SANTA MONICA, CA--(Marketwired - February 19, 2014) - Max Sound Corporation (MAXD)
Dear MAX-D Shareholders,
What follows is a summary of where the Company is at today, and a discussion of the progress we made throughout 2013. I will discuss the MAX-D HD Audio product and its positioning, and also provide an update on our online music retailer Liquid Spins.
I'll start by thanking all of our outstanding personnel who make up the MAX-D Team, each of whom has devoted countless hours, pushing us toward our ultimate goal of great success. I'd also like to thank all of our investors, who have become believers in our mission to make MAX-D the new consumer audio brand standard across all major vertical markets including: Multimedia, Entertainment, and Communication.
THE MAX-D HD AUDIO TECHNOLOGY
The MAX-D HD Audio Technology is currently delivering high definition audio without increasing file size. We know it's better for your hearing than today's MP3's, and the implications are serious and impactful. MAX-D MP3 files sound incredible, but remain one-tenth the size of a .wav file, plus with more clarity, dimension, articulation and impact in every range of the audio spectrum, they can sound as good as the original recording.
MAX-D HD Technology does not require any high cost changeover and can be added to any industry wanting better sounding audio. There is no need for bigger pipes, bigger servers, new consumer appliances, or higher data costs (which would be rejected by today's cost conscious consumers). The only change would be exceptional sound. MAX-D is proving that size matters, fitting life-like HD Audio into our existing MP3 and gigantic compressed audio eco-system. So the wait for high definition audio is over.
As a practical matter, when stock performance fails to meet expectations (yours and ours), the tendency is to use recent pricing as the only indicator of the Company's value. Yet we believe it's not valid to use recent pricing as a measurement, when considering that MAX-D is actually in a much better, more valuable position today than it was just three months ago, due to the recent positive developments discussed below.
Ask yourself, "What could the MAX-D value be when everyone knows about it, and consumers all over the world can enjoy a far better audio experience?" You probably have an idea what that value could be, which is probably why you invested in MAX-D. We have an idea too, which is why we keep investing our time, energy and financial resources (Seven figures has already been invested by our founder).
When consumers hear MAX-D HD Audio demonstrations, they think the value of our Technology is off the charts! Whether from a sound bar, headphones, a car system, home theatre or on stereo speakers, Listening to the demos leads all consumers to ask two questions: "What is that?" and "How do I get it?" It's because of this statement we believe we have gold.
In the past few months, it's become clear which markets will give us the fastest acceptance and the quickest realization of our collective dreams, professionally and financially. Every day my team and I are focused on delivering a series of big name customers with revenue events that will tell our shareholders, and the world, that we have arrived and consumers prefer the perfection of audio with MAX-D!
2013 A YEAR IN REVIEW
Research & Development was nearly completed in 2013; including: programming the MAX-D technology into the device industry (smartphones and tablets), infiltrating the movie industry (post production audio for movie companies) and developing a MAX-D API. This API can be deployed across streaming music services and web based audio/video services and can now also reside in audio hardware (speakers and audio receivers - such as car smart head units).
As shown by our key partners, and most recently by market trends, the focus of the Company has been to adapt the MAX-D HD Audio technology into industries having the highest potential sales and profit yields.
Last year (2013) provided many breakthroughs for us in the software development of MAX-D for Android OS, Windows OS, Apple iOS, Universal API and the Qualcomm 8900 series chips.
Qualcomm Snap Dragon Processor & Hexagon program
In 2013 the MAX-D HD Audio technology was embedded on the DSP (Digital Signal Processor) and available for licensing to the 86 Qualcomm OEM's.
The time and expense to port over to the 8900 series Snapdragon chip with Qualcomm took about 5 months longer than expected. However, at the end of the day, we debuted the MAX-D technology at the Qualcomm Uplinq conference in San Diego on Sept 3rd, 2013 and the event was a great success. We proved that MAX-D HD Audio produces an audio experience far beyond all other audio technologies currently offered.
As a result of our success at Uplinq, Qualcomm has taken the lead in marketing MAX-D HD Audio to its customers. Our team has taken several sales meetings, and is having continuous dialogues with the leading chip buyers, and is now vigorously working to set-up meetings to discuss potential license agreements.
The primary goal we had when joining this Qualcomm program was for MAX-D HD Audio to become embedded on the DSP (Digital Signal Processor) and available for licensing to the 86 Qualcomm OEM's that represent a significant portion of the global Smartphone and tablet market. We have now accomplished this goal.
Qualcomm is the global leader in chip sales in the Smartphone market. Neilson reports show that as of May 2012, 110 million users in the US have Smartphone's accounting for 54.9% of the total US cellular phone market. Gartner reports that total Smartphone's sold globally in 2011 totaled 472 million. The study found that 821 million smartphones and tablets will be purchased worldwide in 2012 and pass the billion mark in 2013.
The MAX-D HD Audio App Player
We currently have over 30,000 subscribers on the free version of the MAX-D HD Audio App and Liquid HD App for MP3's on Android; and are well on our way to completing the development of Apple iOs and Windows platforms for release in Q2 2014. This will be our first actual consumer retail product. This version will play all MP3 and AAC formats as well as all streaming audio. We plan to offer a subscription model by Q3 of 2014. Our sales force will be aligning partnerships with streaming music services and major App adoption companies that could push it out to their millions of consumers who will be experiencing MAX-D HD Audio first for a free 30 day trial, and then upgrade to paid annual subscription.
In my last letter, I stated the following, "market research firm Gartner has forecasted that global mobile app store revenues will triple from $5.2 billion in 2010 to $15 billion in 2011, and keep growing to an astounding $58 billion by 2014". Now with $26 billion in worldwide app sales and 102 billion downloads in 2013, this market is on track with Gartner's projections. Currently the MAX-D App produces an audio experience that no other App can duplicate.
In the past year, we have also developed an API (Application Programming Interface). This API allows the MAX-D algorithm to be inserted into applications such as streaming services, DSP memory in speakers, developer platforms and web-based applications. We currently have our API in testing with brand leaders in the Speakers, Headphones and Streaming Music Industries who all are interested in licensing MAX-D.
MAX-D HD Audio Box
The majority of the post-production houses that produce audio for the motion picture industry have requested a MAX-D Box. The MAX-D Box is basically a small Windows based computer that will allow the audio engineers to apply our HD Audio technology to protect the original audio as it is compressed and distributed downstream throughout the internet in all compressed formats. We anticipate delivering the first boxes in Q2 2014.
The MAX-D HD Audio Challenge
In November 2013, we took our consumer adoption concept to the World Famous Venice Beach Boardwalk. For two days, thousands of people, from all walks of life including: sound engineers, children, elderly, musicians, teenagers, and young adults experienced audio with and without MAX-D. We recorded the entire event, and the results were profound! Everyone that heard MAX-D HD Audio were amazed by it and said they would it today if it were available in any product.
Video Link: http://vimeo.com/81220894
THE AUTOMOBILE INDUSTRY
The positive exposure and brand awareness continued into 2014 at CES (Consumer Electronics Show) in Las Vegas. The MAX-D booth was strategically positioned in the Automotive Hall, between Ford and Chevrolet, demonstrating MAX-D HD Audio. We asked hundreds of consumers and industry leaders two key questions, "Did you like it?" and "How much would you pay to add that to your car audio entertainment system?" EVERYONE we spoke with was astonished by how much MAX-D improved sound quality, and said they would pay from $500 to $5,000 to add it to their cars - TODAY.
To see many of these responses, watch these CES videos:
http://vimeo.com/84691816 CES MAX-D HD Audio Challenge 1 - Las Vegas
http://vimeo.com/85476097 CES MAX-D HD Audio Challenge 2 - Las Vegas
We chose to present to automobile manufactures because, widespread consumer adoption in cars alone could open MAX-D up for hundreds of millions of dollars in potential revenue. Since the show, we have been engaged with major international and domestic auto manufacturers that represent a majority of the 15.6 million cars that were sold in the USA last year. In addition, Qualcomm has now begun the adoption of MAX-D into the chips that are already being put into Mercedes Benz, BMW, Porsche and many domestic manufacturers.
A recent article featured in autonews.com states that by 2018, the majority of cars will have a fully internet-connected smart device in the dashboard. Max Sound has discovered a wide-open first market mover advantage, in what appears to be a newfound billion-dollar market.
The Liquid Spins team has also been focused on adapting to the changes with InComm and the companies it has acquired to increase the sale of music by implementing new proven technologies.
We now have all the agreements in place with InComm across all divisions. InComm is the industry leading marketer, distributor and technology innovator of stored-value gift and prepaid products having 500 brand partners in over 250,000 locations here in the USA and reaching over 1 billion consumers weekly generating nearly $21 billion in retail sales of prepaid products in 2013.
Liquid Spins continues to generate interest in the music space. However, due to delays in contract revisions and negotiations with gift card giant InComm (which took about 9 months), we weren't able to begin full deployment of the Liquid Spins Gift Cards until late Q4. This caused us to miss the lucrative Holiday retail sales of 2013. On a more positive note, InComm acquired new companies and asked Liquid Spins to negotiate and adapt to their technology to participate with each of them. One of the acquisitions that we're excited about is InComm's Giftango which allows Liquid Spins to expand its music offering and do away with digital plastic cards. This new division of InComm is now called IDS (InComm Digital Solutions) https://www.giftango.com/. IDS allows us to sell music digitally through full eCommerce and supports the gifting of music with all major retailers.
We introduced our Liquid Spins (Liquid HD) App on Android allowing users to hear all their MP3 music in MAX-D HD Audio. In addition it connects directly to the Liquid Spins Music Store for the purchase of music that can be downloaded onto Android Smartphone computer or tablet. Liquid Spins is a strategic move that aligns the MAX-D technology with a targeted audience of music consumers. It allows us to promote music sales to everyone who uses the MAX-D High Definition Audio App and it also allows music buyers to get a free app from us after they purchase music from Liquid Spins.
When we first acquired Liquid Spins we had approx. 2 million songs with 4 major record labels. We now currently have over 10 million songs, which represent 95% of all top selling music in history. Most importantly, we receive the same 30% profit on every music sale, just like iTunes® does.
Liquid Spins has developed a unique marketing deployment that will put the world's largest music catalogues and the MAX-D HD Audio Apps in front of millions of potential retail consumers in 2014 and beyond. We believe that Liquid Spins has a decisive competitive advantage in non-traditional markets. To receive more information on the Liquid Spins branding strategy, send an email to firstname.lastname@example.org
In 2013, download stores like iTunes gained market share growing to 40.6% of U.S online digital album sales, while mass merchants like Target and Walmart saw sales drop 16.3% to about 78 million physical CD units and now comprise nearly 27% market share; with chain stores like Best Buy and Target seeing sales decline by nearly 20% to 39 million album units to comprise 13.5% market share.
Apple continues to hold a 63% share of the market down from 66% in 2010, with Amazon at 22%, up from 13% 3 years ago. 44 million Americans bought at least one song last year.
MP3 MUSIC SALES ARE 37% OF ALL DIGITAL MUSIC SALES AND GROWING.
With the explosive growth of Android phones now out selling IOS (Apple) 3 to 1 on a global scale 1 to 1 in the USA. The demand for easy to download MP3 music formats is increasing.
Just a few months ago, Digital music download sales reached the tipping point and now represent over 50% of all music sold having grown at a rate of 8.3% in 2011 to $5.23 billion, according to the IFPI (International Federation of the Phonographic Industry). Within the United States, the total digital music revenue rose 17.3 percent to $2.62 billion.
The industry demographics above prove that Liquid Spins has positioned itself to capture its fair % of this growing MP3 market as Android phones take market share and retailers look for a digital solution to decreasing physical CD sales.
So revenue has begun for MAX-D due to Liquid Spins current roll out, and by Q2 2014 we believe we will be able to provide tangible revenue results.
HEARING AIDS AND CONGRESSIONAL HEARING HEALTH CAUCUS
We are currently pursuing significant opportunities from the Congressional level to Medical Institutions that we believe will clearly show how MP3's are damaging to our hearing and how MAX-D re-shapes the waveform to improve hearing health. This has led us to recent opportunities in the enormous Hearing Aid market and to clinical research that we believe will support our role as a major solution to this growing problem.
We have made significant progress on the building of our 71 foreign and domestic Patents. We will be updating this information and the related benefits in our upcoming Annual Report.
As CEO, my goal is to constantly minimize dilution, while funding the company as we expand the sales and R&D departments. This ever-changing barometer requires a constant focus on operating expenses as we take MAX-D to these vertical markets.
At the end of 2012, the total outstanding shares issued were 260.2 million (which included the 21 million-share acquisition of Liquid Spins). That said, let's go over the dilution of the company in shares issued over the past 2 years, to help you better understand our strategy, as we move into the DSP/Chip, OEM and consumer adoption models that we have focused the company's resources on.
12-31-11: 242,287,741 Weighted average number of shares outstanding during the year basic and diluted
12-03-12: 24,752,475 Total Shares issued for the LS acquisition 12-2012
12-31-12: 283,159,135 Weighted average number of shares outstanding during the year basic and diluted
We completed the acquisition of Liquid Spins in a 100% stock acquisition that was approximately a 10.2% dilution to the company. This along with the operations of Max Sound accounted for 8.7% of the weighted shares outstanding in 2013.
12-31-12: 16,118,919 Total Share Issued for operations 6.6% dilution in 2012 for operations
12-31-13: 308,761,581 Weighted average number of shares outstanding during the year basic diluted
12-31-13: 25,602,446 Total Share Issued for operations 8.2% dilution in 2013 for operations
Total shares issued as of today: 311,629,224
Once recent review showed that the average industry software technology company on NASDAQ has 310 million shares issued.
As you can see, we had a 1.6% increase of operations dilution for the operations of Liquid Spins from the 6.6% in 2012 to the 8.2% in 2013 and also our R&D expenses increased to port MAX-D over to API and the new IOS's and Qualcomm 8900 series Chips that reside in smartphone and tablets that is part of that 1.6% increase.
As you can see, Max Sound Corporation has evolved into a company that is focused on the Perfection of Audio to the right industries that will yield the highest revenue, profit and growth potential for all our shareholders. We continue to strive and move in this direction while at the same time staying debt free and minimizing dilution.
MAX-D HD Audio technology has the ability to bring disruption of the best kind, much like Google taking over search from Yahoo. Google didn't need a whole new web browser to revolutionize "search". They slid right into the existing eco-system. Once people got better search results, millions migrated and a new standard was set. MAX-D intends to become mainstream in much the same way. It's time to get ready for a breakthrough technology that reverses MP3 audio degradation and can add new revenue to the bottom line for companies in every vertical market using audio. Above all, we recognize the significance of closing a major deal, one that has brand name recognition and will be a substantial revenue event.
Thank you sincerely for taking the time to read this update and for your continued support.
Very truly yours,
John Blaisure - CEO
Max Sound Corporation
ABOUT MAX SOUND COROPORATION
MAX-D is to audio what HD (High Definition) is to video. The MAX-D™ Audio Process makes everything sound better and can convert any audio file to high definition quality while significantly reducing the file size. Visit us www.maxsound.com
Max Sound® and MAX-D™ are registered trademarks and Patent Pending technologies wholly owned by Max Sound Corporation. All other trademarks are the property of their respective owners.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Statements in this press release which are not purely historical, including statements regarding Max Sound's intentions, beliefs, expectations, representations, projections, plans or strategies regarding the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties including, but not limited to, the risks associated with the effect of changing economic conditions, trends in the products markets, variations in the company's cash flow or adequacy of capital resources, market acceptance risks, technical development risks, and other risk factors. The company cautions investors not to place undue reliance on the forward-looking statements contained in this press release. Max Sound disclaims any obligation and does not undertake to update or revise any forward-looking statements in this press release. Expanded and historical information is made available to the public by Max Sound Corporation and its Affiliates on its website www.maxsound.com or at www.sec.gov.