Chairman’s Message Part II, January 2012
• January 19, 2012 •
Part II
First, I would like to wish you a belated Happy New Year and a wonderfully exciting 2012. I hope you enjoyed the holidays and are now preparing for what promises to be the most exciting year in Medizone International’s history.
In the fifteen years I’ve been associated with this company there’s never been as much activity, optimism and excitement in the air as there is at this very moment.
With that in mind, I’d now like to share with you where we’re at and where we’re headed:
A Positive Move
You might have noticed that we relocated over the holidays. Our Executive offices are now located at 4000 Bridgeway, Suite 401 in Sausalito. In my opinion, this move is an upgrade in regard to the ambiance and comfort of the office. Importantly, it also affords us the capability to bring Distribution and Sales under the same roof – in a nice corporate environment.
High-Level Recruitment Search
While I’ve been personally putting the initial distribution contracts in place – a couple of which we expect to announce later this month – it’s a corporate imperative that we identify a Distribution and Sales manager; a leader with vision to establish a Distribution, Sales and Service department.
We must be prepared to expand distribution and sales at a significantly faster pace following the ‘soft launch’ phase i.e. after our confidence in the robustness of our system is reinforced in the real world environment with a dependable service record from the first units delivered.
A highly capable distribution and sales manager will be a key department head – someone who is fully organizational-capable. We’ll take our time with the executive search, hoping to identify a rising star.
Distribution, sales, training, supply and service management promises to become the single largest [/color]business sector of Medizone International as we move into the future following the anticipated success of our ‘soft launch.’
2012 - Income Projections
As you can appreciate, when first entering the market place, projecting future sales is always risky with a new and revolutionary product such as AsepticSure. There are many variables at the beginning of a product’s commercial life that can impact on sales volume and, more importantly, the sustainability of growth ‘moving forward.’
Hence the ‘soft launch’ strategy.
I currently believe we will have delivered at least ten units by the end of Q2. Based on distributor costs, that should equate to approximately $800,000 in initial revenue by the end of the quarter.
I also expect that Q3 sales will produce in the neighborhood of ten sales, although there are some indications that demand could be higher. Even so, twenty units would be a perfect number in keeping with our stated ‘soft launch’ approach. Twenty delivered units would give us a reasonable base for product performance and dependability evaluation in the field.
Proof of product dependability in the real world will give us confidence in expanding the distributor network and accepting more orders as we move into the later part of Q3 and then into Q4.
Q4 numbers are difficult to predict. Should we have data on reduced incident of HAI in the hospital environment by the end of Q3 (which is one of our primary goals), well, all I can say is… “Hold onto your hat!”
In any case, my ‘best guess outlook’ at this time predicts minimum sales of 40 units for the year with revenues of > $3,000,000. Our gross profit should compute in the region of 50% as production efficiencies are achieved. Medizone would obtain profitability just by reaching these modest and achievable goals.
Should sales numbers exceed these figures, it’ll be due to sales volumes achieved after the company is satisfied that the first 15 – 20 production units have proven themselves in the soft launch evaluation. i.e. during the second half of the year.
It’s reassuring to know that highly qualified staff will be in place well before then to service increased volume, and that our ability to greatly ramp up production already exists, thanks to SMTC’s four manufacturing facilities.
Manufacturing & Certification
Technology transfer to SMTC Corporation for production, which I mentioned last month was underway, has now been completed. We’ll have our first 5 AsepticSure production machines in just a few short weeks.
Regulators require that these first production units undergo rigorous independent verification testing (a mandatory procedure that’s part of the certification process). The compilation of import/export documentation and various certifications associated with product-entry into various countries is a critical and somewhat complex step.
To this end, we’ve done our best to bring in the most competent people at every juncture of the development program, including our certification team. Just this past week, we had a review completed by a highly respected specialist – Gordon Wehner, MSc, MBA – who had not been previously associated with Asepticsure, to evaluate our progress to date.
The excerpt below, from an email to Dr Shannon and our development team from Gordon Wehner, allows me to rest easy:
“Of all the applications I have worked on, the documentation ADA has put together is the most comprehensive and I am confident putting the regulatory files should be straightforward.”
In summary, we remain on schedule for initial deliveries toward the end of Q1 as promised, and now anticipate having outside verification completed and certifications in place for distribution in March. From that point on we’ll be able to produce product at what ever manufacturing level we require, as our manufacturing partner SMTC has the ability to greatly expand capacity at short notice.
Our recent press release on patent filings should also give shareholders comfort. Not only do we possess the most potent, green decontamination technology the planet has ever seen; we have an exceedingly strong patent protection program being built around the technology and science of AsepticSure. With licensing and regulatory issues being satisfied, patents being granted, distributors established and sales starting, we are truly becoming a fully commercial company.
Funding
Medizone shareholders have supported us strongly with our recent private placement program. It’s immensely gratifying for management to know that your support and commitment is as unshakable now as it has always been. I truly thank you for your continued belief in – and support of – the vision we all share for Asepticsure. What a wonderfully special ‘family’ Medizone has grown into.
Distributor Agreements
Requests from around the world have come in, requesting distributorships for AsepticSure. We’re carefully reviewing them with an eye toward only signing up companies with an established track record and a client base already established in our target markets.
In keeping with our ‘soft launch’ policy, we’re:
intentionally accepting just a limited number of distributor applications to begin with
focusing on quality control and product support now so that increased sales volumes later can be sustained with minimum risk
The first distributor announcements will come this month. Once we have the first ten or fifteen machines delivered, which we believe will occur by the end of Q2, and those units have proven the reliability of AsepticSure in the ‘real world environment’, we’ll then begin to widen our distribution base. But to do so prior to internal product reliability review of the soft launch production units would, in my opinion, not be a prudent move.
When we do expand our distributor base from the initial ‘incubation’ stage, we want to feel 100% confident that the product we supply has been tested enough to have proven fully dependable and that a ramp up in manufacturing and product delivery may be accomplished with minimal downside risk.
Media Coverage
As you may have noticed, the media is now approaching Medizone, not the other way around. Dr Shannon and Dr Dick Zoutman were recently invited to appear on a Kingston TV news segment – and did so this past Monday evening.
In December, Dr Shannon was the ‘star’ of an excellent radio interview that led to significant new buying interest in MZEI stock.
The recent Queen’s University article featuring Dr Zoutman’s role in working with Dr Shannon in development of AsepticSure at Innovation Park, has also taken off like wild-fire – the broader hospital community is now paying full attention! As Dick would say, ‘the power of peer reviewed research.’
Journalists are finding our press releases, researching the info on our site and then writing their own stories and publishing them on major sites including the likes of DiscoveryChannel.com.
NewsUSA feature stories have just begun to roll out and we’ve already seen the positive impact of the first one just before Christmas.
Our planned media coverage and exposure will expand as the year goes on.
Trade Show Promotions
Potential distributors and end-users alike continue to visit the website as a result of our inaugural appearance at FIME last August. It’s part of our strategy moving forward to support our distributors in attending industry-relevant trade shows whenever they provide an appropriate fit.
Photos of AsepticSure Unit
Studio quality photos of the finished AsepticSure unit will be published to the website sometime in February.
In Closing…
I would once again like to express my gratitude and thanks on behalf of all the team here at Medizone for your support ‘through thick and thin’ over the years that you’ve been shareholders of this great company of ours. Your patience and enduring loyalty will be rewarded many times over in the months and years to come.
Perhaps in signing off it’s only fitting that I end this message with what I know to be the reality of where we’re headed – and I can say this unequivocally:
‘There’s no longer any question about the future demand for AsepticSure – the inquiries are coming in on an almost daily basis.
Our time has come.’
A Happy Medizone New Year to All,
Best wishes,
Ed
