Somatic Systems, Inc.
32 Masonic Street
Northampton, MA 01060
413-586-2555 • 877-586-2555
somatics.org
A MESSAGE FROM THE CEO
May 4, 2007
Dear fellow shareholders,
I’m writing to thank you for your interest in SMAS, and your enthusiasm. We are tremendously grateful for recent rise in awareness about our company. I also want to say that everyone here at Somatic Systems believes that your enthusiasm is well deserved. I say that not to boast or posture, but to let you know that we proud of our company, and believe that it both worthy of strong enthusiasm and a worthwhile investment.
The excitement we saw from you in the past week on the public front finally started to mirror the excitement our customers have for the company we have run and the services we have offered for the past 14 years.
I will say that we were caught almost completely off-guard by the surge in your interest. The public has been relatively quiet about our company since we went public less than a year ago, despite our strides. We have been seeking new ways and representatives to make SMAS more widely known, so that our current and future growth and news did not fall on deaf ears. Before we could even start that process, you started listening. Because we were not expecting that just yet, I don’t think were speaking enough to do your interest and concerns justice. We look forward to moving forward with the level of open communication and interaction with you, our shareholders, that we have always wanted to have.
For those of you unfamiliar with the nature of our Somatics products and services, I will provide a (relatively) brief introduction right here. For clarity, I’ve labeled sections separately, so if you’re only interested in the company growth and not in the nature of our products and services (sections “What is Somatics?” and “Business Model”), you can jump ahead to the section called “Growth & Shareholder Value”.
One of the reasons we are so excited about being a company in which you can invest is that we have found over the last 14 years that virtually everything about the science and business of Somatics is a “win/win” situation. We think that as you get to know Somatic Systems more, you will see how much this is true, and how valuable an asset we can be to you.
What is Somatics?
SMAS offers Clinical Somatics, a groundbreaking form of pain management and muscular retraining. Clinical Somatics is simply unparalleled in its efficacy, value, and scientific substance. Clinical Somatics has been in development for over 25 years, and all of our research over that time and more, we have yet to find a physical therapy, medicine, or surgical intervention that even comes close to Somatics in terms of how quickly it works, how long the effects last, and how thoroughly it relieves the problems it treats. Here are some of examples of the problems Clinical Somatics can help:
- back pain
- knee injuries
- hip, shoulder and other joint?problems
- carpal tunnel syndrome
- TMJ
- scoliosis
- bursitis
- sciatica
- tension headaches
- tendonitis
- Other problems of accident, injury, trauma,?misuse, repetitive stress and aging.
Clinical Somatics works by rapidly and naturally readjusting muscle and joint tension and function, eliminating the underlying cause of a surprisingly numerous and wide variety of muscle, joint, and pain disorders. Because Somatics works by improving musculoskeletal function, it can both repair and prevent injuries and the effects of wear-and-tear and aging of the muscles and joints. In other words, it can help people of all ages and stages of life: Senior citizens can use Clinical Somatics to relieve many of the pains and limitations of aging, folks of any age can find relief from nagging epidemics like back pain, and serious athletes can treat sports injuries (often performing better afterwards than before their injuries) or prevent injuries and significantly improve performance in the first place. Here are some of the treatment options for which Clinical Somatics offers a frequently superior alternative:
- Orthopedics
- Pain Medication
- Physical Therapy
- Chiropractic
- Yoga
- Pilates
- Rolfing
- Feldenkrais & Alexander Technique
- Massage
Clinical Somatics is natural, gentle, and easy to do; it comes in 2 forms: Clients can get one-on-one treatments like they might in a physical therapy office for acute and serious long-term problems; or anyone can do specialized therapeutic Clinical Somatics exercises, which have most of the same benefits of the clinical sessions. Exercises can be enjoyed at home via CDs and videos, or in group classes. Although the exercises can have strong curative and preventative effect, they are easy and pleasant. Group classes can an enjoyable part of any lifestyle, including at senior centers, corporate wellness program, performance training institutes, or simply like on might attend a fitness or yoga class. In fact many people find it a preferred replacement to yoga or pilates for fitness, flexibility, and relaxation; in fact, people choose Somatics to avoid the injuries they get from other fitness options, while also obtaining better performance results.
Business Model
Pain costs the nation more than $70 billion annually in missed days at work, visits to hospital emergency departments, medications and the use of other medical and healthcare services. Clinical Somatics delivers an effective, drug-free approach to pain elimination. Somatic Systems controls the “whole pipeline” of Clinical Somatics, and can grow the reach and revenue of this system across the board: We intend to expand our current business model nationwide:
1. Clinic Centers
…(corporate stores and franchises) offering sessions and group classes, which we hope someday will be as prevalent as Starbucks, so anyone can get the pain treatments they need or take classes like they would at their local gym or Y.2. Self-care Exercise Products
…such as CD’s and videos, for sale online, at our Clinics, and other retail locations.3. Professional Training
…to train and license practitioners of Clinical Somatics, to work in our Clinics as well as other medical and fitness settings. (These trainings currently gross $10,000 per student.)Our approach to these different divisions and stages is “cookie-cutter”. We work hard to create easy win/win formulas of infrastructure and pricing that allow us to keep adding locations and presence as markets allow.
Clinical Somatics has been so successful and exciting for the people who have already encountered it, that you may have already heard the term “Somatics” used by a variety of other pain care and relaxation treatments. The term “Somatics” was coined more than 25 years ago, by the researcher who developed our field, Clinical Somatics.
Somatic Systems understands the importance of brand in the development of a broad international presence. For this reason, and simply to protect and assure consumers they are spending their money on the right product, Somatic Systems plans to pursue aggressive branding efforts as a core element of our marketing strategies over the months and years to come.
Just as Somatics is so exciting to consumers because of its amazing results, our business model is exciting because of how synergistic it has proven to be: Our retail products are an affordable experience of Somatics, which is good enough to encourage retail customers to become clients of our clinics and their more expensive services. Many clients are so impressed with the results they obtain in Clinic sessions and classes, they actually apply to and join our Professional Training program. Many of our most avid training students are folks who came in for a session, never expecting that they would be inspired to make a career change. With every growth in training enrollment, we gain a passionate group of people that market all of our products further. This functions almost like a multi-level marketing model, and is another example of the win/win situation of Somatic Systems.
Growth & Shareholder Value
We have been called the best-kept secret in pain relief, and I think that is a fair assessment on both counts: Somatic Systems’ products and services can be so effective, clients wonder why no one has ever heard of us before. It is for this reason I believe SMAS is sitting on a goldmine. Just as most of the world has yet to find out about Clinical Somatics, most of the investing public has yet to find out about SMAS.
I think if you look at what we have to offer, you will see that SMAS is a highly undervalued company. We have no illusions that we are currently a huge, profitable venture. On the contrary, we are currently a very small company with modest revenues. However, our understanding is that is exactly the kind of “next big thing” opportunity for which most micro cap investors are constantly on the lookout.
We think our size and history are exactly what makes us such a great investment. While we are still a small company, and have only been public for less than a year, we have been in business for 14 years. The entirety of that time has been spent developing and perfecting the quality and viability of our products and services. We are not a Pink Sheet company who is looking for millions of dollars to do research and development to even come up with a product in the first place. Instead, we are at the stage of needing to ramp up marketing and “production” ó production of more practitioners, products, and clinical presence.
To this end, every dollar we earn or receive is invested back in to the growth of our company and its products and services. From the CEO down to most of the employees who work in our offices, we have been personally helped by Somatics, and are passionately committed to Somatic Systems’ success and growth. Almost 20 years ago, as I went off to college to begin my adult life, I became bedridden from a severe chronic pain disorder; the Somatics work we now do at Somatic Systems was the only thing that helped, so that within a few years of treatments, I was fully cured from a condition that is still considered by medicine to be a life-long chronic illness. To this day, Somatics helps me work the 10 to 16 hour days I work, with comfort and energy.
Some of our other key staff have similarly life-changing experiences, but even those that don’t quickly become impassioned by the results they see in others, be it the pain patients they see come in and out of our doors, or the professional training students they meet, some of whom come from lifelong careers in other distinguished health care professions and yet claim that this is the first time they are truly able to help others’ chronic pain. Our base of practitioners is quite small, and so we are only able to help a small number of people right now. Consequently, it feels like a mission to us to grow our business adequately to be able to help more people. Simultaneously, it is really clear to us how important it is to grow that business stably and responsibly, so we can be around to help people for a long time.
For all these reasons and more, I think our commitment is part of what makes SMAS such a goldmine itself. There was a time until very recently when it seemed no one knew SMAS existed. During that entire time, we have continued to operate and grow our business, and fine-tune our services further, as we had for the 13 years prior. Just as we have so far, we intend to continue to grow our business, no matter what happens to our share price. Just as our price dipped before and is coming back, we expect our long-term value and price to just keep climbing. We are not a company that was started just to make money on the public markets, and we know that we will continue to show up for work everyday, building our business stronger and stronger. It seems to me that this is only an equation for continued growth in share value, and another example of a win/win scenario.
We know that shareholders have concerns over the seemingly never-ending battle in the micro cap markets between rising share price and increased dilution. We are certainly sensitive to that concern. However, we do think that it doesn’t have to be choice between share price and company growth. We believe that even on the Pink Sheets, it can be just the opposite situation, another win/win.
We are certainly in the process of raising monies, and this sometimes means an increase in shares. Growing our company is why we went public in the first place. As investors I’m sure you understand that is why most public companies are public. The costs of operating a publicly traded company, even on the Pink Sheets, are substantial, and really not a particularly smart business move for the health of a company unless the company is seeking investments.
Many or most of the companies you invest your dollars in each day are likely in the process of trading some interest or equity for capital. Given that reality, shouldn’t you invest in a company that is using its capital to increase the health and value of the company (i.e. shareholder value)? That is, in your calculations of risk/return, aren’t you likely to get the best return on investing in companies like SMAS who are spending their monies and other resources on growing responsibly, efficiently, and sustainably for the long-term?
Listing on the Pink Sheets is the very phase at which a company like ours is endeavoring to grow dramatically, thus offering the potential for dramatic returns. Based on market performance, I think our business and share activity is such that short-term and long-term investors can benefit from our growth strategies. As I have said, we continue to invest all of our capital and other resources directly into increasing company/shareholder value, for now and the future. We believe in being agile, “small and scrappy”. We take pride in making smart decisions that give us twice the value for half the cost. Any monies we make and have made over operating expenses go towards smart expenditures such as:
- depleting existing debt from development stage costs;
- building renewed and brand new strategic relationships;
- nimble expansion of infrastructure for the long-term (for example, investing in integrated technologies that allow our phones and networks to be affordable now but scale up rapidly and economically as we grow);
- careful increases in staffing to add stability and constantly troubleshoot gaps in efficiency, compliance, or quality of service;
- completion of new development projects that serve as keystones in our short-term and long-term growth strategies;
- simultaneously conservative and cautious but bold and visionary steps that move us farther and farther along our business plan and towards each successive milestone.
As I said, we’re going to continue to come to work each day and grow our company whether the market values us or not, and we’ll keep doing so until the market begins to value us properly as it seems like it is now. After that trend continues, we’ll still keep coming to work, and grow our company more. I can’t communicate to you how excited and honored we have been in recent weeks to see that the market, and you our shareholders, have started to notice our value. Honestly, it has put an even bigger smile on each of our employees#8217; faces, and as their boss, I want to see those smiles continue: Not only do I want to see my employees happy, but it also makes them work harder for me and increase company value further (not to hammer it home yet again, but this another win/win).
Because we believe that with greater power comes greater responsibility, we intend to post increasingly more thorough financial disclosures as we grow, so you can be assured that our basement is just as clean as our living room.
We encourage you to visit our headquarters in Massachusetts, and meet our business and the folks who dedicate their lives to it. When our new, larger New York offices are fully operational, we hope you will visit us there too. As we grow throughout the country, we hope you will come visit our ever-expanding locations, so you can see your shareholder dollars at work.
Thank you again for your support. We look forward to a great year and beyond with all of you.
Sincerely,
Steven Aronstein
Chief Executive Officer
Somatic Systems, Inc. [SMAS]
