MDHI files 8-K with SEC
http://biz.yahoo.com/e/130205/mdhi8-k.html
First of all would like to talk a little bit about the history of the company - where we have been - and what has happened during the past year. I think this will give everyone a really good background on some of the obstacles we have faced and what we have done to break down these obstacles to get to the level of success we are currently realizing. I think you will agree that the Medical Alarm Concepts of today is vastly different than even just a few short months ago.
The company was organized back in the beginning of 2009 and rather than acquiring a shell company in which to merge, we went through the added expense and time involved in actually filing documents with the Securities and Exchange Commission. The company at that time was financed with a great deal of convertible debt that contained a lot of toxic features. In hindsight, it clearly wasn't the best structure for a public company and as a result of this financing that was put in place - along with several other issues - the company failed to develop a robust growth rate during its first few years of operation.
Since that time we've spent a lot of time and money turning the company around. And, as a result, I am happy to say that today Medical Alarm Concepts is experiencing a robust growth rate, quality relationships with quality customers, a significantly improved balance sheet - and most importantly - the company has now reached operational positive cash flow status. Simply put - we are now operating in the black for the first time in our company history.
Let's move on now to talk a little bit about our product - Our product is called the MediPendant. It is a personal emergency medical alarm that is mainly purchased by middle-age adults for their elderly parents. While it is primarily a device for older people, there is also a market for those who are disabled. We have a unique spin on the product category. Approximately 95% of all of the medical alarms that are currently being sold in the United States are the older style technology that requires the user to speak and listen to a central base station unit. If the user of one of these older generation products is not within speaking or listening distance of this base station, the user may not be heard by the monitoring center. Our product is very different. It enables the wearer to simply speak and listen through the pendant in the event of an emergency. The MediPendant is designed to be worn in the bath or shower and offers a 600-foot range so that the wearer can operate the unit from virtually anywhere within their home or front or back yards. Time and time again we get comments from our customers about the convenience and comfort they receive by knowing that they will be able to reach help in an emergency by simply hitting the button and then simply listening and speaking directly through the pendant. The technology is so flexible that the EMT Trained operators can even link a son, daughter or other loved one into the emergency call in real time. Other devices simply cannot match the features and functions of our unit. An additional major capability of our product is the use of voice prompts. This is a patented technology that upon pushing the button for an emergency call, the unit provides feedback to the wearer in the form of a voice prompt letting the user know that the emergency call is being completed. This is a very advanced feature and one that separates us from our competition.
The other good news about the MediPendant product is the very high quality we are receiving from our factory. The units are working almost flawlessly and our return rate relative to defective merchandise is almost zero. In many ways we could argue that the product is over-engineered. It is extremely durable, very reliable and we are very, very happy with a long battery life we are currently getting out of the units. Once a customer receives these units the return rate is incredibly low - it continues to astound us.
Let's discuss the specific actions and programs we have put in place to restore the company to a robust revenue growth rate and move us into positive cash flow status.
First of all - It is important to outline the major retail success we have experienced over the past few months. Near the end of December of 2011 we announced that we would be offering our products on the website of one of the largest retailers in the country. This retailer, which is Costco, is one of the largest retailers not only in the states, but throughout the world - they currently have approximately 60,000,000 customers worldwide. Our relationship with this retailer has been very strong and sales are occurring on a daily basis. Customer return rates are very low and customer satisfaction is very high. We believe the relationship with this retailer remains very strong and we are certainly happy with what we have seen so far. We will soon start an additional promotional programs with Costco, which will involve both e-mail marketing and mailers to the Costco customer base. We conducted a similar promotion during November that produced sales of approximately 600 units for the company, but we are hoping to do even better on these two promotions.
This talk little bit about the business arrangement for this distribution agreement, as I want to point out something that is important about sales process and our revenue stream relative to this account.
As many of you know, the sale of a personal medical alarm usually involves collecting monthly fees for the monitoring of the service. Costco customers get very special pricing. The retail price includes a MediPendant unit and six months of monitoring services. This pricing is important as it allows us to be cash flow positive from day one. This is not usually the case in the medical alarm business as it is necessary to first pay for the manufacturing of the unit, shipping costs, customer acquisition costs and all of the other costs associated with the new sale. The fact that we are cash flow positive from day one on sales from one of the country's largest retailers has helped improve our business operations very significantly. We are currently gearing up to acquire more inventory to meet the ongoing demand we are seeing from our retail operations. We are very pleased with this retail program.
Let's move on now to our next distribution channel for discussion - which is the international marketplace. We recently began shipping units to an operator in Denmark and we are currently working to begin distribution into Ireland. Some of you may have noticed the press release we issued relative to our upcoming entrance into the Chinese market. We are working on the final touches of an agreement with JTT-EMS, which is a company located just outside of Beijing. We recently visited the company's operations in China and, as a result, both parties have decided to move forward with an initial product offering in the People's Republic of China. We are also discussing an additional equity investment in the company by JTT. We do not yet have any developments to report relative to this equity financing, but we will keep you posted as events occur. We are expecting a good steady growth rate from our international markets during 2013 and we believe there are probably a couple of other countries that will start shipping to during this year.
We also sell our product through Internet marketing and this is an area that has undergone constant change. Frankly, we really haven't dialed in the complete formula for Internet sales and our customer acquisition cost still remain relatively high, although they have come down recently. This is a major area of focus for us over the next few months and we have recently contracted with a new web developer to modify our websites to improve our customer conversion ratios. We think Internet marketing is the low hanging fruit for us, but it is one we haven't yet optimized. It clearly offers tremendous upside potential for us over the coming months.
We are also beginning to work with outside call centers, several of which have expressed strong interest in marketing our products. This week we are beginning testing with a new and extremely large call center operation located in Omaha Nebraska. We have a unique financing arrangement in place that will enable us to monetize these contracts rather quickly and will enable us to afford the inventory that may be needed should the program really take off. It is too early to tell exactly what is going to happen with this new call center program, but we are very encouraged by the possibilities and will keep everyone posted as developments occur. About two months ago we launched our first call center sales function and that effort produced some strong results for us. This new call center is considerably larger and it database capabilities are much stronger, so we are excited about the possibilities for even faster revenue growth as it comes on line.
Let's talk a little bit about other contracts on which we are currently bidding. We don't want to put the cart before the horse on these - but we do think it is worthwhile to give you a little bit of the peak on some of the "elephants" we are currently hunting relative to our sales programs. We are currently working with a couple of hospital chains that have expressed interest in offering the MediPendant product to those who are being checked out of the hospital. We are also working with several international customers as I indicated previously. Most importantly, we are currently working with a large insurance carrier that could significantly change the entire face of the company should we land this contract. Like I indicated previously, it is simply too early to tell if we will land these deals, but were working hard to gain these customers and any of these would significantly propel our revenue growth during 2013 and beyond. There are surely a lot of moving parts to closing this business and we want to be clear that were not promising anything, but were excited about the prospects. We'll keep you posted on developments relative to this area. These are big opportunities for our company.
