Hipcricket Inc.(fka HIPPQ)

[Joeiniowa]

My editorial coverage has always been, is now, and always will be without charge.

Current Larry Oakley's Stock Pick:

Date Posted: 03/08/10

Alert -- Modavox (OTC BB: MDVX)

Introductory Comment

I have been covering an emerging growth situation -- VirnetX Holding Corporation (AMEX: VHC) – you can see it at “Larry Oakley’s Bold Ventures” editorial column at our home page at WallStreetCorner.com. What impressed me was its patents and court trial to begin today (3/8/2010) in which VHC is suing Microsoft (NASDAQ: MSFT) for patent infringement – a “David & Goliath” story.

Because I was so interested in VHC, I did some investigation of other possible David & Goliath type situations. What I found was a very interesting opportunity called Modavox. The company has only a $72 million market cap, patented Intellectual Property estimated to be worth $1 billion & a fully funded operating mobile marketing business, projected to be cash flow positive within just twelve months. It is one of the few pure-play publicly traded mobile companies that is focused on the cutting edge of mobile advertising, viewed by many as "the next big thing" in advertising & projected to exceed the $24 billion online advertising market in three to five years.

The recent announcement of a sophisticated “Midwest” investor investing $2 million at prices higher than the current market & the addition of the former President of E*Trade Capital Markets at E*Trade Financial to its board doesn’t hurt either. Given all this, I believe this $1.20 stock could easily reach its 52 week high of $4.38 in 2010 as the investing public gets more aware of the powerhouse potential of both the IP & the operating business.

It is seldom that I find another great company so soon, but given the number of similarities between the two stories I decided to immediately bring it to your attention. While VHC roughly doubled in the weeks since we found it, MDVX may offer similar, if not better potential.

Modavox’s Patent Portfolio

Modavox has the patent portfolio to do something very similar to what VHC is doing & will do in the future. It has the potential of providing investors with an early stage opportunity reminiscent of Qualcomm. Just like the VHC situation, Modavox has already had a very favorable Markman ruling against AOL, is almost three years into litigation, & is in process of filing a request for sanctions against them. They have also expanded their litigation & patent monetization initiative by filing additional suits against Yahoo & Time Warner. The business side of Modavox is focusing on the explosive growth area in the mobile market where both Google & Apple have made large acquisitions in the last several months.

What You Should Know About Modavox

Here’s a very brief overview of why Modavox is another situation that I believe you should have in your personal portfolio of impressive emerging growth stocks.

Modavox is a technology & services leader that concentrates on new media marketing platforms. Its focus is on high-growth markets in mobile marketing, digital advertising & video content delivery through market-driven patented technologies & platforms.

It just announced that it is completing the transition to its new corporate identity, Augme Technologies, Inc., including a change to a new ticker symbol which will be announced soon (I’ll keep you informed). The corporate identity & trading symbol change are part of the its overall rebranding initiative intended to emphasize its core technical platforms & refined business mission.

Modavox (watch for Augme) launched a completely revamped web site. Check it at www.Augme.com. The newly restructured company manages three operating divisions in the markets of mobile marketing (AD LIFE™), video content delivery (AD BOOM™), & ad network provisioning (AD SERVE™).

AD LIFE™ platform is a true end-to-end mobile marketing solution that enables marketers, brands, & advertising agencies to create, deliver, manage, & track mobile-interactive marketing campaigns.

AD BOOM™ is an intelligent Broadcast as a Service (BaaS) platform, designed for marketers & companies that want to sell, promote, extend, & enhance their content.

AD SERVE™ is an ad delivery platform which serves rich media & marketing communications to targeted destinations through a robust & flexible platform designed to be compatible, measurable, & cost-effective for both marketers & their clients.

Modavox (Augme) is the technology & services leader in new media marketing platforms that enable the seamless integration of brands, music, video, & other content with life through the power of the Internet & mobile communications.

Its intuitive new media marketing platforms give companies the control they need to quickly create, deploy, & measure rich-media & interactive marketing campaigns across all networks & devices. Augme marketing platforms condense the customer loyalty cycle by personalizing the brand experience & delivering that experience to customers where they work, play, & live. Through its three operating divisions, Augme is connecting brands & content to consumers in a network of mobile & multimedia experiences enabling companies & their marketing agencies to create new markets & monetize brand interactions.

Modavox’s (now Augme’s) patent portfolio enhances the value of its technology platforms by enabling such platforms to automatically provide customized content to individuals based on information such as past web activity, personal preferences, geography, or other data.

The original Modavox patent issued in 2002 has a priority date of October 1999 & that predates Microsoft, Google, AOL, & Yahoo's targeted advertising initiatives. The company subsequently had a new patent issued in 2007. Both patents are in force through 2018 & two Continuation filings have been filed along with one Divisional filing, leaving open the door to additional inventions & claims stemming from the original.

The Modavox patented technology is foundational (October 1999 priority date) to key targeted Internet functions, such as advertising, broadcasting, & content delivery. The patents cover breakthrough technology invented early in the mass consumer Internet age, placing its invention ahead of the inception of key companies in this space. The patents teach of a code module system, designed to automatically assemble content delivery on backend server systems allowing Website publishers using the Modavox method to target content to end-users’ preferences, networks, devices, & installed Internet capabilities from any Website destination

The key is that the distribution process owned by Modavox allows any webpage to provide users with customized content. The process provides for the targeting widely utilized in advertising delivery space & also covers the targeting systems allegedly even used by e-commerce sites such as Amazon & eBay (EBAY). With so many big name companies using this foundational technology, it begs the question why doesn’t one of them just buy the company? I think it’s only a matter of time since the Modavox IP offers the unique ability to own & license the delivery of targeted advertising the behavioral subset, & other targeting such as geographic targeted advertising. By owning Modavox's IP, the eventual purchaser of Modavox would assume ownership & dominance of this key technical space, again think Qualcom& its ownership of the original patents related to its CDMA digital technology.

Modavox is already over two plus years into a patent infringement suit against Tacoda, founded & sold by David Morgan to AOL for $275 million. Modavox filed a subsequent suit against AOL, TWX, & Platform A adding them to the infringement list. A favorable Markman ruling followed by the filing of seemingly damning sanctions for Spoliation of Evidence in the Tacoda case appears to paint a picture of AOL’s Tacoda trying to elongate the case while admitting to having willfully destroyed key technical evidence instead of actually trying to defend against it. In November of 2009, Modavox filed a complaint in the United States District Court for the Northern District of California, asserting two causes of action against Yahoo! for patent infringement related to Modavox-owned United States Patent No. 6,594,691 ("Method and System for Adding Function to a Web Page") and United States Patent No. 7,269,636 ("Method & Code Module For Adding Function to a Web Page"). Modavox's complaint specifically asserts that Yahoo! has operated a business for profit that uses Modavox's technology claimed & described in the '691 & '636 Patents without having sought or received Modavox's authorization to use its patented technology.

The Modavox IP portfolio would seemingly provide its eventual owner with protection against these lawsuits & could be used to counter behavioral patents & other patents that emerge from the backend, data collection, or other related IP that ultimately uses the Modavox system to distribute & monetize advertising or customized content to end users. Obviously the eventual owner of Modavox's IP would see these cases either fortified or undermined depending on the purchaser.

So what is this patented technology possibly worth? Fortunately I don’t have to speculate because the Kenrich Group, Intellectual Property consulting experts who provide valuation services for intellectual property and companies rich in intellectual property, already weighed in with their opinion. Using the Market Approach, their valuation conclusion is as follows:

“It is my understanding that a large amount of infringement within the industry has prevented Modavox from maximizing the value of its fundamental technology. Due to the unique facts & circumstances of the present situation, we have decided to use The Market Approach as a benchmark supporting the preliminary value obtained from The Income Approach. The Market Approach suggests a median purchase price of $1,035 million.”

YES, that’s $1 billion. The company’s current market capitalization stands at a paltry approximate $72 million!

Here is a link to the report in its entirety filed in a form 8k with the SEC (http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6886252-11353-128124&type=sect&dcn=0001214782-09-000305)

Importantly, the Modavox IP also includes the Augme Mobile platform & offers additional value to anyone of the big players in that it further enhances their position in the mobile space & provides again key ownership of sought-after targeting within the technical space. The global mobile targeting initiative just launched by Google would be an example of a technology system that would appear to be suspect of infringement on Modavox patents with respect to targeting within the mobile space. Modavox has yet to even set its sights on what I’m guessing can only be a very comprehensive list of additional mobile infringers.

Companies like VHC and MDVX may be potential acquisition targets. Why? It’s simple, because any large company buying either one will materially enhance their intellectual property portfolio while likely fortifying the foundation of their own existing proprietary technology. They can use it to protect themselves or leverage it against competitors. Companies with assets like these rarely if ever remain independent; the true value of their assets is generally unlocked inside the scale of a larger entity. When the sum of a company’s assets is valued at far less collectively than they are worth individually, they typically become takeover targets.

I like the fact that Modavox purchased Augme Mobile in 2009. Augme Mobile operates a first of its kind interactive mobile marketing platform (trademark: AD LIFE) which provides marketers, brand promoters, & advertising agencies the ability to create, deliver, manage,& track interactive marketing campaigns targeting mobile consumers via phones & PDAs. Augme Mobile’s exclusive right to apply the Modavox IP in the Mobile Space provides an important barrier of entry to competitors in this high growth business. Augme Mobile expands the Modavox advertising/content targeting platform from the stationary Internet to the “Mobile Web”—the fastest growth area of advertising expenditures. Augme Mobile’s executive team has tremendous experience on Madison Avenue & is using that experience & long-time contacts to attract Fortune 500 clients & major advertising agency clients. Included in its growing list of clients are the following: Inmar, News Corp, Time Warner/HBO, Johnson and Johnson, DuPont, Graphics Packaging, & Colgate-Palmolive. In addition Shazam®, the world’s leading mobile discovery provider, recently announced the launch of the Shazam Audio Recognition Advertising (SARA)™ program & its partnership with Augme Mobile to take the SARA program to the North American market.

Another potentially huge division of Augme Mobile is Augme Mobile Health. Augme Mobile Health enables instant communication for patients & health care providers through any mobile device. It works seamlessly with pharm brands physicians & patient databases, & is fully HIPAA & FDA compliant.

Augme Mobile Health currently works with two of the top 10 pharmaceutical companies & is on track to work with at least another five of those top companies providing complete mobilization to a litany of their premium brands in this quarter.

My Opinion

I particularly like the fact that Modavox’s patents could effectively make them, or an acquirer, the ultimate gatekeeper for the successful delivery of targeted advertising & content on the Internet &/or mobile devices.

Modavox has IP worth an estimated $1 billion plus, mobile IP worth potentially more, & an operational mobile marketing business which should start to see revenue ramp up in the current quarter projected to be cash flow positive in about a year. I like it. I like it even more that one sophisticated “Midwest” investor just put $2 million in the company above the current share price alleviating any need for future material dilution.

I suggest that you do your own homework on this situation. This is a company that you should include as one of your emerging growth stocks. Modavox closed Friday 3/5/2010 at $1.19 on a volume of 41,357 shares. The average volume over the last three months was 88,257 shares. Its 52-week range is $1.00 - $4.38

Modavox/Augme is located at 43 West 24th St. Suite 11B, New York, NY 10010 – 212-710-9376. You can reach investor relations contact Frank Milano at 612-201-2363 or 612-333-9099.

My comments in this column are strictly my personal opinion. At times, I will include forward-looking information as that term is defined in the Private Security Reform Act of 1995. Such information & the related company are subject to many risks & uncertainties. There can be no assurance that actual results, business conditions, business developments, losses & contingencies, local & foreign factors, & other matters will not differ materially from those suggested in any of my forward-looking statements. Such differences are the result of all sorts of factors (some examples: market conditions, competition, advances in technology, acquisitions, mergers, potential litigation, personnel changes, market changes, capital availability, etc., etc.).

Do not run out & buy a stock just because I am enthusiastic about the situation. Call the company before you buy -- satisfy yourself first. I always include a phone number for that purpose. My purpose in this column is to respond to your request for my personal opinion. You have the responsibility of making your own investment decisions. Do not give up that responsibility.

My editorial coverage has always been, is now, and always will be without charge. That includes what I write in Conservative Speculator, and what I write in "Larry Oakley's Opinion, " "Larry Oakley's Stock Pick," "Larry Oakley's Comment," & "Larry Oakley's Bold Ventures" columns. It also includes what I write in such venues as articles submitted to other publications, interviews on radio & television, and at the investment seminars and conferences at which I am a featured speaker. By doing all my editorial work free of charge, I have the advantage of writing about what companies I particularly like. There are occasions when I will write about a company that is a paying participant on WallStreetCorner -- that's because I like the company. I always make it clear to them that editorial coverage is free and is not a part of the fee they pay to have their Profile researched, prepared, & posted at WallStreetCorner