TMM, Inc.: Letter to Shareholders
February 17, 2015
To our shareholders:
We can all be proud of what the team here at TMM has accomplished on behalf of shareholders this past year. Our development team has been creating new products and capabilities to a degree that is beyond what's expected. We are taking the long view, reinventing the company's core technology, and getting customers to say, "I can use that. When can I have it?"
Before we answer that, I'd like to take you on a tour that samples our various initiatives, ranging from our TRUDEF software and a portfolio of other new and exciting software products, to Business Development initiatives and new Customer Engagements, to important accomplishments by TMM Corporate on key Legal and Administrative issues.
The goal is to give you a sense for how much is going on at TMM and how exciting it is to work on these programs. These important initiatives are only possible because a small team of talented people are exercising their good judgment every day and always asking, "How do we make TMM successful?"
There continues to be enormous potential for growth in digital video and for TMM. According to Cisco, Internet video will account for about 84 percent of all U.S. Internet traffic in four years, up from its current 78 percent. That includes IP VOD, which is basically, Pay-TV providers' on-demand video services. As video is created and distributed at ever-higher display resolutions, the demand for tools to manage this enormous amount of data economically increases.
Our TRUDEF™ Digital Video Compression Technology brings the promise of Better Pictures, Smaller Files and can create an enduring franchise not only in established markets, but in emerging markets where specialized video is fast becoming the only practical alternative to old forms of communication like text and still images. TMM offers users real value by providing them a practical choice that addresses the particular requirements of each user type.
The competitive landscape is shifting and substantial opportunity awaits us as organizations expand their use of video. They are receptive to new solutions and ready to form new relationships. For the vast majority of users, we can demonstrate that our technology is better.
As a U.S. based digital asset technology development company, TMM is focused on research, product marketing and implementation. We are actively creating advanced proprietary digital video compression technology and going to market with both COTS (Commercial Off-The-Shelf) technology that is ready-to-use today and adaptive Custom Engineering Solutions based on User Defined Requirements (UDRs).
Our efforts this year have been focused on fundamentals in three key areas: Research and Development of our core technology and new products; identifying and pursuing opportunities for Business Development; addressing the necessary Administrative and Legal activities to secure our rights.
It's About the Long Term
We believe that a best measure of our success will be the shareholder value we create over the ensuing years. This value will be a direct result of our ability to be a disruptive force with innovative technology where choice has not been an option for the customer. Within each market segment, we intend to show customers a superior value proposition based on their specific needs and adapt our technology to outperform the competition. The better our solution, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.
We see substantial opportunity in the markets we are targeting. Our model for Custom Engineering follows a time honored method of building long-term relationships within each niche by partnering with large industrial users who depend on digital video for high-value information that is mission-critical. We intend to move quickly by building a base of specialized customers as our early adopters while we pursue opportunities in other areas. While this strategy is not without risk in that it may require some additional investment and demands crisp execution, the risks for both our customers and our shareholders are mitigated by our approach.
Customer Funded, Joint Research Programs leading to Custom Engineering Technology Development based on User Defined Requirements and feasibility of product integration within a customer's environment.
Walk: Product Development
Customer Funded Initiative for User Implementation based on specific parameters with minimal CAPEX.
Run: Product Deployment
Licensing TMM technology for Implementation of Product Placement throughout the customer's ecosystem.
Tight financial controls have been particularly important to us in our pre-revenue status of the past three years. Our decisions have consistently reflected a focus on the long-term: cleaning up the corporate structure; asserting our rights over our intellectual property; modernizing and reinventing our technology and establishing a scalable go-to-market strategy. We have invested wisely and will continue to invest to leverage our technology's unique advantages; develop a customer base; and build a viable infrastructure as we move to establish an enduring franchise.
Within the next few weeks, we expect to make our first major public announcement regarding business development since shareholders voted to install the current management team in the fall of 2011. Our new patent pending technology is based on our own proprietary algorithm. We anticipate that it will be game-changing in its impact on markets ranging from Intelligence Surveillance and Reconnaissance, On-Line Education, Law Enforcement, Motion Picture production workflow, Content Development, Streaming Media and Advertising - to cable carriers, Web service companies, WIFI, Telecom, defense, security, healthcare and education - anyplace where bandwidth, storage and picture quality matter.
TMMI will pursue revenue opportunities by developing relationships on a sector-by-sector basis with leading B2B users of video compression technology typically in the high-value, lower-volume quadrant of the user market. Initial efforts focus on closed-loop specialized users within applications where video is mission critical.
These opportunities ultimately lead to high-volume, lower-value consumer-facing businesses, with large-scale integration components. We migrate toward B2C as our resources and delivery capabilities expand - typically through Content Delivery Networks and Content Developers.
Our development team has made remarkable progress in both Research and Product Development on our TRUDEF product offering during the past year. Through diligent experimentation and relentless testing, it became clear that in order to make our technology fully scalable, we had to develop a new proprietary algorithm for our TRUDEF with more extensible features, greater flexibility for integration and compatibility with large-scale platforms already in widespread use. The outstanding results show that this development initiative has been worth the effort.
As a valuable by-product of this development initiative, extracting performance features not only served to streamline our core technology, but also led to development of new solutions, which we have reconfigured as a portfolio of stand-alone products that can be marketed immediately. COTS (Commercial Off-The-Shelf) products:
A COTS workflow solution that will reduce file size selectively without sacrificing visual quality of desired focal points: By enabling users to set multiple focal points within a frame, users can reduce overall file size of a video by an additional 35-40%. It is an agnostic GUI (OSX, Linux, Windows) with customization available for use with other CODECs.
A real-time solution to higher resolution video with no increase in file size: Users will access 2x and 4x zoom mode to scale video. This solution will be available on any CPU based system or any AMD equipped GPU system, with customization available for use on other players. Through VLC or Widows, both commonly available, users can zoom by image or region.
An ISO zoom feature compatible that works with TRUDEF or with other popular codec: Users will have picture-in-picture control of individual stop-action frames or active video with zoom capabilities of 2x, 4x and 8x.
In April, we entered into a joint research program with Raytheon Company (RTN-NYSE) for Intelligence, Surveillance and Reconnaissance to test, research and develop technology for deployment within the realm of U.S. military operations. That relationship continues.
In November, we successfully demonstrated our new TRUDEF Digital Video Compression software to Raytheon with 250:1, 500:1 and 1000:1 as target compression ratios. Using these parameters, TRUDEF outperformed their test criteria, with 3,900:1 compression ratio while maintaining good image quality. As of January 2015, Raytheon conducted head-to-head comparison testing against its current technology. Results were outstanding, with compression ratios 3 to 5 times better than current.
We installed our TRUDEF™ technology into VideoBank's operating environment. VideoBank is a leading Digital Asset Management provider and will test our technology as our first beta site and embed TRUDEF and our COTS solutions in their presentations to customers and prospects to demonstrate how our compression technology works within their customer's system.
In November, Geppetto Avatars, Inc. agreed to a reciprocal sales and marketing program with TMM. GA will include our TRUDEF™ technology in their workflow and identify it in their customer presentations.
We have been working closely with other major contractors using customer supplied test files, and have successfully demonstrated the TRUDEF™ codec, as well as our COTS solutions.
An Auditor has been engaged to prepare audited financial statements. The firm has been working with outside legal counsel, who has provided historical documents for the audit. Since TMMI has not had an audit statement filed since 1993, it has entailed significant time and effort to produce the necessary backup materials. This will go a long way toward validating our efforts and establishing a baseline valuation for TMM.
We have an excellent Advisory Board of high achievers, and count on them for their expert counsel, as well as access to decision-makers. I gratefully thank members for their advice and counsel in the past year.
Special thanks and recognition to:
Garrett Brown for being awarded the 2014 Locarno Vision Award (http://www.pardolive.ch/en/Pardo-Live/today-at-the-festival/2014/vision-award-garrett-brown.html#.VIDly8lZik8for his invention) for his invention of the SteadiCam®. This follows his induction into the USPTO Inventor's Hall of Fame in 2013.
Mung Chiang, PhD EE, Alfred L. Doty Chair, Princeton University for receiving an Engineering fellowship from the John Simon Guggenheim Memorial Foundation. This follows Dr. Chiang winning the Alan T. Waterman Award for outstanding scientist with the $1,000,000 prize.
Thomas Mackie, Lt. Col. USMCR, President of G-Force Leadership, LLC, for his invaluable insight into market conditions in digital cinema, digital cameras, sports and defense and for introductions to potential customers.
Lou Siracusano Jr., President of VideoBank, Inc., a leading Digital Asset Management company has engaged with us to refine our go-to-market strategy, establish a price-value platform and embed our technology within VideoBank's customer offering.
Charles Wright, Founder of Fall River Investments, for his strategic guidance and introducing us to Geppetto Avatars, Inc., with whom we are developing a working relationship in sales & marketing. GA is also including our TRUDEF technology in their workflow.
Administrative and Legal
Our outside counsels have been engaged to protect our current corporate assets through litigation and preparing and submitting contracts for new customer business.
New patent rules have been recently introduced by the USPTO that rewards the first to file as the owner of the patent.
These new patent "first to file" rules also state that the inventor must not reveal the potential discovery in any detail with any potential customer prior to filing at least a provisional patent.
Until recently, this new ruling has limited our ability to fully demonstrate and announce all the codec attributes in development and disclose new products to customers.
With guidance from our technology development team and specialized legal counsel on intellectual property to research prior art, we have identified new patentable program methods and made the appropriate filings for provisional patents on TRUDEF and on our new COTS technology with the USPTO.
These efforts by management and your patience as investors are soon to be rewarded. Thank you for your continued support.
Gerard V. Cavanaugh, President
For more information, please visit the Company's Website at http://www.tmmi.us.
Safe Harbor Statement
The information in this release contains forward-looking statements which involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as "may," "should," "will," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "forecast," "project," or "continue," the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results. Any or all of the Company's forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. Factors may cause the Company's actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for the Company to predict all factors that may cause actual results to differ materially from those contained in any forward- looking statements. The Company disclaims any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this document, except as required by applicable law.
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