Technologies Sonomax Inc SXHHF

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Company update:

Sonomax is a Canadian based company that develops hearing protection technology and custom-fitted hearing devices. While historically, the complex fitting process hampered its product acceptance, Sonomax’s new V4 earpiece technology is the platform that could bring meaningful order flow across Consumer, Industrial, Military and Medical verticals.

Back to the future. Sonomax has largely exited manufacturing, slashed costs and returned to its core strength in R&D where it hopes to grow sales through licensing its technology and royalty fees.

Novel technology paradigm. Sonomax’s novel V4 technology is a self-fitting system that results in a better fitted, cost effective ear-piece with a shorter delivery time as it removes cost-layer of a trained technician.

High-potential Consumer Market opportunity. With its V4 technology Sonomax gains greater access to a massive Consumer Market opportunity. We believe the announced relationship with Levin Consulting will increase Sonomax’s visibility among the likes of Apple, RIM, Nokia or Monster.

Financial Position: Sonomax’s cash position appears slightly better due to recent warrant exercise. We feel that in order to execute on its ambitious strategy and gain credibility as a partner with OEMs, Sonomax may require additional liquidity.

Growth strategy: Management estimates its addressable market at ~100m units in select Consumer, Industrial, Military and Medical opportunities and Sonomax has approached both the key OEMs and ODM suppliers to offer the brand, and the technology in return for a per unit royalty in the C$2.50- 5.00 range. This business model, if successful, could result in very high margins as revenues fall almost directly to the bottom line.

High risk/reward outlook: While the company has massive IP in the hearing protection field, moving the stock rests on the market’s perception of Sonomax’s ability to rapidly negotiate high volume deals with key partners. If management is successful, it is not hard to envision significant stock appreciation or a possible take-out scenario.