Today, Simtrol, Inc.’s President and CEO issued the following letter to stockholders:
Dear Valued Shareholder,
I am writing today to give you an update on our business. In our business model, it is important that our technology offerings are scalable, easy to implement, attract market leading channel partners, and provide tremendous value for the end customer. We have refined and productized our technology assets, making them easy to deploy through our channel partners into the verticals we have targeted. During the past year, in spite of a difficult financial environment and exceptionally soft business climate, we have successfully developed multiple distribution channels for products based on our Device Manager™ technology. The major markets for these products include Education, Healthcare and Judicial/Corrections. We are excited about the prospects for these products as they work their way through their sales cycles. As these channels develop, there is a significant revenue opportunity which can emerge over the coming months and years.
Current situation and market activities since March by vertical market:
Education – Our products are primarily offered by our partner, a large, rapidly growing interactive whiteboard manufacturer focused on the education market.
As we told you in March, there are “buying windows” in education. The activity in the spring window was slower and smaller than anticipated due primarily to two factors: reduced spending on education due to a decline in tax revenues in most states and a delay in receiving stimulus funds, which caused planning delays for many districts. In spite of this we have:
• Deployed pilots in multiple school districts representing in excess of 20,000 potential classrooms if deployed district wide.
• Made major proposals to additional districts representing another 15,000 total classrooms.
• Negotiated distribution agreements with two large statewide education cooperative buying organizations which we are in the process of finalizing. These organizations support districts with hundreds of thousands of classrooms.
• Continued to develop opportunities in conjunction with our partner.
Healthcare – A large medical device distribution and integration company is our partner.
• We have sold 50 licenses to our partner.
• As of October 1, 2009, they are actively marketing our product.
• We continue to do software development work for our partner, more tightly integrating our technology into their product offering and addressing FDA and customer requirements.
Corrections – A leading integrator and service provider to the sector is our distribution partner.
• We have sold our Visitor™ and Scheduler™ applications to our partner for $500,000, along with an ongoing royalty arrangement on future sales.
• Our partner has established an initial strong pipeline of existing and prospective customers. The products are currently deployed at two customer sites.
• We will leverage our network and contacts to find additional opportunities to sell with our partner.
Business Model & Strategy
Based upon the current market conditions, our ability to deploy our existing products very efficiently and the traction we are realizing via our current channels we are transitioning our business to a low fixed overhead, success-based business model. Our strategy will focus on maximizing the value of our existing technologies and business activity while leveraging our business platform, technology expertise and business contacts to acquire technologies or businesses where our skill and experience can have a significant impact on value creation.
Our key initiatives are as follows:
Exercise strong financial control over our business, establishing a low overhead, success-based business model
• As stated above, we have chosen to market our products primarily through channel partners and licensing arrangements. This allowed us to reduce expenses and headcount in both sales and software development.
• We have significantly reduced net cash used by operations during the current year. Actual cash used by operations:
o Q1 2009- $595,501 (Actual)
o Q2 2009- $571,321(Actual)
o Q3 2009 – $256,751 (Estimated)
o Q4 2009-less than $100,000 (Estimated)
Maximize the value of our current technology and business activity
• Our products currently operate successfully in the field delivering value to satisfied customers.
• We are focused on creating value by licensing our technology to distribution partners who have the capability to successfully promote our technology solutions to their customers.
• In addition, where it makes strategic sense, we will sell certain products to buyers that recognize the value created by their ownership of the technology/product.
Acquire businesses and technologies where we can accelerate value creation for existing ownership and our shareholders
• We will partner with and acquire complimentary businesses where our existing technologies, deep technology expertise, industry experience and relationships can improve operating results and drive value.
Our acquisition targets will have the following profile:
• Profitable and cash-flow positive with an established track record of customer success.
• Successful private firms that have made it through the developmental stage, but need additional product development, product management, business development, and marketing expertise and support to accelerate growth.
• Operate in markets where our existing proprietary knowledge, experience and network will have a strong impact.
• Have flexible ownership looking to build long-term value.
We intend to partner with existing ownership and support them in managing and growing their businesses to improve their outcomes.
Conclusion
We have transitioned our company to a low fixed overhead, success-based business model. We are marketing our technology products primarily through channel partners and licensing arrangements. Our strategy is focused on maximizing the value of our existing technologies and business activity while leveraging our business platform, technology expertise and business contacts to acquire technologies or businesses where our skill and experience can have a significant impact. Executing this strategy will require additional funding and the company is in constant dialogue with potential funding sources.
Thank you for your continued support. Rest assured that the team is working hard to create value in these turbulent times.
Respectfully,
Oliver M. Cooper, III
President and Chief Executive Officer
