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SHH Sonomax Technologies

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Share Name Share Symbol Market Type
Sonomax Technologies TSXV:SHH TSX Venture Common Stock
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Summary of Sonomax's First Monthly Conference Call

28/05/2008 1:00pm

Marketwired Canada


Sonomax Hearing Healthcare Inc. (TSX VENTURE:SHH) is pleased to provide a
summary of the first monthly status update conference call which was held on May
21, 2008.


Highlights

- Sonomax is moving its business model to a POS (Point of Sale - sales made by
licensees/distributors directly to end users/customers) driven system as opposed
to POP (Point of Purchase - sales made by Sonomax to Licensees/Distributors).
The business model will become a demand pull system as opposed to push. The
result will be an optimized supply chain that will set and manage the inventory
level in the channel (network of all licensees/distributors selling Sonomax
products) at a target inventory level. Therefore production levels will be set
such that the finished goods inventory provide licensees required quantities
within established lead times taking into consideration the licensees current
inventory position and forecast data. As inventory is reduced in the sales
channel to the target levels and better customer planning and collaboration is
established between Sonomax and the sales channel, Sonomax's quarterly sales
forecasting for Hearing Protection will improve dramatically, we will be able to
improve our manufacturing planning and the licensees will be able to free up
operating cash flow to invest in more sales staff and product promotion.


- Due to the change from POP to POS the first half of the year will have a
reduced level of sales. The channel inventory correction will be well advanced
by the end of Q2-08. Significant progress has already been made. By the end of
Q1-08 the channel inventory was reduced by well over half and it is estimated
that another 30% reduction will be achieved by the end of Q2-08. From an
accounting perspective Sonomax will continue to recognize revenues using POP
data.


- All licensees will be providing end user/customer data on a regular basis.
This will allow Sonomax to build a sales funnel (Tool used to manage the sales
process. Leads enter the sales funnel, become opportunities, then qualified
opportunities, leading to design wins and then finally exit the funnel as a
production win). Based on information received, the sales cycle (time period
from lead to production win) is approximately 12 to 18 months.


- The Inside sales team is being built to ensure that opportunities are properly
qualified and the sales cycle is reduced as much as possible. All this
information will help Sonomax in establishing whether or not there are enough
distributors/licensees in a given territory and measure each distributor's
effectiveness in selling product to end-users.


- VitaSound subsidiary has been sold. This will allow Sonomax to focus on its
core competency the instant-fit custom expansion earpiece technology. Sonomax
will work with Vitasound to support them in their pursuit of the hearing aid
market. Progress by Vitasound has already been made with the largest pharmacy
chains in the United States.


- MSA have obtained final CA certification for the HPD products and are now
ready to officially launch the Sonomax products in Brazil, Argentina, Peru and
Chile this summer. We are confident that MSA will do an excellent job in
representing Sonomax in this geography.


- Sonomax Management has decreased overall operating costs to reduce the cash
burn by approximately 40%.


- Discussions with major retailers pertaining to the Soundcage MP3 earphones are
currently taking place. Further news to be provided as the selection process is
completed.


- Areas of margin leakage such as RMAs, free samples, over shipment, etc. have
been improved.


- Material and production costs continue to be reduced by outsourcing. This
trend will continue and improvements are expected.


Overall Potential

- HPD Sales - (Hearing Protection Devices) - this product is predominantly
targeted into the industrial sector. It is approximated that the TAM (Total
Available Market - potential sales volume) is in excess of $150 M (US)
worldwide. The STAM (Sonomax Total Available Market) in the HPD space has a
target of greater than 15% of this amount.


- Validation Software - Sonomax enjoys the position of having the only objective
validation testing software in the world. As legislation continues to progress
and companies take a more aggressive position in the hearing conservation area,
the sales will accelerate. The initial launch of the software has been in United
States where there are more than 30 million noise exposed workers. The STAM in
this area is at least 50% of this number but we have not yet determined the
speed with which customers will use this technology in order to combat the
problem, as well as establish at what rate Aearo/3M/Sonomax will roll out the
software around the world.


- The acquisition by 3M of Aearo Technologies increases the sales channel
resources for Sonomax significantly and it is expected that the 3M sales force
will be promoting Sonomax products by the end of Q2-08. With the combined power
of 3M and Aearo sales in the industrial space for HPDs and the Validation
software should increase quarterly. However, for the past few months Aearo's
sales focus has been less than expected possibly due to the Aearo/3M integration
activity which has had a significant impact on both POS and POP.


- In 2010 the forecast is that there will be sales of about 1 billion MP3
enabled products. Based on previous sales approximately 45% of those units will
purchase a new set of earphones. This is a great opportunity for the Soundcage
products.


Company Objectives for next 12 months

1. Get to positive cash and breakeven profitability within next 12 months.

2. Quarter to quarter sales and gross margin growth.

3. Sales Function - Build a sales organization and implement sales policies and
procedures by end of Q3-08. Establish sales data required from licensees and
start collecting by end of Q2-08 with consistent data by end of Q3-08.  Also
decide whether new distributors/licensees are needed in every territory around
the world.


4. Implement Key Performance Indicators (KPI) for the company overall and for
each department by the end of Q2-08. Establish tactics to improve each indicator
in Q3-08.


5. Improve Communications to employees, licensees/distributors, suppliers,
customers and shareholders.


6. Complete the commercialization and launch of all focus products by the end of
Q3-08.


7. Determine by end of Q3-08 whether new investments in a sales infrastructure
will be needed to achieve objectives


Summary

The company has made significant progress in reducing costs and reducing the
cash burn. The sales in the first half of the year will be down due to many
reasons and is forecasted to increase in the second half of the year. The focus
for the organization is to get to a positive cash position and build a strong
industrial business that will eventually cover the SG & A (Selling, General &
Administrative Overhead).


Sonomax has excellent products and expects sales and financial metrics to
improve on a quarterly basis.


The feedback received from many customers that are in the Fortune 500 category
is exciting and with the new Sonomax sales team there will be timely information
to close more sales opportunities. The company is focused on methodically
improving the key performance indicators and establishing a trend of quarterly
improvements for the foreseeable future.


Monthly updates and/or conference calls will be provided in order to keep our
valued shareholders well informed.


About Sonomax

Sonomax Hearing Healthcare Inc. is a leader in the development and manufacturing
of intra-ear technologies. The company's patented custom-fit, instant-fit
expansion earpieces deliver a perfect acoustic seal every time and can be
certified by SonoPass(R), the company's proprietary, computer generated
proof-of-performance software. Building on its technology leadership in hearing
protection, Sonomax has expanded the applications for its technologies into high
growth consumer products such as MP3 audio, multi-media and gaming earphones,
instant-fit affordable hearing aids, and custom earpieces for Bluetooth(TM)
cellular headsets.


This news release contains certain forward-looking statements that reflect the
current views and/or expectations of Sonomax Hearing Healthcare Inc. with
respect to its performance, business and future events. Such statements are
subject to a number of risks, uncertainties and assumptions. Actual results and
events may vary significantly.


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