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SPARE BACKUP, INC. - 10-Q/A - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Edgar Glimpses Via Acquire Media NewsEdge) Overview
We are a software development company and service provider for the PC and mobile
device industry. Our flagship product is Spare Backup , a fully-automated remote
backup solution designed and developed especially for the small office, mobile
and home environment which automatically and efficiently backs up all data on
selected laptops, tablets or desktop computers, as well as smart phones. As a
result, we believe individuals and businesses can ensure file safety. We
launched our Spare Back-up service and software product version 1.0 in March
2005 specifically designed for the PC, and we are currently offering version 6.0
of the product which now incorporates not only the PC but tablets and smart
phones which are carrier agnostic and handset agonistic .
Our Spare Switch software enables users to complete the transfer of personal
files from one personal computer (PC) to another via a high speed Internet
connection. We focus on individuals and businesses that use diverse technologies
and various devices to support their businesses and lifestyles.
Our Spare Mobile product backs up personal content on your "smart phones" such
as contacts, emails, calendar events, photos, music and videos. We offer a
complete line of security products to compliment the user's smart phone, such
as:
Last Known LocationPRO: View the approximate location of your registered
phone(s) on an integrated map using the phone's built-in GPS.
Lock/Unlock PhonePRO: Remotely lock your phone to prevent unauthorized use and
protect your personal information.
Display MessagePRO: Send a message to your phone that locks your phone and
displays a message requesting that the Good Samaritan holding your phone contact
you to return it.
Set Phone AlarmPRO: Locks your phone and sends a loud, audible alert directly to
your phone to immediately pinpoint its location.
Erase PhonePRO: Remotely lock your phone and erase your contacts, photos, etc.
from your phone.
We provide an easy to use, scalable, cloud-based solution for securing business
files, media, and personal data. The total Spare Backup offerings represent a
suite of complementary products and services which are designed for use by
technical and non-technical users. Our software has unique, easy,
scalable characteristics which we believe provides a competitive advantage over
other competitors whose products require large investments in hardware,
installation, training and support.
We have focused our more recent development and marketing efforts on our Spare
Mobile product, which backs up personal content on "smart phones" and "tablets,"
such as contacts, emails, calendar events, photos, music, videos and data
files. It also offers a complete line of mobilesecurity productsandparental
controls(developed in 2011 and 2012) to compliment the users' mobile devices, as
described in our software development section. We have shifted our focus to the
mobile industry to take advantage of a number of industry trends which we
believe represent a tremendous growth opportunity for our company. In 2011,
there were approximately six billion mobile subscribers throughout the world
according to The International Telecommunications Union, representing almost 87%
of the world's population. Industry experts, including IDC and Strategy
Analytics, estimate that worldwide shipments of smart phones were approximately
490 million units, up over 60% from 2010, and representing over 31% of all
handsets shipped. In June of 2012,Ericsson forecasts that mobile subscriptions
will reach 9 billion in 2017, of which 5 billion will be mobile broadband
connections . With recent estimates by Juniper Research that less than 1 in 20
smart phones and tablets have third-party security software installed in them,
this represents a vast potential market for mobile security. According to
Canalys, the U.S. market for mobile security is estimated to grow to over $3
billion annually by 2015.
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We have generated minimal revenue since our inception on September 12, 2002, and
have incurred net losses of approximately $119million from cash and non-cash
activity since inception through September30, 2012. Revenues generated from our
business have not been sufficient to fund our current operations and we have
relied on funds raised from the sale of our securities to provide sufficient
cash to operate our business.
Corporate Relocation
We completed the move of our corporate headquarters, including a major portion
of our software development team, to Minden, Nevada in the third quarter of
2011. We believe the move will enable us to draw from a more experienced labor
pool for software design, as well as provide us with a significantly more
favorable corporate tax environment. We currently anticipate that we will be
subject to minimal corporate taxes for the remainder of 2012.
Business Development and Marketing Strategy:
We market our software products through distributor's retailers as well as
insurance and warrantee providers. We are continuing to expand our current
distribution base with scheduled launches throughout the remainder of the year.
We will focus our distribution efforts in four vertical channels:
· Insurance and warranties: Assurant, Service Net and Lifestyle Group;
· Retail: Car Phone Warehouse, Best Buy Europe and Simplexity;
· Original Equipment Manufacturers: Sony;
· Carriers
Examples of our marketing partners within the four vertical distribution
channels include Wirefly/Simplexity, Assurant/Federal Home Warranty, Life Styles
Group (a UK warranty provider), Best Buy Europe, and Sony. We will continue to
aggressively add additional partnerships. We expect our current partners will
commence a number of scheduled launches of our services during 2012 and we are
in late stage negotiations for a near term launch with a large international
mobile communications company. We are also in various stages of negotiations
with potential partners in the U.S., Brazil, India, the Middle East, South
America, and the South Pacific. We are hopeful that these negotiations will
result in additional partnerships in the coming quarters.
While, we believe the launch of our base offerings will be commercially
successful, it is still too early, to determine the extent of its market
penetration.
We continue to invest in our software development, particularly focusing on the
smart phone market. We have added additional features, such as:
Last Known LocationPRO: View the approximate location of your registered
phone(s) on an integrated map using the phone's built-in GPS.
Lock/Unlock PhonePRO: Remotely lock your phone to prevent unauthorized use and
protect your personal information.
Display MessagePRO: Send a message to your phone that locks your phone and
displays a message requesting that the Good Samaritan holding your phone contact
you to return it.
Set Phone AlarmPRO: Locks your phone and sends a loud, audible alert directly to
your phone to immediately pinpoint its location.
Erase PhonePRO: Remotely lock your phone and erase your contacts, photos, etc.
from your phone. Since Wirefly Mobile Backup also backs up your contacts,
photos, and more, you can easily transfer your stored data to your replacement
device in minutes.
In the third quarter of 2011 we completed the first phase of development of a
new suite of parental controls to enable parents to monitor and manage numerous
aspects of their children's use of smart mobile devices. The parental controls
are activated through a simple set-up wizard that helps users establish
boundaries for monitoring up to 5 children's locations and times of daily
activities like school, sports, and time with friends. Once specific rules are
put into place by the subscriber, if the child's phone is not in the location it
should be, the intelligent software automatically notifies the subscriber
through email or text. Through the secure website and mobile devices a parent
can view the exact movements of a monitored child to see where they have been.
Additional functionalities are being developed which we anticipate will be
released in the coming quarters
We believe our offerings will adapt to the customer's day-to-day needs, as our
cloud system provides smart phones with the ability to link to our cloud and
connect to multiple devices, which include PC's and tablets.
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In addition, we are working on providing our partners with real time data
analytics which will provide them with behavioral pattern matching and market
research.
We have now converted our product to support the local language in the
Netherlands and Spain. We have also begun translation of our product and
documentation into the Turkish language which we anticipate will be launched
December 2012.
In September 2010 we reached a distribution agreement with Simplexity, LLC.,
("Simplexity"), the parent company of Wirefly.com. Simplexity, a privately held
company, is the Internet's leading authorized seller of cell phones and wireless
services. Wirefly is Simplexity's shopping and comparison site for consumers,
bringing online shoppers an unprecedented selection of cell phones and service
plans from every major U.S. carrier with the convenience of automated
application processing and cell phone activation. For the last six years Wirefly
has been the internet's #1 authorized dealer for AT&T, Verizon Wireless, Sprint,
and T-Mobile. Simplexity also operates and maintains similar online websites for
a number of major retailers in North America. We believe Simplexity is uniquely
positioned in the U.S. market to reach potential mobile customers across a wide
variety of carriers through online mobile sales sites they own or manage within
North America. We anticipate the sales launch of our services through
Simplexity's distribution network to progressively grow in 2012 and beyond. The
service will be offered as an add-on or inclusive in the service packages such
as "data protection," currently marketed by Simplexity to its channel partners
and customers.
We opened a new distribution channel for our mobile platform through mobile
insurance and warrantee providers. In North America we reached an agreement with
Assurant (Federal Warranty Service Corporation). Assurant, which develops,
underwrites, and markets specialty insurance, extended service contracts, and
other risk management solutions with leading financial institutions, retailers,
and other entities, has bundled us into their services. The first of their
launches is with Sprint, a US-based cellular company. Our backup solution will
be bundled into all warranties associated with tablet sales. We will be
expanding our offerings and are currently doing translations for additional
languages to support additional launches throughout 2012 and 2013.
We also have a distribution partnership with Lifestyle Services Group (LSG),
provider of leading lifestyle solutions and insurance products. LSG specializes
in supporting its client products brands, attracting customers, improving the
customer journey, and reducing customer attrition rates. LSG's portfolio
includes Mobile Phone Insurance, Card Protection and Tech Protect®, and The
HubbTM , which allows clients to seamlessly integrate a complete suite of
products and services all accessed via one number. Their customer base includes
Virgin Mobile, Orange, "3", Phone, Phones 4 U, Barclay's and Lloyds bank. Bank
of Scotland to name a few in the U.K. LSG has also amended our December 13,
2010 master services agreement in the third quarter of 2011 to include our
parental controls functionality. Under the terms of the amended agreement, Spare
Backup will supply the parental controls to LSG for distribution to LSG's
affinity distribution channels.
We expect to be able to work with each LSG partner, including scheduled launches
which occurred in Q3 of 2012 with Lloyds and a soft launch with the Bankof
Scotland in Q3 of 2012, as these rolling launches continue, we expect to add
customers and revenue accordingly as these partners increase their marketing and
awareness of the product to their customers. The software is marketed as a way
to not only protect data from loss, but to also increase the likelihood of
retrieving a lost or stolen phone through the suite of security features. As
mobile devices are becoming more prevalent and more powerful, we believe this
channel should become a significant source of revenue to our company in the
coming quarters. We anticipate that these companies will continue to roll out
marketing programs progressively in 2012 and 2013.
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Software Development
Our decision to expand the scope of our cloud-based platform into mobile backup
and security required us to make substantial changes to our software to enhance
the scalability and functionality of our services across a wide array of devices
and platforms. This expansion delayed our ability to launch a number of
important programs in 2011. Our development team continued to test and improve
the mobile platform throughout the second half of 2011 and now feel that these
changes enable us to complete launches with our marketing partners in 2012 and
2013. We believe with the improvements that we have made, we are able to handle
carrier commitments that the company is currently negotiating to launch..
In the third quarter we began the full migration to an HTML-based platform for
our distribution partners. We have begun launching with our marketing partners
and anticipate a progressive roll out system-wide by the end of 2012. The sites
will enable a full touchscreen interface to support all tablet and mobile device
applications including Android, Blackberry, Windows and Apple. HTML will also
enable quicker launch schedules for new customers, greater scalability,
simplification of server technology, and faster maintenance.
We also began the upgrade of our hardware in the third quarter of 2011 to a
scalable storage platform capable of supporting millions of users for our
software products. Through a unique cloud-like structure, this new platform can
be infinitely scaled as usage increases by the combined use of additional
network storage and virtual machine arrays (VMWARE). Upon completion all user
backup data will be stored on state of the art NetAPP SAN storage. User account
information and transactional information will be stored in a secure SQL-Server
redundant distributed database utilizing special high-speed RAID drives. In
addition, our IIS web servers each can support thousands of simultaneous users.
Combining this with our new, scalable virtual machine array allows the system
to be used by millions of users.
We believe that through our software and hardware improvements we are now better
positioned to begin the launches of Assurant, Simplexity, LSG and other
potential partners in 2012 and 2013. The above partnerships represent multiple
opportunities, as each of the companies has different distributors and strategic
alliances marketing their products. We will continue to enhance our platform
nonetheless. We believe the backbone for our service platform has been
substantially developed. We have added new features to our existing services
that will continue rolling out throughout 2012 that will accelerate revenue from
our distribution.
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Results of Operations for the three-month and nine-month periods ended September
30, 2012 compared to the three-month and nine-month periods ended September 30,
2011
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