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| MYST.OB > SEC Filings for MYST.OB > Form 10-Q/A on 7-Jan-2009 | All Recent SEC Filings |
7-Jan-2009
Quarterly Report
This periodic report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the financial condition, results of operations, business strategies, operating
efficiencies or synergies, competitive positions, growth opportunities for
existing products, plans and objectives of management. Statements in this
periodic report that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act.
Prospective shareholders should understand that several factors govern whether any forward-looking statement contained herein will be or can be achieved. Any one of those factors could cause actual results to differ materially from those projected herein. These forward-looking statements include plans and objectives of management for future operations, including plans and objectives relating to the products and the future economic performance of the Company. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development projects, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of those assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in any of the forward-looking statements contained herein will be realized. Based on actual experience and business development, the Company may alter its marketing, capital expenditure plans or other budgets, which may in turn affect our results of operations. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of any such statement should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved.
The following analysis of the results of operations and financial condition of the Company should be read in conjunction with the financial statements of the Company for the year ended September 30, 2006 and notes thereto contained in the report on Form 10-KSB as filed with the Securities and Exchange Commission.
OVERVIEW
Company Background
We believe that we can be one of the leading internet and value-added telecommunications services providers in the PRC. We specialize in supplying both the entertainment and lifestyle content along with what we currently believe is leading edge software, which we sell as a package to telecommunication service providers ("SP") who subscribe to our products. The SP then deliver our content through our software products, though various media, to some of the approximately several hundred million end users in the telecommunications market in the PRC. Since the launch of our Total Solutions System ("TS"), together with our SEO4Mobile Short Message Services ("SMS") search engine software in 2005, we believe that we now have the right software products to deliver our content, in order to serve the rapidly expanding telecommunications market in the PRC.
We will target the enterprise multimedia communications market in the PRC where there is significant growth potential. In the PRC, where billions of messages are sent every month, SMS is the basic form of text messaging, but there is a major increase in Multimedia Message Services ("MMS"). MYST's Customer Relations Management Virtual Call Center ("CRM") provides highly customized, scalable, flexible interactive services, offers clients high value, low cost sales and service solutions using the highly scalable interactive MMS response, interactive voice response and speech recognition solutions.
During the year ended September 30, 2006, we signed sales contracts with five major clients, which generated revenues in the amount of $12,678,107 to the Company, which represented 82% of our total revenue. The loss of these customers, individually or in the aggregate, could have a material impact on our results of operations. The sales contracts validate our current business model and are a strong indication that we have customer acceptance for our products in the PRC telecommunications market. It is our present expectation that the integrated internet and value-added telecommunication service market that we serve is an expanding market in the PRC and our customer base and number of sales contracts should increase in fiscal year 2007.
As described above, we are a fully integrated information and entertainment service provider to the PRC market. We sell our products through channel resellers, which are British Virgin Islands ("BVI") companies and we distribute our products to the SP market in the PRC. Channel resellers supply our content, through various telecommunication providers, to the end users in the PRC. Our products serve the voice, video, data, web and mobile communication markets in the PRC. We have experienced revenue growth in the CRM market, which is the primary deliverable of MYST's TS. Our CRM product combined an extensive network of Chinese contact centers for live operator support, and provides all end users with opt in subscriptions of SMS and MMS. We added 114 stations in 2005, to bring our total business customers and CRM's to over 200 as of December 31, 2006. Our software products are sold to companies with less than 500 employees, inner information resource management and affiliate networks.
We organized our operations in 2006 into four principal operating segments:
integrated communications network solutions, import and export trading, royalty
income from movie copyrights and membership income from websites. These
operating segments were organized based on the nature of the products and
services offered. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. Our chief executive officer and chief
financial officer have been identified as the Company's chief decision makers.
Our chief decision makers direct the allocation of resources to operating
segments based on the profitability and cash flows of each respective segment.
The operating segments share a common workforce and office headquarters, which include an allocation of all overhead components. Overhead items that are specifically identifiable to a particular segment are applied to such segment.
Our software products, described in detail below, includes our Total Solutions System, CRM System, SEO4Mobile and AdMaxB2Search, which deliver our entertainment and lifestyle content and our IBS 5.1 & IBS 4.1 Enterprise Suite, which is for small to midsize enterprise wireless/web applications.
THE INTEGRATED INFORMATION AND ENTERTAINMENT SERVICE PROVIDER SOFTWARE PRODUCTS
About Total Solutions System - SMS/MMS Call Center & CRM System
Our specialized software product, Total Solutions System, offers integrated communications network solutions and Internet content service in universal voice, video, data, web and mobile communication for interactive media applications, technology and content leaders in interactive multimedia communications. We develop markets and sell a universal media software solution for enterprise-wide deployment of integrated voice, video, data, web, and mobile communication for media applications. Designed around MYST's Internet content and database and integrated into the Information Manager System and SMS/MMS Call Center CRM System core software, the Total Solutions application facilitates the collaboration of key business processes, such as corporate and marketing communications, membership distance interactive programs, product development, customer relationship management and content management, by allowing dispersed enterprise users to collaborate in real time with multimedia message services.
Our business model is built on the integration of strong entertainment and lifestyle content into the Total Solutions System, network database and the application of technology. Network database was established by signing contracts with strategic partners and the database collected all of their Internet and mobile phone users to be the online/offline members in the PRC. Our content was built through our business alliance in which IC Star MMS Limited (formerly known as Sino Super Ltd.), one of our subsidiaries and a network services provider based in Hong Kong, links entertainment and lifestyle information to local communities across the PRC. IC Star, which was originally created as the Star SMS /MMS called "My Star Friends" community, was first invented as a SMS/MMS interactive between IC Star and fans of local artists in the world. By integrating the network database and contents into software that MYST sources from the market, we can leverage the functions of the software and target it to various industries.
About SEO4Mobile
SEO4Mobile, a search engine optimization for mobile phones, is the original unique new service solution creation by Alpha. SEO4Mobile offers wireless mobile phone service, allowing providers the ability to use SMS search implementation for their users. Mobile phone users who enter a relevant keyword or keyword phrase, along with a geographic identifier, can send searches via an SMS to a service code. The search results will be received by MMS and the search engine optimization processes the search through the internet within a matter of minutes. Many searchers don't realize that, within an SMS search query, they can add in a geographic identifier. By specifically laying out a separate search SMS for the geographic portion, SEO4Mobile helps structure the search in a simple and efficient way for the searcher. SEO4Mobile has been selected by service providers such as China Mobile and China Unicom.
About IBS v4.1 and v5.0 Enterprise Suite
IBS v4.1 and v5.0 is our main product line, which includes a built-in MoDirect, an innovative suite of technologies that enables wireless and web publishers to target SEO4Mobile users more effectively and allows advertisers to obtain targeted leads with rich demographic data. IBS v4.1 and v5.0 are part of the TS family. Corporate users can leverage all available information resource management on the intranet/extranet over the internet, including wireless applications, and advertisers can use the IBS v4.1 and v5.0 to publish SMS and MMS by searches on mobile phones. The system enables manufacturers and services providers to use the internet to establish and manage continuous connections with automated e-services, operations monitoring and e-commerce offerings. The system's customers include end-user clients in many industries throughout the PRC. The IBS v4.1 and v5.0 standard package includes 3 servers, software, as well as system integration.
SkyeStar.com
SkyeStar.com is a website that is a multilink user experience sharing network in the PRC as well as a multi-channel entertainment portal, supported by proprietary fan clubs and a community platform. SkyeStar.com combines the best of IC Star MMS's artist profiles, "my star friend", games and other entertainment offerings with a host of new content, community and fan networking features. SkyeStar.com is the first internet portal that links network users across multiple entertainment channels, linking friends and their entertainment choices.
In February 2005, we established 3G Dynasty Inc., a subsidiary of the Company, for the preparation of the third generation mobile system. 3G Dynasty will be responsible for sales of IC Star products, and will focus on entertainment content for 3G mobile and internet use. IC Star Wireless Application Protocol ("WAP") Club is based on the IC Star Theme Club on WAP, which provides the most comprehensive and up-to-date mobile entertainment services in the PRC. The WAP users can access IC Star Theme Club for content we provide through China Mobile Communications. In May 2005, 3G Dynasty created the website http://skyestar.com, a multi-channel infotainment portal supported by proprietary fan clubs and a community platform. It allows new members to personalize their own homepage with 3G Dynasty's content. It registers members and allows them to build their personal homepage on WAP. As the host and content provider, 3G Dynasty will start publishing a daily Real Simple Syndication ("RSS") feed of its original content from a number of its contracted web sites, including local information, life style and entertainment content. Through the use of RSS feeds, users can receive 3G Dynasty's daily content automatically, thereby broadening 3G Dynasty's distribution and providing an additional platform for mobile phone users who are registered members of the Star Theme Club on WAP. Members with their homepage on WAP can reach their targeted audience through wireless technology.
This personal homepage and WAP membership service was launched in June 2006. The adoption of RSS has deepened our relationship with our members and enhanced the appeal of our original content. We believe that RSS represents the next evolution in the distribution of content. It allows publishers and end users alike to be seamlessly notified of new content and to integrate that content into start pages, blogs and web sites.
As more and more people personalize their content on the internet, many are turning to RSS feeds to quickly and easily access information from news and entertainment sites.
SkyeStar.com provides users multiple opportunities to play games, send MMS/SMS greetings, watch movie trailers, find show times, and purchase tickets and DVDs. They can also rate, review and refer their entertainment choices to others. Customization features allow members to create their own personal homepages, profile and display their entertainment favorites as well as access their friends' recommendations. SkyeStar.com's innovative fan club's networking features flow throughout the site so users can enjoy diverse content and connect with other people who enjoy similar interests.
SkyeStar.com features include:
· "My Star Friend", where members upload images of their artist friends, create star profiles, and enter them in a ratings system allowing members to vote on the my star friend;
· Fans Experiences Sharing, where members rate and review their favorite movies, music, and greetings for the community to read;
· Customizable User Homepages and Profiles, where members track their favorite movies, music, games, stars and greetings as well as their friends' favorites, upload photos, check music statistics, view event reminders, and post on "friends-only" message boards;
· User Music Critics, where members review and rate their choices of music, add their ratings to a community score and compare their reviews and ratings to those of professional music critics;
· Online & Downloadable Games, where members play single player and multiplayer games online or download and purchase their favorites; and
· User-generated Content, where developers and creators upload their own music, games and photographs for the community to enjoy and review.
IC Star has partnered with several industry leaders to provide content on the SkyeStar.com entertainment portal. Among its partners, Stareastnet, a company with which IC Star MMS Limited ("IC Star") has partnered, provides features such as "Artist Profiles and Homepages" and NC Entertainment, another partner of IC Star, provides movie trailers. SkyeStar.com provides a community experience within the entertainment vertical by including artists, movies, games, music and more. Through user-generated content as well as personal homepages and content reviews, community members can express themselves and become a trusted referral of content for their friends.
IT Consultant Services - Guangzhou TCOM Computer Tech by the integration of MYST's Total Solutions into IBS v4.1 and v5.0 Enterprise Suite
Alpha completed stages planned for the integration of MYST's TS, SMS/MMS virtual Call Center CRM Systems, SEO4Mobile and new SME software, developing and distribution operations.
Guangzhou TCOM Computer Tech Ltd. - consisting of Alpha Century Holdings Limited's TS, SMS/MMS virtual Call Center CRM Systems, SEO4Mobile, MoDirect, AdMaxB2Search and IBS v4.1 and v5.0 Enterprise Suite, the internet business service total solution business - combined and operated by TCOM Computer, the new formation is a wholly owned subsidiary of the Company in the PRC. TCOM Computer also integrated the IBS v4.1 and v5.0 Enterprise Suites, which are web enabling updaters of exchange between corporate user content and end user content. As TCOM Computer integrates with the TS business group of MYST, it will strategically invest in the PRC, specifically to address new market dynamics and help SME users get the most from end user content while effectively handling changes in capacity, deal terms and players.
The integration expertise we gained through the successful launch of TCOM Computer, and the IBS v5.0 Enterprise Suite gives us confidence in our core business organization to the SME market, the potential for our total solution business, and the achievement of synergies we identified as part of our strategic investment efforts.
IC Star MMS
IC Star, a wholly owned subsidiary of the Company, began to establish a film distribution network with the purchase of the copyrights to certain films in March 2006. IC Star will distribute the films, through multiple distribution channels into the PRC film market, including through the internet, mobile phone, TV, VCD/DVD and the theatrical screening in theaters across the PRC.
Subaye.com - Operations
On April 1, 2006, we acquired HRDQ Group Inc., a Delaware corporation. HRDQ conducted its operations principally through Subaye.com. In addition, we have conducted part of our operations through Guangzhou Panyu Metals & Minerals Imports & Exports Co., Ltd., a limited liability company in Guangzhou, China, which holds the licenses and approvals necessary to operate our international trading and provide e-commerce logistic agent services. After several combinations, including stock transactions, in September of 2006, HRDQ contracted with our newly incorporated and wholly owned subsidiary, TCOM Computer.
Because of the limitation of PRC laws to the foreign ownership of companies that provide internet content and advertising services, in order to comply with these foreign ownership restrictions, we operate our websites and provide online advertising services in the PRC through TCOM Computer. TCOM Computer holds the licenses and approvals necessary to operate our websites and to provide e-commerce online advertising services in the PRC. We have contractual arrangements with TCOM Computer and its shareholders pursuant to which we provide technology consulting services and license our registered domain names, trademarks and certain software to TCOM Computer. Through these contractual arrangements, we also have the ability to substantially influence TCOM Computer's daily operations and financial affairs, appoint its senior executives and approve all matters requiring shareholder approval. As a result of these contractual arrangements, which enable us to control TCOM Computer's business, we are considered the primary beneficiary of TCOM Computer.
Subaye.com - Internet corporate video provider
Subaye.com, Inc. is a PRC-based internet corporate video provider, offering a unique Chinese language corporate video sharing platform for both users and customers. We focus on our potential users in the PRC that demand publishing and sharing their corporate video content on-line. Our platform consists of our websites and Subaye alliance network, which is our network of third-party websites.
Our services are designed to enable internet users to find relevant information video online from our video database, which currently consists of over 20,000 video corporate profiles, as visible video showcase for presentation. It includes Chinese language corporate web pages, news, images and multimedia files, through links provided on our websites. We provide our users with easy access to an index of up to a million video clips, images and web pages. We also offer a business to business to consumer based online auction marketplace, Subaye e-commerce strategic, which currently consists of over 1,000,000 items of product and service as visible video showcase for purchase and sale.
Business Partnership Developments
IC Star began the theatrical screening of the film "Big Movie" (http://ent.sina.com.cn/f/m/bigmovie/index.shtml) in 400 theaters throughout the PRC on December 29, 2006, running through January 20, 2007. The newly launched movie investment, distributions and value-added services business by IC Star's PRC operations, is committed to bringing a variety of unique titles to Chinese markets. Our first release, Big Movie, a joint venture with Hua Xia Films Distributions Limited Beijing, is a template for the future distribution of film in the PRC by MYST. IC Star is also partnering with Sina.com (Nasdaq: SINA) for movie promotion and marketing services.
On October 3, 2006 the Company acquired MyStarU.com, Inc. ("Mystaru"), which runs a website (http://www.mystaru.com) dedicated to performing arts education. Mystaru's content launch includes ten hours of multimedia performing education courses developed by our business partner Stareastnet ( http://www.stareastnet.com ). The content draws on the popularity of Stareastnet's unique 30-minute presentation concept. Stareastnet has been producing artist profiles since 1999, and delivers several live seminars each year.
The website is a prototype for state-of-the-art delivery of streaming video performing social education courses in all industries in greater China. The new courseware was developed using our EDU v5.0 Education Management System and is delivered to viewers via the MyStarU platform. The multimedia content is produced using Adobe Flash® video synchronized presentations and demonstrative video clips. Users can view multimedia performing training presentations that include downloadable video files of course materials and are then able to upload their own video files to teachers for analysis, which affords users the opportunity to have questions answered by course teachers.
The website generates revenues through monthly basic membership fees, which we share with our franchisees. In this quarter, MyStarU.com, Inc. has successfully launched a franchise program and sold five master franchise licenses, license fees of $1,000,000 in a one-time offer, signifying the successful progress of the online education franchise program.
MyStarU.com, Inc. is also working with vocational education companies and Subaye.com 's 10,000 SME members in China to adapt their platforms specifically to suit the unique needs of the vocational education market. Mystaru is in co-operation with Sohu.com ( http://yule.sohu.com/s2006/bogeboqjhhx/ ) for promotion and marketing services.
TCOM Computer has completed the integration of all business units of Alpha and 3G Dynasty into cooperation with China Netcom, Guangdong Mobile Communication Co., Limited, a China Mobile Communications Corporation and China Mobile (Hong Kong) Ltd. (NYSE: CHL) to develop entertainment, social education and corporate video online broadband and other wireless contents such as artist profiles, gaming and an SEO4Mobile SMS search engine.
We have continually worked to establish a system that can quickly and accurately respond to the market, as well as raise shareholder value by strengthening the development and competitiveness of each business. As part of this strategy, we have been implementing the integration of development, production and sales of each business within the Company. We have determined that a positive impact will be realized from integrating the functions of the various contracted operations lines of business and that, as a result, IC Star will become more competitive and synergies will be realized between its marketing, product development and sales organizations. It is also projected that as the resources of the Company are increased and the strategic alliance is structured, the overall efficiency of group management will improve, providing even greater shareholder value.
Impact of Inflation
We believe that inflation has had a negligible effect on operations during the period. We believe that we can offset inflationary increases in the cost of sales by increasing sales and improving operating efficiencies.
Trends, Events, and Uncertainties
The present demand for our products will be dependent on, among other things, market acceptance of the Company's concept, the quality of its products and general economic conditions, which are cyclical in nature. The Company's business operations may be adversely affected by increased competition and prolonged recessionary periods in the PRC.
We expect the demand for our products described above to increase next year due to the following factors:
1. Multiple Distribution Channels into Chinese Films Market.
IC Star has been successful bringing two movies into the Chinese market, via several different distribution channels, including the internet, mobile phone, TV, VCD/DVD and the theatrical screenings in cinemas across the PRC. We will continue investment to establish our distribution network and acquire more content copyright.
In the past three years, the Chinese film market posted an average of 30% annual growth rate. We believe this market will continue significant growth, based on the results of our research.
2. Our New Product Line, SkyeStar.com IPTV operated by TCOM Computer.
We expect SkyeStar.com, the flagship entertainment property of MYST, will be a fast-growing, revenue streaming entity. In the coming months, we will launch SkyeStar.com ("SkyeStar") on IPTV, with new features that let users access their SkyeStar accounts from IPTV. SkyeStar is a free, members only web site that offers community, email, exclusive music and video downloads, instant messaging, blogs, photos and more. We will generate revenue by advertising, entertainment downloads, pay per view, video-on-demand and VIP membership fees.
IPTV is the format representing the convergence of internet, television and telecommunication networks, and is expected to be adopted in the PRC next year. The PRC is one of the largest IPTV markets in the world. The PRC is among the first in the world to put IPTV services in commercial trial operation. Statistics show that there are 360 million TV viewers and 75 million broadband users in the PRC, creating a huge potential market for development of IPTV services.
One of our business partners, ZesTV, Inc. ("ZesTV") is one of the leading Chinese media and entertainment companies in the development, production, and marketing of entertainment, news and information to a global audience. ZesTV owns and operates a valuable portfolio of news and entertainment networks, a premier motion picture company, significant television production operations, a leading internet entertainment website group, and plans the development of studio branded theme parks. MYST has the first right to buy ZesTV music, films . . .
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