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MSM Corporation (ASX:MSM), is a media entertainment and digital technology company. It creates and develops online entertainment products for audience across Australia, US, Great Britain, New Zealand, Canada and South Africa.
On May 1st, 2019, ASX had raised queries regarding the financial condition and operations of MSM, specifically under Listing rule 12.1 (related to operations) and Listing Rule 12.2 (related to finances). Besides these, it had asked for compliance confirmations (Listing Rule 3.1).
As per the half-year accounts for the half year ended 31 December 2018, the company had no full-time employees, no customers and no ability to generate revenue other than via The Riva Group and associated company, RTE. As per the cash flow of the company, net operating cash out flows for the quarter were at $354,000. Cash at the end of the quarter was at $108,000; and estimated cash outflows for the next quarter amounted to $90,000.
However, MSM, in its response confirmed that its level of operations would suffice to warrant continued quotation of its securities on ASX. The company is heading to commercialise its online talent search contest platform, Megastar, which was a key strategy. The first contest is complete with users across Australia, USA, The UK, Canada and in South Africa. Additional contests are expected to expand in India. The expansion of this platform will reduce the operating costs of the company as these costs would be taken care of by the licensees.
The company stated that it is in agreement with the Riva Group to work together to launch Megastar in India. The Board is on a lookout for similar licensing arrangements and other strategic investors to fund and accelerate the growth of the business beyond North America. On 1 April 2019, MSM provided a market update on the ongoing discussions of the licensing of Megastar.
The company notified ASX that its financial condition is good enough to warrant continued quotation of its securities on ASX. As announced on 30 April 2019, $1.44M convertible note funding Lead Managed by Emerald Capital Australia Pty Limited of $0.55M is expected to be completed in the current quarter. In the event of this not being received, the JV with Riva would pay MSM an annual royalty of 5%, along with a minimum annual guarantee amounting to US$500,000 (due by June 30th, 2019).
MSM has also subscribed for shares and secured interest-free loan notes in Rivaâs associated company RTE for US$1.5M. The company confirms its operating cashflow to appear negative until Megastar India royalty payment is received, RTE Loan Notes are repaid (whichever happens before). Though, it is determined to work towards cost reductions and better its working capital position.
On May 7th, 2019, MSM provided an update on the strategic partnership with The Riva Group. As announced on 26 November 2018, in relation to secured shares, the RTE Loan Notes were issued to the Company on 18 March 2019. They are to be repaid by 31 December 2019.
In consideration of the US$1.5M paid, the company subscribed for shares in RTE with a 10% equity interest, once they are issued. The RTE has executed Share Purchase Agreement to acquire a majority interest in J&D Holdings Limited as well. J&D Holdings Limited is the owner of Firefly Games Inc.
As notified on April 1st, 2019, Riva Group and Firefly Games would work towards a mobile game, DreamWorks Universe of Legends on Google Play.
Currently the shares are under suspension and the same is expected until 8th May 2019. The shares were last traded on 20 September 2018 at $0.009 on the ASX.
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