Spare Backup, Inc. (fka SPBU)

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RESEARCH REPORT

SPBU Research Report



COMPANY OVERVIEW

Spare Backup is the chosen mobile partner for technology retailers, manufacturers, Telco's and Insurance reseller’s. Our mission is to deliver simple to use and valuable storage solutions under a white label which provides accessibility to content for the end users resulting in high customer satisfaction, increased loyalty, and improved service revenues for us and our partners.

• Spare Backup provides cloud based data, content management, and synchronization.
• Spare Backup services are for mobile devices and computers.
• Users can organize all digital content on one or multiple platforms.
• Can do cross platform data transfers.
• World class partners and customers.
• Deep, enterprise class, carrier grade security.
• Data protection for computers and mobile phones.
• Large and growing potential market.


Spare Backup is one of the leading online data storage companies in the world, along with its team of programmers and designers, they have developed a way for PC and Mobile users to have all their data in a safe secure location that can be accessed at anytime from anywhere in the world from any computer or smart phone!

Competitive Advantage

• Spare has first mover advantage in backup and mobile markets.

• Spare backup software allows for the synchronization across multiple providers and multiple carries.
• We are carrier and handset agnostic, which serves as a barrier to entry for other competitive products.
• Upon request, we can customize our product to suit our customer’s needs making us a “white label” provider.

I: Products
1 - Spare PC & Tablet Backup
2 - Spare Mobile Backup
3 - Spare Mobile Security
4 - Parental Controls

II: Customers and Markets The Coda Research Consultancy predict global smartphone sales of some 2.5 billion over the 2010-2015 period, and also suggest that mobile Internet use via smartphones will increase 50 fold by the end of that period.

III: The Overview Significant competitive bar to entry. Bundled product offering. Attractive business model with high margin and reoccurring revenue model.

1. Spare PC & Tablet Backup

http://my.sparebackup.com/

2. Spare Mobile

The features of Spare Mobile are focused on mobile phones, ensuring that contacts and photos are backed up and can be accessed in the event of a loss of phone or change of device from anywhere in the world. The Coda Research Consultancy predict global smartphone sales of some 2.5 billion over the 2010-2015 period, and also suggest that mobile Internet use via smartphones will increase 50 fold by the end of that period. Spare Mobile is designed to work in conjunction with the Spare Backup Inc. family of products. Spare Mobile provides a user with a means to create a secure online backup of all files contained on their mobile device. A user will have the ability to access Spare Mobile while the phone is in an offline mode. While turning the phone transmit option to off is a function of the phone, while in this mode the user will still have access to files that have been cached locally by Spare Mobile.

A typical Mobile backup includes the following items.
• Contacts / Photo’s / Music / Videos Spare Mobile supports the following Mobile device operating systems:
• Android / iPhone / Black Berry / Windows Mobile / Java

3. Security Services

Spare Backup’s Spare Mobile™, is designed to securely protect the data and information on users’ mobile devices. Spare Mobile™ is a carrier agnostic online mobile data protection service. Mobile devices have become the most important and integral technology in the user’s daily life however, mobile devices remain the most susceptible to theft, damage, loss and even viruses. It is now increasingly important for users to securely backup and protect their mobile device and Spare Mobile™ with its Security features provides a simple and secure way to accomplish this. Spare Mobile’s Security Products provides users the means to remotely manage and monitor their mobile device. The Spare Mobile’s Security Products five features include:

• Locate my Phone
• Lock / Unlock my Phone
• Message my Phone
• Remote Audible Alert
• Wipe my Phone

4. Parental Controls

Parental Control allows parents to control usage of their children’s cell phones. It allows the parents to monitor where their children are and whether they are away from specific locations at designated time

Phase I
•Monitors child’s location Where is your child?
Geo-Fencing of your child’s location. Alerts and Notifications. Proactive Parent notification
View the child’s location on the web portal. You can even verify that they arrived at a particular destination, like soccer practice right from your wireless phone. Parental Control supports the following Mobile operating systems:
• Android / iPhone / Blackberry / Windows Mobile / Java
Spare Backup's Parental Controls

http://www.mycellguardian.com/

Subsequent Phases through 2012 and beyond
• Restricts phone, email and text usage School Hours
• Night/Weekend privileges
• Restricts Internet usage Times of allowed usage
• Web blocking
• Facebook and other Social networking sites monitoring
• Text Monitoring

Spare Backup’s Customers

Retailers

Phones 4u – Just Update My Phone http://jump.sparebackup.com/#

Article on JUMP: http://www.itproportal.com/2012/02/1...pgrade-scheme/

Carphone Warehouse / Best Buy Europe – My Hub http://my-hub.co.uk/#
Youtube video for My Hub:

Wirefly
http://www.wirefly.com/backup

Is Radio Shack next?
http://www.simplexity.com/who-we-serve/r...

Manufacturers

Sony – My Memory Center
http://biz.yahoo.com/e/120309/spbu.ob8-k...

Telcos

NEW as of 5/1 Turkcell – 68M subscribers

http://www.thestreet.com/story/11516...-controls.html

Service Net / Tracfone
http://biz.yahoo.com/e/120123/spbu.ob8-k...

Adding just one major telco (ie Telefonica) can have a significant impact on SPBU monthly recurring revenue

Top Mobile Operators globally: http://en.wikipedia.org/wiki/List_of...work_operators

Insurance resellers

http://www.lifestylegroup.co.uk/content/...

Lifestyle Services Group – Find My Child http://parentalcontrols.sparebackup.com/

Lloyds TSB – Save What Matters https://savewhatmatters.sparebackup.com/...

Direct Sales

Spare Backup – My Cell Guardian http://www.mycellguardian.com/
Spare Backup – PC Backup http://my.sparebackup.com/

Analysis:

Favorable investment case for SPBU:
Launching its Proprietary Products. Several core customers (including Wirefly, LSG) are now in the process of launching SPBU’s systems/software on mobile devices. At LSG, for example, it is possible that as many as 500,000 installations can be introduced on a monthly basis. This represents a potential initial market opportunity of 6 million devices per year. Assuming a monthly charge of $1.00 per device (or $12/year), and a 50% market share, the annual gross revenue for SPBU could be $35 million. These projections are based solely on SPBU’s current contract with LSG. Should the Company capture more of LSG’s total customer base—e.g., insurance, banking, finance—the relationship could expand into a $100-million potential.

The Global Market Opportunity for Mobile Devices Is Huge. There are currently 5 billion mobile phones being used. And the market is growing 8-10%/year. We think SPBU’s “addressable” market opportunity is at least 2 billion devices. Clearly, the arithmetic suggests that SPBU could become a “hundreds of millions of dollars” enterprise in less than five years.
Spare is Savvy about Protection/Backup Systems for “Smart Phones”—one of the fastest-growing markets in the world. The Company has several “core” customer agreements with some of the leading providers/sellers of mobile devices in the world: LSG, the largest United Kingdom provider of mobile phone insurance, which is available to more than 9.5 million customers; Car Phone Warehouse (CPW), one of Europe’s leading mobile device retailers (and part of Best Buy Europe); Simplexity, which owns Wirefly.com mobile devices retail website (Simplexity is the Internet’s leading authorized seller in the U.S. of cell phones and wireless service); and Sprint, through its contract with Assurant (which strengthens Spare’s systems for Tablets, including the iPad and Android).
SPBU will be both Profitable and Cash Flow Positive in 2012. Company’s operating expenses (Research and Development, SGA) are running at $12-15 million/year. Estimated SPBU’s gross profit margin (after applying varying “customer revenue-sharing” arrangements) is 60%. Hence, the “threshold” revenue base for SPBU to achieve profitability is $30-35 million. And we think the Company can hit or exceed that level in 2012. At such levels SPBU would also be comfortable cash-flow positive.

SPBU could be close to breakeven and cash flow positive right now.

As the Company fully ramps up with four of its “core” customers in 2012, estimated revenues should approach $50 million, and expect SPBU to report a net profit of more than $10 million, or $0.05 per share. Expect Spare to report a net loss of more than $10 million in 2011.

The long-term prospects for SPBU are even more impressive. Revenues could more than double in 2013 and could be at least $250 million by 2015. This suggests earnings likely hitting $0.15-$0.20 per share in 2013 and $0.60-$0.65 per share in 2015.

Current Price (5/8/12): $0.045
3-month Target: $0.22
6-month Target: $0.51
1-year Target: $1.25