Overview
MoPals.com, Inc. (f/k/a MortgageBrokers.com Holdings, Inc. which was f/k/a MagnaData, Inc.) (the “Company”, “we”, “our” or “us”), a development stage company,
was incorporated under the laws of Delaware on February 6, 2003.
In February 2005, we filed articles of amendment with the State of Delaware changing the name of our Company from MagnaData, Inc. to MortgageBrokers.com Holdings, Inc.
On March 26, 2013, we filed articles of amendment with the State of Delaware changing the name of our Company to
MoPals.com, Inc.
Discontinued Operations of Mortgage Brokerage Business
Prior to March 26, 2013, the Company operated as a mortgage brokerage in Canada through its four subsidiaries: MortgageBrokers.com Inc. (an Ontario Canada provincially incorporated company that held licensure for operating as a mortgage broker in the Province of Ontario); MortgageBrokers.com Financial Group of Companies Inc. (a Canadian federally incorporated company, which held licenses for operating as a mortgage broker in the Provinces of Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, Alberta and British Columbia); MBKR Holdings Inc. (a Canadian federally incorporated company through which the Company centralized back office services in Canada); and, MBKR Franchising Inc. (a Canadian federally incorporated company, through which the Company acted as a franchisor in Canada of the MortgageBrokers.com business system).
As noted in prior filings and disclosures, the Company had been actively exploring restructuring options to reduce Company overhead expenses. Based upon the 2011 and 2012 year-end financial results of operations and losses of cash from operating activities, the high costs associated with driving a high-service value proposition in an eroding margin brokerage marketplace in Canada and the increasingly high costs associated with administering a publicly traded company, the Director of the Company decided to privatize and wind down the Canadian operations (the “Mortgage Brokerage Business”) through a sale to a private company under common control ( collectively, the “Mortgage Brokerage Privatization”). In an effort to reduce overhead costs, and in exchange for the provision of ongoing working capital deficit funding, in late 2010, all human resources for the Company were consolidated into a related party company who provided back office corporate services to the Company on a cost allocation basis. Over 2012, in an effort to further reduce overhead expenses and in preparation for the inevitable Mortgage Brokerage Privatization, all brokerage services including mortgage brokerage licensure, branding, mortgage agent back office operations, training and technology platforms were transitioned to the same related party company in the latter half of 2012. The Company’s subsidiaries did not renew their provincial mortgage brokerage licensure in the various jurisdictions where they operate and as at December 31, 2012, the Company’s subsidiaries had no active licenses empowering them to operate as a mortgage brokerage.
All business activities of the Company in the first quarter of 2013 were related to executing the Mortgage Brokerage Privatization including activities related to the contemplated Mortgage Brokerage Privatization; activities related to the administration of the publicly reporting entity; and administration of the business including management of trades payables.
On March 26, 2013, the Company entered into an Agreement of Sale(the “Agreement of Sale”) pursuant to which the Company transferred to MortgageBrokers.com Canada Inc., a Canadian Corporation under the control of Alex Haditaghi, the Company’s sole officer and director, and principal shareholder , all of the Company’s equity interest in the Company’s former Mortgage Brokerage Business and MortgageBrokers.com Canada Inc. agreed to assume any and all liabilities associated with the Company’s former Mortgage Broker Business, including, but not limited to all commitments, liabilities and contingent liabilities, effective immediately prior to closing of the Share Exchange. Pursuant to the Agreement of Sale, the Mr. Haditaghi forfeited all rights to any monies owed to Mr. Haditaghi by the Company associated with a shareholder loan of approximately $25,000 (the “Spin Out and Cancellation”).
Operations of MoPals.com, Inc.
On March 26, 2013, immediately following the Spin Out and Cancellation, the Company entered into a share exchange agreement (the “Exchange Agreement”) by and among (i) the Company, (ii) MoPals, Inc., a Nevada corporation (“MoPals (Nevada)”); (iii) Alex Haditaghi and (iv) the shareholders of MoPals (Nevada) (“MoPals Nevada Shareholders”). Pursuant to the terms of the Exchange Agreement, the Company acquired 100% of the issued and outstanding equity securities of MoPals (Nevada) in exchange for the issuance of 50,000,000 shares of the Company’s common stock, par value $0.0001 per share (each a “Share” and collectively, the “Common Stock”)(the “Share Exchange”).
MoPals (Nevada) was incorporated in the State of Nevada on November 6, 2012.
IQIC.com Inc. (“IQIC”) was incorporated federally in Canada on August 7, 2012. On November 7, 2012, IQIC filed Articles of Amendment to its Articles of Incorporation to change its name to “MoPals Canada Inc.” (“MoPals Canada Inc.”). Prior to March 26, 2013, MoPals Canada Inc. was a wholly-owned subsidiary of MoPals (Nevada). Pursuant to execution of the Exchange Agreement, MortgageBrokers.com Holdings, Inc. acquired 100% of the issued and outstanding equity securities of MoPals (Nevada) and subsequently changed its name to MoPals.com, Inc. (also “MoPals” for references regarding events after March 26, 2013).
At Present, all of MoPals’ operations are conducted through our Canadian subsidiary, MoPals Canada Inc.
Description of MoPals’ Business
MoPals is a development stage company which currently devotes all of its resources developing its business and marketing plans, raising investment capital, hiring staff and building its service technology platform.
MoPals Service, Distribution and Market
MoPals is building an internet and mobile brand loyalty application and service that the Company believes will bridge the gap between social media and loyalty rewards. It is management’s opinion that our service will be unique as the world’s first community-driven, crowd sourced loyalty platform. With a mobile-based, experiential and Big Data-driven platform, it is our intent to reward our members for both social and transactional behaviors. It is our plan that MoPals will use an exclusive digital currency, called ‘MoCoins™’, to foster a community where consumers are rewarded for making purchases at participating businesses, as well as engaging in a wide range of social media activities that enhance brand value.
Our consumer behavior incentives are centered around MoCoins™ which are earned by members for a number of online and ‘in-store’ behaviors within a consumer’s social network including rewards for promotional participation; ‘liking’, sharing or reviewing an experience at a business; referring business promotions; creating content driving polls; or referring friends to join the MoPals community. MoPals aims to be a leader in how brands inspire customer loyalty, driving online brand enhancing behavior and sales.
It is our aim that our technology platform will enable businesses to connect with their customers, giving businesses a cost effective means to encourage and reward brand enhancing behavior. It is our intent that our proprietary platform under development will also allow businesses to receive data associated with their consumer’s behavior from which they might target promotional offers and marketing strategies.
Following our service launch, our plan is that MoPals will generate revenue from:
1.
|
participating merchant subscriptions to receive ongoing consumer data; and
|
2.
|
receiving a percentage of promotion-based sales revenue from participating businesses.
|
In additional to the financial condition and results of operations of the Company, it is management’s belief that growth of our Company will also, in part, be demonstrated through the metrics of MoCoins™ issued or accrued, the number of registered members, number and types of promotional items sold, member retention via repeat engagement and the number of retail businesses who sign on to and offer promotions through the MoPals community.
The Company plans to initially launch its service in Ontario, Canada and expand to other parts of Canada shortly thereafter with a plan to actively penetrate the USA marketplace in the third quarter of 2014.
Current Market Conditions
The Company believes that MoPals bridges both the ‘Social Media’ and ‘Loyalty Program’ market places.
Social Media
The Company has observed significant growth in sales and users for market dominant social media companies over the past three to five years. Facebook Inc., for example, has seen their gross revenue grow from $1.97 billion in 2010 to $7.87 billion in 2013 (
Annual Financial Reports, Facebook Inc., 2010 – 2013
) – approximately 300% over three years. Twitter Inc.’s gross revenue has grown from $106 million in 2011 to $665 million in 2013 (
Annual Financial Reports, Twitter Inc., 2011 – 2013
) - approximately 525% over two years.
According to emarketer.com in a June 18, 2013 on-line article, social media company sales and profits are closely linked to the number of users on the platform. The amount of global social network users was estimated at 1.73 billion people in 2013, up 18% from 2012. Social networking reaches nearly one in four people around the world. According to Emily Adler as published on businessinsider.com on January 5, 2014, social media users are highly engaged. Social is now the top Internet activity: Americans spend an average of 37 minutes daily on social media, a higher time-spend than any other major Internet activity including email.
Loyalty Programs
The Company believes that the loyalty program industry, a generally mature market space, can be characterized by high growth rates and innovative ideas.
According to an article by McKinsey & Company published in Business Insider on March 21, 2014, the loyalty program industry growth rate still remains strong, even with customers already belonging to a large amount of programs. In the United States alone, loyalty memberships have been increasing by the annual compound rate of 8.7% since 2000 and the total loyalty program members in the U.S. are estimated at 2.5 billion in 2012. However, the amount of active loyalty memberships (meaning members had engaged at least once in the past 12 months) appears to be declining and was measured at 44% in 2012.
According to McKinsey & Company, many companies have been successfully innovating in the loyalty space. One such example is Target Corporation, which uses the data gained from their loyalty program to focus on highest-value consumers such as future moms. Another example is Sainsbury PLC, which built partnerships among many different retailers to deliver strong value to its loyalty program members. Both companies’ success in the loyalty space is attributed to their innovations.
Competitive Market Conditions
In industries as valuable as Social Media and Loyalty, there are many large competitors with dominant market share positions.
The four main competitors to MoPals are Yelp Inc., Foursquare Labs, Inc., Alliance Data Systems Corporation (Air Miles
)
and Aimia Inc. (Aeroplan).
Yelp
Yelp, Inc. is a multinational corporation headquartered in San Francisco, California that operates an "online urban guide" and business review site. According to Wikipedia.com, the company's website (www.yelp.com) began as an email service for exchanging local business recommendations and later introduced social networking features, discounts, and mobile applications.
According to financial information published on www.google.com/finance, from 2010 to 2013 Yelp saw its revenue grow from $48 Million to $233 Million - an increase of over 385% over three years. Yelp also has seen its stock price grow by 241% from $23.49 on March 25, 2013 to $81.17 on March 24, 2014. The company has a market capitalization of $5.5 billion as of March 28, 2014.
Foursquare
Foursquare is a location-based social networking website for mobile devices, such as smartphones. Users "check in" at venues using a mobile website, text messaging or a device-specific application by selecting from a list of venues the application locates nearby. Each check-in awards the user points and sometimes "badges". The user who ‘checks in’ most often to a venue becomes the "mayor," and users regularly vie for "mayorships".
In an article written by Sarah Frier for Bloomberg Businessweek on April 11, 2013, Foursquare received a $41 million investment from private equity fund Silver Lake Partners and venture capital firms Andreessen Horowitz, Union Square Ventures, O’Reilly AlphaTech Ventures, and Spark Capital in early April of 2014. Early investment rounds valued the company at $600 million.
Aimia
Aeroplan is a coalition loyalty program owned by Aimia Inc., a global loyalty management company. The Aeroplan program was created in July 1984 by Air Canada as an incentive program for its frequent flyer customers. There are approximately 4.6 million active members in the program. In recent years, Aeroplan has evolved into a loyalty marketing program with retail partners such as Esso, Home Hardware, Rona, Birks, Sobeys, Thrifty Foods, Nestle Canada and others.
According to financial information published on www.google.com/finance, from 2010 to 2013 Aimia saw its revenue decline from $1.96 billion to $1.67 billion. Despite this, Aimia has seen its stock price grow by 96% in five years from $8.66 on March 27, 2009 to $17.72 on March 24, 2014. The company has a market capitalization of $3.07 billion as of March 24, 2014.
Alliance Data (Air Miles)
Alliance Data Systems Corporation is a publicly traded provider of loyalty and marketing solutions, such as private label credit cards, coalition loyalty programs, and direct marketing services, derived from the capture and analysis of transaction-rich data.
According to financial information published on www.google.com/finance, from 2010 to 2013 Alliance Data saw its revenue grow from $2.8 billion to $4.3 billion, an increase of over 54% in three years. The company has a market capitalization of $14.92 billion as of March 24, 2014. Alliance Data has seen its stock price grow by 792% in a five year period from $36.34 on March 27, 2009 to $280.65 on March 24, 2014.
Strategic Market Positioning
The Company views the overall lack of recent innovation and customer engagement in the loyalty program industry as an opportunity to leverage the innovative strength and tools of social media in the brand loyalty market place. Company management also believe that the strength of the current market dominant competitors and the ongoing elevated degree of acquisitions in the social media and brand loyalty marketplaces may afford MoPals additional opportunities for growth.
The Company feels it has an advantage being a later entrant into the social media and brand loyalty markets which allows it to see what has worked for competitors in each market and how to improve upon it leveraging successes from one market into the other. The Company also feels that building a ‘Big-Data’ member platform can now be accomplished very cost effectively by outsourcing to off-shore developers.
MoPals Technology Platform & Service
MoPals’ software is planned to be multi-platform and will aim to integrate with all major social media sites, such as Facebook, Twitter, LinkedIn, Instagram, and Pinterest. Our product development approach is centered on building the most useful tools that enable users to connect, share, discover, and communicate with each other. Our services for users are free of charge and available on the internet and mobile platforms.
The MoPals’ proprietary software allows merchants to send customized and targeted brand promotions to our MoPals’ members using the wealth of information that is being volunteered over social media sites.
Our service will include:
|
i.
|
Promotional offers. We will be featuring promotional offers from our national and local merchants and distributing them by email to our MoPals’ members.
|
|
ii.
|
Self-Service Deals. Our merchants can use our self-service platform to create and launch deals at their discretion on our site.
|
|
iii.
|
Member-Generated Polls. Our members will be able to create and generate polls and send them to their friends.
|
|
iv.
|
Member-Generated Surveys. Our members will be able to create surveys and send them to their friends.
|
|
v.
|
Our merchants will be able to create polls or surveys to be posted on the MoPals’ site.
|
|
vi.
|
Our members can earn MoCoins™ for joining, liking a brand, purchasing a promotion, sharing their promotion and creating and responding to surveys.
|
Intellectual Property
We protect our core technology and intellectual property rights by relying on federal, state/provincial and common law rights, as well as contractual restrictions. We control access to our proprietary technology by entering into confidentiality agreements with our employees, contractors and third parties.
In addition to these contractual arrangements, we may also rely on a combination of trade secrets, copyrights, trademarks, service marks, trade dress, domain names and patents to protect our intellectual property. We may pursue the registration of certain copyrights, trademarks, service marks and domain names in Canada and the United States and potentially in certain locations outside these areas.
Regulatory Matters and Compliance
We are subject to a number of Canadian federal and provincial, as well as American federal and state laws and regulations affecting companies conducting business on the internet. As we expand, we may be subject to similar laws and regulations in jurisdictions outside of Canada and the United States. These laws are constantly evolving and being tested in courts and could be interpreted in a variety of ways that could harm our business. These laws and regulations may involve such areas as taxation, tariffs, privacy and protection of personal data, rights of publicity, content, intellectual property, distribution, electronic contracts and other communications, on-line sweepstakes and contests, competition, protection of minors, consumer protection, and the provision of online payment services, among other areas.
It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce.
We are also subject to federal, state, provincial and foreign laws regarding privacy and protection of user data. Foreign data protection, privacy, and other laws and regulations are often more restrictive than those in the United States. U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly-evolving industry in which we operate. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning data protection which could affect us. For example, a revision to the 1995 European Union Data Protection Directive is currently being considered by legislative bodies that may include more stringent operational requirements for data processors and significant penalties for non-compliance.
We post our Privacy Policy and Terms of Service online, in which we describe our practices concerning the use, transmission and disclosure of user data. Any failure by us to comply with our posted privacy policy or privacy related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business. In addition, the interpretation of data protection laws, and their application to the Internet is unclear and in a state of flux. There is a risk that these laws may be interpreted and applied in conflicting ways from state to state, province to province, country to country, or region to region, and in a manner that is not consistent with our current data protection practices. Complying with these varying international requirements could cause us to incur additional costs and change our business practices. Further, any failure by us to adequately protect our players’ privacy and data could result in a loss of player confidence in our services and ultimately in a loss of players, which could adversely affect our business.
Offers and/or MoCoins™ may be considered gift cards, gift certificates, stored value cards or prepaid cards and therefore governed by, among other laws, the CARD Act and state and provincial laws governing gift cards, stored value cards and coupons. Many of these laws contain provisions governing the use of gift cards, gift certificates, stored value cards or prepaid cards, including specific disclosure requirements and prohibitions or limitations on the use of expiration dates and the imposition of certain fees. If Offers and/or MoCoins™ are subject to the CARD Act, the value of the Offer and/or Miles must not expire before the later of (i) five years after the date on which the Offer and/or MoCoins™ were issued; and (ii) the Offer and/or MoCoins™’ expiration date (if any).
In addition, certain states and foreign jurisdictions have requirements for disclosure and service terms and conditions, including expiration dates and permissible fees that might apply to Mopals. Some states and foreign jurisdictions also include gift cards under their unclaimed and abandoned property laws which require companies to remit to the government the value of the unredeemed balance on the gift cards after a specified period of time (generally between one and five years) and impose certain reporting and recordkeeping obligations. We do not remit any amounts relating to unredeemed Offers and/or MoCoins™ based upon our assessment of applicable laws. The analysis of the potential application of the unclaimed and abandoned property laws to Offers and/or MoCoins™ is complex, involving an analysis of constitutional and statutory provisions and factual issues, including our relationship with customers and merchants and our role as it relates to the issuance and delivery of an Offer and/or MoCoins™.
Many states have passed laws requiring notification to subscribers when there is a security breach of personal data. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection laws in Europe and other jurisdictions outside the United States may be more restrictive, and the interpretation and application of these laws are still uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data practices, which could have an adverse effect on our business. Furthermore, the Digital Millennium Copyright Act has provisions that limit, but do not necessarily eliminate, our liability for linking to third-party websites that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act.
Various laws and regulations in the United States, Canada, and abroad, such as the Bank Secrecy Act, the Dodd-Frank Act, the USA PATRIOT Act, and the Credit CARD Act impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. For these purposes, financial institutions are broadly defined to include money services businesses such as money transmitters, check cashers and sellers or issuers of stored value. Examples of anti-money laundering requirements imposed on financial institutions include customer identification and verification programs, record retention policies and procedures and transaction reporting. We do not believe that we are a financial institution subject to these laws and regulations based, in part, on the characteristics of the offers and/or MoCoins™ and our role with respect to the distribution of the offers and/or MoCoins™ to customers. However, the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department tasked with implementing the requirements of the Bank Secrecy Act, recently proposed amendments to the scope and requirements for parties involved in stored value or prepaid access, including a proposed expansion of the definition of financial institution to include sellers or issuers of prepaid access. In the event that this proposal is adopted as proposed, it is possible that an offer and/or the MoCoins™ could be considered a financial product and that we could be a financial institution.
Additionally, the
Personal Information Protection and Electronic Documents Act
(“PIPEDA”) (Canada) requires organizations to take reasonable steps to safeguard the personal information in their custody or control from such risks as unauthorized access, collection, use, disclosure, copying, modification, disposal or destruction.
The first step in developing reasonable safeguards is to collect only the personal information that is needed for a particular purpose. If it is not needed, organizations should not collect it. But if they do, they need to take appropriate precautions.
In addition, because our services are accessible worldwide, certain foreign jurisdictions have claimed and others may claim that we are required to comply with their laws, including in jurisdictions where we have no local entity, employees, or infrastructure.
Material Agreements
On December 19, 2013, the Company entered into a letter of intent with Relativity Sports, LLC (“Relativity”), a sports management company that provides professional athletes with services including contract negotiation, marketing, media relations, fan management, brand building, community involvement and personal services. The letter of intent provides a framework whereby Relativity would provide certain services to have its athletes endorse the Company. A definitive agreement with Relativity and endorsement agreements with select athletes will be negotiated over an exclusive period of up to sixty days. The letter of intent provides details of the proposed terms of the contemplated definitive agreement, stock compensation to be paid by the Company to Relativity upon closing of the contemplated definitive agreements and the terms of the contemplated endorsement agreements between MoPals and each Relativity athlete. As of April 15, 2014, the Company has not entered into any definitive agreements related to the Relativity letter of intent.
Employees & Independent Contractors
As of April 15, 2013, we had fourteen (14) full-time employees and eighteen (18) independent contractors. None of these employees are represented by collective bargaining agreements. The Company considers its relations with its employees and independent contractors to be in good standing.
Corporate Information
The Company’s corporate headquarters is located at a leased office space located at 109 Atlantic Avenue, Suite 308, Toronto, Ontario, CANADA, M6K 1X4. Our telephone number is (416) 362-4888. Our website is
www.mopals.com
.