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X-FACTOR COMMUNICATIONS HOLDINGS, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion should be read in conjunction with our audited balance sheets as of December 31, 2012 and 2011 and the related statements of operations and members' deficit and cash flows for each of the years then ended and the notes attached thereto and the unaudited consolidated balance sheet as of March 31, 2013 and the related unaudited consolidated statements of operations and stockholders' and members' deficit and cash flows for the three months ended March 31, 2013 and 2012 and the notes attached thereto. Such March 31, 2012 financial statements exclude the effects of the Merger and the related reorganization. This interim financial information reflects, in the opinion of management, all adjustments necessary (consisting only of normal recurring adjustments and changes in estimates, where appropriate) to present fairly the results for the interim periods. The results of operations and cash flows for such interim periods are not necessarily indicative of those expected for a full year. All statements contained herein that are not historical facts, including, but not limited to, statements regarding anticipated future capital requirements, our future development plans, our ability to obtain debt, equity or other financing, and our ability to generate cash from operations, are based on current expectations. The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future. The Company operates in one segment and therefore segment information is not presented. The statements contained herein, other than historical information, are or may be deemed to be forward-looking statements and involve factors, risks and uncertainties that may cause our actual results in future periods to differ materially from such statements. These factors, risks and uncertainties are discussed below and include market acceptance and availability of digital media communication services, rapid technological change affecting demand for our services, competition from other digital media communication service providers, deteriorating economic conditions, the availability of sufficient financial resources to enable us to pay our existing obligations and expand our operations, adequacy of internal controls, being an early stage software development company, as well as other risks and uncertainties that may be detailed from time to time in our filings with the Securities and Exchange Commission. Overview X-Factor Communications Holdings, Inc., a Delaware corporation (formerly, Organic Spice Imports, Inc.) ("Holdings" or the "Company", "we", "us" or "our"), through its wholly-owned subsidiary X-Factor Communications, LLC, a New York limited liability company ("X-Factor"), located in South Hackensack, New Jersey, provides interactive digital media network software and services. References herein to: the "Company", "we", "us" or "our", refer to X-Factor Communications Holdings, Inc. and X-Factor. The X-Factor Digital Media Network Platform, our cloud-based Digital Media, web and mobile solution, is delivered as a software-as-a-service and under a software license model, enabling our customers to build simple yet scalable advertising and corporate digital media networks. The Company's webcasting solution, a live and on-demand multimedia distribution product, delivers rich media content, desktop signage and emergency messaging to mobile and Web devices. The Company's solutions address the rapidly expanding digital media needs of its corporate, public venue, education and government sector customers. The Company markets its software and services throughout the United States. Liquidity and Capital Resources At March 31, 2013 the Company had a stockholders' deficit of $1,543,159, a working capital deficiency of $969,783 and incurred a net loss of $605,382 for the three months then ended. In addition, there was a decrease in revenue of $43,266 for the three months ended March 31, 2013 when compared to 2012. There can be no assurance that: (1) existing stockholders will continue to support the operational and financial requirements of the Company, (2) that the Company will be able to raise sufficient equity or (3) that the Company will continue to be able to comply with existing covenants with creditors in future periods. While the Company has been successful to date in raising funds through sales of securities, the Company does not currently have any sources of committed funding available. The report of our independent registered public accounting firm on our December 31, 2012 financial statements included an explanatory paragraph indicating that there was substantial doubt concerning the Company's ability to operate as a going concern. X-Factor has historically incurred net losses and recurring negative cash flows from operations. Furthermore X-Factor has, in the past, defaulted on debt service payments and been in default of covenants in certain debt agreements and there are no assurances that investors will continue to support X-Factor or that X-Factor will be able to raise sufficient capital or debt financing to sustain operations. All of these conditions raise substantial doubt about X-Factor's ability to continue as a going concern. The consolidated financial statements do not include any adjustments to the carrying value of assets and liabilities that might result from the outcome of these uncertainties. 24 -------------------------------------------------------------------------------- During the three months ended March 31, 2013 the Company sold 200,000 shares of its common stock for gross proceeds of $160,000 (see Note 18) and an additional 218,750 shares of its' common stock for gross proceeds of $175,000 subsequent to March 31, 2013 (see Note 20) . The Company believes that the remainder of net cash proceeds received from the sale of securities in the Offerings will only provide sufficient equity to fund its operations for the next two to three months from the date of filing this Quarterly Report on Form 10-Q. Additional significant amounts of capital will be needed to be raised to continue the Company's operations. There are no assurances, however, that the Company will be able to raise additional capital as may be needed, or increase revenue levels and profitability. Further, if the current economic climate negatively impacts the Company, as it may, and the Company is unable to raise additional capital on acceptable terms, it could have a material adverse effect on the Company's financial condition, future operations and cash flows. Critical Accounting Policies Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are uncollateralized, non interest bearing, customer obligations due under normal trade terms and are stated at the amount billed to the customer. Payments of accounts receivable are allocated to the specific invoices identified on the customer's remittance advice or, if unspecified, are applied to the earliest unpaid invoices. The carrying amount of the Company's accounts receivable may, at times, be reduced by a valuation allowance that reflects management's best estimate of the amounts that will not be collected. Management individually reviews all accounts receivable balances periodically and based on an assessment of the current creditworthiness of the customer, estimates the portion, if any, of the balance that will not be collected. Equipment and Leasehold Improvements Equipment and leasehold improvements are recorded at cost. Depreciation on equipment is recorded over the estimated useful lives of the assets (five years) using the straight-line method. Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful life of the asset (seven years) or the expected term of the occupancy. Included in equipment are fixed assets subject to capital leases which are depreciated over the life of the respective asset. Maintenance and repair costs are charged to expense as incurred. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is reported in results of operations. Long-Lived Assets The Company periodically evaluates the net realizable value of long-lived assets, principally equipment and leasehold improvements, relying on a number of factors including operating results, business plans, economic projections and anticipated future cash flows. Impairment in the carrying value of an asset is recognized whenever anticipated future undiscounted cash flows from an asset are estimated to be less than its carrying value. The amount of the impairment recognized is the difference between the carrying value of the asset and its fair value. There were no impairment losses recognized in the three months ended March 31, 2013 and 2012. Revenue Recognition Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. The Company has certain arrangements where it is obligated to deliver multiple products and/or services (multiple elements). In these arrangements, the Company allocates the total revenue among the elements based on the sales price of each element when sold separately using vendor-specific objective evidence. Revenue from multi-year licensing arrangements is accounted for as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the billing coverage period. Unearned revenue also consists of future maintenance and upgrade services that will be provided by the Company in future periods under terms of a non-refundable service contract. 25 --------------------------------------------------------------------------------Derivative Financial Instruments The Company's objectives in using debt-related derivative financial instruments are to obtain the lowest cash cost source of funds. Derivatives are recognized in the balance sheet at fair value based on the criteria specified in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 815, "Derivatives and Hedging " ("ASC Topic 815"). Under ASC Topic 815, the estimated fair value of derivative liabilities is revalued at each balance sheet date with the changes in value, if any, recorded in the interest and other expense section of the accompanying Consolidated Statements of Operations and in derivative financial instruments of the liability section of the Consolidated Balance Sheets. Financial Instruments with Anti-Dilution Features The Company has issued warrants that contain a weighted average anti-dilution feature that in certain circumstances could provide the warrant holders with protection against changes in the market value of the Company's common stock; accordingly, they are required under applicable accounting standards to be recorded at fair value as of the balance sheet date. On the balance sheet date the Company evaluates the fair value of the warrants using a valuation model and the net difference, if material, between their previous periods' fair values and their current fair values is recorded in the interest and other expense section of the accompanying Consolidated Statements of Operations and in derivative financial instruments of the liability section of the Consolidated Balance Sheets. Equity-Based Compensation Equity-based awards for common stock have been accounted for as required by FASB ASC Topic 718, "Compensation - Stock Compensation" ("ASC Topic 718"). Under ASC Topic 718, equity-based awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service period. The Company values its equity-based awards using the Black-Scholes option valuation model. The fair value of the common stock used in these valuation models is based on the most recent sale of a share of common stock of the Company. We periodically grant options for common stock to employees and consultants in accordance with the provisions of our stock option plans (see Note 16), with the exercise price of the options established at the price of a recent sale of a share of common stock of the Company. As a consequence of the Merger, no additional grants may be made from the 2006 and 2010 Plans and the options are exercisable into shares of the Company. We periodically grant warrants for common stock to consultants and investors (see Note 17). The fair value of warrants for shares of common stock issued to consultants or investors are recognized over the requisite service period with a corresponding credit to Additional Paid-in Capital. Warrants issued to consultants are based on the fair value of a share of common stock related to the warrants. Warrants for common stock issued to equity investors have no effect on Additional Paid-in Capital; that is, the fair value of the warrants granted to investors and charged to Additional Paid-in Capital are entirely offset by a corresponding adjustment to Additional Paid-in Capital. Income Taxes Holdings operates as a "C" corporation. Prior to the Merger, the members of X-Factor elected to be treated as a limited liability corporation, under the applicable provisions of the Internal Revenue Code and State of New Jersey tax laws. Holdings uses the asset and liability method to determine our income tax expense or benefit. Deferred tax assets and liabilities are computed based on temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered or settled. Any resulting net deferred tax assets are evaluated for recoverability and an assessment of whether it is more likely than not that such amount will be realized. Based on an assessment of all available evidence, a valuation allowance has been established against net deferred tax assets of $940,000 (principally composed of a $615,000 net operating loss ("NOL") and $275,000 of compensation expenses) at March 31, 2013 For the period from the effective date of the Merger through December 31, 2012 the Company did not record a benefit for income taxes. At March 31, 2013 the Company had Federal and New Jersey NOL carry-forwards of approximately $1,536,000 which begin to expire in 2032 and 2019, respectively. The utilization of our NOL for Federal income tax purposes sustained by the Company may be substantially limited annually as a result of an "ownership change" (as defined by Section 382 of the Internal Revenue Code of 1986, as amended). If it is determined that there is a change in ownership, or if the Company undergoes a change of ownership in the future, the utilization of the Company's NOL carry-forwards may be materially constrained. This would result in a reduction in equal amounts to the deferred tax assets and the related valuation reserves. 26 -------------------------------------------------------------------------------- FASB ASC Topic 740 "Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in an entity's consolidated financial statements and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. The standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition requirements. Prior to the Merger, X-Factor operated as a limited liability corporation and Federal and state taxes are passed through to the members, so too would the assessments from any tax examinations and, since the Merger, has generated an operating loss. The Company conducts business domestically and, as a result, files Federal and state income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities. There are no ongoing or pending examinations by Federal or state tax agencies. The Company has evaluated its tax positions for all currently open tax years, 2009 through 2012, and has concluded that there are no significant uncertain tax positions for either Federal or state purposes. There were no interest or penalties related to income taxes that have been accrued or recognized as of March 31, 2013 and December 31, 2012, or for the three months ended March 31, 2013 and 2012. Emerging Growth Company We are an "emerging growth company" under the Jumpstart Our Business Startups Act (the "JOBS Act"). We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. Though the Company made this election, we have adopted all new or revised accounting standards at the effective dates that for apply public companies. Results of Operations Three months ended March 31, 2013 (the "2013 Quarter") compared to the three months ended March 31, 2012 (the "2012 Quarter") Revenues - Revenues decreased $43,266, or 23.7%, in the 2013 Quarter to $139,663 from $182,929 in the 2012 Quarter . The primary reason in the decrease in Webcasting revenues was caused by two major customers transitioning their business to their in-house systems. The following are the changes in the components of X-Factor's revenue: Favorable March 31, (Unfavorable) 2013 2012 Change Digital media software and services $ 82,679 $ 36,615 $ 46,064 Webcasting 56,984 146,314 (89,330 ) Total revenues $ 139,663 $ 182,929 $ (43,266 ) Cost of revenues - Cost of revenues decreased $3,597, or 4.8% in the 2013 Quarter to $71,437 from $75,034 in the 2012 Quarter. Cost of revenues, as a percentage of revenues, were 51.1% in the 2013 Quarter and 41.0% in the 2012 Quarter. This increase in the cost of revenues as a percentage of revenues is primarily related to development costs of approximately $45,000 for digital media software. Gross Profit - Gross profit decreased $39,669, or 36.8% in the 2013 Quarter to $68,226 from $107,895 in the 2012 Quarter. Gross profit, as a percentage of revenues, was 48.9% in the 2013 Quarter and 59.0% in the 2012 Quarter. Salaries and fringe benefits expenses - Compensation costs increased $144,652, or 154.7% in the 2013 Quarter to $238,134 from $93,482 in the 2012 Quarter. Compensation costs, as a percentage of revenues, were 170.5% in the 2013 Quarter and 51.1% in the 2012 Quarter. The primary reason for the increase in costs during the 2013 Quarter was the increase to 6 employees in the 2013 Quarter from 3 employees in the 2012 Quarter. 27 -------------------------------------------------------------------------------- Favorable March 31, (Unfavorable) 2013 2012 Change Salaries $ 177,947 $ 76,250 $ (101,697 ) Equity-based compensation 32,244 - (32,244 ) Commissions and bonuses 387 4,458 4,071 Employee insurance 5,527 4,128 (1,399 ) Payroll taxes 22,029 8,646 (13,383 ) Total salaries and fringe benefits $ 238,134 $ 93,482 $ (144,652 ) General and administrative expenses - General and administrative expenses decreased $37,839, or 8.4% in the 2013 Quarter to $414,048 from $451,887 in the 2012 Quarter. General and administrative expenses, as a percentage of revenues, were 296.5% in the 2013 Quarter and 247.0% in the 2012 Quarter. The following are the significant changes in the components of the Company's general and administrative expenses: Favorable March 31, (Unfavorable) 2013 2012 ChangeProfessional fees and consultants - Operations $ 169,230 $ 170,669 $ 1,439 Professional fees and consultants - Legal (A) 16,031 59,164 43,133 Professional fees and consultants - Accounting (A) 34,275 121,896 87,621 Professional fees and consultants - equity based (B) 119,013 1,485 (117,528 ) Travel (A) 16,963 31,237 14,274 Communication expenses 7,952 14,394 6,442 Insurance (C) 15,707 467 (15,240 ) SEC printing and filing fees 5,817 3,844 (1,973 ) Computer and office supplies 16,696 29,895 13,199 Advertising and marketing 3,157 7,500 4,343 Miscellaneous expenses 9,207 11,336 2,129 Total general and administrative $ 414,048 $ 451,887 $ 37,839 Note A - 2012 expenses are primarily related to the preparation required to becoming a "Public Company". Note B - In 2013 am individual received equity based compensation in lieu of cash compensation for performing software development services. Note C - Increase is primarily related to a Directors and Officers liability insurance policy the Company obtained upon becoming a "Public Company". Note D - Decreases are primarily related to the Company scaling back operations to conserve cash. Depreciation and amortization - Depreciation and amortization expenses decreased $11,556, or 71.9%, in the 2013 Quarter to $4,509 from $16,065 in the 2012 Quarter. The decrease was due to some assets being fully depreciated and the absence of equipment and leasehold improvement additions in all periods. Loss from operations - Loss from operations increased by $134,926, or 29.7% in the 2013 Quarter to $588,465 from $453,539 in the 2012 Quarter. 28 -------------------------------------------------------------------------------- Other expense - Other expense decreased by $720,587 in the 2013 Quarter to $16,917 from $737,504 in the 2012 Quarter. In the 2012 Quarter, amendments to, and the conversion of various Notes Payable to Related Parties, caused the related unamortized discounts and financing costs to be expensed and shown as a Loss on Extinguishment or Modification of Debt., due to amendments to Notes Payable, the related unamortized discount costs was expensed and shown as a Loss on Extinguishment or Modification of Debt. Professional fees related to the Merger were expensed as incurred. Amendments to various Notes Payable to Related Parties, required the recording of the change in fair value of derivative financial instruments. The following are the changes in the components of the Company's other expenses: Favorable March 31, (Unfavorable) 2013 2012 ChangeLoss on Extinguishment or Modification of Debt $ - $ 329,862 $ 329,862 Professional fees related to Merger - 133,191 133,191 Change in fair value of derivative financial instruments for Related Parties 1,543 121,296 119,753 Interest 12,868 33,073 20,205 Accretion of discount on notes 564 109,071 108,507 Amortization of prepaid financing costs - 11,011 11,011 Other expenses 1,942 - (1,942 ) Total other expenses $ 16,917 $ 737,504 $ (720,587 ) Income taxes - As a result of X-Factor being a limited liability company all profits and losses of X-Factor prior to the Merger flowed through to the individual members of X-Factor. Accordingly, X-Factor did not record a tax provision, incur any liability for incomes taxes nor record a benefit for income taxes or any deferred tax assets or liabilities for Federal or state tax purposes. Holdings operates as a "C" corporation. Net deferred tax assets are evaluated for recoverability and an assessment of whether it is more likely than not that such amounts will be realized. Based on an assessment of all available evidence, a valuation allowance has been established against net deferred tax assets (principally net operating losses) at March 31, 2013 and for the period from the Merger Date through March 31, 2013 the Company did not record a benefit for income taxes. Net loss - The decrease in gross profit and increase in operating expenses partially offset by the decrease in other expenses caused primarily by non-recurring expenses related to the change in fair value of derivative financial instruments and loss on extinguishment of debt caused the net loss to decrease by $585,661 in the 2013 Quarter to $605,382 from $1,191,043 in the 2012 Quarter. Cash flows At March 31, 2013, the Company had a working capital deficit of $969,783, compared to a working capital deficit of $670,657 at December 31, 2012, an increase in the deficit of $299,126. The Company had $105,515 in cash at March 31, 2013, compared to $311,843 at December 31, 2012, a decrease of $206,328. Net cash used in operating activities was $346,971 for the 2013 Quarter. The components of the use of funds were a net loss of $605,382 (net $441,860 excluding non-cash charges and credits) and a $14,312 increase in accounts receivable partially offset by a $81,743 net increase in accounts payable and accrued expenses, a $17,833 increase in unearned revenues and a $9,625 decrease in other current assets. Net cash used in operating activities was $61,536 for the 2012 Quarter. The components of the use of funds were a net loss of $1,191,043 ($584,537 excluding non-cash charges and credits), $20,811 from a reduction in unearned revenues and a $30,000 increase in other current assets partially offset by a decrease of $148,137 in accounts receivable and a $425,675 increase in accounts payable and accrued expenses. Cash provided by investing activities in the 2012 Quarter consisted of a $75,000 reimbursement by the Controlling Stockholders of the deposit advanced by X-Factor towards the acquisition of control of the Company for the purpose of consummating the Merger. Cash provided by financing activities in the 2013 Quarter totaled $140,643 and was comprised of $160,000 of gross proceeds from the sale of common stock in the December 2012 Offering partially offset by $16,000 in direct costs relating to the December 2012 Offering, $2,756 of principal repayments of lease obligations, and $601 of principal repayments towards the line of credit. Cash provided by financing activities in the 2012 Quarter totaled $44,436 and was comprised of $75,000 from the proceeds of notes payable - related parties and $316 from an increase in the Line of Credit partially offset by $27,983 in direct costs related to obtaining the notes payable - related parties and $2,897 of principal repayments of lease obligations. Inflation Inflation has a minimal impact on the operations of the Company 29 -------------------------------------------------------------------------------- Contractual Obligations Payments Due By Period Less Than Obligations Total 1 Year 2 - 3 Years 4 - 5 Years Notes payable - Note A $ 337,306 $ 27,056 $ 206,834 $ 103,416 Notes payable - related parties 288,606 - - 288,606 Capital leases 8,483 8,483 - - Line of credit - Note B 97,245 97,245 - - $ 731,640 $ 132,784 $ 206,834 $ 392,022 Note A - Payments are based on a percentage of the prior year's revenues with any unpaid principal due on August 1, 2016. For purposes of this table we were unable to estimate our revenues for the next three years so we have assumed that the unpaid principal balance, after our payment in July 2013, will be paid equally in years 2, 3 and 4. Note B - There is no maturity date for the Line of Credit; however the Company has classified this obligation as a current liability. Off-Balance Sheet Arrangements The Company had no off-balance sheet arrangements as of March 31, 2013 and December 31, 2012. Recent Accounting Pronouncements In January 2010, the FASB issued guidance that revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis. The guidance also clarifies that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. These new disclosure requirements became effective for the Company's financial statements for the period ended March 31, 2011, except for the requirement concerning gross presentation of Level 3 activity, which became effective for our 2011 year end. Since this guidance is only related to financial statement disclosures, there was no impact to the Company's financial statements as a result of the adoption of this guidance. In May 2011, the FASB issued Accounting Standards Update ("ASU") 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards" ("IFRS") ("ASU 2011-04"), which amends FASB ASC Topic 820, "Fair Value Measurement." These amendments, effective for the interim and annual periods beginning on or after December 15, 2011 (early adoption is prohibited), result in a common definition of fair value and common requirements for measurement of and disclosure requirements between U.S. GAAP and IFRS. Consequently, the amendments change some fair value measurement principles and disclosure requirements. The adoption of ASU 2011-04 did not have an impact on the Company's March 31, 2013 financial statements. In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income," which amends FASB ASC Topic 220, "Comprehensive Income." This guidance, effective retrospectively for the interim and annual periods beginning on or after December 15, 2011 (early adoption is permitted), requires presentation of total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The option to present components of other comprehensive income as part of the statement of stockholders' and members' deficit was eliminated. The items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation of loss per share. The adoption of ASU 2011-05 did not have an impact on the Company's March 31, 2013 financial statements as the Company has no items that require reporting as a component of comprehensive loss. The Company is not aware of any other pronouncements, not yet issued or adopted, that would have a material effect on its future financial statements. 30 --------------------------------------------------------------------------------Other Recent Developments The Company has recently added the following new products and solutions to its product base: The C4 "Corporate Communications Control Center" (the "C4 Solution") is an easy to use software-based solution for multi-media, multi-channel and multi-dimensional internal and external corporate communications. C4 is an advanced and intuitive content creation and management system that supports emergency messaging, conventional publishing as well as interactive applications. The C4 solution is complementary to other in-place systems, including intranet sites and Microsoft SharePoint, adding greater functionality and ease of use including the automated transformation of PowerPoint documents into desktop signs and alerts, for example. Content distributed over C4 is optimized for all end-points, whether large lobby displays, interactive kiosks including wayfinding capabilities, or mobile tablets and smart phones. MACC "Marketing and Advertising Control Center" builds upon over five years of experience developing, implementing and managing multimedia "immersive" digital media networks. MACC makes it easier than ever to participate in the rapidly growing "Digital-Out-Of-Home" marketing trend and enables marketers and their agency partners to: - Sell and deliver targeted advertising; - Provide product information and spur cross-selling and up-selling; - Promote features and benefits; - Help ensure consistency of messaging in multiple languages and geographies; and - Control costs via a Software-as-a-Service (SaaS) delivery model MACC is a high-impact delivery platform integrated into the way people shop, learn and play, presented at the most appropriate moments in the most interesting venues (retail shops, stadiums, public transportation hubs, on trains and buses, at medical centers, in malls, and much more). Displays can deliver messaging that is customized by geography, time of day, specific location and more in real-time, and data collected informs the real-time grooming of campaigns to ensure the highest conversion rates and ROI. X-Factor's "Enterprise Desktop" makes it possible to distribute content to desktops, intranet sites including SharePoint and mobile devices in real-time, including notifications, promotions, emergency alerts and more. Desktop signage takes content usually available on the intranet or digital signs and delivers it to a large employee community in a way that is hard to miss. While employees typically have access to a wealth of internal corporate information, due to the demands on their time, they often do not take the time to look for information unless it is related to a topic that they are specifically interested in. X-Factor's Enterprise Desktop enables company leaders to get key messages out, whether in screensaver mode or seeing content within the desktop player. Employees simply click for more information on any particular subject or to view a live webcast. X-Factor's Enterprise Desktop complements existing publishing systems including Microsoft SharePoint. X-Factor's mobile interactive capabilities extend the power of Digital Media to audiences' mobile devices. Through X-Factor's enhanced mobile engagement solutions, its mobile applications augment point of display to deliver information, marketing, ads, coupons and offers directly to an individual's smartphone or tablet. X-Factor's product range can be combined to support large scale "real world" and "virtual world" campaigns. For example, users can be sent to one of X-Factor's unique digital players, optimized for their mobile device. After enjoying an entertaining experience at a media wall or other digital sign, consumers can download the player and its contents to enjoy after leaving the venue. At interactive kiosks, consumers can receive wayfinding directions through a simple SMS text, or can receive an e-ticket or coupon instantly. X-Factor has developed a multimedia player which can be easily branded and customized to aggregate content of all types (photos, animations, videos, audio files, interactive applications, and more) into a single, intuitive user experience. The player that runs automatically, without having the user download a special application, and brings multiple content feeds together in an exciting user experience. X-Factor's digital media and creative services teams can easily and cost-efficiently design and deploy custom branded media players, and because the players are fed by X-Factor's dmcp:// platform, all the advantages of our related products, including the company's advertising sales monetization products dscp:// Storefront and DMAX are easily included. Working with companies who provide hardware and network infrastructure, X-Factor has released advanced interactive kiosks software, enabling audience engagement and interaction, advertising and marketing content creation, publishing, distribution and management. This software allows remote monitoring of kiosks from a single location, multi-user privileges for hierarchal (local and national) publishing, targeted advertising and transparent kiosk management and collection of user information. The Company works with other companies to ensure clients' goals for their customized interactive kiosk network are met, ensuring that all the elements in the solution meet stringent guidelines -- from the hardware and the kiosk interface and features to the appropriate network connectivity and uptime. 31-------------------------------------------------------------------------------- |