  issued or outstanding, pro forma as adjusted..............
Common stockholders' deficit:
Common stock, $.001 par value,           shares authorized;
            shares issued and outstanding, actual;
            shares authorized,           shares issued and
  outstanding, pro forma; and           shares authorized,
            shares issued and outstanding, pro forma as
  adjusted..................................................
Paid-in capital.............................................
Accumulated deficit.........................................
Accumulated other comprehensive income......................
Notes receivable from officers..............................
     Total common stockholders' deficit.....................
          Total capitalization..............................
</TABLE>

     The table above excludes as of July 31, 1999           shares of common
stock issuable upon exercise of outstanding stock options at a weighted average
exercise price of $          per share under our 1996 Stock Option Plan and
          additional shares of common stock available for future grant under our
1999 Stock Option and Grant Plan. See "Management -- Executive Compensation,"
"-- 1996 Stock Option Plan" and "-- 1999 Stock Option and Grant Plan."

                                       14
<PAGE>   21

                                    DILUTION

     As of July 31, 1999, we had a pro forma net tangible book deficit of $24.7
million, or $     per share. Pro forma net tangible book deficit per share is
equal to our total tangible assets less total liabilities, divided by the number
of outstanding shares of our common stock, after giving effect to the conversion
of all outstanding shares of our convertible preferred stock into common stock.
Without taking into account any other changes in pro forma net tangible book
value after July 31, 1999, other than to give effect to our receipt of the
estimated net proceeds from the sale of the                shares of common
stock offered hereby at an assumed initial public offering price of $       per
share and after deducting the estimated underwriting discounts and commissions
and the estimated expenses relating to this offering, our pro forma net tangible
book value as of July 31, 1999 would have been $       , or $       per share.
This represents an immediate increase in pro forma net tangible book value of
$     per share to existing stockholders and an immediate dilution of $     per
share to new investors. If the initial public offering price is higher or lower
than $     per share, the dilution to new stockholders will be higher or lower,
respectively. The following table illustrates this per share dilution:

<TABLE>
    <S>                                                           <C>     <C>
    Assumed initial public offering price per share.............          $
    Pro forma net tangible book deficit per share as of July 31,
      1999......................................................  $
    Increase per share attributable to new investors............
                                                                  ----
    Pro forma net tangible book value per share after the
      offering..................................................
                                                                          ----
    Dilution per share to new investors.........................
                                                                          ====
</TABLE>

     The following table summarizes, as of July 31, 1999, on the pro forma basis
described above, the difference between the number of shares of common stock
purchased from us, the total consideration paid and the average price per share
paid by the existing stockholders and by new public investors purchasing shares
from us before deducting underwriting discounts and commissions and estimated
offering expenses:

<TABLE>
<CAPTION>
                                            SHARES PURCHASED      TOTAL CONSIDERATION
                                           -------------------    -------------------    AVERAGE PRICE
                                            NUMBER     PERCENT    AMOUNT     PERCENT       PER SHARE
                                           --------    -------    -------    --------    -------------
<S>                                        <C>         <C>        <C>        <C>         <C>
Existing stockholders....................                    %    $                %        $
New investors............................
                                           --------     -----     ------      -----
          Total..........................               100.0%    $           100.0%
                                           ========     =====     ======      =====
</TABLE>

     The foregoing computations are based on the number of common shares
outstanding as of July 31, 1999 and exclude:

     -      shares of common stock subject to outstanding options at July 31,
       1999 at a weighted average exercise price of $     per share;

     -      additional shares available for future grant under our 1999 Stock
       Option and Grant Plan.

     To the extent stock is issued upon the exercise of stock options or granted
under our stock option plans, there will be further dilution to new investors.
See "Management -- 1996 Stock Option Plan" and "-- 1999 Stock Option and Grant
Plan" and Note 8 of Notes to Consolidated Financial Statements included
elsewhere in this prospectus.

                                       15
<PAGE>   22

                      SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected consolidated financial data should be read in
conjunction with our Consolidated Financial Statements and related Notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this prospectus. The consolidated statements of
operations data for the fiscal years ended April 30, 1998 and 1999, and the
consolidated balance sheets data at April 30, 1998 and 1999, are derived from
our consolidated financial statements which have been audited by Ernst & Young,
LLP, independent auditors, and are included in this prospectus. The consolidated
statement of operations data for the fiscal year ended April 30, 1997 are
derived from our consolidated financial statements which have been audited by
PricewaterhouseCoopers, LLP, independent auditors, and are included in this
prospectus. The consolidated statements of operations data for the fiscal years
ended April 30, 1995 and 1996, and the consolidated balance sheet data at April
30, 1995, 1996 and 1997 are derived from our audited consolidated financial
statements which are not included in this prospectus. The selected consolidated
financial data for the three months ended July 31, 1998 and 1999 and at July 31,
1999 have been derived from unaudited consolidated financial statements included
elsewhere in this prospectus that include, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for a fair presentation of our financial position and results of
operations for those periods. The historical results are not necessarily
indicative of the operating results to be expected in the future.

<TABLE>
<CAPTION>
                                                                                                       THREE MONTHS
                                                                                                           ENDED
                                                               YEARS ENDED APRIL 30,                     JULY 31,
                                                ---------------------------------------------------   ---------------
                                                  1995        1996       1997      1998      1999      1998     1999
                                                ---------   ---------   -------   -------   -------   ------   ------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>         <C>         <C>       <C>       <C>       <C>      <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues......................................  $   1,810   $   5,339   $ 5,921   $ 7,876   $14,270   $3,116   $4,523
Cost of goods sold............................        796       2,423     2,313     2,800     5,390    1,188    1,690
                                                ---------   ---------   -------   -------   -------   ------   ------
Gross profit..................................      1,014       2,916     3,608     5,076     8,880    1,928    2,832
Operating expenses:
  Research and development....................        266         344       815     1,758     3,349      751      964
  Sales and marketing.........................         --         576     1,145     2,191     3,889      779    1,347
  General and administrative..................        626         319       607     1,485     1,617      391      494
  Transaction-related charges.................         --          --       493        --        --       --       --
                                                ---------   ---------   -------   -------   -------   ------   ------
    Total operating expenses..................        892       1,239     3,060     5,434     8,854    1,922    2,805
                                                ---------   ---------   -------   -------   -------   ------   ------
Income (loss) from operations.................        122       1,677       547      (358)       26        6       28
Other income (expense)........................         12           7      (343)     (595)     (207)    (129)     (95)
                                                ---------   ---------   -------   -------   -------   ------   ------
Income (loss) before provision for income
  taxes.......................................        134       1,684       205      (953)     (181)    (123)     (68)
Provision for income taxes....................         13         652       302        --        --       --       --
                                                =========   =========   =======   =======   =======   ======   ======
Net income (loss).............................  $     121   $   1,032   $   (97)  $  (953)  $  (181)  $ (123)  $  (68)
                                                =========   =========   =======   =======   =======   ======   ======
Dividends on preferred stock..................         --          --     1,144     1,380     2,163      443      601
Net income (loss) applicable to common
  shares......................................  $     121   $   1,032   $(1,241)  $(2,333)  $(2,344)  $ (566)  $ (669)
                                                =========   =========   =======   =======   =======   ======   ======
Basic and diluted net income (loss) per
  share.......................................
Shares used in computing basic and diluted net
  income (loss) per share.....................
Pro forma basic and diluted net income (loss)
  per share...................................
Shares used in computing pro forma basic and
  diluted net income (loss) per share.........
</TABLE>

<TABLE>
<CAPTION>
                                                                   APRIL 30,
                                               --------------------------------------------------    JULY 31,
                                               1995     1996       1997        1998        1999        1999
                                               ----    ------    --------    --------    --------    --------
                                                                       (IN THOUSANDS)
<S>                                            <C>     <C>       <C>         <C>         <C>         <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents.........................  $ 42    $    1    $  3,228    $  1,867    $  3,285    $  3,596
Working capital..............................   335       (97)      4,965       3,545       5,578       5,621
Total assets.................................   726     3,148       6,517       5,665       9,428       9,813
Long-term debt...............................    31        57       5,000       5,000       2,500       2,654
Redeemable preferred stock...................    --       500      16,291      17,538      23,501      24,003
Redeemable convertible preferred stock.......    --        --       1,778       1,911       4,704       4,799
Total common stockholders' equity
  (deficit)..................................   427      (207)    (17,568)    (20,050)    (24,040)    (24,750)
</TABLE>

                                       16
<PAGE>   23

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with our
consolidated financial statements and the related notes included elsewhere in
this prospectus.

OVERVIEW

     MCK Communications is a leading provider of remote voice access products
that enable corporations to distribute the full range of features and
applications of PBX systems to branch offices and telecommuters over data
networks. Our technology makes it possible for corporations to build a unified
voice network by enabling the PBX to act like a corporate voice server that
delivers packetized voice to remote locations over the same wide area network,
or WAN, used for remote data connectivity. We market and distribute our products
through an international network of original equipment manufacturers, or OEMs,
and private label partners, incumbent local exchange carriers, or ILECs, systems
integrators and distributors, telecom and datacom value-added resellers, or
VARs, broadband service providers and, to a lesser extent, through direct sales.
We are headquartered in Newton, Massachusetts and have a development center in
Calgary, Canada.

     From our inception in 1989 through 1993, we were a small company based in
Calgary, Canada that designed and marketed a number of niche, voice products
targeted at the oil industry. Commencing in 1993, we altered our business focus
and began developing remote voice access solutions by leveraging the technology
derived from this initial business. These efforts led to the development of our
EXTender product line. During the period from 1993 through 1995, our operating
activities related primarily to establishing a research and development
organization, developing and testing prototype designs, and developing OEM
relationships. We shipped our first remote voice access product, the EXTender
1000, in February 1995. In June 1996, Summit Partners acquired a majority of our
stock pursuant to a leveraged recapitalization. In June 1997, we recruited a new
chief executive officer and moved our headquarters to Newton, Massachusetts.
Since then we recruited the rest of our management team, focused our research
and development efforts on developing additional remote voice access products
and product enhancements, created a product validation laboratory, built
international indirect sales channels, developed additional technology
relationships, and established our sales, marketing and customer support
organizations. We began shipments of the EXTender 3000 and Branch Office
EXTender 6000 in December 1997 and April 1999, respectively.

     Through the fiscal year ended April 30, 1999, our revenues consisted
primarily of product sales of our single-user remote voice access products and,
to a lesser degree, our digital-to-analog converter products. In fiscal 1999,
Lucent accounted for approximately 46.7% of our revenues. In April 1999, we
released our first multi-user remote voice access product, the Branch Office
EXTender 6000, and we are presently developing additional remote voice access
products that operate over broadband networks. For the foreseeable future, we
anticipate that substantially all of our revenues will be attributable to sales
of our remote voice access products, with sales of digital-to-analog converters
representing a decreasing percentage of our revenues. Among our remote voice
access products, we believe that the multi-user products and next generation
single-user products will represent a substantial and increasing percentage of
our revenues, while the sales of our existing single-user products may decline
as a percentage of our revenues. Going forward, we expect to generate service
and maintenance revenues. Service revenues will be recognized as the services
are performed. Maintenance revenues will be deferred and recognized over the
period of the contract. We do not expect maintenance or service revenues to be a
significant portion of our revenues. Periodically, we have received
non-recurring engineering fees, although such fees have not been material to
date.

     We recognize product revenues upon shipment to the customer. We routinely
analyze and establish, as necessary, reserves at the time of shipment for
product returns and allowances, which amounts to date have not been significant.
As of July 31, 1999, our backlog was $1.4 million. This compares to $350,000 at
the same time last year. We expect to ship the entire backlog during the current
fiscal year. We believe

                                       17
<PAGE>   24

backlog is not an indicator of future success and our contracts generally allow
customers to cancel orders prior to shipment with little or no liability.

     Our cost of goods sold consists primarily of purchased finished products
from Celestica, one of our two contract manufacturers, and purchased
subassemblies that we buy from our other contract manufacturer. We incur
additional costs to test, assemble and prepare these subassemblies for shipment
to our customers. Cost of goods sold also includes certain manufacturing
overhead costs, primarily facilities and related depreciation. In August 1999,
we began offering maintenance and support services to our distribution channels
and end users through Vital Network Services, a third-party support provider. We
expense services provided by Vital Network Services as they are performed.

     Research and development expenses consist primarily of salaries and related
personnel costs and contract engineering, purchased software and prototype
expenses related to the design, development, enhancement and testing of our
remote voice access products. As of July 31, 1999, all research and development
costs have been expensed as incurred. We intend to increase our investment in
research and development, which is critical to achieving our product objectives.
We will also increase our expenditures on our product validation laboratory to
test the interoperability of our products with PBXs and other products. This
competency is becoming increasingly critical to our business as we develop
additional products that function over data networks in conjunction with
third-party data equipment. We expect research and development expenses to
increase significantly in the future as we continue to develop new products and
enhance existing products.

     Sales and marketing expenses consist primarily of salaries, commissions and
related personnel expenses for those engaged in the sales, marketing and support
of products as well as related trade show, promotional and public relations
expenses. We primarily sell our products through an indirect distribution system
that includes the following channels: OEMs and private label partners, ILECs,
systems integrators and distributors, telecom and datacom VARs and broadband
service providers. Our sales force and marketing efforts are primarily directed
at developing brand awareness and supporting our indirect distribution channels.
We intend to pursue sales and marketing campaigns aggressively and increase our
sales force headcount and, therefore, expect these expenses to increase in the
future.

     General and administrative expenses consist primarily of salaries and
related personnel expenses for executive, accounting and administrative
personnel, professional fees and other general corporate expenses. As we add
personnel and incur additional costs related to the growth of our business and
our becoming a public company, we expect that general and administrative
expenses will also increase. Furthermore, we expect to add office space in our
current building in Newton, Massachusetts or move our corporate headquarters to
new office space in the next 6 to 12 months.

RESULTS OF OPERATIONS

     The following table sets forth certain financial data for the periods
indicated as a percentage of revenues.

<TABLE>
<CAPTION>
                                                      YEARS ENDED            THREE MONTHS ENDED
                                                       APRIL 30,                  JULY 31,
                                               -------------------------     -------------------
                                               1997      1998      1999       1998         1999
                                               -----     -----     -----     ------       ------
<S>                                            <C>       <C>       <C>       <C>          <C>
Revenues.....................................  100.0%    100.0%    100.0%    100.0%       100.0%
Cost of goods sold...........................   39.1      35.6      37.8      38.1         37.4
                                               -----     -----     -----     -----        -----
Gross margin.................................   60.9      64.4      62.2      61.9         62.6
Operating expenses:
  Research and development...................   13.8      22.3      23.5      24.1         21.3
  Sales and marketing........................   19.3      27.8      27.3      25.0         29.8
  General and administrative.................   10.3      18.9      11.3      12.6         10.9
  Transaction-related charges................    8.3        --        --        --           --
                                               -----     -----     -----     -----        -----
       Total operating expenses..............   51.7      69.0      62.0      61.7         62.0
                                               -----     -----     -----     -----        -----
</TABLE>

                                       18
<PAGE>   25

<TABLE>
<CAPTION>
                                                      YEARS ENDED            THREE MONTHS ENDED
                                                       APRIL 30,                  JULY 31,
                                               -------------------------     -------------------
                                               1997      1998      1999       1998         1999
                                               -----     -----     -----     ------       ------
<S>                                            <C>       <C>       <C>       <C>          <C>
Income (loss) from operations................    9.2      (4.5)      0.2       0.2          0.6
Other expense, net...........................   (5.8)     (7.6)     (1.5)     (4.1)        (2.1)
                                               -----     -----     -----     -----        -----
Income (loss) before provision for income
  taxes......................................    3.5     (12.1)     (1.3)     (3.9)        (1.5)
Provision for income taxes...................   (5.1)       --        --        --           --
                                               -----     -----     -----     -----        -----
Net loss.....................................   (1.6)%   (12.1)%    (1.3)%     (3.9)%       (1.5)%
                                               =====     =====     =====     =====        =====
</TABLE>

Three months ended July 31, 1998 and 1999

     Revenues.  Revenues increased from $3.1 million for the three months ended
July 31, 1998 to $4.5 million for the three months ended July 31, 1999, an
increase of $1.4 million or 45.1%. This increase was primarily due to the
release of our first multi-user product in April 1999, which accounted for
approximately $1.7 million or 37.6% of revenues. We expect revenues from our
current single-user products to decrease as a percentage of revenues as we grow
our sales of our multi-user products and our next generation single-user
products.

     Cost of goods sold.  Our cost of goods sold increased from $1.2 million for
the three months ended July 31, 1998 to $1.7 million for the three months ended
July 31, 1999, an increase of $502,000 or 42.3%. This increase was primarily
related to the increase in volume of units shipped. Gross margin increased from
61.9% for the three months ended July 31, 1998 to 62.6% for the three months
ended July 31, 1999. The increase in gross margin was primarily attributable to
the introduction of our first multi-user product, which has a higher gross
margin than our other products.

     Research and development.  Research and development expenses increased from
$751,000 for the three months ended July 31, 1998 to $964,000 for the three
months ended July 31, 1999, an increase of $212,000 or 28.3%. This increase was
due primarily to increases in staffing, the manufacturing of prototype units for
our EXTender 3200 for IDSL, IP EXTender 4000 and PBXgateway IP product lines
and, to a lesser extent, related overhead costs. For the three months ended July
31, 1998 and 1999, research and development expenses decreased as a percentage
of revenues from 24.1% to 21.3% as a result of increased revenues.

     Sales and marketing.  Sales and marketing expenses increased from $779,000
for the three months ended July 31, 1998 to $1.3 million for the three months
ended July 31, 1999, an increase of $568,000 or 72.9%. This increase was
primarily due to increases in staffing of both sales and marketing personnel
and, to a lesser extent, increased marketing activities related to the
introduction of our first multi-user product. For the three months ended July
31, 1998 and 1999, sales and marketing expenses increased as a percentage of
revenues from 25.0% to 29.8% as newly hired sales personnel generally do not
achieve full productivity for the first few months with us.

     General and administrative.  General and administrative expenses increased
from $391,000 for the three months ended July 31, 1998 to $494,000 for the three
months ended July 31, 1999, an increase of $102,000 or 26.2%. This increase was
primarily due to increases in staffing in our accounting group to support our
growth, consulting costs relating to an upgrade of our enterprise resource
planning system to ensure its Year 2000 compliance and, to a lesser extent,
professional service costs. For the three months ended July 31, 1998 and 1999,
general and administrative expenses decreased as a percentage of revenues from
12.6% to 10.9% as a result of increased revenues.

     Other expense, net.  Other expense, net consisted primarily of interest
expense related to our subordinated debt, offset by interest income, and foreign
exchange gains or losses related to the effects of the Canadian/U.S. exchange
rate on intra-company transactions. Other expense, net decreased from $129,000
for the three months ended July 31, 1998 to $95,000 for the three months ended
July 31, 1999, a decrease of $34,000 or 26.1%. Interest expense, offset by
interest income, decreased from $135,000 for the three months ended July 31,
1998 to $67,000 for the three months ended July 31, 1999. This decrease was

                                       19
<PAGE>   26

due to a reduction in the subordinated debt on our balance sheet from $5.0
million to $2.5 million relating to the July 1998 financing. Foreign exchange
gains for the three months ended July 31, 1998 were $6,000 compared to a loss of
$29,000 for the three months ended July 31, 1999. The increased loss was due to
a strengthening of the U.S. dollar against the Canadian dollar.

Fiscal years ended April 30, 1998 and 1999

     Revenues.  Revenues increased from $7.9 million for the fiscal year ended
April 30, 1998 to $14.3 million for the fiscal year ended April 30, 1999, an
increase of $6.4 million or 81.2%. This increase was due to an increased number
of units sold, which resulted from continued development of our existing
distribution channels, the addition of new distribution channels and the release
of our first multi-user product late in the fourth quarter of fiscal 1999.
Revenues from that multi-user product accounted for $1.3 million or 9.1% of
revenues.

     Cost of goods sold.  Cost of goods sold increased from $2.8 million for
fiscal 1998 to $5.4 million for fiscal 1999, an increase of $2.6 million or
92.5%. This increase was primarily related to the increase in volume of units
shipped. For fiscal 1998 and 1999, gross margin decreased from 64.4% to 62.2%.
The decrease in gross margin was primarily due to start-up costs associated with
adding a second contract manufacturer, increased manufacturing headcount and, to
a lesser extent, the write-off of obsolete inventory.

     Research and development.  Research and development expenses increased from
$1.8 million for fiscal 1998 to $3.3 million for fiscal 1999, an increase of
$1.6 million or 90.5%. This increase was due primarily to the hiring of a vice
president of engineering and additional engineers, the expansion of our product
validation facilities and staff and, to a lesser extent, related overhead costs.
For fiscal 1998 and 1999, research and development expenses increased as a
percentage of revenues from 22.3% to 23.5% as we hired new staff to develop our
first multi-user product which did not generate revenues until April 1999.

     Sales and marketing.  Sales and marketing expenses increased from $2.2
million for fiscal 1998 to $3.9 million for fiscal 1999, an increase of $1.7
million or 77.5%. This increase was primarily due to the hiring of sales and
marketing personnel and increased marketing activities. For fiscal 1998 and
1999, sales and marketing expenses decreased slightly as a percentage of
revenues from 27.8% to 27.3%.

     General and administrative.  General and administrative expenses increased
from $1.5 million for fiscal 1998 to $1.6 million for fiscal 1999, an increase
of $132,000 or 8.9%. This increase was primarily due to the hiring of new
accounting personnel and related expenses. For fiscal 1998 and 1999, general and
administrative expenses decreased as a percentage of revenues from 18.9% to
11.3%.

     Other expense, net.  Other expense, net decreased from $595,000 for fiscal
1998 to $207,000 for fiscal 1999, a decrease of $388,000 or 65.2%. Interest
expense, offset by interest income, decreased from $518,000 for fiscal 1998 to
$268,000 for fiscal 1999. This decrease was due to a reduction in the
outstanding amount of our subordinated debt from $5.0 million to $2.5 million in
July 1998. Foreign exchange losses were $77,000 in fiscal 1998 versus a gain of
$60,000 in fiscal 1999. The gain during 1999 was due to a weakening of the U.S.
dollar against the Canadian dollar.

Fiscal years ended April 30, 1997 and 1998

     Revenues.  Revenues increased from $5.9 million for the fiscal year 1997 to
$7.9 million for fiscal 1998, an increase of $2.0 million or 33.0%. This
increase was due to an increased number of units sold relating to development of
our existing distribution channels, the addition of new distribution channels
and the release of our EXTender 3000 product line.

     Cost of goods sold.  Cost of goods sold increased from $2.3 million for
fiscal 1997 to $2.8 million for fiscal 1998, an increase of $487,000 or 21.1%.
This increase was primarily related to the increase in volume of units shipped.
For fiscal 1997 and 1998, gross margin increased from 60.9% to 64.4%. The
increase in

                                       20
<PAGE>   27

gross margin was primarily due to manufacturing efficiencies, lower component
costs and the inclusion of non-recurring engineering fee revenues.

     Research and development.  Research and development expenses increased from
$815,000 for fiscal 1997 to $1.8 million for fiscal 1998, an increase of
$943,000 or 115.7%. The increase was due primarily to the hiring of engineers,
the creation of a product validation laboratory and, to a lesser extent, related
overhead and consulting costs. For fiscal 1997 and 1998, research and
development expenses increased as a percentage of revenues from 13.8% to 22.3%
as we developed new products, including the EXTender 3000 which did not generate
significant revenues until the fourth quarter of fiscal 1998, and upgraded
existing products, including switching to a Rockwell modem set on the EXTender
1000+.

     Sales and marketing.  Sales and marketing expenses increased from $1.1
million for 1997 to $2.2 million for 1998, an increase of $1.0 million or 91.3%.
This increase was primarily due to hiring of personnel including a vice
president of sales, vice president of marketing, vice president of business
development and sales personnel and, to a lesser extent, increased marketing
activities. For fiscal 1997 and 1998, sales and marketing expenses increased as
a percentage of revenues from 19.3% to 27.8%.

     General and administrative.  General and administrative expenses increased
by $900,000 from $607,000 for 1997 to $1.5 million for 1998, an increase of
144.6%. This increase was primarily due to recruitment of management personnel
including a new chief executive officer and chief financial officer, the opening
of our offices in Newton, Massachusetts and, to a lesser extent, consulting and
professional services costs. For fiscal 1997 and 1998, general and
administrative expenses increased as a percentage of revenues from 10.3% to
18.9% as we invested in our management team and corporate infrastructure.

     Transaction-related expenses.  In fiscal 1997, we recorded
transaction-related expenses of $493,000 related to our June 1996
recapitalization pursuant to which employee stock options were either exercised
and redeemed, or exchanged for new options in the U.S. company. In conjunction
with this event, we incurred a one-time compensation charge. See Note 13 of
Notes to Consolidated Financial Statements.

     Other expense, net.  Other expense, net increased from $343,000 for fiscal
1997 to $595,000 for fiscal 1998, a increase of $253,000 or 73.8%. Interest
expense, offset by interest income, increased from $393,000 for fiscal 1997 to
$518,000 for fiscal 1998 due to the issuance of $5.0 million in subordinated
debt as part of our June 1996 recapitalization and an increase in the
outstanding balances on a revolving line of credit. Foreign exchange gains were
$50,000 in fiscal 1997 versus a loss of $77,000 in fiscal 1998. The loss during
fiscal 1998 was due to a strengthening of the U.S. dollar against the Canadian
dollar.

QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth certain unaudited consolidated statements of
operations data in dollars and as a percentage of revenues for our nine most
recent quarters. In management's opinion, this unaudited information has been
prepared on the same basis as the annual consolidated financial statements and
includes all adjustments necessary to fairly present the unaudited quarterly
results. These adjustments consist only of normal recurring adjustments. This
information should be read in conjunction with the

                                       21
<PAGE>   28

consolidated financial statements and related notes included elsewhere in this
prospectus. The operating results for any quarter are not necessarily indicative
of results for any future period.

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED
                                 ------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF       JULY 31,   OCT. 31,   JAN. 31,   APR. 30,   JULY 31,   OCT. 31,   JAN. 31,   APR. 30,   JULY 31,
OPERATIONS DATA:                   1997       1997       1998       1998       1998       1998       1999       1999       1999
--------------------------       --------   --------   --------   --------   --------   --------   --------   --------   --------
                                                                          (IN THOUSANDS)
<S>                              <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Revenues.......................   $1,431     $1,728     $2,065     $2,652     $3,116     $3,441     $3,609     $4,104     $4,523
Cost of goods sold.............      543        603        665        989      1,188      1,330      1,376      1,496      1,690
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
Gross profit...................      888      1,125      1,400      1,663      1,928      2,111      2,233      2,608      2,832
Operating expenses:
  Research and development.....      297        406        501        554        751        770        880        948        964
  Sales and marketing..........      361        625        551        655        779        918      1,004      1,187      1,347
  General and administrative...      200        404        425        457        391        415        347        463        494
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
    Total operating expenses...      857      1,434      1,477      1,665      1,922      2,103      2,231      2,597      2,805
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
Income (loss) from
  operations...................       31       (309)       (78)        (3)         6          8          2         11         28
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
Other income (expense), net....     (126)      (164)      (179)      (127)      (129)       (91)        (8)        21        (95)
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
Net income (loss)..............   $  (95)    $ (473)    $ (256)    $ (129)    $ (123)    $  (84)    $   (6)    $   32     $  (68)
                                  ======     ======     ======     ======     ======     ======     ======     ======     ======
</TABLE>

<TABLE>
<CAPTION>
                                                                 AS A PERCENTAGE OF REVENUES
                               ------------------------------------------------------------------------------------------------
                               JULY 31,   OCT. 31,   JAN. 31,   APR. 30,   JULY 31,   OCT. 31,   JAN. 31,   APR. 30,   JULY 31,
                                 1997       1997       1998       1998       1998       1998       1999       1999       1999
                               --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>                            <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Revenues.....................   100.0%     100.0%     100.0%     100.0%     100.0%     100.0%     100.0%     100.0%     100.0%
Cost of goods sold...........    37.9       34.9       32.2       37.3       38.1       38.6       38.1       36.4       37.4
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
Gross margin.................    62.1       65.1       67.8       62.7       61.9       61.4       61.9       63.6       62.6
Operating expenses:
  Research and development...    20.7       23.5       24.3       20.9       24.1       22.4       24.4       23.1       21.3
  Sales and marketing........    25.2       36.1       26.7       24.7       25.0       26.7       27.8       28.9       29.8
  General and
    administrative...........    14.0       23.3       20.6       17.2       12.6       12.1        9.6       11.3       10.9
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
    Total operating
      expenses...............    59.9       83.0       71.6       62.8       61.7       61.1       61.8       63.3       62.0
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
Income (loss) from
  operations.................     2.2      (17.9)      (3.8)      (0.1)       0.2        0.2        0.0        0.3        0.6
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
Other income (expense),
  net........................    (8.8)      (9.5)      (8.7)      (4.8)      (4.1)      (2.7)      (0.2)       0.5       (2.1)
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
Net income (loss)............    (6.6)%    (27.4)%    (12.4)%     (4.9)%     (3.9)%     (2.4)%     (0.2)%      0.8%      (1.5)%
                                =====      =====      =====      =====      =====      =====      =====      =====      =====
</TABLE>

     Our revenues have increased each quarter since the three months ended July
31, 1997 due to the introduction of new products, the development of our
existing distribution channels and the addition of new distribution channels.
While we have maintained our gross margins in the low sixty percent range, we
have experienced some variability in specific quarters. For the three months
ended October 31, 1997 and January 31, 1998, our gross margins increased to
65.1% and 67.8%, respectively, due to non-recurring engineering fees received in
these quarters. For the three months ended October 31, 1997, we experienced a
rapid increase in sales and marketing expenses associated with the hiring of a
new sales force. General and administrative expenses increased for the three
months ended October 31, 1997, primarily due to the costs associated with the
opening of our Newton office, and the recruitment of a new chief executive
officer and chief financial officer. General and administrative expenses have
generally decreased as a percentage of revenues, primarily due to increased
revenues.

LIQUIDITY AND CAPITAL RESOURCES

     We have financed our operations primarily from the sale of preferred stock
and other financing arrangements, such as a bank line of credit, a subordinated
debt offering and a capital equipment

                                       22
<PAGE>   29

financing. As of July 31, 1999, we had cash and equivalents of $3.6 million,
which included $230,000 borrowed under our credit facilities.

     We entered into a revolving credit facility against accounts receivable in
April 1999 which provides borrowings of up to $2.0 million. Borrowings under
this credit facility bear interest at the prime rate, which was 8.0% as of July
31, 1999. Borrowings are due upon demand and are secured by substantially all of
our assets. As of July 31, 1999, we had no outstanding balance on this credit
facility. This agreement expires in April 2000. We have an equipment term loan
which provides borrowings of up to $500,000 through September 1999 to finance
the acquisition of computer hardware and furniture. As of July 31, 1999, we had
an outstanding balance of $230,000 under this facility. Borrowings under this
facility bear interest at 50 basis points above the prime rate. The loan is
payable in equal installments over 36 months. We also entered into subordinated
loan and security agreements in June 1996. Borrowings under these loans are $2.5
million, bear interest at a rate of 12.5% per annum and are secured by  2/3rds
of the outstanding common stock of our subsidiary, MCK Telecommunications.

     Net cash provided by operating activities was $256,000 for the three months
ended July 31, 1999. Net cash provided by operating activities during the three
months ended July 31, 1999 was primarily due to decreases in inventory and
increases in accounts payable and accrued liabilities, partially offset by net
losses and increases in accounts receivable. Net cash used by operating
activities was $402,000 in fiscal 1999. During fiscal 1999, net cash used by
operating activities was primarily due to net losses and increases in accounts
receivable and inventories, partially offset by increases in accounts payable
and accrued liabilities. Net cash provided by operating activities was $82,000
in fiscal 1998. During fiscal 1998, net cash provided by operating activities
was primarily due to decreases in inventory and prepaid assets and increases in
accounts payable and accrued liabilities, partially offset by net losses and
increases in accounts receivable.

     Net cash used in investing activities was $136,000 for the three months
ended July 31, 1999. Net cash used was primarily the result of purchases of
property and equipment. Net cash used in investing activities was $676,000 in
fiscal 1999 and $566,000 in fiscal 1998. Cash was used during these periods to
acquire property and equipment, a significant portion of which was used to
expand our product validation laboratory. We currently do not have significant
capital spending or short-term purchase commitments, but expect to continue to
engage in capital spending in the ordinary course of business. We expense all
software development costs as they are incurred.

     Net cash provided by financing activities was $226,000 for the three months
ended July 31, 1999, which was related primarily to the establishment of an
equipment term loan. Net cash provided by financing activities in fiscal 1999
was $2.5 million, which was primarily due to the issuance of preferred stock,
partially offset by the repayment of subordinated debt. Net cash used by
financing activities in fiscal 1998 was $748,000, which was primarily due to a
decrease in short-term borrowings.

     We expect to experience growth in our working capital needs for the
foreseeable future in order to execute our business plan. We anticipate that
operating activities, as well as planned capital expenditures, will constitute a
material use of our cash resources. In addition, we may utilize cash resources
to fund acquisitions or investments in complementary businesses, technologies or
products. We believe that the net proceeds from this offering, together with our
current cash and equivalents, cash generated from operations and available
borrowings under our line of credit, will be sufficient to meet our anticipated
cash requirements for working capital and capital expenditures for at least the
next 12 months.

YEAR 2000 READINESS DISCLOSURE

     Some computers, software, and other equipment include computer code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. These
problems are widely expected to increase in frequency and severity as the Year
2000 approaches, and are commonly referred to as the "Year 2000 problem."

                                       23
<PAGE>   30

     Assessment.  The Year 2000 problem affects the computers, software and
other equipment that we use, operate or maintain for our business. Accordingly,
we have organized a project team responsible for monitoring the assessment and
remediation status of our Year 2000 projects. This project team is currently
assessing the potential effects and costs of remediating the Year 2000 problem
for our internal systems. To date, we have not obtained verification or
validation from any independent third parties of our processes to assess and
correct any of our Year 2000 problems or the costs associated with these
activities.

     Internal infrastructure.  We believe that we have identified
mission-critical computers, servers and applications, and our business systems
and related equipment used in connection with our internal operations that will
need to be evaluated to determine if they must be modified, upgraded or replaced
to minimize the possibility of a material disruption to our business. Upon
completion of such evaluation, which we expect to occur by October 1999, we
expect to commence the process of modifying, upgrading and replacing major
systems that have been assessed as adversely affected, and expect to complete
this process before the occurrence of any material disruption of our business.

     Systems other than information technology systems.  In addition to
computers and related systems, the operation of office and facilities equipment,
such as fax machines, telephone switches, security systems and other common
devices, may be affected by the Year 2000 problem. We are currently assessing
the potential effects and costs of remediating the Year 2000 problem on our
office equipment and our facilities and expect this process to be completed by
the end of the calendar year 1999.

     Products.  We have tested and intend to continue to test all of our
products for Year 2000 problems. Only our Branch Office EXTender 6000 and
PBXgateway IP products have internal clocks, and we believe such product lines
are Year 2000 compliant. None of our other products have time keeping
capabilities and are therefore, by default, Year 2000 compliant. We currently do
not expect any significant Year 2000 problems to arise with our products. We
have generally represented to our indirect channel partners and end users that
our products are Year 2000 compliant, and if that turns out to be untrue, these
parties may make claims against us which may result in litigation or contract
terminations.

     We estimate the total cost to us of completing any required modifications,
upgrades or replacements of our internal systems will not exceed $100,000,
almost all of which we believe will be incurred in calendar year 1999. Of the
$100,000, approximately $40,000 has been used to upgrade existing systems
through April 30, 1999, and the remaining amount will be used to replace
non-Year 2000 compliant systems. All of the costs have been capitalized to date
and we expect that future costs will also be capitalized. In addition, we have
not deferred any material information technology projects as a result of our
Year 2000 problem activities.

     Suppliers.  We are in the process of assessing the readiness of our
sole-sourced component suppliers. We expect that we will be able to resolve any
significant Year 2000 problems with sole-sourced component suppliers; however,
we cannot assure you that these suppliers will resolve any or all Year 2000
problems before the occurrence of a material disruption to the operation of our
business. Any failure of these third parties to timely resolve Year 2000
problems with their systems could harm our business.

     Most likely consequences of Year 2000 problems.  We expect to identify and
resolve all Year 2000 problems that could adversely affect our business
operations. However, we believe that it is not possible to determine with
complete certainty that all Year 2000 problems affecting us have been identified
or corrected. The number of devices that could be affected and the interactions
among these devices are simply too numerous for us to anticipate every possible
problem. In addition, no one can accurately predict how many Year 2000
problem-related failures will occur or the severity, duration or financial
consequences of these possibly inevitable failures. As a result, we believe that
the following consequences are possible:

     - a significant number of operational inconveniences and inefficiencies for
       us, our contract manufacturers and our indirect channel partners and end
       users that will divert management's time and attention and financial and
       human resources from ordinary business activities;

     - business disputes and claims for pricing adjustments or penalties due to
       Year 2000 problems by our indirect channel partners and end users; and
                                       24
<PAGE>   31

     - a number of serious business disputes alleging that we failed to comply
       with the terms of contracts or industry standards of performance, some of
       which could result in litigation or contract termination.

     Contingency plans.  We are currently developing contingency plans to be
implemented if our efforts to identify and correct Year 2000 problems affecting
our internal systems are not effective. We expect to complete our contingency
plans by the end of October 1999. Depending on the systems affected, these plans
could include:

     - accelerated replacement of affected equipment or software;

     - short to medium-term use of backup equipment and software;

     - increased work hours for our personnel; and

     - use of contract personnel to correct, on an accelerated schedule, any
       Year 2000 problems that arise or to provide manual workarounds for
       information systems.

     Our implementation of any of these contingency plans could harm our
business.

     Disclaimer.  The discussion of our efforts and expectations relating to
Year 2000 compliance are forward-looking statements. Our ability to achieve Year
2000 compliance and the level of incremental associated cost, could be adversely
affected by, among other things, availability and cost of programming and
testing resources, third-party suppliers' ability to modify proprietary
software, and unanticipated problems identified in our ongoing compliance
review.

QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

     Interest Rate Risk.  We have a fixed rate debt obligation. An increase in
interest rates would not increase interest expense due to the fixed nature of
our debt obligation or materially change the fair value of the debt obligation.
We have cash equivalents that primarily consist of overnight money market
accounts. A 100 basis point shift in interest rates would not result in a
material change in interest expense, cash flows or the fair value of the cash
equivalents.

     Foreign Currency Exchange Rate Risk.  We primarily sell our products in
U.S. dollars and therefore we are not generally exposed to foreign currency
exchange risk. However, our Canadian subsidiary sells products to Canadian
customers that it invoices in Canadian dollars. In fiscal 1999, this revenue
accounted for 11.8% of revenues and for the three months ended July 31, 1999 it
accounted for 8.5% of revenues. Transactions with our Canadian subsidiary, whose
functional currency is the Canadian dollar, present us with foreign currency
exchange risk. The principal transactions are buying and selling of inventory.
The intercompany balance is denominated in U.S. dollars and changes in the
foreign currency exchange rate result in foreign currency gains and losses.
Using the intercompany balance at July 31, 1999, a 10% strengthening of the U.S.
dollar against the Canadian dollar would result in a foreign currency
transaction loss of $90,000.

                                       25
<PAGE>   32

                                    BUSINESS

OVERVIEW

     MCK Communications is a leading provider of remote voice access products
that enable corporations to seamlessly extend the features and applications of
private branch exchanges, or PBXs, from the corporate office to remote branch
offices and telecommuters over wide area networks, or WANs. Our EXTender
products cost-effectively deliver a unified enterprise-wide voice network by
enabling the PBX to function as a corporate voice server that transmits
packetized voice and PBX signaling information to remote locations over
corporations' existing data networks. In addition, our products reduce the total
cost of ownership by leveraging corporations' current investment in voice and
data equipment, and streamline network administration through the utilization of
industry standard network management techniques.

INDUSTRY BACKGROUND

     Most businesses today have deployed separate networks to support voice and
data communications. As the corporate world shifts from large, centralized
organizations to distributed workforces with multiple branch offices and a large
number of telecommuters, new demands are being placed on the traditionally
localized corporate communications networks. While data networks have evolved to
meet this challenge by offering high-speed remote data access and a high degree
of interoperability among data systems and components, corporate voice networks
have remained largely centralized and proprietary. Consequently, branch offices
and telecommuters do not have cost-effective access to the features and
applications of corporate voice systems.

     This shift toward corporate decentralization results from a number of
factors. The competitive advantage of being located near key customers,
suppliers and partners and the competition for qualified employees are driving
corporations to open branch offices in numerous geographic locations. We believe
Fortune 5000 businesses maintain approximately 1.6 million branch offices. In
order to retain employees and comply with expanding environmental regulation,
corporations are also implementing large-scale telecommuting programs. According
to the Gartner Group, the number of telecommuters worldwide is expected to grow
from 35 million in 1998 to 140 million in 2003.

     Because of decentralization, corporations are increasingly challenged by
the need to integrate voice and data networks across multiple locations.
Corporations depend on company-wide communication to ensure critical internal
collaboration, provide suitable levels of customer service and maintain
operational efficiency and productivity by sharing resources across all
locations. As the business environment becomes more competitive, a unified
communications network will become increasingly important. These factors are
driving demand for remote access solutions that deliver an integrated network
environment with all the features and applications found at corporate
headquarters to distributed locations and employees.

Corporate Data Networks

     Initially, data networks were built upon mainframe computers that served a
single office location, were accessible by a limited number of users and were
too costly for small organizations. Over the past 20 years, advances in computer
processing and networking technology have altered this centralized model to
deliver cost-effective, high-speed distributed data processing and
communications by using a client-server architecture. Corporations have been
able to deploy equipment from multiple vendors that is interoperable at the
corporate office or throughout a local area network, or LAN, using multiple
network protocols because of the adoption of standard communication protocols,
internetworking technologies, and industry-standard system management platforms,
as well as the use of open architectures. These same developments have also
facilitated widespread data access through the deployment of remote access
equipment capable of extending the reach of the data network beyond the LAN over
public and private networks to create WANs.

                                       26
<PAGE>   33

     Today, most remote data access capabilities are deployed to branch offices
and telecommuters over a variety of circuit-based networks that were architected
for voice service. These circuit-based networks are dedicated point-to-point
connections that require corporations to constantly maintain sufficient
bandwidth to meet their maximum communications requirements. The recent
development of broadband technologies has resulted in the deployment of new
packet-based networks. These next generation networks divide all types of data,
including voice, into packets that can be simultaneously transmitted and
reassembled into their original form at their final destination. As a result,
these packet-based networks are more efficient in their use of available
bandwidth than traditional circuit-based networks, thus minimizing network
capacity constraints and management requirements.

     As a result of the growing demand for high-bandwidth applications, such as
Internet and intranet access, a new generation of service providers is migrating
from existing circuit-based networks to packet-based networks. The ability of
packet-based networks to increase bandwidth availability and network efficiency,
lower operating costs and simplify network administration has led service
providers to make significant investments in packet-based networks in the public
WAN infrastructure. Next generation telecommunications service providers are
creating new service offerings over private managed networks and public
networks, such as the Internet and are using new technologies, such as Quality
of Service to offer both services over the same network. Widespread access to
corporate data networks, coupled with the deployment of new packet-based
networks, is enabling corporations to realize tremendous productivity gains due
to increased collaboration, internal communication and sharing of resources.
Examples of specific benefits include company-wide e-mail capabilities,
company-wide access to the files and applications that are run from the
corporate server and immediate access for remote workers.

Corporate Voice Networks

     Large corporate voice systems are generally based on circuit-based networks
and corporate voice switches known as private branch exchanges, or PBXs. Given
the mission critical nature of voice communications and related applications,
PBX systems have been architected with numerous built-in fault tolerant and
redundancy features and are designed to deliver 99.999% up-time reliability. In
addition to delivering reliable voice service, PBXs have the capability to serve
as the platform for more than 500 critical voice features and applications.
PBX-based applications include:

     - voicemail systems;

     - unified messaging systems that create a single interface for accessing
       voicemail, e-mail and fax messages;

     - automatic call distribution, or ACD systems;

     - auto-attendant systems;

     - call accounting software;

     - least-cost routing applications; and

     - interactive voice response, or IVR systems.

The PBX is also responsible for delivering features and capabilities such as:

     - phone numbering plans;

     - three- or four-digit internal dialing;

     - call transferring, conferencing and forwarding; and

     - receptionist call screening.

     The Multimedia Telecommunications Association, or MTA, estimates that the
installed base of PBX systems in the United States in 1998 exceeded 45 million.
In addition, the MTA has reported that the PBX market is growing. Since 1991
over 44 million PBX lines have been added to both new PBX systems

                                       27
<PAGE>   34

and existing systems. In 1998 alone, 7.4 million new lines were added to PBX
systems. Full-featured PBXs typically cost between $100,000 and $1.0 million,
and are designed for large, centralized corporate environments with 50 or more
users. In addition, corporations often spend as much on the applications
supported by their PBXs as they do on the equipment itself. According to the
MTA, over $25 billion has been spent on PBX systems in the United States since
1991.

     Despite the reliability and functionality of centralized circuit-based
voice networks, the features and applications of today's PBXs cannot be
cost-effectively extended to small branch offices and telecommuters. A number of
factors have created this deficiency. Technical signaling limitations cause the
quality of voice transmission to degrade beyond a limited distance from the PBX.
In addition, the high cost associated with deploying a PBX and its supported
voice applications typically makes them prohibitively expensive for small branch
offices and telecommuters. Accordingly, corporations seeking to extend voice
applications to small branch offices have the following voice options, all of
which have significant limitations:

     - Key Systems/Hybrid PBXs.  Key systems and hybrid PBXs are small,
       proprietary voice switches that have functionality similar to PBXs but
       have been cost-effectively architected to service small office
       environments. Accordingly, they lack the full feature set and scalability
       of more expensive PBX systems. Key systems have limited interoperability
       with PBX systems, and consequently function as stand-alone voice systems
       with separate voice applications that create inefficiencies and network
       management complexities in a multi-office environment.

     - Centrex.  Centrex is a business telephone service that is offered by
       local telephone companies from their central office switches. While
       Centrex offers many of the same features as PBXs, its effectiveness is
       constrained by phone companies' switch capacity, its lack of
       interoperability with PBXs, its geographic limitations and its reliance
       upon the local phone company for service and support. In addition,
       full-featured Centrex service for a small office can be a prohibitively
       expensive solution.

     - Off-Premises Extension, or OPX.  An Off-Premises Extension is a dedicated
       telephone line that originates from a PBX and extends a subset of PBX
       features and applications to remote users. OPX offerings cannot support
       digital telephone sets, and require an expensive dedicated leased line or
       private network connection.

     - LAN and NT PBXs.  Recently introduced solutions from data networking
       vendors, such as LAN and NT-server based PBXs, lack the full feature set
       of traditional PBXs and have limited ability to network with the
       corporate PBX, thus also failing to give an enterprise a unified voice
       network.

The inability of these voice options to fully network with the PBX has caused
corporations to deploy separate voice networks for their branch offices and
telecommuters, limiting the effectiveness of corporate communications and
increasing the burden on systems administrators. In addition, corporations
seeking to extend voice applications to telecommuters presently have no
cost-effective, full-featured solutions.

The Opportunity for PBX-based Remote Voice Access over Data Networks

     As business organizations decentralize, remote access to the corporate
communications network is becoming increasingly important. While data networks
have evolved to meet this critical business requirement, there is a need for a
suitable voice solution that cost-effectively leverages the PBX and its features
and applications to offer corporate voice applications to small branch offices
and telecommuters. Furthermore, in order to lower costs and simplify network
administration, corporations are increasingly demanding that distributed voice
and data services be offered over the same centrally-managed corporate
communications infrastructure. This convergence of voice and data is made
possible by the packetization of voice and advances in Quality of Service which
enable the transmission of voice over private managed data networks and public
data networks, such as the Internet. Accordingly, to deliver remote voice access
over data networks, a solution should be capable of packetizing voice and PBX
signaling information. As a result of its reliability, the wide variety of
applications that it supports and the size of its installed base,

                                       28
<PAGE>   35

PBXs are pervasive in large, corporate enterprises and are likely to remain
entrenched as the central corporate system on which new voice applications are
developed and deployed. Thus, solutions for the remote voice marketplace must
offer a centrally-managed interface to proprietary PBX systems and have the
capability of packetizing and transmitting voice and PBX signaling information
over both traditional circuit-based data networks and emerging packet networks.

THE MCK EXTender SOLUTION

     We develop and market products that enable enterprises to seamlessly
deliver all of the PBX features and applications that exist at the corporate
office to branch offices and telecommuters. Our technology allows enterprises to
create a unified, enterprise-wide voice network by enabling the PBX to function
as a corporate voice server that transmits packetized voice and PBX signaling
information to remote locations over existing data networks. In addition, our
products reduce the total cost of ownership by leveraging corporations' current
investments in voice and data equipment, and streamline network administration
through the utilization of industry standard network management techniques.

     Following are the key attributes of our solution:

     Full-Featured Remote Voice Access.  Our EXTender solutions seamlessly
provide the features and applications of the PBX to branch office employees,
telecommuters and remote call center agents over circuit and packet networks.
Our solutions allow these remote workers to utilize PBX features such as three-
or four-digit internal dialing, call transferring and conferencing, and
applications such as voicemail, unified messaging and automated call
distribution. Extending these corporate voice applications to remote employees
increases productivity, facilitates internal collaboration and delivers to
external callers transparent access to all telephone extensions throughout a
corporation.

     Digital Line Extension Technology.  The features and applications of the
PBX reside on the digital line cards of the PBX. We have developed proprietary
software and hardware interfaces that extract the voice and PBX signaling
information from these digital line cards. Our products then packetize and
transmit this information to our remote devices over existing data networks.
Utilizing this captured information, our remote products mimic the digital line
card, thereby transparently connecting the user's digital telephone set to the
corporate PBX. As a result of this product architecture and our experience in
interfacing with the proprietary digital line cards of most leading PBX vendors,
our products enable corporations to deploy effective remote voice solutions
without significant reconfigurations or upgrades to their existing PBX systems.
Similarly, our products enable branch offices and telecommuters to use their
digital telephone sets and existing user interfaces to transparently access
their corporate PBXs.

     Packet Voice Architecture.  Our extensive experience in packetizing voice,
PBX signaling information and voice applications enables us to deliver a
complete remote voice solution over traditional circuit-based networks and
emerging packet-based networks. Utilizing our proprietary Remote Voice Protocol,
or RVP, software platform and our standardized hardware architecture, we
packetize, compress, encode, transmit and decode voice over networks such as
asynchronous transfer mode, or ATM, digital data service, digital subscriber
line, or DSL, fiber, frame relay, IP, integrated services digital network, or
ISDN, T-1, fractional T-1 and traditional telephone networks. Our products
enable next generation service providers such as the emerging DSL and cable
network operators to provide MCK EXTender functionality as a value-added service
offering to corporations for branch offices and telecommuters over WANs.

     Lower Cost Solution.  Our products provide a cost-effective solution to
enable full-featured remote voice access, lowering costs in the following areas:

     - Transmission.  Our products lower transmission costs by consolidating
       voice and data traffic over a single network, eliminating local loop
       service charges and enabling remote users to utilize volume-based,
       corporate long distance rates.

     - Management.  Our recently introduced products provide telecom managers
       the ability to centrally manage our remote devices using Telnet,
       hypertext mark-up language, or HTML, and simple network management
       protocol, or SNMP, with graphical user interfaces. Our customers can use
                                       29
<PAGE>   36

       these remote monitoring and diagnostic capabilities to solve problems
       on-line, thereby reducing the time and cost associated with dispatching a
       technician to a remote site.

     - Equipment.  Our products enable corporations to leverage their existing
       capital investment in PBX systems, voice applications and data networks,
       thereby eliminating the need to expend significant additional capital on
       disparate, incompatible solutions such as key systems.

     - Facilities.  Our products allow corporations to reduce physical facility
       costs and infrastructure investments by enabling employees to work
       effectively outside of corporate locations.

     Compatibility with Leading PBX Manufacturers.  We have worked with Alcatel,
Lucent, NEC and Nortel Networks to develop interfaces between our RVP software
platform and their primary proprietary PBX protocols. These manufacturers have
tested and validated in their labs that our RVP platform is interoperable with
their primary PBX products, including 4400/4200 (Alcatel), DEFINITY (Lucent),
NEAX 1000/2000/2400 (NEC), Meridian (Nortel Networks), and Norstar (Nortel
Networks) equipment. According to Dataquest, these four manufacturers represent
approximately 65% of the U.S. PBX market share for large enterprise customers.

STRATEGY

     Our strategy is to become the leading provider of remote voice access
solutions for branch offices and telecommuters of Fortune 5000 businesses. The
following are the principal elements of our business strategy:

     Maintain technology leadership in the remote voice access marketplace.  Our
technology enables us to provide leading remote voice access products that
distribute PBX features and applications to branch offices and telecommuters.
Our technology leadership is the result of our knowledge and experience
interfacing with proprietary PBX systems, our ability to packetize voice and PBX
signaling information and our understanding of how to condition packet voice for
transmission over circuit and packet networks. We intend to continue to leverage
our existing expertise in packetized PBX voice applications to develop new
products and applications that target broadband markets, in particular DSL and
cable. We will also continue to work with third-party software and hardware
manufacturers to ensure the interoperability between our solutions and a wide
range of networking equipment in order to facilitate ease of deployment and
ensure that we can transmit packet voice within multiple network environments.

     Establish our Gateway products as platforms for new voice applications.  We
intend to establish our Gateway products as platforms for the delivery of new
applications and services to branch offices and telecommuters. Our products are
positioned on the line-side of the PBX, which enables us to extend the full
features and applications of the PBX to remote locations with minimal impact on
the PBX or its resident software applications. We believe that this
non-intrusive implementation, and our products' positioning within the corporate
voice switch room, strategically positions us to develop new software
components, as well as incorporate third-party software applications, to provide
new features and applications for remote users.

     Expand distribution, marketing and technology relationships.  We will
continue to establish distribution, marketing and technology relationships with
PBX vendors, service providers and distribution channel partners to further
penetrate our target markets and develop our products. We have development,
marketing and distribution relationships with Alcatel, Lucent and NEC and
distribution relationships with Nortel Networks and its major channel partners
such as Bell Canada, BellSouth, GTE and Williams Communications. We have also
established a number of other important distribution channel relationships such
as with SBC and Sprint North Supply. In addition to expanding our field sales
and systems engineering forces, we will continue to work with our channel
partners to focus on major corporate accounts. Furthermore, we will continue to
build additional channels, both in the U.S. and international markets, to expand
the distribution of our products.

     Work with broadband equipment vendors and next generation service
providers.  We are working with a number of leading broadband equipment vendors
and next generation service providers to jointly
                                       30
<PAGE>   37

develop service offerings based on our technology that can deliver our
application over broadband networks such as DSL and cable. We jointly developed
a DSL product with Copper Mountain and are in the process of developing other
product sets with Copper Mountain and other broadband equipment vendors. We are
also working with leading service providers such as Rhythms NetConnections to
develop service offerings based on our new broadband product set. We have
entered into a distribution agreement with Rhythms pursuant to which it markets
a service called PBXpress that delivers remote PBX voice to its customers by
bundling our equipment into this service offering. We anticipate entering into
new relationships with broadband equipment vendors and next generation service
providers such as competitive local exchange carriers, or CLECs, Internet
service providers, or ISPs, and managed service providers to enhance our
leadership position.

     Continue to target Fortune 5000 corporations.  We intend to continue to
focus our distribution strategies on Fortune 5000 corporations. These
organizations have made substantial capital investments in PBX systems and have
significant numbers of branch offices and telecommuters. Accordingly, these
corporations have the most to gain from an integrated, PBX-based voice network.
We are well positioned to target the Fortune 5000 market because our products
interface with PBX systems from Alcatel, Lucent, NEC and Nortel Networks. We
will work with our existing and new partners to increase the market opportunity
for, and drive market acceptance of, our products.

TECHNOLOGY

     We have developed expertise in digital line extension and the packetization
of voice for transmission over data networks to address the technology
challenges of extending the features and applications of corporate PBXs to
remote locations. Another key component of our technological advantage is the
highly flexible software and hardware architecture upon which we build our
remote voice solutions. We will continue to invest significant resources to
maintain and extend our technological advantage.

Digital Line Extension Technology

     The rich features and applications of proprietary PBX systems are accessed
through digital line cards that reside on the user or line side of the PBX.
These line-side interfaces enable the delivery of the features and applications
of PBX systems to digital telephone sets. As a result of our years of experience
in working with major PBX manufacturers, we have gained a significant
understanding of these digital line cards and have developed line-side software
interfaces to a number of different proprietary digital line cards used in
today's PBX systems. In addition to our software interfaces, we have developed a
hardware subsystem capable of duplicating the electrical interfaces of Alcatel,
Lucent, NEC and Nortel Networks PBX systems. These line-side software and
hardware interfaces extract the voice and PBX signaling information from the
digital line cards located on the PBX and, using our RVP software platform,
packetize this voice and PBX signaling information for transmission over data
networks to our remote voice access products. We have developed messaging
software that transmits this voice and PBX signaling information from our remote
voice access products to the digital telephone sets of the PBX manufacturers
that we support, thereby transparently connecting these sets to the PBX.

Delivery of Packet Voice with Remote Voice Protocol

     To deliver voice over data networks, solutions must convert voice into
packet form and then transmit these voice packets alongside data packets.
Despite the advantages of simultaneous transmission of voice and data, there are
also a number of technological challenges to delivering voice over data networks
because audio quality can be distorted by jitter and latency associated with
congestion on the data network.

     We have developed a proprietary software platform, known as Remote Voice
Protocol, or RVP, that packetizes, compresses and encodes circuit voice and PBX
signaling information for secure transmission over data networks. We have
implemented both industry standard and proprietary voice prioritization and
voice fragmentation techniques that use bandwidth efficiently while also
ensuring that delay sensitive voice

                                       31
<PAGE>   38

packets are delivered with the quality expected from voice. Much of this
technology revolves around our core expertise in developing software that runs
on standard digital signal processors, which are required for encoding voice for
transmission over bandwidth constrained networks. In particular, we have
designed and implemented the following software features in our products to
improve the quality of packet voice transmission, minimize system delay and
jitter, and utilize bandwidth efficiently:

     - Voice Compression.  We integrate a number of industry standard voice
       coding algorithms, including G.711, G.726, G.729A and G.723.1, that
       compress voice to reduce the total bandwidth required for transmission.

     - Echo Cancellation.  We deliver echoless voice by integrating industry
       standard acoustic echo cancellation technology, known as G.165, to which
       we have made proprietary enhancements.

     - Silence Detection.  Our proprietary silence detection technology
       eliminates unnecessary transmission of voice packets during the periods
       of silence that occur in normal conversation, freeing bandwidth for other
       uses.

     - Comfort Noise.  We incorporate technology that inserts comfort noise
       during periods of silence so that users do not inadvertently think that
       the phone call is no longer active.

     - Jitter Buffering Techniques.  Our products adapt to the real-time
       irregularities in network transmission and ensure all traffic reaches its
       endpoint at the appropriate time by introducing delay that is
       unrecognizable to the user.

     - DTMF Processing Technology.  Dual tone multi frequency, or DTMF, tones
       are generated by depressing buttons on digital telephone sets, enabling
       the digital telephone set to recognize dialed numbers used for outbound
       calls and for applications such as voicemail. Our proprietary technology
       improves the transmission of DTMF tones over packet networks.

     We have significant experience in transmitting packet voice over both
low-speed, traditional telephone networks and higher speed, broadband networks.
We have developed network interfaces for the delivery of remote voice over
traditional telephone connections and ISDN networks and have incorporated
third-party network devices to support T-1, digital data service and frame relay
networks. In addition, to deliver data connectivity alongside our packet voice
transmission, we have expertise in terminating dial-up networking connections
and bridging standard data traffic such as TCP/IP.

Remote Voice Product Architecture

     We develop our products using a combination of proprietary and commercial
hardware and software subsystems. Our product architecture enables these
subsystems to be configured and adapted in order to deliver a broad range of
enterprise voice product solutions, thereby minimizing product development
cycles and maximizing manufacturing efficiency. Our products are fully
compatible with the large installed base of telephone systems from Alcatel,
Lucent, NEC and Nortel Networks, and require no design modifications or upgrades
to these PBX systems or their respective digital telephone sets.

     We have designed a standard hardware architecture that serves as a common
platform for our software modules. We use industry standard digital signal
processors and programmable logic devices to build a standard hardware platform
that can be software modified to support different applications or PBX protocols
without requiring a hardware change. We have also architected our products with
a variety of standard telephony and WAN interfaces to ensure that we can
transmit packet voice over the multiple network environments currently
available.

     All of our products share a common software library of functional modules
that comprise our digital line interface software subsystem and our RVP software
platform. Our digital line interface software subsystem is responsible for the
interface to the proprietary software protocols on the digital line cards of
PBXs. This software subsystem has been designed to emulate a majority of the
digital line cards on the market today without requiring a change to our
hardware architecture. This flexible software architecture also enables us to
easily add software support for new PBX protocols. Our RVP software platform is
                                       32
<PAGE>   39

responsible for packetizing voice and PBX signaling information, as well as
conditioning these voice packets for transmission over data networks. RVP has
been engineered to enable new features to be easily and quickly introduced in
parallel to its existing capabilities.

     All the software development for our IP EXTender 4000, EXTender 3200 for
IDSL, Branch Office EXTender 6000 and PBXgateway IP product lines runs on the
VxWorks real-time operating system from Wind River Systems. This industry
standard operating system provides our engineers with a standard development
environment in which to design new proprietary software applications and easily
incorporate third-party software applications. A standard development
environment such as VxWorks allows for the rapid prototyping and application
development necessary for our products that serve as platforms for future
applications.

PRODUCTS

     We have worked with Alcatel, Lucent, NEC and Nortel Networks to develop
seamless interfaces between the proprietary protocols of these leading PBX
vendors and our RVP software platform and standard hardware architecture. As a
result of these relationships, we have developed substantial expertise in
understanding and interfacing with these proprietary PBX protocols. These PBX
manufacturers have tested and validated in their own labs that our RVP platform
is interoperable with a variety of their PBX equipment. Currently, our EXTender
series of products is compatible with the following PBX systems: 4400/4200
(Alcatel), DEFINITY (Lucent), NEAX 1000/2000/2400 (NEC), Meridian (Nortel
Networks) and Norstar (Nortel Networks).

     The EXTender solution consists of the following component parts:

     - Customer Premise Equipment, or CPE, Devices.  Single- or multi-user
       remote location client devices that service branch offices, remote call
       centers and telecommuters; and

     - Corporate PBX Gateways.  PBX switch site products, located at the
       corporate location, that seamlessly extend voice traffic, PBX signaling
       information and PBX applications to our CPE devices.

     Our EXTender series of products enables corporations to provide the
functionality of the PBX and all of its supported applications to users who
traditionally have not had access to the corporate PBX and its voice
applications because of the limitations of current voice systems. Our products
enable the PBX to act as a server that seamlessly distributes the features and
applications of PBX-based voice systems to remote locations over networks such
as ATM, digital data service, DSL, fiber, frame relay, IP, ISDN, T-1, fractional
T-1 and traditional telephone connections. Remote voice users can utilize
digital telephone sets identical to the sets deployed in the corporate
headquarters and access the corporate voice system for applications such as
voicemail, ACD and interactive voice response, and features such as three- or
four-digit internal dialing, conferencing and call forwarding. By enabling all
employees, regardless of location, to have access to the corporate voice system,
our EXTender solutions create a single, unified voice network.

     [Diagrams: 3 network topology diagrams that show the implementation of our
products.]
[EDGAR DESCRIPTIONS OF DIAGRAMS]

                         CAPTION: SINGLE-USER PRODUCTS
1. Diagram of single-user product configuration between a corporate location at
which a PBX and data server reside, utilizing PBXtender, and two remote
locations, each with a personal computer and telephone set, utilizing an
EXTender 3000 and EXTender 1000+ via ISDN or a traditional telephone network.

                          CAPTION: MULTI-USER PRODUCTS
2. Diagram of multiple-user product configuration between a corporate location
at which a PBX resides, utilizing an EXTender 6000 which connects to a network
termination device which connects to public and private networks, and a remote
location. The remote location connects to the public and private network via a
network termination device. A Branch Office EXTender 6000 connects to the
network termination device. Multiple phones connect to the Branch Office
EXTender 6000.

          CAPTION: BROADBAND NETWORK PRODUCTS CURRENTLY IN BETA TRIALS
3. Diagram of a corporate location with a PBX connected to a PBXGateway IP which
connects to a network termination device which is connected, through broadband
networks, to remote locations which contain (i) an IP EXTender 4000 connected to
a telephone set and personal computer, (ii) a Branch Office EXTender 6000
connected to a telephone set, and (iii) an EXTender 3200 for ISDL connected to a
telephone set and personal computer. The EXTender 3200 connects directly to the
public and private network. The Branch Office EXTender 6000 and IP EXTender 4000
connect to the public and private network via a network termination device.

CPE Devices

     Our single-user product line provides telecommuters and remote call center
agents with seamless connectivity to the corporate PBX and the LAN over data
networks.

     - EXTender 1000+.  The EXTender 1000+ is a single-user, integrated access
       device that supports both PBX voice and personal computer, or PC, data
       over a single traditional telephone line. The remote user's PC and
       full-featured digital telephone set plug into the product, which
       terminates and multiplexes voice and data over a single telephone line.
       The product contains a built-in, industry-standard 56 kilobits per
       second, or Kbps, modem which enables the user to access the corporate LAN
       and supports standard Windows-based, dial-up networking technology. The
       EXTender 1000+ unit is situated at the remote location and connects to
       either another EXTender 1000+ unit or a
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<PAGE>   40

PBXtender gateway product located at the corporate PBX site. In the future, the
EXTender 1000+ will also be able to connect to a PBXgateway IP product located
at the corporate PBX site.

     - EXTender 3000.  The EXTender 3000 is a single-user, integrated access
       device that supports both PBX voice and PC data over an ISDN basic rate
       interface, or BRI, connection. An ISDN BRI connection is composed of two
       64 Kbps lines, or b-channels, that each can deliver a separate network
       connection. With its built-in ISDN line interface, the EXTender 3000
       enables the remote user to connect a digital telephone set and a personal
       computer into the EXTender 3000. The EXTender 3000 unit situated at the
       remote location is connected to either another EXTender 3000 unit or a
       PBXtender gateway product located at the corporate PBX site. In the
       future, the EXTender 3000 will also be able to connect to a PBXgateway IP
       product located at the corporate PBX site. There are three versions of
       the EXTender 3000:

        - EXTender 3000S and EXTender 3000T.  The EXTender 3000S and the
          EXTender 3000T utilize a serial data connection and offer simultaneous
          voice and PC data multiplexed over one ISDN BRI b-channel. The second
          b-channel is available for analog devices such as a fax, additional
          phone or a modem. The EXTender 3000T uses standard Windows-based,
          dial-up networking technology to enable the user to set up a dial-up
          network connection to a remote access server at the corporate location
          for remote LAN access.

        - EXTender 3000E.  The EXTender 3000E offers dedicated voice over one
          ISDN BRI b-channel and a 64 Kbps Ethernet data connection on the
          second b-channel. The EXTender 3000E uses an Ethernet port and
          bridging technology to enable simultaneous voice and LAN access
          capabilities. In addition, standard hardware compression technology is
          utilized to significantly enhance data throughput. When not used for
          Ethernet data, the second b-channel is available as an analog port,
          supporting a fax, additional phone or modem.

     - EXTender 3200 for IDSL.  The EXTender 3200 for IDSL is a single-user,
       integrated access device that delivers voice and PC data over an
       integrated digital subscriber line, or IDSL, network connection. IDSL is
       DSL-enabled ISDN network connection that combines both b-channels into
       one digital connection that can simultaneously transmit packet voice and
       data. The product was developed in conjunction with Copper Mountain and
       interoperates with Copper Mountain's digital subscriber line access
       multiplexer, or DSLAM, product line. DSLAMs are telecommunications
       equipment located in the central offices of service providers that
       transmit DSL traffic to and from end users. The EXTender 3200 for IDSL
       connects to a PBXgateway IP product located at the corporate PBX site.
       This product is currently in beta testing and is expected to be
       commercially available by the fourth quarter of calendar year 1999.

     - IP EXTender 4000.  The IP EXTender 4000 is a single-user product that
       delivers PBX voice over IP networks. The product requires an external
       network termination device such as a DSL or cable modem and delivers
       IP-based remote voice over data networks. The IP EXTender 4000 connects
       to a PBXgateway IP product located at the corporate PBX site. This
       product is currently in beta testing and is expected to be commercially
       available by the fourth quarter of calendar year 1999.

     Our branch office product provides remote offices with seamless
connectivity to the corporate PBX and the LAN over data networks.

     - Branch Office EXTender 6000.  The Branch Office EXTender 6000 is a
       multi-user product that supports 8 remote users and will scale to support
       12 users following the release of a 4-port daughter card that is expected
       to be commercially available in the fourth quarter of calendar year 1999.
       The product was constructed with standard 19-inch, rack-mountable
       hardware so a number of units can easily be deployed together to service
       larger remote offices. In addition, the product has dual external WAN
       interfaces that allow for multiple network options and redundancy
       capability and transmits voice over a wide variety of data networks
       including ATM, digital data service, DSL, fiber, frame relay, IP, ISDN,
       T-1 and fractional T-1 connections. The Branch Office EXTender 6000 can
       be centrally administered over a Telnet connection, an in-band RVP
       connection, or with

                                       34
<PAGE>   41

       SNMP or HTML interfaces. The product's ability to dynamically allocate
       bandwidth between multiple users allows for flexible configurations and
       bandwidth conservation. The Branch Office EXTender 6000 located at the
       remote office connects to either another Branch Office EXTender 6000 unit
       or a PBXgateway IP located at the corporate PBX site.

Corporate PBX Gateway Products

     Our PBX gateway products, located at the corporate PBX site, interface with
the line side of the PBX and create seamless extensions of voice, PBX signaling
information and PBX applications to our remote CPE products.

     - PBXtender.  The PBXtender is a high density PBX gateway product that can
       support up to 24 ports per chassis. The PBXtender currently supports our
       EXTender 1000+ and EXTender 3000 CPE product lines. The PBXtender can be
       configured with up to 12 line cards that may be mixed and matched to
       support up to 12 analog users or 24 ISDN users simultaneously. The
       product also has a Windows-based graphical user interface to enable
       remote management and diagnostics of our CPE equipment.

     - PBXgateway.  The PBXgateway supports a range of our CPE products,
       including both multi-user and single-user clients. Depending upon the
       version of the product, the PBXgateway will transmit voice over a wide
       variety of data networks including ATM, digital data service, DSL, fiber,
       frame relay, IP, ISDN, T-1 and fractional T-1 connections. The PBXgateway
       can be centrally administered over a Telnet connection, an in-band RVP
       connection, or with SNMP and HTML interfaces.

        - Branch Office EXTender 6000.  The Branch Office EXTender 6000 unit,
          located at the corporate PBX site, seamlessly extends the
          functionality of the corporate PBX to a Branch Office EXTender 6000
          located at the remote office site. This product will transmit voice
          over ATM, digital data service, fiber, frame relay, ISDN, T-1 or
          fractional T-1 network connections.

        - PBXgateway IP.  The PBXgateway IP seamlessly extends the functionality
          of the corporate PBX to a variety of our multi-user and single-user IP
          CPE devices, including the Branch Office EXTender 6000, EXTender 3200
          for IDSL, and the IP EXTender 4000. The PBXgateway IP can support up
          to 12 simultaneous users across any of these CPE devices over multiple
          types of networks, including DSL and IP networks. As part of our
          strategy, we intend to utilize this product as a platform to deliver
          new applications and services to our remote CPE devices utilizing both
          new software components that we intend to develop and third-party
          software applications that we intend to incorporate into the product.
          The PBXgateway IP is currently in beta testing and is expected to be
          commercially available by the fourth quarter of calendar year 1999.

Other Products

     - Digital-to-Analog Recording Interface.  Our Digital-to-Analog Recording
       Interface converts proprietary digital PBX signaling into a standard
       analog audio output so that voice calls can be recorded on any voice
       logger or recording device. We offer 3 configurations that support from 2
       to 48 lines, and are modular in nature, allowing for easy expansion to
       accommodate more users. Our Digital-to-Analog Recording Interface is
       compatible with the following voice systems: DEFINITY (Lucent); Meridian
       (Nortel Networks); Norstar (Nortel Networks); and DMS Centrex (Nortel
       Networks).

     - Telebridge.  The Telebridge series of products emulates digital PBX
       telephone sets and terminates calls, allowing computer telephony
       integration, or CTI, applications to interface with legacy PBX systems.

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<PAGE>   42

SALES AND MARKETING

     We primarily sell our products through an indirect distribution system that
includes the following channels: OEMs and private label partners, ILECs, systems
integrators and distributors, telecom and datacom VARs, and broadband service
providers. We support our sales channels with our own internal sales
professionals as well as marketing programs, educational programs, field
technical support and telephone technical support. At July 31, 1999, our sales
team was composed of a vice president of sales, eight regional sales managers,
three systems engineers, three channel sales managers and two sales
administrators. Our multi-channel strategy enables us to create end-user demand
for our products and services, and access corporate opportunities identified by
our channel partners, while also allowing the customers to choose the reseller
that is most appropriate for delivering those products and services to them.

                       OUR PRIMARY DISTRIBUTION CHANNELS

<TABLE>
<S>                                     <C>
OEMs and Private Label Partners.....    Alcatel, Bell Canada, Dictaphone, Lucent,
                                        NEC
ILECs...............................    BellSouth, GTE, SBC
Systems Integrators and
  Distributors......................    Anixter, Dacon, Ingram Micro, Sprint North
                                        Supply, Williams Communications
Telecom and Datacom VARs............    Northwest Extension, PB Exchange, Stevens
                                        Communications, TeleCommute Solutions
Broadband Service Providers*........    AT&T Local Services, HarvardNet, JATO
                                        Communications, Northpoint Communications,
                                        Rhythms NetConnections, UUNet (MCI WorldCom)
</TABLE>

---------------
* Products in beta testing; channel under development

     Our regional sales managers provide support to all of the channels in their
geographic territory. They work closely with our channel partners, participating
in end-user briefings, proposals, product training sessions, end-user seminars,
trade shows and other demand generating activities. In addition, regional sales
managers are involved in generating and qualifying end-user leads that are
closed in partnership with our indirect channels.

     Our field-based systems engineers, located in Alberta, Tennessee and New
Jersey, provide our channels with technical training and perform pre- and
post-sale technical support for our channels and end-user customers. All of our
systems engineers have in-depth industry experience and product expertise. They
assist our channel partners with proposals, configurations, requests for
quotations and executive briefings, and perform other consultative duties.

     Our channel sales managers work at a corporate level with all of our
largest channel partners in developing sales and marketing plans that are
implemented at the field levels. These channel sales managers are primarily
responsible for driving business through the Lucent, NEC and Nortel Networks
channels. They also work with our regional territory managers on large sales
opportunities and national accounts.

     Our VARs are responsible for identifying potential business customers,
selling our products as part of complete solutions, and installing and
supporting the equipment at end-user sites. We establish relationships with our
resellers through written reseller agreements that provide pricing, discounts,
and terms and conditions under which they may purchase our products for resale.
These agreements are generally non-exclusive, may be terminated at will and do
not prevent our resellers from carrying competing lines or require our resellers
to attain specific sales levels. We provide significant sales, marketing,
training and technical support to our channels.

     Sales outside of the United States accounted for 18.3% of sales in fiscal
year 1999. We sell globally through Alcatel, Lucent and NEC. In addition, we
have a distribution arrangement with Dacon

                                       36
<PAGE>   43

Electronics plc for European sales of Nortel Networks-based products, as well as
distribution arrangements with 10 other international distributors.

     We focus our marketing efforts on awareness generation, lead generation and
sales support activities. Our marketing audience includes existing and
prospective customers, channel partners, trade and business press, industry
analysts and others who are influential in the industry.

     We participate in over 20 trade shows annually, taking advantage of joint
marketing opportunities with our resellers and channel partners whenever
possible. Trade show efforts include shows in the telecommunications,
teleworking, CTI, networking, call center and service provider industries. We
participate in many seminars with our resellers, as well as all major PBX user
group events and industry-related conferences. We use direct marketing programs
to generate awareness and qualified leads. Many campaigns are executed in
conjunction with our resellers, customized with their messages and contact
information and then mailed to their prospect and customer lists. Our web site
serves as an information source for end users, prospects and channel partners,
as well as a lead generation tool and customer service resource. Additionally,
we dedicate significant marketing resources to public relations activities,
generation of product and partner press releases, speaking opportunities,
by-lined articles, product reviews, customer success stories and editorial
coverage.

     To support our sales channels, we prepare training materials,
presentations, collateral, cost-justification tools, case studies, product
configurations, fact sheets, product introduction kits and distributor success
guides. Our regional sales managers and systems engineers regularly visit our
reseller offices and conduct product and technical training. Our marketing
database and sales force automation system currently contains over 20,000
records that can be segmented and are marketed to regularly.

CUSTOMER SUPPORT

     A high level of customer support and service is critical to developing
long-term relationships with our major distribution channels and end-user
customers. The majority of our service and support activities are related to
installation support and initial network configuration issues. In North America,
we also offer a variety of comprehensive and flexible maintenance and support
programs including basic product warranty, installation services, 24 hours a
day, 7 days a week remote telephone support and onsite maintenance services. Our
products are architected with support in mind. For example, our branch products
are engineered with remote monitoring, management and diagnostic capabilities so
that problems can be diagnosed on-line, thereby reducing the time and costs
associated with dispatching a technician to a remote site.

     A number of our distribution partners support our products. These
distribution partners provide installation, onsite maintenance and telephone
support services to our end users. To complement this service infrastructure, we
have engaged Vital Network Services, an outsourced technical support and
customer services organization, to provide fee-based telephone support,
installation and onsite maintenance services. We sell these services directly
and indirectly to end users. To date, our revenues attributable to customer
service and support services have been immaterial. We provide high-level,
back-up technical support and engineering assistance for both our distribution
partners and Vital Network Services. We have established strict escalation
guidelines with both our distribution channels and Vital Network Services to
ensure that the appropriate technical resources and management attention within
our company are focused on problems that are not solved in a timeframe
commensurate with the problem's priority.

     At July 31, 1999, we employed five people in customer support. Although we
may augment our Newton, Massachusetts and Calgary, Alberta-based support staff,
we do not intend to recruit our own direct field service and support
organization.

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<PAGE>   44

CUSTOMERS

     We sell substantially all of our products through independent channel
partners. The following is a representative list of our indirect channel
partners responsible for revenues of $50,000 or more in the 12 months ending
July 31, 1999:

<TABLE>
<S>                     <C>                       <C>
Alcatel                 Dacon Electronics         PB Exchange
Ameritech               Dictaphone                Positron
Anixter                 GTE                       SBC
BC Tel                  Loffler Business Systems  Sprint North Supply
Bell Canada             Lucent                    Stevens Communications
BellSouth               Mitel                     TCI
Charter Communications  NEC                       Teleswitch
Coastcom                Northwest Extension       Williams Communications
</TABLE>

     For the fiscal year ended April 30, 1999, Lucent accounted for
approximately 46.7% of our revenues, which consisted of Lucent-branded products
that constituted 43.7% of our revenues and MCK-branded products that constituted
3.0% of our revenues. For the three-month period ended July 31, 1999, Lucent
accounted for approximately 46.3% of our revenues, which consisted of
Lucent-branded products that constituted 29.6% of our revenues and MCK-branded
products that constituted 16.7% of our revenues. No other customer represented
over 10% of revenues in either period. Approximately 78.7% and 74.3% of our
revenues were derived from ten customers in fiscal 1999 and in the three-month
period ended July 31, 1999, respectively.

     The following is a representative list of end users, by vertical market
segment, that have deployed multiple systems:

<TABLE>
<CAPTION>
  FINANCIAL/INSURANCE           TECHNOLOGY         GOVERNMENT/EDUCATION     HOSPITALITY/TRAVEL
  -------------------           ----------         --------------------     ------------------
<S>                      <C>                       <C>                   <C>
Arthur Andersen          3M                        American Diabetes     American Express Travel
Bankers Trust            Ameritrade                  Association         Avis
Bear Stearns             Ascend                    City of San Antonio   Promus Hotels
Comdisco                 Bottomline Technologies   Massachusetts State   Travel Services
Deloitte & Touche        Citrix Systems              Police                International
Fidelity                 Digital (Compaq)          New York University   United Airlines
General Auto Insurance   Landmark Systems          U.S. Postal Service   World Travel Partners
MFS                      Northrop Grumman
Merrill Lynch
Nationsbank (Bank of     TELECOM/MEDIA             OTHER
  America)                                         Argon
Option One               CNN                       Circuit City
Prudential Securities    Harte-Hanks               Federal Express
Safeco                   Sitel                     Otis Elevator
Sun Trust                TCI                       Pacificorp
TD Waterhouse Group      Turner Broadcasting       Pfizer
</TABLE>

RESEARCH AND DEVELOPMENT

     To maintain our technology leadership position, we focus our research and
development efforts on improving the functionality and performance of our
existing products and designing new products that address customer needs and
changes in the marketplace. We have assembled a team of experienced hardware and
software engineers with capabilities in both networking and telecommunications.
Our engineering expertise includes significant understanding of:

     - the line side of proprietary PBX systems;

     - digital audio technology, such as echo cancellation and voice compression
       algorithms;

                                       38
<PAGE>   45

     - IP telephony;

     - wide area network and telephony interfaces; and

     - network diagnostic and management frameworks.

     At July 31, 1999, we employed 31 people in our engineering organization,
and intend to continue to expand all functional areas of the engineering
organization. We perform research and product development activities at our
principal offices in Newton, Massachusetts, as well as at our Calgary, Alberta
development facility.

     Our research and development process is driven by market demand. Product
development begins with a comprehensive functional product specification based
on input from all functional groups and levels within our company. In addition,
we value feedback from our end-user customers and distribution channel partners,
and have incorporated a significant amount of customer-requested functionality
to date. We are also active in industry bodies and standards committees and
utilize information from these organizations in the product development process.
Finally, we have maintained an ongoing dialogue and established technology
partnerships with a number of PBX manufacturers, internetworking vendors,
broadband equipment suppliers and service providers. We will continue to work
with these companies to develop products that meet specific market requirements.

     In addition to designing enhancements for our current products, we will
work to develop new remote voice products that extend the functionality of the
PBX across multiple networks, particularly broadband networks. Furthermore, we
plan to develop new software components for our universal hardware architecture
that expand the basic capabilities of our solutions to enable the delivery of
new applications and services. We are focusing development efforts on, among
other things, supporting additional PBX protocols and new network environments,
developing additional software applications, expanding the port density of our
existing products and implementing additional network management capabilities.
Finally, we will continue to work with third-party software and hardware
manufacturers to establish interoperability between our products and other
important elements within common network environments.

PRODUCT VALIDATION LABORATORY

     Over the last year, we have hired the personnel and purchased the equipment
necessary to build our product validation laboratory. Of the 31 people in our
engineering organization, 5 are dedicated full time to our product validation
laboratory. At both our Newton, Massachusetts and Calgary, Alberta development
facilities, we have constructed state of the art laboratories with equipment
from such vendors as ADC Kentrox, Ascend, Cisco, Copper Mountain, Flowpoint,
IBM, Lucent, NEC, Netopia, Newbridge, Nortel Networks, Packeteer and Paradyne.

     Our Calgary, Alberta facility system tests the EXTender product line and
validates our product's integration with the major PBX vendors that we support.
We conduct extensive product testing to ensure that our equipment meets the high
standards for voice quality and reliability associated with mission critical
systems such as PBXs. We also conduct extensive tests on the embedded systems
within our EXTender product line as well as on all the features and functions of
the EXTenders. Our Calgary facility also conducts tests that ensure that our
products are compatible with the PBXs and respective digital telephone sets of
manufacturers that we support.

     Our Newton, Massachusetts facility tests system interoperability. The
ability to deliver traffic within multiple network environments and to
interoperate with equipment from numerous vendors has become a key component to
the success of communications equipment companies. Because no communications
equipment product can be validated independently of the network within which it
operates or independently from the equipment with which it interfaces, this lab
conducts extensive tests of our product line operating within multiple network
environments and interacting with equipment from numerous equipment vendors. We
conduct extensive tests that measure device performance, quality of service and

                                       39
<PAGE>   46

voice prioritization within multiple network environments and across a range of
network conditions. Our facilities contain the following equipment and network
circuits to conduct these tests:

     - ATM switches, DSLAMs and frame relay access devices;

     - enterprise routers that support multiple network interfaces and protocols
       including ATM, Ethernet, frame relay, T-1 and V.35;

     - multiplexers, inverse multiplexers, channel banks, and channel service
       units, or CSUs, and data service units, or DSUs;

     - CPE equipment such as DSL modems; and

     - traditional telephone, ISDN, 56 Kbps leased line, T-1 and DSL circuits.

     By combining the capabilities of our two facilities, we have implemented a
product validation procedure that enables us to deliver high quality voice
equipment that works within multiple network environments, is compatible with
most widely deployed network equipment and is capable of adapting to a wide
range of network conditions. Furthermore, the engineers in our product
validation laboratory work continually with validation engineers at other
equipment companies in order to compile feedback and recommendations to improve
our products.

MANUFACTURING

     We outsource our manufacturing to two contract manufacturers. Celestica,
which is located in Exeter, New Hampshire and is ISO 9002 registered,
manufactures the Branch Office EXTender and PBXgateway IP products. They provide
full turnkey services, including material procurement, final assembly, testing,
shipment to our customers and warranty repair. Electronic Manufacturing Group
located in Calgary, Alberta manufactures all of our other product lines.
Electronic Manufacturing Group also provides us with printed circuit assemblies.
We are ISO 9001 registered and complete the final assembly, testing and
inspection of these printed circuit assemblies at our Calgary, Alberta facility.

     We design and develop the key components, including printed circuit boards
and software, for all of our products. In addition, we determine the components
that are incorporated in our products and select the appropriate suppliers of
these components. We design the tests and specify the testing equipment for the
product testing performed at Celestica and at our facility in Calgary, Alberta.

     We use a rolling six-month forecast based upon anticipated product orders
to determine our material requirements. Lead times for the materials and
components that we order vary significantly and depend on factors such as
specific supplier, contract terms and demand for a component at a given time.
We, along with our contract manufacturers, may terminate our contracts without
cause at any time. At that time, the terminating party must honor all open
purchases.

COMPETITION

     We compete in a new, rapidly evolving and highly competitive and fragmented
industry that is subject to increasing product, market and technology changes
brought about by the introduction of new technologies, the deployment of
broadband networks and changes in the regulatory environment. We believe that
the main competitive factors in our market are the following:

     - technology partnerships, particularly with the major PBX manufacturers
       and service providers;

     - system reliability and performance;

     - sales and distribution capability;

     - price/performance characteristics;

     - access to third-party technology;

     - conformance to industry standards;
                                       40
<PAGE>   47

     - brand name recognition;

     - ease of deployment and use;

     - timeliness of product introductions;

     - product features and breadth;

     - customer relationships; and

     - technical support and service.

     We believe our success in competing with other manufacturers of
communications products depends primarily on:

     - our ability to enter into and maintain key technology and distribution
       relationships with third-party manufacturers, distributors, resellers and
       service providers in our market segment;

     - our engineering, marketing and sales skills;

     - the price, quality and reliability of our products; and

     - our delivery and service capabilities.

     Our principal and potential competitors include large telecommunications
manufacturers such as Nortel Networks and a number of other public and private
companies that are developing next generation network access products that
target the branch office and telecommuting marketplaces. We expect competition
to intensify in the future and new competitors to emerge. Many of our
competitors are substantially larger than we are and have significantly greater
financial, sales and marketing, technical, manufacturing and other resources,
more established distribution channels and stronger relationships with service
providers. These competitors may be able to respond more rapidly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sale of their products than we can.
Furthermore, we believe some of our competitors may offer aggressive sales
terms, including financing alternatives, which we might not be able to match.
These competitors may enter our existing or future markets with solutions that
may be less expensive, provide higher performance or additional features or be
introduced earlier than our solutions. Given the market opportunity, we also
expect that other companies may enter our market with better products and
technologies. If any technology that is competing with ours is more reliable,
has better quality, is less expensive or has other advantages over our
technology, then the demand for our products could decrease.

     We expect our competitors to continue to improve the performance of their
current products and introduce new products or new technologies. Successful new
product introductions or enhancements by our competitors could reduce the sales
or market acceptance of our products, perpetuate intense price competition or
make our products obsolete. To be competitive, we must continue to invest
significant resources in research and development, sales and marketing and
customer support. We cannot be sure that we will have sufficient resources to
make these investments or that we will be able to make the technological
advances necessary to be competitive.

     Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share. Our failure to compete successfully
against current or future competitors could seriously harm our business,
financial condition and results of operations.

INTELLECTUAL PROPERTY

     Our success and ability to compete is dependent in part upon our
proprietary technology. We rely on a combination of copyright, trademark, trade
secret and other intellectual property law, nondisclosure agreements and other
protective measures to protect our proprietary rights. We also utilize
unpatented proprietary knowledge and trade secrets, and employ various methods
to protect our trade secrets and knowledge. We presently have no patents.

                                       41
<PAGE>   48

     We believe our intellectual property rights are significant and that the
loss of all or a substantial portion of such rights could have a material
adverse effect on our business, financial condition and results of operations.
There can be no assurance that our intellectual property protection measures
will be sufficient to prevent misappropriation of our technology. Some of our
contractual arrangements provide third parties with access to our source code
and other intellectual property upon the occurrence of specified events. Such
access could enable these third parties to use our intellectual property and
source code to develop and manufacture competing products, which would adversely
affect our performance and ability to compete. In addition, we cannot be certain
that others will not independently develop substantially equivalent intellectual
property, gain access to our trade secrets or intellectual property, or disclose
our intellectual property or trade secrets. Furthermore, the laws of many
foreign countries do not protect our intellectual property to the same extent as
the laws of the United States. From time to time, we may desire or be required
to renew or to obtain licenses from others in order to develop and market
commercially viable products effectively. There can be no assurances that any
necessary licenses will be available on reasonable terms, if at all.

     The communications industry is characterized by the existence of a large
number of patents and frequent claims and related litigation regarding patent
and other intellectual property rights. In particular, leading companies in the
communications markets have extensive patent portfolios. From time to time,
third parties may assert exclusive patent, copyright, trademark and other
intellectual property rights to technologies and related standards that are
important to us. We expect that we may increasingly be subject to infringement
claims as the number of products and competitors in the market for our
technology grows and the functionality of products overlaps. Although we have
not been a party to any litigation asserting claims that allege infringement of
intellectual property rights, we may be a party to litigation in the future. In
addition, third parties may assert claims or initiate litigation against us or
our manufacturers, suppliers, OEMs, technology partners or customers alleging
infringement of their proprietary rights with respect to our existing or future
products.

     We may in the future initiate claims or litigation against third parties
for infringement of our proprietary rights to determine the scope and validity
of our proprietary rights. Any such claims, with or without merit, could be
time-consuming, result in costly litigation and diversion of technical and
management personnel or require us to develop non-infringing technology or enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on acceptable terms, if at all.

EMPLOYEES

     At July 31, 1999, we had a total of 80 employees, of which 31 were in
research and development, 29 were in sales, marketing, business development and
customer support, 7 were in manufacturing, and 13 were in finance,
administration and operations. None of our employees is represented by a labor
union. We have not experienced any work stoppages and consider relations with
our employees to be good.

FACILITIES

     We currently lease approximately 8,000 square feet of space at our
headquarters in Newton, Massachusetts under a lease that expires in June 2002,
and lease an additional 1,500 square feet at our headquarters building in Newton
on a month-to-month basis. We are currently in need of more space and anticipate
leasing additional office space in our current building in Newton, Massachusetts
or moving our corporate headquarters to new office space in the Newton area in
the next 6 to 12 months. We also lease approximately 8,500 square feet at our
development center in Calgary, Alberta under a lease that expires in December
2000.

LEGAL PROCEEDINGS

     We are currently not a party to any material legal proceedings.

                                       42
<PAGE>   49

                                   MANAGEMENT

EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS

     Our executive officers, key employees and directors and their ages as of
September 30, 1999, are as follows:

<TABLE>
<CAPTION>
                   NAME                     AGE                     POSITION
                   ----                     ---                     --------
<S>                                         <C>    <C>
Steven J. Benson..........................  40     President, Chief Executive Officer,
                                                   Chairman and Director
Paul K. Zurlo.............................  33     Chief Financial Officer and Vice President
                                                   of Operations
Michael D. Williams.......................  41     Vice President of Business Development
Patrick J. Curley.........................  39     Vice President of Engineering
Jeffrey P. Dickerson......................  39     Vice President of Sales
Joan E. Lockhart..........................  43     Vice President of Marketing
J. Robert Geiman..........................  26     Director of Corporate Development
Gregory M. Avis(1)........................  40     Director
Michael H. Balmuth(2).....................  36     Director
John B. Landry(2).........................  51     Director
Calvin K. Manz............................  46     Director
Paul Severino(1)..........................  52     Director
</TABLE>

---------------
(1) Member of the compensation committee
(2) Member of the audit committee

     Steven J. Benson has served as our President, Chief Executive Officer and a
Director of MCK since June 1997 and Chairman since August 1999. From September
1992 to April 1997, he served as Senior Vice President of Worldwide Sales and
Marketing at Shiva Corporation, a manufacturer of data access products. From
January 1988 to August 1992, Mr. Benson served as Director of Worldwide Sales
and Marketing for Lotus Development Corporation's Portable Computing Group. Mr.
Benson holds a Bachelor's degree from Bentley College.

     Paul K. Zurlo has served as our Chief Financial Officer and Vice President
of Operations since September 1997. From July 1995 to June 1997, he served as a
Vice President at Summit Partners, a venture capital firm. Summit Partners and
its affiliates manage a number of venture capital funds, including Summit
Ventures IV, L.P., Summit Subordinated Debt Fund L.P. and Summit Investors III,
L.P., which are all stockholders of MCK. From July 1993 to July 1995, Mr. Zurlo
was a consultant with Bain & Company. Mr. Zurlo holds a Bachelor's degree from
Georgetown University and an M.B.A. from Harvard University.

     Michael D. Williams has served as our Vice President of Business
Development since July 1997. From December 1994 to July 1997, he served in a
series of increasingly senior management positions at Gandalf Canada Ltd., a
networking solutions provider for the remote access market, most recently as the
Vice President of Product Marketing. From December 1992 to November 1994, Mr.
Williams served as the Strategic Marketing Manager for Canada at AT&T Network
Systems (now Lucent). Mr. Williams holds a Bachelor's degree from the University
of Waterloo.

     Patrick J. Curley has served as our Vice President of Engineering since May
1998. From July 1994 to March 1998, he served as Director and Vice President of
Engineering at Windata, Inc., a wireless local area networking company. From
September 1991 to June 1994, Mr. Curley served as Director of Engineering at
PictureTel Corporation, a video and data conferencing company. He holds a
Bachelor's degree from Boston University.

                                       43
<PAGE>   50

     Jeffrey P. Dickerson has served as our Vice President of Sales since
September 1997. From November 1996 to August 1997, he served as Vice President
of Sales and Service at Intelligent Environments, Inc., a British Internet
software company. From February 1993 to November 1996, Mr. Dickerson served as
Vice President of Direct Sales at VMark Software, Inc., a data warehousing
software company. Mr. Dickerson holds a Bachelor's degree from North Adams State
College.

     Joan E. Lockhart has served as our Vice President of Marketing since July
1997. From May 1997 to July 1997, she served as Director of Marketing
Communications and Product Marketing for Anysoft, Inc., an Internet software
company. From July 1996 to May 1997, she served as Director of Corporate
Communications for PictureTel Corporation. From June 1992 to June 1996, Ms.
Lockhart served as Director of Corporate Marketing for Avid Technology, Inc., a
digital media company. Ms. Lockhart holds a Bachelor's degree from S.U.N.Y.
Binghamton.

     J. Robert Geiman has served as our Director of Corporate Development since
January 1999. From July 1995 to December 1998, he served as an Associate at
Summit Partners. Mr. Geiman holds a Bachelor's degree from Dartmouth College.

     Gregory M. Avis has served as a Director of MCK since May 1996. Mr. Avis
has served as a Managing Partner of Summit Partners since 1990, and has been a
General Partner since 1987. Mr. Avis also serves as a director of: Ditech
Communications Corporation, a manufacturer of communications equipment; Extended
Systems, Inc., a network peripherals and wireless communications company;
Powerwave Technologies, Inc., a designer and manufacturer of power amplifiers
for wireless communications; Splash Technology Holdings, Inc., a developer of
color server systems; and several privately held companies. Mr. Avis holds a
Bachelor's degree from Williams College and an M.B.A. from Harvard University.

     Michael H. Balmuth has served as a Director of MCK since September 1997. He
has served as a Principal at Summit Partners since December 1998 and a Vice
President from March 1997 to December 1998. From August 1991 to February 1997,
Mr. Balmuth served as a Principal at Broadview Associates. He is a director of
several private companies. Mr. Balmuth holds a Bachelor's degree from Dartmouth
College and an M.B.A. from Harvard University.

     John B. Landry has served as a Director of MCK since September 1997. Since
1995, he has served as Vice President of Technology Strategy for IBM. In
addition, since February 1995, Mr. Landry has served as the Chairman of
Anyday.com, an Internet calendar and personal information management company.
From March 1996 to January 1999, he served as Chairman of Narrative
Communications, an Internet-based advertising and direct marketing company. From
December 1990 to June 1995, Mr. Landry served as the Senior Vice President of
Development and Chief Technology Officer for Lotus Development Corporation. He
also serves as a director of Giga Information Group, a market research firm, and
Interliant, an applications service provider, as well as several private
companies. Mr. Landry holds a Bachelor's degree from Babson College.

     Calvin K. Manz has served as a Director since June 1989. He founded our
company in June 1989, and served as our President and Chief Executive Officer
until June 1997. He has served as the President and Chief Executive Officer of
Odyssey Financial Inc., a financial and management advisor to technology
companies, since December 1997. Mr. Manz was a Director of Telebackup Systems
Inc., a software utilities company, from June 1997 until the company merged in
May 1999 with Veritas Software, a supplier of storage management software. Mr.
Manz also serves as a director of International Properties Group Ltd., a
publicly-traded real estate company in Canada, and several private companies.

     Paul Severino has served as a Director of MCK since July 1999. He has
served as the Chairman of NetCentric Corporation, a provider of Internet
protocol telephony applications, since August 1997. From October 1994 to
November 1996, Mr. Severino served as the Chairman of the Board of Bay Networks,
Inc., after its formation from the merger of Wellfleet and Synoptics. From
October 1986 to October 1994, he served as the President and Chief Executive
Officer of Wellfleet Communications, Inc., a company he co-founded and which
merged with Bay Networks. He is a director of Media 100, Inc., a provider of

                                       44
<PAGE>   51

digital video systems, Interspeed, Inc., a remote access equipment company, and
SilverStream Software, Inc., an Internet software company. Mr. Severino holds a
Bachelor's degree from Rensselaer Polytechnic Institute.

     Following this offering, the Board of Directors will consist of six
directors divided into three classes, with each class serving for a term of
three years. At each annual meeting of stockholders, directors will be elected
by the holders of common stock to succeed the directors whose terms are
expiring. Messrs. Benson and Manz are Class I directors whose terms will expire
in 2000. Messrs. Balmuth and Landry are Class II directors whose terms will
expire in 2001, and Messrs. Avis and Severino are Class III directors whose
terms will expire in 2002.

BOARD COMMITTEES

     The Board of Directors has a Compensation Committee composed of Messrs.
Avis and Severino, which makes recommendations concerning salaries and incentive
compensation for our employees and administers the 1996 Stock Option Plan and
the 1999 Stock Option and Grant Plan. The Board of Directors also has an Audit
Committee composed of Messrs. Balmuth and Landry, which recommends the
engagement of our outside auditors and reviews our accounting controls, the
results and scope of the audit and other services provided by our outside
auditors. The Board of Directors may establish, from time to time, other
committees to facilitate the management of our business.

DIRECTOR COMPENSATION

     We do not currently compensate our directors, but they are reimbursed for
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors or its committees. Our directors are generally eligible to
participate in the 1996 Stock Option Plan and the 1999 Stock Option and Grant
Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The members of the Compensation Committee of our Board of Directors are
Messrs. Avis and Severino. None of the executive officers serves on the Board of
Directors or Compensation Committee of any entity which has one or more
executive officers serving as a member of our Board of Directors or Compensation
Committee.

                                       45
<PAGE>   52

EXECUTIVE COMPENSATION

     The following table sets forth information with respect to the compensation
earned for services rendered to us by our current Chief Executive Officer and
each of our four other most highly compensated executive officers whose salary
and bonus compensation for the fiscal year ended April 30, 1999 exceeded
$100,000, collectively referred to below as the Named Executive Officers.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                   LONG-TERM
                                                                  COMPENSATION
                                                               ------------------
                                         ANNUAL COMPENSATION    NUMBER OF SHARES          ALL
                                         -------------------   UNDERLYING OPTIONS        OTHER
NAME & PRINCIPAL POSITION(1)              SALARY    BONUS(2)       GRANTED(#)       COMPENSATION(3)
----------------------------             --------   --------   ------------------   ---------------
<S>                                      <C>        <C>        <C>                  <C>
Steven J. Benson.......................  $271,356   $243,268                             $660
  President and Chief Executive Officer
Paul K. Zurlo..........................   109,584     34,258                              290
  Chief Financial Officer and Vice
  President of Operations
Michael D. Williams....................   110,000     24,280                              264
  Vice President of Business
  Development
Jeffrey P. Dickerson...................   120,001     75,568                              264
  Vice President of Sales
Joan E. Lockhart.......................   122,193     15,308                              304
  Vice President of Marketing
</TABLE>

---------------
(1) The number of shares of restricted stock held by each of the Named Executive
    Officers at the end of the fiscal year ended April 30, 1999 is as follows:
    Mr. Benson,        shares; Mr. Zurlo,        shares; Mr. Williams,
    shares; Mr. Dickerson,        shares; and Ms. Lockhart,        shares. The
    value of these shares of restricted stock is as follows: Mr. Benson,
    $       ; Mr. Zurlo, $       ; Mr. Williams, $       ; Mr. Dickerson,
    $       ; and Ms. Lockhart, $       . The values of the restricted stock
    holdings were calculated on the basis of the fair market value of $     per
    share at April 30, 1999, as determined by the Board of Directors.
(2) Includes amounts paid in respect of interest due to us from the Named
    Executive Officers on certain promissory notes. See "Certain Transactions."
(3) Represents premiums paid for term life insurance.

                       OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth information regarding stock options granted
during the fiscal year ended April 30, 1999 to the Named Executive Officers.

<TABLE>
<CAPTION>
                                                                                        POTENTIAL REALIZABLE
                                             INDIVIDUAL GRANTS                            VALUE AT ASSUMED
                        ------------------------------------------------------------    ANNUAL RATES OF STOCK
                        NUMBER OF SHARES   PERCENT OF TOTAL                            PRICE APPRECIATION FOR
                           UNDERLYING       OPTIONS GRANTED    EXERCISE                    OPTION TERM(3)
                            OPTIONS         TO EMPLOYEES IN     PRICE     EXPIRATION   -----------------------
NAME                       GRANTED(#)       FISCAL YEAR(1)      ($/SH)     DATE(2)       5%($)        10%($)
----                    ----------------   -----------------   --------   ----------   ----------   ----------
<S>                     <C>                <C>                 <C>        <C>          <C>          <C>
Steven J. Benson......
Paul K. Zurlo.........
Michael D. Williams...
Jeffrey P.
  Dickerson...........
Joan E. Lockhart......
</TABLE>

---------------
(1) Based on an aggregate of                options granted to officers and
    employees during the fiscal year ended April 30, 1999.
(2) All stock options granted vest as to 1/4th of the underlying shares on the
    first anniversary of the date of grant and 1/48th of the underlying shares
    monthly thereafter, so long as the optionee remains as an employee.
(3) The amounts shown as potential realizable value illustrate what might be
    realized upon exercise immediately prior to expiration of the option term
    using the 5% and 10% appreciation rates

                                       46
<PAGE>   53

    established in regulations of the SEC, compounded annually. The potential
    realizable value is not intended to predict future appreciation of the price
    of our common stock and do not give effect to any actual appreciation after
    the date of grant.

               AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
                         FISCAL YEAR-END OPTION VALUES

     The following table sets forth information concerning the number and value
of unexercised options to purchase common stock held by the Named Executive
Officers. The Named Executive Officers did not exercise any stock options during
fiscal year 1999. There was no public trading market for our common stock as of
April 30, 1999. Accordingly, the values of the unexercised in-the-money options
have been calculated on the basis of the fair market value at that time of
$     per share, as determined by the Board of Directors.

<TABLE>
<CAPTION>
                                                 NUMBER OF SECURITIES            VALUE OF UNEXERCISED
                                                UNDERLYING UNEXERCISED           IN-THE-MONEY OPTIONS
                                              OPTIONS AT FISCAL YEAR-END        AT FISCAL YEAR-END($)
                                             ----------------------------    ----------------------------
NAME                                         EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
----                                         -----------    -------------    -----------    -------------
<S>                                          <C>            <C>              <C>            <C>
Steven J. Benson...........................       --                              --          $
Paul K. Zurlo..............................       --                              --
Michael D. Williams........................       --                              --
Jeffrey P. Dickerson.......................       --                              --
Joan E. Lockhart...........................       --                              --
</TABLE>

1999 STOCK OPTION AND GRANT PLAN

     Our Board of Directors and stockholders adopted the 1999 Stock Option and
Grant Plan in August 1999. The 1999 Stock Option and Grant Plan permits us to
grant incentive stock options, non-qualified stock options and restricted and
unrestricted stock. These grants may be made to our officers, employees,
independent directors, consultants, advisors and key persons. The 1999 Stock
Option and Grant Plan allows for the issuance of        shares of common stock.
No shares have been issued under the 1999 Stock Option and Grant Plan.

     The 1999 Stock Option and Grant Plan is administered by the Board of
Directors or a committee designated by the Board of Directors. Subject to the
provisions of the 1999 Stock Option and Grant Plan, the Board of Directors or
the committee may select the individuals eligible to receive awards, determine
the terms and conditions of the awards granted, accelerate the vesting schedule
of any award and generally administer and interpret the plan.

     The exercise price of options granted under the 1999 Stock Option and Grant
Plan is determined by the Board of Directors or the committee. Under present
law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986, as amended, may not be granted at an exercise price less than the fair
market value of the common stock on the date of grant, or less than 110% of the
fair market value in the case of incentive stock options granted to optionees
holding more than 10% of the voting power. Non-qualified stock options may be
granted at prices which are less than the fair market value of the underlying
shares on the date granted. Options are typically subject to vesting schedules,
terminate ten years from the date of grant and may be exercised for specified
periods after the termination of the optionee's employment or other service
relationship with us. Upon the exercise of options, the option exercise price
must be paid in full either in cash or by certified or bank check or other
instrument acceptable to the Board of Directors or the committee or, in the sole
discretion of the Board of Directors or the committee, by delivery of shares of
common stock that have been owned by the optionee free of restrictions for at
least six months. The exercise price may also be delivered to us (a) by the
optionee in the form of a promissory note if the loan of such funds to the
optionee has been authorized by the Board of Directors and the optionee pays so
much of the exercise price as represents the par value of the common stock
acquired in a form other than

                                       47
<PAGE>   54

a promissory note and (b) by a broker under irrevocable instructions to the
broker selling the underlying shares from the optionee.

     The purchase price, and vesting dates and/or requirements of restricted
stock awards are determined by the Board of Directors or the committee. The
Board of Directors or the committee may place conditions on the restricted stock
awards such as, continued employment and/or the achievement of performance goals
or objectives in a grant document. Restricted stock may not be sold, assigned,
transferred or pledged except as specifically provided in the grant document. If
a restricted stock award recipient's employment or other relationship with us
terminates or other events specified in the grant document occur, we have the
right to repurchase some or all of the shares of stock subject to the award at
the purchase price of such stock.

     In the event of a merger, reorganization or consolidation, the sale of all
or substantially all of our assets or all of our outstanding capital stock or a
liquidation or other similar transaction, 50% of all outstanding awards issued
under the 1999 Stock Option and Grant Plan that are not then vested will become
fully vested and exercisable upon the closing of the transaction. In the event
of any such merger, reorganization or sale in which the outstanding awards
issued under the 1999 Stock Option and Grant Plan are not assumed by the
surviving entity, or equivalent substitute awards are not issued by such issuing
entity, all of the outstanding awards issued under the 1999 Stock Option and
Grant Plan that are not then vested will become fully vested and exercisable
upon the closing of the transaction. In such event, all awards issued under the
1999 Stock Option and Grant Plan will terminate upon closing of such
transactions. All participants under the 1999 Stock Option and Grant Plan will
be permitted to exercise, for a period of 15 days before any such termination,
all awards held by them which are then exercisable or will become exercisable
upon the closing of the transaction.

1996 STOCK OPTION PLAN

     Our Board of Directors and stockholders adopted the 1996 Stock Option Plan
in June 1996. The 1996 Stock Option Plan permits us to grant incentive stock
options and non-qualified stock options to our officers, employees, directors,
consultants, and advisors. The 1996 Stock Option Plan allows for the issuance of
       shares of common stock. Of the shares reserved for issuance under the
1996 Stock Option Plan,        shares remain available for issuance.

     The 1996 Stock Option Plan may be administered by the Board of Directors or
a committee designated by the Board of Directors. Subject to the provisions of
the 1996 Stock Option Plan, the Board of Directors or the committee may select
the individuals eligible to receive awards, determine the terms and conditions
of the awards granted, accelerate the vesting schedule of any award and
generally administer and interpret the 1996 Stock Option Plan.

     The exercise price of options granted under the 1996 Stock Option Plan
shall be determined by the Board of Directors or the committee. Under present
law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986, as amended, may not be granted at an exercise price less than the fair
market value of the common stock on the date of grant, or less than 110% of the
fair market value in the case of incentive stock options granted to optionees
holding more than 10% of the voting power of outstanding capital stock. Non-
qualified stock options may be granted at prices which are less than the fair
market value of the underlying shares on the date granted. Options are typically
subject to vesting schedules, terminate ten years from the date of grant and may
be exercised for specified periods after the termination of the optionee's
employment or other service relationship with us. Upon the exercise of options,
the option exercise price must be paid in full either in cash or by certified or
bank check or other instrument acceptable to the Board of Directors or committee
or, in the sole discretion of the Board of Directors or committee, by delivery
of shares of common stock that have been owned by the optionee free of
restrictions for at least six months. The exercise price may also be delivered
to us (a) by the optionee in the form of a promissory note if the loan of such
funds to the optionee has been authorized by the Board of Directors and the
optionee pays that part of the exercise price that represents the par value of
the common stock acquired in

                                       48
<PAGE>   55

a form other than a promissory note and (b) by a broker under irrevocable
instructions to the broker selling the underlying shares from the optionee.

     In the event of a merger, reorganization or consolidation, the sale of all
or substantially all of our assets or all of our outstanding capital stock or a
liquidation or other similar transaction in which the outstanding awards issued
under the 1996 Stock Option Plan are not assumed by the surviving entity, or
equivalent substitute options are not issued by such surviving entity, then all
outstanding awards issued under the 1996 Stock Option Plan that are not then
vested will become fully vested and exercisable upon the closing of the
transaction. All awards issued under the 1996 Stock Option Plan will terminate
upon any of the transactions described above. All participants under the 1996
Stock Option Plan will be permitted to exercise, for a period of 15 days before
any such termination, all awards held by them which are then exercisable or will
become exercisable upon the closing of the transaction.

RESTRICTED AND UNRESTRICTED STOCK GRANTS

     We sold an aggregate of        shares of restricted common stock to our
employees and directors for an aggregate cash purchase price of $     ,
including an aggregate of        shares sold to Messrs. Benson, Zurlo, Williams
and Dickerson and Ms. Lockhart for an aggregate purchase price of $     . Shares
of restricted common stock sold to employees and directors generally vest upon a
specified date or dates, subject to accelerated vesting for 50% of any unvested
shares upon a merger in which we are not the surviving company, or the sale of a
majority of our voting stock or substantially all of our assets, with unvested
shares being subject to repurchase at cost upon the termination of the
purchaser's employment or other relationship with us. In the event the
purchaser's employment or other relationship with us is terminated for cause,
all shares of restricted stock sold to the purchaser are generally subject to
repurchase by us at the purchaser's cost.                shares of Mr. Benson's
restricted stock will vest upon completion of this offering.

SEVERANCE AGREEMENT

     We entered into a severance agreement with Steven J. Benson on June 17,
1997. The severance agreement provides that, in the event Mr. Benson's
employment is terminated without cause, Mr. Benson will continue to receive
salary and benefits for six months or until Mr. Benson is reemployed, whichever
occurs first.

LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS

     Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director has
breached his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation Law
or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. Our by-laws provide that directors and officers shall
be, and in the discretion of the Board of Directors, non-officer employees may
be, indemnified by us to the fullest extent authorized by Delaware law, as it
now exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for or on our behalf. The by-laws
also provide that the right of directors and officers to indemnification shall
be a contract right and shall not be exclusive of any other right now possessed
or hereafter acquired under any by-law, agreement, vote of stockholders or
otherwise. We also have directors' and officers' insurance against certain
liabilities.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers or controlling persons MCK as
described above, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.

                                       49
<PAGE>   56

                              CERTAIN TRANSACTIONS

     Certain stock option grants to our directors and executive officers are
described in this prospectus under the caption "Management -- Executive
Compensation."

PRIVATE PLACEMENT TRANSACTIONS

     We have issued preferred stock in private placement transactions as
follows:

<TABLE>
<CAPTION>
                                                                 NUMBER
                                                                   OF       PRICE PER      AGGREGATE
      DATE OF ISSUANCE                    SERIES                 SHARES       SHARE      CONSIDERATION
      ----------------         -----------------------------    --------    ---------    -------------
<S>                            <C>                              <C>         <C>          <C>
June 1996....................  Series E Redeemable Preferred                 $              $
                                 of subsidiary
June 1996 and July 1998......  Series A Redeemable Preferred
June 1996....................  Series B Redeemable
                               Convertible Preferred
July 1998....................  Series C Redeemable Preferred
July 1998....................  Series D Redeemable
                               Convertible Preferred
</TABLE>

     The following table summarizes the shares of our preferred stock and Series
E Redeemable Preferred Stock of our subsidiary purchased by our Named Executive
Officers, directors and 5% stockholders, and persons and entities associated
with them:

<TABLE>
<CAPTION>
                                                   SERIES B                     SERIES D
                                     SERIES A     REDEEMABLE      SERIES C     REDEEMABLE      SERIES E
                                    REDEEMABLE    CONVERTIBLE    REDEEMABLE    CONVERTIBLE    REDEEMABLE
                                    PREFERRED      PREFERRED     PREFERRED      PREFERRED     PREFERRED
             INVESTOR                 STOCK          STOCK         STOCK          STOCK         STOCK
             --------               ----------    -----------    ----------    -----------    ----------
<S>                                 <C>           <C>            <C>           <C>            <C>
Summit Group......................
Lazard Freres Group...............
Calvin K. Manz....................
</TABLE>

For more detailed information regarding the investors, see "Principal
Stockholders."

     We have also issued common stock and stock options in private placement
transactions to our executive officers and directors as follows:

     On January 12, 1998, we issued restricted stock to certain of our executive
officers. We accepted promissory notes as consideration for the restricted
stock. Steven J. Benson, Paul K. Zurlo, Michael D. Williams, Jeffrey P.
Dickerson and Joan E. Lockhart each issued a promissory note to us in the
principal amounts of $          , $          , $          , $          and
$          , respectively, for        ,        ,        ,        and
shares of common stock. These promissory notes bear interest at a compound
annual rate of 6%. The principal amount of the promissory notes and any accrued
and unpaid interest is required to be repaid with the net, after-tax proceeds
from the sale of the restricted stock granted to the executive officer and paid
for with these promissory notes. The principal amount of the promissory notes
and any accrued and unpaid interest are due and payable on the earlier of
January 12, 2003 or 60 days after the termination of the executive officer's
employment with us. We make annual bonus payments to these executive officers in
the amount of the annual interest due on the promissory notes. Approximately 50%
of the restricted stock of Messrs. Williams and Dickerson and Ms. Lockhart is
vested as of August 31, 1999, and the remaining unvested shares vest ratably on
a monthly basis through 2001, except that 50% of any remaining unvested shares
vest upon certain sale transactions. Approximately 56% of Mr. Zurlo's restricted
stock is vested as of August 31, 1999, and the remaining unvested shares vest
ratably on a monthly basis through 2001, except that 100% of any remaining
unvested shares vest upon certain sale transactions. Approximately 44% of Mr.
Benson's restricted stock is vested as of August 31, 1999, an additional 22%
shall vest upon consummation of this offering and the remainder shall vest
ratably on an annual basis through 2001.

                                       50
<PAGE>   57

     On January 31, 1998, we issued        shares of restricted stock to one of
our Directors, John B. Landry, for an aggregate purchase price of $       . On
July 16, 1998, we granted        nonqualified stock options to Mr. Landry with
an exercise price of $       per share. These shares of restricted stock and
stock options vest as to 1/4th of the shares on the first anniversary of the
date of grant and 1/48th of the shares on a monthly basis thereafter.

     On July 12, 1999, we issued restricted stock to certain of our executive
officers. We accepted promissory notes as consideration for the restricted
stock. Paul K. Zurlo, Michael D. Williams, Jeffrey P. Dickerson, Joan E.
Lockhart and Patrick J. Curley each issued a promissory note to us in the
principal amount of        for   shares of common stock, and Steven J. Benson
issued a promissory note to us in the principal amount of        for   shares of
common stock. These promissory notes bear interest at a compound annual rate of
5.82%. The principal amount of the promissory notes and any accrued and unpaid
interest is required to be repaid with the net, after-tax proceeds from the sale
of the restricted stock granted to the executive officer and paid for with these
promissory notes. The principal amount of the promissory notes and any accrued
and unpaid interest are due and payable on the earlier of July 12, 2004 or 60
days after the termination of the executive officer's employment with us. We
make annual bonus payments to these executive officers in the amount of the
annual interest due on the promissory notes. The restricted stock of Messrs.
Benson, Zurlo, Williams, Dickerson and Curley, and Ms. Lockhart vests 1/4th on
the first anniversary of the date of grant and 1/48th of the shares monthly
thereafter.

     On           , 1999, we issued        shares of common stock to one of our
Directors, Paul Severino, for an aggregate purchase price of $          , and we
granted        nonqualified stock options to Mr. Severino with an exercise price
of $       per share. These shares of common stock and stock options were fully
vested on the date of grant.

CALGARY LEASE

     On January 1, 1996, MCK Telecommunications, our subsidiary, entered into a
lease agreement with Manz Developments, Inc. Mr. Manz, a director and principal
stockholder of MCK, is the controlling stockholder of Manz Developments. The
term of the lease is for five years, and we have the option to extend the lease
for five years. Pursuant to the lease agreement, MCK Telecommunications pays
Manz Developments $144,000 Canadian per year.

REGISTRATION RIGHTS AGREEMENTS

     Certain holders of common stock and preferred stock have certain
registration rights with respect to their shares of common stock, including
common stock issuable upon conversion of their preferred stock. See "Description
of Capital Stock -- Registration Rights of Certain Holders."

                                       51
<PAGE>   58

                             PRINCIPAL STOCKHOLDERS

     The following table sets forth information regarding the beneficial
ownership of common stock as of September 30, 1999 and as adjusted to reflect
the sale of the common stock offered hereby, by:

     - all persons who own beneficially 5% or more of our common stock;

     - the Chief Executive Officer and each of the other Named Executive
       Officers;

     - each of our directors; and

     - all directors and executive officers as a group.

     Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of common stock beneficially owned,
subject to community property laws, where applicable. Beneficial ownership is
determined in accordance with the rules issued by the SEC. Under these rules,
beneficial ownership includes any shares which the individual or entity has sole
or shared voting or investment power and shares of common stock subject to
options held that are currently exercisable or exercisable within 60 days of
September 30, 1999. The applicable percentage of "beneficial ownership" after
the offering is based upon        shares of common stock outstanding, which
includes shares issuable upon conversion of all outstanding shares of
convertible preferred stock upon completion of this offering, but excludes all
outstanding shares of redeemable preferred stock subject to redemption upon
completion of this offering.

     The address of the Summit Partners Group is 600 Atlantic Avenue, Boston, MA
02210. The address of Messrs. Avis and Balmuth is c/o Summit Partners, LLC, 600
Atlantic Avenue, Boston, MA 02210. The address of the Lazard Freres Group is 30
Rockeller Plaza, New York, NY 10020. The address of all other listed
stockholders is c/o MCK Communications, Inc. 313 Washington Street, Newton,
Massachusetts 02458.

<TABLE>
<CAPTION>
                                                                                      PERCENT
                                                                                BENEFICIALLY OWNED
                                                          NUMBER OF SHARES    -----------------------
                                                            BENEFICIALLY      BEFORE THE    AFTER THE
                                                               OWNED           OFFERING     OFFERING
                                                          ----------------    ----------    ---------
<S>                                                       <C>                 <C>           <C>
Summit Partners Group(1)................................                         42.2%           %
Lazard Freres Group(2)..................................                         15.0
Steven J. Benson(3).....................................                          8.1
Paul K. Zurlo(4)........................................                          1.2
Michael D. Williams(5)..................................                            *
Jeffrey P. Dickerson(6).................................                            *
Joan E. Lockhart(7).....................................                          1.0
Gregory M. Avis(8)......................................                         42.2          --
Michael H. Balmuth(9)...................................                         42.2          --
John B. Landry(10)......................................                            *
Calvin K. Manz(11)......................................                         21.7
Paul Severino...........................................                           --          --
All executive officers and directors as a group (11
  persons)(12)..........................................                         34.0
</TABLE>

---------------
  *  Less than 1%

 (1) Represents        shares held by Summit Ventures IV, L.P.,        shares
     held by Summit Subordinated Debt Fund, L.P., and        shares held by
     Summit Investors III, L.P. Summit Ventures IV, L.P., Summit Subordinated
     Debt Fund, L.P., and Summit Investors III, L.P. are part of an affiliated
     group of investment partnerships referred to, collectively, as the Summit
     Partners Group.

                                       52
<PAGE>   59

 (2) Represents        shares held by Lazard Technology Partners L.P.,
     shares held by Lazard Technology Partners LLC, and        shares held by
     Lazard Technology Investors (1998) LLC. Lazard Technology Partners L.P.,
     Lazard Technology Partners LLC and Lazard Technology Investors (1998) LLC
     are part of an affiliated group of investment partnerships referred to,
     collectively, as the Lazard Freres Group.

 (3) Includes        shares underlying options granted to Mr. Benson which are
     exercisable within 60 days of September 30, 1999 and        shares owned by
     the Benson Family Limited Partnership, of which Mr. Benson is the general
     partner and two trusts for his minor children are the limited partners.

 (4) Includes        shares underlying options granted to Mr. Zurlo which are
     exercisable within 60 days of September 30, 1999.

 (5) Includes        shares underlying options granted to Mr. Williams which are
     exercisable within 60 days of September 30, 1999.

 (6) Includes        shares underlying options granted to Mr. Dickerson which
     are exercisable within 60 days of September 30, 1999.

 (7) Includes        shares underlying options granted to Ms. Lockhart which are
     exercisable within 60 days of September 30, 1999.

 (8) Represents shares described in note (1) above, beneficially owned by Summit
     Partners Group. Mr. Avis disclaims beneficial ownership of such shares
     except to the extent of his pecuniary interest therein.

 (9) Represents shares described in note (1) above, beneficially owned by Summit
     Partners Group. Mr. Balmuth disclaims beneficial ownership of such shares
     except to the extent of his pecuniary interest therein.

(10) Includes        shares underlying options granted to Mr. Landry which are
     exercisable within 60 days of September 30, 1999.

(11) Represents shares held by Manz Developments, Inc., of which Mr. Manz holds
     100% of the voting stock and 48% of the total equity.

(12) Includes        shares underlying options which are exercisable within 60
     days of September 30, 1999.

                          DESCRIPTION OF CAPITAL STOCK

     Following the offering, our authorized capital stock will consist of
       shares of common stock of which                will be issued and
outstanding; and        shares of undesignated preferred stock issuable in one
or more series to be designated by the board of directors, of which no shares
will be issued and outstanding.

     As of September 30, 1999, there were outstanding: (1)        shares of
common stock held by        stockholders of record; (2)        shares of
convertible preferred stock (convertible into        shares of common stock);
(3)        shares of redeemable preferred stock (to be redeemed upon closing of
the offering for an aggregate of approximately $     million, including accrued
dividends of approximately $     million); and (4) options to purchase an
aggregate of        shares of common stock.

COMMON STOCK

     The holders of common stock have one vote per share. Holders of common
stock are not entitled to vote cumulatively for the election of directors.
Generally, all matters to be voted on by stockholders must be approved by a
majority, or, in the case of election of directors, by a plurality, subject to
any voting
                                       53
<PAGE>   60

rights granted to holders of any then outstanding preferred stock. Except as
otherwise provided by law, amendments to our certificate of incorporation, which
will be effective upon consummation of the offering, must be approved by a
majority of the voting power of the common stock.

     Holders of common stock share ratably in any dividends declared by the
Board of Directors, subject to the preferential rights of any preferred stock
then outstanding. Dividends consisting of shares of common stock may be paid to
holders of shares of common stock. In the event of our merger or consolidation
with or into another company as a result of which shares of common stock are
converted into or exchangeable for shares of stock, other securities or
property, including cash, all holders of common stock will be entitled to
receive the same kind and amount, on a per share of common stock basis, of such
shares of stock and other securities and property, including cash. On our
liquidation, dissolution or winding up, all holders of common stock are entitled
to share ratably in any assets available for distribution to the holders of
shares of common stock. No shares of common stock are subject to redemption or
have preemptive rights to purchase additional shares of common stock.

     All the outstanding shares of common stock are legally issued, fully paid
and nonassessable.

PREFERRED STOCK

     Our certificate of incorporation provides that shares of preferred stock
may be issued from time to time in one or more series. Our Board of Directors is
authorized to establish the voting rights, if any, and the designations, powers,
preferences, qualifications, limitations and restrictions applicable to the
shares of each series. The Board of Directors may, without stockholder approval,
issue preferred stock with voting and other rights that could adversely affect
the voting power and other rights of the holders of the common stock and could
have anti-takeover effects. The ability of the Board of Directors to issue
preferred stock without stockholder approval could have the effect of delaying,
deferring or preventing a change of control or the removal of our existing
management. We have no present plans to issue any shares of preferred stock.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

     Under the terms of the Registration Rights Agreement, amended and restated
in July 1998, the holders of at least 50% of the shares held in the aggregate by
Summit Group, Lazard Freres Group and certain other entities may demand that we
file a registration statement for the registration of all or any portion of
their shares, subject to certain minimum thresholds, under the Securities Act.
We are not required to effect more than a total of two of these demand
registrations per year. Upon completion of this offering, holders of an
aggregate of           shares are party to the Registration Rights Agreement.

     In addition, after the closing of the offering, these stockholders and Manz
Developments will be entitled to piggyback registration rights in connection
with any registration by us of securities for our own account or the account of
other stockholders. If we propose to register any shares of common stock under
the Securities Act, we are required to give those stockholders notice of the
registration and to include their shares in the registration statement. At any
time after we become eligible to file a registration statement on Form S-3,
these stockholders may require us to file an unlimited number of registration
statements on Form S-3 under the Securities Act with respect to their shares of
common stock.

     The registration rights of these stockholders will terminate when the
shares held by them may be sold under Rule 144 under the Securities Act. We are
generally required to bear all of the expenses of all demand and piggyback
registrations, except underwriting discounts and commissions. We also have
agreed to indemnify those stockholders under the terms of the Registration
Rights Agreement.

AMENDMENT OF THE CERTIFICATE OF INCORPORATION

     Any amendment to our certificate of incorporation must first be approved by
a majority of the board of directors and thereafter approved by a majority of
the total votes eligible to be cast by holders of voting stock with respect to
such amendment.

                                       54
<PAGE>   61

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

     Statutory Business Combination Provision.  Following the offering, we will
be subject to Section 203 of the Delaware General Corporation Law, which
prohibits a publicly held Delaware corporation from consummating a "business
combination," except under certain circumstances, with an "interested
stockholder" for a period of three years after the date such person became an
"interested stockholder" unless:

     - before such person became an interested stockholder, the board of
       directors of the corporation approved the transaction in which the
       interested stockholder became an interested stockholder or approved the
       business combination;

     - upon the closing of the transaction that resulted in the interested
       stockholder's becoming an interested stockholder, the interested
       stockholder owned at least 85% of the voting stock of the corporation
       outstanding at the time the transaction commenced, excluding shares held
       by directors who are also officers of the corporation and shares held by
       employee stock plans; or

     - following the transaction in which such person became an interested
       stockholder, the business combination is approved by the board of
       directors of the corporation and authorized at a meeting of stockholders
       by the affirmative vote of the holders of 66 2/3% of the outstanding
       voting stock of the corporation not owned by the interested stockholder.

     The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three years,
owned 15% or more of a corporation's outstanding voting stock. The term
"business combination" includes mergers, asset sales and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more difficult for an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or by-laws resulting from an amendment approved by
holders of at least a majority of the outstanding voting stock. Neither our
certificate of incorporation nor our by-laws contains any such exclusion.

     By-law Provisions.  Our by-laws provide that a special meeting of
stockholders may be called only by the President or the Board of Directors
unless otherwise required by law. Our by-laws provide that only those matters
included in the notice of the special meeting may be considered or acted upon at
that special meeting unless otherwise provided by law. In addition, our by-laws
include advance notice and informational requirements and time limitations on
any director nomination or any new proposal which a stockholder wishes to make
at an annual meeting of stockholders.

     Ability to Adopt Stockholder Rights Plan.  The Board of Directors may in
the future resolve to issue shares of preferred stock or rights to acquire such
shares to implement a stockholder rights plan. A stockholder rights plan
typically creates voting or other impediments that would discourage persons
seeking to gain control of MCK by means of a merger, tender offer, proxy contest
or otherwise if the Board of Directors determines that such change in control is
not in the best interests of our stockholders. The Board of Directors has no
present intention of adopting a stockholder rights plan and is not aware of any
attempt to obtain control of MCK.

TRADING ON THE NASDAQ NATIONAL MARKET SYSTEM

     We have applied to have the common stock approved for quotation on the
Nasdaq National Market under the symbol MCKC.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the common stock will be American
Stock Transfer Company.

                                       55
<PAGE>   62

                        SHARES ELIGIBLE FOR FUTURE SALE

     Future sales of substantial amounts of shares of our common stock in the
public market could adversely affect prevailing market prices. Furthermore,
since only a limited number of shares will be available for sale shortly after
this offering because of certain contractual and legal restrictions on resale,
as described below, sales of substantial amounts of common stock in the public
market after the restrictions lapse could adversely affect the prevailing market
price.

     After this offering,        shares of common stock will be outstanding,
assuming the issuance of an aggregate of        shares of common stock. The
number of shares outstanding after this offering is based on the number of
shares outstanding as of August 31, 1999, and assumes no exercise of outstanding
options. The        shares sold in this offering will be freely tradable without
restriction under the Securities Act. The remaining        shares of common
stock outstanding upon completion of the offering are restricted securities in
that they may be sold in the public market only if registered or if they qualify
for an exemption from registration under the Securities Act or Rules 144 or 701
of the Securities Act.

     All of our officers, directors and stockholders have entered into lock-up
agreements generally providing that they will not offer, pledge, sell, offer to
sell, contract to sell, sell any option or contract to purchase, purchase any
option to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any of the shares of common
stock or any securities convertible into, or exercisable or exchangeable for,
common stock owned by them, or enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the common stock, for a period of 180 days after the date of this
prospectus, without the prior written consent of BancBoston Robertson Stephens
Inc. Transfers may be made earlier:

     - as a bona fide gift or gifts, provided the donee or donees agree in
       writing to be bound by this restriction;

     - as a distribution to partners, stockholders or beneficiaries of the
       transferor, provided that the distributees agree in writing to be bound
       by the terms of this restriction;

     - with respect to dispositions or purchases of common stock acquired on the
       open market; or

     - with the prior written consent of BancBoston Robertson Stephens Inc.

     BancBoston Robertson Stephens Inc. may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
lock-up agreements. When determining whether or not to release shares from the
lock-up agreements, BancBoston Robertson Stephens Inc. will consider, among
other factors, the stockholder's reasons for requesting the release, the number
of shares for which the release is being requested and market conditions at the
time. Following the expiration of the 180 day lock-up period, additional shares
of common stock will be available for sale in the public market subject to
compliance with Rule 144 or Rule 701.

     In general, under Rule 144 as currently in effect, an affiliate of MCK or a
person, or persons whose shares are aggregated, who has beneficially owned
restricted securities for at least one year, including the holding period of any
prior owner except an affiliate of MCK, would be entitled to sell within any
three month period a number of shares that does not exceed the greater of 1% of
our then outstanding shares of common stock or the average weekly trading volume
of our common stock on the Nasdaq National Market during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about MCK. Any person, or persons whose shares are aggregated, who
is not deemed to have been an affiliate of MCK at any time during the 90 days
preceding a sale, and who has beneficially owned shares for at least two years
including any period of ownership of preceding non-affiliated holders, would be
entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.

                                       56
<PAGE>   63

     We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, except we
may issue, and grant options to purchase, shares of common stock under the 1996
Stock Option Plan and the 1999 Stock Option and Grant Plan.

     Following the offering, under specified circumstances and subject to
customary conditions, the Summit Group, the Lazard Freres Group and certain
other stockholders have will have rights with respect to        shares of common
stock, subject to the 180-day lock-up arrangement described above, to require us
to register their shares of common stock under the Securities Act, and they,
along with Manz Developments, will have rights to participate in any future
registration of securities by us.

                                       57
<PAGE>   64

                                  UNDERWRITING

     The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, and Hambrecht & Quist LLC have severally agreed with us,
subject to the terms and conditions of the underwriting agreement, to purchase
from us the number of shares of common stock set forth below opposite their
respective names. The underwriters are committed to purchase and pay for all
shares if any are purchased.

<TABLE>
<CAPTION>
                        UNDERWRITER                           NUMBER OF SHARES
                        -----------                           ----------------
<S>                                                           <C>
BancBoston Robertson Stephens Inc...........................
Dain Rauscher Wessels.......................................
Hambrecht & Quist LLC.......................................
                                                                  -------
          Total.............................................
                                                                  =======
</TABLE>

     The underwriters propose to offer the shares of common stock directly to
the public at the initial public offering price shown on the cover page of this
prospectus and to certain dealers at such price less a concession not in excess
of $     per share. The underwriters may allow and such dealers may reallow a
concession not in excess of $     per share to certain other dealers. After the
initial public offering of the shares, the offering price and other selling
terms may be changed by the representatives of the underwriters.

     Over-Allotment Option.  We and certain of our stockholders have granted to
the underwriters an option, exercisable no later than 30 days after the date of
this prospectus to purchase up to        additional shares of common stock at
the initial public offering price less the underwriting discount shown on the
cover page of this prospectus. To the extent that the underwriters exercise this
option, each of the underwriters will have a firm commitment to purchase
approximately the same percentage of the option which the number of shares of
common stock to be purchased by it shown in the above table bears to the total
number of shares of common stock offered hereby. We and certain of our
stockholders will be obligated, as part of the option, to sell shares to the
underwriters to the extent the option is exercised. The underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of common stock offered hereby.

     Indemnity.  We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect of those
liabilities.

     Lock-up Agreements.  All our executive officers, directors and certain of
our stockholders, who will own in the aggregate                shares of common
stock after the offering, have agreed that they will not, without the prior
written consent of BancBoston Robertson Stephens, offer, sell, or otherwise
dispose of any shares of common stock, options or warrants to acquire shares of
common stock or securities exchangeable for or convertible into shares of common
stock owned by them during the 180-day period following the date of this
prospectus. We have agreed that we will not, without the prior written consent
of BancBoston Robertson Stephens, offer, sell or otherwise dispose of any shares
of common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock during
the 180-day period following the date of this prospectus, except that we may
issue shares upon the exercise of options granted before the date hereof, and
may grant additional options under its stock option plans, provided that,
without the prior written consent of BancBoston Robertson Stephens, such
additional options shall not be exercisable during such period. BancBoston
Robertson Stephens may release us or our stockholders from such restrictions at
anytime, in whole or in part, without notice.

     Determination of Offering Price.  Before the offering, there has been no
public market for the common stock. The initial public offering price for the
common stock will be determined by negotiation

                                       58
<PAGE>   65

among us and the representatives. Among the factors considered in determining
the initial public offering price are prevailing market and economic conditions,
our revenues and earnings, market valuations of other companies engaged in
activities similar to us, estimates of our business potential and prospects, the
present state of our business operations, our management and other factors
deemed relevant. The estimated initial public offering price range shown on the
cover of this prospectus is subject to change as a result of market conditions
and other factors.

     Stabilization.  Certain persons participating in the offering may
over-allot or effect transactions which stabilize, maintain or otherwise affect
the market price of the common stock at levels above those which might otherwise
prevail in the open market, including by entering stabilizing bids, effective
syndicate covering transactions or imposing penalty bids. A stabilizing bid
means the placing of any bid or effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of the common stock. A syndicate
covering transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created in
connection with the offering. A penalty bid means an arrangement that permits
the underwriters to reclaim a selling concession from a syndicate member in
connection with the offering when the common stock sold by the syndicate member
is purchased in syndicate covering transactions. Such transactions may be
effected on the Nasdaq National Market, in the over-the-counter market, or
otherwise. Such stabilizing, if commenced may be discontinued at any time.

                                 LEGAL MATTERS

     The validity of the shares of common stock offered hereby will be passed
upon for MCK Communications by McDermott, Will & Emery, Boston, Massachusetts.
Various legal matters related to the sale of the common stock offered hereby
will be passed upon for the underwriters by Testa, Hurwitz & Thibeault, LLP,
Boston, Massachusetts.

                                    EXPERTS

     Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at April 30, 1999 and 1998, and for each of the two years
in the period ended April 30, 1999, as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

     PricewaterhouseCoopers LLP, independent accountants, have audited our
statements of operations, cash flows and changes in stockholders' equity for the
year ended April 30, 1997. We have included these 1997 financial statements in
the prospectus and elsewhere in the registration statement in reliance on
PricewaterhouseCoopers LLP report, given on their authority as experts in
accounting and auditing.

                       CHANGE IN INDEPENDENT ACCOUNTANTS

     In September 1997, we engaged Ernst & Young LLP as our independent
auditors, to replace PricewaterhouseCoopers LLP. The decision was made by our
Board of Directors and was not due to any disagreement with
PricewaterhouseCoopers LLP. During the fiscal year ended April 30, 1997 and
during the interim period prior to engaging Ernst & Young LLP, we had no
disagreements with PricewaterhouseCoopers LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope of
procedure, which disagreements, if not resolved to the satisfaction of
PricewaterhouseCoopers LLP, would have caused them to make reference thereto in
their report on our financial statements. The reports of PricewaterhouseCoopers
LLP on our financial statements for the fiscal year ended April 30, 1997 (the
last fiscal year audited by PricewaterhouseCoopers LLP) did not contain any
adverse opinion, disclaimer of opinion or qualification or modification as to
uncertainty, audit scope or accounting principles.

                                       59
<PAGE>   66

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the SEC a registration statement on Form S-1 under the
Securities Act and the rules and regulations thereunder, for the registration of
the common stock offered hereby. This prospectus, which forms a part of the
registration statement, does not contain all the information included in the
registration statement, parts of which have been omitted as permitted by the SEC
rules and regulations. For further information about us and our common stock,
you should refer to the registration statement. Statements contained in this
prospectus as to any contract or other document are not necessarily complete.
Where the contract or other document is an exhibit to the registration
statement, each statement is qualified by the provisions of that exhibit.

     The registration statement can be inspected and copied at the public
reference facility maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
portion of the registration statement can be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the registration statement is publicly available
through the SEC's site on the Internet's World Wide Web, located at
http://www.sec.gov.

     We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can also request copies of these
documents, for a copying fee, by writing to the SEC.

                                       60
<PAGE>   67

                            MCK COMMUNICATIONS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Reports of Independent Auditors.............................  F-2
Consolidated Balance Sheets.................................  F-4
Consolidated Statements of Operations.......................  F-5
Consolidated Statements of Common Stockholders' Deficit.....  F-6
Consolidated Statements of Cash Flows.......................  F-7
Notes to Consolidated Financial Statements..................  F-8
</TABLE>

                                       F-1
<PAGE>   68

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
  MCK Communications, Inc.

     We have audited the accompanying consolidated balance sheets of MCK
Communications, Inc. (the Company) as of April 30, 1999 and 1998, and the
related consolidated statements of operations, common stockholders' deficit, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of April 30, 1999 and 1998 and the consolidated results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.

                                                               Ernst & Young LLP
Boston, Massachusetts
July 30, 1999

                                       F-2
<PAGE>   69

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Directors and Stockholders of
  MCK Communications, Inc.

     We have audited the accompanying consolidated statements of operations,
common stockholders' deficit and cash flows for the year ended April 30, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

     We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

     In our opinion, these consolidated financial statements audited by us
present fairly, in all material respects, the consolidated results of its
operations and its cash flows and changes in stockholders' deficit for the year
ended April 30, 1997, in conformity with accounting principles generally
accepted in the United States.

PricewaterhouseCoopers LLP
Calgary, Alberta
June 20, 1997

                                       F-3
<PAGE>   70

                            MCK COMMUNICATIONS, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                            APRIL 30,
                                                   ----------------------------      JULY 31,
                                                       1998            1999            1999
                                                   ------------    ------------    -------------
                                                                                    (UNAUDITED)
<S>                                                <C>             <C>             <C>
                                             ASSETS
Current assets:
  Cash and equivalents...........................  $  1,867,213    $  3,284,984    $  3,596,211
  Accounts receivable (net of allowances of
     $150,000 in 1998, 179,560 in 1999 and
     $198,251 at July 31, 1999)..................     1,893,036       3,350,389       3,593,508
  Inventory......................................       756,746       1,493,641       1,245,490
  Prepaids and other current assets..............       294,445         213,025         292,839
                                                   ------------    ------------    ------------
     Total current assets........................     4,811,440       8,342,039       8,728,048
Fixed assets, net................................       804,970       1,054,561       1,056,706
Other assets.....................................        48,915          31,843          28,093
                                                   ------------    ------------    ------------
Total assets.....................................  $  5,665,325    $  9,428,443    $  9,812,847
                                                   ============    ============    ============

LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable...............................  $    485,014    $  1,666,438    $  1,672,083
  Accrued liabilities............................       474,947         693,005       1,018,573
  Accrued compensation and benefits..............       306,086         404,490         313,700
  Borrowings under line of credit................            --              --          76,812
  Deferred revenue...............................            --              --          25,817
                                                   ------------    ------------    ------------
     Total current liabilities...................     1,266,047       2,763,933       3,106,985

Long-term debt...................................     5,000,000       2,500,000       2,653,624
Redeemable preferred stock of subsidiary.........     2,293,333       2,490,280       2,540,495
Redeemable preferred stock.......................    15,244,755      21,010,759      21,462,308
Redeemable convertible preferred stock...........     1,911,111       4,703,751       4,799,201
Common stockholders' deficit:
Common stock, $.001 par value; 25,000,000
  authorized: 3,253,967, 3,464,170 and 3,709,170
  shares issued and outstanding, respectively....         3,254           3,464           3,709
Additional paid-in capital.......................       154,077         178,186         790,441
Accumulated deficit..............................   (19,901,160)    (23,897,510)    (24,566,415)
Accumulated other comprehensive income (loss)....      (155,290)       (165,743)       (206,324)
Notes receivable from officers...................      (150,802)       (158,677)       (771,177)
                                                   ------------    ------------    ------------
Total common stockholders' deficit...............   (20,049,921)    (24,040,280)    (24,749,766)
                                                   ------------    ------------    ------------
Total liabilities and common stockholders'
  deficit........................................  $  5,665,325    $  9,428,443    $  9,812,847
                                                   ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-4
<PAGE>   71

                            MCK COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                     THREE MONTHS ENDED
                                                  YEARS ENDED APRIL 30,                   JULY 31,
                                         ---------------------------------------   -----------------------
                                            1997          1998          1999          1998         1999
                                         -----------   -----------   -----------   ----------   ----------
                                                                                         (UNAUDITED)
<S>                                      <C>           <C>           <C>           <C>          <C>
Revenues...............................  $ 5,920,645   $ 7,875,779   $14,269,603   $3,116,151   $4,522,919
Cost of goods sold.....................    2,313,015     2,799,994     5,389,557    1,188,294    1,690,472
                                         -----------   -----------   -----------   ----------   ----------
Gross profit...........................    3,607,630     5,075,785     8,880,046    1,927,857    2,832,447
Operating expenses:
  Research and development.............      814,664     1,757,524     3,348,608      751,124      963,591
  Sales and marketing..................    1,145,265     2,191,182     3,888,537      779,298    1,347,459
  General and administrative...........      607,106     1,484,812     1,616,620      391,277      493,705
  Transaction-related charges..........      493,284            --            --           --           --
                                         -----------   -----------   -----------   ----------   ----------
    Total operating expenses...........    3,060,319     5,433,518     8,853,765    1,921,699    2,804,755
                                         -----------   -----------   -----------   ----------   ----------
Income (loss) from operations..........      547,311      (357,733)       26,281        6,158       27,692
Other (income) expense:
  Interest expense.....................      527,060       663,121       397,969      150,562       90,282
  Interest income......................     (134,204)     (144,888)     (130,339)     (15,185)     (23,706)
  Other (income) expense, net..........      (50,337)       77,217       (60,267)      (6,413)      28,672
                                         -----------   -----------   -----------   ----------   ----------
    Total other expense................      342,519       595,450       207,363      128,964       95,248
Income (loss) before provision for
  income taxes.........................      204,792      (953,183)     (181,082)    (122,806)     (67,556)
Provision for income taxes.............      302,109            --            --           --           --
                                         -----------   -----------   -----------   ----------   ----------
Net loss...............................      (97,317)     (953,183)     (181,082)    (122,806)     (67,556)

Dividends on subsidiary redeemable
  preferred stock......................      133,333       160,000       196,947       49,614       50,215
Dividends on redeemable preferred
  stock................................    1,010,557     1,220,000     1,965,921      393,234      551,134
                                         -----------   -----------   -----------   ----------   ----------
Total dividends on preferred stock.....    1,143,890     1,380,000     2,162,868      442,848      601,349
                                         -----------   -----------   -----------   ----------   ----------
Loss applicable to common stock........  $(1,241,207)  $(2,333,183)  $(2,343,950)  $ (565,654)  $ (668,905)
                                         ===========   ===========   ===========   ==========   ==========
Basic and diluted net loss per share...  $     (0.60)  $     (1.03)  $     (0.92)  $    (0.24)  $    (0.24)
                                         ===========   ===========   ===========   ==========   ==========
Shares used in computing basic and
  diluted net loss per share...........    2,083,759     2,272,079     2,536,931    2,390,233    2,813,097
                                         ===========   ===========   ===========   ==========   ==========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-5
<PAGE>   72

                            MCK COMMUNICATIONS, INC.

            CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
                                                                            COMMON
                                                                 SHARES     STOCK                                 ACCUMULATED
                                                COMPREHENSIVE      OF         AT     ADDITIONAL                      OTHER
                                                   INCOME        COMMON      PAR      PAID-IN     ACCUMULATED    COMPREHENSIVE
                                                   (LOSS)         STOCK     VALUE     CAPITAL       DEFICIT         INCOME
                                                -------------   ---------   ------   ----------   ------------   -------------
<S>                                             <C>             <C>         <C>      <C>          <C>            <C>
Balance at April 30, 1996.....................            --        1,000   $ 100           --    $   (207,533)           --
Cancellation of old common stock..............            --       (1,000)   (100)          --             100            --
Issuance of new common stock..................            --    2,031,616   2,032           --          (2,032)           --
Dividends to Manz Development, Inc............            --           --      --           --     (16,119,603)           --
Dividends on preferred stock..................            --           --      --           --      (1,143,890)           --
Stock options exercised.......................            --      140,476     140     $  2,621              --            --
Other.........................................            --           --      --           --           2,298            --
Net loss......................................   $   (97,317)          --      --           --         (97,317)           --
                                                 -----------    ---------   ------    --------    ------------     ---------
Total comprehensive income (loss).............   $   (97,317)          --      --           --              --            --
                                                 -----------
Balance at April 30, 1997.....................            --    2,172,092   2,172        2,621     (17,567,977)           --
Stock options exercised.......................            --       76,530      77        1,659              --            --
Sale of restricted stock......................            --    1,005,345   1,005      149,797              --            --
Foreign currency translation adjustment.......   $  (155,290)          --      --           --              --     $(155,290)
Dividends on preferred stock..................            --           --      --           --      (1,380,000)           --
Net loss......................................      (953,183)          --      --           --        (953,183)           --
                                                 -----------    ---------   ------    --------    ------------     ---------
Total comprehensive income (loss).............   $(1,108,473)          --      --           --              --            --
Balance at April 30, 1998.....................            --    3,253,967   3,254      154,077     (19,901,160)     (155,290)
Stock options exercised.......................            --      157,703     158       16,286              --            --
Sale of restricted stock......................            --       75,000      75       11,175              --            --
Cancellation of restricted stock..............            --      (22,500)    (23)      (3,352)             --            --
Foreign currency translation adjustment.......   $   (10,453)          --      --           --              --       (10,453)
Dividends on preferred stock..................            --           --      --           --      (2,162,868)           --
Issuance of preferred stock in exchange for
  redemption premium..........................            --           --      --           --      (1,652,400)           --
Net loss......................................      (181,082)          --      --           --        (181,082)           --
                                                 -----------    ---------   ------    --------    ------------     ---------
Total comprehensive income (loss).............   $  (191,535)          --      --           --              --            --
Balance at April 30, 1999.....................            --    3,464,170   3,464      178,186     (23,897,510)     (165,743)
Foreign currency translation adjustment
  (unaudited).................................   $   (40,581)          --      --           --              --       (40,581)
Sale of restricted stock......................            --      245,000     245      612,255              --            --
Dividends on preferred stock (unaudited)......            --           --      --           --        (601,349)           --
Net loss (unaudited)..........................       (67,556)          --      --           --         (67,556)           --
                                                 -----------    ---------   ------    --------    ------------     ---------
Total comprehensive income (loss)
  (unaudited).................................   $  (108,137)          --      --           --              --            --
Balance at July 31, 1999 (unaudited)..........            --    3,709,170   $3,709    $790,441    $(24,566,415)    $(206,324)
                                                 ===========    =========   ======    ========    ============     =========

<CAPTION>

                                                   NOTES          TOTAL
                                                RECEIVABLES      COMMON
                                                   FROM       STOCKHOLDERS'
                                                 OFFICERS        DEFICIT
                                                -----------   -------------
<S>                                             <C>           <C>
Balance at April 30, 1996.....................          --    $   (207,433)
Cancellation of old common stock..............          --              --
Issuance of new common stock..................          --              --
Dividends to Manz Development, Inc............          --     (16,119,603)
Dividends on preferred stock..................          --      (1,143,890)
Stock options exercised.......................          --           2,761
Other.........................................          --           2,298
Net loss......................................          --         (97,317)
                                                 ---------    ------------
Total comprehensive income (loss).............          --              --
Balance at April 30, 1997.....................          --     (17,563,184)
Stock options exercised.......................          --           1,736
Sale of restricted stock......................   $(150,802)             --
Foreign currency translation adjustment.......          --        (155,290)
Dividends on preferred stock..................          --      (1,380,000)
Net loss......................................          --        (953,183)
                                                 ---------    ------------
Total comprehensive income (loss).............          --              --
Balance at April 30, 1998.....................    (150,802)    (20,049,921)
Stock options exercised.......................          --          16,444
Sale of restricted stock......................     (11,250)             --
Cancellation of restricted stock..............       3,375              --
Foreign currency translation adjustment.......          --         (10,453)
Dividends on preferred stock..................          --      (2,162,868)
Issuance of preferred stock in exchange for
  redemption premium..........................          --      (1,652,400)
Net loss......................................          --        (181,082)
                                                 ---------    ------------
Total comprehensive income (loss).............          --              --
Balance at April 30, 1999.....................    (158,677)    (24,040,280)
Foreign currency translation adjustment
  (unaudited).................................          --         (40,581)
Sale of restricted stock......................    (612,500)             --
Dividends on preferred stock (unaudited)......          --        (601,349)
Net loss (unaudited)..........................          --         (67,556)
                                                 ---------    ------------
Total comprehensive income (loss)
  (unaudited).................................          --              --
Balance at July 31, 1999 (unaudited)..........   $(771,177)   $(24,749,766)
                                                 =========    ============
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-6
<PAGE>   73

                            MCK COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                              THREE MONTHS ENDED
                                                         YEARS ENDED APRIL 30,                     JULY 31,
                                                ----------------------------------------   ------------------------
                                                    1997          1998          1999          1998          1999
                                                ------------   -----------   -----------   -----------   ----------
                                                                                                 (UNAUDITED)
<S>                                             <C>            <C>           <C>           <C>           <C>
Cash flow from operating activities:
  Net loss....................................  $    (97,317)  $  (953,183)  $  (181,082)  $  (122,806)  $  (67,556)
  Depreciation and amortization...............       160,075       230,342       393,977        72,943      132,031
  Deferred income taxes.......................        22,593       (80,000)           --            --           --
  Transaction-related charges.................        44,554            --            --            --           --
  Change in operating assets and liabilities:
     Accounts receivable......................       712,364      (846,047)   (1,457,353)     (257,254)    (243,119)
     Inventory................................      (222,271)      283,403      (736,895)     (344,503)     248,151
     Prepaids and other current assets........      (943,093)      366,050        81,420       (42,944)     (79,814)
     Accounts payable.........................      (373,529)      357,431     1,181,424       118,784        5,645
     Accrued liabilities......................         1,380       451,344       218,058       (21,594)     325,568
     Accrued compensation and benefits........      (166,085)      272,666        98,404      (126,904)     (90,790)
     Deferred revenue.........................            --            --            --            --       25,817
                                                ------------   -----------   -----------   -----------   ----------
       Net cash (used) provided by operating
          activities..........................      (861,329)       82,006      (402,047)     (724,278)     255,933
Cash flows from investing activities:
  Purchase of fixed assets....................      (318,908)     (565,526)     (675,650)     (182,226)    (136,147)
Cash flows from financing activities:
  Proceeds from issuance of preferred stock,
     net of issuance costs....................    15,000,000            --     4,940,323     4,953,761       (4,135)
  Dividends paid to Manz Development, Inc.....   (14,119,603)           --            --            --           --
  Issuance of subordinated debt...............     5,000,000            --            --            --           --
  Payment of debt and equity issuance costs...      (297,382)           --            --            --           --
  Redemption of preferred stock...............      (500,000)           --            --            --           --
  Repayment of promissory note................    (1,166,667)           --            --            --           --
  Increase (decrease) in short-term
     borrowings...............................       390,684      (749,496)           --            --      230,436
  Repayment of subordinated debt..............            --            --    (2,500,000)   (2,500,000)          --
  Proceeds from exercise of stock options.....         2,761         1,736        16,444         1,663           --
                                                ------------   -----------   -----------   -----------   ----------
       Net cash provided (used) by financing
          activities..........................     4,309,793      (747,760)    2,456,767     2,455,424      226,301
Effect of exchange rate changes on cash.......        97,909      (129,761)       38,701         7,085      (34,860)
                                                ------------   -----------   -----------   -----------   ----------
Net increase (decrease) in cash...............     3,227,465    (1,361,041)    1,417,771     1,556,005      311,227
Cash and equivalents at beginning of year.....           789     3,228,254     1,867,213     1,867,213    3,284,984
                                                ------------   -----------   -----------   -----------   ----------
Cash and equivalents at end of year...........  $  3,228,254   $ 1,867,213   $ 3,284,984   $ 3,423,218   $3,596,211
                                                ============   ===========   ===========   ===========   ==========

Non-cash transactions:
  Dividends on preferred stock................  $  1,143,890   $ 1,380,000   $ 2,162,868   $   442,848   $  601,349
  Sale of restricted stock....................            --       150,802         7,875         7,875      612,500
  Dividends paid to Manz Developments, Inc....     2,000,000            --            --            --           --
  Issuance of preferred stock in exchange for
     redemption premium.......................            --            --     1,652,400     1,652,400           --
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-7
<PAGE>   74

                            MCK COMMUNICATIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                FISCAL YEARS ENDED APRIL 30, 1997, 1998 AND 1999

1. NATURE OF OPERATIONS

     MCK Communications, Inc. (MCK or the Company) develops and markets remote
voice access products that enable corporations to distribute the features and
applications of PBX systems to branch offices and telecommuters over data
networks. Sales are made to OEMs and private label partners, ILECs, systems
integrators and distributors, telecom and datacom VARs, and broadband service
providers. In the fiscal years ended 1997, 1998 and 1999, sales to one customer
represented 27%, 46% and 47%, respectively, of consolidated revenues.

2. SIGNIFICANT ACCOUNTING POLICIES

  (a) Principles of Consolidation

     The consolidated financial statements include the accounts of MCK
Communications, Inc. and its Canadian subsidiary, MCK Telecommunications, Inc.
All significant intercompany accounts and transactions are eliminated.

  (b) Cash Equivalents

     Cash equivalents are defined as short-term, highly-liquid investments
having an original maturity of three months or less.

  (c) Inventory

     Inventory is valued at the lower of cost (first-in, first-out) or market.

  (d) Fixed Assets

     Fixed assets are stated at cost and depreciated on a straight-line basis
over the following estimated useful lives:

<TABLE>
<S>                               <C>
Equipment.......................  3 years
Furniture and fixtures..........  3 years
Purchased software..............  2 years
Leasehold improvements..........  The lesser of five years or term
                                  of lease
</TABLE>

  (e) Fair Value of Financial Instruments

     The Company's cash, cash equivalents, accounts receivable, accounts
payable, accrued liabilities and long-term debt are carried at cost, which
approximates fair value.

  (f) Revenue Recognition

     Revenues from product sales to end users are recognized upon shipment. A
portion of the Company's sales are made to distributors under arrangements where
the distributors are not obligated to pay the Company until the distributor has
resold the product. The Company defers recognition of such sales and related
gross margin until the product is sold by the distributors.

  (g) Earnings per Share

     In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share," or SFAS 128, which was required to be adopted for fiscal
years ending after December 15, 1997. Earnings

                                       F-8
<PAGE>   75
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

per share amounts for all periods presented conform to the SFAS 128
requirements. See Note 11 for the computation of basic and diluted earnings per
share.

  (h) Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include the collectibility of accounts
receivable and the carrying value of inventory. Actual results could differ from
those estimates.

  (i) Translation of Foreign Currencies

     The functional currency for the Company's Canadian operations is the
Canadian dollar. The translation of Canadian dollars into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date, and for revenue and expense accounts using the
weighted-average exchange rate during the period. The gains or losses resulting
from such translation are reported in a separate component of stockholders'
deficit, which also includes exchange gains and losses on certain intercompany
balances of a long-term investment nature. Gains or losses resulting from
foreign currency transactions, which are included in results of operations, were
a gain of approximately $86,000 in 1997, a loss of approximately $67,000 in 1998
and a gain of approximately $56,000 in 1999. The Company's Canadian subsidiary
represented approximately $3,350,000 of total assets at April 30, 1999. The
Company had foreign and U.S. revenues of $2.6 million and $11.7 million,
respectively, during the year ended April 30, 1999.

  (j) Income Taxes

     The Company provides deferred taxes to recognize temporary differences
between the financial and tax bases of assets and liabilities. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.

  (k) Comprehensive Income

     During the year ended April 30, 1999, the Company adopted SFAS No. 130,
Reporting Comprehensive Income, which establishes standards for the reporting
and presentation of comprehensive income and its components in the financial
statements. Comprehensive income includes all changes in equity during a period
except those resulting from investments by and distributions to owners.

  (l) Segments of an Enterprise

     In 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information," or SFAS
131, which was required to be adopted for fiscal years beginning after December
15, 1997. SFAS 131 superseded SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise." This statement changes the way public companies report
segment information in annual financial statements. SFAS 131 requires public
companies to report financial and descriptive information about their operating
segments in interim financial reports to shareholders as well. The adoption of
this Statement had no impact on the disclosures in the Company's financial
statements as the Company operates in one business segment.

                                       F-9
<PAGE>   76
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  (m) Concentration of Credit Risk

     Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of cash equivalents and trade accounts
receivable. The Company invests its cash equivalents in deposits with financial
institutions with strong credit ratings. The Company sells its products to
customers in the telecommunications industry, primarily in the United States and
Canada. The Company maintains reserves for potential credit losses and such
losses have been within management's expectations. Trade accounts receivable at
April 30, 1998 and 1999 included approximately $1,002,000 and $1,068,000,
respectively, from one customer.

  (n) Interim Financial Information

     The financial information for the three month periods ended July 31, 1998
and 1999 is unaudited but includes all adjustments, consisting only of normal
recurring adjustments, that the Company considers necessary for a fair
presentation of the operating results and cash flows for such periods. Results
for the three month period ended July 31, 1999 are not necessarily indicative of
results in future periods.

3. INVENTORY

     Inventories consisted of:

<TABLE>
<CAPTION>
                                                        APRIL 30,
                                                 ------------------------     JULY 31,
                                                    1998          1999          1999
                                                 ----------    ----------    -----------
                                                                             (UNAUDITED)
<S>                                              <C>           <C>           <C>
Raw materials..................................  $  230,888    $  518,235    $  595,068
Work-in-process................................     382,211       780,584       535,902
Finished goods.................................     143,647       194,822       114,520
                                                 ----------    ----------    ----------
                                                 $  756,746    $1,493,641    $1,245,490
                                                 ==========    ==========    ==========
</TABLE>

4. FIXED ASSETS

     Fixed assets consisted of:

<TABLE>
<CAPTION>
                                                        APRIL 30,
                                                 ------------------------
                                                    1998          1999
                                                 ----------    ----------
<S>                                              <C>           <C>           <C>
Equipment......................................  $  715,139    $1,054,588
Purchased software.............................     176,896       410,715
Leasehold improvements.........................     243,048       269,339
Furniture and fixtures.........................     155,553       231,644
                                                 ----------    ----------
                                                  1,290,636     1,966,286
Accumulated depreciation.......................    (485,666)     (911,725)
                                                 ----------    ----------
                                                 $  804,970    $1,054,561
                                                 ==========    ==========
</TABLE>

5. CREDIT AGREEMENTS

     Revolving Credit Agreement.  The Company maintains a revolving credit
agreement that provides for borrowings up to the lesser of $2,000,000 or 80% of
qualifying accounts receivable, which, at April 30, 1999, provided for
borrowings of approximately $1,920,000. No amounts were outstanding under this
agreement during the year ended April 30, 1999. Interest is charged at the
bank's base rate (7.75% at

                                      F-10
<PAGE>   77
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

April 30, 1999). This agreement expires in April 2000. The debt is
collateralized by substantially all assets of the Company.

     Subordinated Debt.  The Company issued $5,000,000 of 12.5% subordinated
promissory notes in connection with a recapitalization in June 1996. In July
1998, the Company completed a private placement (see Note 7), and repaid
$2,500,000 of the subordinated promissory notes. Amounts outstanding under the
remaining subordinated promissory notes are due at the earlier of a qualified
initial public offering or as follows: $1,666,666 on June 30, 2000 and $833,334
on June 30, 2001.

     The Company paid interest of approximately $506,000, $375,000 and $663,000
for the years ended 1997, 1998 and 1999, respectively, and $156,250 (unaudited)
and $16,875 (unaudited) for the three months ended July 31, 1998 and 1999,
respectively, associated with these credit agreements.

6. INCOME TAXES

Pre-tax income (loss) is summarized by country as follows:

<TABLE>
<CAPTION>
                                                                       APRIL 30,
                                                           ----------------------------------
                                                             1997        1998         1999
                                                           --------    ---------    ---------
<S>                                                        <C>         <C>          <C>
Canada...................................................  $130,693    $(180,545)   $(195,394)
United States............................................    74,099     (772,638)      14,312
                                                           --------    ---------    ---------
          Total..........................................  $204,792    $(953,183)   $(181,082)
                                                           ========    =========    =========
</TABLE>

The provision (benefit) for income taxes consisted of:

<TABLE>
<CAPTION>
                                                                       APRIL 30,
                                                           ----------------------------------
                                                             1997        1998         1999
                                                           --------    ---------    ---------
<S>                                                        <C>         <C>          <C>
Current:
Canada...................................................  $246,041    $  80,000    $      --
United States............................................    25,194           --           --
                                                           --------    ---------    ---------
                                                            271,235       80,000
                                                                                           --
Deferred:
Canada...................................................    30,874      (80,000)          --
                                                           --------    ---------    ---------
          Total..........................................  $302,109    $      --    $      --
                                                           ========    =========    =========
</TABLE>

     The provision for income taxes differed from the amount computed by
applying the U.S. federal statutory rate as follows:

<TABLE>
<CAPTION>
                                                                       APRIL 30,
                                                           ----------------------------------
                                                             1997        1998         1999
                                                           --------    ---------    ---------
<S>                                                        <C>         <C>          <C>
Income tax provision (benefit) at statutory rate.........  $ 71,677    $(333,614)   $ (63,379)
Tax loss with no current benefit.........................        --      330,104       45,843
Foreign tax differential.................................    12,573      (16,290)     (12,214)
Non-deductible expenses..................................   220,103       19,800       29,750
Other, net...............................................    (2,244)          --           --
                                                           --------    ---------    ---------
          Total..........................................  $302,109    $      --    $      --
                                                           ========    =========    =========
</TABLE>

                                      F-11
<PAGE>   78
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The components of the Company's deferred tax assets and liabilities are as
follows:

<TABLE>
<CAPTION>
                                                                    APRIL 30,
                                                              ----------------------
                                                                1998         1999
                                                              ---------    ---------
<S>                                                           <C>          <C>
Deferred tax assets:
Reserves and accruals.......................................  $ 201,000    $ 198,000
Tax credits.................................................     32,000       63,000
Net operating loss carryforward.............................         --       48,000
                                                              ---------    ---------
          Total deferred tax assets.........................    233,000      309,000
                                                              ---------    ---------
Deferred tax liabilities:
Depreciation................................................    (14,000)     (18,000)
Other.......................................................    (15,000)     (10,000)
                                                              ---------    ---------
          Total deferred tax liabilities....................    (29,000)     (28,000)
                                                              ---------    ---------

Valuation allowance.........................................   (204,000)    (281,000)
                                                              ---------    ---------
Net deferred tax assets.....................................  $      --    $      --
                                                              =========    =========
</TABLE>

     At April 30, 1998 and 1999, the Company had $31,500 and $63,000 of Canadian
investment tax credits earned as a result of government incentive programs which
expire in 2008 and 2009 respectively and net operating loss carryforwards of
$112,600 which expire in 2019.

     The Company paid income taxes of $264,000, $18,900 and $912 in 1997, 1998
and 1999, respectively.

7. PREFERRED STOCK

     On July 16, 1998, the Company raised $5,000,000 through the private
placement of 28,505 shares of Series C Redeemable Preferred Stock and 1,672,354
shares of Series D Redeemable Convertible Preferred Stock. In connection with
the private placement, the Company restructured the redemption premium that
would have been due under certain circumstances to the Series A preferred
stockholders associated with the redemption of the Series B preferred stock and
issued 1,652,400 shares of Series A preferred stock to the existing Series A
stockholders. The Company used $2,500,000 of the proceeds to repay a portion of
the subordinated promissory notes and the balance of the private placement
proceeds was retained for working capital purposes.

                                      F-12
<PAGE>   79
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Preferred stock consisted of:

<TABLE>
<CAPTION>
                                                                      APRIL 30,
                                                              --------------------------
                                                                 1998           1999
                                                              -----------    -----------
<S>                                                           <C>            <C>
Redeemable preferred stock:
  Series A redeemable preferred stock, 13,333,333 and
     14,985,733 shares issued (liquidation value of
     $13,333,333 and $14,985,733, plus accrued dividends of
     $1,986,113 and $3,373,199) at April 30, 1998 and 1999,
     respectively...........................................  $15,244,755    $18,284,241
  Series C redeemable preferred stock, 28,505 shares issued
     (liquidation value of $2,850,000 plus accrued dividends
     of $256,356)...........................................           --      2,726,518
  Series E redeemable preferred stock of subsidiary, no par
     value, 2,000,000 shares issued and outstanding
     (liquidation value of $2,000,000 plus accrued dividends
     of $293,333 and $490,280)..............................    2,293,333      2,490,280
                                                              -----------    -----------
          Total.............................................  $17,538,088    $23,501,039
                                                              ===========    ===========
Redeemable convertible preferred stock:
  Series B redeemable convertible preferred stock, 3,968,384
     shares issued (liquidation value of $1,666,667 plus
     accrued dividends of $244,444 and $408,567)............  $ 1,911,111    $ 2,075,234
  Series D redeemable convertible preferred stock, 1,672,354
     shares issued (liquidation value of $2,500,000 plus
     accrued dividends of $158,356).........................           --      2,628,517
                                                              -----------    -----------
          Total.............................................  $ 1,911,111    $ 4,703,751
                                                              ===========    ===========
</TABLE>

     Each share of preferred stock accrues daily dividends on a cumulative basis
at a rate of 8% per annum on their respective liquidation values. Total accrued
and unpaid dividends at April 30, 1998 and 1999 were $2,523,890 and $4,686,758,
respectively. The Series A, C and D preferred stock were recorded net of
$74,691, $29,838 and $29,839 of issuance costs, respectively. The Series E
preferred stock represents redeemable preferred stock in the Company's Canadian
subsidiary. All of the Series E preferred stock is owned by Manz Developments,
Inc. (MDI), the beneficial owners of which also own 2,031,616 shares of common
stock of the Company.

     Each share of Series A, C and E preferred stock, together with any accrued
and unpaid dividends, are to be redeemed by the Company in three equal
installments in June 2001, June 2002 and June 2003. Series A, C and E preferred
stock automatically redeem in the event of a change in ownership, and may also
be redeemed after a qualified initial public offering, as defined.

     Each share of Series B preferred stock is convertible into shares of the
Company's common stock, at the option of the holder, at a conversion price of
approximately $0.42 per share. The Series B preferred stock automatically
converts into common stock upon the earlier of a qualified initial public
offering, as defined, or upon request of 66.7% of Series B preferred
stockholders. Upon conversion, all accrued and unpaid dividends will be paid in
either cash or additional shares of common stock at fair market value, at the
option of the Company.

     Each share of Series D preferred stock is convertible into shares of the
Company's common stock, at the option of the holder, at a conversion price of
approximately $1.50 per share. The Series D preferred stock automatically
converts into common stock upon the earlier of a qualified initial public
offering, as defined, or upon request of 66.7% of Series D preferred
stockholders. Upon conversion, all accrued and unpaid dividends will be paid in
either cash or additional shares of common stock, at the option of the Company.

     At any time after June 27, 2003, the Company is required, at the request of
a majority of Series B and D preferred stockholders, to redeem all Series B and
D preferred stock at a price equal to its

                                      F-13
<PAGE>   80
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

liquidation value plus all accumulated and unpaid dividends. The Series B and D
preferred stock may also become redeemable upon a change in ownership unless the
holders elect to convert their shares to common stock.

     As long as any Series B or D preferred stock are outstanding, the holders
of Series B are entitled to elect three directors and the holders of Series D
are entitled to elect one director of the Company. Holders of Series B and
Series D preferred stock are entitled to vote with the common stock on all
matters submitted to stockholders.

     The Series A, C and E preferred stock is nonvoting. However, as long as any
preferred stock is outstanding, the Company is restricted, without the consent
of the preferred shareholders, from selling more than 20% of its consolidated
assets (20% of the Company's Canadian subsidiary's assets for Series E preferred
stock), merging (unless the preferred stock is redeemed in the transaction),
issuing any instrument that would rank senior to the common stock, liquidating
or increasing the authorized number of preferred shares.

8. STOCK PLANS

     In June 1996, the Company adopted the 1996 Stock Option Plan (the Plan),
which provides for the issuance of up to 823,061 shares of common stock of the
Company as either incentive stock options or non-qualified stock options (see
Note 13). Options granted under the Plan generally vest as to 25% of the
underlying shares on the first anniversary of the date of grant and ratably over
the remaining thirty-six months and expire five years from date of grant. At
April 30, 1999, 72,823 shares were available for future grant. At April 30,
1997, 1998 and 1999, there were 158,546, 214,360 and 95,835 options exercisable
under the plan, at a weighted average exercise price of $.001, $.08 and $.07 per
share, respectively.

     The following table summarizes option activity over the life of this plan:

<TABLE>
<CAPTION>
                                                                OPTIONS      WEIGHTED AVERAGE
                                                              OUTSTANDING     EXERCISE PRICE
                                                              -----------    ----------------
<S>                                                           <C>            <C>
  Granted...................................................    547,669           $ .07
  Exercised.................................................   (140,476)            .01
  Canceled..................................................    (40,020)            .15
                                                               --------           -----
Outstanding at April 30, 1997...............................    367,173             .10
  Granted...................................................     94,100             .15
  Exercised.................................................    (76,530)            .02
  Canceled..................................................    (77,180)            .15
                                                               --------           -----
Outstanding at April 30, 1998...............................    307,563             .10
  Granted...................................................    498,541             .18
  Exercised.................................................   (157,703)            .10
  Canceled..................................................    (13,341)            .15
                                                               --------           -----
Outstanding at April 30, 1999...............................    635,060             .16
                                                               --------           -----
  Granted (unaudited).......................................    247,000            2.06
  Exercised (unaudited).....................................         --              --
  Canceled (unaudited)......................................    (18,142)            .15
                                                               --------           -----
Outstanding at July 31, 1999 (unaudited)....................    863,918           $ .71
                                                               ========           =====
</TABLE>

     The Company's stock plans are accounted for under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations (APB No. 25). Under APB No. 25,

                                      F-14
<PAGE>   81
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

no compensation expense is recorded when the exercise price of options granted
equals the market price of the underlying stock on the date of grant. Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), requires the Company to disclose, on a pro forma
basis, the effect on net income (loss) as if the Company had recorded
compensation expense for its stock-based compensation plans based on the fair
value of the awards. On a pro forma basis, the effect in 1997, 1998 and 1999 was
immaterial.

     However, the pro forma effect in 1997, 1998 and 1999 of expensing the
estimated fair value of stock options is not necessarily representative of the
effects on reported net income for future years due to such factors as the
vesting period of the stock options and the potential for issuance of additional
stock options and stock purchase shares in future years.

     The fair market value for these options was estimated at the date of grant
using the minimum value method and the following weighted-average assumptions
for options granted in 1997, 1998 and 1999: risk-free interest rate of 5.0%,
4.5% and 5.0%; a weighted-average expected life of the option of five years; and
no dividends. The weighted-average fair value of stock options granted in 1997,
1998 and 1999 was $0.03, $0.03 and $0.04. The weighted average remaining
contractual life for those stock options outstanding at April 30, 1999 was 3.94
years. The options outstanding at April 30, 1999 have exercise prices ranging
from $0.001 to $0.30 per share.

     The Company issued 75,000 shares of restricted common stock in May 1998 and
1,005,345 shares of restricted common stock in June and September, 1997 to
certain executives and a member of the Board of Directors in exchange for
promissory notes equal to the fair market value of the common stock on the grant
date ($0.15 per share). The promissory notes are non-interest bearing to
employees insofar as the Company is required to reimburse the employees for any
interest on the promissory notes that is payable to the Company. The restricted
stock generally vests over four years and the promissory notes have a five-year
maturity. The outstanding balance of the promissory notes at April 30, 1998 and
1999 is $150,802 and $158,677, respectively.

     At April 30, 1999, the Company had reserved 6,336,544 shares of common
stock for issuance under the 1996 Stock Option Plan and upon conversion of the
Series B and D preferred stock.

9. EMPLOYEE SAVINGS PLANS

     The Company maintains a retirement savings plan under section 401(k) of the
Internal Revenue Code. The plan covers substantially all U.S. employees and
allows participants to defer a portion of their annual compensation on a pre-tax
basis. The Company also maintains a Registered Retirement Savings Plan for its
Canadian employees which allows participants to defer a portion of their annual
compensation on a pre-tax basis. The Company made no contributions to either
plan during 1997, 1998 or 1999.

10. COMMITMENTS AND CONTINGENCIES

     The Company leases office space in the United States and Canada under
non-cancelable operating leases. The Company's Canadian facility is leased from
Manz Developments, Inc., a related party. Rent expense under this arrangement
was approximately $96,000 in 1997 and 1998 and $99,000 in 1999. Total rent
expense under all operating leases for 1997, 1998 and 1999 was approximately
$96,000, $264,000 and $333,000, respectively. At April 30, 1999, future minimum
lease commitments were approximately $333,000 in 2000, $273,000 in 2001,
$207,000 in 2002 and $69,000 in 2003.

                                      F-15
<PAGE>   82
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. EARNINGS PER SHARE

     The calculations of earnings per share are as follows:

<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED
                                            YEARS ENDED APRIL 30,                   JULY 31,
                                   ---------------------------------------   -----------------------
                                      1997          1998          1999          1998         1999
                                   -----------   -----------   -----------   -----------   ---------
                                                                                   (UNAUDITED)
<S>                                <C>           <C>           <C>           <C>           <C>
Numerator:
  Net loss.......................  $   (97,317)  $  (953,183)  $  (181,082)  $  (122,806)  $ (67,556)
  Dividend on subsidiary
     redeemable preferred
     stock.......................      133,333       160,000       196,947        49,614      50,215
  Dividends on preferred stock...    1,010,557     1,220,000     1,965,921       393,234     551,134
                                   -----------   -----------   -----------   -----------   ---------
          Total dividends........    1,143,890     1,380,000     2,162,868       442,848     601,349
  Numerator for basic and diluted
     earnings per share-income
     available to common
     stockholders................  $(1,241,207)  $(2,333,183)  $(2,343,950)  $  (565,654)  $(668,905)
                                   ===========   ===========   ===========   ===========   =========
Denominator:
  Denominator for basic and
     diluted earnings per
     share -- weighted-average
     shares......................    2,083,759     2,272,079     2,536,931     2,390,233   2,813,097
                                   ===========   ===========   ===========   ===========   =========
Basic and diluted earnings (loss)
  per share......................  $     (0.60)  $     (1.03)  $     (0.92)  $     (0.24)  $   (0.24)
                                   ===========   ===========   ===========   ===========   =========
</TABLE>

     The following potential common shares have been excluded from the
computation of diluted net loss per share for all periods presented because the
effect would have been anti-dilutive (in thousands):

<TABLE>
<CAPTION>
                                                                                 THREE MONTHS
                                                      YEAR ENDED APRIL 30,      ENDED JULY 31,
                                                     -----------------------    --------------
                                                     1997     1998     1999     1998     1999
                                                     -----    -----    -----    -----    -----
                                                                                 (UNAUDITED)
<S>                                                  <C>      <C>      <C>      <C>      <C>
Shares issuable under stock options................    367      308      635      398      864
                                                     =====    =====    =====    =====    =====
Shares of nonvested restricted stock...............     --      934      732      827      827
                                                     =====    =====    =====    =====    =====
Shares potentially issuable upon conversion of
  Series B and D preferred stock...................  4,709    5,598    9,420    7,596    7,849
                                                     =====    =====    =====    =====    =====
</TABLE>

12. VALUATION AND QUALIFYING ACCOUNTS

     ACCOUNTS RECEIVABLE RESERVES AND ALLOWANCES:

<TABLE>
<CAPTION>
                                                              ADDITIONS
                                               BALANCE AT     CHARGED TO     DEDUCTIONS
                                              BEGINNING OF      INCOME      (PRINCIPALLY    BALANCE AT
PERIOD                                            YEAR        STATEMENT     WRITE-OFFS)     END OF YEAR
------                                        ------------    ----------    ------------    -----------
<S>                                           <C>             <C>           <C>             <C>
Year ended April 30, 1997...................    $ 48,709       $ 12,500      $ (14,031)      $ 47,178
Year ended April 30, 1998...................    $ 47,178       $165,252      $ (62,430)      $150,000
Year ended April 30, 1999...................    $150,000       $112,418      $ (82,858)      $179,560
</TABLE>

                                      F-16
<PAGE>   83
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. CORPORATE RESTRUCTURING

     In June 1996, the Company completed a recapitalization. The
recapitalization consisted of the following major transactions:

     1) Issued 3,968,384 shares of Series B redeemable convertible preferred
        stock in the Company valued at $1,666,667 and 2,000,000 shares of Series
        E redeemable preferred stock in its Canadian subsidiary valued at
        $2,000,000 to MDI, the then sole shareholder of the Company.

     2) Sold 13,333,333 shares of Series A redeemable preferred stock to an
        outside investor for $13,333,333.

     3) Arranged for the outside investor to purchase from MDI the 3,968,384
        shares of Series B redeemable convertible preferred stock for
        $1,666,667.

     4) Obtained $5,000,000 of 12.5% subordinated promissory notes from the
        outside investor.

     5) Paid the following to MDI: $14,119,603 of dividends, $500,000 for
        redemption of preferred stock and $1,166,667 for repayment of an
        outstanding promissory note.

     6) Incurred a transaction charge of $493,284, consisting of $448,730 of
        employee stock options redeemed for cash and other charges of $44,554.

     Subsequent to the series of transactions described above, the outside
investor, through ownership of 3,968,384 shares of Series B redeemable
convertible preferred stock, owned 66.1% of the Company, and MDI, through
ownership of 2,031,616 shares of common stock, owned 33.9% of the Company.

14. SUBSEQUENT EVENTS

     The Company is contemplating completing a stock split prior to the
effective date of its initial public offering.

     On June 1, 1999, the Company increased its option pool for the 1996 Stock
Option Plan (the Plan), by 200,000 shares. Subsequent to the increase, the
Company granted approximately 247,000 options to key employees.

     On June 23, 1999, the Company issued 245,000 shares of restricted common
stock to certain executives in exchange for promissory notes equal to the fair
market value of the common stock on the date of grant.

     On July 1, 1999, the Company entered into a financing agreement with a bank
to provide a $500,000 equipment line of credit. Under the terms of the
agreement, the Company can draw up to $500,000 through September 1999 to
purchase capital equipment. Drawings under the line are treated as a term loan
which is payable in 36 equal monthly installments of principal and interest. The
equipment line carries a rate of interest equal to the bank's base rate plus 50
basis points (8.5% at July 30, 1999). The Company has drawn approximately
$230,000 on the line in July.

                                      F-17
<PAGE>   84

EDGAR DESCRIPTIONS FOR INSIDE BACK COVER:

                   CAPTION: AWARDS FOR EXTENDER PRODUCT LINE.

     1.  Diagram showing the MCK logo circled by the logos of awards with the
following text: (1) 1998 Product of the Year, Call Center Magazine, EXTender
3000; (2) 1998 Product of the Year, Computer Telephony Magazine, EXTender
3000-series; (3) 1998 Product of the Year, CTI Magazine, EXTender 3000; (4) 1998
Product of the Year, Call Center Solutions Magazine, EXTender 3000; (5) Best of
Show, CT Expo 98, Computer Telephony Magazine, PBXtender; (6) Judges' Pick, 1998
Computer Telephony, EXTender 6000; (7) 1998 Editor's Choice, CTI Magazine,
EXTender 3000; (8) Best of CT Expo Fall 1998, CTI Magazine, EXTender; (9) Best
of CT Expo Spring 1999, Computer Telephony Magazine, Branch Office EXTender
6000; (10) Best of Show, Demo 97, Fall Expo, Computer Telephony/Teleconnect
Magazine, EXTender; (11) Editor's Choice, 1998 Telemarketing and Call Center
Solutions, PBXtender/IP EXTender 4000.

<PAGE>   85

                                     [LOGO]
<PAGE>   86

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the estimated expenses payable by us in
connection with the offering (excluding underwriting discounts and commissions):

<TABLE>
<CAPTION>
NATURE OF EXPENSE                                             AMOUNT
-----------------                                             -------
<S>                                                           <C>
SEC Registration Fee........................................  $17,214
NASD Filing Fee.............................................    6,692
Nasdaq National Market Listing Fee..........................        *
Accounting Fees and Expenses................................        *
Legal Fees and Expenses.....................................        *
Printing Expenses...........................................        *
Blue Sky Qualification Fees and Expenses....................   15,000
Transfer Agent's Fee........................................        *
Miscellaneous...............................................        *
                                                              -------
Total.......................................................        *
</TABLE>

---------------
* To be completed by amendment.

     The amounts set forth above, except for the Securities and Exchange
Commission, National Association of Securities Dealers, Inc. and Nasdaq National
Market fees, are in each case estimated.

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our amended and restated certificate of incorporation provides
that no director of MCK Communications be personally liable to MCK
Communications, its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to MCK Communications or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (3) in respect of unlawful dividend payments or stock
redemptions or repurchases, or (4) for any transaction from which the director
derived an improper personal benefit. In addition, the first amended and
restated certificate of incorporation provides that if the Delaware General
Corporation Law is amended to authorize the further elimination or limitation of
the liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.

     Article V of our amended and restated by-laws provides for indemnification
by MCK Communications of its officers and certain non-officer employees under
certain circumstances against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement, reasonably incurred in connection with the
defense or settlement of any threatened, pending or completed legal proceeding
in which any such person is involved by reason of the fact that such person is
or was an officer or employee of the registrant if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of MCK Communications, and, with respect to criminal actions
or proceedings, if such person had no reasonable cause to believe his or her
conduct was unlawful.

     Under Section 7 of the underwriting agreement to be filed as Exhibit 1.1
hereto, the underwriters have agreed to indemnify, under certain conditions, MCK
Communications, its directors, certain officers and persons who control MCK
Communications within the meaning of the Securities Act against certain
liabilities.

                                      II-1
<PAGE>   87

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     Set forth in chronological order below is information regarding the number
of shares of capital stock issued by the Registrant during the past three years.
Further included is the consideration, if any, received by the Registrant for
such shares, and information relating to the section of the Securities Act or
rule of the Securities and Exchange Commission under which exemption from
registration was claimed.

     1. An aggregate of                shares of Series A preferred stock (which
        are subject to redemption, and will be redeemed, upon the completion of
        this initial public offering) were issued in a private placement in July
        1998 to investment funds associated with Summit Partners. The
        consideration received for such shares was $      .

     2. An aggregate of                shares of Series C preferred stock (which
        are subject to redemption, and will be redeemed, upon the completion of
        this initial public offering) was issued in a private placement in July
        1998 to investment funds associated with Lazard Freres, and certain
        other purchasers, pursuant to a Stock Purchase Agreement. The
        consideration received for such shares was $      .

     3. An aggregate of                shares of Series D preferred stock (which
        are convertible into                shares of common stock) was issued
        in a private placement in July 1998 to investment funds associated with
        Lazard Freres, and certain other purchasers, pursuant to a Stock
        Purchase Agreement. The consideration received for such shares was $
             .

     4. From January 1998 to August 1999, an aggregate of                shares
        of common stock was sold to certain directors and key executives of MCK
        Communications pursuant to Stock Restriction Agreements and a Stock
        Purchase Agreement for prices ranging from $          to $     per
        share. The aggregate consideration received for such shares was $      .

     5. From June 1996 to July 1999, MCK Communications granted stock options to
        purchase an aggregate of                shares of common stock to
        directors, employees and consultants with exercise prices ranging from
        $     to $     per share pursuant to MCK Communications 1996 Stock
        Option Plan. As of July 31, 1999,           shares of common stock have
        been issued upon exercise of options.

     6. Prior to August 1996, we sold several series of preferred stock to
        investment funds associated with Summit Partners and certain entities
        associated with Wilson, Sonsini, Goodrich and Rosati, P.C. For
        additional information regarding the sale of preferred stock to the
        Summit Group, see "Certain Transactions with Related Parties."

     No underwriters were used in connection with these sales and issuances. The
sales and issuances of these securities were exempt from registration under the
Securities Act pursuant to Rule 701 promulgated thereunder on the basis that
these securities were offered and sold either pursuant to a written compensatory
benefit plan or pursuant to written contracts relating to compensation, as
provided by Rule 701, or pursuant to Section 4(2) of the Securities Act on the
basis that the transactions did not involve a public offering.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<C>     <S>
  *1.1  Form of Underwriting Agreement.
   2.1  Stock and Note Purchase Agreement, dated as of June 27,
        1996, by and among MCK Communications, Inc., MCK
        Telecommunications, Inc., Cal Manz, Manz Developments, Inc.
        and the Investors named therein (excluding schedules, which
        the Registrant agrees to furnish supplementally to the
        Commission upon request).
   2.2  Stock Purchase Agreement, dated as of July 16, 1998, by and
        among MCK Communications, Inc. and the Purchasers named
        therein (excluding schedules, which the Registrant agrees to
        furnish supplementally to the Commission upon request).
</TABLE>

                                      II-2
<PAGE>   88
<TABLE>
<C>     <S>
   3.1  Certificate of Incorporation of the Registrant.
  *3.2  Form of Amended and Restated Certificate of Incorporation of
        the Registrant (to be filed following consummation of the
        offering).
  *3.3  Form of First Amended and Restated Certificate of
        Incorporation of the Registrant (to be filed prior to
        consummation of this offering).
   3.4  By-laws of the Registrant.
  *3.5  Form of Second Amended and Restated By-laws of the
        Registrant (to be effective upon consummation of the
        offering).
  *4.1  Specimen certificate for shares of common stock, $.001 par
        value, of the Registrant.
  *5.1  Opinion of McDermott, Will & Emery as to the validity of the
        securities being offered.
  10.1  Amended and Restated Stockholders' Agreement, dated July 16,
        1998, between the Registrant and the Stockholders named
        therein.
  10.2  Amended and Restated Registration Rights Agreement, dated
        July 16, 1998, between the Registrant and the Stockholders
        named therein.
  10.3  Amended and Restated 1996 Stock Option Plan of the
        Registrant.
  10.4  1999 Stock Option and Grant Plan of the Registrant.
  10.5  Class A Subordinated Promissory Note issued by MCK
        Communications, Inc. to WS Investment Company 96A in the
        amount of $8,750 dated June 27, 1996.
  10.6  Class A Subordinated Promissory Note issued by MCK
        Communications, Inc. to Trustee, WSGR Retirement Plan FBO
        Jeffery D. Saper in the amount of $16,250 dated June 27,
        1996.
  10.7  Class A Subordinated Promissory Note issued by MCK
        Communications, Inc. to Summit Subordinated Debt Fund, L.P.
        in the amount of $4,875,500 dated June 27, 1996.
  10.8  Class A Subordinated Promissory Note issued by MCK
        Communications, Inc. to Summit Investors III in the amount
        of $99,500 dated June 27, 1996.
  10.9  Form of Stock Restriction Agreement for sale of restricted
        stock to executive officers.
 10.10  Form of Promissory Note for purchase of restricted stock by
        executive officers.
 10.11  Form of Pledge Agreement.
 10.12  Form of Bonus Agreement.
*10.13  Lease Agreement between Manz Developments, Inc. and MCK
        Telecommunications, Inc. dated January 1, 1996.
*10.14  Office Lease between MCK Communications, Inc. and 313
        Washington Street, LLC dated June 2, 1997, as amended April
        22, 1998 and June 30, 1998.
*10.15  Agreement between MCK Communications, Inc. and Lucent
        Technologies, Inc. effective as of April 30, 1999.
*10.16  Master Support Agreement between MCK Communications, Inc.
        and Vital Networks, Inc. dated June 28, 1999.
  16.1  Letter regarding change in certifying accountants
 *23.1  Consent of McDermott, Will & Emery (included in Exhibit 5.1
        hereto).
  23.2  Consent of Ernst & Young LLP.
  23.3  Consent of PricewaterhouseCoopers LLP
  24.1  Powers of Attorney (included on page II-5).
  27.1  Financial Data Schedule.
</TABLE>

---------------
* To be filed by amendment to this Registration Statement.

                                      II-3
<PAGE>   89

     (b) Consolidated Financial Statement Schedules

     All schedules have been omitted because they are not required or because
the required information is given in the Consolidated Financial Statements or
Notes to those statements.

ITEM 17.  UNDERTAKINGS

     The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

     The undersigned registrant hereby undertakes that:

          (1) For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this registration statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     registration statement as of the time it was declared effective.

          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

                                      II-4
<PAGE>   90

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newton, Commonwealth of
Massachusetts, on August 24, 1999.

                                          MCK COMMUNICATIONS, INC.

                                          By:     /s/ STEVEN J. BENSON
                                            ------------------------------------
                                                      Steven J. Benson
                                               President and Chief Executive
                                                           Officer

                               POWER OF ATTORNEY

     KNOWN ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints each of Steven J. Benson and Paul K.
Zurlo such person's true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to any
other registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act), and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that any said attorney-in-fact and agent, or any
substitute or substitutes of any of them, may lawfully do or cause to be done by
virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                     SIGNATURE                                     TITLE                     DATE
                     ---------                                     -----                     ----
<C>                                                  <S>                                <C>
               /s/ STEVEN J. BENSON                  President, Chief Executive         August 24, 1999
---------------------------------------------------    Officer and Director (Principal
                 Steven J. Benson                      Executive Officer)

                 /s/ PAUL K. ZURLO                   Chief Financial Officer            August 24, 1999
---------------------------------------------------    (Principal Financial Officer
                   Paul K. Zurlo                       and Principal Accounting
                                                       Officer)

                /s/ CALVIN K. MANZ                   Director                           August 24, 1999
---------------------------------------------------
                  Calvin K. Manz

                /s/ JOHN B. LANDRY                   Director                           August 24, 1999
---------------------------------------------------
                  John B. Landry

                /s/ GREGORY M. AVIS                  Director                           August 24, 1999
---------------------------------------------------
                  Gregory M. Avis
</TABLE>

                                      II-5
<PAGE>   91

<TABLE>
<CAPTION>
                     SIGNATURE                                     TITLE                     DATE
                     ---------                                     -----                     ----
<C>                                                  <S>                                <C>
              /s/ MICHAEL H. BALMUTH                 Director                           August 24, 1999
---------------------------------------------------
                Michael H. Balmuth

                 /s/ PAUL SEVERINO                   Director                           August 24, 1999
---------------------------------------------------
                   Paul Severino
</TABLE>

                                      II-6
<PAGE>   92

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                        EXHIBIT DESCRIPTION
-------                       -------------------
<C>       <S>
  *1.1    Form of Underwriting Agreement.
   2.1    Stock and Note Purchase Agreement, dated as of June 27,
          1996, by and among MCK Communications, Inc., MCK
          Telecommunications, Inc., Cal Manz, Manz Developments, Inc.
          and the Investors named therein (excluding schedules, which
          the Registrant agrees to furnish supplementally to the
          Commission upon request).
   2.2    Stock Purchase Agreement, dated as of July 16, 1998, by and
          among MCK Communications, Inc. and the Purchasers named
          therein (excluding schedules, which the Registrant agrees to
          furnish supplementally to the Commission upon request).
   3.1    Certificate of Incorporation of the Registrant.
  *3.2    Form of Amended and Restated Certificate of Incorporation of
          the Registrant (to be filed following consummation of the
          offering).
  *3.3    Form of First Amended and Restated Certificate of
          Incorporation of the Registrant (to be filed prior to
          consummation of this offering).
   3.4    By-laws of the Registrant.
  *3.5    Form of Second Amended and Restated By-laws of the
          Registrant (to be effective upon consummation of the
          offering).
  *4.1    Specimen certificate for shares of common stock, $.001 par
          value, of the Registrant.
  *5.1    Opinion of McDermott, Will & Emery as to the validity of the
          securities being offered.
  10.1    Amended and Restated Stockholders' Agreement, dated July 16,
          1998, between the Registrant and the Stockholders named
          therein.
  10.2    Amended and Restated Registration Rights Agreement, dated
          July 16, 1998, between the Registrant and the Stockholders
          named therein.
  10.3    Amended and Restated 1996 Stock Option Plan of the
          Registrant.
  10.4    1999 Stock Option and Grant Plan of the Registrant.
  10.5    Class A Subordinated Promissory Note issued by MCK
          Communications, Inc. to WS Investment Company 96A in the
          amount of $8,750 dated June 27, 1996.
  10.6    Class A Subordinated Promissory Note issued by MCK
          Communications, Inc. to Trustee, WSGR Retirement Plan FBO
          Jeffery D. Saper in the amount of $16,250 dated June 27,
          1996.
  10.7    Class A Subordinated Promissory Note issued by MCK
          Communications, Inc. to Summit Subordinated Debt Fund, L.P.
          in the amount of $4,875,500 dated June 27, 1996.
  10.8    Class A Subordinated Promissory Note issued by MCK
          Communications, Inc. to Summit Investors III in the amount
          of $99,500 dated June 27, 1996.
  10.9    Form of Stock Restriction Agreement for sale of restricted
          stock to executive officers.
 10.10    Form of Promissory Note for purchase of restricted stock by
          executive officers.
 10.11    Form of Pledge Agreement.
 10.12    Form of Bonus Agreement.
*10.13    Lease Agreement between Manz Developments, Inc. and MCK
          Telecommunications, Inc. dated January 1, 1996.
*10.14    Office Lease between MCK Communications, Inc. and 313
          Washington Street, LLC dated June 2, 1997, as amended April
          22, 1998 and June 30, 1998.
*10.15    Agreement between MCK Communications, Inc. and Lucent
          Technologies, Inc. effective as of April 30, 1999.
*10.16    Master Support Agreement between MCK Communications, Inc.
          and Vital Networks, Inc. dated June 28, 1999.
</TABLE>
<PAGE>   93

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                        EXHIBIT DESCRIPTION
-------                       -------------------
<C>       <S>
  16.1    Letter regarding change in certifying accountants
 *23.1    Consent of McDermott, Will & Emery (included in Exhibit 5.1
          hereto).
  23.2    Consent of Ernst & Young LLP.
  23.3    Consent of PricewaterhouseCoopers LLP
  24.1    Powers of Attorney (included on page II-5).
  27.1    Financial Data Schedule.
</TABLE>

---------------
* To be filed by amendment to this Registration Statement.
[{"type": "S-1", "sequence": "1", "description": "MCK COMMUNICATIONS FORM S-1", "secsgml_size_bytes": 363806}]
{"company-data": {"conformed-name": "MCK COMMUNICATIONS INC", "cik": "0001093576", "assigned-sic": ""}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-85821", "film-number": "99698604"}, "business-address": {"street1": "313 WASHINGTON ST", "city": "NEWTON", "state": "MA", "zip": "02458", "phone": "6174546100"}, "mail-address": {"street1": "313 WASHINGTON ST", "city": "NEWTON", "state": "MA", "zip": "02458"}}
1

    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1999

                                           REGISTRATION STATEMENT NO. 333-

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------

                            MCK COMMUNICATIONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE                             3661                            06-1555163
   (STATE OR OTHER JURISDICTION       (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)     CLASSIFICATION CODE NUMBER)            IDENTIFICATION NO.)
------------------------

                             313 WASHINGTON STREET
                          NEWTON, MASSACHUSETTS 02458
                                 (617) 454-6100
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                    REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)

                            ------------------------

                                STEVEN J. BENSON
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                            MCK COMMUNICATIONS, INC.
                             313 WASHINGTON STREET
                          NEWTON, MASSACHUSETTS 02458
                                 (617) 454-6100
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)

                            ------------------------

                                   COPIES TO:
JOHN J. EGAN III, P.C.                              MICHAEL A. CONZA, ESQ.
               JOHN B. STEELE, ESQ.                           TESTA, HURWITZ & THIBEAULT LLP
              MCDERMOTT, WILL & EMERY                                 125 HIGH STREET
                  28 STATE STREET                               BOSTON, MASSACHUSETTS 02110
         BOSTON, MASSACHUSETTS 02109-1775                             (617) 248-7000
                  (617) 535-4000
------------------------

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
------------

    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
------------

    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------

    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                            ------------------------

                        CALCULATION OF REGISTRATION FEE
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
                                                                     PROPOSED
                                                                MAXIMUM AGGREGATE           AMOUNT OF
     TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED         OFFERING PRICE(1)        REGISTRATION FEE
------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value per share.....................       $61,920,600               $17,214
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee in
    accordance with Rule 457(o) under the Securities Act of 1933.

                            ------------------------

    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                  SUBJECT TO COMPLETION, DATED AUGUST 24, 1999

                                     [LOGO]

                                             SHARES

                                  COMMON STOCK

     MCK Communications, Inc. is offering           shares of its common stock.
This is our initial public offering and no public market currently exists for
our shares. We have applied to have the common stock approved for quotation on
the Nasdaq National Market under the symbol "MCKC." The estimated initial public
offering price will be between $     and $     per share.

                         ------------------------------

                 INVESTING IN THE COMMON STOCK INVOLVES RISKS.
                    SEE "RISK FACTORS" BEGINNING ON PAGE 4.
                         ------------------------------
PER SHARE       TOTAL
                                                              ---------    -----------
Public Offering Price.......................................   $           $
Underwriting Discounts and Commissions......................   $           $
Proceeds to MCK.............................................   $           $
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

     MCK and certain of our stockholders have granted the underwriters a 30-day
option to purchase up to           additional shares of common stock to cover
over-allotments. BancBoston Robertson Stephens Inc. expects to deliver the
shares of common stock to purchasers on             , 1999.

                         ------------------------------

BANCBOSTON ROBERTSON STEPHENS

                             DAIN RAUSCHER WESSELS
                             A DIVISION OF DAIN RAUSCHER INCORPORATED
                                                               HAMBRECHT & QUIST
               The date of this prospectus is             , 1999
3

                                   [MCK LOGO]
A leading supplier of remote voice access products that extend the full range of
  features and applications of PBX systems to branch offices and telecommuters
                              over data networks.

                                  CPE DEVICES

SINGLE-USER EXTENDERS provide corporate PBX connectivity
over data networks to telecommuters and remote call center
agents. Single-user models include:
                  [picture of a MCK product (a small black box) and a telephone]

     - EXTender 1000+.  An integrated access device that supports both PBX voice
       and PC data connectivity over a single traditional telephone line.

     - EXTender 3000 Series.  Integrated access devices that support both PBX
       voice and PC data over an ISDN line. The EXTender 3000 is available in
       three data network configurations.

     - EXTender 3200 for IDSL.  An integrated access device, currently in beta
       testing, that delivers voice and PC data over an IDSL network.

     - IP EXTender 4000.  This unit, currently in beta testing, delivers PBX
       voice over IP networks. The product requires an external network
       termination device such as a router, DSL modem or cable modem.

MULTI-USER EXTENDERS are CPE devices that deliver PBX functionality to a single
branch location.

     - Branch Office EXTender 6000. Each unit works with a
       customer's existing data networking equipment to
       provide simultaneous voice connectivity to the
       corporate PBX for up to 8 employees located in a
       branch office. A 4-port daughter card, scheduled for
       release, will enable this product to support 12
       simultaneous users.        [picture of a MCK product (a small black box)]

                         CORPORATE PBX GATEWAY PRODUCTS

PBX GATEWAYS, located at the corporate PBX site, interface
with the line side of the PBX and create seamless
extensions of voice, PBX signaling information and PBX
applications to our remote CPE products. These products
include:

     - PBXtender.  This unit is a high density PBX gateway
       product that can support up to 24-ports per chassis.
       This product supports the EXTender 1000+ and the
       EXTender 3000 series.        [picture of MCK product (a small black box)]

     - Branch Office EXTender 6000.  This unit, located at the corporate PBX
       site, seamlessly extends the functionality of the corporate PBX to a
       Branch Office EXTender 6000 located in a remote office.

     - PBXgateway IP.  This unit, currently in beta testing, seamlessly extends
       the functionality of the corporate PBX to a variety of our IP CPE
       devices, including the Branch Office EXTender 6000, EXTender 3200 for
       ISDL and the IP EXTender 4000. The PBXgateway IP can support up to 12
       simultaneous users across any of these CPE devices over multiple types of
       networks, including DSL and IP networks.
4

Edgar description for Interior Fold-out Page:

                                   (MCK LOGO)
  CAPTION: EXTENDING THE CORPORATE PBX TO REMOTE LOCATIONS OVER MANY NETWORKS
                               Selected Examples

     The page is divided into three sections, labeled "Corporate location" on
the left, "Multi-user locations" in the center and "Single-user locations" on
the right. The diagram shows a large corporate office with a PBX connected to a
PBXgateway IP and PBXtender. The PBXgateway IP connects to a network termination
devices which connects directly, or through the Internet, to public and private
networks. The PBXtender and a non-MCK data server independently connect to
public and private networks. At the multi-user location, the diagram shows a
network termination device that connects to public and private networks,
specifically ATM, DDS, DSL, Frame and T-1. A Branch Office EXTender 6000
connects to a network termination device and multiple telephone sets connect to
the Branch Office EXTender 6000. In another multi-user location, a network
termination device connects to public and private networks over a fiber network
connection. Two Branch Office EXTender 6000s and an IP EXTender 4000 connect to
this network termination device to show a campus LAN. Multiple telephone sets
connect to the Branch Office EXTender 6000s and one telephone set connects to
the EXTender 4000. At the single-user location, the diagram shows three
single-user locations: (i) a telephone set and a personal computer connected to
an EXTender 1000+; (ii) a telephone set and personal computer connected to an
EXTender 3000, and (iii) a telephone set and personal computer connected to an
EXTender 4000 which is connected to a network termination device; each connected
to public and private networks over a traditional telephone network, ISDN and
cable or DSL networks, respectively.
5

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.

     UNTIL                , 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

                          ----------------------------

                               TABLE OF CONTENTS
PAGE
                                                              ----
Prospectus Summary..........................................    1
Risk Factors................................................    4
Note on Forward Looking Statements..........................   13
Use of Proceeds.............................................   13
The Company.................................................   13
Dividend Policy.............................................   13
Capitalization..............................................   14
Dilution....................................................   15
Selected Consolidated Financial Data........................   16
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   17
Business....................................................   26
Management..................................................   43
Certain Transactions........................................   50
Principal Stockholders......................................   52
Description of Capital Stock................................   53
Shares Eligible for Future Sale.............................   56
Underwriting................................................   58
Legal Matters...............................................   59
Experts.....................................................   59
Where You Can Find More Information.........................   60
Index to Consolidated Financial Statements..................  F-1
----------------------------

     We own or have rights to trademarks that we use in conjunction with the
sale of our products. EXTender, MCK, MCK EXTender, PBXtender, PBXgateway, RVP
and Telebridge are our trademarks. All other trade names and trademarks used in
this prospectus are the property of their respective owners.

                                        i
6

                      (This page intentionally left blank)
7

                               PROSPECTUS SUMMARY

     This is only a summary and may not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus carefully, including the "Risk Factors" section and our financial
statements and the notes thereto included elsewhere in this prospectus. Unless
otherwise indicated, this prospectus assumes that the underwriters have not
exercised their option to purchase additional shares and that all shares of
convertible preferred stock have been automatically converted into shares of
common stock, and all common stock share information has been adjusted to
reflect a      for-one stock split of the common stock effected as a dividend on
               , 1999 and the filing of our amended and restated certificate of
incorporation.

                            MCK COMMUNICATIONS, INC.

     MCK Communications is a leading provider of remote voice access products
that enable corporations to seamlessly extend the features and applications of
private branch exchanges, or PBXs, from the corporate office to remote branch
offices and telecommuters over wide area networks, or WANs. Our EXTender
products cost-effectively deliver a unified, enterprise-wide voice network by
enabling the PBX to function as a corporate voice server that transmits
packetized voice and PBX signaling information to remote locations over
corporations' existing data networks. In addition, our products reduce the total
cost of ownership by leveraging corporations' current investment in voice and
data equipment, and streamline network administration through the utilization of
industry standard network management techniques.

     Large corporations are increasingly shifting towards a decentralized
business model of distributed work forces with multiple branch offices and
numerous telecommuters in order to realize the competitive advantages of being
located near key customers, suppliers and partners and to attract qualified
employees. We believe Fortune 5000 businesses maintain approximately 1.6 million
branch offices. According to the Gartner Group, the number of telecommuters
worldwide is expected to grow from 35 million in 1998 to 140 million in 2003.

     As corporations decentralize, they seek to extend their voice and data
networks across multiple locations due to their dependence upon company-wide
communications to facilitate internal collaboration, provide superior customer
service and maintain efficiency and productivity. Advances in data networking
technologies have enabled cost-effective, high-speed remote data access and
communications over local and wide area networks, including virtual private
networks, through the deployment of interoperable equipment from multiple
vendors. In contrast, PBX-based voice networks, which are known for their
reliability and functionality in centralized environments, have not been
efficiently extended from corporate locations to branch offices and
telecommuters due to technical signaling limitations and cost constraints. As a
result, corporations have had to deploy separate voice networks for each remote
location, limiting the effectiveness of corporate communications and increasing
the burden on systems administrators.

     Furthermore, in order to lower costs and simplify network administration,
corporations are increasingly demanding that distributed voice and data services
be offered over one centrally-managed corporate communications infrastructure.
This convergence of voice and data is made possible by the packetization of
voice and advances in Quality of Service which enable the transmission of voice
over private managed data networks and public data networks such as the
Internet. Thus, solutions for the remote voice marketplace must offer a
centrally-managed interface to corporate PBX systems and have the capability of
packetizing and transmitting PBX voice over both traditional circuit-based data
networks and emerging packet networks.

     Our remote voice access solutions enable corporations to realize the
following key benefits:

     - Full-Featured Remote Voice Access.  Our solutions seamlessly provide PBX
       features and applications to branch office employees and telecommuters
       over existing data networks.

     - Digital Line Extension Technology.  Our solutions utilize our proprietary
       hardware and software interfaces to extract voice and PBX signaling
       information from PBX digital line cards, where the rich features and
       applications of PBXs reside, for transmission across WANs.

                                        1
8

     - Packet Voice Architecture.  Utilizing our proprietary Remote Voice
       Protocol, or RVP, software platform, we packetize voice and PBX signaling
       information extracted from PBX digital line cards for transmission over
       data networks to remote locations.

     - Lower Cost Solution.  Our solutions enable corporations to lower costs,
       including network transmission, network management, equipment and
       infrastructure costs.

     - Compatibility with Leading PBX Manufacturers.  Our solutions are
       compatible with the proprietary PBX protocols of Alcatel, Lucent, NEC and
       Nortel Networks, whose products collectively have a market share of
       approximately 65% in the U.S. PBX market.

     Our objective is to become the leading provider of remote voice access
solutions to Fortune 5000 businesses for their branch offices and telecommuters.
Key components of our strategy include:

     - maintaining our technology leadership in the remote voice access
       marketplace;

     - establishing our Gateway products as platforms for new voice
       applications;

     - expanding our distribution, marketing and technology relationships;

     - working with broadband equipment vendors and next generation service
       providers; and

     - targeting Fortune 5000 corporations.

     We primarily sell our products through an indirect distribution system
including the following channels: original equipment manufacturers and private
label partners, incumbent local exchange carriers, systems integrators and
distributors, telecom and datacom value-added resellers and broadband service
providers. We support our sales channels with our own internal sales
professionals as well as marketing programs, educational programs, and field and
telephone technical support.

     Our principal executive offices are at 313 Washington Street, Newton,
Massachusetts 02458 and our telephone number at that address is (617) 454-6100.
Information contained on our web site at www.mck.com does not constitute part of
this prospectus.

                                  THE OFFERING

Common stock offered by MCK.............               shares

Common stock to be outstanding after the
offering................................               shares(1)

Use of proceeds.........................     We expect to use the net proceeds
                                             to redeem our outstanding
                                             redeemable preferred stock, to
                                             repay our subordinated
                                             indebtedness, and for working
                                             capital and general corporate
                                             purposes. See "Use of Proceeds."

Proposed Nasdaq National Market
Symbol..................................     MCKC
---------------
(1) Based on the number of shares outstanding as of September 30, 1999.
    Excludes:

    -       shares issuable upon exercise of outstanding options at a weighted
      average exercise price of $    per share; and

    -       additional shares of common stock reserved for future issuance under
      our 1999 Stock Option and Grant Plan. See "Management -- Executive
      Compensation," "-- 1996 Stock Option Plan" and "-- 1999 Stock Option and
      Grant Plan."

                                        2
9

                      SUMMARY CONSOLIDATED FINANCIAL DATA

     The as adjusted consolidated balance sheet data summarized below reflects
the conversion of our convertible preferred stock into                shares of
common stock upon the completion of this offering and the application of the net
proceeds from the sale of                shares of common stock issued hereby at
an assumed offering price of $     per share after deducting the underwriting
discounts and commissions and our estimated offering expenses. The number of
shares used to compute basic and diluted earnings per share gives effect to the
               for           stock split of our common stock effected on
               , 1999, and such information for the years ended April 30, 1995
and 1996 gives effect to the recapitalization that occurred during the year
ended April 30, 1997 as if it had occurred at the beginning of each fiscal year.
See Note 11 of Notes to Consolidated Financial Statements for an explanation of
the number of shares used in computing per share data.
THREE
                                                                                           MONTHS ENDED
                                                     YEARS ENDED APRIL 30,                   JULY 31,
                                        -----------------------------------------------   ---------------
                                         1995      1996      1997      1998      1999      1998     1999
                                        -------   -------   -------   -------   -------   ------   ------
                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)          (UNAUDITED)
CONSOLIDATED STATEMENT OF OPERATIONS
  DATA:
Revenues..............................  $ 1,810   $ 5,339   $ 5,921   $ 7,876   $14,270   $3,116   $4,523
Cost of goods sold....................      796     2,423     2,313     2,800     5,390    1,188    1,690
                                        -------   -------   -------   -------   -------   ------   ------
Gross profit..........................    1,014     2,916     3,608     5,076     8,880    1,928    2,832
Operating expenses:
  Research and development............      266       344       815     1,758     3,349      751      964
  Sales and marketing.................       --       576     1,145     2,191     3,889      779    1,347
  General and administrative..........      626       319       607     1,485     1,617      391      494
  Transaction-related charges.........       --        --       493        --        --       --       --
                                        -------   -------   -------   -------   -------   ------   ------
      Total operating expenses........      892     1,239     3,060     5,434     8,854    1,922    2,805
                                        -------   -------   -------   -------   -------   ------   ------
Income (loss) from operations.........      122     1,677       547      (358)       26        6       28
Other income (expense)................       12         7      (343)     (595)     (207)    (129)     (95)
                                        -------   -------   -------   -------   -------   ------   ------
Income (loss) before provision for
  income taxes........................      134     1,684       205      (953)     (181)    (123)     (68)
Provision for income taxes............       13       652       302        --        --       --       --
                                        -------   -------   -------   -------   -------   ------   ------
Net income (loss).....................  $   121   $ 1,032   $   (97)  $  (953)  $  (181)  $ (123)  $  (68)
                                        =======   =======   =======   =======   =======   ======   ======

Dividends on preferred stock..........       --        --     1,144     1,380     2,163      443      601
                                        -------   -------   -------   -------   -------   ------   ------
Net income (loss) applicable to common
  shares..............................  $   121   $ 1,032   $(1,241)  $(2,333)  $(2,344)  $ (566)  $ (669)
                                        =======   =======   =======   =======   =======   ======   ======
Basic and diluted net income (loss)
  per common share....................
Shares used in computing basic and
  diluted net income (loss) per common
  share...............................
Pro forma basic and diluted net income
  (loss) per share....................
Shares used in computing pro forma
  basic and diluted net income (loss)
  per share...........................
JULY 31, 1999
                                                              -----------------------
                                                               ACTUAL     AS ADJUSTED
                                                              --------    -----------
                                                                    (UNAUDITED)
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents........................................  $  3,596
Working capital.............................................     5,621
Total assets................................................     9,813
Long-term debt..............................................     2,654
Redeemable preferred stock..................................    24,003
Redeemable convertible preferred stock......................     4,799
Total common stockholders' deficit..........................   (24,750)
3
10

                                  RISK FACTORS

     You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.

     This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.

WE DERIVE ALMOST ALL OF OUR REVENUES FROM A SMALL NUMBER OF CUSTOMERS AND OUR
REVENUES MAY DECLINE SIGNIFICANTLY IF ANY MAJOR CUSTOMER CANCELS OR DELAYS A
PURCHASE OF OUR PRODUCTS

     We have historically derived the majority of our revenues from a small
number of customers, most of whom resell our products to end users. Our business
would be seriously harmed if we do not generate as much revenue as expected from
these customers or if any of these customers cease purchasing our products,
particularly Lucent. For the fiscal year April 30, 1999, Lucent accounted for
46.7% of our revenues, and our ten largest customers, including Lucent,
accounted for 78.7% of our revenues. None of these large customers is obligated
to purchase additional products or services. Accordingly, we cannot be certain
that present or future customers will not terminate their purchasing
arrangements with us or significantly reduce or delay their orders. Any
termination, change, reduction or delay in orders could seriously harm our
business, financial condition and results of operations. Accordingly, unless and
until we diversify and expand our customer base, our future success will
significantly depend upon the timing and size of future purchases by our largest
customers and, in particular:

     - the product requirements of these customers;

     - the financial and operational success of these customers; and

     - the success of the underlying products and services that our products
       support.

     The loss of any one of our major customers or the delay of significant
orders from such customers, even if only temporary, could reduce or delay our
recognition of revenues, harm our reputation in the industry and reduce our
ability to accurately predict cash flow, and, as a consequence, could materially
adversely affect our business, financial condition and results of operations.

OUR ABILITY TO SUSTAIN OR GROW OUR BUSINESS MAY BE HARMED IF WE ARE UNABLE TO
DEVELOP AND MAINTAIN RELATIONSHIPS WITH KEY PBX VENDORS

     Our success will depend to a significant degree upon our relationships with
leading PBX vendors, including those with Alcatel, Lucent, NEC and Nortel
Networks. The PBX systems sold by these vendors account for approximately 65% of
the U.S. market for corporate PBX sales, and approximately 99% of our revenues
for fiscal year 1999 were attributable to products which interoperate with PBX
systems offered by these vendors. We may not have access in the future to the
proprietary protocols for the major PBX systems marketed by those vendors, which
access may be essential to ensure the continued interoperability of our
products. Moreover, there is no assurance that we will be able to develop
products that interoperate with PBX systems offered by other vendors.
Additionally, the standards for IP telephony equipment and data networks are
evolving and there is no assurance that our products will be compatible with any
new technology standards that may emerge. If we are unable to provide our
customers with interoperable solutions, they may make purchases from vendors who
provide the requisite product interoperability. This could seriously harm our
business, financial condition and results of operations.

     In addition, we currently have varying distribution, marketing and
development arrangements with the PBX vendors noted above. These relationships
are not exclusive and there is no assurance that we will continue to enjoy the
support and cooperation that we have historically experienced from these parties
or

                                        4
11

their distribution channels. Moreover, it is possible that the PBX vendors may
seek to offer broader product lines and solutions that are competitive with our
products.

UNLESS WE ARE ABLE TO KEEP PACE WITH THE RAPIDLY CHANGING PRODUCT REQUIREMENTS
OF OUR CUSTOMERS, WE WILL NOT BE ABLE TO SUSTAIN OR GROW OUR BUSINESS

     The telecommunications market is characterized by rapid technological
advances, evolving industry standards, changes in end-user requirements,
frequent new product introductions and evolving offerings by telecommunications
service providers. We believe our future success will largely depend on our
ability to anticipate or adapt to such changes and to offer, on a timely basis,
products that meet customer demands. Our failure to produce technologically
competitive products in a cost-effective manner or on a timely basis would
seriously harm our business, financial condition and results of operations.

INTENSE COMPETITION IN THE MARKET FOR REMOTE VOICE SOLUTIONS COULD PREVENT US
FROM INCREASING OR SUSTAINING REVENUE AND PREVENT US FROM ACHIEVING OR
SUSTAINING PROFITABILITY

     The market for remote voice solutions is highly competitive. If we are
unable to compete effectively in this market, our revenues and future
profitability would be materially adversely affected. Many of our current and
potential competitors have significantly greater sales and marketing, technical,
manufacturing, financial and other resources, more established distribution
channels and stronger relationships with service providers. For instance, in
June 1999 Nortel Networks announced its intention to develop new products which
will compete directly with our products. Moreover, our competitors may foresee
the course of market developments more accurately than we do and could in the
future develop new technologies that compete with our products or even render
our products obsolete. Realizing and maintaining technological advantages over
our competitors will require a continued high level of investment in research
and development, sales and marketing and customer support. Due to the
opportunities in and the rapidly evolving nature of the market in which we
compete, additional competitors with significant market presence and financial
resources, including large communications equipment manufacturers, may enter our
market, thereby further intensifying competition. We may not have sufficient
resources to continue to make the investments or achieve the technological
advances necessary to compete successfully with existing competitors or new
competitors.

     Increased competition is likely to result in price reductions, reduced
gross margins, longer sales cycles and loss of market share, any of which would
seriously harm our business and results of operations. We cannot be certain that
we will be able to compete successfully against current or future competitors or
that competitive pressures will not seriously harm our business.

FUTURE CONSOLIDATION IN THE COMMUNICATIONS EQUIPMENT INDUSTRY MAY INCREASE
COMPETITION THAT COULD HARM OUR BUSINESS

     The markets in which we compete are characterized by increasing
consolidation both within the communications sector and by companies combining
or acquiring communications assets, as exemplified by the acquisitions of Ascend
by Lucent and Diamond Lane by Nokia. We may not be able to compete successfully
in an increasingly consolidated industry. Increased competition and
consolidation in our industry could require that we reduce the prices of our
products and may result in our loss of market share, which would materially
adversely affect our business, financial condition and results of operations.
Additionally, because we are now, and may in the future be, dependent on certain
strategic relationships with third parties in our industry, any consolidation
involving these parties could reduce the demand for our products and otherwise
harm our business prospects.

FLUCTUATIONS IN OUR QUARTERLY RESULTS COULD CAUSE THE MARKET PRICE OF OUR COMMON
STOCK TO FALL

     Our quarterly operating results have varied in the past and are likely to
vary in the future. It is possible that our revenues and operating results may
be below the expectations of securities analysts and investors in future
quarters. If we fail to meet or surpass the expectations of securities analysts
or investors,

                                        5
12

the market price of our common stock will most likely fall. Fluctuations in our
quarterly results could be caused by a number of factors, including, but not
limited to:

     - the timing and amount of, or cancellation or rescheduling of, orders for
       our products, particularly large orders from our key customers;

     - our ability to develop, introduce, ship and support new products and
       product enhancements, and manage product transitions;

     - new product introductions and announcements, and reductions in the prices
       of products offered by our competitors;

     - our ability to sustain our technology relationships, particularly with
       the major PBX manufacturers and service providers;

     - availability and changes in the prices of components provided by third
       parties;

     - our ability to attain and maintain production volumes and quality levels
       for our products;

     - the mix of products sold and the mix of distribution channels through
       which they are sold;

     - fluctuations in demand for our products;

     - costs relating to possible acquisitions and integration of technologies
       or businesses;

     - telecommunications market conditions and economic conditions generally;

     - our ability to hire, train, integrate and retain new personnel; and

     - changes in the level of our operating expenses.

     Given that any one or more of these or other factors could have an adverse
effect on our business, the prediction of future quarterly results is difficult
and uncertain. In addition, some of our operating expenses are relatively fixed
in advance of any particular quarter. As a result, we may not be able to reduce
our operating costs in response to unanticipated reductions in our revenues or
the demand for our products.

OUR DEPENDENCE ON INDEPENDENT MANUFACTURERS AND SUPPLIERS COULD RESULT IN
PRODUCT DELIVERY DELAYS

     We currently use two independent manufacturers, Celestica and Electronic
Manufacturing Group, to manufacture all of our products. We are also
contemplating using an additional manufacturer to manufacture our multi-user
products. Our reliance on independent manufacturers involves a number of risks,
including the absence of adequate capacity, the unavailability of or
interruptions in access to certain process technologies and reduced control over
delivery schedules. If our manufacturers are unable or unwilling to continue
manufacturing our products and components in required volumes, we will have to
identify acceptable alternative manufacturers, which could take in excess of six
months. Furthermore, the use of a new manufacturer may cause significant
interruptions in supply if the new manufacturer has difficulty manufacturing
products to our specifications. Further, the introduction of a new manufacturer
may increase the variance in the quality of our products. In addition, we rely
upon third-party suppliers of specialty components and intellectual property
used in our products. It is possible that a component needed to complete the
manufacture of our products may not be available to us at acceptable prices or
on a timely basis, if at all. Inadequate supplies of components, or the loss of
intellectual property rights, could affect our ability to deliver products to
our customers. Any significant interruption in the supply of our products would
result in the reduction of product sales to customers, which in turn could have
a material adverse effect on our business, financial condition and results of
operations.

OUR ABILITY TO SUSTAIN OR GROW OUR BUSINESS MAY BE HARMED IF WE ARE UNABLE TO
PROVIDE ADEQUATE CUSTOMER SUPPORT

     Our ability to continue to grow and to retain current and future customers
depends in part upon the quality of our customer support operations. We have
recently entered into an arrangement with a third-

                                        6
13

party customer support firm to provide some of our customer support functions.
Failure to offer adequate customer support, either directly or through third
parties, or failure to properly integrate third-party services into our customer
support framework could materially and adversely affect our reputation and cause
demand for our products to decline.

WE ARE DEPENDENT ON MARKET ACCEPTANCE OF OUR PRODUCTS

     Market acceptance of our products is critical to our future success.
Factors that may affect the market acceptance of our products include:

     - continued market acceptance of PBX technology;

     - the performance, price and total cost of ownership of our products;

     - the availability and price of competing products and technologies; and

     - the efforts and success of our indirect distribution channels.

     Many of these factors are beyond our control. We may experience failure or
delays in market acceptance of our products. Failure of our existing or future
products to maintain and achieve meaningful levels of market acceptance would
materially adversely affect our business, financial condition and results of
operations.

BECAUSE SUBSTANTIALLY ALL OF OUR REVENUES ARE DERIVED FROM SALES OF A SMALL
NUMBER OF PRODUCTS, OUR FUTURE OPERATING RESULTS WILL BE DEPENDENT ON SALES OF
THESE PRODUCTS

     We currently derive substantially all of our revenues from our product
family of remote voice access equipment, and we expect that this concentration
will continue in the foreseeable future. The market may not continue to demand
our products, and we may not be successful in marketing any new or enhanced
products. Any reduction in the demand for our products or our failure to
successfully develop or market new or enhanced products could materially
adversely affect our operating results and cause the price of our common stock
to decline. In addition, our branch office products have only recently been
introduced to the market, and we are expecting that these products will account
for a substantial portion of our revenues for the foreseeable future. Factors
that could affect sales of our products include:

     - the demand for remote access voice solutions;

     - the successful development, introduction and market acceptance of new and
       enhanced products that address customer requirements;

     - product introductions or announcements by our competitors;

     - price competition in our industry; and

     - technological change.

IF WE FAIL TO DEVELOP AND EXPAND OUR INDIRECT DISTRIBUTION CHANNELS, OUR
BUSINESS COULD SUFFER

     Our product distribution strategy focuses primarily on continuing to
develop and expand our indirect distribution channels, maintain our
relationships with large PBX vendors and telecommunications service providers,
and expand our field sales organization. If we fail to develop and cultivate
relationships with significant indirect distribution channels, or if these
distribution channels are not successful in their sales efforts, our product
sales may decrease and our operating results may suffer. Many of our indirect
distribution channels also sell products that compete with our products, and
none of our strategic or reseller arrangements are exclusive. In addition, our
operating results will likely fluctuate significantly depending on the timing
and amount of orders from our indirect distribution channels. We cannot assure
you that our indirect distribution channels will market our products effectively
or continue to devote the resources necessary to provide us with effective
sales, marketing and technical support.

                                        7
14

     In order to support and develop leads for our indirect distribution
channels, we plan to significantly expand our field sales staff. We cannot
assure you that this internal expansion will be successfully completed, that the
cost of this expansion will not exceed the revenues generated or that our
expanded sales and support staff will be able to compete successfully against
the significantly more extensive and well-funded sales and marketing operations
of many of our current or potential competitors. Our inability to effectively
develop and expand our distribution channels or manage the expansion of our
sales and support staff would adversely affect our ability to grow and increase
revenues.

OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL SHARES AT OR
ABOVE THE OFFERING PRICE

     There has previously not been a public market for our common stock. We
cannot predict the extent to which investor interest in us will lead to the
development of a trading market or how liquid that market might become. The
initial public offering price for the shares will be determined by negotiations
between us and the representatives of the underwriters and may not be indicative
of prices that will prevail in the trading market. The trading price of our
common stock could be subject to wide fluctuations in response to factors such
as:

     - actual or anticipated variations in quarterly operating results;

     - announcements of technological innovations;

     - general technology or economic trends;

     - revenues and operating results failing to meet or surpass the
       expectations of securities analysts or investors in any quarter;

     - changes in general market conditions;

     - changes in financial estimates by securities analysts;

     - announcements of significant acquisitions, strategic partnerships, joint
       ventures or capital commitments by us or our competitors;

     - additions or departures of key personnel;

     - the demand for our common stock;

     - the number of market makers for our common stock;

     - sales of a large number of shares of our common stock in the public
       market after this offering or the perception that such sales could occur;
       and

     - other events or factors, many of which are beyond our control.

     In addition, the stock market in general, and the Nasdaq National Market
and technology companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of such companies. The trading prices of many technology
companies' stocks are at or near historical highs and these trading prices are
substantially above historical levels. These trading prices may not be
sustained. These broad market and industry factors may materially adversely
affect the market price of our common stock, regardless of our actual operating
performance. In the past, following periods of volatility in the market price of
a company's securities, securities class-action litigation has often been
instituted against such companies. Such litigation, if instituted, could result
in substantial costs and a diversion of management's attention and resources,
which would materially adversely affect our business, financial condition and
results of operations.

SALES TO CUSTOMERS BASED OUTSIDE THE UNITED STATES HAVE HISTORICALLY ACCOUNTED
FOR A SIGNIFICANT PORTION OF OUR REVENUES, WHICH EXPOSES US TO RISKS INHERENT IN
INTERNATIONAL OPERATIONS

     International sales represented 18.3% of our revenues for the fiscal year
ended April 30, 1999, and 13.5% of our revenues for the fiscal quarter ended
July 31, 1999. We expect sales to international markets

                                        8
15

to increase as a percentage of revenues in the future. International sales are
subject to a number of risks, including:

     - changes in foreign government regulations and communications standards;

     - export license requirements;

     - currency fluctuations, tariffs and taxes;

     - other trade barriers;

     - difficulty in collecting accounts receivable;

     - difficulty in managing foreign operations; and

     - political and economic instability.

     If the relative value of the U.S. dollar in comparison to the currency of
our foreign customers should increase, the resulting effective price increase of
our products to these foreign customers could result in decreased sales. In
addition, to the extent that our customers may be impacted by general economic
downturns, the ability of these customers to purchase our products could be
adversely affected. Payment cycles for international customers are typically
longer than those for customers in the United States. We cannot assure you that
foreign markets for our products will not develop more slowly than currently
anticipated.

     We anticipate that our non-Canadian, foreign sales will generally be
invoiced in U.S. dollars, and we do not currently plan to engage in foreign
currency hedging transactions. As we expand our international operations,
however, we may allow payment in foreign currencies, and exposure to losses in
foreign currency transactions may increase. We may choose to limit any currency
exposure through the purchase of forward foreign exchange contracts or other
hedging strategies. We cannot assure you that any currency hedging strategy we
may adopt would be successful in avoiding exchange related losses.

OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY MAY ADVERSELY AFFECT
OUR ABILITY TO COMPETE

     Our success and ability to compete is dependent in part upon our
proprietary technology. Any infringement of our proprietary rights could result
in significant litigation costs, and any failure to adequately protect our
proprietary rights could result in our competitors offering similar products,
potentially resulting in loss of a competitive advantage and decreased revenues.
We rely on a combination of copyright, trademark, trade secret and other
intellectual property laws, as well as confidentiality agreements and licensing
arrangements, to establish and protect our proprietary rights. We presently have
no patents. Despite our efforts to protect our proprietary rights, existing
copyright, trademark and trade secret laws afford only limited protection. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States. Attempts may be
made to copy or reverse engineer aspects of our products or to obtain and use
information that we regard as proprietary. Accordingly, we may not be able to
protect our proprietary rights against unauthorized third-party copying or use.
Furthermore, policing the unauthorized use of our products is difficult. Some of
our contractual arrangements provide third parties with access to our source
code and other intellectual property upon the occurrence of specified events.
Such access could enable these third parties to use our intellectual property
and source code to develop and manufacture competing products, which would
adversely affect our performance and ability to compete. Litigation may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary
rights of others. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our future
operating results.

CLAIMS ALLEGING INFRINGEMENT OF A THIRD PARTY'S INTELLECTUAL PROPERTY COULD
RESULT IN SIGNIFICANT EXPENSE TO US AND RESULT IN OUR LOSS OF SIGNIFICANT RIGHTS

     The telecommunications industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of patent
infringement. From time to time, third parties may assert

                                        9
16

patent, copyright, trademark and other intellectual property rights to
technologies that are important to our business, and this risk may increase as
the number of entrants in our market increases and the functionality of our
products is enhanced and overlaps with the products of other companies. Any
claims against us or any purchaser or user of our products asserting that our
products infringe or may infringe proprietary rights of third parties, if
determined adversely to us, could have a material adverse effect on our
business, financial condition or results of operations. Any claims, with or
without merit, could be time-consuming, result in costly litigation, divert the
efforts of our technical and management personnel, cause product shipment
delays, disrupt our relationships with our customers or require us to enter into
royalty or licensing agreements, any of which could have a material adverse
effect upon our operating results. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to us, if at all. Legal
action claiming patent infringement may be commenced against us. We cannot
assure you that we would prevail in such litigation given the complex technical
issues and inherent uncertainties in patent litigation. In the event a claim
against us is successful and we cannot obtain a license to the relevant
technology on acceptable terms, license a substitute technology or redesign our
products to avoid infringement, our business, financial condition and results of
operations would be materially adversely affected.

IF OUR PRODUCTS CONTAIN DEFECTS, WE MAY BE SUBJECT TO SIGNIFICANT LIABILITY
CLAIMS FROM OUR CUSTOMERS AND THE END USERS OF OUR PRODUCTS AND INCUR
SIGNIFICANT UNEXPECTED EXPENSES AND LOST SALES

     Our products have in the past contained, and may in the future contain,
undetected or unresolved errors when first introduced or as new versions are
released. Despite extensive testing, errors, defects or failures may be found in
our current or future products or enhancements after commencement of commercial
shipments. If this happens, we may experience delay in or loss of market
acceptance and sales, product returns, diversion of development resources,
injury to our reputation or increased service and warranty costs, any of which
could have a material adverse effect on our business, financial condition and
results of operations. For example, a defect in our EXTender 3000E product
caused us to cease shipments of that product for a period of time to enable us
to correct the defect. Moreover, because our products are designed to provide
critical communications services, we may receive significant liability claims.
Our agreements with customers typically contain provisions intended to limit our
exposure to liability claims. These limitations may not, however, preclude all
potential claims resulting from a defect in one of our products. Although we
maintain product liability insurance covering certain damages arising from the
implementation and use of our products, our insurance may not cover any claims
sought against us. Liability claims could require us to spend significant time
and money in litigation or to pay significant damages. As a result, any such
claims, whether or not successful, could seriously damage our reputation and our
business.

WE MAY HAVE DIFFICULTY IDENTIFYING THE SOURCE OF THE PROBLEM WHEN THERE IS A
PROBLEM IN A NETWORK

     Our products must successfully integrate with products from other vendors,
such as traditional telephone systems. As a result, when problems occur in a
network, it may be difficult to identify the source of the problem. The
occurrence of hardware and software errors, whether caused by our products or
another vendor's products, may result in the delay or loss of market acceptance
of our products and any necessary revisions may force us to incur significant
expenses. The occurrence of some of these types of problems may seriously harm
our business, financial condition and results of operations.

WE CONTINUE TO SIGNIFICANTLY EXPAND OUR OPERATIONS AND OUR FAILURE TO MANAGE
GROWTH COULD HARM OUR BUSINESS AND ADVERSELY AFFECT OUR RESULTS OF OPERATIONS
AND FINANCIAL CONDITION

     We have significantly expanded our operations, including the number of our
employees, the breadth of our product offerings and the geographic scope of our
activities. At July 31, 1999, we employed 80 employees. During the twelve months
ended July 31, 1999, we hired 28 new employees and we expect the number of our
employees to increase significantly in the future. Further significant expansion
will likely be necessary to address potential growth in our customer base and
market opportunities. In addition, substantially all of our senior management
have been with us for approximately two years. Any failure to

                                       10
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manage growth effectively could harm our business and adversely affect our
financial condition and operating results. We cannot assure you that we will be
able to do any of the following activities, which we believe are essential to
successfully manage the anticipated growth of our operations:

     - improve our existing and implement new operations, financial and
       management information controls, reporting systems and procedures;

     - hire, train and manage additional qualified personnel;

     - expand and upgrade our core technologies; and

     - effectively manage multiple relationships with our customers, suppliers
       and other third parties.

IF WE LOSE KEY PERSONNEL, WE MAY NOT BE ABLE TO SUCCESSFULLY OPERATE OUR
BUSINESS

     Our success depends to a significant degree upon the continued
contributions of our senior sales, engineering and management personnel, many of
whom perform important management functions and would be difficult to replace.
Specifically, we believe that our future success is highly dependent on Steven
J. Benson and other senior management personnel. The loss of the services of any
key personnel, particularly senior management and engineers, could materially
adversely affect our business, financial condition and results of operations.

IF WE ARE UNABLE TO RETAIN AND HIRE ADDITIONAL QUALIFIED PERSONNEL AS NECESSARY,
WE MAY NOT BE ABLE TO SUCCESSFULLY ACHIEVE OUR OBJECTIVES

     We have experienced growth in revenues and expansion of our operations,
which has placed significant demands on our management, engineering staff and
facilities. Continued growth will also require us to hire more engineering,
sales and administrative personnel. We may not be able to attract and retain the
necessary personnel to accomplish our business objectives and we may experience
constraints that will adversely affect our ability to satisfy customer demand in
a timely fashion or to support our customers and operations. We have at times
experienced, and continue to experience, difficulty in recruiting qualified
personnel. Recruiting qualified personnel is an intensely competitive and
time-consuming process. New sales personnel and marketing personnel will require
training and take time to achieve full productivity. In addition, the design and
installation of telephony solutions can be complex. Accordingly, we need highly
trained professional services and customer support personnel. We cannot be
certain that we will successfully attract and retain additional qualified
personnel. In addition, our key person life insurance policy, covering some of
our key employees, may be insufficient to cover the costs associated with the
loss of one of these employees.

IF WE OR OUR KEY SUPPLIERS OR CUSTOMERS FAIL TO BE YEAR 2000 COMPLIANT, OUR
BUSINESS MAY BE SEVERELY DISRUPTED AND OUR RESULTS OF OPERATIONS MAY BE
MATERIALLY ADVERSELY AFFECTED

     The Year 2000 problem creates a risk for us. Although most of our products
do not incorporate internal clocks, if our remaining products or our internal
computer systems do not correctly recognize date information when the year
changes to 2000, there could be an adverse impact on our operations. The risk
exists primarily in four areas:

     - potential warranty or other claims from our customers, which may result
       in significant expense to us;

     - failures of systems we use to run our business, which could disrupt our
       business operations;

     - failures of systems used by our suppliers and contract manufacturers,
       which could delay or affect the quality of our products; and

                                       11
18

     - the potential for failures of our products, particularly our central
       office-based systems, due to Year 2000 problems associated with products
       manufactured by other equipment vendors used in conjunction with our
       products, which may require that we incur significant unexpected
       expenses.

We are currently evaluating our exposure in all of these areas.

     We are in the process of conducting a comprehensive inventory and
evaluation of the information systems used to run our business. We intend to
upgrade or replace systems which are identified as non-compliant. For the Year
2000 non-compliance issues identified to date, the cost of remediation is not
expected to be material to our operating results. If implementation of
replacement systems is delayed, however, or if significant new non-compliance
issues are identified, our business, financial condition or results of
operations could be materially adversely affected.

     We intend to contact our critical suppliers and contract manufacturers to
determine whether their operations and the products and services they provide
are Year 2000 compliant. Where practicable, we will attempt to mitigate our
risks with respect to the failure of our suppliers and contract manufacturers to
be prepared for any Year 2000 problems. However, failures remain a possibility
and could have a material adverse effect on our business, financial condition or
results of operations.

     In addition, litigation regarding Year 2000 compliance issues is expected
to escalate. For these reasons, the impact of customer claims could have a
material adverse effect on our business, financial condition or results of
operations.

CONTROL BY EXISTING STOCKHOLDERS MAY LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME
OF DIRECTOR ELECTIONS AND OTHER MATTERS REQUIRING STOCKHOLDER APPROVAL

     Upon completion of this offering, our executive officers, directors and
principal stockholders and their affiliates will own                shares, or
approximately      % of the outstanding shares of common stock (     % if the
underwriters' over-allotment option is exercised in full). These stockholders,
if acting together, would be able to significantly influence all matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions. This
concentration of ownership could have the effect of delaying or preventing a
change in our control or otherwise discouraging a potential acquiror from
attempting to obtain control of us, which in turn could have a material adverse
effect on the market price of the common stock or prevent our stockholders from
realizing a premium over the market prices for their shares of common stock. For
information about the ownership of common stock by our executive officers,
directors and principal stockholders please refer to "Principal Stockholders."

A PORTION OF THE PROCEEDS FROM THE OFFERING WILL BENEFIT OUR EXISTING
STOCKHOLDERS AND WILL NOT BE AVAILABLE TO FUND WORKING CAPITAL OR CAPITAL
EXPENDITURES

     Approximately $27.3 million of the estimated $          million in net
proceeds from the offering will be used to redeem our outstanding redeemable
preferred stock and retire our subordinated debt. See "Use of Proceeds" and
"Certain Transactions."

PROVISIONS OF DELAWARE LAW AND OF OUR CHARTER AND BY-LAWS MAY MAKE A TAKEOVER
MORE DIFFICULT

     Provisions in our certificate of incorporation and by-laws and in Delaware
corporate law may make it difficult and expensive for a third party to pursue a
tender offer, change in control or takeover attempt that is opposed by our
management. Public stockholders who might desire to participate in such a
transaction may not have an opportunity to do so, and the ability of public
stockholders to change our management could be substantially impeded by these
anti-takeover provisions. For example, we have a staggered board of directors
and the right under our charter documents to issue preferred stock without
further stockholder approval, which provisions could adversely affect the
holders of our common stock.

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                       NOTE ON FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify
forward-looking statements. This prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding the
growth in the number of branch offices and telecommuters. You should not place
undue reliance on these forward-looking statements, which apply only as of the
date of this prospectus. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us and described in the preceding pages and elsewhere in this
prospectus.

                                USE OF PROCEEDS

     We estimate that the net proceeds to us from the sale of the common stock
will be approximately $          million, at an assumed initial offering price
of $          per share and after deducting the estimated underwriting discounts
and commissions and offering expenses payable by us in connection with the
offering. If the underwriters' over-allotment option is exercised in full, we
estimate that our net proceeds will be approximately $          million. We
expect to use substantially all of these estimated net proceeds as follows:

     - make a mandatory redemption payment with respect to our Series A
       Redeemable Preferred Stock upon consummation of the offering in an
       aggregate amount of approximately $19.0 million, which represents a
       redemption payment of approximately $15.0 million plus accrued dividends
       on the preferred stock, which amounted to approximately $4.0 million as
       of September 30, 1999;

     - make a mandatory redemption payment with respect to our Series C
       Redeemable Preferred Stock upon consummation of the offering in an
       aggregate amount of approximately $3.2 million, which represents a
       redemption payment of approximately $2.9 million plus accrued dividends
       on the preferred stock, which amounted to approximately $300,000 as of
       September 30, 1999;

     - make a mandatory redemption payment with respect to the Series E
       Redeemable Preferred Stock of our subsidiary, MCK Telecommunications,
       upon consummation of the offering in an aggregate amount of approximately
       $2.6 million, which represents a redemption payment of approximately $2.0
       million plus accrued dividends on the preferred stock which amounted to
       approximately $600,000 as of September 30, 1999;

     - repay $2.5 million in principal amount of the subordinated indebtedness
       held by certain of the holders of the Series A Redeemable Preferred
       Stock, which debt bears interest at a rate of 12.5% annually, and which
       must be repaid upon the completion of this offering; and

     - working capital and general corporate purposes.

                                  THE COMPANY

     We are a Delaware corporation and were formed in August 1999. Our indirect
subsidiary, MCK Telecommunications, was incorporated in Canada in 1989. As a
result of our June 1996 recapitalization, MCK Telecommunications became a
wholly-owned subsidiary of MCK Communications, Inc., a Nevada corporation. As a
result of a migratory merger effected in August 1999, the Nevada corporation
became our wholly-owned subsidiary.

                                DIVIDEND POLICY

     We have never declared or paid cash dividends on our capital stock. We
currently intend to retain any future earnings to fund the development and
growth of our business and do not currently anticipate paying any cash dividends
in the foreseeable future. Future dividends, if any, will be determined by our
Board of Directors.

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                                 CAPITALIZATION

     The following table sets forth our capitalization as of July 31, 1999:

     - on an actual basis;

     - on a pro forma basis to reflect the conversion of all outstanding shares
       of redeemable convertible preferred stock into           shares of common
       stock; and

     - on a pro forma as adjusted basis to reflect the sale of the common stock
       in this offering at an assumed initial public offering price of
       $          per share, after deduction of estimated underwriting discounts
       and commissions and our estimated offering expenses and the use of net
       proceeds as described in "Use of Proceeds."

The adjusted information set forth below is unaudited and should be read in
conjunction with our Consolidated Financial Statements and Notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
AS OF JULY 31, 1999
                                                              -----------------------------------
                                                                                       PRO FORMA
                                                              ACTUAL     PRO FORMA    AS ADJUSTED
                                                              -------    ---------    -----------
                                                                        (IN THOUSANDS)
Subordinated debt...........................................
Series A redeemable preferred stock, $0.001 par value per
  share: shares authorized, issued and outstanding, actual
  and pro forma; no shares authorized, issued or outstanding
  pro forma as adjusted.....................................
Series B redeemable convertible preferred stock, $0.001 par
  value per share; shares authorized, issued and
  outstanding, actual; no shares authorized, issued or
  outstanding, pro forma and pro forma as adjusted..........
Series C redeemable preferred stock, $0.001 par value per
  share; shares authorized, issued and outstanding, actual
  and pro forma; no shares authorized, issued or
  outstanding, pro forma as adjusted........................
Series D redeemable convertible preferred stock, $0.001 par
  value per share; shares authorized, issued and
  outstanding, actual; no shares authorized, issued or
  outstanding, pro forma as adjusted........................
Series E redeemable preferred stock of subsidiary, $0.001
  par value per share; shares authorized, issued and
  outstanding, actual and pro forma; no shares authorized,
  issued or outstanding, pro forma as adjusted..............
Common stockholders' deficit:
Common stock, $.001 par value,           shares authorized;
            shares issued and outstanding, actual;
            shares authorized,           shares issued and
  outstanding, pro forma; and           shares authorized,
            shares issued and outstanding, pro forma as
  adjusted..................................................
Paid-in capital.............................................
Accumulated deficit.........................................
Accumulated other comprehensive income......................
Notes receivable from officers..............................
     Total common stockholders' deficit.....................
          Total capitalization..............................
The table above excludes as of July 31, 1999           shares of common
stock issuable upon exercise of outstanding stock options at a weighted average
exercise price of $          per share under our 1996 Stock Option Plan and
          additional shares of common stock available for future grant under our
1999 Stock Option and Grant Plan. See "Management -- Executive Compensation,"
"-- 1996 Stock Option Plan" and "-- 1999 Stock Option and Grant Plan."

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                                    DILUTION

     As of July 31, 1999, we had a pro forma net tangible book deficit of $24.7
million, or $     per share. Pro forma net tangible book deficit per share is
equal to our total tangible assets less total liabilities, divided by the number
of outstanding shares of our common stock, after giving effect to the conversion
of all outstanding shares of our convertible preferred stock into common stock.
Without taking into account any other changes in pro forma net tangible book
value after July 31, 1999, other than to give effect to our receipt of the
estimated net proceeds from the sale of the                shares of common
stock offered hereby at an assumed initial public offering price of $       per
share and after deducting the estimated underwriting discounts and commissions
and the estimated expenses relating to this offering, our pro forma net tangible
book value as of July 31, 1999 would have been $       , or $       per share.
This represents an immediate increase in pro forma net tangible book value of
$     per share to existing stockholders and an immediate dilution of $     per
share to new investors. If the initial public offering price is higher or lower
than $     per share, the dilution to new stockholders will be higher or lower,
respectively. The following table illustrates this per share dilution:
Assumed initial public offering price per share.............          $
    Pro forma net tangible book deficit per share as of July 31,
      1999......................................................  $
    Increase per share attributable to new investors............
                                                                  ----
    Pro forma net tangible book value per share after the
      offering..................................................
                                                                          ----
    Dilution per share to new investors.........................
                                                                          ====
The following table summarizes, as of July 31, 1999, on the pro forma basis
described above, the difference between the number of shares of common stock
purchased from us, the total consideration paid and the average price per share
paid by the existing stockholders and by new public investors purchasing shares
from us before deducting underwriting discounts and commissions and estimated
offering expenses:
SHARES PURCHASED      TOTAL CONSIDERATION
                                           -------------------    -------------------    AVERAGE PRICE
                                            NUMBER     PERCENT    AMOUNT     PERCENT       PER SHARE
                                           --------    -------    -------    --------    -------------
Existing stockholders....................                    %    $                %        $
New investors............................
                                           --------     -----     ------      -----
          Total..........................               100.0%    $           100.0%
                                           ========     =====     ======      =====
The foregoing computations are based on the number of common shares
outstanding as of July 31, 1999 and exclude:

     -      shares of common stock subject to outstanding options at July 31,
       1999 at a weighted average exercise price of $     per share;

     -      additional shares available for future grant under our 1999 Stock
       Option and Grant Plan.

     To the extent stock is issued upon the exercise of stock options or granted
under our stock option plans, there will be further dilution to new investors.
See "Management -- 1996 Stock Option Plan" and "-- 1999 Stock Option and Grant
Plan" and Note 8 of Notes to Consolidated Financial Statements included
elsewhere in this prospectus.

                                       15
22

                      SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected consolidated financial data should be read in
conjunction with our Consolidated Financial Statements and related Notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this prospectus. The consolidated statements of
operations data for the fiscal years ended April 30, 1998 and 1999, and the
consolidated balance sheets data at April 30, 1998 and 1999, are derived from
our consolidated financial statements which have been audited by Ernst & Young,
LLP, independent auditors, and are included in this prospectus. The consolidated
statement of operations data for the fiscal year ended April 30, 1997 are
derived from our consolidated financial statements which have been audited by
PricewaterhouseCoopers, LLP, independent auditors, and are included in this
prospectus. The consolidated statements of operations data for the fiscal years
ended April 30, 1995 and 1996, and the consolidated balance sheet data at April
30, 1995, 1996 and 1997 are derived from our audited consolidated financial
statements which are not included in this prospectus. The selected consolidated
financial data for the three months ended July 31, 1998 and 1999 and at July 31,
1999 have been derived from unaudited consolidated financial statements included
elsewhere in this prospectus that include, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for a fair presentation of our financial position and results of
operations for those periods. The historical results are not necessarily
indicative of the operating results to be expected in the future.
THREE MONTHS
                                                                                                           ENDED
                                                               YEARS ENDED APRIL 30,                     JULY 31,
                                                ---------------------------------------------------   ---------------
                                                  1995        1996       1997      1998      1999      1998     1999
                                                ---------   ---------   -------   -------   -------   ------   ------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues......................................  $   1,810   $   5,339   $ 5,921   $ 7,876   $14,270   $3,116   $4,523
Cost of goods sold............................        796       2,423     2,313     2,800     5,390    1,188    1,690
                                                ---------   ---------   -------   -------   -------   ------   ------
Gross profit..................................      1,014       2,916     3,608     5,076     8,880    1,928    2,832
Operating expenses:
  Research and development....................        266         344       815     1,758     3,349      751      964
  Sales and marketing.........................         --         576     1,145     2,191     3,889      779    1,347
  General and administrative..................        626         319       607     1,485     1,617      391      494
  Transaction-related charges.................         --          --       493        --        --       --       --
                                                ---------   ---------   -------   -------   -------   ------   ------
    Total operating expenses..................        892       1,239     3,060     5,434     8,854    1,922    2,805
                                                ---------   ---------   -------   -------   -------   ------   ------
Income (loss) from operations.................        122       1,677       547      (358)       26        6       28
Other income (expense)........................         12           7      (343)     (595)     (207)    (129)     (95)
                                                ---------   ---------   -------   -------   -------   ------   ------
Income (loss) before provision for income
  taxes.......................................        134       1,684       205      (953)     (181)    (123)     (68)
Provision for income taxes....................         13         652       302        --        --       --       --
                                                =========   =========   =======   =======   =======   ======   ======
Net income (loss).............................  $     121   $   1,032   $   (97)  $  (953)  $  (181)  $ (123)  $  (68)
                                                =========   =========   =======   =======   =======   ======   ======
Dividends on preferred stock..................         --          --     1,144     1,380     2,163      443      601
Net income (loss) applicable to common
  shares......................................  $     121   $   1,032   $(1,241)  $(2,333)  $(2,344)  $ (566)  $ (669)
                                                =========   =========   =======   =======   =======   ======   ======
Basic and diluted net income (loss) per
  share.......................................
Shares used in computing basic and diluted net
  income (loss) per share.....................
Pro forma basic and diluted net income (loss)
  per share...................................
Shares used in computing pro forma basic and
  diluted net income (loss) per share.........
APRIL 30,
                                               --------------------------------------------------    JULY 31,
                                               1995     1996       1997        1998        1999        1999
                                               ----    ------    --------    --------    --------    --------
                                                                       (IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents.........................  $ 42    $    1    $  3,228    $  1,867    $  3,285    $  3,596
Working capital..............................   335       (97)      4,965       3,545       5,578       5,621
Total assets.................................   726     3,148       6,517       5,665       9,428       9,813
Long-term debt...............................    31        57       5,000       5,000       2,500       2,654
Redeemable preferred stock...................    --       500      16,291      17,538      23,501      24,003
Redeemable convertible preferred stock.......    --        --       1,778       1,911       4,704       4,799
Total common stockholders' equity
  (deficit)..................................   427      (207)    (17,568)    (20,050)    (24,040)    (24,750)
16
23

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with our
consolidated financial statements and the related notes included elsewhere in
this prospectus.

OVERVIEW

     MCK Communications is a leading provider of remote voice access products
that enable corporations to distribute the full range of features and
applications of PBX systems to branch offices and telecommuters over data
networks. Our technology makes it possible for corporations to build a unified
voice network by enabling the PBX to act like a corporate voice server that
delivers packetized voice to remote locations over the same wide area network,
or WAN, used for remote data connectivity. We market and distribute our products
through an international network of original equipment manufacturers, or OEMs,
and private label partners, incumbent local exchange carriers, or ILECs, systems
integrators and distributors, telecom and datacom value-added resellers, or
VARs, broadband service providers and, to a lesser extent, through direct sales.
We are headquartered in Newton, Massachusetts and have a development center in
Calgary, Canada.

     From our inception in 1989 through 1993, we were a small company based in
Calgary, Canada that designed and marketed a number of niche, voice products
targeted at the oil industry. Commencing in 1993, we altered our business focus
and began developing remote voice access solutions by leveraging the technology
derived from this initial business. These efforts led to the development of our
EXTender product line. During the period from 1993 through 1995, our operating
activities related primarily to establishing a research and development
organization, developing and testing prototype designs, and developing OEM
relationships. We shipped our first remote voice access product, the EXTender
1000, in February 1995. In June 1996, Summit Partners acquired a majority of our
stock pursuant to a leveraged recapitalization. In June 1997, we recruited a new
chief executive officer and moved our headquarters to Newton, Massachusetts.
Since then we recruited the rest of our management team, focused our research
and development efforts on developing additional remote voice access products
and product enhancements, created a product validation laboratory, built
international indirect sales channels, developed additional technology
relationships, and established our sales, marketing and customer support
organizations. We began shipments of the EXTender 3000 and Branch Office
EXTender 6000 in December 1997 and April 1999, respectively.

     Through the fiscal year ended April 30, 1999, our revenues consisted
primarily of product sales of our single-user remote voice access products and,
to a lesser degree, our digital-to-analog converter products. In fiscal 1999,
Lucent accounted for approximately 46.7% of our revenues. In April 1999, we
released our first multi-user remote voice access product, the Branch Office
EXTender 6000, and we are presently developing additional remote voice access
products that operate over broadband networks. For the foreseeable future, we
anticipate that substantially all of our revenues will be attributable to sales
of our remote voice access products, with sales of digital-to-analog converters
representing a decreasing percentage of our revenues. Among our remote voice
access products, we believe that the multi-user products and next generation
single-user products will represent a substantial and increasing percentage of
our revenues, while the sales of our existing single-user products may decline
as a percentage of our revenues. Going forward, we expect to generate service
and maintenance revenues. Service revenues will be recognized as the services
are performed. Maintenance revenues will be deferred and recognized over the
period of the contract. We do not expect maintenance or service revenues to be a
significant portion of our revenues. Periodically, we have received
non-recurring engineering fees, although such fees have not been material to
date.

     We recognize product revenues upon shipment to the customer. We routinely
analyze and establish, as necessary, reserves at the time of shipment for
product returns and allowances, which amounts to date have not been significant.
As of July 31, 1999, our backlog was $1.4 million. This compares to $350,000 at
the same time last year. We expect to ship the entire backlog during the current
fiscal year. We believe

                                       17
24

backlog is not an indicator of future success and our contracts generally allow
customers to cancel orders prior to shipment with little or no liability.

     Our cost of goods sold consists primarily of purchased finished products
from Celestica, one of our two contract manufacturers, and purchased
subassemblies that we buy from our other contract manufacturer. We incur
additional costs to test, assemble and prepare these subassemblies for shipment
to our customers. Cost of goods sold also includes certain manufacturing
overhead costs, primarily facilities and related depreciation. In August 1999,
we began offering maintenance and support services to our distribution channels
and end users through Vital Network Services, a third-party support provider. We
expense services provided by Vital Network Services as they are performed.

     Research and development expenses consist primarily of salaries and related
personnel costs and contract engineering, purchased software and prototype
expenses related to the design, development, enhancement and testing of our
remote voice access products. As of July 31, 1999, all research and development
costs have been expensed as incurred. We intend to increase our investment in
research and development, which is critical to achieving our product objectives.
We will also increase our expenditures on our product validation laboratory to
test the interoperability of our products with PBXs and other products. This
competency is becoming increasingly critical to our business as we develop
additional products that function over data networks in conjunction with
third-party data equipment. We expect research and development expenses to
increase significantly in the future as we continue to develop new products and
enhance existing products.

     Sales and marketing expenses consist primarily of salaries, commissions and
related personnel expenses for those engaged in the sales, marketing and support
of products as well as related trade show, promotional and public relations
expenses. We primarily sell our products through an indirect distribution system
that includes the following channels: OEMs and private label partners, ILECs,
systems integrators and distributors, telecom and datacom VARs and broadband
service providers. Our sales force and marketing efforts are primarily directed
at developing brand awareness and supporting our indirect distribution channels.
We intend to pursue sales and marketing campaigns aggressively and increase our
sales force headcount and, therefore, expect these expenses to increase in the
future.

     General and administrative expenses consist primarily of salaries and
related personnel expenses for executive, accounting and administrative
personnel, professional fees and other general corporate expenses. As we add
personnel and incur additional costs related to the growth of our business and
our becoming a public company, we expect that general and administrative
expenses will also increase. Furthermore, we expect to add office space in our
current building in Newton, Massachusetts or move our corporate headquarters to
new office space in the next 6 to 12 months.

RESULTS OF OPERATIONS

     The following table sets forth certain financial data for the periods
indicated as a percentage of revenues.
YEARS ENDED            THREE MONTHS ENDED
                                                       APRIL 30,                  JULY 31,
                                               -------------------------     -------------------
                                               1997      1998      1999       1998         1999
                                               -----     -----     -----     ------       ------
Revenues.....................................  100.0%    100.0%    100.0%    100.0%       100.0%
Cost of goods sold...........................   39.1      35.6      37.8      38.1         37.4
                                               -----     -----     -----     -----        -----
Gross margin.................................   60.9      64.4      62.2      61.9         62.6
Operating expenses:
  Research and development...................   13.8      22.3      23.5      24.1         21.3
  Sales and marketing........................   19.3      27.8      27.3      25.0         29.8
  General and administrative.................   10.3      18.9      11.3      12.6         10.9
  Transaction-related charges................    8.3        --        --        --           --
                                               -----     -----     -----     -----        -----
       Total operating expenses..............   51.7      69.0      62.0      61.7         62.0
                                               -----     -----     -----     -----        -----
18
25
YEARS ENDED            THREE MONTHS ENDED
                                                       APRIL 30,                  JULY 31,
                                               -------------------------     -------------------
                                               1997      1998      1999       1998         1999
                                               -----     -----     -----     ------       ------
Income (loss) from operations................    9.2      (4.5)      0.2       0.2          0.6
Other expense, net...........................   (5.8)     (7.6)     (1.5)     (4.1)        (2.1)
                                               -----     -----     -----     -----        -----
Income (loss) before provision for income
  taxes......................................    3.5     (12.1)     (1.3)     (3.9)        (1.5)
Provision for income taxes...................   (5.1)       --        --        --           --
                                               -----     -----     -----     -----        -----
Net loss.....................................   (1.6)%   (12.1)%    (1.3)%     (3.9)%       (1.5)%
                                               =====     =====     =====     =====        =====
Three months ended July 31, 1998 and 1999

     Revenues.  Revenues increased from $3.1 million for the three months ended
July 31, 1998 to $4.5 million for the three months ended July 31, 1999, an
increase of $1.4 million or 45.1%. This increase was primarily due to the
release of our first multi-user product in April 1999, which accounted for
approximately $1.7 million or 37.6% of revenues. We expect revenues from our
current single-user products to decrease as a percentage of revenues as we grow
our sales of our multi-user products and our next generation single-user
products.

     Cost of goods sold.  Our cost of goods sold increased from $1.2 million for
the three months ended July 31, 1998 to $1.7 million for the three months ended
July 31, 1999, an increase of $502,000 or 42.3%. This increase was primarily
related to the increase in volume of units shipped. Gross margin increased from
61.9% for the three months ended July 31, 1998 to 62.6% for the three months
ended July 31, 1999. The increase in gross margin was primarily attributable to
the introduction of our first multi-user product, which has a higher gross
margin than our other products.

     Research and development.  Research and development expenses increased from
$751,000 for the three months ended July 31, 1998 to $964,000 for the three
months ended July 31, 1999, an increase of $212,000 or 28.3%. This increase was
due primarily to increases in staffing, the manufacturing of prototype units for
our EXTender 3200 for IDSL, IP EXTender 4000 and PBXgateway IP product lines
and, to a lesser extent, related overhead costs. For the three months ended July
31, 1998 and 1999, research and development expenses decreased as a percentage
of revenues from 24.1% to 21.3% as a result of increased revenues.

     Sales and marketing.  Sales and marketing expenses increased from $779,000
for the three months ended July 31, 1998 to $1.3 million for the three months
ended July 31, 1999, an increase of $568,000 or 72.9%. This increase was
primarily due to increases in staffing of both sales and marketing personnel
and, to a lesser extent, increased marketing activities related to the
introduction of our first multi-user product. For the three months ended July
31, 1998 and 1999, sales and marketing expenses increased as a percentage of
revenues from 25.0% to 29.8% as newly hired sales personnel generally do not
achieve full productivity for the first few months with us.

     General and administrative.  General and administrative expenses increased
from $391,000 for the three months ended July 31, 1998 to $494,000 for the three
months ended July 31, 1999, an increase of $102,000 or 26.2%. This increase was
primarily due to increases in staffing in our accounting group to support our
growth, consulting costs relating to an upgrade of our enterprise resource
planning system to ensure its Year 2000 compliance and, to a lesser extent,
professional service costs. For the three months ended July 31, 1998 and 1999,
general and administrative expenses decreased as a percentage of revenues from
12.6% to 10.9% as a result of increased revenues.

     Other expense, net.  Other expense, net consisted primarily of interest
expense related to our subordinated debt, offset by interest income, and foreign
exchange gains or losses related to the effects of the Canadian/U.S. exchange
rate on intra-company transactions. Other expense, net decreased from $129,000
for the three months ended July 31, 1998 to $95,000 for the three months ended
July 31, 1999, a decrease of $34,000 or 26.1%. Interest expense, offset by
interest income, decreased from $135,000 for the three months ended July 31,
1998 to $67,000 for the three months ended July 31, 1999. This decrease was

                                       19
26

due to a reduction in the subordinated debt on our balance sheet from $5.0
million to $2.5 million relating to the July 1998 financing. Foreign exchange
gains for the three months ended July 31, 1998 were $6,000 compared to a loss of
$29,000 for the three months ended July 31, 1999. The increased loss was due to
a strengthening of the U.S. dollar against the Canadian dollar.

Fiscal years ended April 30, 1998 and 1999

     Revenues.  Revenues increased from $7.9 million for the fiscal year ended
April 30, 1998 to $14.3 million for the fiscal year ended April 30, 1999, an
increase of $6.4 million or 81.2%. This increase was due to an increased number
of units sold, which resulted from continued development of our existing
distribution channels, the addition of new distribution channels and the release
of our first multi-user product late in the fourth quarter of fiscal 1999.
Revenues from that multi-user product accounted for $1.3 million or 9.1% of
revenues.

     Cost of goods sold.  Cost of goods sold increased from $2.8 million for
fiscal 1998 to $5.4 million for fiscal 1999, an increase of $2.6 million or
92.5%. This increase was primarily related to the increase in volume of units
shipped. For fiscal 1998 and 1999, gross margin decreased from 64.4% to 62.2%.
The decrease in gross margin was primarily due to start-up costs associated with
adding a second contract manufacturer, increased manufacturing headcount and, to
a lesser extent, the write-off of obsolete inventory.

     Research and development.  Research and development expenses increased from
$1.8 million for fiscal 1998 to $3.3 million for fiscal 1999, an increase of
$1.6 million or 90.5%. This increase was due primarily to the hiring of a vice
president of engineering and additional engineers, the expansion of our product
validation facilities and staff and, to a lesser extent, related overhead costs.
For fiscal 1998 and 1999, research and development expenses increased as a
percentage of revenues from 22.3% to 23.5% as we hired new staff to develop our
first multi-user product which did not generate revenues until April 1999.

     Sales and marketing.  Sales and marketing expenses increased from $2.2
million for fiscal 1998 to $3.9 million for fiscal 1999, an increase of $1.7
million or 77.5%. This increase was primarily due to the hiring of sales and
marketing personnel and increased marketing activities. For fiscal 1998 and
1999, sales and marketing expenses decreased slightly as a percentage of
revenues from 27.8% to 27.3%.

     General and administrative.  General and administrative expenses increased
from $1.5 million for fiscal 1998 to $1.6 million for fiscal 1999, an increase
of $132,000 or 8.9%. This increase was primarily due to the hiring of new
accounting personnel and related expenses. For fiscal 1998 and 1999, general and
administrative expenses decreased as a percentage of revenues from 18.9% to
11.3%.

     Other expense, net.  Other expense, net decreased from $595,000 for fiscal
1998 to $207,000 for fiscal 1999, a decrease of $388,000 or 65.2%. Interest
expense, offset by interest income, decreased from $518,000 for fiscal 1998 to
$268,000 for fiscal 1999. This decrease was due to a reduction in the
outstanding amount of our subordinated debt from $5.0 million to $2.5 million in
July 1998. Foreign exchange losses were $77,000 in fiscal 1998 versus a gain of
$60,000 in fiscal 1999. The gain during 1999 was due to a weakening of the U.S.
dollar against the Canadian dollar.

Fiscal years ended April 30, 1997 and 1998

     Revenues.  Revenues increased from $5.9 million for the fiscal year 1997 to
$7.9 million for fiscal 1998, an increase of $2.0 million or 33.0%. This
increase was due to an increased number of units sold relating to development of
our existing distribution channels, the addition of new distribution channels
and the release of our EXTender 3000 product line.

     Cost of goods sold.  Cost of goods sold increased from $2.3 million for
fiscal 1997 to $2.8 million for fiscal 1998, an increase of $487,000 or 21.1%.
This increase was primarily related to the increase in volume of units shipped.
For fiscal 1997 and 1998, gross margin increased from 60.9% to 64.4%. The
increase in

                                       20
27

gross margin was primarily due to manufacturing efficiencies, lower component
costs and the inclusion of non-recurring engineering fee revenues.

     Research and development.  Research and development expenses increased from
$815,000 for fiscal 1997 to $1.8 million for fiscal 1998, an increase of
$943,000 or 115.7%. The increase was due primarily to the hiring of engineers,
the creation of a product validation laboratory and, to a lesser extent, related
overhead and consulting costs. For fiscal 1997 and 1998, research and
development expenses increased as a percentage of revenues from 13.8% to 22.3%
as we developed new products, including the EXTender 3000 which did not generate
significant revenues until the fourth quarter of fiscal 1998, and upgraded
existing products, including switching to a Rockwell modem set on the EXTender
1000+.

     Sales and marketing.  Sales and marketing expenses increased from $1.1
million for 1997 to $2.2 million for 1998, an increase of $1.0 million or 91.3%.
This increase was primarily due to hiring of personnel including a vice
president of sales, vice president of marketing, vice president of business
development and sales personnel and, to a lesser extent, increased marketing
activities. For fiscal 1997 and 1998, sales and marketing expenses increased as
a percentage of revenues from 19.3% to 27.8%.

     General and administrative.  General and administrative expenses increased
by $900,000 from $607,000 for 1997 to $1.5 million for 1998, an increase of
144.6%. This increase was primarily due to recruitment of management personnel
including a new chief executive officer and chief financial officer, the opening
of our offices in Newton, Massachusetts and, to a lesser extent, consulting and
professional services costs. For fiscal 1997 and 1998, general and
administrative expenses increased as a percentage of revenues from 10.3% to
18.9% as we invested in our management team and corporate infrastructure.

     Transaction-related expenses.  In fiscal 1997, we recorded
transaction-related expenses of $493,000 related to our June 1996
recapitalization pursuant to which employee stock options were either exercised
and redeemed, or exchanged for new options in the U.S. company. In conjunction
with this event, we incurred a one-time compensation charge. See Note 13 of
Notes to Consolidated Financial Statements.

     Other expense, net.  Other expense, net increased from $343,000 for fiscal
1997 to $595,000 for fiscal 1998, a increase of $253,000 or 73.8%. Interest
expense, offset by interest income, increased from $393,000 for fiscal 1997 to
$518,000 for fiscal 1998 due to the issuance of $5.0 million in subordinated
debt as part of our June 1996 recapitalization and an increase in the
outstanding balances on a revolving line of credit. Foreign exchange gains were
$50,000 in fiscal 1997 versus a loss of $77,000 in fiscal 1998. The loss during
fiscal 1998 was due to a strengthening of the U.S. dollar against the Canadian
dollar.

QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth certain unaudited consolidated statements of
operations data in dollars and as a percentage of revenues for our nine most
recent quarters. In management's opinion, this unaudited information has been
prepared on the same basis as the annual consolidated financial statements and
includes all adjustments necessary to fairly present the unaudited quarterly
results. These adjustments consist only of normal recurring adjustments. This
information should be read in conjunction with the

                                       21
28

consolidated financial statements and related notes included elsewhere in this
prospectus. The operating results for any quarter are not necessarily indicative
of results for any future period.
THREE MONTHS ENDED
                                 ------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF       JULY 31,   OCT. 31,   JAN. 31,   APR. 30,   JULY 31,   OCT. 31,   JAN. 31,   APR. 30,   JULY 31,
OPERATIONS DATA:                   1997       1997       1998       1998       1998       1998       1999       1999       1999
--------------------------       --------   --------   --------   --------   --------   --------   --------   --------   --------
                                                                          (IN THOUSANDS)
Revenues.......................   $1,431     $1,728     $2,065     $2,652     $3,116     $3,441     $3,609     $4,104     $4,523
Cost of goods sold.............      543        603        665        989      1,188      1,330      1,376      1,496      1,690
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
Gross profit...................      888      1,125      1,400      1,663      1,928      2,111      2,233      2,608      2,832
Operating expenses:
  Research and development.....      297        406        501        554        751        770        880        948        964
  Sales and marketing..........      361        625        551        655        779        918      1,004      1,187      1,347
  General and administrative...      200        404        425        457        391        415        347        463        494
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
    Total operating expenses...      857      1,434      1,477      1,665      1,922      2,103      2,231      2,597      2,805
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
Income (loss) from
  operations...................       31       (309)       (78)        (3)         6          8          2         11         28
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
Other income (expense), net....     (126)      (164)      (179)      (127)      (129)       (91)        (8)        21        (95)
                                  ------     ------     ------     ------     ------     ------     ------     ------     ------
Net income (loss)..............   $  (95)    $ (473)    $ (256)    $ (129)    $ (123)    $  (84)    $   (6)    $   32     $  (68)
                                  ======     ======     ======     ======     ======     ======     ======     ======     ======
AS A PERCENTAGE OF REVENUES
                               ------------------------------------------------------------------------------------------------
                               JULY 31,   OCT. 31,   JAN. 31,   APR. 30,   JULY 31,   OCT. 31,   JAN. 31,   APR. 30,   JULY 31,
                                 1997       1997       1998       1998       1998       1998       1999       1999       1999
                               --------   --------   --------   --------   --------   --------   --------   --------   --------
Revenues.....................   100.0%     100.0%     100.0%     100.0%     100.0%     100.0%     100.0%     100.0%     100.0%
Cost of goods sold...........    37.9       34.9       32.2       37.3       38.1       38.6       38.1       36.4       37.4
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
Gross margin.................    62.1       65.1       67.8       62.7       61.9       61.4       61.9       63.6       62.6
Operating expenses:
  Research and development...    20.7       23.5       24.3       20.9       24.1       22.4       24.4       23.1       21.3
  Sales and marketing........    25.2       36.1       26.7       24.7       25.0       26.7       27.8       28.9       29.8
  General and
    administrative...........    14.0       23.3       20.6       17.2       12.6       12.1        9.6       11.3       10.9
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
    Total operating
      expenses...............    59.9       83.0       71.6       62.8       61.7       61.1       61.8       63.3       62.0
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
Income (loss) from
  operations.................     2.2      (17.9)      (3.8)      (0.1)       0.2        0.2        0.0        0.3        0.6
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
Other income (expense),
  net........................    (8.8)      (9.5)      (8.7)      (4.8)      (4.1)      (2.7)      (0.2)       0.5       (2.1)
                                -----      -----      -----      -----      -----      -----      -----      -----      -----
Net income (loss)............    (6.6)%    (27.4)%    (12.4)%     (4.9)%     (3.9)%     (2.4)%     (0.2)%      0.8%      (1.5)%
                                =====      =====      =====      =====      =====      =====      =====      =====      =====
Our revenues have increased each quarter since the three months ended July
31, 1997 due to the introduction of new products, the development of our
existing distribution channels and the addition of new distribution channels.
While we have maintained our gross margins in the low sixty percent range, we
have experienced some variability in specific quarters. For the three months
ended October 31, 1997 and January 31, 1998, our gross margins increased to
65.1% and 67.8%, respectively, due to non-recurring engineering fees received in
these quarters. For the three months ended October 31, 1997, we experienced a
rapid increase in sales and marketing expenses associated with the hiring of a
new sales force. General and administrative expenses increased for the three
months ended October 31, 1997, primarily due to the costs associated with the
opening of our Newton office, and the recruitment of a new chief executive
officer and chief financial officer. General and administrative expenses have
generally decreased as a percentage of revenues, primarily due to increased
revenues.

LIQUIDITY AND CAPITAL RESOURCES

     We have financed our operations primarily from the sale of preferred stock
and other financing arrangements, such as a bank line of credit, a subordinated
debt offering and a capital equipment

                                       22
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financing. As of July 31, 1999, we had cash and equivalents of $3.6 million,
which included $230,000 borrowed under our credit facilities.

     We entered into a revolving credit facility against accounts receivable in
April 1999 which provides borrowings of up to $2.0 million. Borrowings under
this credit facility bear interest at the prime rate, which was 8.0% as of July
31, 1999. Borrowings are due upon demand and are secured by substantially all of
our assets. As of July 31, 1999, we had no outstanding balance on this credit
facility. This agreement expires in April 2000. We have an equipment term loan
which provides borrowings of up to $500,000 through September 1999 to finance
the acquisition of computer hardware and furniture. As of July 31, 1999, we had
an outstanding balance of $230,000 under this facility. Borrowings under this
facility bear interest at 50 basis points above the prime rate. The loan is
payable in equal installments over 36 months. We also entered into subordinated
loan and security agreements in June 1996. Borrowings under these loans are $2.5
million, bear interest at a rate of 12.5% per annum and are secured by  2/3rds
of the outstanding common stock of our subsidiary, MCK Telecommunications.

     Net cash provided by operating activities was $256,000 for the three months
ended July 31, 1999. Net cash provided by operating activities during the three
months ended July 31, 1999 was primarily due to decreases in inventory and
increases in accounts payable and accrued liabilities, partially offset by net
losses and increases in accounts receivable. Net cash used by operating
activities was $402,000 in fiscal 1999. During fiscal 1999, net cash used by
operating activities was primarily due to net losses and increases in accounts
receivable and inventories, partially offset by increases in accounts payable
and accrued liabilities. Net cash provided by operating activities was $82,000
in fiscal 1998. During fiscal 1998, net cash provided by operating activities
was primarily due to decreases in inventory and prepaid assets and increases in
accounts payable and accrued liabilities, partially offset by net losses and
increases in accounts receivable.

     Net cash used in investing activities was $136,000 for the three months
ended July 31, 1999. Net cash used was primarily the result of purchases of
property and equipment. Net cash used in investing activities was $676,000 in
fiscal 1999 and $566,000 in fiscal 1998. Cash was used during these periods to
acquire property and equipment, a significant portion of which was used to
expand our product validation laboratory. We currently do not have significant
capital spending or short-term purchase commitments, but expect to continue to
engage in capital spending in the ordinary course of business. We expense all
software development costs as they are incurred.

     Net cash provided by financing activities was $226,000 for the three months
ended July 31, 1999, which was related primarily to the establishment of an
equipment term loan. Net cash provided by financing activities in fiscal 1999
was $2.5 million, which was primarily due to the issuance of preferred stock,
partially offset by the repayment of subordinated debt. Net cash used by
financing activities in fiscal 1998 was $748,000, which was primarily due to a
decrease in short-term borrowings.

     We expect to experience growth in our working capital needs for the
foreseeable future in order to execute our business plan. We anticipate that
operating activities, as well as planned capital expenditures, will constitute a
material use of our cash resources. In addition, we may utilize cash resources
to fund acquisitions or investments in complementary businesses, technologies or
products. We believe that the net proceeds from this offering, together with our
current cash and equivalents, cash generated from operations and available
borrowings under our line of credit, will be sufficient to meet our anticipated
cash requirements for working capital and capital expenditures for at least the
next 12 months.

YEAR 2000 READINESS DISCLOSURE

     Some computers, software, and other equipment include computer code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. These
problems are widely expected to increase in frequency and severity as the Year
2000 approaches, and are commonly referred to as the "Year 2000 problem."

                                       23
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     Assessment.  The Year 2000 problem affects the computers, software and
other equipment that we use, operate or maintain for our business. Accordingly,
we have organized a project team responsible for monitoring the assessment and
remediation status of our Year 2000 projects. This project team is currently
assessing the potential effects and costs of remediating the Year 2000 problem
for our internal systems. To date, we have not obtained verification or
validation from any independent third parties of our processes to assess and
correct any of our Year 2000 problems or the costs associated with these
activities.

     Internal infrastructure.  We believe that we have identified
mission-critical computers, servers and applications, and our business systems
and related equipment used in connection with our internal operations that will
need to be evaluated to determine if they must be modified, upgraded or replaced
to minimize the possibility of a material disruption to our business. Upon
completion of such evaluation, which we expect to occur by October 1999, we
expect to commence the process of modifying, upgrading and replacing major
systems that have been assessed as adversely affected, and expect to complete
this process before the occurrence of any material disruption of our business.

     Systems other than information technology systems.  In addition to
computers and related systems, the operation of office and facilities equipment,
such as fax machines, telephone switches, security systems and other common
devices, may be affected by the Year 2000 problem. We are currently assessing
the potential effects and costs of remediating the Year 2000 problem on our
office equipment and our facilities and expect this process to be completed by
the end of the calendar year 1999.

     Products.  We have tested and intend to continue to test all of our
products for Year 2000 problems. Only our Branch Office EXTender 6000 and
PBXgateway IP products have internal clocks, and we believe such product lines
are Year 2000 compliant. None of our other products have time keeping
capabilities and are therefore, by default, Year 2000 compliant. We currently do
not expect any significant Year 2000 problems to arise with our products. We
have generally represented to our indirect channel partners and end users that
our products are Year 2000 compliant, and if that turns out to be untrue, these
parties may make claims against us which may result in litigation or contract
terminations.

     We estimate the total cost to us of completing any required modifications,
upgrades or replacements of our internal systems will not exceed $100,000,
almost all of which we believe will be incurred in calendar year 1999. Of the
$100,000, approximately $40,000 has been used to upgrade existing systems
through April 30, 1999, and the remaining amount will be used to replace
non-Year 2000 compliant systems. All of the costs have been capitalized to date
and we expect that future costs will also be capitalized. In addition, we have
not deferred any material information technology projects as a result of our
Year 2000 problem activities.

     Suppliers.  We are in the process of assessing the readiness of our
sole-sourced component suppliers. We expect that we will be able to resolve any
significant Year 2000 problems with sole-sourced component suppliers; however,
we cannot assure you that these suppliers will resolve any or all Year 2000
problems before the occurrence of a material disruption to the operation of our
business. Any failure of these third parties to timely resolve Year 2000
problems with their systems could harm our business.

     Most likely consequences of Year 2000 problems.  We expect to identify and
resolve all Year 2000 problems that could adversely affect our business
operations. However, we believe that it is not possible to determine with
complete certainty that all Year 2000 problems affecting us have been identified
or corrected. The number of devices that could be affected and the interactions
among these devices are simply too numerous for us to anticipate every possible
problem. In addition, no one can accurately predict how many Year 2000
problem-related failures will occur or the severity, duration or financial
consequences of these possibly inevitable failures. As a result, we believe that
the following consequences are possible:

     - a significant number of operational inconveniences and inefficiencies for
       us, our contract manufacturers and our indirect channel partners and end
       users that will divert management's time and attention and financial and
       human resources from ordinary business activities;

     - business disputes and claims for pricing adjustments or penalties due to
       Year 2000 problems by our indirect channel partners and end users; and
                                       24
31

     - a number of serious business disputes alleging that we failed to comply
       with the terms of contracts or industry standards of performance, some of
       which could result in litigation or contract termination.

     Contingency plans.  We are currently developing contingency plans to be
implemented if our efforts to identify and correct Year 2000 problems affecting
our internal systems are not effective. We expect to complete our contingency
plans by the end of October 1999. Depending on the systems affected, these plans
could include:

     - accelerated replacement of affected equipment or software;

     - short to medium-term use of backup equipment and software;

     - increased work hours for our personnel; and

     - use of contract personnel to correct, on an accelerated schedule, any
       Year 2000 problems that arise or to provide manual workarounds for
       information systems.

     Our implementation of any of these contingency plans could harm our
business.

     Disclaimer.  The discussion of our efforts and expectations relating to
Year 2000 compliance are forward-looking statements. Our ability to achieve Year
2000 compliance and the level of incremental associated cost, could be adversely
affected by, among other things, availability and cost of programming and
testing resources, third-party suppliers' ability to modify proprietary
software, and unanticipated problems identified in our ongoing compliance
review.

QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

     Interest Rate Risk.  We have a fixed rate debt obligation. An increase in
interest rates would not increase interest expense due to the fixed nature of
our debt obligation or materially change the fair value of the debt obligation.
We have cash equivalents that primarily consist of overnight money market
accounts. A 100 basis point shift in interest rates would not result in a
material change in interest expense, cash flows or the fair value of the cash
equivalents.

     Foreign Currency Exchange Rate Risk.  We primarily sell our products in
U.S. dollars and therefore we are not generally exposed to foreign currency
exchange risk. However, our Canadian subsidiary sells products to Canadian
customers that it invoices in Canadian dollars. In fiscal 1999, this revenue
accounted for 11.8% of revenues and for the three months ended July 31, 1999 it
accounted for 8.5% of revenues. Transactions with our Canadian subsidiary, whose
functional currency is the Canadian dollar, present us with foreign currency
exchange risk. The principal transactions are buying and selling of inventory.
The intercompany balance is denominated in U.S. dollars and changes in the
foreign currency exchange rate result in foreign currency gains and losses.
Using the intercompany balance at July 31, 1999, a 10% strengthening of the U.S.
dollar against the Canadian dollar would result in a foreign currency
transaction loss of $90,000.

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                                    BUSINESS

OVERVIEW

     MCK Communications is a leading provider of remote voice access products
that enable corporations to seamlessly extend the features and applications of
private branch exchanges, or PBXs, from the corporate office to remote branch
offices and telecommuters over wide area networks, or WANs. Our EXTender
products cost-effectively deliver a unified enterprise-wide voice network by
enabling the PBX to function as a corporate voice server that transmits
packetized voice and PBX signaling information to remote locations over
corporations' existing data networks. In addition, our products reduce the total
cost of ownership by leveraging corporations' current investment in voice and
data equipment, and streamline network administration through the utilization of
industry standard network management techniques.

INDUSTRY BACKGROUND

     Most businesses today have deployed separate networks to support voice and
data communications. As the corporate world shifts from large, centralized
organizations to distributed workforces with multiple branch offices and a large
number of telecommuters, new demands are being placed on the traditionally
localized corporate communications networks. While data networks have evolved to
meet this challenge by offering high-speed remote data access and a high degree
of interoperability among data systems and components, corporate voice networks
have remained largely centralized and proprietary. Consequently, branch offices
and telecommuters do not have cost-effective access to the features and
applications of corporate voice systems.

     This shift toward corporate decentralization results from a number of
factors. The competitive advantage of being located near key customers,
suppliers and partners and the competition for qualified employees are driving
corporations to open branch offices in numerous geographic locations. We believe
Fortune 5000 businesses maintain approximately 1.6 million branch offices. In
order to retain employees and comply with expanding environmental regulation,
corporations are also implementing large-scale telecommuting programs. According
to the Gartner Group, the number of telecommuters worldwide is expected to grow
from 35 million in 1998 to 140 million in 2003.

     Because of decentralization, corporations are increasingly challenged by
the need to integrate voice and data networks across multiple locations.
Corporations depend on company-wide communication to ensure critical internal
collaboration, provide suitable levels of customer service and maintain
operational efficiency and productivity by sharing resources across all
locations. As the business environment becomes more competitive, a unified
communications network will become increasingly important. These factors are
driving demand for remote access solutions that deliver an integrated network
environment with all the features and applications found at corporate
headquarters to distributed locations and employees.

Corporate Data Networks

     Initially, data networks were built upon mainframe computers that served a
single office location, were accessible by a limited number of users and were
too costly for small organizations. Over the past 20 years, advances in computer
processing and networking technology have altered this centralized model to
deliver cost-effective, high-speed distributed data processing and
communications by using a client-server architecture. Corporations have been
able to deploy equipment from multiple vendors that is interoperable at the
corporate office or throughout a local area network, or LAN, using multiple
network protocols because of the adoption of standard communication protocols,
internetworking technologies, and industry-standard system management platforms,
as well as the use of open architectures. These same developments have also
facilitated widespread data access through the deployment of remote access
equipment capable of extending the reach of the data network beyond the LAN over
public and private networks to create WANs.

                                       26
33

     Today, most remote data access capabilities are deployed to branch offices
and telecommuters over a variety of circuit-based networks that were architected
for voice service. These circuit-based networks are dedicated point-to-point
connections that require corporations to constantly maintain sufficient
bandwidth to meet their maximum communications requirements. The recent
development of broadband technologies has resulted in the deployment of new
packet-based networks. These next generation networks divide all types of data,
including voice, into packets that can be simultaneously transmitted and
reassembled into their original form at their final destination. As a result,
these packet-based networks are more efficient in their use of available
bandwidth than traditional circuit-based networks, thus minimizing network
capacity constraints and management requirements.

     As a result of the growing demand for high-bandwidth applications, such as
Internet and intranet access, a new generation of service providers is migrating
from existing circuit-based networks to packet-based networks. The ability of
packet-based networks to increase bandwidth availability and network efficiency,
lower operating costs and simplify network administration has led service
providers to make significant investments in packet-based networks in the public
WAN infrastructure. Next generation telecommunications service providers are
creating new service offerings over private managed networks and public
networks, such as the Internet and are using new technologies, such as Quality
of Service to offer both services over the same network. Widespread access to
corporate data networks, coupled with the deployment of new packet-based
networks, is enabling corporations to realize tremendous productivity gains due
to increased collaboration, internal communication and sharing of resources.
Examples of specific benefits include company-wide e-mail capabilities,
company-wide access to the files and applications that are run from the
corporate server and immediate access for remote workers.

Corporate Voice Networks

     Large corporate voice systems are generally based on circuit-based networks
and corporate voice switches known as private branch exchanges, or PBXs. Given
the mission critical nature of voice communications and related applications,
PBX systems have been architected with numerous built-in fault tolerant and
redundancy features and are designed to deliver 99.999% up-time reliability. In
addition to delivering reliable voice service, PBXs have the capability to serve
as the platform for more than 500 critical voice features and applications.
PBX-based applications include:

     - voicemail systems;

     - unified messaging systems that create a single interface for accessing
       voicemail, e-mail and fax messages;

     - automatic call distribution, or ACD systems;

     - auto-attendant systems;

     - call accounting software;

     - least-cost routing applications; and

     - interactive voice response, or IVR systems.

The PBX is also responsible for delivering features and capabilities such as:

     - phone numbering plans;

     - three- or four-digit internal dialing;

     - call transferring, conferencing and forwarding; and

     - receptionist call screening.

     The Multimedia Telecommunications Association, or MTA, estimates that the
installed base of PBX systems in the United States in 1998 exceeded 45 million.
In addition, the MTA has reported that the PBX market is growing. Since 1991
over 44 million PBX lines have been added to both new PBX systems

                                       27
34

and existing systems. In 1998 alone, 7.4 million new lines were added to PBX
systems. Full-featured PBXs typically cost between $100,000 and $1.0 million,
and are designed for large, centralized corporate environments with 50 or more
users. In addition, corporations often spend as much on the applications
supported by their PBXs as they do on the equipment itself. According to the
MTA, over $25 billion has been spent on PBX systems in the United States since
1991.

     Despite the reliability and functionality of centralized circuit-based
voice networks, the features and applications of today's PBXs cannot be
cost-effectively extended to small branch offices and telecommuters. A number of
factors have created this deficiency. Technical signaling limitations cause the
quality of voice transmission to degrade beyond a limited distance from the PBX.
In addition, the high cost associated with deploying a PBX and its supported
voice applications typically makes them prohibitively expensive for small branch
offices and telecommuters. Accordingly, corporations seeking to extend voice
applications to small branch offices have the following voice options, all of
which have significant limitations:

     - Key Systems/Hybrid PBXs.  Key systems and hybrid PBXs are small,
       proprietary voice switches that have functionality similar to PBXs but
       have been cost-effectively architected to service small office
       environments. Accordingly, they lack the full feature set and scalability
       of more expensive PBX systems. Key systems have limited interoperability
       with PBX systems, and consequently function as stand-alone voice systems
       with separate voice applications that create inefficiencies and network
       management complexities in a multi-office environment.

     - Centrex.  Centrex is a business telephone service that is offered by
       local telephone companies from their central office switches. While
       Centrex offers many of the same features as PBXs, its effectiveness is
       constrained by phone companies' switch capacity, its lack of
       interoperability with PBXs, its geographic limitations and its reliance
       upon the local phone company for service and support. In addition,
       full-featured Centrex service for a small office can be a prohibitively
       expensive solution.

     - Off-Premises Extension, or OPX.  An Off-Premises Extension is a dedicated
       telephone line that originates from a PBX and extends a subset of PBX
       features and applications to remote users. OPX offerings cannot support
       digital telephone sets, and require an expensive dedicated leased line or
       private network connection.

     - LAN and NT PBXs.  Recently introduced solutions from data networking
       vendors, such as LAN and NT-server based PBXs, lack the full feature set
       of traditional PBXs and have limited ability to network with the
       corporate PBX, thus also failing to give an enterprise a unified voice
       network.

The inability of these voice options to fully network with the PBX has caused
corporations to deploy separate voice networks for their branch offices and
telecommuters, limiting the effectiveness of corporate communications and
increasing the burden on systems administrators. In addition, corporations
seeking to extend voice applications to telecommuters presently have no
cost-effective, full-featured solutions.

The Opportunity for PBX-based Remote Voice Access over Data Networks

     As business organizations decentralize, remote access to the corporate
communications network is becoming increasingly important. While data networks
have evolved to meet this critical business requirement, there is a need for a
suitable voice solution that cost-effectively leverages the PBX and its features
and applications to offer corporate voice applications to small branch offices
and telecommuters. Furthermore, in order to lower costs and simplify network
administration, corporations are increasingly demanding that distributed voice
and data services be offered over the same centrally-managed corporate
communications infrastructure. This convergence of voice and data is made
possible by the packetization of voice and advances in Quality of Service which
enable the transmission of voice over private managed data networks and public
data networks, such as the Internet. Accordingly, to deliver remote voice access
over data networks, a solution should be capable of packetizing voice and PBX
signaling information. As a result of its reliability, the wide variety of
applications that it supports and the size of its installed base,

                                       28
35

PBXs are pervasive in large, corporate enterprises and are likely to remain
entrenched as the central corporate system on which new voice applications are
developed and deployed. Thus, solutions for the remote voice marketplace must
offer a centrally-managed interface to proprietary PBX systems and have the
capability of packetizing and transmitting voice and PBX signaling information
over both traditional circuit-based data networks and emerging packet networks.

THE MCK EXTender SOLUTION

     We develop and market products that enable enterprises to seamlessly
deliver all of the PBX features and applications that exist at the corporate
office to branch offices and telecommuters. Our technology allows enterprises to
create a unified, enterprise-wide voice network by enabling the PBX to function
as a corporate voice server that transmits packetized voice and PBX signaling
information to remote locations over existing data networks. In addition, our
products reduce the total cost of ownership by leveraging corporations' current
investments in voice and data equipment, and streamline network administration
through the utilization of industry standard network management techniques.

     Following are the key attributes of our solution:

     Full-Featured Remote Voice Access.  Our EXTender solutions seamlessly
provide the features and applications of the PBX to branch office employees,
telecommuters and remote call center agents over circuit and packet networks.
Our solutions allow these remote workers to utilize PBX features such as three-
or four-digit internal dialing, call transferring and conferencing, and
applications such as voicemail, unified messaging and automated call
distribution. Extending these corporate voice applications to remote employees
increases productivity, facilitates internal collaboration and delivers to
external callers transparent access to all telephone extensions throughout a
corporation.

     Digital Line Extension Technology.  The features and applications of the
PBX reside on the digital line cards of the PBX. We have developed proprietary
software and hardware interfaces that extract the voice and PBX signaling
information from these digital line cards. Our products then packetize and
transmit this information to our remote devices over existing data networks.
Utilizing this captured information, our remote products mimic the digital line
card, thereby transparently connecting the user's digital telephone set to the
corporate PBX. As a result of this product architecture and our experience in
interfacing with the proprietary digital line cards of most leading PBX vendors,
our products enable corporations to deploy effective remote voice solutions
without significant reconfigurations or upgrades to their existing PBX systems.
Similarly, our products enable branch offices and telecommuters to use their
digital telephone sets and existing user interfaces to transparently access
their corporate PBXs.

     Packet Voice Architecture.  Our extensive experience in packetizing voice,
PBX signaling information and voice applications enables us to deliver a
complete remote voice solution over traditional circuit-based networks and
emerging packet-based networks. Utilizing our proprietary Remote Voice Protocol,
or RVP, software platform and our standardized hardware architecture, we
packetize, compress, encode, transmit and decode voice over networks such as
asynchronous transfer mode, or ATM, digital data service, digital subscriber
line, or DSL, fiber, frame relay, IP, integrated services digital network, or
ISDN, T-1, fractional T-1 and traditional telephone networks. Our products
enable next generation service providers such as the emerging DSL and cable
network operators to provide MCK EXTender functionality as a value-added service
offering to corporations for branch offices and telecommuters over WANs.

     Lower Cost Solution.  Our products provide a cost-effective solution to
enable full-featured remote voice access, lowering costs in the following areas:

     - Transmission.  Our products lower transmission costs by consolidating
       voice and data traffic over a single network, eliminating local loop
       service charges and enabling remote users to utilize volume-based,
       corporate long distance rates.

     - Management.  Our recently introduced products provide telecom managers
       the ability to centrally manage our remote devices using Telnet,
       hypertext mark-up language, or HTML, and simple network management
       protocol, or SNMP, with graphical user interfaces. Our customers can use
                                       29
36

       these remote monitoring and diagnostic capabilities to solve problems
       on-line, thereby reducing the time and cost associated with dispatching a
       technician to a remote site.

     - Equipment.  Our products enable corporations to leverage their existing
       capital investment in PBX systems, voice applications and data networks,
       thereby eliminating the need to expend significant additional capital on
       disparate, incompatible solutions such as key systems.

     - Facilities.  Our products allow corporations to reduce physical facility
       costs and infrastructure investments by enabling employees to work
       effectively outside of corporate locations.

     Compatibility with Leading PBX Manufacturers.  We have worked with Alcatel,
Lucent, NEC and Nortel Networks to develop interfaces between our RVP software
platform and their primary proprietary PBX protocols. These manufacturers have
tested and validated in their labs that our RVP platform is interoperable with
their primary PBX products, including 4400/4200 (Alcatel), DEFINITY (Lucent),
NEAX 1000/2000/2400 (NEC), Meridian (Nortel Networks), and Norstar (Nortel
Networks) equipment. According to Dataquest, these four manufacturers represent
approximately 65% of the U.S. PBX market share for large enterprise customers.

STRATEGY

     Our strategy is to become the leading provider of remote voice access
solutions for branch offices and telecommuters of Fortune 5000 businesses. The
following are the principal elements of our business strategy:

     Maintain technology leadership in the remote voice access marketplace.  Our
technology enables us to provide leading remote voice access products that
distribute PBX features and applications to branch offices and telecommuters.
Our technology leadership is the result of our knowledge and experience
interfacing with proprietary PBX systems, our ability to packetize voice and PBX
signaling information and our understanding of how to condition packet voice for
transmission over circuit and packet networks. We intend to continue to leverage
our existing expertise in packetized PBX voice applications to develop new
products and applications that target broadband markets, in particular DSL and
cable. We will also continue to work with third-party software and hardware
manufacturers to ensure the interoperability between our solutions and a wide
range of networking equipment in order to facilitate ease of deployment and
ensure that we can transmit packet voice within multiple network environments.

     Establish our Gateway products as platforms for new voice applications.  We
intend to establish our Gateway products as platforms for the delivery of new
applications and services to branch offices and telecommuters. Our products are
positioned on the line-side of the PBX, which enables us to extend the full
features and applications of the PBX to remote locations with minimal impact on
the PBX or its resident software applications. We believe that this
non-intrusive implementation, and our products' positioning within the corporate
voice switch room, strategically positions us to develop new software
components, as well as incorporate third-party software applications, to provide
new features and applications for remote users.

     Expand distribution, marketing and technology relationships.  We will
continue to establish distribution, marketing and technology relationships with
PBX vendors, service providers and distribution channel partners to further
penetrate our target markets and develop our products. We have development,
marketing and distribution relationships with Alcatel, Lucent and NEC and
distribution relationships with Nortel Networks and its major channel partners
such as Bell Canada, BellSouth, GTE and Williams Communications. We have also
established a number of other important distribution channel relationships such
as with SBC and Sprint North Supply. In addition to expanding our field sales
and systems engineering forces, we will continue to work with our channel
partners to focus on major corporate accounts. Furthermore, we will continue to
build additional channels, both in the U.S. and international markets, to expand
the distribution of our products.

     Work with broadband equipment vendors and next generation service
providers.  We are working with a number of leading broadband equipment vendors
and next generation service providers to jointly
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develop service offerings based on our technology that can deliver our
application over broadband networks such as DSL and cable. We jointly developed
a DSL product with Copper Mountain and are in the process of developing other
product sets with Copper Mountain and other broadband equipment vendors. We are
also working with leading service providers such as Rhythms NetConnections to
develop service offerings based on our new broadband product set. We have
entered into a distribution agreement with Rhythms pursuant to which it markets
a service called PBXpress that delivers remote PBX voice to its customers by
bundling our equipment into this service offering. We anticipate entering into
new relationships with broadband equipment vendors and next generation service
providers such as competitive local exchange carriers, or CLECs, Internet
service providers, or ISPs, and managed service providers to enhance our
leadership position.

     Continue to target Fortune 5000 corporations.  We intend to continue to
focus our distribution strategies on Fortune 5000 corporations. These
organizations have made substantial capital investments in PBX systems and have
significant numbers of branch offices and telecommuters. Accordingly, these
corporations have the most to gain from an integrated, PBX-based voice network.
We are well positioned to target the Fortune 5000 market because our products
interface with PBX systems from Alcatel, Lucent, NEC and Nortel Networks. We
will work with our existing and new partners to increase the market opportunity
for, and drive market acceptance of, our products.

TECHNOLOGY

     We have developed expertise in digital line extension and the packetization
of voice for transmission over data networks to address the technology
challenges of extending the features and applications of corporate PBXs to
remote locations. Another key component of our technological advantage is the
highly flexible software and hardware architecture upon which we build our
remote voice solutions. We will continue to invest significant resources to
maintain and extend our technological advantage.

Digital Line Extension Technology

     The rich features and applications of proprietary PBX systems are accessed
through digital line cards that reside on the user or line side of the PBX.
These line-side interfaces enable the delivery of the features and applications
of PBX systems to digital telephone sets. As a result of our years of experience
in working with major PBX manufacturers, we have gained a significant
understanding of these digital line cards and have developed line-side software
interfaces to a number of different proprietary digital line cards used in
today's PBX systems. In addition to our software interfaces, we have developed a
hardware subsystem capable of duplicating the electrical interfaces of Alcatel,
Lucent, NEC and Nortel Networks PBX systems. These line-side software and
hardware interfaces extract the voice and PBX signaling information from the
digital line cards located on the PBX and, using our RVP software platform,
packetize this voice and PBX signaling information for transmission over data
networks to our remote voice access products. We have developed messaging
software that transmits this voice and PBX signaling information from our remote
voice access products to the digital telephone sets of the PBX manufacturers
that we support, thereby transparently connecting these sets to the PBX.

Delivery of Packet Voice with Remote Voice Protocol

     To deliver voice over data networks, solutions must convert voice into
packet form and then transmit these voice packets alongside data packets.
Despite the advantages of simultaneous transmission of voice and data, there are
also a number of technological challenges to delivering voice over data networks
because audio quality can be distorted by jitter and latency associated with
congestion on the data network.

     We have developed a proprietary software platform, known as Remote Voice
Protocol, or RVP, that packetizes, compresses and encodes circuit voice and PBX
signaling information for secure transmission over data networks. We have
implemented both industry standard and proprietary voice prioritization and
voice fragmentation techniques that use bandwidth efficiently while also
ensuring that delay sensitive voice

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38

packets are delivered with the quality expected from voice. Much of this
technology revolves around our core expertise in developing software that runs
on standard digital signal processors, which are required for encoding voice for
transmission over bandwidth constrained networks. In particular, we have
designed and implemented the following software features in our products to
improve the quality of packet voice transmission, minimize system delay and
jitter, and utilize bandwidth efficiently:

     - Voice Compression.  We integrate a number of industry standard voice
       coding algorithms, including G.711, G.726, G.729A and G.723.1, that
       compress voice to reduce the total bandwidth required for transmission.

     - Echo Cancellation.  We deliver echoless voice by integrating industry
       standard acoustic echo cancellation technology, known as G.165, to which
       we have made proprietary enhancements.

     - Silence Detection.  Our proprietary silence detection technology
       eliminates unnecessary transmission of voice packets during the periods
       of silence that occur in normal conversation, freeing bandwidth for other
       uses.

     - Comfort Noise.  We incorporate technology that inserts comfort noise
       during periods of silence so that users do not inadvertently think that
       the phone call is no longer active.

     - Jitter Buffering Techniques.  Our products adapt to the real-time
       irregularities in network transmission and ensure all traffic reaches its
       endpoint at the appropriate time by introducing delay that is
       unrecognizable to the user.

     - DTMF Processing Technology.  Dual tone multi frequency, or DTMF, tones
       are generated by depressing buttons on digital telephone sets, enabling
       the digital telephone set to recognize dialed numbers used for outbound
       calls and for applications such as voicemail. Our proprietary technology
       improves the transmission of DTMF tones over packet networks.

     We have significant experience in transmitting packet voice over both
low-speed, traditional telephone networks and higher speed, broadband networks.
We have developed network interfaces for the delivery of remote voice over
traditional telephone connections and ISDN networks and have incorporated
third-party network devices to support T-1, digital data service and frame relay
networks. In addition, to deliver data connectivity alongside our packet voice
transmission, we have expertise in terminating dial-up networking connections
and bridging standard data traffic such as TCP/IP.

Remote Voice Product Architecture

     We develop our products using a combination of proprietary and commercial
hardware and software subsystems. Our product architecture enables these
subsystems to be configured and adapted in order to deliver a broad range of
enterprise voice product solutions, thereby minimizing product development
cycles and maximizing manufacturing efficiency. Our products are fully
compatible with the large installed base of telephone systems from Alcatel,
Lucent, NEC and Nortel Networks, and require no design modifications or upgrades
to these PBX systems or their respective digital telephone sets.

     We have designed a standard hardware architecture that serves as a common
platform for our software modules. We use industry standard digital signal
processors and programmable logic devices to build a standard hardware platform
that can be software modified to support different applications or PBX protocols
without requiring a hardware change. We have also architected our products with
a variety of standard telephony and WAN interfaces to ensure that we can
transmit packet voice over the multiple network environments currently
available.

     All of our products share a common software library of functional modules
that comprise our digital line interface software subsystem and our RVP software
platform. Our digital line interface software subsystem is responsible for the
interface to the proprietary software protocols on the digital line cards of
PBXs. This software subsystem has been designed to emulate a majority of the
digital line cards on the market today without requiring a change to our
hardware architecture. This flexible software architecture also enables us to
easily add software support for new PBX protocols. Our RVP software platform is
                                       32
39

responsible for packetizing voice and PBX signaling information, as well as
conditioning these voice packets for transmission over data networks. RVP has
been engineered to enable new features to be easily and quickly introduced in
parallel to its existing capabilities.

     All the software development for our IP EXTender 4000, EXTender 3200 for
IDSL, Branch Office EXTender 6000 and PBXgateway IP product lines runs on the
VxWorks real-time operating system from Wind River Systems. This industry
standard operating system provides our engineers with a standard development
environment in which to design new proprietary software applications and easily
incorporate third-party software applications. A standard development
environment such as VxWorks allows for the rapid prototyping and application
development necessary for our products that serve as platforms for future
applications.

PRODUCTS

     We have worked with Alcatel, Lucent, NEC and Nortel Networks to develop
seamless interfaces between the proprietary protocols of these leading PBX
vendors and our RVP software platform and standard hardware architecture. As a
result of these relationships, we have developed substantial expertise in
understanding and interfacing with these proprietary PBX protocols. These PBX
manufacturers have tested and validated in their own labs that our RVP platform
is interoperable with a variety of their PBX equipment. Currently, our EXTender
series of products is compatible with the following PBX systems: 4400/4200
(Alcatel), DEFINITY (Lucent), NEAX 1000/2000/2400 (NEC), Meridian (Nortel
Networks) and Norstar (Nortel Networks).

     The EXTender solution consists of the following component parts:

     - Customer Premise Equipment, or CPE, Devices.  Single- or multi-user
       remote location client devices that service branch offices, remote call
       centers and telecommuters; and

     - Corporate PBX Gateways.  PBX switch site products, located at the
       corporate location, that seamlessly extend voice traffic, PBX signaling
       information and PBX applications to our CPE devices.

     Our EXTender series of products enables corporations to provide the
functionality of the PBX and all of its supported applications to users who
traditionally have not had access to the corporate PBX and its voice
applications because of the limitations of current voice systems. Our products
enable the PBX to act as a server that seamlessly distributes the features and
applications of PBX-based voice systems to remote locations over networks such
as ATM, digital data service, DSL, fiber, frame relay, IP, ISDN, T-1, fractional
T-1 and traditional telephone connections. Remote voice users can utilize
digital telephone sets identical to the sets deployed in the corporate
headquarters and access the corporate voice system for applications such as
voicemail, ACD and interactive voice response, and features such as three- or
four-digit internal dialing, conferencing and call forwarding. By enabling all
employees, regardless of location, to have access to the corporate voice system,
our EXTender solutions create a single, unified voice network.

     [Diagrams: 3 network topology diagrams that show the implementation of our
products.]
[EDGAR DESCRIPTIONS OF DIAGRAMS]

                         CAPTION: SINGLE-USER PRODUCTS
1. Diagram of single-user product configuration between a corporate location at
which a PBX and data server reside, utilizing PBXtender, and two remote
locations, each with a personal computer and telephone set, utilizing an
EXTender 3000 and EXTender 1000+ via ISDN or a traditional telephone network.

                          CAPTION: MULTI-USER PRODUCTS
2. Diagram of multiple-user product configuration between a corporate location
at which a PBX resides, utilizing an EXTender 6000 which connects to a network
termination device which connects to public and private networks, and a remote
location. The remote location connects to the public and private network via a
network termination device. A Branch Office EXTender 6000 connects to the
network termination device. Multiple phones connect to the Branch Office
EXTender 6000.

          CAPTION: BROADBAND NETWORK PRODUCTS CURRENTLY IN BETA TRIALS
3. Diagram of a corporate location with a PBX connected to a PBXGateway IP which
connects to a network termination device which is connected, through broadband
networks, to remote locations which contain (i) an IP EXTender 4000 connected to
a telephone set and personal computer, (ii) a Branch Office EXTender 6000
connected to a telephone set, and (iii) an EXTender 3200 for ISDL connected to a
telephone set and personal computer. The EXTender 3200 connects directly to the
public and private network. The Branch Office EXTender 6000 and IP EXTender 4000
connect to the public and private network via a network termination device.

CPE Devices

     Our single-user product line provides telecommuters and remote call center
agents with seamless connectivity to the corporate PBX and the LAN over data
networks.

     - EXTender 1000+.  The EXTender 1000+ is a single-user, integrated access
       device that supports both PBX voice and personal computer, or PC, data
       over a single traditional telephone line. The remote user's PC and
       full-featured digital telephone set plug into the product, which
       terminates and multiplexes voice and data over a single telephone line.
       The product contains a built-in, industry-standard 56 kilobits per
       second, or Kbps, modem which enables the user to access the corporate LAN
       and supports standard Windows-based, dial-up networking technology. The
       EXTender 1000+ unit is situated at the remote location and connects to
       either another EXTender 1000+ unit or a
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PBXtender gateway product located at the corporate PBX site. In the future, the
EXTender 1000+ will also be able to connect to a PBXgateway IP product located
at the corporate PBX site.

     - EXTender 3000.  The EXTender 3000 is a single-user, integrated access
       device that supports both PBX voice and PC data over an ISDN basic rate
       interface, or BRI, connection. An ISDN BRI connection is composed of two
       64 Kbps lines, or b-channels, that each can deliver a separate network
       connection. With its built-in ISDN line interface, the EXTender 3000
       enables the remote user to connect a digital telephone set and a personal
       computer into the EXTender 3000. The EXTender 3000 unit situated at the
       remote location is connected to either another EXTender 3000 unit or a
       PBXtender gateway product located at the corporate PBX site. In the
       future, the EXTender 3000 will also be able to connect to a PBXgateway IP
       product located at the corporate PBX site. There are three versions of
       the EXTender 3000:

        - EXTender 3000S and EXTender 3000T.  The EXTender 3000S and the
          EXTender 3000T utilize a serial data connection and offer simultaneous
          voice and PC data multiplexed over one ISDN BRI b-channel. The second
          b-channel is available for analog devices such as a fax, additional
          phone or a modem. The EXTender 3000T uses standard Windows-based,
          dial-up networking technology to enable the user to set up a dial-up
          network connection to a remote access server at the corporate location
          for remote LAN access.

        - EXTender 3000E.  The EXTender 3000E offers dedicated voice over one
          ISDN BRI b-channel and a 64 Kbps Ethernet data connection on the
          second b-channel. The EXTender 3000E uses an Ethernet port and
          bridging technology to enable simultaneous voice and LAN access
          capabilities. In addition, standard hardware compression technology is
          utilized to significantly enhance data throughput. When not used for
          Ethernet data, the second b-channel is available as an analog port,
          supporting a fax, additional phone or modem.

     - EXTender 3200 for IDSL.  The EXTender 3200 for IDSL is a single-user,
       integrated access device that delivers voice and PC data over an
       integrated digital subscriber line, or IDSL, network connection. IDSL is
       DSL-enabled ISDN network connection that combines both b-channels into
       one digital connection that can simultaneously transmit packet voice and
       data. The product was developed in conjunction with Copper Mountain and
       interoperates with Copper Mountain's digital subscriber line access
       multiplexer, or DSLAM, product line. DSLAMs are telecommunications
       equipment located in the central offices of service providers that
       transmit DSL traffic to and from end users. The EXTender 3200 for IDSL
       connects to a PBXgateway IP product located at the corporate PBX site.
       This product is currently in beta testing and is expected to be
       commercially available by the fourth quarter of calendar year 1999.

     - IP EXTender 4000.  The IP EXTender 4000 is a single-user product that
       delivers PBX voice over IP networks. The product requires an external
       network termination device such as a DSL or cable modem and delivers
       IP-based remote voice over data networks. The IP EXTender 4000 connects
       to a PBXgateway IP product located at the corporate PBX site. This
       product is currently in beta testing and is expected to be commercially
       available by the fourth quarter of calendar year 1999.

     Our branch office product provides remote offices with seamless
connectivity to the corporate PBX and the LAN over data networks.

     - Branch Office EXTender 6000.  The Branch Office EXTender 6000 is a
       multi-user product that supports 8 remote users and will scale to support
       12 users following the release of a 4-port daughter card that is expected
       to be commercially available in the fourth quarter of calendar year 1999.
       The product was constructed with standard 19-inch, rack-mountable
       hardware so a number of units can easily be deployed together to service
       larger remote offices. In addition, the product has dual external WAN
       interfaces that allow for multiple network options and redundancy
       capability and transmits voice over a wide variety of data networks
       including ATM, digital data service, DSL, fiber, frame relay, IP, ISDN,
       T-1 and fractional T-1 connections. The Branch Office EXTender 6000 can
       be centrally administered over a Telnet connection, an in-band RVP
       connection, or with

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41

       SNMP or HTML interfaces. The product's ability to dynamically allocate
       bandwidth between multiple users allows for flexible configurations and
       bandwidth conservation. The Branch Office EXTender 6000 located at the
       remote office connects to either another Branch Office EXTender 6000 unit
       or a PBXgateway IP located at the corporate PBX site.

Corporate PBX Gateway Products

     Our PBX gateway products, located at the corporate PBX site, interface with
the line side of the PBX and create seamless extensions of voice, PBX signaling
information and PBX applications to our remote CPE products.

     - PBXtender.  The PBXtender is a high density PBX gateway product that can
       support up to 24 ports per chassis. The PBXtender currently supports our
       EXTender 1000+ and EXTender 3000 CPE product lines. The PBXtender can be
       configured with up to 12 line cards that may be mixed and matched to
       support up to 12 analog users or 24 ISDN users simultaneously. The
       product also has a Windows-based graphical user interface to enable
       remote management and diagnostics of our CPE equipment.

     - PBXgateway.  The PBXgateway supports a range of our CPE products,
       including both multi-user and single-user clients. Depending upon the
       version of the product, the PBXgateway will transmit voice over a wide
       variety of data networks including ATM, digital data service, DSL, fiber,
       frame relay, IP, ISDN, T-1 and fractional T-1 connections. The PBXgateway
       can be centrally administered over a Telnet connection, an in-band RVP
       connection, or with SNMP and HTML interfaces.

        - Branch Office EXTender 6000.  The Branch Office EXTender 6000 unit,
          located at the corporate PBX site, seamlessly extends the
          functionality of the corporate PBX to a Branch Office EXTender 6000
          located at the remote office site. This product will transmit voice
          over ATM, digital data service, fiber, frame relay, ISDN, T-1 or
          fractional T-1 network connections.

        - PBXgateway IP.  The PBXgateway IP seamlessly extends the functionality
          of the corporate PBX to a variety of our multi-user and single-user IP
          CPE devices, including the Branch Office EXTender 6000, EXTender 3200
          for IDSL, and the IP EXTender 4000. The PBXgateway IP can support up
          to 12 simultaneous users across any of these CPE devices over multiple
          types of networks, including DSL and IP networks. As part of our
          strategy, we intend to utilize this product as a platform to deliver
          new applications and services to our remote CPE devices utilizing both
          new software components that we intend to develop and third-party
          software applications that we intend to incorporate into the product.
          The PBXgateway IP is currently in beta testing and is expected to be
          commercially available by the fourth quarter of calendar year 1999.

Other Products

     - Digital-to-Analog Recording Interface.  Our Digital-to-Analog Recording
       Interface converts proprietary digital PBX signaling into a standard
       analog audio output so that voice calls can be recorded on any voice
       logger or recording device. We offer 3 configurations that support from 2
       to 48 lines, and are modular in nature, allowing for easy expansion to
       accommodate more users. Our Digital-to-Analog Recording Interface is
       compatible with the following voice systems: DEFINITY (Lucent); Meridian
       (Nortel Networks); Norstar (Nortel Networks); and DMS Centrex (Nortel
       Networks).

     - Telebridge.  The Telebridge series of products emulates digital PBX
       telephone sets and terminates calls, allowing computer telephony
       integration, or CTI, applications to interface with legacy PBX systems.

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SALES AND MARKETING

     We primarily sell our products through an indirect distribution system that
includes the following channels: OEMs and private label partners, ILECs, systems
integrators and distributors, telecom and datacom VARs, and broadband service
providers. We support our sales channels with our own internal sales
professionals as well as marketing programs, educational programs, field
technical support and telephone technical support. At July 31, 1999, our sales
team was composed of a vice president of sales, eight regional sales managers,
three systems engineers, three channel sales managers and two sales
administrators. Our multi-channel strategy enables us to create end-user demand
for our products and services, and access corporate opportunities identified by
our channel partners, while also allowing the customers to choose the reseller
that is most appropriate for delivering those products and services to them.

                       OUR PRIMARY DISTRIBUTION CHANNELS
OEMs and Private Label Partners.....    Alcatel, Bell Canada, Dictaphone, Lucent,
                                        NEC
ILECs...............................    BellSouth, GTE, SBC
Systems Integrators and
  Distributors......................    Anixter, Dacon, Ingram Micro, Sprint North
                                        Supply, Williams Communications
Telecom and Datacom VARs............    Northwest Extension, PB Exchange, Stevens
                                        Communications, TeleCommute Solutions
Broadband Service Providers*........    AT&T Local Services, HarvardNet, JATO
                                        Communications, Northpoint Communications,
                                        Rhythms NetConnections, UUNet (MCI WorldCom)
---------------
* Products in beta testing; channel under development

     Our regional sales managers provide support to all of the channels in their
geographic territory. They work closely with our channel partners, participating
in end-user briefings, proposals, product training sessions, end-user seminars,
trade shows and other demand generating activities. In addition, regional sales
managers are involved in generating and qualifying end-user leads that are
closed in partnership with our indirect channels.

     Our field-based systems engineers, located in Alberta, Tennessee and New
Jersey, provide our channels with technical training and perform pre- and
post-sale technical support for our channels and end-user customers. All of our
systems engineers have in-depth industry experience and product expertise. They
assist our channel partners with proposals, configurations, requests for
quotations and executive briefings, and perform other consultative duties.

     Our channel sales managers work at a corporate level with all of our
largest channel partners in developing sales and marketing plans that are
implemented at the field levels. These channel sales managers are primarily
responsible for driving business through the Lucent, NEC and Nortel Networks
channels. They also work with our regional territory managers on large sales
opportunities and national accounts.

     Our VARs are responsible for identifying potential business customers,
selling our products as part of complete solutions, and installing and
supporting the equipment at end-user sites. We establish relationships with our
resellers through written reseller agreements that provide pricing, discounts,
and terms and conditions under which they may purchase our products for resale.
These agreements are generally non-exclusive, may be terminated at will and do
not prevent our resellers from carrying competing lines or require our resellers
to attain specific sales levels. We provide significant sales, marketing,
training and technical support to our channels.

     Sales outside of the United States accounted for 18.3% of sales in fiscal
year 1999. We sell globally through Alcatel, Lucent and NEC. In addition, we
have a distribution arrangement with Dacon

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43

Electronics plc for European sales of Nortel Networks-based products, as well as
distribution arrangements with 10 other international distributors.

     We focus our marketing efforts on awareness generation, lead generation and
sales support activities. Our marketing audience includes existing and
prospective customers, channel partners, trade and business press, industry
analysts and others who are influential in the industry.

     We participate in over 20 trade shows annually, taking advantage of joint
marketing opportunities with our resellers and channel partners whenever
possible. Trade show efforts include shows in the telecommunications,
teleworking, CTI, networking, call center and service provider industries. We
participate in many seminars with our resellers, as well as all major PBX user
group events and industry-related conferences. We use direct marketing programs
to generate awareness and qualified leads. Many campaigns are executed in
conjunction with our resellers, customized with their messages and contact
information and then mailed to their prospect and customer lists. Our web site
serves as an information source for end users, prospects and channel partners,
as well as a lead generation tool and customer service resource. Additionally,
we dedicate significant marketing resources to public relations activities,
generation of product and partner press releases, speaking opportunities,
by-lined articles, product reviews, customer success stories and editorial
coverage.

     To support our sales channels, we prepare training materials,
presentations, collateral, cost-justification tools, case studies, product
configurations, fact sheets, product introduction kits and distributor success
guides. Our regional sales managers and systems engineers regularly visit our
reseller offices and conduct product and technical training. Our marketing
database and sales force automation system currently contains over 20,000
records that can be segmented and are marketed to regularly.

CUSTOMER SUPPORT

     A high level of customer support and service is critical to developing
long-term relationships with our major distribution channels and end-user
customers. The majority of our service and support activities are related to
installation support and initial network configuration issues. In North America,
we also offer a variety of comprehensive and flexible maintenance and support
programs including basic product warranty, installation services, 24 hours a
day, 7 days a week remote telephone support and onsite maintenance services. Our
products are architected with support in mind. For example, our branch products
are engineered with remote monitoring, management and diagnostic capabilities so
that problems can be diagnosed on-line, thereby reducing the time and costs
associated with dispatching a technician to a remote site.

     A number of our distribution partners support our products. These
distribution partners provide installation, onsite maintenance and telephone
support services to our end users. To complement this service infrastructure, we
have engaged Vital Network Services, an outsourced technical support and
customer services organization, to provide fee-based telephone support,
installation and onsite maintenance services. We sell these services directly
and indirectly to end users. To date, our revenues attributable to customer
service and support services have been immaterial. We provide high-level,
back-up technical support and engineering assistance for both our distribution
partners and Vital Network Services. We have established strict escalation
guidelines with both our distribution channels and Vital Network Services to
ensure that the appropriate technical resources and management attention within
our company are focused on problems that are not solved in a timeframe
commensurate with the problem's priority.

     At July 31, 1999, we employed five people in customer support. Although we
may augment our Newton, Massachusetts and Calgary, Alberta-based support staff,
we do not intend to recruit our own direct field service and support
organization.

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CUSTOMERS

     We sell substantially all of our products through independent channel
partners. The following is a representative list of our indirect channel
partners responsible for revenues of $50,000 or more in the 12 months ending
July 31, 1999:
Alcatel                 Dacon Electronics         PB Exchange
Ameritech               Dictaphone                Positron
Anixter                 GTE                       SBC
BC Tel                  Loffler Business Systems  Sprint North Supply
Bell Canada             Lucent                    Stevens Communications
BellSouth               Mitel                     TCI
Charter Communications  NEC                       Teleswitch
Coastcom                Northwest Extension       Williams Communications
For the fiscal year ended April 30, 1999, Lucent accounted for
approximately 46.7% of our revenues, which consisted of Lucent-branded products
that constituted 43.7% of our revenues and MCK-branded products that constituted
3.0% of our revenues. For the three-month period ended July 31, 1999, Lucent
accounted for approximately 46.3% of our revenues, which consisted of
Lucent-branded products that constituted 29.6% of our revenues and MCK-branded
products that constituted 16.7% of our revenues. No other customer represented
over 10% of revenues in either period. Approximately 78.7% and 74.3% of our
revenues were derived from ten customers in fiscal 1999 and in the three-month
period ended July 31, 1999, respectively.

     The following is a representative list of end users, by vertical market
segment, that have deployed multiple systems:
FINANCIAL/INSURANCE           TECHNOLOGY         GOVERNMENT/EDUCATION     HOSPITALITY/TRAVEL
  -------------------           ----------         --------------------     ------------------
Arthur Andersen          3M                        American Diabetes     American Express Travel
Bankers Trust            Ameritrade                  Association         Avis
Bear Stearns             Ascend                    City of San Antonio   Promus Hotels
Comdisco                 Bottomline Technologies   Massachusetts State   Travel Services
Deloitte & Touche        Citrix Systems              Police                International
Fidelity                 Digital (Compaq)          New York University   United Airlines
General Auto Insurance   Landmark Systems          U.S. Postal Service   World Travel Partners
MFS                      Northrop Grumman
Merrill Lynch
Nationsbank (Bank of     TELECOM/MEDIA             OTHER
  America)                                         Argon
Option One               CNN                       Circuit City
Prudential Securities    Harte-Hanks               Federal Express
Safeco                   Sitel                     Otis Elevator
Sun Trust                TCI                       Pacificorp
TD Waterhouse Group      Turner Broadcasting       Pfizer
RESEARCH AND DEVELOPMENT

     To maintain our technology leadership position, we focus our research and
development efforts on improving the functionality and performance of our
existing products and designing new products that address customer needs and
changes in the marketplace. We have assembled a team of experienced hardware and
software engineers with capabilities in both networking and telecommunications.
Our engineering expertise includes significant understanding of:

     - the line side of proprietary PBX systems;

     - digital audio technology, such as echo cancellation and voice compression
       algorithms;

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45

     - IP telephony;

     - wide area network and telephony interfaces; and

     - network diagnostic and management frameworks.

     At July 31, 1999, we employed 31 people in our engineering organization,
and intend to continue to expand all functional areas of the engineering
organization. We perform research and product development activities at our
principal offices in Newton, Massachusetts, as well as at our Calgary, Alberta
development facility.

     Our research and development process is driven by market demand. Product
development begins with a comprehensive functional product specification based
on input from all functional groups and levels within our company. In addition,
we value feedback from our end-user customers and distribution channel partners,
and have incorporated a significant amount of customer-requested functionality
to date. We are also active in industry bodies and standards committees and
utilize information from these organizations in the product development process.
Finally, we have maintained an ongoing dialogue and established technology
partnerships with a number of PBX manufacturers, internetworking vendors,
broadband equipment suppliers and service providers. We will continue to work
with these companies to develop products that meet specific market requirements.

     In addition to designing enhancements for our current products, we will
work to develop new remote voice products that extend the functionality of the
PBX across multiple networks, particularly broadband networks. Furthermore, we
plan to develop new software components for our universal hardware architecture
that expand the basic capabilities of our solutions to enable the delivery of
new applications and services. We are focusing development efforts on, among
other things, supporting additional PBX protocols and new network environments,
developing additional software applications, expanding the port density of our
existing products and implementing additional network management capabilities.
Finally, we will continue to work with third-party software and hardware
manufacturers to establish interoperability between our products and other
important elements within common network environments.

PRODUCT VALIDATION LABORATORY

     Over the last year, we have hired the personnel and purchased the equipment
necessary to build our product validation laboratory. Of the 31 people in our
engineering organization, 5 are dedicated full time to our product validation
laboratory. At both our Newton, Massachusetts and Calgary, Alberta development
facilities, we have constructed state of the art laboratories with equipment
from such vendors as ADC Kentrox, Ascend, Cisco, Copper Mountain, Flowpoint,
IBM, Lucent, NEC, Netopia, Newbridge, Nortel Networks, Packeteer and Paradyne.

     Our Calgary, Alberta facility system tests the EXTender product line and
validates our product's integration with the major PBX vendors that we support.
We conduct extensive product testing to ensure that our equipment meets the high
standards for voice quality and reliability associated with mission critical
systems such as PBXs. We also conduct extensive tests on the embedded systems
within our EXTender product line as well as on all the features and functions of
the EXTenders. Our Calgary facility also conducts tests that ensure that our
products are compatible with the PBXs and respective digital telephone sets of
manufacturers that we support.

     Our Newton, Massachusetts facility tests system interoperability. The
ability to deliver traffic within multiple network environments and to
interoperate with equipment from numerous vendors has become a key component to
the success of communications equipment companies. Because no communications
equipment product can be validated independently of the network within which it
operates or independently from the equipment with which it interfaces, this lab
conducts extensive tests of our product line operating within multiple network
environments and interacting with equipment from numerous equipment vendors. We
conduct extensive tests that measure device performance, quality of service and

                                       39
46

voice prioritization within multiple network environments and across a range of
network conditions. Our facilities contain the following equipment and network
circuits to conduct these tests:

     - ATM switches, DSLAMs and frame relay access devices;

     - enterprise routers that support multiple network interfaces and protocols
       including ATM, Ethernet, frame relay, T-1 and V.35;

     - multiplexers, inverse multiplexers, channel banks, and channel service
       units, or CSUs, and data service units, or DSUs;

     - CPE equipment such as DSL modems; and

     - traditional telephone, ISDN, 56 Kbps leased line, T-1 and DSL circuits.

     By combining the capabilities of our two facilities, we have implemented a
product validation procedure that enables us to deliver high quality voice
equipment that works within multiple network environments, is compatible with
most widely deployed network equipment and is capable of adapting to a wide
range of network conditions. Furthermore, the engineers in our product
validation laboratory work continually with validation engineers at other
equipment companies in order to compile feedback and recommendations to improve
our products.

MANUFACTURING

     We outsource our manufacturing to two contract manufacturers. Celestica,
which is located in Exeter, New Hampshire and is ISO 9002 registered,
manufactures the Branch Office EXTender and PBXgateway IP products. They provide
full turnkey services, including material procurement, final assembly, testing,
shipment to our customers and warranty repair. Electronic Manufacturing Group
located in Calgary, Alberta manufactures all of our other product lines.
Electronic Manufacturing Group also provides us with printed circuit assemblies.
We are ISO 9001 registered and complete the final assembly, testing and
inspection of these printed circuit assemblies at our Calgary, Alberta facility.

     We design and develop the key components, including printed circuit boards
and software, for all of our products. In addition, we determine the components
that are incorporated in our products and select the appropriate suppliers of
these components. We design the tests and specify the testing equipment for the
product testing performed at Celestica and at our facility in Calgary, Alberta.

     We use a rolling six-month forecast based upon anticipated product orders
to determine our material requirements. Lead times for the materials and
components that we order vary significantly and depend on factors such as
specific supplier, contract terms and demand for a component at a given time.
We, along with our contract manufacturers, may terminate our contracts without
cause at any time. At that time, the terminating party must honor all open
purchases.

COMPETITION

     We compete in a new, rapidly evolving and highly competitive and fragmented
industry that is subject to increasing product, market and technology changes
brought about by the introduction of new technologies, the deployment of
broadband networks and changes in the regulatory environment. We believe that
the main competitive factors in our market are the following:

     - technology partnerships, particularly with the major PBX manufacturers
       and service providers;

     - system reliability and performance;

     - sales and distribution capability;

     - price/performance characteristics;

     - access to third-party technology;

     - conformance to industry standards;
                                       40
47

     - brand name recognition;

     - ease of deployment and use;

     - timeliness of product introductions;

     - product features and breadth;

     - customer relationships; and

     - technical support and service.

     We believe our success in competing with other manufacturers of
communications products depends primarily on:

     - our ability to enter into and maintain key technology and distribution
       relationships with third-party manufacturers, distributors, resellers and
       service providers in our market segment;

     - our engineering, marketing and sales skills;

     - the price, quality and reliability of our products; and

     - our delivery and service capabilities.

     Our principal and potential competitors include large telecommunications
manufacturers such as Nortel Networks and a number of other public and private
companies that are developing next generation network access products that
target the branch office and telecommuting marketplaces. We expect competition
to intensify in the future and new competitors to emerge. Many of our
competitors are substantially larger than we are and have significantly greater
financial, sales and marketing, technical, manufacturing and other resources,
more established distribution channels and stronger relationships with service
providers. These competitors may be able to respond more rapidly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sale of their products than we can.
Furthermore, we believe some of our competitors may offer aggressive sales
terms, including financing alternatives, which we might not be able to match.
These competitors may enter our existing or future markets with solutions that
may be less expensive, provide higher performance or additional features or be
introduced earlier than our solutions. Given the market opportunity, we also
expect that other companies may enter our market with better products and
technologies. If any technology that is competing with ours is more reliable,
has better quality, is less expensive or has other advantages over our
technology, then the demand for our products could decrease.

     We expect our competitors to continue to improve the performance of their
current products and introduce new products or new technologies. Successful new
product introductions or enhancements by our competitors could reduce the sales
or market acceptance of our products, perpetuate intense price competition or
make our products obsolete. To be competitive, we must continue to invest
significant resources in research and development, sales and marketing and
customer support. We cannot be sure that we will have sufficient resources to
make these investments or that we will be able to make the technological
advances necessary to be competitive.

     Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share. Our failure to compete successfully
against current or future competitors could seriously harm our business,
financial condition and results of operations.

INTELLECTUAL PROPERTY

     Our success and ability to compete is dependent in part upon our
proprietary technology. We rely on a combination of copyright, trademark, trade
secret and other intellectual property law, nondisclosure agreements and other
protective measures to protect our proprietary rights. We also utilize
unpatented proprietary knowledge and trade secrets, and employ various methods
to protect our trade secrets and knowledge. We presently have no patents.

                                       41
48

     We believe our intellectual property rights are significant and that the
loss of all or a substantial portion of such rights could have a material
adverse effect on our business, financial condition and results of operations.
There can be no assurance that our intellectual property protection measures
will be sufficient to prevent misappropriation of our technology. Some of our
contractual arrangements provide third parties with access to our source code
and other intellectual property upon the occurrence of specified events. Such
access could enable these third parties to use our intellectual property and
source code to develop and manufacture competing products, which would adversely
affect our performance and ability to compete. In addition, we cannot be certain
that others will not independently develop substantially equivalent intellectual
property, gain access to our trade secrets or intellectual property, or disclose
our intellectual property or trade secrets. Furthermore, the laws of many
foreign countries do not protect our intellectual property to the same extent as
the laws of the United States. From time to time, we may desire or be required
to renew or to obtain licenses from others in order to develop and market
commercially viable products effectively. There can be no assurances that any
necessary licenses will be available on reasonable terms, if at all.

     The communications industry is characterized by the existence of a large
number of patents and frequent claims and related litigation regarding patent
and other intellectual property rights. In particular, leading companies in the
communications markets have extensive patent portfolios. From time to time,
third parties may assert exclusive patent, copyright, trademark and other
intellectual property rights to technologies and related standards that are
important to us. We expect that we may increasingly be subject to infringement
claims as the number of products and competitors in the market for our
technology grows and the functionality of products overlaps. Although we have
not been a party to any litigation asserting claims that allege infringement of
intellectual property rights, we may be a party to litigation in the future. In
addition, third parties may assert claims or initiate litigation against us or
our manufacturers, suppliers, OEMs, technology partners or customers alleging
infringement of their proprietary rights with respect to our existing or future
products.

     We may in the future initiate claims or litigation against third parties
for infringement of our proprietary rights to determine the scope and validity
of our proprietary rights. Any such claims, with or without merit, could be
time-consuming, result in costly litigation and diversion of technical and
management personnel or require us to develop non-infringing technology or enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on acceptable terms, if at all.

EMPLOYEES

     At July 31, 1999, we had a total of 80 employees, of which 31 were in
research and development, 29 were in sales, marketing, business development and
customer support, 7 were in manufacturing, and 13 were in finance,
administration and operations. None of our employees is represented by a labor
union. We have not experienced any work stoppages and consider relations with
our employees to be good.

FACILITIES

     We currently lease approximately 8,000 square feet of space at our
headquarters in Newton, Massachusetts under a lease that expires in June 2002,
and lease an additional 1,500 square feet at our headquarters building in Newton
on a month-to-month basis. We are currently in need of more space and anticipate
leasing additional office space in our current building in Newton, Massachusetts
or moving our corporate headquarters to new office space in the Newton area in
the next 6 to 12 months. We also lease approximately 8,500 square feet at our
development center in Calgary, Alberta under a lease that expires in December
2000.

LEGAL PROCEEDINGS

     We are currently not a party to any material legal proceedings.

                                       42
49

                                   MANAGEMENT

EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS

     Our executive officers, key employees and directors and their ages as of
September 30, 1999, are as follows:
NAME                     AGE                     POSITION
                   ----                     ---                     --------
Steven J. Benson..........................  40     President, Chief Executive Officer,
                                                   Chairman and Director
Paul K. Zurlo.............................  33     Chief Financial Officer and Vice President
                                                   of Operations
Michael D. Williams.......................  41     Vice President of Business Development
Patrick J. Curley.........................  39     Vice President of Engineering
Jeffrey P. Dickerson......................  39     Vice President of Sales
Joan E. Lockhart..........................  43     Vice President of Marketing
J. Robert Geiman..........................  26     Director of Corporate Development
Gregory M. Avis(1)........................  40     Director
Michael H. Balmuth(2).....................  36     Director
John B. Landry(2).........................  51     Director
Calvin K. Manz............................  46     Director
Paul Severino(1)..........................  52     Director
---------------
(1) Member of the compensation committee
(2) Member of the audit committee

     Steven J. Benson has served as our President, Chief Executive Officer and a
Director of MCK since June 1997 and Chairman since August 1999. From September
1992 to April 1997, he served as Senior Vice President of Worldwide Sales and
Marketing at Shiva Corporation, a manufacturer of data access products. From
January 1988 to August 1992, Mr. Benson served as Director of Worldwide Sales
and Marketing for Lotus Development Corporation's Portable Computing Group. Mr.
Benson holds a Bachelor's degree from Bentley College.

     Paul K. Zurlo has served as our Chief Financial Officer and Vice President
of Operations since September 1997. From July 1995 to June 1997, he served as a
Vice President at Summit Partners, a venture capital firm. Summit Partners and
its affiliates manage a number of venture capital funds, including Summit
Ventures IV, L.P., Summit Subordinated Debt Fund L.P. and Summit Investors III,
L.P., which are all stockholders of MCK. From July 1993 to July 1995, Mr. Zurlo
was a consultant with Bain & Company. Mr. Zurlo holds a Bachelor's degree from
Georgetown University and an M.B.A. from Harvard University.

     Michael D. Williams has served as our Vice President of Business
Development since July 1997. From December 1994 to July 1997, he served in a
series of increasingly senior management positions at Gandalf Canada Ltd., a
networking solutions provider for the remote access market, most recently as the
Vice President of Product Marketing. From December 1992 to November 1994, Mr.
Williams served as the Strategic Marketing Manager for Canada at AT&T Network
Systems (now Lucent). Mr. Williams holds a Bachelor's degree from the University
of Waterloo.

     Patrick J. Curley has served as our Vice President of Engineering since May
1998. From July 1994 to March 1998, he served as Director and Vice President of
Engineering at Windata, Inc., a wireless local area networking company. From
September 1991 to June 1994, Mr. Curley served as Director of Engineering at
PictureTel Corporation, a video and data conferencing company. He holds a
Bachelor's degree from Boston University.

                                       43
50

     Jeffrey P. Dickerson has served as our Vice President of Sales since
September 1997. From November 1996 to August 1997, he served as Vice President
of Sales and Service at Intelligent Environments, Inc., a British Internet
software company. From February 1993 to November 1996, Mr. Dickerson served as
Vice President of Direct Sales at VMark Software, Inc., a data warehousing
software company. Mr. Dickerson holds a Bachelor's degree from North Adams State
College.

     Joan E. Lockhart has served as our Vice President of Marketing since July
1997. From May 1997 to July 1997, she served as Director of Marketing
Communications and Product Marketing for Anysoft, Inc., an Internet software
company. From July 1996 to May 1997, she served as Director of Corporate
Communications for PictureTel Corporation. From June 1992 to June 1996, Ms.
Lockhart served as Director of Corporate Marketing for Avid Technology, Inc., a
digital media company. Ms. Lockhart holds a Bachelor's degree from S.U.N.Y.
Binghamton.

     J. Robert Geiman has served as our Director of Corporate Development since
January 1999. From July 1995 to December 1998, he served as an Associate at
Summit Partners. Mr. Geiman holds a Bachelor's degree from Dartmouth College.

     Gregory M. Avis has served as a Director of MCK since May 1996. Mr. Avis
has served as a Managing Partner of Summit Partners since 1990, and has been a
General Partner since 1987. Mr. Avis also serves as a director of: Ditech
Communications Corporation, a manufacturer of communications equipment; Extended
Systems, Inc., a network peripherals and wireless communications company;
Powerwave Technologies, Inc., a designer and manufacturer of power amplifiers
for wireless communications; Splash Technology Holdings, Inc., a developer of
color server systems; and several privately held companies. Mr. Avis holds a
Bachelor's degree from Williams College and an M.B.A. from Harvard University.

     Michael H. Balmuth has served as a Director of MCK since September 1997. He
has served as a Principal at Summit Partners since December 1998 and a Vice
President from March 1997 to December 1998. From August 1991 to February 1997,
Mr. Balmuth served as a Principal at Broadview Associates. He is a director of
several private companies. Mr. Balmuth holds a Bachelor's degree from Dartmouth
College and an M.B.A. from Harvard University.

     John B. Landry has served as a Director of MCK since September 1997. Since
1995, he has served as Vice President of Technology Strategy for IBM. In
addition, since February 1995, Mr. Landry has served as the Chairman of
Anyday.com, an Internet calendar and personal information management company.
From March 1996 to January 1999, he served as Chairman of Narrative
Communications, an Internet-based advertising and direct marketing company. From
December 1990 to June 1995, Mr. Landry served as the Senior Vice President of
Development and Chief Technology Officer for Lotus Development Corporation. He
also serves as a director of Giga Information Group, a market research firm, and
Interliant, an applications service provider, as well as several private
companies. Mr. Landry holds a Bachelor's degree from Babson College.

     Calvin K. Manz has served as a Director since June 1989. He founded our
company in June 1989, and served as our President and Chief Executive Officer
until June 1997. He has served as the President and Chief Executive Officer of
Odyssey Financial Inc., a financial and management advisor to technology
companies, since December 1997. Mr. Manz was a Director of Telebackup Systems
Inc., a software utilities company, from June 1997 until the company merged in
May 1999 with Veritas Software, a supplier of storage management software. Mr.
Manz also serves as a director of International Properties Group Ltd., a
publicly-traded real estate company in Canada, and several private companies.

     Paul Severino has served as a Director of MCK since July 1999. He has
served as the Chairman of NetCentric Corporation, a provider of Internet
protocol telephony applications, since August 1997. From October 1994 to
November 1996, Mr. Severino served as the Chairman of the Board of Bay Networks,
Inc., after its formation from the merger of Wellfleet and Synoptics. From
October 1986 to October 1994, he served as the President and Chief Executive
Officer of Wellfleet Communications, Inc., a company he co-founded and which
merged with Bay Networks. He is a director of Media 100, Inc., a provider of

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digital video systems, Interspeed, Inc., a remote access equipment company, and
SilverStream Software, Inc., an Internet software company. Mr. Severino holds a
Bachelor's degree from Rensselaer Polytechnic Institute.

     Following this offering, the Board of Directors will consist of six
directors divided into three classes, with each class serving for a term of
three years. At each annual meeting of stockholders, directors will be elected
by the holders of common stock to succeed the directors whose terms are
expiring. Messrs. Benson and Manz are Class I directors whose terms will expire
in 2000. Messrs. Balmuth and Landry are Class II directors whose terms will
expire in 2001, and Messrs. Avis and Severino are Class III directors whose
terms will expire in 2002.

BOARD COMMITTEES

     The Board of Directors has a Compensation Committee composed of Messrs.
Avis and Severino, which makes recommendations concerning salaries and incentive
compensation for our employees and administers the 1996 Stock Option Plan and
the 1999 Stock Option and Grant Plan. The Board of Directors also has an Audit
Committee composed of Messrs. Balmuth and Landry, which recommends the
engagement of our outside auditors and reviews our accounting controls, the
results and scope of the audit and other services provided by our outside
auditors. The Board of Directors may establish, from time to time, other
committees to facilitate the management of our business.

DIRECTOR COMPENSATION

     We do not currently compensate our directors, but they are reimbursed for
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors or its committees. Our directors are generally eligible to
participate in the 1996 Stock Option Plan and the 1999 Stock Option and Grant
Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The members of the Compensation Committee of our Board of Directors are
Messrs. Avis and Severino. None of the executive officers serves on the Board of
Directors or Compensation Committee of any entity which has one or more
executive officers serving as a member of our Board of Directors or Compensation
Committee.

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52

EXECUTIVE COMPENSATION

     The following table sets forth information with respect to the compensation
earned for services rendered to us by our current Chief Executive Officer and
each of our four other most highly compensated executive officers whose salary
and bonus compensation for the fiscal year ended April 30, 1999 exceeded
$100,000, collectively referred to below as the Named Executive Officers.

                           SUMMARY COMPENSATION TABLE
LONG-TERM
                                                                  COMPENSATION
                                                               ------------------
                                         ANNUAL COMPENSATION    NUMBER OF SHARES          ALL
                                         -------------------   UNDERLYING OPTIONS        OTHER
NAME & PRINCIPAL POSITION(1)              SALARY    BONUS(2)       GRANTED(#)       COMPENSATION(3)
----------------------------             --------   --------   ------------------   ---------------
Steven J. Benson.......................  $271,356   $243,268                             $660
  President and Chief Executive Officer
Paul K. Zurlo..........................   109,584     34,258                              290
  Chief Financial Officer and Vice
  President of Operations
Michael D. Williams....................   110,000     24,280                              264
  Vice President of Business
  Development
Jeffrey P. Dickerson...................   120,001     75,568                              264
  Vice President of Sales
Joan E. Lockhart.......................   122,193     15,308                              304
  Vice President of Marketing
---------------
(1) The number of shares of restricted stock held by each of the Named Executive
    Officers at the end of the fiscal year ended April 30, 1999 is as follows:
    Mr. Benson,        shares; Mr. Zurlo,        shares; Mr. Williams,
    shares; Mr. Dickerson,        shares; and Ms. Lockhart,        shares. The
    value of these shares of restricted stock is as follows: Mr. Benson,
    $       ; Mr. Zurlo, $       ; Mr. Williams, $       ; Mr. Dickerson,
    $       ; and Ms. Lockhart, $       . The values of the restricted stock
    holdings were calculated on the basis of the fair market value of $     per
    share at April 30, 1999, as determined by the Board of Directors.
(2) Includes amounts paid in respect of interest due to us from the Named
    Executive Officers on certain promissory notes. See "Certain Transactions."
(3) Represents premiums paid for term life insurance.

                       OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth information regarding stock options granted
during the fiscal year ended April 30, 1999 to the Named Executive Officers.
POTENTIAL REALIZABLE
                                             INDIVIDUAL GRANTS                            VALUE AT ASSUMED
                        ------------------------------------------------------------    ANNUAL RATES OF STOCK
                        NUMBER OF SHARES   PERCENT OF TOTAL                            PRICE APPRECIATION FOR
                           UNDERLYING       OPTIONS GRANTED    EXERCISE                    OPTION TERM(3)
                            OPTIONS         TO EMPLOYEES IN     PRICE     EXPIRATION   -----------------------
NAME                       GRANTED(#)       FISCAL YEAR(1)      ($/SH)     DATE(2)       5%($)        10%($)
----                    ----------------   -----------------   --------   ----------   ----------   ----------
Steven J. Benson......
Paul K. Zurlo.........
Michael D. Williams...
Jeffrey P.
  Dickerson...........
Joan E. Lockhart......
---------------
(1) Based on an aggregate of                options granted to officers and
    employees during the fiscal year ended April 30, 1999.
(2) All stock options granted vest as to 1/4th of the underlying shares on the
    first anniversary of the date of grant and 1/48th of the underlying shares
    monthly thereafter, so long as the optionee remains as an employee.
(3) The amounts shown as potential realizable value illustrate what might be
    realized upon exercise immediately prior to expiration of the option term
    using the 5% and 10% appreciation rates

                                       46
53

    established in regulations of the SEC, compounded annually. The potential
    realizable value is not intended to predict future appreciation of the price
    of our common stock and do not give effect to any actual appreciation after
    the date of grant.

               AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
                         FISCAL YEAR-END OPTION VALUES

     The following table sets forth information concerning the number and value
of unexercised options to purchase common stock held by the Named Executive
Officers. The Named Executive Officers did not exercise any stock options during
fiscal year 1999. There was no public trading market for our common stock as of
April 30, 1999. Accordingly, the values of the unexercised in-the-money options
have been calculated on the basis of the fair market value at that time of
$     per share, as determined by the Board of Directors.
NUMBER OF SECURITIES            VALUE OF UNEXERCISED
                                                UNDERLYING UNEXERCISED           IN-THE-MONEY OPTIONS
                                              OPTIONS AT FISCAL YEAR-END        AT FISCAL YEAR-END($)
                                             ----------------------------    ----------------------------
NAME                                         EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
----                                         -----------    -------------    -----------    -------------
Steven J. Benson...........................       --                              --          $
Paul K. Zurlo..............................       --                              --
Michael D. Williams........................       --                              --
Jeffrey P. Dickerson.......................       --                              --
Joan E. Lockhart...........................       --                              --
1999 STOCK OPTION AND GRANT PLAN

     Our Board of Directors and stockholders adopted the 1999 Stock Option and
Grant Plan in August 1999. The 1999 Stock Option and Grant Plan permits us to
grant incentive stock options, non-qualified stock options and restricted and
unrestricted stock. These grants may be made to our officers, employees,
independent directors, consultants, advisors and key persons. The 1999 Stock
Option and Grant Plan allows for the issuance of        shares of common stock.
No shares have been issued under the 1999 Stock Option and Grant Plan.

     The 1999 Stock Option and Grant Plan is administered by the Board of
Directors or a committee designated by the Board of Directors. Subject to the
provisions of the 1999 Stock Option and Grant Plan, the Board of Directors or
the committee may select the individuals eligible to receive awards, determine
the terms and conditions of the awards granted, accelerate the vesting schedule
of any award and generally administer and interpret the plan.

     The exercise price of options granted under the 1999 Stock Option and Grant
Plan is determined by the Board of Directors or the committee. Under present
law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986, as amended, may not be granted at an exercise price less than the fair
market value of the common stock on the date of grant, or less than 110% of the
fair market value in the case of incentive stock options granted to optionees
holding more than 10% of the voting power. Non-qualified stock options may be
granted at prices which are less than the fair market value of the underlying
shares on the date granted. Options are typically subject to vesting schedules,
terminate ten years from the date of grant and may be exercised for specified
periods after the termination of the optionee's employment or other service
relationship with us. Upon the exercise of options, the option exercise price
must be paid in full either in cash or by certified or bank check or other
instrument acceptable to the Board of Directors or the committee or, in the sole
discretion of the Board of Directors or the committee, by delivery of shares of
common stock that have been owned by the optionee free of restrictions for at
least six months. The exercise price may also be delivered to us (a) by the
optionee in the form of a promissory note if the loan of such funds to the
optionee has been authorized by the Board of Directors and the optionee pays so
much of the exercise price as represents the par value of the common stock
acquired in a form other than

                                       47
54

a promissory note and (b) by a broker under irrevocable instructions to the
broker selling the underlying shares from the optionee.

     The purchase price, and vesting dates and/or requirements of restricted
stock awards are determined by the Board of Directors or the committee. The
Board of Directors or the committee may place conditions on the restricted stock
awards such as, continued employment and/or the achievement of performance goals
or objectives in a grant document. Restricted stock may not be sold, assigned,
transferred or pledged except as specifically provided in the grant document. If
a restricted stock award recipient's employment or other relationship with us
terminates or other events specified in the grant document occur, we have the
right to repurchase some or all of the shares of stock subject to the award at
the purchase price of such stock.

     In the event of a merger, reorganization or consolidation, the sale of all
or substantially all of our assets or all of our outstanding capital stock or a
liquidation or other similar transaction, 50% of all outstanding awards issued
under the 1999 Stock Option and Grant Plan that are not then vested will become
fully vested and exercisable upon the closing of the transaction. In the event
of any such merger, reorganization or sale in which the outstanding awards
issued under the 1999 Stock Option and Grant Plan are not assumed by the
surviving entity, or equivalent substitute awards are not issued by such issuing
entity, all of the outstanding awards issued under the 1999 Stock Option and
Grant Plan that are not then vested will become fully vested and exercisable
upon the closing of the transaction. In such event, all awards issued under the
1999 Stock Option and Grant Plan will terminate upon closing of such
transactions. All participants under the 1999 Stock Option and Grant Plan will
be permitted to exercise, for a period of 15 days before any such termination,
all awards held by them which are then exercisable or will become exercisable
upon the closing of the transaction.

1996 STOCK OPTION PLAN

     Our Board of Directors and stockholders adopted the 1996 Stock Option Plan
in June 1996. The 1996 Stock Option Plan permits us to grant incentive stock
options and non-qualified stock options to our officers, employees, directors,
consultants, and advisors. The 1996 Stock Option Plan allows for the issuance of
       shares of common stock. Of the shares reserved for issuance under the
1996 Stock Option Plan,        shares remain available for issuance.

     The 1996 Stock Option Plan may be administered by the Board of Directors or
a committee designated by the Board of Directors. Subject to the provisions of
the 1996 Stock Option Plan, the Board of Directors or the committee may select
the individuals eligible to receive awards, determine the terms and conditions
of the awards granted, accelerate the vesting schedule of any award and
generally administer and interpret the 1996 Stock Option Plan.

     The exercise price of options granted under the 1996 Stock Option Plan
shall be determined by the Board of Directors or the committee. Under present
law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986, as amended, may not be granted at an exercise price less than the fair
market value of the common stock on the date of grant, or less than 110% of the
fair market value in the case of incentive stock options granted to optionees
holding more than 10% of the voting power of outstanding capital stock. Non-
qualified stock options may be granted at prices which are less than the fair
market value of the underlying shares on the date granted. Options are typically
subject to vesting schedules, terminate ten years from the date of grant and may
be exercised for specified periods after the termination of the optionee's
employment or other service relationship with us. Upon the exercise of options,
the option exercise price must be paid in full either in cash or by certified or
bank check or other instrument acceptable to the Board of Directors or committee
or, in the sole discretion of the Board of Directors or committee, by delivery
of shares of common stock that have been owned by the optionee free of
restrictions for at least six months. The exercise price may also be delivered
to us (a) by the optionee in the form of a promissory note if the loan of such
funds to the optionee has been authorized by the Board of Directors and the
optionee pays that part of the exercise price that represents the par value of
the common stock acquired in

                                       48
55

a form other than a promissory note and (b) by a broker under irrevocable
instructions to the broker selling the underlying shares from the optionee.

     In the event of a merger, reorganization or consolidation, the sale of all
or substantially all of our assets or all of our outstanding capital stock or a
liquidation or other similar transaction in which the outstanding awards issued
under the 1996 Stock Option Plan are not assumed by the surviving entity, or
equivalent substitute options are not issued by such surviving entity, then all
outstanding awards issued under the 1996 Stock Option Plan that are not then
vested will become fully vested and exercisable upon the closing of the
transaction. All awards issued under the 1996 Stock Option Plan will terminate
upon any of the transactions described above. All participants under the 1996
Stock Option Plan will be permitted to exercise, for a period of 15 days before
any such termination, all awards held by them which are then exercisable or will
become exercisable upon the closing of the transaction.

RESTRICTED AND UNRESTRICTED STOCK GRANTS

     We sold an aggregate of        shares of restricted common stock to our
employees and directors for an aggregate cash purchase price of $     ,
including an aggregate of        shares sold to Messrs. Benson, Zurlo, Williams
and Dickerson and Ms. Lockhart for an aggregate purchase price of $     . Shares
of restricted common stock sold to employees and directors generally vest upon a
specified date or dates, subject to accelerated vesting for 50% of any unvested
shares upon a merger in which we are not the surviving company, or the sale of a
majority of our voting stock or substantially all of our assets, with unvested
shares being subject to repurchase at cost upon the termination of the
purchaser's employment or other relationship with us. In the event the
purchaser's employment or other relationship with us is terminated for cause,
all shares of restricted stock sold to the purchaser are generally subject to
repurchase by us at the purchaser's cost.                shares of Mr. Benson's
restricted stock will vest upon completion of this offering.

SEVERANCE AGREEMENT

     We entered into a severance agreement with Steven J. Benson on June 17,
1997. The severance agreement provides that, in the event Mr. Benson's
employment is terminated without cause, Mr. Benson will continue to receive
salary and benefits for six months or until Mr. Benson is reemployed, whichever
occurs first.

LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS

     Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director has
breached his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation Law
or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. Our by-laws provide that directors and officers shall
be, and in the discretion of the Board of Directors, non-officer employees may
be, indemnified by us to the fullest extent authorized by Delaware law, as it
now exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for or on our behalf. The by-laws
also provide that the right of directors and officers to indemnification shall
be a contract right and shall not be exclusive of any other right now possessed
or hereafter acquired under any by-law, agreement, vote of stockholders or
otherwise. We also have directors' and officers' insurance against certain
liabilities.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers or controlling persons MCK as
described above, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.

                                       49
56

                              CERTAIN TRANSACTIONS

     Certain stock option grants to our directors and executive officers are
described in this prospectus under the caption "Management -- Executive
Compensation."

PRIVATE PLACEMENT TRANSACTIONS

     We have issued preferred stock in private placement transactions as
follows:
NUMBER
                                                                   OF       PRICE PER      AGGREGATE
      DATE OF ISSUANCE                    SERIES                 SHARES       SHARE      CONSIDERATION
      ----------------         -----------------------------    --------    ---------    -------------
June 1996....................  Series E Redeemable Preferred                 $              $
                                 of subsidiary
June 1996 and July 1998......  Series A Redeemable Preferred
June 1996....................  Series B Redeemable
                               Convertible Preferred
July 1998....................  Series C Redeemable Preferred
July 1998....................  Series D Redeemable
                               Convertible Preferred
The following table summarizes the shares of our preferred stock and Series
E Redeemable Preferred Stock of our subsidiary purchased by our Named Executive
Officers, directors and 5% stockholders, and persons and entities associated
with them:
SERIES B                     SERIES D
                                     SERIES A     REDEEMABLE      SERIES C     REDEEMABLE      SERIES E
                                    REDEEMABLE    CONVERTIBLE    REDEEMABLE    CONVERTIBLE    REDEEMABLE
                                    PREFERRED      PREFERRED     PREFERRED      PREFERRED     PREFERRED
             INVESTOR                 STOCK          STOCK         STOCK          STOCK         STOCK
             --------               ----------    -----------    ----------    -----------    ----------
Summit Group......................
Lazard Freres Group...............
Calvin K. Manz....................
For more detailed information regarding the investors, see "Principal
Stockholders."

     We have also issued common stock and stock options in private placement
transactions to our executive officers and directors as follows:

     On January 12, 1998, we issued restricted stock to certain of our executive
officers. We accepted promissory notes as consideration for the restricted
stock. Steven J. Benson, Paul K. Zurlo, Michael D. Williams, Jeffrey P.
Dickerson and Joan E. Lockhart each issued a promissory note to us in the
principal amounts of $          , $          , $          , $          and
$          , respectively, for        ,        ,        ,        and
shares of common stock. These promissory notes bear interest at a compound
annual rate of 6%. The principal amount of the promissory notes and any accrued
and unpaid interest is required to be repaid with the net, after-tax proceeds
from the sale of the restricted stock granted to the executive officer and paid
for with these promissory notes. The principal amount of the promissory notes
and any accrued and unpaid interest are due and payable on the earlier of
January 12, 2003 or 60 days after the termination of the executive officer's
employment with us. We make annual bonus payments to these executive officers in
the amount of the annual interest due on the promissory notes. Approximately 50%
of the restricted stock of Messrs. Williams and Dickerson and Ms. Lockhart is
vested as of August 31, 1999, and the remaining unvested shares vest ratably on
a monthly basis through 2001, except that 50% of any remaining unvested shares
vest upon certain sale transactions. Approximately 56% of Mr. Zurlo's restricted
stock is vested as of August 31, 1999, and the remaining unvested shares vest
ratably on a monthly basis through 2001, except that 100% of any remaining
unvested shares vest upon certain sale transactions. Approximately 44% of Mr.
Benson's restricted stock is vested as of August 31, 1999, an additional 22%
shall vest upon consummation of this offering and the remainder shall vest
ratably on an annual basis through 2001.

                                       50
57

     On January 31, 1998, we issued        shares of restricted stock to one of
our Directors, John B. Landry, for an aggregate purchase price of $       . On
July 16, 1998, we granted        nonqualified stock options to Mr. Landry with
an exercise price of $       per share. These shares of restricted stock and
stock options vest as to 1/4th of the shares on the first anniversary of the
date of grant and 1/48th of the shares on a monthly basis thereafter.

     On July 12, 1999, we issued restricted stock to certain of our executive
officers. We accepted promissory notes as consideration for the restricted
stock. Paul K. Zurlo, Michael D. Williams, Jeffrey P. Dickerson, Joan E.
Lockhart and Patrick J. Curley each issued a promissory note to us in the
principal amount of        for   shares of common stock, and Steven J. Benson
issued a promissory note to us in the principal amount of        for   shares of
common stock. These promissory notes bear interest at a compound annual rate of
5.82%. The principal amount of the promissory notes and any accrued and unpaid
interest is required to be repaid with the net, after-tax proceeds from the sale
of the restricted stock granted to the executive officer and paid for with these
promissory notes. The principal amount of the promissory notes and any accrued
and unpaid interest are due and payable on the earlier of July 12, 2004 or 60
days after the termination of the executive officer's employment with us. We
make annual bonus payments to these executive officers in the amount of the
annual interest due on the promissory notes. The restricted stock of Messrs.
Benson, Zurlo, Williams, Dickerson and Curley, and Ms. Lockhart vests 1/4th on
the first anniversary of the date of grant and 1/48th of the shares monthly
thereafter.

     On           , 1999, we issued        shares of common stock to one of our
Directors, Paul Severino, for an aggregate purchase price of $          , and we
granted        nonqualified stock options to Mr. Severino with an exercise price
of $       per share. These shares of common stock and stock options were fully
vested on the date of grant.

CALGARY LEASE

     On January 1, 1996, MCK Telecommunications, our subsidiary, entered into a
lease agreement with Manz Developments, Inc. Mr. Manz, a director and principal
stockholder of MCK, is the controlling stockholder of Manz Developments. The
term of the lease is for five years, and we have the option to extend the lease
for five years. Pursuant to the lease agreement, MCK Telecommunications pays
Manz Developments $144,000 Canadian per year.

REGISTRATION RIGHTS AGREEMENTS

     Certain holders of common stock and preferred stock have certain
registration rights with respect to their shares of common stock, including
common stock issuable upon conversion of their preferred stock. See "Description
of Capital Stock -- Registration Rights of Certain Holders."

                                       51
58

                             PRINCIPAL STOCKHOLDERS

     The following table sets forth information regarding the beneficial
ownership of common stock as of September 30, 1999 and as adjusted to reflect
the sale of the common stock offered hereby, by:

     - all persons who own beneficially 5% or more of our common stock;

     - the Chief Executive Officer and each of the other Named Executive
       Officers;

     - each of our directors; and

     - all directors and executive officers as a group.

     Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of common stock beneficially owned,
subject to community property laws, where applicable. Beneficial ownership is
determined in accordance with the rules issued by the SEC. Under these rules,
beneficial ownership includes any shares which the individual or entity has sole
or shared voting or investment power and shares of common stock subject to
options held that are currently exercisable or exercisable within 60 days of
September 30, 1999. The applicable percentage of "beneficial ownership" after
the offering is based upon        shares of common stock outstanding, which
includes shares issuable upon conversion of all outstanding shares of
convertible preferred stock upon completion of this offering, but excludes all
outstanding shares of redeemable preferred stock subject to redemption upon
completion of this offering.

     The address of the Summit Partners Group is 600 Atlantic Avenue, Boston, MA
02210. The address of Messrs. Avis and Balmuth is c/o Summit Partners, LLC, 600
Atlantic Avenue, Boston, MA 02210. The address of the Lazard Freres Group is 30
Rockeller Plaza, New York, NY 10020. The address of all other listed
stockholders is c/o MCK Communications, Inc. 313 Washington Street, Newton,
Massachusetts 02458.
PERCENT
                                                                                BENEFICIALLY OWNED
                                                          NUMBER OF SHARES    -----------------------
                                                            BENEFICIALLY      BEFORE THE    AFTER THE
                                                               OWNED           OFFERING     OFFERING
                                                          ----------------    ----------    ---------
Summit Partners Group(1)................................                         42.2%           %
Lazard Freres Group(2)..................................                         15.0
Steven J. Benson(3).....................................                          8.1
Paul K. Zurlo(4)........................................                          1.2
Michael D. Williams(5)..................................                            *
Jeffrey P. Dickerson(6).................................                            *
Joan E. Lockhart(7).....................................                          1.0
Gregory M. Avis(8)......................................                         42.2          --
Michael H. Balmuth(9)...................................                         42.2          --
John B. Landry(10)......................................                            *
Calvin K. Manz(11)......................................                         21.7
Paul Severino...........................................                           --          --
All executive officers and directors as a group (11
  persons)(12)..........................................                         34.0
---------------
  *  Less than 1%

 (1) Represents        shares held by Summit Ventures IV, L.P.,        shares
     held by Summit Subordinated Debt Fund, L.P., and        shares held by
     Summit Investors III, L.P. Summit Ventures IV, L.P., Summit Subordinated
     Debt Fund, L.P., and Summit Investors III, L.P. are part of an affiliated
     group of investment partnerships referred to, collectively, as the Summit
     Partners Group.

                                       52
59

 (2) Represents        shares held by Lazard Technology Partners L.P.,
     shares held by Lazard Technology Partners LLC, and        shares held by
     Lazard Technology Investors (1998) LLC. Lazard Technology Partners L.P.,
     Lazard Technology Partners LLC and Lazard Technology Investors (1998) LLC
     are part of an affiliated group of investment partnerships referred to,
     collectively, as the Lazard Freres Group.

 (3) Includes        shares underlying options granted to Mr. Benson which are
     exercisable within 60 days of September 30, 1999 and        shares owned by
     the Benson Family Limited Partnership, of which Mr. Benson is the general
     partner and two trusts for his minor children are the limited partners.

 (4) Includes        shares underlying options granted to Mr. Zurlo which are
     exercisable within 60 days of September 30, 1999.

 (5) Includes        shares underlying options granted to Mr. Williams which are
     exercisable within 60 days of September 30, 1999.

 (6) Includes        shares underlying options granted to Mr. Dickerson which
     are exercisable within 60 days of September 30, 1999.

 (7) Includes        shares underlying options granted to Ms. Lockhart which are
     exercisable within 60 days of September 30, 1999.

 (8) Represents shares described in note (1) above, beneficially owned by Summit
     Partners Group. Mr. Avis disclaims beneficial ownership of such shares
     except to the extent of his pecuniary interest therein.

 (9) Represents shares described in note (1) above, beneficially owned by Summit
     Partners Group. Mr. Balmuth disclaims beneficial ownership of such shares
     except to the extent of his pecuniary interest therein.

(10) Includes        shares underlying options granted to Mr. Landry which are
     exercisable within 60 days of September 30, 1999.

(11) Represents shares held by Manz Developments, Inc., of which Mr. Manz holds
     100% of the voting stock and 48% of the total equity.

(12) Includes        shares underlying options which are exercisable within 60
     days of September 30, 1999.

                          DESCRIPTION OF CAPITAL STOCK

     Following the offering, our authorized capital stock will consist of
       shares of common stock of which                will be issued and
outstanding; and        shares of undesignated preferred stock issuable in one
or more series to be designated by the board of directors, of which no shares
will be issued and outstanding.

     As of September 30, 1999, there were outstanding: (1)        shares of
common stock held by        stockholders of record; (2)        shares of
convertible preferred stock (convertible into        shares of common stock);
(3)        shares of redeemable preferred stock (to be redeemed upon closing of
the offering for an aggregate of approximately $     million, including accrued
dividends of approximately $     million); and (4) options to purchase an
aggregate of        shares of common stock.

COMMON STOCK

     The holders of common stock have one vote per share. Holders of common
stock are not entitled to vote cumulatively for the election of directors.
Generally, all matters to be voted on by stockholders must be approved by a
majority, or, in the case of election of directors, by a plurality, subject to
any voting
                                       53
60

rights granted to holders of any then outstanding preferred stock. Except as
otherwise provided by law, amendments to our certificate of incorporation, which
will be effective upon consummation of the offering, must be approved by a
majority of the voting power of the common stock.

     Holders of common stock share ratably in any dividends declared by the
Board of Directors, subject to the preferential rights of any preferred stock
then outstanding. Dividends consisting of shares of common stock may be paid to
holders of shares of common stock. In the event of our merger or consolidation
with or into another company as a result of which shares of common stock are
converted into or exchangeable for shares of stock, other securities or
property, including cash, all holders of common stock will be entitled to
receive the same kind and amount, on a per share of common stock basis, of such
shares of stock and other securities and property, including cash. On our
liquidation, dissolution or winding up, all holders of common stock are entitled
to share ratably in any assets available for distribution to the holders of
shares of common stock. No shares of common stock are subject to redemption or
have preemptive rights to purchase additional shares of common stock.

     All the outstanding shares of common stock are legally issued, fully paid
and nonassessable.

PREFERRED STOCK

     Our certificate of incorporation provides that shares of preferred stock
may be issued from time to time in one or more series. Our Board of Directors is
authorized to establish the voting rights, if any, and the designations, powers,
preferences, qualifications, limitations and restrictions applicable to the
shares of each series. The Board of Directors may, without stockholder approval,
issue preferred stock with voting and other rights that could adversely affect
the voting power and other rights of the holders of the common stock and could
have anti-takeover effects. The ability of the Board of Directors to issue
preferred stock without stockholder approval could have the effect of delaying,
deferring or preventing a change of control or the removal of our existing
management. We have no present plans to issue any shares of preferred stock.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

     Under the terms of the Registration Rights Agreement, amended and restated
in July 1998, the holders of at least 50% of the shares held in the aggregate by
Summit Group, Lazard Freres Group and certain other entities may demand that we
file a registration statement for the registration of all or any portion of
their shares, subject to certain minimum thresholds, under the Securities Act.
We are not required to effect more than a total of two of these demand
registrations per year. Upon completion of this offering, holders of an
aggregate of           shares are party to the Registration Rights Agreement.

     In addition, after the closing of the offering, these stockholders and Manz
Developments will be entitled to piggyback registration rights in connection
with any registration by us of securities for our own account or the account of
other stockholders. If we propose to register any shares of common stock under
the Securities Act, we are required to give those stockholders notice of the
registration and to include their shares in the registration statement. At any
time after we become eligible to file a registration statement on Form S-3,
these stockholders may require us to file an unlimited number of registration
statements on Form S-3 under the Securities Act with respect to their shares of
common stock.

     The registration rights of these stockholders will terminate when the
shares held by them may be sold under Rule 144 under the Securities Act. We are
generally required to bear all of the expenses of all demand and piggyback
registrations, except underwriting discounts and commissions. We also have
agreed to indemnify those stockholders under the terms of the Registration
Rights Agreement.

AMENDMENT OF THE CERTIFICATE OF INCORPORATION

     Any amendment to our certificate of incorporation must first be approved by
a majority of the board of directors and thereafter approved by a majority of
the total votes eligible to be cast by holders of voting stock with respect to
such amendment.

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DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

     Statutory Business Combination Provision.  Following the offering, we will
be subject to Section 203 of the Delaware General Corporation Law, which
prohibits a publicly held Delaware corporation from consummating a "business
combination," except under certain circumstances, with an "interested
stockholder" for a period of three years after the date such person became an
"interested stockholder" unless:

     - before such person became an interested stockholder, the board of
       directors of the corporation approved the transaction in which the
       interested stockholder became an interested stockholder or approved the
       business combination;

     - upon the closing of the transaction that resulted in the interested
       stockholder's becoming an interested stockholder, the interested
       stockholder owned at least 85% of the voting stock of the corporation
       outstanding at the time the transaction commenced, excluding shares held
       by directors who are also officers of the corporation and shares held by
       employee stock plans; or

     - following the transaction in which such person became an interested
       stockholder, the business combination is approved by the board of
       directors of the corporation and authorized at a meeting of stockholders
       by the affirmative vote of the holders of 66 2/3% of the outstanding
       voting stock of the corporation not owned by the interested stockholder.

     The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three years,
owned 15% or more of a corporation's outstanding voting stock. The term
"business combination" includes mergers, asset sales and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more difficult for an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or by-laws resulting from an amendment approved by
holders of at least a majority of the outstanding voting stock. Neither our
certificate of incorporation nor our by-laws contains any such exclusion.

     By-law Provisions.  Our by-laws provide that a special meeting of
stockholders may be called only by the President or the Board of Directors
unless otherwise required by law. Our by-laws provide that only those matters
included in the notice of the special meeting may be considered or acted upon at
that special meeting unless otherwise provided by law. In addition, our by-laws
include advance notice and informational requirements and time limitations on
any director nomination or any new proposal which a stockholder wishes to make
at an annual meeting of stockholders.

     Ability to Adopt Stockholder Rights Plan.  The Board of Directors may in
the future resolve to issue shares of preferred stock or rights to acquire such
shares to implement a stockholder rights plan. A stockholder rights plan
typically creates voting or other impediments that would discourage persons
seeking to gain control of MCK by means of a merger, tender offer, proxy contest
or otherwise if the Board of Directors determines that such change in control is
not in the best interests of our stockholders. The Board of Directors has no
present intention of adopting a stockholder rights plan and is not aware of any
attempt to obtain control of MCK.

TRADING ON THE NASDAQ NATIONAL MARKET SYSTEM

     We have applied to have the common stock approved for quotation on the
Nasdaq National Market under the symbol MCKC.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the common stock will be American
Stock Transfer Company.

                                       55
62

                        SHARES ELIGIBLE FOR FUTURE SALE

     Future sales of substantial amounts of shares of our common stock in the
public market could adversely affect prevailing market prices. Furthermore,
since only a limited number of shares will be available for sale shortly after
this offering because of certain contractual and legal restrictions on resale,
as described below, sales of substantial amounts of common stock in the public
market after the restrictions lapse could adversely affect the prevailing market
price.

     After this offering,        shares of common stock will be outstanding,
assuming the issuance of an aggregate of        shares of common stock. The
number of shares outstanding after this offering is based on the number of
shares outstanding as of August 31, 1999, and assumes no exercise of outstanding
options. The        shares sold in this offering will be freely tradable without
restriction under the Securities Act. The remaining        shares of common
stock outstanding upon completion of the offering are restricted securities in
that they may be sold in the public market only if registered or if they qualify
for an exemption from registration under the Securities Act or Rules 144 or 701
of the Securities Act.

     All of our officers, directors and stockholders have entered into lock-up
agreements generally providing that they will not offer, pledge, sell, offer to
sell, contract to sell, sell any option or contract to purchase, purchase any
option to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any of the shares of common
stock or any securities convertible into, or exercisable or exchangeable for,
common stock owned by them, or enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the common stock, for a period of 180 days after the date of this
prospectus, without the prior written consent of BancBoston Robertson Stephens
Inc. Transfers may be made earlier:

     - as a bona fide gift or gifts, provided the donee or donees agree in
       writing to be bound by this restriction;

     - as a distribution to partners, stockholders or beneficiaries of the
       transferor, provided that the distributees agree in writing to be bound
       by the terms of this restriction;

     - with respect to dispositions or purchases of common stock acquired on the
       open market; or

     - with the prior written consent of BancBoston Robertson Stephens Inc.

     BancBoston Robertson Stephens Inc. may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
lock-up agreements. When determining whether or not to release shares from the
lock-up agreements, BancBoston Robertson Stephens Inc. will consider, among
other factors, the stockholder's reasons for requesting the release, the number
of shares for which the release is being requested and market conditions at the
time. Following the expiration of the 180 day lock-up period, additional shares
of common stock will be available for sale in the public market subject to
compliance with Rule 144 or Rule 701.

     In general, under Rule 144 as currently in effect, an affiliate of MCK or a
person, or persons whose shares are aggregated, who has beneficially owned
restricted securities for at least one year, including the holding period of any
prior owner except an affiliate of MCK, would be entitled to sell within any
three month period a number of shares that does not exceed the greater of 1% of
our then outstanding shares of common stock or the average weekly trading volume
of our common stock on the Nasdaq National Market during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about MCK. Any person, or persons whose shares are aggregated, who
is not deemed to have been an affiliate of MCK at any time during the 90 days
preceding a sale, and who has beneficially owned shares for at least two years
including any period of ownership of preceding non-affiliated holders, would be
entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.

                                       56
63

     We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, except we
may issue, and grant options to purchase, shares of common stock under the 1996
Stock Option Plan and the 1999 Stock Option and Grant Plan.

     Following the offering, under specified circumstances and subject to
customary conditions, the Summit Group, the Lazard Freres Group and certain
other stockholders have will have rights with respect to        shares of common
stock, subject to the 180-day lock-up arrangement described above, to require us
to register their shares of common stock under the Securities Act, and they,
along with Manz Developments, will have rights to participate in any future
registration of securities by us.

                                       57
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                                  UNDERWRITING

     The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, and Hambrecht & Quist LLC have severally agreed with us,
subject to the terms and conditions of the underwriting agreement, to purchase
from us the number of shares of common stock set forth below opposite their
respective names. The underwriters are committed to purchase and pay for all
shares if any are purchased.
UNDERWRITER                           NUMBER OF SHARES
                        -----------                           ----------------
BancBoston Robertson Stephens Inc...........................
Dain Rauscher Wessels.......................................
Hambrecht & Quist LLC.......................................
                                                                  -------
          Total.............................................
                                                                  =======
The underwriters propose to offer the shares of common stock directly to
the public at the initial public offering price shown on the cover page of this
prospectus and to certain dealers at such price less a concession not in excess
of $     per share. The underwriters may allow and such dealers may reallow a
concession not in excess of $     per share to certain other dealers. After the
initial public offering of the shares, the offering price and other selling
terms may be changed by the representatives of the underwriters.

     Over-Allotment Option.  We and certain of our stockholders have granted to
the underwriters an option, exercisable no later than 30 days after the date of
this prospectus to purchase up to        additional shares of common stock at
the initial public offering price less the underwriting discount shown on the
cover page of this prospectus. To the extent that the underwriters exercise this
option, each of the underwriters will have a firm commitment to purchase
approximately the same percentage of the option which the number of shares of
common stock to be purchased by it shown in the above table bears to the total
number of shares of common stock offered hereby. We and certain of our
stockholders will be obligated, as part of the option, to sell shares to the
underwriters to the extent the option is exercised. The underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of common stock offered hereby.

     Indemnity.  We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect of those
liabilities.

     Lock-up Agreements.  All our executive officers, directors and certain of
our stockholders, who will own in the aggregate                shares of common
stock after the offering, have agreed that they will not, without the prior
written consent of BancBoston Robertson Stephens, offer, sell, or otherwise
dispose of any shares of common stock, options or warrants to acquire shares of
common stock or securities exchangeable for or convertible into shares of common
stock owned by them during the 180-day period following the date of this
prospectus. We have agreed that we will not, without the prior written consent
of BancBoston Robertson Stephens, offer, sell or otherwise dispose of any shares
of common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock during
the 180-day period following the date of this prospectus, except that we may
issue shares upon the exercise of options granted before the date hereof, and
may grant additional options under its stock option plans, provided that,
without the prior written consent of BancBoston Robertson Stephens, such
additional options shall not be exercisable during such period. BancBoston
Robertson Stephens may release us or our stockholders from such restrictions at
anytime, in whole or in part, without notice.

     Determination of Offering Price.  Before the offering, there has been no
public market for the common stock. The initial public offering price for the
common stock will be determined by negotiation

                                       58
65

among us and the representatives. Among the factors considered in determining
the initial public offering price are prevailing market and economic conditions,
our revenues and earnings, market valuations of other companies engaged in
activities similar to us, estimates of our business potential and prospects, the
present state of our business operations, our management and other factors
deemed relevant. The estimated initial public offering price range shown on the
cover of this prospectus is subject to change as a result of market conditions
and other factors.

     Stabilization.  Certain persons participating in the offering may
over-allot or effect transactions which stabilize, maintain or otherwise affect
the market price of the common stock at levels above those which might otherwise
prevail in the open market, including by entering stabilizing bids, effective
syndicate covering transactions or imposing penalty bids. A stabilizing bid
means the placing of any bid or effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of the common stock. A syndicate
covering transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created in
connection with the offering. A penalty bid means an arrangement that permits
the underwriters to reclaim a selling concession from a syndicate member in
connection with the offering when the common stock sold by the syndicate member
is purchased in syndicate covering transactions. Such transactions may be
effected on the Nasdaq National Market, in the over-the-counter market, or
otherwise. Such stabilizing, if commenced may be discontinued at any time.

                                 LEGAL MATTERS

     The validity of the shares of common stock offered hereby will be passed
upon for MCK Communications by McDermott, Will & Emery, Boston, Massachusetts.
Various legal matters related to the sale of the common stock offered hereby
will be passed upon for the underwriters by Testa, Hurwitz & Thibeault, LLP,
Boston, Massachusetts.

                                    EXPERTS

     Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at April 30, 1999 and 1998, and for each of the two years
in the period ended April 30, 1999, as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

     PricewaterhouseCoopers LLP, independent accountants, have audited our
statements of operations, cash flows and changes in stockholders' equity for the
year ended April 30, 1997. We have included these 1997 financial statements in
the prospectus and elsewhere in the registration statement in reliance on
PricewaterhouseCoopers LLP report, given on their authority as experts in
accounting and auditing.

                       CHANGE IN INDEPENDENT ACCOUNTANTS

     In September 1997, we engaged Ernst & Young LLP as our independent
auditors, to replace PricewaterhouseCoopers LLP. The decision was made by our
Board of Directors and was not due to any disagreement with
PricewaterhouseCoopers LLP. During the fiscal year ended April 30, 1997 and
during the interim period prior to engaging Ernst & Young LLP, we had no
disagreements with PricewaterhouseCoopers LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope of
procedure, which disagreements, if not resolved to the satisfaction of
PricewaterhouseCoopers LLP, would have caused them to make reference thereto in
their report on our financial statements. The reports of PricewaterhouseCoopers
LLP on our financial statements for the fiscal year ended April 30, 1997 (the
last fiscal year audited by PricewaterhouseCoopers LLP) did not contain any
adverse opinion, disclaimer of opinion or qualification or modification as to
uncertainty, audit scope or accounting principles.

                                       59
66

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the SEC a registration statement on Form S-1 under the
Securities Act and the rules and regulations thereunder, for the registration of
the common stock offered hereby. This prospectus, which forms a part of the
registration statement, does not contain all the information included in the
registration statement, parts of which have been omitted as permitted by the SEC
rules and regulations. For further information about us and our common stock,
you should refer to the registration statement. Statements contained in this
prospectus as to any contract or other document are not necessarily complete.
Where the contract or other document is an exhibit to the registration
statement, each statement is qualified by the provisions of that exhibit.

     The registration statement can be inspected and copied at the public
reference facility maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
portion of the registration statement can be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the registration statement is publicly available
through the SEC's site on the Internet's World Wide Web, located at
http://www.sec.gov.

     We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can also request copies of these
documents, for a copying fee, by writing to the SEC.

                                       60
67

                            MCK COMMUNICATIONS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
                                                              ----
Reports of Independent Auditors.............................  F-2
Consolidated Balance Sheets.................................  F-4
Consolidated Statements of Operations.......................  F-5
Consolidated Statements of Common Stockholders' Deficit.....  F-6
Consolidated Statements of Cash Flows.......................  F-7
Notes to Consolidated Financial Statements..................  F-8
F-1
68

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
  MCK Communications, Inc.

     We have audited the accompanying consolidated balance sheets of MCK
Communications, Inc. (the Company) as of April 30, 1999 and 1998, and the
related consolidated statements of operations, common stockholders' deficit, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of April 30, 1999 and 1998 and the consolidated results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.

                                                               Ernst & Young LLP
Boston, Massachusetts
July 30, 1999

                                       F-2
69

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Directors and Stockholders of
  MCK Communications, Inc.

     We have audited the accompanying consolidated statements of operations,
common stockholders' deficit and cash flows for the year ended April 30, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

     We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

     In our opinion, these consolidated financial statements audited by us
present fairly, in all material respects, the consolidated results of its
operations and its cash flows and changes in stockholders' deficit for the year
ended April 30, 1997, in conformity with accounting principles generally
accepted in the United States.

PricewaterhouseCoopers LLP
Calgary, Alberta
June 20, 1997

                                       F-3
70

                            MCK COMMUNICATIONS, INC.

                          CONSOLIDATED BALANCE SHEETS
APRIL 30,
                                                   ----------------------------      JULY 31,
                                                       1998            1999            1999
                                                   ------------    ------------    -------------
                                                                                    (UNAUDITED)
ASSETS
Current assets:
  Cash and equivalents...........................  $  1,867,213    $  3,284,984    $  3,596,211
  Accounts receivable (net of allowances of
     $150,000 in 1998, 179,560 in 1999 and
     $198,251 at July 31, 1999)..................     1,893,036       3,350,389       3,593,508
  Inventory......................................       756,746       1,493,641       1,245,490
  Prepaids and other current assets..............       294,445         213,025         292,839
                                                   ------------    ------------    ------------
     Total current assets........................     4,811,440       8,342,039       8,728,048
Fixed assets, net................................       804,970       1,054,561       1,056,706
Other assets.....................................        48,915          31,843          28,093
                                                   ------------    ------------    ------------
Total assets.....................................  $  5,665,325    $  9,428,443    $  9,812,847
                                                   ============    ============    ============

LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable...............................  $    485,014    $  1,666,438    $  1,672,083
  Accrued liabilities............................       474,947         693,005       1,018,573
  Accrued compensation and benefits..............       306,086         404,490         313,700
  Borrowings under line of credit................            --              --          76,812
  Deferred revenue...............................            --              --          25,817
                                                   ------------    ------------    ------------
     Total current liabilities...................     1,266,047       2,763,933       3,106,985

Long-term debt...................................     5,000,000       2,500,000       2,653,624
Redeemable preferred stock of subsidiary.........     2,293,333       2,490,280       2,540,495
Redeemable preferred stock.......................    15,244,755      21,010,759      21,462,308
Redeemable convertible preferred stock...........     1,911,111       4,703,751       4,799,201
Common stockholders' deficit:
Common stock, $.001 par value; 25,000,000
  authorized: 3,253,967, 3,464,170 and 3,709,170
  shares issued and outstanding, respectively....         3,254           3,464           3,709
Additional paid-in capital.......................       154,077         178,186         790,441
Accumulated deficit..............................   (19,901,160)    (23,897,510)    (24,566,415)
Accumulated other comprehensive income (loss)....      (155,290)       (165,743)       (206,324)
Notes receivable from officers...................      (150,802)       (158,677)       (771,177)
                                                   ------------    ------------    ------------
Total common stockholders' deficit...............   (20,049,921)    (24,040,280)    (24,749,766)
                                                   ------------    ------------    ------------
Total liabilities and common stockholders'
  deficit........................................  $  5,665,325    $  9,428,443    $  9,812,847
                                                   ============    ============    ============
See accompanying notes to consolidated financial statements.
                                       F-4
71

                            MCK COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
                                                  YEARS ENDED APRIL 30,                   JULY 31,
                                         ---------------------------------------   -----------------------
                                            1997          1998          1999          1998         1999
                                         -----------   -----------   -----------   ----------   ----------
                                                                                         (UNAUDITED)
Revenues...............................  $ 5,920,645   $ 7,875,779   $14,269,603   $3,116,151   $4,522,919
Cost of goods sold.....................    2,313,015     2,799,994     5,389,557    1,188,294    1,690,472
                                         -----------   -----------   -----------   ----------   ----------
Gross profit...........................    3,607,630     5,075,785     8,880,046    1,927,857    2,832,447
Operating expenses:
  Research and development.............      814,664     1,757,524     3,348,608      751,124      963,591
  Sales and marketing..................    1,145,265     2,191,182     3,888,537      779,298    1,347,459
  General and administrative...........      607,106     1,484,812     1,616,620      391,277      493,705
  Transaction-related charges..........      493,284            --            --           --           --
                                         -----------   -----------   -----------   ----------   ----------
    Total operating expenses...........    3,060,319     5,433,518     8,853,765    1,921,699    2,804,755
                                         -----------   -----------   -----------   ----------   ----------
Income (loss) from operations..........      547,311      (357,733)       26,281        6,158       27,692
Other (income) expense:
  Interest expense.....................      527,060       663,121       397,969      150,562       90,282
  Interest income......................     (134,204)     (144,888)     (130,339)     (15,185)     (23,706)
  Other (income) expense, net..........      (50,337)       77,217       (60,267)      (6,413)      28,672
                                         -----------   -----------   -----------   ----------   ----------
    Total other expense................      342,519       595,450       207,363      128,964       95,248
Income (loss) before provision for
  income taxes.........................      204,792      (953,183)     (181,082)    (122,806)     (67,556)
Provision for income taxes.............      302,109            --            --           --           --
                                         -----------   -----------   -----------   ----------   ----------
Net loss...............................      (97,317)     (953,183)     (181,082)    (122,806)     (67,556)

Dividends on subsidiary redeemable
  preferred stock......................      133,333       160,000       196,947       49,614       50,215
Dividends on redeemable preferred
  stock................................    1,010,557     1,220,000     1,965,921      393,234      551,134
                                         -----------   -----------   -----------   ----------   ----------
Total dividends on preferred stock.....    1,143,890     1,380,000     2,162,868      442,848      601,349
                                         -----------   -----------   -----------   ----------   ----------
Loss applicable to common stock........  $(1,241,207)  $(2,333,183)  $(2,343,950)  $ (565,654)  $ (668,905)
                                         ===========   ===========   ===========   ==========   ==========
Basic and diluted net loss per share...  $     (0.60)  $     (1.03)  $     (0.92)  $    (0.24)  $    (0.24)
                                         ===========   ===========   ===========   ==========   ==========
Shares used in computing basic and
  diluted net loss per share...........    2,083,759     2,272,079     2,536,931    2,390,233    2,813,097
                                         ===========   ===========   ===========   ==========   ==========
See accompanying notes to consolidated financial statements.
                                       F-5
72

                            MCK COMMUNICATIONS, INC.

            CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
COMMON
                                                                 SHARES     STOCK                                 ACCUMULATED
                                                COMPREHENSIVE      OF         AT     ADDITIONAL                      OTHER
                                                   INCOME        COMMON      PAR      PAID-IN     ACCUMULATED    COMPREHENSIVE
                                                   (LOSS)         STOCK     VALUE     CAPITAL       DEFICIT         INCOME
                                                -------------   ---------   ------   ----------   ------------   -------------
Balance at April 30, 1996.....................            --        1,000   $ 100           --    $   (207,533)           --
Cancellation of old common stock..............            --       (1,000)   (100)          --             100            --
Issuance of new common stock..................            --    2,031,616   2,032           --          (2,032)           --
Dividends to Manz Development, Inc............            --           --      --           --     (16,119,603)           --
Dividends on preferred stock..................            --           --      --           --      (1,143,890)           --
Stock options exercised.......................            --      140,476     140     $  2,621              --            --
Other.........................................            --           --      --           --           2,298            --
Net loss......................................   $   (97,317)          --      --           --         (97,317)           --
                                                 -----------    ---------   ------    --------    ------------     ---------
Total comprehensive income (loss).............   $   (97,317)          --      --           --              --            --
                                                 -----------
Balance at April 30, 1997.....................            --    2,172,092   2,172        2,621     (17,567,977)           --
Stock options exercised.......................            --       76,530      77        1,659              --            --
Sale of restricted stock......................            --    1,005,345   1,005      149,797              --            --
Foreign currency translation adjustment.......   $  (155,290)          --      --           --              --     $(155,290)
Dividends on preferred stock..................            --           --      --           --      (1,380,000)           --
Net loss......................................      (953,183)          --      --           --        (953,183)           --
                                                 -----------    ---------   ------    --------    ------------     ---------
Total comprehensive income (loss).............   $(1,108,473)          --      --           --              --            --
Balance at April 30, 1998.....................            --    3,253,967   3,254      154,077     (19,901,160)     (155,290)
Stock options exercised.......................            --      157,703     158       16,286              --            --
Sale of restricted stock......................            --       75,000      75       11,175              --            --
Cancellation of restricted stock..............            --      (22,500)    (23)      (3,352)             --            --
Foreign currency translation adjustment.......   $   (10,453)          --      --           --              --       (10,453)
Dividends on preferred stock..................            --           --      --           --      (2,162,868)           --
Issuance of preferred stock in exchange for
  redemption premium..........................            --           --      --           --      (1,652,400)           --
Net loss......................................      (181,082)          --      --           --        (181,082)           --
                                                 -----------    ---------   ------    --------    ------------     ---------
Total comprehensive income (loss).............   $  (191,535)          --      --           --              --            --
Balance at April 30, 1999.....................            --    3,464,170   3,464      178,186     (23,897,510)     (165,743)
Foreign currency translation adjustment
  (unaudited).................................   $   (40,581)          --      --           --              --       (40,581)
Sale of restricted stock......................            --      245,000     245      612,255              --            --
Dividends on preferred stock (unaudited)......            --           --      --           --        (601,349)           --
Net loss (unaudited)..........................       (67,556)          --      --           --         (67,556)           --
                                                 -----------    ---------   ------    --------    ------------     ---------
Total comprehensive income (loss)
  (unaudited).................................   $  (108,137)          --      --           --              --            --
Balance at July 31, 1999 (unaudited)..........            --    3,709,170   $3,709    $790,441    $(24,566,415)    $(206,324)
                                                 ===========    =========   ======    ========    ============     =========
NOTES          TOTAL
                                                RECEIVABLES      COMMON
                                                   FROM       STOCKHOLDERS'
                                                 OFFICERS        DEFICIT
                                                -----------   -------------
Balance at April 30, 1996.....................          --    $   (207,433)
Cancellation of old common stock..............          --              --
Issuance of new common stock..................          --              --
Dividends to Manz Development, Inc............          --     (16,119,603)
Dividends on preferred stock..................          --      (1,143,890)
Stock options exercised.......................          --           2,761
Other.........................................          --           2,298
Net loss......................................          --         (97,317)
                                                 ---------    ------------
Total comprehensive income (loss).............          --              --
Balance at April 30, 1997.....................          --     (17,563,184)
Stock options exercised.......................          --           1,736
Sale of restricted stock......................   $(150,802)             --
Foreign currency translation adjustment.......          --        (155,290)
Dividends on preferred stock..................          --      (1,380,000)
Net loss......................................          --        (953,183)
                                                 ---------    ------------
Total comprehensive income (loss).............          --              --
Balance at April 30, 1998.....................    (150,802)    (20,049,921)
Stock options exercised.......................          --          16,444
Sale of restricted stock......................     (11,250)             --
Cancellation of restricted stock..............       3,375              --
Foreign currency translation adjustment.......          --         (10,453)
Dividends on preferred stock..................          --      (2,162,868)
Issuance of preferred stock in exchange for
  redemption premium..........................          --      (1,652,400)
Net loss......................................          --        (181,082)
                                                 ---------    ------------
Total comprehensive income (loss).............          --              --
Balance at April 30, 1999.....................    (158,677)    (24,040,280)
Foreign currency translation adjustment
  (unaudited).................................          --         (40,581)
Sale of restricted stock......................    (612,500)             --
Dividends on preferred stock (unaudited)......          --        (601,349)
Net loss (unaudited)..........................          --         (67,556)
                                                 ---------    ------------
Total comprehensive income (loss)
  (unaudited).................................          --              --
Balance at July 31, 1999 (unaudited)..........   $(771,177)   $(24,749,766)
                                                 =========    ============
See accompanying notes to consolidated financial statements.
                                       F-6
73

                            MCK COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
                                                         YEARS ENDED APRIL 30,                     JULY 31,
                                                ----------------------------------------   ------------------------
                                                    1997          1998          1999          1998          1999
                                                ------------   -----------   -----------   -----------   ----------
                                                                                                 (UNAUDITED)
Cash flow from operating activities:
  Net loss....................................  $    (97,317)  $  (953,183)  $  (181,082)  $  (122,806)  $  (67,556)
  Depreciation and amortization...............       160,075       230,342       393,977        72,943      132,031
  Deferred income taxes.......................        22,593       (80,000)           --            --           --
  Transaction-related charges.................        44,554            --            --            --           --
  Change in operating assets and liabilities:
     Accounts receivable......................       712,364      (846,047)   (1,457,353)     (257,254)    (243,119)
     Inventory................................      (222,271)      283,403      (736,895)     (344,503)     248,151
     Prepaids and other current assets........      (943,093)      366,050        81,420       (42,944)     (79,814)
     Accounts payable.........................      (373,529)      357,431     1,181,424       118,784        5,645
     Accrued liabilities......................         1,380       451,344       218,058       (21,594)     325,568
     Accrued compensation and benefits........      (166,085)      272,666        98,404      (126,904)     (90,790)
     Deferred revenue.........................            --            --            --            --       25,817
                                                ------------   -----------   -----------   -----------   ----------
       Net cash (used) provided by operating
          activities..........................      (861,329)       82,006      (402,047)     (724,278)     255,933
Cash flows from investing activities:
  Purchase of fixed assets....................      (318,908)     (565,526)     (675,650)     (182,226)    (136,147)
Cash flows from financing activities:
  Proceeds from issuance of preferred stock,
     net of issuance costs....................    15,000,000            --     4,940,323     4,953,761       (4,135)
  Dividends paid to Manz Development, Inc.....   (14,119,603)           --            --            --           --
  Issuance of subordinated debt...............     5,000,000            --            --            --           --
  Payment of debt and equity issuance costs...      (297,382)           --            --            --           --
  Redemption of preferred stock...............      (500,000)           --            --            --           --
  Repayment of promissory note................    (1,166,667)           --            --            --           --
  Increase (decrease) in short-term
     borrowings...............................       390,684      (749,496)           --            --      230,436
  Repayment of subordinated debt..............            --            --    (2,500,000)   (2,500,000)          --
  Proceeds from exercise of stock options.....         2,761         1,736        16,444         1,663           --
                                                ------------   -----------   -----------   -----------   ----------
       Net cash provided (used) by financing
          activities..........................     4,309,793      (747,760)    2,456,767     2,455,424      226,301
Effect of exchange rate changes on cash.......        97,909      (129,761)       38,701         7,085      (34,860)
                                                ------------   -----------   -----------   -----------   ----------
Net increase (decrease) in cash...............     3,227,465    (1,361,041)    1,417,771     1,556,005      311,227
Cash and equivalents at beginning of year.....           789     3,228,254     1,867,213     1,867,213    3,284,984
                                                ------------   -----------   -----------   -----------   ----------
Cash and equivalents at end of year...........  $  3,228,254   $ 1,867,213   $ 3,284,984   $ 3,423,218   $3,596,211
                                                ============   ===========   ===========   ===========   ==========

Non-cash transactions:
  Dividends on preferred stock................  $  1,143,890   $ 1,380,000   $ 2,162,868   $   442,848   $  601,349
  Sale of restricted stock....................            --       150,802         7,875         7,875      612,500
  Dividends paid to Manz Developments, Inc....     2,000,000            --            --            --           --
  Issuance of preferred stock in exchange for
     redemption premium.......................            --            --     1,652,400     1,652,400           --
See accompanying notes to consolidated financial statements.
                                       F-7
74

                            MCK COMMUNICATIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                FISCAL YEARS ENDED APRIL 30, 1997, 1998 AND 1999

1. NATURE OF OPERATIONS

     MCK Communications, Inc. (MCK or the Company) develops and markets remote
voice access products that enable corporations to distribute the features and
applications of PBX systems to branch offices and telecommuters over data
networks. Sales are made to OEMs and private label partners, ILECs, systems
integrators and distributors, telecom and datacom VARs, and broadband service
providers. In the fiscal years ended 1997, 1998 and 1999, sales to one customer
represented 27%, 46% and 47%, respectively, of consolidated revenues.

2. SIGNIFICANT ACCOUNTING POLICIES

  (a) Principles of Consolidation

     The consolidated financial statements include the accounts of MCK
Communications, Inc. and its Canadian subsidiary, MCK Telecommunications, Inc.
All significant intercompany accounts and transactions are eliminated.

  (b) Cash Equivalents

     Cash equivalents are defined as short-term, highly-liquid investments
having an original maturity of three months or less.

  (c) Inventory

     Inventory is valued at the lower of cost (first-in, first-out) or market.

  (d) Fixed Assets

     Fixed assets are stated at cost and depreciated on a straight-line basis
over the following estimated useful lives:
Equipment.......................  3 years
Furniture and fixtures..........  3 years
Purchased software..............  2 years
Leasehold improvements..........  The lesser of five years or term
                                  of lease
(e) Fair Value of Financial Instruments

     The Company's cash, cash equivalents, accounts receivable, accounts
payable, accrued liabilities and long-term debt are carried at cost, which
approximates fair value.

  (f) Revenue Recognition

     Revenues from product sales to end users are recognized upon shipment. A
portion of the Company's sales are made to distributors under arrangements where
the distributors are not obligated to pay the Company until the distributor has
resold the product. The Company defers recognition of such sales and related
gross margin until the product is sold by the distributors.

  (g) Earnings per Share

     In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share," or SFAS 128, which was required to be adopted for fiscal
years ending after December 15, 1997. Earnings

                                       F-8
75
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

per share amounts for all periods presented conform to the SFAS 128
requirements. See Note 11 for the computation of basic and diluted earnings per
share.

  (h) Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include the collectibility of accounts
receivable and the carrying value of inventory. Actual results could differ from
those estimates.

  (i) Translation of Foreign Currencies

     The functional currency for the Company's Canadian operations is the
Canadian dollar. The translation of Canadian dollars into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date, and for revenue and expense accounts using the
weighted-average exchange rate during the period. The gains or losses resulting
from such translation are reported in a separate component of stockholders'
deficit, which also includes exchange gains and losses on certain intercompany
balances of a long-term investment nature. Gains or losses resulting from
foreign currency transactions, which are included in results of operations, were
a gain of approximately $86,000 in 1997, a loss of approximately $67,000 in 1998
and a gain of approximately $56,000 in 1999. The Company's Canadian subsidiary
represented approximately $3,350,000 of total assets at April 30, 1999. The
Company had foreign and U.S. revenues of $2.6 million and $11.7 million,
respectively, during the year ended April 30, 1999.

  (j) Income Taxes

     The Company provides deferred taxes to recognize temporary differences
between the financial and tax bases of assets and liabilities. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.

  (k) Comprehensive Income

     During the year ended April 30, 1999, the Company adopted SFAS No. 130,
Reporting Comprehensive Income, which establishes standards for the reporting
and presentation of comprehensive income and its components in the financial
statements. Comprehensive income includes all changes in equity during a period
except those resulting from investments by and distributions to owners.

  (l) Segments of an Enterprise

     In 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information," or SFAS
131, which was required to be adopted for fiscal years beginning after December
15, 1997. SFAS 131 superseded SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise." This statement changes the way public companies report
segment information in annual financial statements. SFAS 131 requires public
companies to report financial and descriptive information about their operating
segments in interim financial reports to shareholders as well. The adoption of
this Statement had no impact on the disclosures in the Company's financial
statements as the Company operates in one business segment.

                                       F-9
76
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  (m) Concentration of Credit Risk

     Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of cash equivalents and trade accounts
receivable. The Company invests its cash equivalents in deposits with financial
institutions with strong credit ratings. The Company sells its products to
customers in the telecommunications industry, primarily in the United States and
Canada. The Company maintains reserves for potential credit losses and such
losses have been within management's expectations. Trade accounts receivable at
April 30, 1998 and 1999 included approximately $1,002,000 and $1,068,000,
respectively, from one customer.

  (n) Interim Financial Information

     The financial information for the three month periods ended July 31, 1998
and 1999 is unaudited but includes all adjustments, consisting only of normal
recurring adjustments, that the Company considers necessary for a fair
presentation of the operating results and cash flows for such periods. Results
for the three month period ended July 31, 1999 are not necessarily indicative of
results in future periods.

3. INVENTORY

     Inventories consisted of:
APRIL 30,
                                                 ------------------------     JULY 31,
                                                    1998          1999          1999
                                                 ----------    ----------    -----------
                                                                             (UNAUDITED)
Raw materials..................................  $  230,888    $  518,235    $  595,068
Work-in-process................................     382,211       780,584       535,902
Finished goods.................................     143,647       194,822       114,520
                                                 ----------    ----------    ----------
                                                 $  756,746    $1,493,641    $1,245,490
                                                 ==========    ==========    ==========
4. FIXED ASSETS

     Fixed assets consisted of:
APRIL 30,
                                                 ------------------------
                                                    1998          1999
                                                 ----------    ----------
Equipment......................................  $  715,139    $1,054,588
Purchased software.............................     176,896       410,715
Leasehold improvements.........................     243,048       269,339
Furniture and fixtures.........................     155,553       231,644
                                                 ----------    ----------
                                                  1,290,636     1,966,286
Accumulated depreciation.......................    (485,666)     (911,725)
                                                 ----------    ----------
                                                 $  804,970    $1,054,561
                                                 ==========    ==========
5. CREDIT AGREEMENTS

     Revolving Credit Agreement.  The Company maintains a revolving credit
agreement that provides for borrowings up to the lesser of $2,000,000 or 80% of
qualifying accounts receivable, which, at April 30, 1999, provided for
borrowings of approximately $1,920,000. No amounts were outstanding under this
agreement during the year ended April 30, 1999. Interest is charged at the
bank's base rate (7.75% at

                                      F-10
77
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

April 30, 1999). This agreement expires in April 2000. The debt is
collateralized by substantially all assets of the Company.

     Subordinated Debt.  The Company issued $5,000,000 of 12.5% subordinated
promissory notes in connection with a recapitalization in June 1996. In July
1998, the Company completed a private placement (see Note 7), and repaid
$2,500,000 of the subordinated promissory notes. Amounts outstanding under the
remaining subordinated promissory notes are due at the earlier of a qualified
initial public offering or as follows: $1,666,666 on June 30, 2000 and $833,334
on June 30, 2001.

     The Company paid interest of approximately $506,000, $375,000 and $663,000
for the years ended 1997, 1998 and 1999, respectively, and $156,250 (unaudited)
and $16,875 (unaudited) for the three months ended July 31, 1998 and 1999,
respectively, associated with these credit agreements.

6. INCOME TAXES

Pre-tax income (loss) is summarized by country as follows:
APRIL 30,
                                                           ----------------------------------
                                                             1997        1998         1999
                                                           --------    ---------    ---------
Canada...................................................  $130,693    $(180,545)   $(195,394)
United States............................................    74,099     (772,638)      14,312
                                                           --------    ---------    ---------
          Total..........................................  $204,792    $(953,183)   $(181,082)
                                                           ========    =========    =========
The provision (benefit) for income taxes consisted of:
APRIL 30,
                                                           ----------------------------------
                                                             1997        1998         1999
                                                           --------    ---------    ---------
Current:
Canada...................................................  $246,041    $  80,000    $      --
United States............................................    25,194           --           --
                                                           --------    ---------    ---------
                                                            271,235       80,000
                                                                                           --
Deferred:
Canada...................................................    30,874      (80,000)          --
                                                           --------    ---------    ---------
          Total..........................................  $302,109    $      --    $      --
                                                           ========    =========    =========
The provision for income taxes differed from the amount computed by
applying the U.S. federal statutory rate as follows:
APRIL 30,
                                                           ----------------------------------
                                                             1997        1998         1999
                                                           --------    ---------    ---------
Income tax provision (benefit) at statutory rate.........  $ 71,677    $(333,614)   $ (63,379)
Tax loss with no current benefit.........................        --      330,104       45,843
Foreign tax differential.................................    12,573      (16,290)     (12,214)
Non-deductible expenses..................................   220,103       19,800       29,750
Other, net...............................................    (2,244)          --           --
                                                           --------    ---------    ---------
          Total..........................................  $302,109    $      --    $      --
                                                           ========    =========    =========
F-11
78
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The components of the Company's deferred tax assets and liabilities are as
follows:
APRIL 30,
                                                              ----------------------
                                                                1998         1999
                                                              ---------    ---------
Deferred tax assets:
Reserves and accruals.......................................  $ 201,000    $ 198,000
Tax credits.................................................     32,000       63,000
Net operating loss carryforward.............................         --       48,000
                                                              ---------    ---------
          Total deferred tax assets.........................    233,000      309,000
                                                              ---------    ---------
Deferred tax liabilities:
Depreciation................................................    (14,000)     (18,000)
Other.......................................................    (15,000)     (10,000)
                                                              ---------    ---------
          Total deferred tax liabilities....................    (29,000)     (28,000)
                                                              ---------    ---------

Valuation allowance.........................................   (204,000)    (281,000)
                                                              ---------    ---------
Net deferred tax assets.....................................  $      --    $      --
                                                              =========    =========
At April 30, 1998 and 1999, the Company had $31,500 and $63,000 of Canadian
investment tax credits earned as a result of government incentive programs which
expire in 2008 and 2009 respectively and net operating loss carryforwards of
$112,600 which expire in 2019.

     The Company paid income taxes of $264,000, $18,900 and $912 in 1997, 1998
and 1999, respectively.

7. PREFERRED STOCK

     On July 16, 1998, the Company raised $5,000,000 through the private
placement of 28,505 shares of Series C Redeemable Preferred Stock and 1,672,354
shares of Series D Redeemable Convertible Preferred Stock. In connection with
the private placement, the Company restructured the redemption premium that
would have been due under certain circumstances to the Series A preferred
stockholders associated with the redemption of the Series B preferred stock and
issued 1,652,400 shares of Series A preferred stock to the existing Series A
stockholders. The Company used $2,500,000 of the proceeds to repay a portion of
the subordinated promissory notes and the balance of the private placement
proceeds was retained for working capital purposes.

                                      F-12
79
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Preferred stock consisted of:
APRIL 30,
                                                              --------------------------
                                                                 1998           1999
                                                              -----------    -----------
Redeemable preferred stock:
  Series A redeemable preferred stock, 13,333,333 and
     14,985,733 shares issued (liquidation value of
     $13,333,333 and $14,985,733, plus accrued dividends of
     $1,986,113 and $3,373,199) at April 30, 1998 and 1999,
     respectively...........................................  $15,244,755    $18,284,241
  Series C redeemable preferred stock, 28,505 shares issued
     (liquidation value of $2,850,000 plus accrued dividends
     of $256,356)...........................................           --      2,726,518
  Series E redeemable preferred stock of subsidiary, no par
     value, 2,000,000 shares issued and outstanding
     (liquidation value of $2,000,000 plus accrued dividends
     of $293,333 and $490,280)..............................    2,293,333      2,490,280
                                                              -----------    -----------
          Total.............................................  $17,538,088    $23,501,039
                                                              ===========    ===========
Redeemable convertible preferred stock:
  Series B redeemable convertible preferred stock, 3,968,384
     shares issued (liquidation value of $1,666,667 plus
     accrued dividends of $244,444 and $408,567)............  $ 1,911,111    $ 2,075,234
  Series D redeemable convertible preferred stock, 1,672,354
     shares issued (liquidation value of $2,500,000 plus
     accrued dividends of $158,356).........................           --      2,628,517
                                                              -----------    -----------
          Total.............................................  $ 1,911,111    $ 4,703,751
                                                              ===========    ===========
Each share of preferred stock accrues daily dividends on a cumulative basis
at a rate of 8% per annum on their respective liquidation values. Total accrued
and unpaid dividends at April 30, 1998 and 1999 were $2,523,890 and $4,686,758,
respectively. The Series A, C and D preferred stock were recorded net of
$74,691, $29,838 and $29,839 of issuance costs, respectively. The Series E
preferred stock represents redeemable preferred stock in the Company's Canadian
subsidiary. All of the Series E preferred stock is owned by Manz Developments,
Inc. (MDI), the beneficial owners of which also own 2,031,616 shares of common
stock of the Company.

     Each share of Series A, C and E preferred stock, together with any accrued
and unpaid dividends, are to be redeemed by the Company in three equal
installments in June 2001, June 2002 and June 2003. Series A, C and E preferred
stock automatically redeem in the event of a change in ownership, and may also
be redeemed after a qualified initial public offering, as defined.

     Each share of Series B preferred stock is convertible into shares of the
Company's common stock, at the option of the holder, at a conversion price of
approximately $0.42 per share. The Series B preferred stock automatically
converts into common stock upon the earlier of a qualified initial public
offering, as defined, or upon request of 66.7% of Series B preferred
stockholders. Upon conversion, all accrued and unpaid dividends will be paid in
either cash or additional shares of common stock at fair market value, at the
option of the Company.

     Each share of Series D preferred stock is convertible into shares of the
Company's common stock, at the option of the holder, at a conversion price of
approximately $1.50 per share. The Series D preferred stock automatically
converts into common stock upon the earlier of a qualified initial public
offering, as defined, or upon request of 66.7% of Series D preferred
stockholders. Upon conversion, all accrued and unpaid dividends will be paid in
either cash or additional shares of common stock, at the option of the Company.

     At any time after June 27, 2003, the Company is required, at the request of
a majority of Series B and D preferred stockholders, to redeem all Series B and
D preferred stock at a price equal to its

                                      F-13
80
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

liquidation value plus all accumulated and unpaid dividends. The Series B and D
preferred stock may also become redeemable upon a change in ownership unless the
holders elect to convert their shares to common stock.

     As long as any Series B or D preferred stock are outstanding, the holders
of Series B are entitled to elect three directors and the holders of Series D
are entitled to elect one director of the Company. Holders of Series B and
Series D preferred stock are entitled to vote with the common stock on all
matters submitted to stockholders.

     The Series A, C and E preferred stock is nonvoting. However, as long as any
preferred stock is outstanding, the Company is restricted, without the consent
of the preferred shareholders, from selling more than 20% of its consolidated
assets (20% of the Company's Canadian subsidiary's assets for Series E preferred
stock), merging (unless the preferred stock is redeemed in the transaction),
issuing any instrument that would rank senior to the common stock, liquidating
or increasing the authorized number of preferred shares.

8. STOCK PLANS

     In June 1996, the Company adopted the 1996 Stock Option Plan (the Plan),
which provides for the issuance of up to 823,061 shares of common stock of the
Company as either incentive stock options or non-qualified stock options (see
Note 13). Options granted under the Plan generally vest as to 25% of the
underlying shares on the first anniversary of the date of grant and ratably over
the remaining thirty-six months and expire five years from date of grant. At
April 30, 1999, 72,823 shares were available for future grant. At April 30,
1997, 1998 and 1999, there were 158,546, 214,360 and 95,835 options exercisable
under the plan, at a weighted average exercise price of $.001, $.08 and $.07 per
share, respectively.

     The following table summarizes option activity over the life of this plan:
OPTIONS      WEIGHTED AVERAGE
                                                              OUTSTANDING     EXERCISE PRICE
                                                              -----------    ----------------
Granted...................................................    547,669           $ .07
  Exercised.................................................   (140,476)            .01
  Canceled..................................................    (40,020)            .15
                                                               --------           -----
Outstanding at April 30, 1997...............................    367,173             .10
  Granted...................................................     94,100             .15
  Exercised.................................................    (76,530)            .02
  Canceled..................................................    (77,180)            .15
                                                               --------           -----
Outstanding at April 30, 1998...............................    307,563             .10
  Granted...................................................    498,541             .18
  Exercised.................................................   (157,703)            .10
  Canceled..................................................    (13,341)            .15
                                                               --------           -----
Outstanding at April 30, 1999...............................    635,060             .16
                                                               --------           -----
  Granted (unaudited).......................................    247,000            2.06
  Exercised (unaudited).....................................         --              --
  Canceled (unaudited)......................................    (18,142)            .15
                                                               --------           -----
Outstanding at July 31, 1999 (unaudited)....................    863,918           $ .71
                                                               ========           =====
The Company's stock plans are accounted for under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations (APB No. 25). Under APB No. 25,

                                      F-14
81
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

no compensation expense is recorded when the exercise price of options granted
equals the market price of the underlying stock on the date of grant. Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), requires the Company to disclose, on a pro forma
basis, the effect on net income (loss) as if the Company had recorded
compensation expense for its stock-based compensation plans based on the fair
value of the awards. On a pro forma basis, the effect in 1997, 1998 and 1999 was
immaterial.

     However, the pro forma effect in 1997, 1998 and 1999 of expensing the
estimated fair value of stock options is not necessarily representative of the
effects on reported net income for future years due to such factors as the
vesting period of the stock options and the potential for issuance of additional
stock options and stock purchase shares in future years.

     The fair market value for these options was estimated at the date of grant
using the minimum value method and the following weighted-average assumptions
for options granted in 1997, 1998 and 1999: risk-free interest rate of 5.0%,
4.5% and 5.0%; a weighted-average expected life of the option of five years; and
no dividends. The weighted-average fair value of stock options granted in 1997,
1998 and 1999 was $0.03, $0.03 and $0.04. The weighted average remaining
contractual life for those stock options outstanding at April 30, 1999 was 3.94
years. The options outstanding at April 30, 1999 have exercise prices ranging
from $0.001 to $0.30 per share.

     The Company issued 75,000 shares of restricted common stock in May 1998 and
1,005,345 shares of restricted common stock in June and September, 1997 to
certain executives and a member of the Board of Directors in exchange for
promissory notes equal to the fair market value of the common stock on the grant
date ($0.15 per share). The promissory notes are non-interest bearing to
employees insofar as the Company is required to reimburse the employees for any
interest on the promissory notes that is payable to the Company. The restricted
stock generally vests over four years and the promissory notes have a five-year
maturity. The outstanding balance of the promissory notes at April 30, 1998 and
1999 is $150,802 and $158,677, respectively.

     At April 30, 1999, the Company had reserved 6,336,544 shares of common
stock for issuance under the 1996 Stock Option Plan and upon conversion of the
Series B and D preferred stock.

9. EMPLOYEE SAVINGS PLANS

     The Company maintains a retirement savings plan under section 401(k) of the
Internal Revenue Code. The plan covers substantially all U.S. employees and
allows participants to defer a portion of their annual compensation on a pre-tax
basis. The Company also maintains a Registered Retirement Savings Plan for its
Canadian employees which allows participants to defer a portion of their annual
compensation on a pre-tax basis. The Company made no contributions to either
plan during 1997, 1998 or 1999.

10. COMMITMENTS AND CONTINGENCIES

     The Company leases office space in the United States and Canada under
non-cancelable operating leases. The Company's Canadian facility is leased from
Manz Developments, Inc., a related party. Rent expense under this arrangement
was approximately $96,000 in 1997 and 1998 and $99,000 in 1999. Total rent
expense under all operating leases for 1997, 1998 and 1999 was approximately
$96,000, $264,000 and $333,000, respectively. At April 30, 1999, future minimum
lease commitments were approximately $333,000 in 2000, $273,000 in 2001,
$207,000 in 2002 and $69,000 in 2003.

                                      F-15
82
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. EARNINGS PER SHARE

     The calculations of earnings per share are as follows:
THREE MONTHS ENDED
                                            YEARS ENDED APRIL 30,                   JULY 31,
                                   ---------------------------------------   -----------------------
                                      1997          1998          1999          1998         1999
                                   -----------   -----------   -----------   -----------   ---------
                                                                                   (UNAUDITED)
Numerator:
  Net loss.......................  $   (97,317)  $  (953,183)  $  (181,082)  $  (122,806)  $ (67,556)
  Dividend on subsidiary
     redeemable preferred
     stock.......................      133,333       160,000       196,947        49,614      50,215
  Dividends on preferred stock...    1,010,557     1,220,000     1,965,921       393,234     551,134
                                   -----------   -----------   -----------   -----------   ---------
          Total dividends........    1,143,890     1,380,000     2,162,868       442,848     601,349
  Numerator for basic and diluted
     earnings per share-income
     available to common
     stockholders................  $(1,241,207)  $(2,333,183)  $(2,343,950)  $  (565,654)  $(668,905)
                                   ===========   ===========   ===========   ===========   =========
Denominator:
  Denominator for basic and
     diluted earnings per
     share -- weighted-average
     shares......................    2,083,759     2,272,079     2,536,931     2,390,233   2,813,097
                                   ===========   ===========   ===========   ===========   =========
Basic and diluted earnings (loss)
  per share......................  $     (0.60)  $     (1.03)  $     (0.92)  $     (0.24)  $   (0.24)
                                   ===========   ===========   ===========   ===========   =========
The following potential common shares have been excluded from the
computation of diluted net loss per share for all periods presented because the
effect would have been anti-dilutive (in thousands):
THREE MONTHS
                                                      YEAR ENDED APRIL 30,      ENDED JULY 31,
                                                     -----------------------    --------------
                                                     1997     1998     1999     1998     1999
                                                     -----    -----    -----    -----    -----
                                                                                 (UNAUDITED)
Shares issuable under stock options................    367      308      635      398      864
                                                     =====    =====    =====    =====    =====
Shares of nonvested restricted stock...............     --      934      732      827      827
                                                     =====    =====    =====    =====    =====
Shares potentially issuable upon conversion of
  Series B and D preferred stock...................  4,709    5,598    9,420    7,596    7,849
                                                     =====    =====    =====    =====    =====
12. VALUATION AND QUALIFYING ACCOUNTS

     ACCOUNTS RECEIVABLE RESERVES AND ALLOWANCES:
ADDITIONS
                                               BALANCE AT     CHARGED TO     DEDUCTIONS
                                              BEGINNING OF      INCOME      (PRINCIPALLY    BALANCE AT
PERIOD                                            YEAR        STATEMENT     WRITE-OFFS)     END OF YEAR
------                                        ------------    ----------    ------------    -----------
Year ended April 30, 1997...................    $ 48,709       $ 12,500      $ (14,031)      $ 47,178
Year ended April 30, 1998...................    $ 47,178       $165,252      $ (62,430)      $150,000
Year ended April 30, 1999...................    $150,000       $112,418      $ (82,858)      $179,560
F-16
83
                            MCK COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. CORPORATE RESTRUCTURING

     In June 1996, the Company completed a recapitalization. The
recapitalization consisted of the following major transactions:

     1) Issued 3,968,384 shares of Series B redeemable convertible preferred
        stock in the Company valued at $1,666,667 and 2,000,000 shares of Series
        E redeemable preferred stock in its Canadian subsidiary valued at
        $2,000,000 to MDI, the then sole shareholder of the Company.

     2) Sold 13,333,333 shares of Series A redeemable preferred stock to an
        outside investor for $13,333,333.

     3) Arranged for the outside investor to purchase from MDI the 3,968,384
        shares of Series B redeemable convertible preferred stock for
        $1,666,667.

     4) Obtained $5,000,000 of 12.5% subordinated promissory notes from the
        outside investor.

     5) Paid the following to MDI: $14,119,603 of dividends, $500,000 for
        redemption of preferred stock and $1,166,667 for repayment of an
        outstanding promissory note.

     6) Incurred a transaction charge of $493,284, consisting of $448,730 of
        employee stock options redeemed for cash and other charges of $44,554.

     Subsequent to the series of transactions described above, the outside
investor, through ownership of 3,968,384 shares of Series B redeemable
convertible preferred stock, owned 66.1% of the Company, and MDI, through
ownership of 2,031,616 shares of common stock, owned 33.9% of the Company.

14. SUBSEQUENT EVENTS

     The Company is contemplating completing a stock split prior to the
effective date of its initial public offering.

     On June 1, 1999, the Company increased its option pool for the 1996 Stock
Option Plan (the Plan), by 200,000 shares. Subsequent to the increase, the
Company granted approximately 247,000 options to key employees.

     On June 23, 1999, the Company issued 245,000 shares of restricted common
stock to certain executives in exchange for promissory notes equal to the fair
market value of the common stock on the date of grant.

     On July 1, 1999, the Company entered into a financing agreement with a bank
to provide a $500,000 equipment line of credit. Under the terms of the
agreement, the Company can draw up to $500,000 through September 1999 to
purchase capital equipment. Drawings under the line are treated as a term loan
which is payable in 36 equal monthly installments of principal and interest. The
equipment line carries a rate of interest equal to the bank's base rate plus 50
basis points (8.5% at July 30, 1999). The Company has drawn approximately
$230,000 on the line in July.

                                      F-17
84

EDGAR DESCRIPTIONS FOR INSIDE BACK COVER:

                   CAPTION: AWARDS FOR EXTENDER PRODUCT LINE.

     1.  Diagram showing the MCK logo circled by the logos of awards with the
following text: (1) 1998 Product of the Year, Call Center Magazine, EXTender
3000; (2) 1998 Product of the Year, Computer Telephony Magazine, EXTender
3000-series; (3) 1998 Product of the Year, CTI Magazine, EXTender 3000; (4) 1998
Product of the Year, Call Center Solutions Magazine, EXTender 3000; (5) Best of
Show, CT Expo 98, Computer Telephony Magazine, PBXtender; (6) Judges' Pick, 1998
Computer Telephony, EXTender 6000; (7) 1998 Editor's Choice, CTI Magazine,
EXTender 3000; (8) Best of CT Expo Fall 1998, CTI Magazine, EXTender; (9) Best
of CT Expo Spring 1999, Computer Telephony Magazine, Branch Office EXTender
6000; (10) Best of Show, Demo 97, Fall Expo, Computer Telephony/Teleconnect
Magazine, EXTender; (11) Editor's Choice, 1998 Telemarketing and Call Center
Solutions, PBXtender/IP EXTender 4000.
85

                                     [LOGO]
86

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the estimated expenses payable by us in
connection with the offering (excluding underwriting discounts and commissions):
NATURE OF EXPENSE                                             AMOUNT
-----------------                                             -------
SEC Registration Fee........................................  $17,214
NASD Filing Fee.............................................    6,692
Nasdaq National Market Listing Fee..........................        *
Accounting Fees and Expenses................................        *
Legal Fees and Expenses.....................................        *
Printing Expenses...........................................        *
Blue Sky Qualification Fees and Expenses....................   15,000
Transfer Agent's Fee........................................        *
Miscellaneous...............................................        *
                                                              -------
Total.......................................................        *
---------------
* To be completed by amendment.

     The amounts set forth above, except for the Securities and Exchange
Commission, National Association of Securities Dealers, Inc. and Nasdaq National
Market fees, are in each case estimated.

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our amended and restated certificate of incorporation provides
that no director of MCK Communications be personally liable to MCK
Communications, its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to MCK Communications or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (3) in respect of unlawful dividend payments or stock
redemptions or repurchases, or (4) for any transaction from which the director
derived an improper personal benefit. In addition, the first amended and
restated certificate of incorporation provides that if the Delaware General
Corporation Law is amended to authorize the further elimination or limitation of
the liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.

     Article V of our amended and restated by-laws provides for indemnification
by MCK Communications of its officers and certain non-officer employees under
certain circumstances against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement, reasonably incurred in connection with the
defense or settlement of any threatened, pending or completed legal proceeding
in which any such person is involved by reason of the fact that such person is
or was an officer or employee of the registrant if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of MCK Communications, and, with respect to criminal actions
or proceedings, if such person had no reasonable cause to believe his or her
conduct was unlawful.

     Under Section 7 of the underwriting agreement to be filed as Exhibit 1.1
hereto, the underwriters have agreed to indemnify, under certain conditions, MCK
Communications, its directors, certain officers and persons who control MCK
Communications within the meaning of the Securities Act against certain
liabilities.

                                      II-1
87

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     Set forth in chronological order below is information regarding the number
of shares of capital stock issued by the Registrant during the past three years.
Further included is the consideration, if any, received by the Registrant for
such shares, and information relating to the section of the Securities Act or
rule of the Securities and Exchange Commission under which exemption from
registration was claimed.

     1. An aggregate of                shares of Series A preferred stock (which
        are subject to redemption, and will be redeemed, upon the completion of
        this initial public offering) were issued in a private placement in July
        1998 to investment funds associated with Summit Partners. The
        consideration received for such shares was $      .

     2. An aggregate of                shares of Series C preferred stock (which
        are subject to redemption, and will be redeemed, upon the completion of
        this initial public offering) was issued in a private placement in July
        1998 to investment funds associated with Lazard Freres, and certain
        other purchasers, pursuant to a Stock Purchase Agreement. The
        consideration received for such shares was $      .

     3. An aggregate of                shares of Series D preferred stock (which
        are convertible into                shares of common stock) was issued
        in a private placement in July 1998 to investment funds associated with
        Lazard Freres, and certain other purchasers, pursuant to a Stock
        Purchase Agreement. The consideration received for such shares was $
             .

     4. From January 1998 to August 1999, an aggregate of                shares
        of common stock was sold to certain directors and key executives of MCK
        Communications pursuant to Stock Restriction Agreements and a Stock
        Purchase Agreement for prices ranging from $          to $     per
        share. The aggregate consideration received for such shares was $      .

     5. From June 1996 to July 1999, MCK Communications granted stock options to
        purchase an aggregate of                shares of common stock to
        directors, employees and consultants with exercise prices ranging from
        $     to $     per share pursuant to MCK Communications 1996 Stock
        Option Plan. As of July 31, 1999,           shares of common stock have
        been issued upon exercise of options.

     6. Prior to August 1996, we sold several series of preferred stock to
        investment funds associated with Summit Partners and certain entities
        associated with Wilson, Sonsini, Goodrich and Rosati, P.C. For
        additional information regarding the sale of preferred stock to the
        Summit Group, see "Certain Transactions with Related Parties."

     No underwriters were used in connection with these sales and issuances. The
sales and issuances of these securities were exempt from registration under the
Securities Act pursuant to Rule 701 promulgated thereunder on the basis that
these securities were offered and sold either pursuant to a written compensatory
benefit plan or pursuant to written contracts relating to compensation, as
provided by Rule 701, or pursuant to Section 4(2) of the Securities Act on the
basis that the transactions did not involve a public offering.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
*1.1  Form of Underwriting Agreement.
   2.1  Stock and Note Purchase Agreement, dated as of June 27,
        1996, by and among MCK Communications, Inc., MCK
        Telecommunications, Inc., Cal Manz, Manz Developments, Inc.
        and the Investors named therein (excluding schedules, which
        the Registrant agrees to furnish supplementally to the
        Commission upon request).
   2.2  Stock Purchase Agreement, dated as of July 16, 1998, by and
        among MCK Communications, Inc. and the Purchasers named
        therein (excluding schedules, which the Registrant agrees to
        furnish supplementally to the Commission upon request).
II-2
88
3.1  Certificate of Incorporation of the Registrant.
  *3.2  Form of Amended and Restated Certificate of Incorporation of
        the Registrant (to be filed following consummation of the
        offering).
  *3.3  Form of First Amended and Restated Certificate of
        Incorporation of the Registrant (to be filed prior to
        consummation of this offering).
   3.4  By-laws of the Registrant.
  *3.5  Form of Second Amended and Restated By-laws of the
        Registrant (to be effective upon consummation of the
        offering).
  *4.1  Specimen certificate for shares of common stock, $.001 par
        value, of the Registrant.
  *5.1  Opinion of McDermott, Will & Emery as to the validity of the
        securities being offered.
  10.1  Amended and Restated Stockholders' Agreement, dated July 16,
        1998, between the Registrant and the Stockholders named
        therein.
  10.2  Amended and Restated Registration Rights Agreement, dated
        July 16, 1998, between the Registrant and the Stockholders
        named therein.
  10.3  Amended and Restated 1996 Stock Option Plan of the
        Registrant.
  10.4  1999 Stock Option and Grant Plan of the Registrant.
  10.5  Class A Subordinated Promissory Note issued by MCK
        Communications, Inc. to WS Investment Company 96A in the
        amount of $8,750 dated June 27, 1996.
  10.6  Class A Subordinated Promissory Note issued by MCK
        Communications, Inc. to Trustee, WSGR Retirement Plan FBO
        Jeffery D. Saper in the amount of $16,250 dated June 27,
        1996.
  10.7  Class A Subordinated Promissory Note issued by MCK
        Communications, Inc. to Summit Subordinated Debt Fund, L.P.
        in the amount of $4,875,500 dated June 27, 1996.
  10.8  Class A Subordinated Promissory Note issued by MCK
        Communications, Inc. to Summit Investors III in the amount
        of $99,500 dated June 27, 1996.
  10.9  Form of Stock Restriction Agreement for sale of restricted
        stock to executive officers.
 10.10  Form of Promissory Note for purchase of restricted stock by
        executive officers.
 10.11  Form of Pledge Agreement.
 10.12  Form of Bonus Agreement.
*10.13  Lease Agreement between Manz Developments, Inc. and MCK
        Telecommunications, Inc. dated January 1, 1996.
*10.14  Office Lease between MCK Communications, Inc. and 313
        Washington Street, LLC dated June 2, 1997, as amended April
        22, 1998 and June 30, 1998.
*10.15  Agreement between MCK Communications, Inc. and Lucent
        Technologies, Inc. effective as of April 30, 1999.
*10.16  Master Support Agreement between MCK Communications, Inc.
        and Vital Networks, Inc. dated June 28, 1999.
  16.1  Letter regarding change in certifying accountants
 *23.1  Consent of McDermott, Will & Emery (included in Exhibit 5.1
        hereto).
  23.2  Consent of Ernst & Young LLP.
  23.3  Consent of PricewaterhouseCoopers LLP
  24.1  Powers of Attorney (included on page II-5).
  27.1  Financial Data Schedule.
---------------
* To be filed by amendment to this Registration Statement.

                                      II-3
89

     (b) Consolidated Financial Statement Schedules

     All schedules have been omitted because they are not required or because
the required information is given in the Consolidated Financial Statements or
Notes to those statements.

ITEM 17.  UNDERTAKINGS

     The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

     The undersigned registrant hereby undertakes that:

          (1) For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this registration statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     registration statement as of the time it was declared effective.

          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

                                      II-4
90

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newton, Commonwealth of
Massachusetts, on August 24, 1999.

                                          MCK COMMUNICATIONS, INC.

                                          By:     /s/ STEVEN J. BENSON
                                            ------------------------------------
                                                      Steven J. Benson
                                               President and Chief Executive
                                                           Officer

                               POWER OF ATTORNEY

     KNOWN ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints each of Steven J. Benson and Paul K.
Zurlo such person's true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to any
other registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act), and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that any said attorney-in-fact and agent, or any
substitute or substitutes of any of them, may lawfully do or cause to be done by
virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                     TITLE                     DATE
                     ---------                                     -----                     ----
/s/ STEVEN J. BENSON                  President, Chief Executive         August 24, 1999
---------------------------------------------------    Officer and Director (Principal
                 Steven J. Benson                      Executive Officer)

                 /s/ PAUL K. ZURLO                   Chief Financial Officer            August 24, 1999
---------------------------------------------------    (Principal Financial Officer
                   Paul K. Zurlo                       and Principal Accounting
                                                       Officer)

                /s/ CALVIN K. MANZ                   Director                           August 24, 1999
---------------------------------------------------
                  Calvin K. Manz

                /s/ JOHN B. LANDRY                   Director                           August 24, 1999
---------------------------------------------------
                  John B. Landry

                /s/ GREGORY M. AVIS                  Director                           August 24, 1999
---------------------------------------------------
                  Gregory M. Avis
II-5
91
SIGNATURE                                     TITLE                     DATE
                     ---------                                     -----                     ----
/s/ MICHAEL H. BALMUTH                 Director                           August 24, 1999
---------------------------------------------------
                Michael H. Balmuth

                 /s/ PAUL SEVERINO                   Director                           August 24, 1999
---------------------------------------------------
                   Paul Severino
II-6
92

                                 EXHIBIT INDEX
EXHIBIT
NUMBER                        EXHIBIT DESCRIPTION
-------                       -------------------
*1.1    Form of Underwriting Agreement.
   2.1    Stock and Note Purchase Agreement, dated as of June 27,
          1996, by and among MCK Communications, Inc., MCK
          Telecommunications, Inc., Cal Manz, Manz Developments, Inc.
          and the Investors named therein (excluding schedules, which
          the Registrant agrees to furnish supplementally to the
          Commission upon request).
   2.2    Stock Purchase Agreement, dated as of July 16, 1998, by and
          among MCK Communications, Inc. and the Purchasers named
          therein (excluding schedules, which the Registrant agrees to
          furnish supplementally to the Commission upon request).
   3.1    Certificate of Incorporation of the Registrant.
  *3.2    Form of Amended and Restated Certificate of Incorporation of
          the Registrant (to be filed following consummation of the
          offering).
  *3.3    Form of First Amended and Restated Certificate of
          Incorporation of the Registrant (to be filed prior to
          consummation of this offering).
   3.4    By-laws of the Registrant.
  *3.5    Form of Second Amended and Restated By-laws of the
          Registrant (to be effective upon consummation of the
          offering).
  *4.1    Specimen certificate for shares of common stock, $.001 par
          value, of the Registrant.
  *5.1    Opinion of McDermott, Will & Emery as to the validity of the
          securities being offered.
  10.1    Amended and Restated Stockholders' Agreement, dated July 16,
          1998, between the Registrant and the Stockholders named
          therein.
  10.2    Amended and Restated Registration Rights Agreement, dated
          July 16, 1998, between the Registrant and the Stockholders
          named therein.
  10.3    Amended and Restated 1996 Stock Option Plan of the
          Registrant.
  10.4    1999 Stock Option and Grant Plan of the Registrant.
  10.5    Class A Subordinated Promissory Note issued by MCK
          Communications, Inc. to WS Investment Company 96A in the
          amount of $8,750 dated June 27, 1996.
  10.6    Class A Subordinated Promissory Note issued by MCK
          Communications, Inc. to Trustee, WSGR Retirement Plan FBO
          Jeffery D. Saper in the amount of $16,250 dated June 27,
          1996.
  10.7    Class A Subordinated Promissory Note issued by MCK
          Communications, Inc. to Summit Subordinated Debt Fund, L.P.
          in the amount of $4,875,500 dated June 27, 1996.
  10.8    Class A Subordinated Promissory Note issued by MCK
          Communications, Inc. to Summit Investors III in the amount
          of $99,500 dated June 27, 1996.
  10.9    Form of Stock Restriction Agreement for sale of restricted
          stock to executive officers.
 10.10    Form of Promissory Note for purchase of restricted stock by
          executive officers.
 10.11    Form of Pledge Agreement.
 10.12    Form of Bonus Agreement.
*10.13    Lease Agreement between Manz Developments, Inc. and MCK
          Telecommunications, Inc. dated January 1, 1996.
*10.14    Office Lease between MCK Communications, Inc. and 313
          Washington Street, LLC dated June 2, 1997, as amended April
          22, 1998 and June 30, 1998.
*10.15    Agreement between MCK Communications, Inc. and Lucent
          Technologies, Inc. effective as of April 30, 1999.
*10.16    Master Support Agreement between MCK Communications, Inc.
          and Vital Networks, Inc. dated June 28, 1999.
93
EXHIBIT
NUMBER                        EXHIBIT DESCRIPTION
-------                       -------------------
16.1    Letter regarding change in certifying accountants
 *23.1    Consent of McDermott, Will & Emery (included in Exhibit 5.1
          hereto).
  23.2    Consent of Ernst & Young LLP.
  23.3    Consent of PricewaterhouseCoopers LLP
  24.1    Powers of Attorney (included on page II-5).
  27.1    Financial Data Schedule.
---------------
* To be filed by amendment to this Registration Statement.