TMCnet News

MASSIVE INTERACTIVE, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
[August 19, 2014]

MASSIVE INTERACTIVE, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


(Edgar Glimpses Via Acquire Media NewsEdge) Forward-Looking Information This "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with our accompanying consolidated financial statements and related notes.



In addition to historical information, this quarterly report on Form 10-Q (this "Quarterly Report") contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this Quarterly Report, including without limitation, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section. We use words such as "believe," "intend," "expect," "anticipate," "plan," "may," "will," "should," "estimate," "potential," "project" and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to the risks identified in our Annual Report on the Form 10-K for the year ended December 31, 2013.

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this Quarterly Report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.


Overview Massive Interactive, Inc. (the "Company" or "Massive") is a leading provider of innovative solutions for the management, delivery and streaming of Internet Protocol (IP)-based video and media assets. Our comprehensive software platform enables enterprise customers to acquire, manage and distribute their video assets across various devices used by consumers including Games Consoles, Smart TV's, Tablets, Smart Phones, Internet-Enabled Set Top Boxes and other devices.

Our suite of products include, MDK, a cross-device software development solution, MUI, a cross devices suite of user interfaces, MSM, a powerful video content management and merchandising system (CMS), and MVP, a complete end-to-end managed video platform. We offer our solutions over the Internet as a subscription service model using a software-as-a-service (SaaS) or an on-demand model, and by installing our software onsite for clients as part of an enterprise licensing model. Our software address the unique needs found across different industry verticals, each with the shared aim of offering video to consumers across multiple devices. The verticals we address include Telecommunications, Media, Technology, Hospitality, Automotive, Travel & Leisure and Publishing. The Company has an average 'Win' ratio of 92%, reflecting how our solutions significantly enhance the way our clients monetize and manage their media assets by driving sales and drastically reducing the overall cost of ownership of enterprise-grade video management and merchandising.

In addition to our software business, we operate design services and technical services businesses. Our services work includes - creative interface design, branding strategies, strategic planning and technical/systems integration services. We currently provide our software solutions, professional and creative services internationally through our offices in New York, London, Prague and Sydney.

On May 1, 2014, we consummated the purchase of all outstanding shares of Wunderkind pursuant to a Stock Purchase Agreement in exchange for a convertible promissory note (the "Wunderkind Promissory Note") issued by the Company. The principal amount of the promissory note is $5.5 million and it is convertible into 45% of the total shares of our common stock issued and outstanding on a fully diluted basis on the date of conversion. The Wunderkind Promissory Note has a term of one year and bears interest at the rate of 0.5% annually.

The Stock Purchase Agreement was entered into in accordance with the terms of a binding letter of intent with the Company's Chief Executive Officer, Ronald Downey, as earlier disclosed in the Current Report on Form 8-K that we filed with the Securities and Exchange Commission on April 1, 2014. Mr. Downey is the majority shareholder of Wunderkind. The Stock Purchase Agreement contains customary representations and warranties and covenants of each party. Breaches of the representations and warranties will be subject to customary indemnification provisions.

Results of Operations The following paragraphs set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results. Our results are comprised of the results of operation of Massive Media Pty Ltd., ("Massive Media") for the three and six months ended June 30, 2014 as well as from Wunderkind Group Pty Ltd.

("Wunderkind") from the time of its acquisition, May 1, 2014 through June 30, 2014. As noted in our annual report on Form 10-K filed with the SEC on April 15, 2014, as part of the acquisition of Massive Media, we proceeded to exit the oil and gas operations related to the properties owned while the entity operated as Xtreme Oil and Gas ("Xtreme"). As such, we reported all activity related to Xtreme's operations as discontinued operations for the three and six months ended June 30, 2014 and 2013. Further detail can be found within Note 4, Discontinued Operations in our financial statements included in this form 10-K.

For the Three Months Ended June 30, 2014 compared to the Three Months Ended June 30, 2013 Revenues For the three month period ended June 30, 2014, revenues were $3,713,006 compared to revenues of $0 for the three month period ended June 30, 2013. Our revenue is comprised of the revenue recognized by Massive Media for the three months ended June 30, 2014, as well as from Wunderkind from the time of its acquisition, May 1, 2014 through June 30, 2014. As previously noted, as part of the acquisition of Massive Media, we proceeded to exit the oil and gas operations related to the properties owned while the entity operated as Xtreme. As such, we reported all activity related to Xtreme as discontinued operations for the three months ended June 30, 2014 and 2013, respectively. Further detail can be found within Note 4, Discontinued Operations in our financial statements included in this Quarterly Report.

21 -------------------------------------------------------------------------------- General and Administrative Expenses For the three month period ended June 30, 2014, general and administrative expenses were $2,987,779 compared to $1,027,886 for the three month ended June 30, 2013. Our general and administrative expenses are comprised of the expenses recorded by Massive Media for the three month period ended June 30, 2014 as well as the remaining expenditures of Xtreme that were not reported in discontinued operations for the three months ended June 30, 2014 and 2013, respectively. Additionally, also included are the general and administrative expenses from Wunderkind from the time of the acquisition, May 1, 2014 through June 30, 2014. As previously noted, as part of the acquisition of Massive Media, we proceeded to exit the oil and gas operations related to the properties owned while the entity operated as Xtreme.

Depreciation and Amortization Expenses Depreciation and amortization expense during the three months ended June 30, 2014 and 2013 was approximately $235,769 and $0, respectively. Our depreciation and amortization expenses are comprised of the expenses recorded by Massive Media for the three month period ended June 30, 2014, as well as from Wunderkind from the time of the acquisition, May 1, 2014 through June 30, 2014. As previously noted, as part of the acquisition of Massive Media, we proceeded to exit the oil and gas operations related to the properties owned while the entity operated as Xtreme. As such, we reported all activity related to Xtreme as discontinued operations for the three months ended June 30, 2014 and 2013, respectively. Further detail can be found within Note 4, Discontinued Operation in our financial statements included in this Quarterly Report.

Other Income (expense) Other income increased from $98,261 of income in 2013 to $1,908,845 in 2014.

This was primarily due to the gain on change in fair value of the derivative liability, offset by interest expense in 2014.

Income Tax Benefit The income tax benefit increased from $0 in 2013 to $237,880 for the three months ended June 30, 2014. The income tax benefit relates to the operations of Massive Media and represents a Research and Development (R&D) tax incentive, which provides a tax offset for eligible R&D activities and is targeted toward R&D that benefits Australia. The incentive, being a refundable tax offset, is available for those entities engaging in eligible activities whose aggregated turnover is less than $20 million. See Note 11, Taxes (Payable) Refundable in our financial statements included in this Quarterly Report.

Net Loss For the three month period ended June 30, 2014, we had net income of $2,636,183 compared with net loss of $1,367,020 for the three months ended June 30, 2013.

The increase in net income from 2013 was primarily due to the increase in revenue from the acquisition of Massive Media in addition to the gain on change in fair value of the derivative liability.

For the Six Months Ended June 30, 2014 compared to the Six Months Ended June 30, 2013 Revenues For the six month period ended June 30, 2014, revenues were $6,827,442 compared to revenues of $0 for the six month period ended June 30, 2013. Our revenue is comprised of the revenue recognized by Massive Media for the six months ended June 30, 2014, as well as from Wunderkind from the time of the acquisition, May 1, 2014 through June 30, 2014. As previously noted, as part of the acquisition of Massive Media, we proceeded to exit the oil and gas operations related to the properties owned while the entity operated as Xtreme. As such, we reported all activity related to Xtreme as discontinued operations for the six months ended June 30, 2014 and 2013, respectively. Further detail can be found within Note 4, Discontinued Operations in our financial statements included in this Quarterly Report.

General and Administrative Expenses For the six month period ended June 30, 2014, general and administrative expenses were $5,418,377 compared to $1,202,948 for the six month ended June 30, 2013. Our general and administrative expenses are comprised of the expenses recorded by Massive Media for the six month period ended June 30, 2014 as well as the remaining expenditures of Xtreme that were not reported in discontinued operations for the six months ended June 30, 2014 and 2013, respectively.

Additionally, also included are the general and administrative expenses from Wunderkind from the time of its acquisition, May 1, 2014 through June 30, 2014.

As previously noted, as part of the acquisition of Massive Media, we proceeded to exit the oil and gas operations related to the properties owned while the entity operated as Xtreme.

22 --------------------------------------------------------------------------------Depreciation and Amortization Expenses Depreciation and amortization expense during the six months ended June 30, 2014 and 2013 was approximately $393,172 and $0, respectively. Our depreciation and amortization expenses are comprised of the expenses recorded by Massive Media for the six month period ended June 30, 2014, as well as from Wunderkind from the time of its acquisition, May 1, 2014 through June 30, 2014. As previously noted, as part of the acquisition of Massive Media, we proceeded to exit the oil and gas operations related to the properties owned while the entity operated as Xtreme. As such, we reported all activity related to Xtreme as discontinued operations for the three months ended June 30, 2014 and 2013, respectively. Further detail can be found within Note 4, Discontinued Operation in our financial statements included in this Quarterly Report.

Other Income (expense) Other income increased from $119,975 of income in 2013 to $1,780,027 in 2014.

This was primarily due to the gain on change in fair value of the derivative liability offset by interest expense in 2014.

Income Tax Benefit The income tax benefit increased from $0 in 2013 to $466,570 for the six months ended June 30, 2014. The income tax benefit relates to the operations of Massive Media and represents a Research and Development (R&D) tax incentive, which provides a tax offset for eligible R&D activities and is targeted toward R&D that benefits Australia. The incentive, being a refundable tax offset, is available for those entities engaging in eligible activities whose aggregated turnover is less than $20 million. See Note 11, Taxes (Payable) Refundable in our financial statements included in this Quarterly Report.

Net Loss For the six month period ended June 30, 2014, we had net income of $3,262,490 compared with net loss of $1,541,123 for the six months ended June 30, 2013. The increase in net income from 2013 was primarily due to the increase in revenue from the acquisition of Massive Media in addition to the gain on change in fair value of the derivative liability.

Liquidity and Capital Resources: As of June 30, 2014, our continuing operations had cash of $240,420, and a working capital balance of ($1,399,588). As of December 31, 2013, continuing operations had cash of $1,121,181 and a working capital balance of $748,896.

Working capital is defined as current assets minus current liabilities, excluding restricted cash, convertible loan notes, derivative liability and discontinued operations.

The reduction in cash is due to the repayment of $972,674 of debt liabilities.

This was non­recurring and one off.

We are comfortable that the convertible loan note due for payment on May 1, 2015 will be settled for shares, this assumption is based on the fact that the principal noteholder is Mr. Ron Downey who is also a director of Massive.

We believe that cash from future operations and our currently available cash will be sufficient to satisfy our anticipated working capital requirements for the foreseeable future.

Cash Flows from Continuing Operations Operating activities Cash provided by (used in) operating activities from continuing operations during the six month periods ended June 30, 2014 and 2013 was $1,350,749 and ($443,160), respectively. The cash flows from operations in 2014 related to net income of $3,262,490, depreciation and amortization of $392,983, offset by a gain on change in fair value of derivative liability of ($2,019,000) and changes in operating assets and liabilities of ($286,722). For 2013, Xtreme's changes in operating assets and liabilities used ($243,495) of cash, in addition to a consolidated net loss from continuing operations for the six months ended June 30, 2013 of ($1,082,973), in addition to net non-cash expenses of $1,341,458, primarily related to preferred stock issued for services, were the factors contributing to the net cash used in operating activities in 2013.

Investing Activities Cash used in investing activities from continuing operations was related primarily of capital expenditures for the six months ended June 30, 2014. The six months ended June 30, 2013 had no cash flow change for continuing operations as a result of investing activities.

Financing Activities Cash (used in) provided by financing activities of continuing operations for the six month period ended June 30, 2014 amounted to ($1,030,648), compared to $43,940 for the six month period ended June 30, 2013 for Xtreme. This is primarily due to the funds paid of $134,106 on borrowings in the second quarter in 2014, compared to proceeds received from borrowings of $64,850 in the second quarter of 2013.

23 --------------------------------------------------------------------------------Disclosure About Off-Balance Sheet Arrangements We do not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.

[ Back To TMCnet.com's Homepage ]