Bioelectronics Corp (BIEL)

[GetSeriousOK]

It's a Distribution Agreement.

A Distribution Agreement is a contract, but it's not a legally binding promise to buy anything. If Synergy fails to buy 975,000 units in 18 months, their "penalty" won't be monetary -- BIEL can't sue them. The "penalty" in Distribution Agreements is usually the loss of exclusivity in the territory or the threat of terminating the Agreement, both of which are rarely, if ever, enforced. If the Distributor can't sell the product of a tiny little unknown developmental biotech, it's not like that biotech has other Distributors lined up and chomping at the bit.

Synergy will probably buy something like 30,000 units in Q4. That's still an improvement because the OEM Partners aren't selling much. THEN Synergy will try to sell those units.

It's obvious that this deal will go just like the OEM Partner deals: lots of hype to start, a large initial stocking order, then crickets. The Synergy contract might be "the largest contract yet" but that's faint praise since it's just a Distribution Deal and previous Distribution Deals have ALL fallen far short of expectations.

Synergy didn't agree to buy 975,000 units -- they agreed to TRY TO SELL RecoveryRx. Who knows how they came up with that 975,000 number, but nobody realistically thinks they can sell 975,000 units in 18 months in SE Asia. I don't expect Synergy to buy more than about 50,000 total in 18 months, IF THAT. They're going to introduce a new product to skeptical ethical professional physicians.

Nalepka accomplished something though: he placated shareholders. He didn't have to explain why revenues have shown a declining trend during his tenure as VP of Sales, even though the company received a milestone FDA clearance.

He didn't have to explain why revenues for the last four quarters were particularly bad.

Instead, shareholders are metaphorically carrying him around on their shoulders and singing "For he's a jolly good fellow."

How long will the Nalepka ticker-tape parade last? A couple of quarters, anyway. Q3 2022 will probably be terrible, but the company can point to that Synergy deal and say "Look at that pie up there in the sky. Mmmmmm, moist filling, flaky crust."

It's been working for 20 years.