Case 1:14-cv-02396-PGG-SN Document 239-17 Filed 11/12/20 Page 1 of 5
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`Exhibit 35
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`Case 1:14-cv-02396-PGG-SN Document 239-17 Filed 11/12/20 Page 2 of 5
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`From: Jim Schrempp <j_schrempp@audiblemagic.com>
`Sent Friday, December 01, 2000 5:34 PM
`To: Edel, Alan; Kvitek, Lou; Nancy Kim (E-mail)
`Subject: Audible Magic November Investor Update
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`We continue to make progress both in our product and organizational development. We remain confident about the
`market need for our technology and services, as demonstrated by discussions from both the recording labels and digital
`media companies. However, to be honest, the current business development and fund raising environment are
`extremely challenging, and the result is delays for completed deals.
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`FINANCIAL HIGHLIGHTS
`Cash usage was slightly over our retargeted forecast for November. This reforecast was $80K lower than the original
`target. In addition, as will be explained, we took out a short term loan convertible to Series C shares for $200K.
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`Cash Use
`Income
`Expenses
`Engineering:
`Operations:
`periods.
`Support:
`Marketing:
`Bus Dev:
`MuscleFish:
`G&A
`Total
`
`Actual Budget Notes
`$22K
`
`18K
`
`$39K $39K
`$42K
`
`$7K
`$60K
`$20K
`$52K
`$27K
`$229K
`
`$40K
`
`$11K
`$27K
`$24K
`$50K
`$58K
`$227K
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`Cash Position: November 30 $196K.
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`Payment of system hosting expenses from prey.
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`Software rental not yet paid
`Payment of PR expenses from previous periods.
`Lower use of outside marketing consulting.
`Untargeted marketing consulting for Soundfisher
`Targeted legal fees not yet paid.
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`With current budget, cash lasts into the middle of December. This is an improvement over our previous cash forecast.
`We are in the process of finalizing an 12 month operating budget with the objective of maintaining a reasonable cash ,
`burn, without sacrificing our goal of establishing an industry standard. In addition, we are exploring short and medium
`term opportunities for revenue generation.
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`SERIES C FUND RAISING PROGRESS
`We have commitments for our Series C round of $1.8M, with several other VC firms in various stages of evaluting an
`investment. We have gained tentative approval from AmBex to have a first close of around $900K in December with the
`remainder to close in January.
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`The firms that are evaluting participation in the C round include:
`Granite Ventures (Chase H&Q), Oak Technology, 31, Forrest, Binkley & Brown. In addition, our Washington law firm has
`decided to convert their legal fees of $30K into a Series C investment.
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`ENGINEERING UPDATE
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`Recognition Engine
`This month we have improved the accuracy of the underlying recognition engine. We now test our accuracy against 26
`hours of captured radio broadcast that has been hand annotated with the correct answers. The engine runs in two
`modes: exhaustive search and indexed. Exhaustive search speed grows with the size of our database; indexed search
`speed does not. On a
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`Ibit )1
`Confidential - Outside Counsel Only Date: Name: AUDMAG00042894
`Lana L. Loper,
`CRR, CCP, CSR No. 9667
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`Case 1:14-cv-02396-PGG-SN Document 239-17 Filed 11/12/20 Page 3 of 5
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`25,000 signature database, the size we typically run in production, indexed searching is about 5 times faster than an
`exhaustive search.
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`Running in exhaustive search mode our accuracy on this test is 98.5% positive id, 1.5% false negative, 0% wrong. This is
`excellent. Running in indexed search mode our accuracy on this test can range from 93 to 96% positive id, still with 0%
`wrong. (The actual rate depends on the composition of the reference database.) This is a very good accuracy rate.
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`Achieving these results has slowed our performance some, but it is still acceptable. In the next month we will focus on
`improving our index accuracy and speed. We still believe it is possible to achieve 100% positive id with acceptable
`performance, and this remains our stretch goal.
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`Clango
`Our clango servers continue to run 24x7 without fail. We have run artificial work loads to stress the id server application
`and the application has performed flawlessly under the load. We have completed several enhancements to the clango
`client: better Win2k support, a file drag/drop function, a more recent version of the audio intercept driver, and a more
`robust uninstall. We will not release this version until we have deployed a new version of our production id server code
`to support these features. This should happen next month.
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`We have completed the beta test version of our first custom clango client.
`This one is for Akoo. The client looks like clango, but is cobranded with the Akoo logo. In addition, all of the active links
`on the client go to cobranded web pages. Our initial design did not anticipate the cobranded web pages, we had
`expected Akoo to create their own web site. Cobranding our web pages was unscheduled but we should complete that
`work in the next week.
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`Other Development
`We have completed development of the our C library for WinCE and delivered a first version to AudioRamp. This library
`will allow AudioRamp to embed our identification technology within their product. We are eagerly awaiting their first
`test.
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`Our Playlist Generation application monitors radio broadcast or streaming audio and generates a playlist of every song.
`This month our newest engineer, Nancy Kim, enhanced PlayGen so that it can use our internet based id servers (the
`previous version ran in a degraded mode when the client was off of our local LAN). This setup will be used in the
`upcoming BMI test.
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`We completed development of the file identification and duplicate detection application. This is targeted at Inktomi and
`other web searching companies.
`This application will identify the content of a file found by a web spider.
`In addition, for those files we are unable to identify with our database, this application will identify which of these files
`are duplicates of each other. This application will help web indexes to be more friendly to copyright holders and to
`provide more effective multimedia searches to their users. This week we will complete our internal testing and shelve
`the application until Inktomi is ready.
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`We have done the early, high level design of the national radio monitoring network. I had hoped that this month we
`would be able to complete the specific design, but pursuing other opportunities pushed this work out. We have made
`progress on some of the obvious components, such as the playlist database, but the detailed design has been delayed.
`As we understand the overall schedule for our collaboration with R&R we will return to the low level design.
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`OPERATIONS
`The load-balancing device has been installed and is working at our ISP (XO).
`There will be one final round of testing before it is completely in production.
`With this device we now have two redundant servers for music identification with automatic fail over capability and
`future increases in capacity will be a simple matter of adding servers.
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`Confidential - Outside Counsel Only
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`ft,r°
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`AUDMAG00042895
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`Case 1:14-cv-02396-PGG-SN Document 239-17 Filed 11/12/20 Page 4 of 5
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`Song Database
`We continue to increase the coverage of our database. In the month of November we kept our coverage of genres to 7
`(Adult Contemporary, Top-40, Alternative, Modern Rock, Classic Rock, Country and Urban). We increased the sources of
`information to build the database. In addition to the playlists from more than 180 radio stations that we are tracking we
`also started using the information supplied by R&R (which is a compilation of over 1000 stations) and playlists from over
`100 Spinner.com radio stations.
`In the month of November we manufactured 4300 new song clips that are very targeted to these genres. Our current
`manufacturing rate is about 250 new
`clips per day. This manual manufacturing process will be winding down at
`the beginning of December. For the month of December we will be focusing our efforts on cleaning-up the known
`(minor) quality issues with the database.
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`Radio Monitoring
`We have created a detailed plan for the effort required to launch a network of radio monitoring sites. This plan includes
`a pert chart of the activities, budgets, human resources and equipment required.
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`MARKETING
`In November, we hired a Director of Marketing, to be responsible Audible Magic's marketing efforts. Her name is Mindy
`Gillen and her most recent position was with Akamai.
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`She will be responsible for both the product management and Marcom efforts for the company. For outbound
`communications she is focused on market education and are developing materials to differentiate our technology
`advantage. We are developing a technology primer/whitepaper to be completed by the end of December.
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`We are working actively with our PR firms to provide strategic direction, enhance efforts at media outreach, and control
`costs. We sent a communication out to the media pre-announcing the technology primer and inviting the media to use
`us as a source of information about the hot topic of audio identification. We got a pretty good response to the
`communication.
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`We are also trying to interest an analyst in doing an audio recognition technology comparison report and are considering
`the value of a small scale challenge to stump our technology (a la SDMI)in order to add clout to our claims of superior
`technology.
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`Lastly, we are exploring other market opportunities for our technology that might result in shorter term opportunities
`while we continue to work on major music industry partnerships.
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`BUSINESS DEVELOPMENT
`November was a challenging month for Business Development but is concluding with promise.
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`We met with EMI and are confident that we will be able to build a business relationship with this influential music label.
`We are currently discussing or negotiating terms for a potential deal with four companies, BMI, eMarker, UnSurface and
`AudioRamp. Additionally, we have active conversations going with a few excellent prospects including Inktomi, Yahoo
`Broadcast, InterTrust (DRM), Sonique (Lycos' media player) and Fast Search (the search engine behind Lycos.)
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`December is traditionally a slow time for Business Development when many of our contacts become distracted by the
`holidays. We will kick off the month by reinforcing our position with each of the companies with which we've opened
`relationships and we'll use any down time to continue research necessary to build new relationships and expand our
`prospective business lines.
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`Vance
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`Confidential - Outside Counsel Only
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`AUDMAG00042896
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`Case 1:14-cv-02396-PGG-SN Document 239-17 Filed 11/12/20 Page 5 of 5
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`Audible Magic Corporation
`985 University Avenue Suite 35
`Los Gatos, CA 95032 USA
`v. 408.399.6422
`f. 408.399.6406
`e. v_ikezoye@audiblemagic.com
`
`Confidential - Outside Counsel Only
`
`AUDMAG00042897
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`